Quintiles Transnational Corp. Form 10-Q 9-30-2003

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). þ Yes o No

The number of shares of Common Stock, $.01 par value, outstanding as of October 31, 2003 was 125,000,000.

The accompanying notes are an integral part of these condensed consolidated statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2002, as amended, of Quintiles Transnational Corp. (the “Company”).

The balance sheet at December 31, 2002 has been derived from the audited consolidated financial statements of the Company. Certain amounts in the 2002 financial statements have been re-classed or modified to conform with the 2003 financial statement presentation.

On September 25, 2003, the Company completed its merger transaction with Pharma Services Holding, Inc. (“Pharma Services”) pursuant to which Pharma Services Acquisition Corp. (“Acquisition Corp.”) was merged with and into the Company, with the Company continuing as the surviving corporation and an indirect wholly-owned subsidiary of Pharma Services (the “Transaction”) as further described in Note 2. As a result of the Transaction, the Company’s results of operations, financial position and cash flows prior to the date of the Transaction are presented as the “Predecessor.” The financial effects of the Transaction and the Company’s results of operations, financial position and cash flows as the surviving corporation following the Transaction are presented as the “Successor.” To clarify and emphasize that the Successor Company has been presented on an entirely new basis of accounting, the Company has separated Predecessor and Successor operations with a vertical black line, where appropriate.

The Transaction has been accounted for as a purchase at the Pharma Services level with the related purchase accounting pushed-down to the Company.

Pursuant to a merger agreement dated as of April 10, 2003, as amended on August 18, 2003, by and among the Company, Acquisition Corp. and its parent company, Pharma Services, Acquisition Corp. was merged with and into the Company on September 25, 2003, with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Pharma Services. Pharma Services was formed for purposes of the Transaction by Dr. Gillings, the Company’s Executive Chairman, Chief Executive Officer and founder, and One Equity Partners LLC, the private equity unit of Bank One Corporation. Dr. Gillings and certain of his affiliates as well as other selected shareholders, including one Predecessor Company director (in addition to Dr. Gillings) and certain members of senior management (including certain executive officers), exchanged all or a portion of their equity interests in the Company for equity securities of Pharma Services. Pharma Services paid $14.50 in cash for each outstanding share of the Company’s common stock, except for shares held by Pharma Services and Acquisition Corp. In addition, Pharma Services paid the excess, if any, of $14.50 over the per share exercise price of each option outstanding at the effective time of the merger to purchase the Company’s Common Stock granted under any of the Company’s option plans, other than options held by Dr. Gillings and any other person who exchanged Company options for equity securities of Pharma Services. No merger consideration was paid for shares and/or options to purchase shares that were exchanged for equity securities of Pharma Services.

The purchase price including transaction costs was approximately $1.82 billion. The Transaction was funded with approximately $508.1 million of the Company’s cash, $550.0 million of equity investments in Pharma Services including cash and equity rollover, $310.0 million from a senior term loan and the issuance of $450.0 million principal amount of 10% Senior Subordinated Notes due in the year 2013 (the “2013 Notes”). In addition, the Company has $75.0 million available under a revolving credit facility. The credit agreements and the indenture governing the 2013 Notes contain significant restrictions and covenants affecting, among other things, the operations and finances of the Company and its subsidiaries. The $550.0 million of equity investments in Pharma Services resulted in Pharma Services issuing approximately $522.5 million of preferred stock and $27.5 million of common stock. Shares of preferred stock are subject to mandatory redemption on the earliest to occur of (i) a sale by Pharma Services of securities representing a majority of the voting power of the common stock of Pharma Services or substantially all of its assets (whether by merger or otherwise), (ii) the consummation of an underwritten public offering of the common stock of Pharma Services that, together with any prior underwritten offerings, results in gross proceeds to Pharma Services of at least $100.0 million or (iii) September 26 2023. Dividends on the preferred stock are to be cumulative and will initially accrue at the rate of 12% per annum.

The Company has prepared a preliminary allocation of the purchase price to the assets acquired and liabilities assumed based upon their respective fair values. The fair values are preliminary and subject to refinement as information relative to the fair values as of September 25, 2003 becomes available. Of the approximately $406.2 million allocated to intangible assets, $145.7 million relates to the Company’s trademarks, trade names and other related intangibles and the remaining $260.5 million is attributable to commercial rights and royalties, licenses and customer relationships. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 88-16, “Basis in Leveraged Buyout Transactions,” Dr. Gillings’ continuing residual interest has been reflected at its original cost adjusted for his share of the Company’s earnings, losses and equity adjustments since the date of original acquisition (“predecessor basis”). In accordance with EITF Issue No. 90-12, “Allocating Basis to Individual Assets and Liabilities within the Scope of Issue 88-16,” only a partial step-up of assets and liabilities to fair value has been recorded in purchase accounting. The partial step-up has resulted in the Company’s assets and liabilities being adjusted by approximately 93.74% of the difference between their fair value at the date of acquisition and their historical carrying cost.

The following table presents the unaudited pro forma results as if the Transaction and related financing had occurred at the beginning of each of the periods presented (in thousands):

The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results that would have actually been attained if the Transaction and related financing had occurred at the beginning of the periods presented.

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS

No. 148, requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net income and net income per share is required by SFAS No. 123, as amended by SFAS No. 148, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The per share weighted-average fair value of stock options granted between July 1, 2003 and September 25, 2003, and the three months ended September 30, 2002, was $4.45 and $2.94 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following assumptions:

The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are freely transferable. All available option pricing models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not provide a reliable single measure of the fair value of its employee stock options.

There were no outstanding stock options for the period from September 26, 2003 through September 30, 2003. The Company suspended its employee stock purchase plan effective April 2003, due to the Transaction with Pharma Services.

The Company’s pro forma information follows (in thousands, except for net income per share information):

Commercial rights and royalties related assets are classified as commercial rights and royalties, accounts receivable — unbilled or advances to customers in the non-current asset section of the accompanying balance sheet. Below is a summary of the commercial rights and royalties related assets (in thousands):

In May 1999, the Company entered into an agreement with CV Therapeutics, Inc. (“CVTX”) to commercialize Ranexa^TM for angina in the United States and Canada. Under the terms of the May 1999 agreement, the Company purchased 1,043,705 shares of CVTX’s common stock for $5 million; the Company owned no shares of CVTX as of September 30, 2003. The May 1999 agreement also made available a $10 million credit line for pre-launch sales and marketing activities. The May 1999 agreement further provided that if Ranexa^TM, which has been submitted to the United States Food and Drug Administration (“FDA”) under a New Drug Application (“NDA”) for review, were approved, the Company would provide a $10 million milestone payment to CVTX which was to be used to pay off any outstanding balances on the credit line. The May 1999 agreement also required the Company to make available an additional line of credit to help fund a portion of the first year sales and marketing expenses. Under the May 1999 agreement, the Company committed to provide a minimum of approximately $14.4 million per year of commercialization services and to fund a minimum of $7.8 million per year of marketing activities, for a period of five years. In return the Company was to receive payment for services rendered by the Company in year one and royalties based on the net sales of Ranexa^TM in years two through five subject to a cap not to exceed 300% of funding by the Company in any year or over the life of the contract. In addition, the Company was also to receive royalties in years six and seven. As of September 30, 2003, the Company had not made any payments to CVTX under the May 1999 agreement in connection with the line of credit or milestone arrangement and had not funded commercialization and

marketing activities nor had the Company received any royalties from CVTX. In July 2003, CVTX and the Company entered into a new agreement that superceded the prior agreement. Under the terms of the July 2003 agreement, all rights to Ranexa^TM reverted back to CVTX, and CVTX will owe no royalty payments to the Company. Under the July 2003 agreement, the Company received 200,000 warrants to purchase shares of CVTX common stock at $32.93 per share during the five-year term commencing July 9, 2003. The Company recorded a gain of $700,000 in connection with the receipt of these warrants. CVTX also is obligated to purchase from the Company, within six months of the approval of Ranexa^TM, services of at least $10 million in aggregate value or to pay the Company a lump sum amount equal to 10% of any shortfall from $10 million in purchased services.

In December 1999, the Company obtained the distribution rights to market four pharmaceutical products in the Philippines from a large pharmaceutical customer in exchange for providing certain commercialization services amounting to approximately $5.1 million during the two-year period ended December 31, 2001. As of September 30, 2003, the Company has capitalized 251.8 million philippino pesos (approximately $4.6 million) related to the cost of acquiring these commercial rights, and is amortizing these costs over five years. Under the terms of the agreement, the customer has the option to reacquire the rights to the four products from the Company after seven years for a price to be determined at the exercise date.

In January 2001, the Company entered into an agreement with Scios Inc. (“SCIO”) to market Natrecor® for acute congestive heart failure in the United States and Canada. Under the terms of the agreement, the Company agreed to provide $30 million in funding over a two and one-half year period for sales and marketing activities following product launch. As of September 30, 2003, the Company had paid $30 million. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of commercial rights and royalties. In addition to receiving payments on a fee for service basis for providing commercialization services, the Company was to receive royalties based on net sales of the product from 2002 through 2008. The royalty payments were subject to minimum and maximum amounts of $50 million and $65 million, respectively, over the life of the agreement. Through September 30, 2003, the Company received payments totaling approximately $63.6 million, of which approximately $62.7 million was received during the nine months ended September 30, 2003. The proceeds are reported in the accompanying statement of cash flows as an operating activity — change in operating assets and liabilities. Initially, the Company also received a warrant to purchase 700,000 shares of SCIO’s common stock at $20 per share, exercisable in installments over two and one-half years. During December 2002, the Company agreed to permit SCIO to hire the sales force the Company had previously provided under the contract effective December 31, 2002 in return for (a) SCIO reimbursing the Company for the operating profit that the Company would have earned between that date and May 31, 2003, the date on which SCIO would be permitted to hire the sales force under the contract, and (b) advancing from May 31, 2003 to December 31, 2002, the Company’s ability to exercise the remaining unexercisable warrant. The early settlement of the Company’s service obligation resulted in accelerating the recognition of revenues of approximately $9.3 million in the fourth quarter of 2002. The early settlement of the Company’s service obligation did not affect the continuing royalty obligation of SCIO. On April 29, 2003, Johnson & Johnson consummated its acquisition of SCIO and the Company received $17.5 million for the warrant that the Company owned (see “Derivatives”). In August 2003, SCIO made a final payment to the Company in the amount of $46.1 million under an agreement reached to terminate the SCIO agreement, including the payment and royalty obligations. This final payment reduced the SCIO commercial rights and royalties balance to zero at September 30, 2003. Total royalty payments received were $63.6 million. The Company reported income of approximately $15.9 million in the third quarter of 2003, related to these events.

In June 2001, the Company entered into an agreement with Pilot Therapeutics, Inc. (“PLTT”) to commercialize a natural therapy for asthma, AIROZIN^TM, in the United States and Canada. Under the

terms of the agreement, the Company will provide commercialization services for AIROZIN^TM and a milestone-based $6 million line of credit which is convertible into PLTT’s common stock, of which $4 million was funded by the Company as of September 30, 2003. Further, based on achieving certain milestones, the Company has committed to paying 50% of sales and marketing activities for AIROZIN^TM over five years with a $6 million limit per year. Following product launch, the Company will receive royalties based on the net sales of AIROZIN^TM. The royalty percentage will vary to allow the Company to achieve a minimum rate of return. The Form 10-QSB filed by PLTT on September 5, 2003 indicated that PLTT will need significant additional financing to continue operations beyond September 15, 2003. As such, the Company has recorded an impairment of $4 million on the loan receivable from PLTT and has reduced its five-year contingent commitment for the sales force and marketing activities to zero at September 30, 2003.

In December 2001, the Company entered into an agreement with Discovery Laboratories, Inc. (“DSCO”) to commercialize, in the United States, DSCO’s humanized lung surfactant, Surfaxin®, which is currently in Phase III studies. Under the terms of the agreement, the Company acquired 791,905 shares of DSCO’s common stock and a warrant to purchase 357,143 shares of DSCO’s common stock at $3.48 per share for a total of $3 million, and has agreed to make available a line of credit up to $10 million for pre-launch commercialization services as certain milestones are achieved by DSCO. As of September 30, 2003, the Company has made $5.7 million available under the line of credit, of which $2.1 million has been funded. In addition, the Company receives warrants to purchase approximately 38,000 shares of DSCO common stock at an exercise price of $3.03 per share for each million dollars made available by the Company under the line of credit as milestones are achieved. The Company has also agreed to pay the sales and marketing activities of this product up to $10 million per year for seven years. In return, the Company will receive commissions based on net sales of Surfaxin® for meconium aspiration syndrome, infant respiratory distress syndrome and all “off-label” uses for 10 years. The subscription agreements under which the Company acquired its shares of DSCO common stock included participation rights to acquire additional shares of DSCO. The Company exercised its participation rights in two such transactions with DSCO. During November 2002, the Company purchased an additional 266,246 shares of DSCO common stock along with detachable warrants to purchase 119,811 shares of DSCO common stock for $517,000. Using the cashless exercise feature, the Company exercised the November 2002 warrants and received 83,357 shares of DSCO common stock. During June 2003, the Company purchased an additional 218,059 shares of DSCO common stock along with detachable warrants to purchase 43,612 shares of DSCO common stock for $1.2 million.

In December 2001, the Company acquired the license to market SkyePharma’s Solaraze^TM skin treatment in the United States, Canada and Mexico for 14 years from Bioglan Pharma Plc for a total consideration of $26.7 million. The Company will amortize the rights in proportion to the revenues earned over the 14 year life of the license. The Company has a commitment to pay royalties to SkyePharma based on a percentage of net sales of Solaraze^TM. Pursuant to the license, the Company may pursue additional indications for the compound, which will be facilitated through the Company’s ownership rights in the Solaraze^TM NDA and Investigational New Drug.

In January 2002, the Company entered into an agreement with Kos Pharmaceuticals, Inc. (“KOSP”) to commercialize, in the United States, KOSP’s treatments for cholesterol disorders, Advicor® and Niaspan®. Advicor® was launched in January 2002, and Niaspan® is also on the market. Under the terms of the agreement, the Company will provide, at its own expense, a dedicated sales force of 150 cardiovascular-trained representatives who, in combination with KOSP’s sales force of 300 representatives, will commercialize Advicor® and Niaspan® for two years. In return, the Company received warrants to purchase 150,000 shares of KOSP’s common stock at $32.79 per share, exercisable in installments over two years. Further, the Company will receive commissions based on net sales of the product from 2002 through 2006. The commission payments are subject to minimum and maximum amounts, as amended

June 30, 2003, of $50 million and $65 million, respectively, over the life of the agreement. Through September 30, 2003, the Company has received payments totaling approximately $7.1 million. The proceeds are reported in the accompanying statement of cash flows as an operating activity — change in operating assets and liabilities.

In March 2002, the Company acquired certain assets of Bioglan Pharma, Inc., for a total consideration of approximately $27.9 million. The assets included distribution rights to market ADOXA^TM in the United States for nine years along with other products and product rights that Bioglan Pharma, Inc., had previously marketed, as well as approximately $1.6 million in cash. Under the purchase method of accounting, the results of operations of Bioglan Pharma, Inc. are included in the Company’s results of operations as of March 22, 2002 and the assets and liabilities of Bioglan Pharma, Inc. were recorded at their respective fair values. The acquisition did not have a material impact on the financial position or results of operations for the Company. The acquisition resulted in total intangible assets of $29.3 million. The Company will amortize the intangible assets in proportion to the estimated revenues over the lives of these products. Under certain of the contracts acquired, the Company has commitments to pay royalties based on a percentage of net sales of the acquired product rights.

During the second quarter of 2002, the Company finalized the arrangements under its previously announced letter of intent with a large pharmaceutical customer to market pharmaceutical products in Belgium, Germany and Italy. Either party may cancel the contract at six-month intervals in the event that sales are not above certain levels specified. In the first quarter of 2003 and the third quarter of 2003, the agreements in Germany and Belgium, respectively, were terminated. For the remaining portion of the contract in Italy, the Company will provide, at its own expense, sales and marketing resources over the five-year life of the agreement. As of September 30, 2003, the Company estimates the cost of its minimum obligation over the remaining contract life for the remaining territory of Italy to be approximately $16 million, in return for which the customer will pay the Company royalties on product sales in excess of certain baselines. The total royalty is comprised of a minimal royalty on the baseline sales targets for these products plus a share of incremental net sales above these baselines.

In July 2002, the Company entered into an agreement with Eli Lilly and Company (“LLY”) to support LLY in its commercialization efforts for Cymbalta^TM in the United States. LLY has submitted a NDA for Cymbalta^TM, which is currently under review by the FDA for the treatment of depression. Under the terms of the agreement, the Company will provide, at its expense, more than 500 sales representatives to supplement the extensive LLY sales force in the promotion of Cymbalta^TM for the five years following product launch. The sales force will promote Cymbalta^TM in its primary, or P1, position within sales calls. During the first three years, LLY will pay for the remainder of the capacity of this sales force, referred to as the P2 and P3 positions, on a fee-for-service basis. The Company will make marketing and milestone payments to LLY totaling $110 million of which $70 million was paid in 2002 and the remaining $40 million is due throughout the four quarters following FDA approval. The $70 million in payments made by the Company is on an at-risk basis, and is not refundable in the event the FDA does not grant final approval for Cymbalta^TM. However, if any such non-approval occurs solely as a result of regulatory issues the FDA cites with respect to LLY’s manufacturing processes and facilities, the Company will be entitled to recoup its pre-approval outlays, plus interest at the prime rate plus five percent, from a percentage of any revenues or royalties LLY derives from the sales of Cymbalta^TM by LLY or sublicense of Cymbalta^TM to third parties, if any. The $110 million in payments will be capitalized and amortized in proportion to the estimated revenues as a reduction of revenue over the five-year service period. The sales force costs will be expensed as incurred. The payments are reported in the accompanying statement of cash flows as an investing activity — advances to customer. In return for the P1 position for Cymbalta^TM and the marketing and milestone payments, LLY will pay to the Company 8.25% of U.S. Cymbalta^TM sales for depression and other neuroscience indications over the five-year service period followed by a 3%

royalty over the subsequent three years. In addition to the Company’s obligations, LLY is obligated to spend at specified levels. The Company or LLY has the ability to cancel this agreement if Cymbalta^TM is not approved by January 31, 2005, in which case the Company would write-off any payments made through that date, unless the FDA had failed to grant approval for Cymbalta^TM based on concerns over LLY’s manufacturing processes and facilities.

In July 2002, the Company entered into an agreement with Columbia Laboratories, Inc. (“COB”) to commercialize, in the United States, the following women’s health products: Prochieve^TM 8%, Prochieve^TM 4%, Advantage-S® and RepHresh^TM. Under the terms of the agreement, the Company purchased 1,121,610 shares of COB common stock for $5.5 million. The Company will also pay to COB four quarterly payments of $1.125 million each which commenced in the third quarter of 2002. In return the Company will receive royalties of 5% on the sales of the four COB’s women’s healthcare products in the United States for a five-year period beginning in the third quarter of 2003. The Company has paid $4.5 million as of September 30, 2003. The payments are reported in the accompanying statement of cash flows as an investing activity-acquisition of commercial rights and royalties. The royalties are subject to minimum and maximum amounts of $8.0 million and $12.0 million, respectively, over the life of the agreement. In addition, the Company will provide to COB, at COB’s expense on a fee-for-service basis, a sales force to commercialize the products. The purchase of the COB common stock included participation rights to acquire additional shares of COB. During July 2003, the Company exercised its participation rights and purchased an additional 56,749 shares of COB for $664,000.

In December 2002, the Company entered into an agreement with a large pharmaceutical customer to market two products in Belgium. Under the terms of an asset purchase agreement, the Company will have the rights to one product in Belgium in exchange for payments of 5.5 million euros (approximately $6.3 million). The customer will continue to manufacture the product through 2005. Under the terms of a distribution agreement, the Company will have the rights to market the other product in Belgium for a period of six years in exchange for payments of 6.9 million euros (approximately $7.9 million) of which 2.2 million euros (approximately $2.5 million) are in the form of services to be completed by December 31, 2008, based on the Company’s standard pricing. The Company has paid 6.5 million euros (approximately $7.5 million) as of September 30, 2003. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of intangible assets. The Company has also provided 900,000 euros in services to the customer under the 2.2 million euros service component. The Company’s service obligation is recorded as a cost of the distribution rights and is being amortized over the six-year distribution agreement. The customer will continue to manufacture the product for the six years of the distribution agreement.

In March 2003, the Company entered into an agreement with COB to commercialize COB’s Striant^TM testosterone buccal bioadhesive product in the United States. COB has submitted an NDA for Striant^TM, which was approved in June 2003 by the FDA for the treatment of hypogonadism. Under the terms of the agreement, the Company will pay to COB five quarterly payments of $3.0 million each which commenced in the second quarter of 2003. In return, the Company will receive a 9% royalty on the net sales of Striant^TM in the United States up to agreed levels of annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments will commence with the launch of Striant^TM and are subject to minimum and maximum amounts of $30.0 million and $55.0 million, respectively, over the life of the agreement. The Company has paid $9.0 million as of September 30, 2003. The payments are reported in the accompanying statement of cash flows as an investing activity — acquisition of commercial rights and royalties. In addition, the Company will provide to COB, at COB’s expense on a fee-for-service basis, a sales force to commercialize the products for a two-and-a-half year term.

The Company has firm commitments under the arrangements described above to provide funding of approximately $250.0 million in exchange for various commercial rights. As of September 30, 2003, the Company has funded approximately $191.2 million. Further, the Company has additional future funding commitments that are contingent upon satisfaction of certain milestones being met by the third party such as receiving FDA approval, obtaining funding from additional third parties, agreeing to a marketing plan and other similar milestones. Due to the uncertainty of the amounts and timing, these contingent commitments are not included in the firm commitment amounts. If all of these contingencies were satisfied over approximately the same time period, the Company estimates these commitments to be a minimum of approximately $90-110 million per year for a period of five to six years, subject to certain limitations and varying time periods.

Below is a summary of the remaining firm commitments with pre-determined payment schedules under such arrangements (in thousands):

The Company has entered into financial arrangements with various customers and other parties in which the Company makes payments in return for equity investments. The equity investments may be subject to certain trading restrictions including “lock-up” agreements. The Company’s portfolio in such transactions as of September 30, 2003 is as follows (in thousands, except share data):

In accordance with its policy to continually review declines in fair value of the marketable equity securities for declines that may be other-than-temporary, the Company recognized losses for the period from January 1, 2003 through September 25, 2003 of $282,000 due to the impairment of marketable equity securities. No such losses were recognized in the period from September 26, 2003 through September 30, 2003 or the nine months ended September 30, 2002.

The Company has entered into financial arrangements with various customers and other parties in which the Company provides funding in the form of an equity investment in non-marketable securities or loans. These financial arrangements are comprised of direct and indirect investments. The indirect

investments are made through eight venture capital funds in which the Company is an investor. The Company’s portfolio in such transactions as of September 30, 2003 is as follows (in thousands):

Below is a table representing management’s estimate as of September 30, 2003 of the amount and timing of the above remaining funding commitments ($ in thousands):

The amount and timing of such funding events are subject to a number of different variables and may differ materially from management’s estimates.

The Company reviews the carrying value of each individual investment at each balance sheet date to determine whether or not an other-than-temporary decline in fair value has occurred. The Company employs alternative valuation techniques including: (1) the review of financial statements including assessments of liquidity, (2) the review of valuations available to the Company prepared by independent third parties used in raising capital, (3) the review of publicly available information including press releases and (4) direct communications with the investee’s management, as appropriate. If the review indicates that such a decline in fair value has occurred, the Company adjusts the carrying value to the estimated fair value of the investment and recognizes a loss for the amount of the adjustment. The Company recognized $10.3 million and $1.4 million of losses due to such impairments in the period from January 1, 2003 through September 25, 2003 and the nine months ended September 30, 2002, respectively, relating to non-marketable equity securities and loans mainly due to declining financial condition of investees that was deemed by management to be other-than-temporary.

The Company may from time to time acquire derivative instruments, primarily warrants, of companies in which a current market value is not readily available. As such, these instruments are included in deposits and other assets. When acquired, the Company records warrants at their fair value. Subsequently, warrants are marked to market each period with changes in their fair values being recognized as investment gains and losses in the accompanying statement of operations. As a result of subsequent evaluations and completion of the SCIO acquisition by Johnson & Johnson, Inc., the Company recognized a gain of $12.1 million on the warrant to acquire 700,000 shares of SCIO in the period from January 1, 2003 through September 25, 2003.

As of September 30, 2003, the Company held warrants from various contracts valued at $4.2 million which are included in the accompanying balance sheet as deposits and other assets. During the periods from January 1, 2003 through September 25, 2003 and September 26, 2003 through September 30, 2003,

the Company recognized investment revenues of $2.6 million and $213,000, respectively, related to changes in the fair value of the warrants.

During 2003, the Company entered into some exchange-traded option contracts; however, these contracts had expired as of September 30, 2003. During the period from January 1, 2003 through September 25, 2003, the Company recorded investment revenues of $87,000 related to changes in the fair value of the exchange-traded option contracts.

The Company has allocated approximately $406.2 million to intangible assets based upon a preliminary allocation of the purchase price of the assets acquired and the liabilities assumed in the Transaction. The fair values are preliminary and subject to refinement as information relative to the fair values as of September 25, 2003 becomes available.

Identifiable intangible assets consist primarily of software and customer relationships, which are amortized over the estimated useful life ranging from three to 10 years, and licensing and distribution rights, which are amortized ratably, based on estimated cash flows, over the life of the rights or service period ranging from five to 15 years. Amortization expense associated with identifiable intangible assets were as follows:

The following is a summary of identifiable intangible assets as of September 30, 2003 (in thousands):

Estimated amortization expense for existing identifiable intangible assets is targeted to be approximately $68.2 million, $55.5 million, $29.5 million, $21.3 million and $17.8 million for each of the years in the five-year period ending December 31, 2008, respectively. Estimated amortization expense can be affected by various factors including future acquisitions or divestitures of product and/or licensing and distribution rights.

In connection with the Transaction, the Company recorded approximately $192.4 million of goodwill. Pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets,” the goodwill resulting from the Transaction will not be amortized but will be subject to an annual impairment test. The Company’s Predecessor goodwill balance of approximately $70.1 million at December 31, 2002 was eliminated in purchase accounting.

Goodwill arising form the Transaction has been allocated to the Company’s segments on a preliminary basis as follows (in thousands):

The following is a summary of the credit facilities available to the Company at September 30, 2003:

The Company did not have any outstanding balances on these facilities at September 30, 2003.

Other notes payable include various notes payables, primarily in foreign currencies, with interest rates ranging between 1.875% and 12.92%.

Maturities of long-term debt and obligations at September 30, 2003 consist of the following (in thousands):

The fair value of the Company’s long-term debt approximates its carrying value.

At September 30, 2003, the Company is authorized to issue 125 million shares of common stock, $.01 per share par value.

The Company was authorized by its Board of Directors in March 2001 to repurchase up to $100 million of the Company’s Common Stock until March 1, 2002. On February 7, 2002, the Board of Directors extended this authorization until March 1, 2003. The authorization expired March 1, 2003. The Company did not repurchase any shares of its Common Stock during the period from January 1, 2003 through September 30, 2003.

No customer accounted for 10% of consolidated gross service revenues less reimbursed service costs for any period presented for 2003. One customer accounted for 10.9% and 11.7% of consolidated gross service revenues less reimbursed service costs for the three and nine months ended September 30, 2002, respectively. The revenues were derived from the product development, commercial services and informatics groups.

During the period from July 1, 2003 through September 25, 2003 in connection with the Transaction, the Company reviewed its estimates of restructuring plans adopted during 2002, 2001 and 2000. This review resulted in a decrease of $1.0 million and $310,000 in severance payments for a plan adopted in 2002 and 2001, respectively. The decrease in severance payments was a result of the number of actual voluntary employee terminations exceeding the Company’s estimates. In addition, there was an increase of $6.4 million and $421,000 in exit costs for abandoned leased facilities for a plan adopted in 2001 and 2000, respectively. The increase was due to several factors including: (1) an increase in management’s previously estimated time required to sublet, (2) a decrease in the expected price per square foot to sublet or (3) an increase in the estimated cost to otherwise terminate the Company’s obligation under those leases brought about by prolonged stagnant conditions in local real estate markets.

During the second quarter of 2002, the Company revised its estimates of the restructuring plan adopted during 2001 (“2001 Plan”) which resulted in a reduction of $9.1 million in accruals for the 2001 Plan. The reduction included approximately $5.7 million in severance payments and $3.4 million of exit costs. The reductions are primarily the result of a higher than expected number of voluntary terminations and the reversal of restructuring accruals due to the Company’s contribution of its informatics segment to the Verispan, L.L.C. joint venture.

Also during the second quarter of 2002, the Company recognized $9.1 million of restructuring charges as a result of the continued implementation of the strategic plan announced during 2001. This restructuring charge included revisions to the 2001 and 2000 restructuring plans of approximately $2.5 million and $1.9 million, respectively, due to a revision in the estimates for the exit costs relating to the abandoned leased facilities. In addition, the adopted follow-on restructuring plan (“2002 Plan”) consisted of $4.3 million related to severance payments, $310,000 related to exit costs and $112,000 of asset write-offs. As part of the 2002 Plan, approximately 99 positions are to be eliminated mostly in the Europe and Africa region. As of September 30, 2003, 89 individuals have been terminated.

As of September 25, 2003, the following amounts were recorded for the 2002 restructuring plans (in thousands):

There was no activity for the 2002 restructuring plans for the period from September 26, 2003 through September 30, 2003.

During the second quarter of 2001, the Company recognized a $2.1 million restructuring charge relating primarily to severance costs from the reorganization of the Internet initiative and the commercial services group in the United States. All of the 40 positions to be eliminated as part of this restructuring were terminated as of September 30, 2001.

During the third quarter of 2001, the Company recognized a $50.9 million restructuring charge. In addition, the Company recognized a restructuring charge of approximately $1.1 million as a revision of an estimate to a 2000 restructuring plan. The restructuring charge consisted of $31.1 million related to severance payments, $8.2 million related to asset impairment write-offs and $12.7 million of exit costs. As part of this restructuring, approximately 1,000 positions worldwide were to be eliminated and as of September 30, 2003, all individuals which were to be terminated under this plan have been terminated. In certain circumstances, international regulations and restrictions have caused the terminations to extend beyond one year. Positions have been eliminated in each of the segments.

As of September 25, 2003, the following amounts were recorded for the 2001 restructuring plans (in thousands):

There was no activity for the 2001 restructuring plans for the period from September 26, 2003 through September 30, 2003.

In January 2000, the Company announced the adoption of a restructuring plan (“January 2000 Plan”). In connection with this plan, the Company recognized a restructuring charge of $58.6 million. The restructuring charge consisted of $33.2 million related to severance payments, $11.3 million related to asset impairment write-offs and $14.0 million of exit costs. As part of this plan, approximately 770 positions worldwide were eliminated as of December 31, 2001. Although positions eliminated were across all functions, most of the eliminated positions were in the product development group.

In the fourth quarter of 2000, the Company revised its estimates of the January 2000 Plan. This revision resulted in a reduction of the January 2000 Plan of $6.9 million. This reduction included $6.3 million in severance payments and $632,000 in exit costs. The severance reduction resulted primarily from a higher than expected number of voluntary terminations, reduced outplacement costs and related fringes.

Also, during the fourth quarter of 2000, management conducted a detailed review of the resource levels within each business group. Based on this review, the Company adopted a follow-on restructuring plan (“2000 Follow-On Plan”) resulting in a restructuring charge of $7.1 million. The restructuring charge consisted of $5.8 million related to severance payments and $1.3 million related to exit costs. As part of this plan, approximately 220 positions were to be eliminated mostly in the commercial services group. As of September 30, 2003, all individuals which were to be terminated under this plan have been terminated. In certain circumstances, international regulations and restrictions have caused the terminations to extend beyond one year.

As of September 25, 2003, the following amounts were recorded for the 2000 restructuring plans (in thousands):

There was no activity for the 2000 restructuring plans for the period from September 26, 2003 through September 30, 2003.

As a result of the September 25, 2003 Transaction, the net book values of the Company’s assets and liabilities have been reestablished. Accordingly, deferred income taxes have been provided, based upon the preliminary purchase allocation which is subject to change, at September 30, 2003 based upon these reestablished values.

The components of income tax expense (benefit) attributable to continuing operations are as follows (in thousands):

The differences between the Company’s consolidated income tax expense (benefit) attributable to continuing operations and the expense (benefit) computed at the 35% U.S. statutory income tax rate were as follows (in thousands):

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $239.6 million at September 30, 2003. As a result of the significant debt service requirements and other costs relating to the Transaction, those earnings are no longer considered to be indefinitely reinvested and, accordingly, the Company has recorded a deferred income tax liability of $83.4 million based upon the U.S. federal income tax rate. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various countries.

The income tax effects of temporary differences from continuing operations that give rise to significant portions of deferred income tax assets (liabilities) are presented below (in thousands):

The Company’s valuation allowance of $124.5 million for deferred income tax assets increased by $105.1 million during 2003 due to the uncertainty related to realization of the deferred income tax asset

for certain federal, state, and foreign net operating and capital losses. This uncertainty arose from the significant debt service requirements and other costs relating to the Transaction and its expected impact on the Company’s future operating results.

The Company’s deferred income tax expense (benefit) attributable to continuing operations results from the following (in thousands):

There was no deferred income tax expense (benefit) for the period September 26, 2003 through September 30, 2003.

The following table sets forth the computation of the weighted-average shares used when calculating the basic and diluted net income per share (in thousands):

Options to purchase 14.8 million shares of the Company’s Common Stock that were outstanding during the period of July 1, 2003 through September 25, 2003, were not included in the computation of diluted net (loss) income per share because the effect on net loss would have been antidilutive. Options to purchase approximately 20.6 million shares of the Company’s Common Stock were outstanding during the period of January 1 through September 25, 2003, but were not included in the computation of diluted net income per share because the options’ exercise price was greater than the average market price of the

Company’s Common Stock and, therefore, the effect would be antidilutive. The Company did not have any outstanding stock options for the period of September 26 through September 30, 2003.

The following table represents the Company’s comprehensive income (in thousands):

The following table presents the Company’s operations by reportable segment. The Company is managed through three reportable segments, namely, the product development group, the commercial services group, and the PharmaBio Development group. The informatics group was transferred to a joint venture in May 2002. Management has distinguished these segments based on the normal operations of the Company. The product development group is primarily responsible for all phases of clinical research and outcomes research consulting. The commercial services group is primarily responsible for sales force deployment and strategic marketing services. Before being transferred to the joint venture, the informatics group was primarily responsible for providing market research solutions and strategic analysis to support healthcare decisions. The PharmaBio Development group is primarily responsible for facilitating non-traditional customer alliances and its results consist primarily of product revenues, royalties and commissions and investment revenues relating to the financial arrangements with customers and other third parties. The Company does not include general and administrative expenses, depreciation and amortization except amortization of commercial rights, interest (income) expense, other (income) expense and income

tax expense (benefit) in determining segment profitability. Intersegment revenues have been eliminated (in thousands):

Total assets by segment will change as a result of the Transaction. As the Company’s valuation is preliminary, the Company has not determined the total assets by segment.

negligence and loss of consortium as to class member spouses. The complaint seeks unspecified damages, plus costs and expenses, including attorneys’ fees and experts’ fees. On September 27, 2003, the parties entered into a settlement memorandum following a mediated settlement conference. The parties are in the process of preparing final settlement documents, which would memorialize payments by several defendants to individual study participants or their representatives. The Company believes that its contribution will be covered by insurance or, in the alternative, will not represent a material amount to the Company.

On January 22, 2002, Federal Insurance Company (“Federal”) and Chubb Custom Insurance Company (“Chubb”) filed suit against the Company, Quintiles Pacific, Inc. and Quintiles Laboratories Limited, two of the Company’s subsidiaries, in the United States District Court for the Northern District of Georgia. In the suit, Chubb, the Company’s primary commercial general liability carrier, and Federal, the Company’s excess liability carrier, seek to rescind the policies issued to the Company for coverage years 2000-2001 and 2001-2002 based on an alleged misrepresentation by the Company on the policy application. Alternatively, Chubb and Federal seek a declaratory judgment that there is no coverage under the policies for some or all of the claims asserted against the Company and its subsidiaries in the class action lawsuit filed on January 26, 2001 and described above and, if one or more of such claims is determined to be covered, Chubb and Federal request an allocation of the defense costs between the claims they contend are covered and non-covered claims. The Company has filed an answer with counterclaims against Federal and Chubb in response to their complaint. Additionally, the Company has amended its pleadings to add AON Risk Services (“AON”) as a counterclaim defendant, as an alternative to the Company’s position that Federal and Chubb are liable under the policies. In order to preserve its rights, on March 27, 2003, the Company also filed a separate action against AON in the United States District Court for the Middle District of North Carolina. The Company believes the allegations made by Federal and Chubb are without merit and is defending this case vigorously.

In October 2002, seven purported class action lawsuits were filed in Superior Court, Durham County, North Carolina by certain of the Company’s shareholders seeking to enjoin the consummation of the initial transaction proposed by Pharma Services Company (a company controlled by Dennis B. Gillings, Ph.D.) to acquire all the Company’s outstanding shares for $11.25 per share in cash. All of the lawsuits were subsequently transferred to the North Carolina Business Court. The lawsuits name as defendants Dr. Gillings, other members of the Company’s Board of Directors, the Company and, in some cases Pharma Services Company. The complaints allege, among other things, a breach of fiduciary duties by the directors with respect to the proposal. The complaints seek to enjoin the transaction proposed by Pharma Services Company, and the plaintiffs seek to recover damages. On November 11, 2002, a Special Committee of the Company’s Board of Directors announced its rejection of the proposal by Pharma Services Company and its intention to investigate strategic alternatives available to the Company for purposes of enhancing shareholder value, including the possibility of a sale of the Company and alternatives that would keep the Company independent and publicly owned. On January 6, 2003, the North Carolina Business Court entered a Case Management Order consolidating all seven lawsuits for all purposes and staying the lawsuits until March 29, 2003 or until the Company provides notice of a change-of-control transaction.

Compromise, Settlement and Release (the “Stipulation of Settlement”). On August 29, 2003, the Court entered an Order for Notice and Hearing on Settlement of Class Action (“Order for Notice”) and a Notice of Pendency of Class Action, Preliminary and Proposed Class Action Certification, Proposed Settlement of Class Action, Settlement Hearing and Right to Appear (the “Class Notice”). The Class Notice sets a hearing date of October 10, 2003 (the “Settlement Hearing”) to determine whether the Court should approve the settlement as fair, adequate and in the best interest of the settlement class, end the action, and to consider other matters including a request by plaintiffs’ counsel for attorneys’ fees and reimbursement of costs, in an amount not to exceed a total of $450,000. In accordance with the terms of the Order of Notice, the Company mailed the Class Notice to the record holders of the Company’s common stock and options, as of the record date of August 19, 2003. A special meeting of the shareholders was held on September 25, 2003, at which time the shareholders approved the proposed transaction and the merger was consummated. On October 10, 2003, the Court certified a class for purposes of the settlement, approved the settlement as fair and reasonable and entered an Order and Final Judgment dismissing the lawsuit with prejudice. The Court also awarded plaintiff’s counsel $450,000 in attorneys’ fees and costs, which are to be paid by the Company pursuant to the terms of the settlement. No other payments are required from the Company or any other party under the terms of the settlement and the Court’s Order.

On June 13, 2003, ENVOY Corporation (“ENVOY”) and Federal filed suit against the Company, in the United States District Court for the Middle District of Tennessee. One or both plaintiffs in this case have alleged claims for breach of contract, contractual subrogation, equitable subrogation, and equitable contribution. Plaintiffs reached settlement in principle, in the amount of $11 million, of the case pending in the same court captioned In Re Envoy Corporation Securities Litigation, Case No. 3-98-0760 (the “Envoy Securities Litigation”). Plaintiffs claim that the Company is responsible for payment of the settlement amount and associated fees and costs in the Envoy Securities Litigation based on merger and settlement agreements between WebMD Corporation, ENVOY and the Company. The Company has filed a motion to dismiss the suit, and the plaintiffs have filed motions for summary judgment. These motions are pending before the court. All parties have agreed to a stay of discovery. The Company believes that the allegations made by ENVOY and Federal are without merit and intends to defend the case vigorously.

The Company also is party to other legal proceedings incidental to its business. While the Company’s management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations for the period in which the ruling occurs.

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities”, which requires the assets, liabilities and results of operations of variable interest entities (“VIE”) be consolidated into the financial statements of the company that has controlling financial interest. FIN 46 also provides the framework for determining whether a VIE should be consolidated based on voting interest or significant financial support provided to the VIE. The Company adopted these provisions, as required, with respect to VIEs created after January 31, 2003. The effective date for applying the provisions of FIN 46 for interests held by public entities in VIEs or potential VIEs created before February 1, 2003 has been deferred and will be effective as of December 31, 2003. The Company is currently evaluating the impact of FIN 46 on these interests held prior to February 1, 2003.

Information set forth in this Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains various “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent our judgment concerning the future and are subject to risks and uncertainties that could cause our actual operating results and financial position to differ materially. Such forward looking statements can be identified by the use of forward looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” or “target” or the negative thereof or other variations thereof or comparable terminology.

We caution you that any such forward looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward looking statements, including without limitation, the risk that our substantial debt could adversely affect our financial condition, the limitations on the operation of our business imposed by the covenants contained in the senior subordinated notes and the senior secured facility, the risk that the market for our products and services will not grow as we expect, the risk that our PharmaBio Development transactions will not generate revenues, profits or return on investment at the rate or levels we expect or that royalty revenues under our PharmaBio Development arrangements may not be adequate to offset our upfront and on-going expenses in providing sales and marketing services or in making milestone and marketing payments, our ability to efficiently distribute backlog among project management groups and match demand to resources, our actual operating performance, variation in the actual savings and operating improvements resulting from previous restructurings, our ability to maintain large customer contracts or to enter into new contracts, changes in trends in the pharmaceutical industry, our ability to operate successfully a new line of business, the risk that Verispan, our joint venture with McKesson Corporation relating to the informatics business, will not be successful, and liability risks associated with our business which could result in losses or indemnity to others not covered by insurance. See “Risk Factors” below for additional factors that could cause actual results to differ.

As a result of the going-private merger transaction, the Condensed Consolidated Financial Statements present our results of operations, financial position and cash flows prior to the date of the merger transaction as the “Predecessor.” The financial effects of the going-private merger transaction and our results of operations, financial position and cash flows following the closing of the Transaction are presented as the “Successor.” In accordance with generally accepted accounting principles in the United States, or GAAP, our predecessor results have not been aggregated with our successor results and, accordingly, our Condensed Consolidated Financial Statements do not show results of operations or cash flows for the three or nine months ended September 30, 2003. However, in order to facilitate an understanding of our results of operations for the three and nine months ended September 30, 2003 in comparison with the three and nine months ended September 30, 2002, in this section our predecessor results and our successor results are presented and discussed on a combined basis. The combined results of operations are non-GAAP financial measures and should not be used in isolation or substitution of the Predecessor and Successor results.

Below is a reconciliation of the combined results for the three and nine months ended September 30, 2003:

Below is a reconciliation of the results by segment on a combined basis for the three and nine months ended September 30, 2003:

Below is a reconciliation of certain items of the combined statement of cash flows for the nine months ended September 30, 2003:

Gross revenues for the third quarter of 2003 were $490.2 million versus $491.0 million for the third quarter of 2002. Gross revenues include service revenues, revenues from commercial rights and royalties and revenues from investments. Net revenues are gross revenues less reimbursed service costs. Reimbursed service costs may fluctuate due, in part, to the payment provisions of the respective service contract. Below is a summary of revenues (in thousands):


	•	Service revenues were $448.0 million for the third quarter of 2003 compared to $458.8 million for the third quarter of 2002. Service revenues less reimbursed service costs, or net service revenues, for


		the third quarter of 2003 were $366.9 million, a slight increase of $2.2 million or 0.6% over net service revenues of $364.8 million for the third quarter of 2002. Net service revenues for the third quarter of 2003 were positively impacted by approximately $15.7 million due to the effect of the weakening of the US Dollar relative to the euro, the British pound, the South African Rand and the Japanese yen. Net service revenues increased in the Asia Pacific region $9.8 million or 19.3% to $60.4 million for the third quarter of 2003 from the third quarter of 2002 including a positive impact of approximately $1.9 million due to the effect of foreign currency fluctuations. Net service revenues decreased $3.3 million or (2.0%) to $161.2 million for the third quarter of 2003 from the third quarter of 2002 in the Europe and Africa region although it was positively impacted by approximately $13.7 million due to the effect of foreign currency fluctuations. The commercial services group experienced difficult business conditions with our syndicated sales forces in two of the countries, primarily the United Kingdom and France. Net service revenues decreased $4.3 million or (2.8%) to $145.4 million for the third quarter of 2003 from the third quarter of 2002 in the Americas region.

	•	Commercial rights and royalties revenues, which include product revenues, royalties and commissions, for the third quarter of 2003 were $43.1 million, an increase of $14.4 million over third quarter 2002 commercial rights and royalties revenues of $28.7 million. Commercial rights and royalties revenues were positively impacted by approximately $2.0 million due to the effect of foreign currency fluctuations related to the weakening of the US Dollar relative to the euro. Commercial rights and royalties revenues for the third quarter of 2003 were reduced by approximately $1.6 million versus $4.3 million for the third quarter of 2002 for payments made by us to our customers. These payments are considered incentives and are amortized against revenues over the service period of the contract. The $14.4 million increase is primarily the result of (1) our contracts with Kos Pharmaceuticals, Inc., or KOSP, and Columbia Labs, Inc., or COB, which contributed $11.1 million during the third quarter of 2003 versus $5.4 million during the third quarter of 2002, (2) contracts in Europe with two large pharmaceutical customers which contributed approximately $8.6 million of revenues during the third quarter of 2003 versus $7.3 million during the third quarter of 2002 and (3) our contract and subsequent termination agreement with SCIO which contributed $15.9 million of revenues during the third quarter of 2003 versus $8.5 million during the third quarter of 2002. For the third quarter of 2003, approximately 36.9% of our commercial rights and royalties revenues was attributable to the termination of our contract with SCIO, approximately 25.7% was attributable to our contracts with KOSP and COB, approximately 20.0% was attributable to our contracts with two large pharmaceutical customers in Europe, approximately 13.0% was attributable to our suite of dermatology products, and the remaining 4.3% was attributable to miscellaneous contracts and activities.

	•	Investment revenues related to our PharmaBio Development group’s financing arrangements, which include gains and losses from the sale of equity securities and impairments from other-than-temporary declines in the fair values of our direct and indirect investments, for the third quarter of 2003 were a loss of ($873,000) versus a gain of $3.5 million for the third quarter of 2002. Investment revenues for the third quarter of 2003 included gross realized gains of $4.4 million from the sale of a portion of our equity investments, primarily in The Medicines Company, or MDCO. In addition, during the third quarter of 2003, we recognized $7.8 million of impairment losses on investments whose decline in fair value was considered to be other-than-temporary.

Costs of revenues were $322.7 million for the third quarter of 2003 versus $330.1 million for the third quarter of 2002. Below is a summary of the costs of revenues (in thousands):


	•	Reimbursed service costs were $81.0 million and $94.1 million for the third quarter of 2003 and 2002, respectively.

	•	Service costs, which include compensation and benefits for billable employees, and certain other expenses directly related to service contracts, were $190.3 million or 51.9% of net service revenues versus $186.1 million or 51.0% of net service revenues for the third quarter of 2003 and 2002, respectively. Bonus expense included in service costs decreased approximately $1.0 million in the third quarter of 2003 as compared to the third quarter of 2002. Service costs were negatively impacted by approximately $8.4 million from the effect of foreign currency fluctuations.

	•	Commercial rights and royalties costs, which include compensation and related benefits for employees, amortization of commercial rights, infrastructure costs of the PharmaBio Development group and other expenses directly related to commercial rights and royalties, were $31.3 million for the third quarter of 2003 versus $29.1 million for the third quarter of 2002. These costs include services and products provided by third parties, as well as services provided by our other service groups, totaling approximately $11.3 million and $13.2 million for the third quarter of 2003 and 2002, respectively.

	•	Investment costs, which include costs directly related to direct and indirect investments in our customers or other strategic partners as part of the PharmaBio Development group’s financing arrangements, were $38,000 for the third quarter of 2002.

	•	Depreciation and amortization, which include depreciation of our property and equipment and amortization of our definite-lived intangible assets except commercial rights, decreased slightly to $20.2 million for the third quarter of 2003 versus $20.8 million for the third quarter of 2002.

General and administrative expenses, which include compensation and benefits for administrative employees, non-billable travel, professional services, and expenses for advertising, information technology and facilities, were $135.1 million or 33.0% of total net revenues for the third quarter of 2003 versus $128.8 million or 32.5% of total net revenues for the third quarter of 2002. General and administrative expenses were negatively impacted by approximately $5.4 million resulting from the effect of foreign currency fluctuations, primarily the euro and British pound. Bonus expense included in general and administrative expenses decreased approximately $1.3 million in the third quarter of 2003 as compared to the third quarter of 2002.

Net interest income, which represents interest income received from bank balances and investments in debt securities, and the accretion of discounts provided pursuant to commercial rights and royalties assets relating to certain PharmaBio contracts, net of interest expense incurred on lines of credit, notes and capital leases, was $1.2 million for the third quarter of 2003 versus $3.3 million for the third quarter of 2002. Interest income decreased approximately $1.1 million to $2.9 million for the third quarter of 2003 as a result of the decline in interest rates. Interest expense increased approximately $961,000 as a result of the $760.0 million of debt incurred in connection with the going-private merger transaction.

Other income was $292,000 for the third quarter of 2003 versus other expense of $1.5 million for the third quarter of 2002. The third quarter of 2002 included losses of approximately $1.1 million on the disposal of assets.

We recognized $50.3 million of transaction expenses and restructuring charges for the third quarter of 2003 which consisted of approximately $44.8 million of transaction related expenses including expenses of the special committee of our Board of Directors and its financial and legal advisors and a $5.5 million restructuring charge. During the third quarter of 2003 in connection with our going-private merger transaction, we reviewed our estimates of the restructuring plans we adopted in prior years. This review resulted in a net increase of approximately $5.5 million in our accruals, including an increase of $6.8 million in exit costs for abandoned leased facilities and a decrease of approximately $1.3 million for severance payments. The decrease in severance payments is a result of the number of actual voluntary employee terminations exceeding our estimates.

Loss before income taxes was $16.3 million for the third quarter of 2003 versus income before income taxes of $33.8 million or 8.5% of total net revenues for the third quarter of 2002.

The effective income tax rate was (2.7%) for the third quarter of 2003 versus 34.3% for the third quarter of 2002. Our effective income tax rate was negatively impacted by the repatriation of cash in connection with the going-private merger transaction for which no foreign tax credits were available and the transaction related expenses some of which were not deductible for income tax purposes. Since we conduct operations on a global basis, our effective income tax rate may vary.

During the third quarter of 2003, we recognized $10,000 of income from equity in unconsolidated affiliates and other which represents our pro rata share of the net income of unconsolidated affiliates, primarily Verispan’s net income, net of a minority interest in a consolidated subsidiary.

Net loss was $16.8 million for the third quarter of 2003 versus net income of $21.2 million for the third quarter of 2002.

The following table summarizes the operating activities for our reportable segments for the third quarter of 2003 and 2002, respectively. We do not include reimbursed service costs, general and administrative expenses, depreciation and amortization except amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in our segment analysis. Intersegment revenues have been eliminated and the profit on intersegment revenues is reported within the service group providing the services (dollars in millions).

Net service revenues for the product development group were $245.2 million for the third quarter of 2003 compared to $242.3 million for the third quarter of 2002. Net service revenues for the third quarter of 2003 were positively impacted by approximately $10.2 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $2.2 million or 8.6% to $27.6 million including a positive impact of approximately $772,000 due to the effect of foreign currency fluctuations. Net service revenues increased $9.8 million or 10.0% to $107.6 million in the Europe and Africa region primarily as a result of the positive impact of approximately $8.9 million due to the effect of foreign

currency fluctuations. Net service revenues decreased $9.1 million or (7.6%) to $110.0 million in the Americas region primarily as a result of increased competition.

Contribution for the product development group was $127.3 million for the third quarter of 2003 compared to $125.9 million for the third quarter of 2002. As a percentage of net service revenues, contribution margin was 51.9% for the third quarter of 2003 compared to 52.0% for the third quarter of 2002. Our product development group experiences slight fluctuations in contribution as a percent of net service revenues from period to period as a result of executed contract scope changes and the timing of project expenses for which revenue is not recognized such as start-up or setup costs.

Net service revenues for the commercial services group were $133.0 million for the third quarter of 2003 compared to $135.6 million for the third quarter of 2002. Net service revenues for the third quarter of 2003 were positively impacted by approximately $5.7 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $7.7 million or 33.9% to $30.3 million, which was positively impacted by $1.1 million due to the effect of foreign currency fluctuations. Net service revenues decreased by approximately $4.3 million or (7.1%) to $55.6 million in the Europe and Africa region although it was positively impacted by $4.8 million due to the effect of foreign currency fluctuations. We continued to experience difficult business conditions with our syndicated sales forces in two of the markets, primarily the United Kingdom and France. Net service revenues decreased $6.0 million or (11.3%) to $47.1 million in the Americas region representing the continuation of a trend resulting from reductions in new product launches and increases in the number of drugs losing patent protection.

Contribution for the commercial services group was $49.3 million for the third quarter of 2003 compared to $52.8 million for the third quarter of 2002. As a percentage of net service revenues, contribution margin was 37.1% for the third quarter of 2003 compared to 38.9% for the third quarter of 2002. The decrease in contribution primarily resulted from the difficult business conditions for our syndicated sales forces which consist of costs which are fixed and, therefore, do not increase or decrease in proportion to the revenue generated by these sales forces.

Net revenues for the PharmaBio Development group increased approximately $10.1 million during the third quarter of 2003 as compared to the third quarter of 2002 due to a $14.4 million increase in commercial rights and royalties revenues which was partially offset by a $4.3 million decrease in investment revenues. Although revenues related to the Bioglan dermatology products remained relatively constant for the quarter ended September 30, 2003 when compared to the same period in 2002, this group experienced a decrease in Bioglan revenues when compared to the first two quarters of 2003. This decrease is due to the normalization of inventory levels at the drug distributors as a result of increases in distributor purchases during the first half of 2003. The commercial rights and royalties costs increased by approximately $2.2 million during the same period primarily as a result of several factors including $4.6 million of costs associated with the marketing of Solaraze^TM and ADOXA^TM for the third quarter of 2003 as compared to $3.0 million for the third quarter of 2002. These factors were partially offset by a decrease of approximately $1.9 million in service costs provided by our commercial services group relating primarily to the completion of the service portion of our contract with SCIO.

The contribution for the PharmaBio Development group increased by $7.9 million from the third quarter of 2002 to the third quarter of 2003. The commercial rights and royalties revenues (net of related costs) in the third quarter of 2003 increased the contribution of this group by approximately $12.2 million when compared to the third quarter of 2002 due to the successful performance of our commercial rights and royalties contracts including the SCIO royalty contract termination agreement. The contribution from the commercial rights and royalties revenues was negatively impacted by costs of approximately $2.1 million related to the Cymbalta^TM contract for which no revenues are being recognized. Investment revenues (net of related costs) in the third quarter of 2003 decreased the contribution of this group by approximately $4.3 million when compared to the third quarter of 2002.

Gross revenues for the first nine months of 2003 were $1.52 billion versus $1.48 billion for the first nine months of 2002. Below is a summary of revenues (in thousands):


	•	Service revenues were $1.39 billion for the first nine months of 2003 compared to $1.40 billion for the first nine months of 2002. Service revenues less reimbursed service costs, or net service revenues, for the first nine months of 2003 were $1.11 billion, an increase of $10.0 million or 0.9% over net service revenues of $1.10 billion for the first nine months of 2002. Included in net service revenues for the first nine months of 2002 was $20.3 million from our informatics group, which was transferred to a joint venture during May 2002 and, therefore, there were no net service revenues from that group for the first nine months of 2003. Net service revenues for the first nine months of 2003 were positively impacted by approximately $70.1 million due to the effect of the weakening of the US Dollar relative to the euro, the British pound, the South African Rand and the Japanese yen. Net service revenues increased in the Asia Pacific region $30.6 million or 22.1% to $169.3 million for the first nine months of 2003 from the first nine months of 2002 and was positively impacted by approximately $10.3 million due to the effect of foreign currency fluctuations. Net service revenues increased $42.6 million or 9.1% to $513.4 million for the first nine months of 2003 from the first nine months of 2002 in the Europe and Africa region, which was positively impacted by $60.4 million due to the effect of foreign currency fluctuations. The commercial services group experienced difficult business conditions with our syndicated sales forces in two markets, primarily the United Kingdom and France. Net service revenues decreased $63.2 million or (12.8%) to $432.3 million for the first nine months of 2003 from the first nine months of 2002 in the Americas region.

	•	Commercial rights and royalties revenues for the first nine months of 2003 were $106.3 million, an increase of $40.5 million over the first nine months of 2002 commercial rights and royalties revenues of $65.9 million. Commercial rights and royalties revenues were positively impacted by approximately $9.7 million primarily due to the effect of foreign currency fluctuations related to the weakening of the US Dollar relative to the euro. Commercial rights and royalties revenues for the first nine months of 2003 were reduced by approximately $2.2 million versus $11.6 million for the first nine months of 2002 for payments made by us to our customers. These payments are considered incentives and are amortized against revenues over the service period of the contract. The $40.5 million increase is primarily the result of (1) our March 2002 acquisition of certain assets of Bioglan Pharma, Inc., or Bioglan, and its successful launch of dermatology products which contributed approximately $34.2 million of revenues for the first nine months of 2003 versus $10.3 million for the first nine months of 2002, (2) our contracts with KOSP and COB, which contributed approximately $25.8 million of revenues for the first nine months of 2003 versus $15.3 million for the first nine months of 2002, and (3) our contracts in Europe with two large pharmaceutical customers which contributed approximately $27.4 million of revenues for the first nine months of 2003 versus $12.1 million for the first nine months of 2002. These increases were partially offset by a reduction in revenue of approximately $7.6 million as a result of the completion of the services portion of our SCIO contract during the fourth quarter of 2002 and a $1.7 million


		decrease in revenues from miscellaneous contracts. For the first nine months of 2003, approximately 32.1% of our commercial rights and royalties revenues was attributable to our suite of dermatology products, approximately 25.8% was attributable to our contracts with two large pharmaceutical customers in Europe, approximately 24.2% was attributable to our contracts with KOSP and COB, approximately 15.0% was attributable to the termination of the SCIO contract, and the remaining 2.9% was attributable to miscellaneous contracts and activities.

	•	Investment revenues related to our PharmaBio Development group’s financing arrangements for the first nine months of 2003 were $28.4 million versus $14.6 million for the first nine months of 2002. Investment revenues for the first nine months of 2003 included $23.4 million of gains on the sale of equity investments in Triangle Pharmaceuticals, Inc., or VIRS, MDCO and CVTX, and a $12.1 million gain on the warrants to acquire 700,000 shares of SCIO as a result of the acquisition of SCIO by Johnson & Johnson, Inc. During the first nine months of 2003 and 2002, we recognized $10.6 million and $1.4 million, respectively, of impairment losses on investments whose decline in fair value was considered to be other than temporary.


	Costs of revenues were $1.01 billion for the first nine months of 2003 versus $1.02 billion for the first nine months of 2002. Below is a summary of the costs of revenues (in thousands):


	•	Reimbursed service costs were $272.1 million and $297.1 million for the first nine months of 2003 and 2002, respectively.

	•	Service costs were $588.2 million or 52.8% of net service revenues versus $589.7 million or 53.4% of net service revenues for the first nine months of 2003 and 2002, respectively. Service costs were negatively impacted by approximately $37.3 million from the effect of foreign currency fluctuations. Bonus expense included in service costs increased approximately $2.2 million in the nine months ended September 30, 2003 as compared to the nine months ended September 30, 2002 as a result of our migration to a cash-based incentive program for our employees. The reduction in service costs, as a percentage of net service revenues, is primarily a result of the residual effect of our process enhancements and cost reduction efforts.

	•	Commercial rights and royalties costs were $91.6 million for the first nine months of 2003 versus $69.9 million for the first nine months of 2002. These costs include services and products provided by third parties, as well as services provided by our other service groups, totaling approximately $30.3 million and $36.7 million for the first nine months of 2003 and 2002, respectively. The nine months ended September 30, 2003 includes nine months of expenses of our Bioglan operations, which we acquired in March 2002, as well as the costs related to the launch and marketing of Solaraze^TM and ADOXA^TM and our contracts in Europe with two large pharmaceutical customers.

	•	Investment costs were $217,000 for the first nine months of 2002.

	•	Depreciation and amortization decreased to $60.8 million for the first nine months of 2003 versus $63.5 million for the first nine months of 2002. This decrease is primarily a result of the transfer of our informatics group to Verispan.

General and administrative expenses were $403.3 million or 32.3% of total net revenues for the first nine months of 2003 versus $382.0 million or 32.2% of total net revenues for the first nine months of 2002. General and administrative expenses increased approximately $21.3 million primarily due to a $1.5 million increase in expenses associated with changes to our employee cash-based incentive program and the negative impact of approximately $24.5 million as a result of the effect of foreign currency fluctuations. These increases offset the reduction of approximately $8.6 million due to the transfer of our informatics group into the Verispan joint venture.

Net interest income was $9.3 million for the first nine months of 2003 versus $10.0 million for the first nine months of 2002.

Other income was $5.7 million for the first nine months of 2003 versus other expense of $344,000 for the first nine months of 2002. Included in the nine months ended September 30, 2003 were approximately $4.2 million in foreign currency translation gains.

We recognized $54.1 million of transaction expenses and restructuring charges during the nine months ended September 30, 2003 which consisted of $48.7 million of transaction related expenses including expenses of the special committee of our Board of Directors and its financial and legal advisors and a $5.5 million restructuring charge. During the third quarter of 2003 in connection with our going-private merger transaction, we reviewed our estimates of the restructuring plans we adopted in prior years. This review resulted in a net increase of approximately $5.5 million in our accruals, including an increase of $6.8 million in exit costs for abandoned leased facilities and a decrease of approximately $1.3 million for severance payments. The decrease in severance payments is a result of the number of actual voluntary employee terminations exceeding our estimates.

Income before income taxes was $66.6 million or 5.3% of total net revenues for the first nine months of 2003 versus $89.6 million or 7.6% of total net revenues for the first nine months of 2002.

The effective income tax rate was 43.0% for the first nine months of 2003 versus 33.5% for the first nine months of 2002. Our effective income tax rate was negatively impacted by the repatriation of cash in connection with the going-private merger transaction for which no foreign tax credits were available and the transaction related expenses some of which were not deductible for income tax purposes. Since we conduct operations on a global basis, our effective income tax rate may vary.

During the first nine months of 2003 and 2002, respectively, we recognized $26,000 and ($540,000) of earnings (losses) from equity in unconsolidated affiliates and other which represents our pro rata share of the net income of unconsolidated affiliates, primarily Verispan’s net income (loss), net of a minority interest in a consolidated subsidiary.

Effective January 2002, we changed our method for calculating deferred income taxes related to our multi-jurisdictional tax transactions. Under the previous method, we followed an incremental approach to measuring the deferred income tax benefit of our multi-jurisdictional transactions. Under this approach, we considered the income tax benefit from the step-up in tax basis, net of any potential incremental foreign income tax consequences determined by projecting taxable income, foreign source income, foreign tax credit provisions and the interplay of these items among and between their respective tax jurisdictions, based on different levels of intercompany foreign debt. Under the new method, we record deferred income taxes only for the future income tax impact of book and tax basis differences created as a result of multi-jurisdictional transactions. We believe the new method has become more widely used in practice and is preferable because it eliminates the subjectivity and complexities involved in determining the timing and amount of the release or reversal of the valuation allowance under the prior method. In order to effect this change, we recorded a cumulative effect adjustment of $45.7 million in the first quarter of 2002 which represents the reversal of the valuation allowance related to deferred income taxes on these multi-jurisdictional income tax transactions.

Net income was $38.0 million for the first nine months of 2003 versus $104.7 million for the first nine months of 2002. The net income for the first nine months of 2002 included $45.7 million for the cumulative effect of changing to a different method of recognizing deferred income taxes.

The following table summarizes the operating activities for our reportable segments for the first nine months of 2003 and 2002, respectively. We do not include reimbursed service costs, general and administrative expenses, depreciation and amortization except amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in our segment analysis. Intersegment revenues have been eliminated and the profit on intersegment revenues is reported within the service group providing the services (dollars in millions).

Net service revenues for the product development group were $746.6 million for the first nine months of 2003 compared to $704.0 million for the first nine months of 2002. Net service revenues for the first nine months of 2003 were positively impacted by approximately $44.5 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $11.6 million or 16.6% to $81.3 million including a positive impact of approximately $4.9 million due to the effect of foreign currency fluctuations. Net service revenues increased $42.7 million or 15.2% to $323.1 million in the Europe and Africa region primarily as a result of the positive impact of approximately $38.9 million due to the effect of foreign currency fluctuations. Net service revenues decreased $11.7 million or (3.3%) to $342.2 million in the Americas region primarily as a result of increased competition.

Contribution for the product development group was $381.7 million for the first nine months of 2003 compared to $354.0 million for the first nine months of 2002. As a percentage of net service revenues, contribution margin was 51.1% for the first nine months of 2003 compared to 50.3% for the first nine months of 2002. Our product development group experiences slight fluctuations in contribution as a percent of net service revenues from period to period as a result of executed contract scope changes and the timing of project expenses for which revenue is not recognized such as start-up or setup costs. We believe this group has realized most of the efficiencies which we originally set out to achieve from the prior year’s restructurings.

Net service revenues for the commercial services group were $398.6 million for the first nine months of 2003 compared to $417.3 million for the first nine months of 2002. Net service revenues for the first nine months of 2003 were positively impacted by approximately $26.3 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific region $19.9 million or 32.5% to $81.0 million, which was positively impacted by $5.2 million due to the effect of foreign currency fluctuations. Net service revenues decreased $5.8 million or (3.3%) to $169.1 million in the Europe and Africa region although it was positively impacted by $21.7 million due to the effect of foreign currency fluctuations. We experienced difficult business conditions with our syndicated sales forces in two of the markets, primarily the United Kingdom and France. Net service revenues decreased $32.7 million or (18.1%) to $148.5 million in the Americas region representing the continuation of a trend resulting from reductions in new product launches and increases in the number of drugs losing patent protection.

Contribution for the commercial services group was $145.0 million for the first nine months of 2003 compared to $153.1 million for the first nine months of 2002. As a percentage of net service revenues, contribution margin was 36.4% for the first nine months of 2003 compared to 36.7% for the first nine months of 2002. The improvement related to our reduction in billable headcount due to our continuation of a migration from dependency on large primary care sales forces with low margins to a balanced mix of

strategic consulting services and specialty sales forces with greater margins was offset by the effects of the difficult business conditions with our syndicated sales forces.

Net revenues for the PharmaBio Development group increased approximately $54.3 million during the first nine months of 2003 as compared to the first nine months of 2002 due to a $40.5 million increase in commercial rights and royalties revenues and a $13.8 million increase in investment revenues. This group benefited in the first half of 2003 from drug distributors increasing their inventory levels through purchases of Bioglan products. During the third quarter of 2003, we experienced a decrease in revenues as inventory levels of Bioglan products began to normalize at the drug distributors which resulted in a decrease in product purchases. The commercial rights and royalties costs increased approximately $21.7 million during the same period primarily as a result of several factors including approximately $12.9 million of costs associated with the marketing of Solaraze^TM and ADOXA^TM during the first nine months of 2003 as compared to $5.9 million for the first nine months of 2002, and an increase of approximately $13.6 million of expenses relating to our risk sharing contracts in Europe, including the 2002 termination of the contract in Germany. These increases were partially offset by a $6.5 million decrease in service costs provided by our commercial services group relating primarily to the fourth quarter of 2002 termination of the services portion of our contract with SCIO.

The contribution for the PharmaBio Development group increased by $32.8 million from the first nine months of 2002 to 2003. The commercial rights and royalties revenues (net of related costs) in the first nine months of 2003 increased the contribution of this group by approximately $18.7 million when compared to the first nine months of 2002 due to the successful launch of the dermatology products and the successful performance of our commercial rights and royalties contracts. The contribution from the commercial rights and royalties revenues was negatively impacted by costs of approximately $4.9 million related to the Cymbalta^TM contract for which no revenues are being recognized. Investment revenues (net of related costs) in the first nine months of 2003 increased the contribution of this group by approximately $14.0 million when compared to the first nine months of 2002.

The informatics group was transferred into the Verispan joint venture in May 2002 and is no longer a segment in 2003.

Cash and cash equivalents were $333.2 million at September 30, 2003 as compared to $644.3 million at December 31, 2002.

Cash provided by operations was $169.9 million for the nine months ended September 30, 2003 versus $168.9 million for the comparable period of 2002.

Cash used in investing activities was $1.62 billion for the nine months ended September 30, 2003 versus $95.2 million for the comparable period of 2002. Investing activities consist primarily of the payments relating to our going private transaction including the repurchase of our common stock and the payment of transaction costs. Investing activities also included the purchases and sales of equity securities and other investments, capital asset purchases, and the acquisition of commercial rights.

Capital asset purchases required an outlay of cash of $39.7 million for the nine months ended September 30, 2003 compared to an outlay of $30.6 million for the same period in 2002. Included in the nine months ended September 30, 2002, is approximately $666,000 of capital asset purchases by our informatics group which was transferred to Verispan in May 2002.

Cash used for the acquisition of commercial rights and royalties related assets was $22.2 million for the nine months ended September 30, 2003 as compared to an outlay of $11.4 million for the comparable period in 2002. The acquisitions for the nine months ended September 30, 2003 included payments of $11.3 million for the contracts with COB, $6.5 million for the contract with SCIO, $3.2 million for the contract with a large pharmaceutical customer in Belgium and approximately $1.3 million for the acquisition of product and marketing rights. Also during the nine months ended September 30, 2003, we acquired additional intangible assets for approximately $1.4 million.

Purchases of equity securities and other investments required an outlay of cash of $10.6 million for the nine months ended September 30, 2003 compared to an outlay of $15.0 million for the same period in 2002. Proceeds from the sale of equity securities and other investments were $61.7 million during the nine months ended September 30, 2003 as compared to $24.8 million for the same period in 2002. The proceeds received during the nine months ended September 30, 2003 included approximately $22.7 million from the sale of our investment in VIRS (which was acquired by Gilead Sciences, Inc. in January 2003), approximately $17.5 million from warrants to acquire SCIO stock (which was acquired by Johnson & Johnson, Inc. in May 2003), and the sale of other equity investments, including MDCO and CVTX.

The following table is a summary of our net service receivables outstanding (dollars in thousands):

The decrease in the number of days of service revenues outstanding is a result of our continued focus on the fundamentals of our business and efficiencies generated by our shared service centers.

Investments in debt securities were $11.4 million at September 30, 2003 as compared to $36.7 million at December 31, 2002. Our investments in debt securities consist primarily of state and municipal securities. The decrease is a result of the redemption of our investments in debt securities, primarily money funds.

Investments in marketable equity securities decreased $5.1 million to $59.8 million at September 30, 2003 as compared to $64.9 million at December 31, 2002 primarily as a result of sales of equity securities which was partially offset by an increase in the market value of the securities.

Investments in non-marketable equity securities and loans at September 30, 2003 were $45.5 million, as compared to $46.4 million at December 31, 2002.

Investments in unconsolidated affiliates, primarily Verispan, were $121.2 million at September 30, 2003 as compared to $121.l million at December 31, 2002.

On September 25, 2003, we completed the going-private merger transaction with a total purchase price of approximately $1.82 billion. We used approximately $508.1 million of cash to fund this transaction and received $390.5 million in cash for capital contributions. In addition, we entered into a secured credit facility which consists of a $310.0 million principal senior term loan and a $75.0 million revolving loan facility. We also issued $450.0 principal amount of 10% Senior Subordinated Notes due 2013. As of September 30, 2003, we did not have any outstanding balance on the revolving loan facility.

The credit agreement governing our senior secured credit facility and the indenture governing the notes each contain restrictive covenants that, among other things, limit our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell our assets or declare dividends. In addition, under our new senior secured credit facility, we are required to achieve certain financial ratios relating to maximum total leverage, maximum senior leverage, maximum capital expenditures and minimum interest coverage. As of September 30, 2003, we are in compliance with the restrictions and covenants under the credit agreement and indenture.

We also have available to us a £10.0 million (approximately $16.6 million) unsecured line of credit and a £1.5 million (approximately $2.5 million) general banking facility with a U.K. bank. At September 30, 2003, we did not have any outstanding balances on these facilities.

Below is a summary of our future payment commitments by year under contractual obligations as of September 30, 2003 (dollar in thousands):

We also have additional future PharmaBio funding commitments that are contingent upon satisfaction of certain milestones by the third party such as receiving FDA approval, obtaining funding from additional third parties, agreement of a marketing plan and other similar milestones. Due to the uncertainty of the amounts and timing of these commitments, they are not included in the commitment amounts above. If all of these contingencies were satisfied over approximately the same time period, then we estimate these commitments to be a minimum of approximately $90-110 million per year for a period of five to six years, subject to certain limitations and varying time periods. Sales force commitments, which comprise a significant amount of such future commitments, are not classified as investments in either our new senior secured facility or the indenture governing the notes and, therefore, these future commitments do not have the same restrictions.

In March 2001, the Board of Directors authorized us to repurchase up to $100 million of our common stock until March 1, 2002 which was subsequently extended to March 1, 2003. This authorization expired on March 1, 2003. We did not enter into any agreements to repurchase our common stock during the period from January 1, 2003 through September 25, 2003.

Shareholders’ equity at September 30, 2003 was $522.5 million versus $1.598 billion at December 31, 2002.

Based on our current operating plan, we believe that our available cash and cash equivalents, together with future cash flows from operations and borrowings available under our revolving portion of our senior credit facility and line of credit agreements will be sufficient to meet our foreseeable cash needs in connection with our operations and debt repayment obligations. As part of our business strategy, we review many acquisition candidates in the ordinary course of business, and in addition to acquisitions already made, we are continually evaluating new acquisition and expansion possibilities. In addition, as part of our business strategy going forward, we intend to review and consider opportunities to acquire additional product rights, as appropriate. We may from time to time seek to obtain debt or equity financing in our

ordinary course of business or to facilitate possible acquisitions or expansion. Any such acquisitions or equity or debt financings may be limited by the terms and restrictions contained in the credit agreement governing the senior secured facility or the indenture.

In addition to the other information provided in this report, you should consider the following factors carefully in evaluating our business and us. Additional risks and uncertainties not presently known to us, that we currently deem immaterial or that are similar to those faced by other companies in our industry or business in general, such as competitive conditions, may also impair our business operations. If any of the following risks occur, our business, financial condition, or results of operations could be materially adversely affected.

As of September 30, 2003, we had outstanding debt of approximately $792.8 million. Of the total debt, approximately $342.8 million is secured, and an additional $75.0 million in loans available under our senior credit facility also is secured by substantially all of our assets, if drawn upon.

Our substantial indebtedness and the significant reduction in our available cash resulting from the financing of the going-private merger transaction could adversely affect our financial condition and thus make it more difficult for us to satisfy our obligations with respect to the notes as well as our obligations under our senior secured credit facility. Our substantial indebtedness and significant reduction in available cash could also:


	•	increase our vulnerability to adverse general economic and industry conditions;

	•	require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

	•	limit our ability to make required payments under our existing contractual commitments (See “Results of Operations — Liquidity and Capital Resources”);

	•	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

	•	place us at a competitive disadvantage compared to our competitors that have less debt;

	•	increase our exposure to rising interest rates because a portion of our borrowings will be at variable interest rates; and

	•	limit our ability to borrow additional funds on terms that are satisfactory to us or at all.

The indenture governing the notes and the credit agreement governing the senior secured credit facility include a number of significant restrictive covenants. These covenants could adversely affect us by limiting our ability to plan for or react to market conditions, meet our capital needs and execute our business strategy. These covenants will, among other things, limit our ability and the ability of our subsidiaries to:


	•	incur additional debt;

	•	pay dividends on, redeem or repurchase capital stock;

	•	issue capital stock of restricted subsidiaries;


	•	make certain investments;

	•	enter into certain types of transactions with affiliates;

	•	engage in unrelated businesses;

	•	create liens; and

	•	sell certain assets or merge with or into other companies.

These covenants may significantly limit our operating and financial flexibility and limit our ability to respond to changes in our business or competitive activities. In addition, the senior secured credit facility includes other and more restrictive covenants and prohibits us from prepaying our other debt, including the notes, while borrowings under our senior secured credit facility are outstanding. The new senior secured credit facility also requires us to maintain certain financial ratios and meet other financial tests. Our failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their scheduled due date. If we were unable to make this repayment or otherwise refinance these borrowings, the lenders under the senior secured credit facility could elect to declare all amounts borrowed under the senior secured credit facility, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the indenture governing the notes. In addition, these lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable terms, our results of operations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of the senior secured credit facility is likely to contain similar restrictive covenants and financial tests.

Although the indenture governing the notes and the credit agreement governing our senior secured credit facility each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. To the extent new debt is added to our current debt levels, our substantial leverage risks would increase. In addition, to the extent new debt is incurred by Pharma Services or Pharma Services Intermediate Holding Corp., a wholly owned subsidiary of Pharma Services, we may be required to generate sufficient cash flow to satisfy such obligations.

While the indenture and the credit agreement also contain restrictions on our ability to make investments, these restrictions are subject to a number of qualifications and exceptions and the investments incurred in compliance with these restrictions could be substantial. The restrictions do not prevent us from incurring certain expenses in connection with our PharmaBio Development group transactions, including expenses incurred to provide sales forces for the products of our customers.

Economic factors and industry trends that affect our primary customers, pharmaceutical and biotechnology companies, also affect our business. For example, the practice of many companies in these industries has been to hire outside organizations like us to conduct large clinical research and sales and marketing projects. This practice grew substantially during the 1990’s and we benefited from this trend. Some industry commentators believe that the rate of growth of outsourcing will tend to decrease. If these industries reduce their outsourcing of clinical research and sales and marketing projects, our operations and financial condition could be materially and adversely affected. We also believe we have been negatively impacted recently by mergers and other factors in the pharmaceutical industry, which appear to have slowed decision making by our customers and delayed certain trials. We believe our commercialization services have been particularly affected by recent reductions in new product launches and increases in the number of drugs losing patent protection. A continuation of these trends would have an ongoing adverse

effect on our business. In addition, U.S. federal and state legislatures and numerous foreign governments have considered various types of health care reforms and have undertaken efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and pharmaceutical companies. If future regulatory cost containment efforts limit the profitability of new drugs, our customers may reduce their research and development spending, which could reduce the business they outsource to us. We cannot predict the likelihood of any of these events or the effects they would have on our business, results of operations or financial condition.

A key element of our growth strategy is the successful development and marketing of new services that complement or expand our existing business. If we are unable to succeed in (1) developing new services and (2) attracting a customer base for those newly developed services, we will not be able to implement this element of our growth strategy, and our future business, results of operations and financial condition could be adversely affected.

We are currently developing an Internet platform for our product development and commercialization services. We have entered into agreements with certain vendors for them to provide web-enablement services to help us develop this platform. If such vendors fail to perform as required or if there are substantial delays in developing and implementing this platform, we may have to make substantial further investments, internally or with third parties, to achieve our objectives. Meeting our objectives is dependent on a number of factors which may not take place as we anticipate, including obtaining adequate web-enablement services, creating web-enablement services which our customers will find desirable and implementing our business model with respect to these services. Also, these expenditures are likely to negatively impact our profitability, at least until our web-enabled products are operationalized. Over time, we envision continuing to invest in extending and enhancing our Internet platform in other ways to further support and improve our services. We cannot assure you that any improvements in operating income resulting from our Internet capabilities will be sufficient to offset our investments in the Internet platform. Our results could be further negatively impacted if our competitors are able to execute their services on a web-based platform before we can launch our Internet services or if they are able to structure a platform that attracts customers away from our services.

In May 2002, we completed the formation of a joint venture, Verispan, with McKesson designed to leverage the operational strengths of the healthcare information business of each party. As part of the formation of Verispan, we contributed our former informatics business. As a result, Verispan remains subject to the risks to which our informatics business was exposed. If Verispan is not successful or if it experiences any of the difficulties described below, there could be an adverse effect on our results of operations and financial condition, as Verispan is a pass-through entity and, as such, its results are reflected in our financial statements to the extent of our interest in Verispan. We may not achieve the intended benefits of Verispan if it is not able to secure additional data in exchange for equity. Verispan also could encounter other difficulties, including:


	•	its ability to obtain continuous access to de-identified healthcare data from third parties in sufficient quantities to support its informatics products;

	•	its ability to process and use the volume of data received from a variety of data providers;

	•	its ability to attract customers, besides Quintiles and McKesson, to purchase its products and services;


	•	the risk of changes in healthcare information privacy laws and regulations that could create a risk of liability, increase the cost of Verispan’s business or limit its service offerings;

	•	the risk that industry regulation may restrict Verispan’s ability to analyze and disseminate pharmaceutical and healthcare data; and

	•	the risk that it will not be able to effectively and cost-efficiently replace services previously provided to the contributed businesses by the former parent corporations.

Although we have a license to use Verispan’s commercially available data products and we may pay Verispan to create customized data products for us, if Verispan is unable to provide us with the quality and character of data products that we need to support those services, we would need to seek other strategic alternatives to achieve our goals.

In contributing our former informatics business to Verispan, we assigned certain contracts to Verispan. Verispan has agreed to indemnify us against any liabilities we may incur in connection with these contracts after contributing them to Verispan, but we still may be held liable under the contracts to the extent Verispan is unable to satisfy its obligations, either under the contracts or to us.

Many of our customers can terminate our contracts upon 15-90 days’ notice. In the event of termination, our contracts often provide for fees for winding down the project, but these fees may not be sufficient for us to maintain our margins, and termination may result in lower resource utilization rates. In addition, we may not realize the full benefits of our backlog of contractually committed services if our customers cancel, delay or reduce their commitments under their contracts with us. Thus, the loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect our net revenue and profitability. We believe that this risk of loss or delay of multiple contracts potentially has greater effect as we pursue larger outsourcing arrangements with global pharmaceutical companies. Also, over the past two years we have observed that customers may be more willing to delay, cancel or reduce contracts more rapidly than in the past. If this trend continues, it could become more difficult for us to balance our resources with demands for our services and our financial results could be adversely affected.

As part of our PharmaBio Development business strategy, we enter into transactions with customers in which we take on some of the risk of the potential success or failure of the customer’s product. These transactions may include making a strategic investment in a customer, providing financing to a customer, or acquiring an interest in the revenues from a customer’s product. For example, we may build or provide a sales organization for a biotechnology customer to commercialize a new product in exchange for a share in the revenues of the product. We anticipate that in the early periods of many of these relationships, our expenses will exceed revenues from these arrangements, particularly where we are providing a sales force for the product at our own cost. Aggregate royalty or other payments made to us under these arrangements may not be adequate to offset our total expenditure in providing a sales force or in making milestone or marketing payments to our customers. We carefully analyze and select the customers and products with which we are willing to structure our risk-based deals. Products underlying our commercial rights strategies may not complete clinical trials, receive FDA approval or achieve the level of market acceptance or consumer demand that we expect, in which case we might not be able to earn a profit or recoup our investment with regard to a particular transaction. In addition, the timing of regulatory approval and product launch and the achievement of other milestones are generally beyond our control and can affect our actual return from these investments. The potential negative effect to us could increase depending on the nature and timing of these transactions and the length of time before it becomes apparent that the product will not achieve commercial success. Our financial results would be adversely affected if our customers or their products do not achieve the level of success that we anticipate and/or our return or payment from the product investment or financing is less than our costs with respect to these transactions.

Our acquisition of the rights to market and sell Solaraze™ and the rights to other dermatology products acquired from Bioglan Pharma, Inc. at the end of 2001, as well as any other product rights we may hold in the future, subject us to a number of risks typical to the pharmaceutical industry. For example, we could face product liability claims in the event users of these products, or of any other pharmaceutical product rights we may acquire in the future, experience negative reactions or adverse side effects or in the event such products cause injury, are found to be unsuitable for their intended purpose or are otherwise defective. While we believe we currently have adequate insurance in place to protect against these risks, we may nevertheless be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products which we manufacture or sell, and any such product liability claim could adversely affect our business, operating results or financial condition. In addition, like pharmaceutical companies, our commercial success in this area will depend in part on our obtaining, securing and defending our intellectual property rights covering our pharmaceutical product rights.

These risks may be augmented by certain risks relating to our outsourcing of the manufacturing and distribution of these products or any pharmaceutical product rights we may acquire in the future. For example, as a result of our decision to outsource the manufacturing and distribution of Solaraze™, we are unable to directly monitor quality control in the manufacturing and distribution processes.

Our plans to market and sell Solaraze™ and other pharmaceutical products also subject us to risks associated with entering into a new line of business in which we have limited experience. If we are unable to operate this new line of business as we expect, the financial results from this new line of business could have a negative impact on our results of operations as a whole. The risk that our results may be affected if we are unable to successfully operate our pharmaceutical operations may increase in proportion with (1) the number of products or product rights we license or acquire in the future, (2) the applicable stage of the drug approval process of the products and (3) the levels of outsourcing involved in the development, manufacture and commercialization of such products.

If we lose the services of Dennis Gillings or other key personnel, our business could be adversely affected.

Our success substantially depends on the performance, contributions and expertise of our senior management team, led by Dennis B. Gillings, Ph.D., our Executive Chairman and Chief Executive Officer. Our performance also depends on our ability to identify, attract and retain qualified management and professional, scientific and technical operating staff, as well as our ability to recruit qualified representatives for our contract sales services. The departure of Dr. Gillings or any key executive, or our inability to continue to attract and retain qualified personnel could have a material adverse effect on our business, results of operations or financial condition.

Our product development services could result in potential liability to us.

We contract with drug companies to perform a wide range of services to assist them in bringing new drugs to market. Our services include supervising clinical trials, data and laboratory analysis, electronic data capture, patient recruitment and other related services. The process of bringing a new drug to market is time-consuming and expensive. If we do not perform our services to contractual or regulatory standards, the clinical trial process could be adversely affected. Additionally, if clinical trial services such as laboratory analysis or electronic data capture and related services do not conform to contractual or regulatory standards, trial participants or trial results could be affected. These events would create a risk of liability to us from the drug companies with whom we contract or the study participants. Similar risks apply to our product development services relating to medical devices.

We also contract with physicians to serve as investigators in conducting clinical trials. Such testing creates risk of liability for personal injury to or death of volunteers, particularly to volunteers with life-threatening illnesses, resulting from adverse reactions to the drugs administered during testing. It is possible third parties could claim that we should be held liable for losses arising from any professional

malpractice of the investigators with whom we contract or in the event of personal injury to or death of persons participating in clinical trials. We do not believe we are legally accountable for the medical care rendered by third party investigators, and we would vigorously defend any such claims. However, such claims may still be brought against us, and it is possible we could be found liable for these types of losses. For example, we are among the defendants named in a purported class action by participants in an Alzheimer’s study seeking to hold us liable for alleged damages to the participants arising from the study.

In addition to supervising tests or performing laboratory analysis, we also own a number of facilities where Phase I clinical trials are conducted. Phase I clinical trials involve testing a new drug on a limited number of healthy individuals, typically 20 to 80 persons, to determine the drug’s basic safety. We also could be liable for the general risks associated with ownership of such a facility. These risks include, but are not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers.

We also provide some clinical trial packaging services. We could be held liable for any problems that result from the trial drugs we package, including any quality control problems in our packaging facilities. For example, accounting for controlled substances is subject to regulation by the United States Drug Enforcement Administration, or the DEA, and some of our facilities have been audited by the DEA. In one case, the DEA indicated that it found that we miscounted certain drugs, which was resolved to DEA’s satisfaction by our providing a corrected accounting of these drugs to the DEA.

We also could be held liable for errors or omissions in connection with our services. For example, we could be held liable for errors or omissions or breach of contract if one of our laboratories inaccurately reports or fails to report lab results. Although we maintain insurance to cover ordinary risks, insurance would not cover the risk of a customer deciding not to do business with us as a result of poor performance, which could adversely affect our results of operations and financial condition.

Our insurance may not cover all of our indemnification obligations and other liabilities associated with our operations.

We maintain insurance designed to cover ordinary risks associated with our operations and our ordinary indemnification obligations. This insurance might not be adequate coverage or may be contested by our carriers. For example, our insurance carrier, to whom we paid premiums to cover risks associated with our product development services, filed suit against us seeking to rescind the insurance policies or to have coverage denied for some or all of the claims arising from class action litigation involving an Alzheimer’s study. The availability and level of coverage provided by our insurance could have a material impact on our profitability if we suffer uninsured losses or are required to indemnify third parties for uninsured losses.

As part of the formation of Verispan, Verispan assumed our obligation under our settlement agreement with WebMD to indemnify WebMD for losses arising out of or in connection with the (1) canceled Data Rights Agreement with WebMD, (2) our data business, which was contributed to the joint venture, (3) the collection, accumulation, storage or use of data by ENVOY for the purpose of transmitting or delivering data to us, (4) any actual transmission or delivery by ENVOY of data to us or (5) violations of law or contract attributable to any of the events described in (1) – (4) above. These indemnity obligations are limited to 50% for the first $20 million in aggregate losses, subject to exceptions for certain indemnity obligations that were not transferred to Verispan. Although Verispan has assumed our indemnity obligations to WebMD relating to our former data business, Verispan may have insufficient resources to satisfy these obligations or may otherwise default with respect thereto. In addition, WebMD may seek indemnity from us, and we would have to proceed against Verispan.

In addition, we remain subject to other indemnity obligations to WebMD, including for losses arising out of the settlement agreement itself or out of the sale of ENVOY to WebMD. In particular, we could be liable for losses which may arise in connection with a class action lawsuit filed against ENVOY prior to its purchase by us and subsequent sale to WebMD. ENVOY and its insurance carrier, Federal, filed a lawsuit in June 2003 against us alleging that we should be responsible for payment of the settlement

amount of $11 million and related fees and costs in connection with the recent settlement of the class action lawsuit. Our indemnity obligation with regard to losses arising from the sale of ENVOY to WebMD including ENVOY’s class action lawsuit is not subject to the limitation on the first $20 million of aggregate losses described above.

Changes in government regulation could decrease the need for the services we provide.

Governmental agencies throughout the world, but particularly in the United States, highly regulate the drug development/approval process. A large part of our business involves helping pharmaceutical and biotechnology companies through the regulatory drug approval process. Any relaxation in regulatory approval standards could eliminate or substantially reduce the need for our services, and, as a result, our business, results of operations and financial condition could be materially adversely affected. Potential regulatory changes under consideration in the United States and elsewhere include mandatory substitution of generic drugs for patented drugs, relaxation in the scope of regulatory requirements or the introduction of simplified drug approval procedures. These and other changes in regulation could have an impact on the business opportunities available to us.

Failure to comply with existing regulations could result in a loss of revenue.

We are subject to a wide range of government regulations and review by a number of regulatory agencies including the FDA, DEA, Department of Transportation and others. Any failure on our part to comply with applicable regulations could materially impact our ability to perform our services. For example, non-compliance could result in the termination of ongoing clinical research or sales and marketing projects or the disqualification of data for submission to regulatory authorities, either of which could have a material adverse effect on us. If we were to fail to verify that informed consent is obtained from patient participants in connection with a particular clinical trial, the data collected from that trial could be disqualified, and we could be required to redo the trial under the terms of our contract at no further cost to our customer, but at substantial cost to us. Moreover, from time to time, including the present, one or more of our customers are investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials and programs. In these situations, we often have provided services to our customers with respect to the trials and programs being investigated and we are called upon to respond to requests for information by the authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for trial or program compliance. For example, our customer, Biovail Corporation, recently became the subject of government inquiries relating to Cardizem LA P.L.A.C.E. late phase clinical program, and has asserted publicly that we have warranted that this program complies with all laws and regulations, to which we have taken exception. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to substantial damages, fines or penalties.

Our services are subject to evolving industry standards and rapid technological changes.

The markets for our services are characterized by rapidly changing technology, evolving industry standards and frequent introduction of new and enhanced services. To succeed, we must continue to:


	•	enhance our existing services;

	•	introduce new services on a timely and cost-effective basis to meet evolving customer requirements;

	•	integrate new services with existing services;

	•	achieve market acceptance for new services; and

	•	respond to emerging industry standards and other technological changes.

Exchange rate fluctuations may affect our results of operations and financial condition.

We derive a large portion of our net revenue from international operations. Our financial statements are denominated in U.S. dollars; thus, factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect our results of operations and financial condition. Exchange rate fluctuations between local currencies and the U.S. dollar create risk in several ways, including:


	•	Foreign Currency Translation Risk. The revenue and expenses of our foreign operations are generally denominated in local currencies.

	•	Foreign Currency Transaction Risk. Our service contracts may be denominated in a currency other than the currency in which we incur expenses related to such contracts.

We try to limit these risks through exchange rate fluctuation provisions stated in our service contracts, or we may hedge our transaction risk with foreign currency exchange contracts or options. Although we may hedge our transaction risk, there were no open foreign exchange contracts or options relating to service contracts at September 30, 2003. Despite these efforts, we may still experience fluctuations in financial results from our operations outside the United States, and we cannot assure you that we will be able to favorably reduce our currency transaction risk associated with our service contracts.

We have significant operations in foreign countries. As a result, we are subject to certain risks inherent in conducting business internationally, including the following:


	•	foreign countries could change regulations or impose currency restrictions and other restraints;

	•	political changes and economic crises may lead to changes in the business environment in which we operate; and

	•	international conflict, including terrorist acts, could significantly impact our financial condition and results of operations.

In addition we have undistributed earnings from our foreign subsidiaries. Those earnings are considered to be indefinitely reinvested and, accordingly, no United States federal or state income taxes have been provided. If those earnings were distributed, we would be subject to both United States federal and state income taxes and withholding taxes payable to various countries. Any resulting tax obligations could materially adversely affect our operations.

New and proposed laws and regulations regarding confidentiality of patients’ information could result in increased risks of liability or increased cost to us, or could limit our service offerings.

The confidentiality and release of patient-specific information are subject to governmental regulation. Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the U.S. Department of Health and Human Services has issued regulations mandating heightened privacy and confidentiality protections. The federal government and state governments have proposed or adopted additional legislation governing the possession, use and dissemination of medical record information and other personal health information. Proposals being considered by state governments may contain privacy and security protections that are more burdensome than the federal regulations. In order to comply with these regulations, we may need to implement new security measures, which may require us to make substantial expenditures or cause us to limit the products and services we offer. In addition, if we violate applicable laws, regulations or duties relating to the use, privacy or security of health information, we could be subject to civil or criminal penalty.

Although we did not have one customer that accounted for 10% of net service revenues for any period presented for 2003, one customer accounted for approximately 12% of our net service revenues for the nine months ended September 30, 2002 due, in part, to the effect of a long term contract that is set to expire as of the end of 2003. These revenues resulted from services provided by the product development and commercial services groups. If this customer or any large customer decreases or terminates its relationship with us, our business, results of operations or financial condition could be materially adversely affected.

If we are unable to submit electronic records to the FDA according to FDA regulations, our ability to perform services for our customers which meet applicable regulatory requirements could be adversely affected.

If we were unable to produce electronic records, which meet the requirements of FDA regulations, our customers may be adversely affected when they submit the data concerned to the FDA in support of an application for approval of a product, which could harm our business. The FDA published 21 CFR Part 11 “Electronic Records; Electronic Signatures; Final Rule” (“Part 11”) in 1997. Part 11 became effective in August 1997 and defines the regulatory requirements that must be met for FDA acceptance of electronic records and/or electronic signatures in place of the paper equivalents. Further, in August 2003, the FDA issued a “Guidance for Industry: Part 11, Electronic Records; Electronic Signatures — Scope and Application” that addressed the FDA’s current thinking on this topic. Part 11 requires that those utilizing such electronic records and/or signatures employ procedures and controls designed to ensure the authenticity, integrity and, as appropriate, confidentiality of electronic records and, Part 11 requires those utilizing electronic signatures to ensure that a person appending an electronic signature cannot readily repudiate the signed record. Pharmaceutical, medical device and biotechnology companies are increasing their utilization of electronic records and electronic signatures and are requiring their service providers and partners to do likewise. Becoming compliant with Part 11 involves considerable complexity and cost. Our ability to provide services to our customers in full compliance with applicable regulations includes a requirement that, over time, we become compliant and maintain compliance with the requirements of Part 11. We are making steady and documented progress in bringing our critical computer applications into compliance according to written enhancement plans that have been reviewed and approved by third party authorities. Lower-priority systems are, likewise, being reviewed and revalidated. If we are unable to complete these compliance objectives, our ability to provide services to our customers which meet FDA requirements may be adversely affected.

The financing arrangements for the going-private merger transaction may increase our exposure to tax liability.

A portion of the funding for the going-private merger transaction was derived from intercompany transactions with our foreign subsidiaries. Although we believe, based in part upon the advice of our tax advisors, that our intended tax treatment of such transactions is appropriate, it is possible that the Internal Revenue Service and other tax authorities could seek to characterize the transactions in a manner that could result in the immediate recognition of taxable income by us. Any such immediate recognition of taxable income would result in a material tax liability which could have a material adverse effect on our business, results of operations and financial condition.

As a result of the going-private merger transaction, our interest rate risk has changed since December 31, 2002.

We are subject to market risk associated with changes in interest rates. Our principal interest rate exposure relates to the term loans outstanding under our new senior secured credit facility. We have approximately $3l0.0 million outstanding under the senior secured credit facility subject to variable rates.

Each quarter point increase or decrease in the applicable interest rate would change our interest expense by approximately $775,000 per year.

At September 30, 2003, our investment in debt securities portfolio consists primarily of state and municipal securities. The portfolio is primarily classified as available-for-sale and therefore these investments are recorded at fair value in the financial statements. These securities are exposed to market price risk which also takes into account interest rate risk. As of September 30, 2003, the fair value of the investment portfolio was $10.7 million, based on quoted market prices. The potential loss in fair value resulting from a hypothetical decrease of 10% in quoted market price is approximately $1.1 million.

We did not have any other material changes in market risk from December 31, 2002.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures provide reasonable assurances that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period required by the United States Securities and Exchange Commission’s rules and forms. There have been no changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

On January 26, 2001, a purported class action lawsuit was filed in the State Court of Richmond County, Georgia, naming Novartis Pharmaceuticals Corp., Pharmed Inc., Debra Brown, Bruce I. Diamond and Quintiles Laboratories Limited, a subsidiary of ours, on behalf of 185 Alzheimer’s patients who participated in drug studies involving an experimental drug manufactured by defendant Novartis and their surviving spouses. The complaint alleges claims for breach of fiduciary duty, civil conspiracy, unjust enrichment, misrepresentation, Georgia RICO violations, infliction of emotional distress, battery, negligence and loss of consortium as to class member spouses. The complaint seeks unspecified damages, plus costs and expenses, including attorneys’ fees and experts’ fees. On September 27, 2003, the parties entered into a settlement memorandum following a mediated settlement conference. The parties are in the process of preparing final settlement documents, which would memorialize payments by several defendants to individual study participants or their representatives. We believe that our contribution will be covered by insurance or, in the alternative, will not represent a material amount to us.

On January 22, 2002, Federal Insurance Company, or Federal, and Chubb Custom Insurance Company, or Chubb, filed suit against us, Quintiles Pacific, Inc. and Quintiles Laboratories Limited, two of our subsidiaries, in the United States District Court for the Northern District of Georgia. In the suit, Chubb, our primary commercial general liability carrier, and Federal, our excess liability carrier, seek to rescind the policies issued to us for coverage years 2000-2001 and 2001-2002 based on an alleged misrepresentation by the Company on the policy application. Alternatively, Chubb and Federal seek a declaratory judgment that there is no coverage under the policies for some or all of the claims asserted against us and our subsidiaries in the class action lawsuit filed on January 26, 2001 and described above and, if one or more of such claims is determined to be covered, Chubb and Federal request an allocation of the defense costs between the claims they contend are covered and non-covered claims. We have filed an answer with counterclaims against Federal and Chubb in response to their complaint. Additionally, we

have amended our pleadings to add AON Risk Services, or AON, as a counterclaim defendant, as an alternative to our position that Federal and Chubb are liable under the policies. In order to preserve its rights, on March 27, 2003, we also filed a separate action against AON in the United States District Court for the Middle District of North Carolina. We believe the allegations made by Federal and Chubb are without merit and are defending this case vigorously.

In October 2002, seven purported class action lawsuits were filed in Superior Court, Durham County, North Carolina by certain of our shareholders seeking to enjoin the consummation of the initial transaction proposed by Pharma Services Company (a company controlled by Dennis B. Gillings, Ph.D.) to acquire all of our outstanding shares for $11.25 per share in cash. All of the lawsuits were subsequently transferred to the North Carolina Business Court. The lawsuits name as defendants Dr. Gillings, other members of our Board of Directors, us and, in some cases Pharma Services Company. The complaints allege, among other things, a breach of fiduciary duties by the directors with respect to the proposal. The complaints seek to enjoin the transaction proposed by Pharma Services Company, and the plaintiffs seek to recover damages. On November 11, 2002, a Special Committee of our Board of Directors announced its rejection of the proposal by Pharma Services Company and its intention to investigate strategic alternatives available to us for purposes of enhancing shareholder value, including the possibility of a sale and alternatives that would keep us independent and publicly owned. On January 6, 2003, the North Carolina Business Court entered a Case Management Order consolidating all seven lawsuits for all purposes and staying the lawsuits until March 29, 2003 or until we provide notice of a change-of-control transaction.

On March 28, 2003, the Court entered an Order Maintaining the Status Quo, which continued its prior Case Management Order in all respects until the earlier of a date selected by the Court or until we provide the notice contemplated by the Case Management Order. On April 10, 2003, our Board of Directors approved a merger agreement with Pharma Services Holding, Inc. which provides for payment to our shareholders of $14.50 per share in cash. On June 25, 2003, counsel for the parties signed a Memorandum of Understanding, in which they agreed upon the terms of a settlement of the litigation, which would include the dismissal with prejudice of all claims against all defendants including us and our Board of Directors. On August 28, 2003, lead counsel for the plaintiffs and counsel for the defendants executed a formal Stipulation and Agreement of Compromise, Settlement and Release, referred to as the Stipulation of Settlement. On August 29, 2003, the Court entered an Order for Notice and Hearing on Settlement of Class Action, or the Order for Notice, and a Notice of Pendency of Class Action, Preliminary and Proposed Class Action Certification, Proposed Settlement of Class Action, Settlement Hearing and Right to Appear, or the Class Notice. The Class Notice set a hearing date of October 10, 2003, the Settlement Hearing, to determine whether the Court should approve the settlement as fair, adequate and in the best interest of the settlement class, end the action, and to consider other matters including a request by plaintiffs’ counsel for attorneys’ fees and reimbursement of costs, in an amount not to exceed a total of $450,000. In accordance with the terms of the Order of Notice, we mailed the Class Notice to the record holders of our common stock and options, as of the record date of August 19, 2003. A special meeting of the shareholders was held September 25, 2003, at which time the shareholders approved the proposed transaction and the merger was consummated. On October 10, 2003, the Court certified a class for purposes of the settlement, approved the settlement as fair and reasonable and entered an Order and Final Judgment dismissing the lawsuit with prejudice. The Court also awarded plaintiff’s counsel $450,000 in attorneys fees and costs, which are to be paid by us pursuant to the terms of the settlement. No other payments are required from us or any other party under the terms of the settlement and the Court’s Order.

On June 13, 2003, ENVOY Corporation, or ENVOY and Federal filed suit against us, in the United States District Court for the Middle District of Tennessee. One or both plaintiffs in this case have alleged claims for breach of contract, contractual subrogation, equitable subrogation, and equitable contribution. Plaintiffs reached settlement in principle, in the amount of $11 million, of the case pending in the same court captioned In Re Envoy Corporation Securities Litigation, Case No. 3-98-0760, or the Envoy Securities Litigation. Plaintiffs claim that we are responsible for payment of the settlement amount and associated fees and costs in the Envoy Securities Litigation based on merger and settlement agreements

between WebMD Corporation, ENVOY and us. We have filed a motion to dismiss the suit, and the plaintiffs have filed motions for summary judgment. These motions are pending before the court. All parties have agreed to a stay of discovery. We believe that the allegations made by ENVOY and Federal are without merit and intend to defend the case vigorously.

We are also party to other legal proceedings incidental to our business. While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations for the period in which the ruling occurs.

We are also a party to certain other pending litigation arising in the normal course of our business. While the final outcome of such litigation cannot be predicted with certainty, it is the opinion of management, based on consultation with legal counsel, that the outcome of these other matters would not materially affect our consolidated financial position or results of operations.

On September 25, 2003, the Company consummated its merger with Pharma Services and Acquisition Corp., a wholly owned subsidiary of Pharma Services. Under the terms of the merger, each share of the Company’s Common Stock outstanding (other than those shares held by Pharma Services or Acquisition Corp.) was converted into the right to receive $14.50 in cash, without interest and each option to purchase the Company’s Common Stock (other than options exchanged for equity securities of Pharma Services) was canceled in exchange for the right to receive $14.50 in cash less the exercise price of such option. The Company is now an indirect wholly owned subsidiary of Pharma Services.

On September 25, 2003, the Company completed an offering of $450.0 million in aggregate principal amount of 10% senior subordinated notes due 2013, which was exempt from registration under the Securities Act of 1933, as amended. The Company sold the notes to Citigroup Global Markets Inc., ABN AMRO Incorporated and Banc One Capital Markets, Inc., collectively referred to as the initial purchasers pursuant to Section 4(2) of the Securities Act of 1933, as amended. The initial purchasers subsequently resold the notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and to non-U.S. persons outside the United States under Regulation S under the Securities Act of 1933, as amended.

On September 25, 2003, the Company held a Special Meeting of Shareholders during which time certain matters related to the Transaction were submitted to the shareholders of the Company for a vote. Below is a brief description of the matters, as well as the number of votes cast for or against and the number of abstentions:

(1)

Approved and adopted the Agreement and Plan of Merger, dated as of April 10, 2003, among the Company, Pharma Services Holding, Inc. and Pharma Services Acquisition Corp., as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 18, 2003, among the same parties, and the transactions contemplated thereby, including a merger of Pharma Services Acquisition Corp. with and into the Company, with the Company continuing as the surviving corporation in the merger as an indirect wholly owned subsidiary of Pharma Services Holding, Inc. The votes were cast as follows:


(2)	Approved a proposal to grant the proxy holders the authority to vote in their discretion regarding a motion to adjourn the special meeting if necessary to satisfy the conditions to completing the merger. The votes were cast as follows:

(a) During the three months ended September 30, 2003, the Company filed or furnished five reports on Form 8-K.

The Company furnished a Form 8-K to the Securities and Exchange Commission dated August 12, 2003, including its press release announcing the Company’s earnings information for the period ended June 30, 2003. This report shall not be deemed to be incorporated by reference into this Form 10-Q or filed hereunder for purposes of liability under the Securities Exchange Act of 1934.

The Company filed a Form 8-K, dated August 26, 2003, including its press release announcing its intent to offer $450 million principal amount of senior subordinated notes due 2013 in connection with its merger with a wholly-owned subsidiary of Pharma Services Holding, Inc. in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended.

The Company filed a Form 8-K dated September 2, 2003, filing certain risk factors which were used in connection with its offering of certain subordinated notes as announced on August 26, 2003.

The Company filed a Form 8-K, dated September 13, 2003, including its press release announcing that it has entered into a purchase agreement dated September 12, 2003 pursuant to which the Company

intended to issue and sell $450 million principal amount of senior subordinated notes due 2013 in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in connection with its merger with Pharma Services Acquisition Corp., a wholly-owned subsidiary of Pharma Services Holding, Inc.

The Company filed a Form 8-K, dated September 25, 2003, including its press release announcing completion of its merger with Pharma Services Acquisition Corp., a wholly-owned subsidiary of Pharma Services Holding, Inc.

No other reports on Form 8-K were filed or furnished during the three months ended September 30, 2003.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

58 EX-3.1 3 g85608exv3w1.txt RESTATED ARTICLES OF INCORPORATION OF THE COMPANY ARTICLES OF RESTATEMENT OF THE ARTICLES OF INCORPORATION OF QUINTILES TRANSNATIONAL CORP. Pursuant to ss.55-10-07 of the General Statutes of North Carolina, the undersigned corporation hereby submits these Articles of Restatement of Articles of Incorporation for the purpose of integrating into one document its original Articles of Incorporation and all amendments thereto: 1. The name of the corporation is Quintiles Transnational Corp. 2. The text of the Restated Articles of Incorporation of Quintiles Transnational Corp is attached. 3. These Restated Articles of Incorporation were adopted by the Board of Directors and do not contain an amendment. 4. These Articles of Restatement will become effective at 11:35AM E.D.T. on September 25, 2003. This the 25th day of September, 2003. QUINTILES TRANSNATIONAL CORP. By: /s/ John S. Russell ------------------------------- John S. Russell Executive Vice President RESTATED ARTICLES OF INCORPORATION OF QUINTILES TRANSNATIONAL CORP. 1. The name of the corporation is Quintiles Transnational Corp. 2. The number of shares the corporation is authorized to issue is one hundred twenty-five million (125,000,000) shares of common stock, par value $0.01 per share. 3. The street address and county of the registered office of the corporation in the State of North Carolina is 225 Hillsborough Street, Raleigh, Wake County, North Carolina 27603, and the name of its registered agent at such address is CT Corporation System. 4. The street address and county of the principal office of the corporation is 4709 Creekstone Drive, Suite 200, Durham, Durham County, North Carolina 27703. 5. To the fullest extent permitted by the North Carolina Business Corporation Act as it exists or may hereafter be amended, no person who is serving or who has served as a director of the corporation shall be personally liable to the corporation or any of its shareholders for monetary damages for breach of duty as a director. No amendment or repeal of this article, nor the adoption of any provision to these Articles of Incorporation inconsistent with this article, shall eliminate or reduce the protection granted herein with respect to any matter that occurred prior to such amendment, repeal or adoption. EX-3.2 4 g85608exv3w2.txt AMENDED AND RESTATED BYLAWS OF PHARMA SERVICES AMENDED AND RESTATED BYLAWS OF PHARMA SERVICES ACQUISITION CORP. (A NORTH CAROLINA CORPORATION) Dated as of September 25, 2003 AMENDED AND RESTATED BYLAWS OF PHARMA SERVICES ACQUISITION CORP. (a North Carolina Corporation) ARTICLE I. MEETINGS OF SHAREHOLDERS SECTION 1.1 ANNUAL MEETINGS. The annual meeting of the shareholders of the Corporation shall be held on such date, at such time and at such place within or without the State of North Carolina as may be designated by the Board of Directors, for the purpose of electing Directors and for the transaction of such other business as may be properly brought before the meeting. SECTION 1.2 SPECIAL MEETINGS. Except as otherwise provided in the Articles of Incorporation, as amended, modified and restated from time to time ("Articles of Incorporation"), a special meeting of the shareholders of the Corporation (a) may be called at any time by the Board of Directors or by any Director who is also a DG Nominee, OEP Nominee, Temasek Nominee or TPG Nominee (as such terms are defined in that certain Stockholders Agreement, dated _______, 2003 among Pharma Services Holding, Inc. ("Holding") and its stockholders named therein ("Stockholders Agreement"), and (b) shall be called pursuant to, and held within 30 days after, delivery to the Corporation of the written request of the holders of not less than one-tenth of all the votes entitled to be cast on any issue proposed to be considered at the meeting. Any special meeting of the shareholders shall be held on such date, at such time and at such place within or outside the State of North Carolina as the person(s) calling the meeting may designate. At a special meeting of the shareholders, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting unless all of the shareholders are present in person or by proxy, in which case any and all business may be transacted at the meeting even though the meeting is held without notice. SECTION 1.3 NOTICE OF MEETINGS. Except as otherwise provided in these Bylaws or by law, a written notice of each meeting of the shareholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each shareholder of the Corporation entitled to vote at such meeting at his or her address as it appears on the records of the Corporation; provided that such notice must be given to all shareholders with respect to any meeting at which a merger or share exchange is to be considered and in such other instances as required by law. In the case of a special meeting, the notice of meeting shall include a description of the purpose or purposes for which the meeting is called; but, in the case of an annual or substitute annual meeting, the notice of meeting need not include a description of the purpose or purposes for which the meeting is called unless such a description is required by the provisions of the North Carolina Business Corporation Act. SECTION 1.4 QUORUM. Shares entitled to vote as a separate voting group may take action on a matter at the meeting only if a quorum of that voting group exists. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter, unless the representation of a larger number of shares shall be required by law, by the Articles of Incorporation or by these Bylaws, in which case the representation of the number of shares so required shall constitute a quorum. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. In the absence of a quorum at the opening of any meeting of shareholders, such meeting may be adjourned from time to time by the vote of a majority of the votes cast on the motion to adjourn; and, subject to the provisions of Section 1.3, at any adjourned meeting any business may be transacted that might have been transacted at the original meeting if a quorum exists with respect to the matter proposed. SECTION 1.5 ADJOURNED MEETINGS. Whether or not a quorum shall be present in person or represented at any meeting of the shareholders, the holders of a majority in number of the shares of stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting may adjourn from time to time; provided, however, that if the holders of any class of stock of the Corporation are entitled to vote separately as a voting group upon any matter at such meeting, any adjournment of the meeting in respect of action by such voting group upon such matter shall be determined by the holders of a majority of the shares of such voting group present in person or represented by proxy and entitled to vote at such meeting. When a meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment and if a new record date is not fixed for the adjourned meeting; but if a new record date is fixed for the adjourned meeting (which must be done if the new date is more than 120 days after the date of the original meeting), or if the adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting. At the adjourned meeting the shareholders, or the holder of any class of stock entitled to vote separately as a voting group, as the case may be, may transact any business which might have been transacted by them at the original meeting. SECTION 1.6 ORGANIZATION. The Executive Chairman or, in his absence, the Chief Executive Officer, or in his absence, the Chief Operating Officer, or in his absence, a Vice President shall call all meetings of the shareholders to order, and shall act as chairman of such meetings unless the holders of a majority of the common stock, par value $0.01 per share of the Corporation ("Common Stock") present in person or represented by proxy and entitled to vote at such meeting choose to select a different person to act as chairman of such meeting. The Secretary of the Corporation shall act as Secretary of all meetings of the shareholders; but in the absence of the Secretary, the chairman of the meeting may appoint any person to act as Secretary of the meeting. Before each meeting of shareholders, the Secretary of the Corporation shall prepare an alphabetical list of the shareholders entitled to notice of such 2 meeting. The list shall be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder. The list shall be kept on file at the principal office of the Corporation, or at a place identified in the meeting notice in the city where the meeting will be held, for the period beginning two business days after notice of the meeting is given and continuing through the meeting, and shall be available for inspection by any shareholder, personally or by or with his representative, at any time during regular business hours. The list shall also be available at the meeting and shall be subject to inspection by any shareholder, personally or by or with his representative, at any time during the meeting or any adjournment thereof. SECTION 1.7 VOTING OF SHARES. Except as otherwise provided in the Articles of Incorporation or by law, each shareholder shall be entitled to one vote for each share of the capital stock of the Corporation registered in the name of such shareholder upon the books of the Corporation. Each shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after eleven months from its date, unless the proxy appointment form expressly provides for a longer period. When directed by the presiding officer or upon the demand of any shareholder, the vote upon any matter before a meeting of shareholders shall be by ballot. Except as otherwise provided by law or by the Articles of Incorporation, Directors shall be elected by a plurality of the votes cast at a meeting of shareholders by the shareholders entitled to vote in the election and, whenever any corporate action, other than the election of Directors is to be taken, it shall be authorized by a majority of the outstanding stock of the Corporation entitled to vote thereon and if any class or series of stock is entitled to vote thereon as a separate voting group, the requisite vote of such voting group but not less than a majority. Shares of the capital stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. SECTION 1.8 INSPECTORS. When required by law or directed by the presiding officer or upon the demand of any shareholder entitled to vote, but not otherwise, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided at any meeting of the shareholders by two or more Inspectors who may be appointed by the Board of Directors before the meeting, or if not so appointed, shall be appointed by the presiding officer at the meeting. If any person so appointed fails to appear or act, the vacancy may be filled by appointment in like manner. SECTION 1.9 INFORMAL ACTION BY SHAREHOLDERS. Unless otherwise provided in the Articles of Incorporation, any action that is required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if one or more written consents, describing the action so taken, shall be signed by all of the shareholders who would be entitled to vote upon such action at a meeting or, if so provided in the Articles of Incorporation, by shareholders having not less than the minimum number of votes that would be necessary to take the action at a 3 meeting at which all shareholders entitled to vote were present and voted, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. If action is taken without a meeting by fewer than all shareholders entitled to vote on the action, the Corporation shall give written notice to all shareholders who have not consented to the action and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting with the same record date as the action taken without a meeting, within ten days after the action is taken. The notice shall describe the action and indicate that the action has been taken without a meeting of shareholders. ARTICLE II. BOARD OF DIRECTORS SECTION 2.1 NUMBER AND TERM OF OFFICE. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, none of whom need be shareholders of the Corporation. The members of the Board of Directors shall be the same as those of Holding. SECTION 2.2 PLACE OF MEETING. The Board of Directors may hold its meetings in such place or places in the State of North Carolina or outside the State of North Carolina as the Board of Directors from time to time shall determine. SECTION 2.3 REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors from time to time by resolution shall determine. No notice shall be required for any regular meeting of the Board of Directors; but a copy of every resolution fixing or changing the time or place of regular meetings shall be mailed to every Director at least five days before the first meeting held in pursuance thereof. SECTION 2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by direction of any Director who is also a DG Nominee, OEP Nominee, Temasek Nominee or TPG Nominee then in office. Notice of the day, hour and place of holding of each special meeting shall be given by mailing the same at least two days before the meeting or by causing the same to be delivered by any means or transmitted by facsimile, e-mail, telegram or telephone at least one day before the meeting to each Director. Unless otherwise indicated in the notice thereof, any and all business other than an amendment of these Bylaws may be transacted at any special meeting, and an amendment of these Bylaws may be acted upon if the notice of the meeting shall have stated that the amendment of these Bylaws is one of the purposes of the meeting. At any meeting at which every Director shall be present, even though without any notice, any business may be transacted, including the amendment of these Bylaws. SECTION 2.5 QUORUM. A majority of the members of the Board of Directors in office shall constitute a quorum for the transaction of business and the vote of the majority of the 4 Directors in office shall be the act of the Board of Directors. If at any meeting of the Board of Directors there is less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 2.6 ORGANIZATION. Unless otherwise determined by a majority of the members of the Board of Directors present at a meeting at which a quorum is present, the Executive Chairman shall preside at all meetings of the Board of Directors. In the absence of the Executive Chairman, a chairman shall be elected from the Directors present. The Secretary of the Corporation shall act as Secretary of all meetings of the Directors; but in the absence of the Secretary, the chairman of the meeting may appoint any person to act as Secretary of the meeting. SECTION 2.7 COMMITTEES. The Board of Directors may designate one or more committees, each committee to consist of one or more of the Directors of the Corporation; provided, that such committees are no different from, and have the same members as, the committees of Holding. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and except as otherwise provided by law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and the affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to approving or adopting, or recommending to the shareholders, any action or matter expressly required by law to be submitted to shareholders for approval, or adopting, amending or repealing these Bylaws. SECTION 2.8 CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted by the Articles of Incorporation or by these Bylaws, the members of the Board of Directors or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee, as the case may be, by means of conference telephone or similar communications equipment or other electronic means and such participation shall constitute presence in person at such meeting. SECTION 2.9 CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF MEETING. Unless otherwise restricted by the Articles of Incorporation or by these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee, as the case may be. SECTION 2.10 CERTAIN TRANSACTIONS AND INVESTMENT DECISIONS. Notwithstanding anything to the contrary in these Bylaws, after the Effective Time (i) all Pharma Bio Investments by the Corporation or any Subsidiary of the Corporation in excess of $10 million shall require the affirmative vote of a majority of the Board of Directors, (ii) any asset divestiture by the Corporation or Subsidiary of the Corporation in excess of $10 million shall require the 5 affirmative vote of a majority of the Board of Directors and (iii) any transactions entered into between the Corporation or any of its Subsidiaries, on the one hand, and any shareholder or Affiliate or Associate of any shareholder of Holding, on the other hand, shall require the affirmative vote of a majority of the Board of Directors of Holding as required by its Bylaws. As used herein, "Effective Time," "Pharma Bio Investments," "Subsidiary," "Affiliate" and "Associate" shall have the meanings ascribed thereto in the Stockholders Agreement. ARTICLE III. OFFICERS SECTION 3.1 OFFICERS. The officers of the Corporation shall be an Executive Chairman, a Chief Executive Officer, a Chief Financial Officer, a Chief Operating Officer, one or more Vice Presidents, a Secretary and a Treasurer, and such additional officers, if any, as shall be elected by the Board of Directors pursuant to the provisions of Section 3.9. The Executive Chairman, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, one or more Vice Presidents, the Secretary and the Treasurer shall be elected by the Board of Directors at its first meeting after each annual meeting of the shareholders. The failure to hold such election shall not of itself terminate the term of office of any officer. All officers shall hold office at the pleasure of the Board of Directors. Any officer may resign at any time upon written notice to the Corporation. Officers may, but need not, be Directors. Any number of offices may be held by the same person. All officers, agents and employees shall be subject to removal, with or without cause, at any time by the Board of Directors. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. All agents and employees other than officers elected by the Board of Directors shall also be subject to removal, with or without cause, at any time by the officers appointing them. Any vacancy caused by the death of any officer, his resignation, his removal, or otherwise, may be filled by the Board of Directors, and any officer so elected shall hold office at the pleasure of the Board of Directors. In addition to the powers and duties of the officers of the Corporation as set forth in these Bylaws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board of Directors. SECTION 3.2 POWERS AND DUTIES OF THE EXECUTIVE CHAIRMAN. Unless otherwise provided in these Bylaws, the Executive Chairman shall preside at meetings of the shareholders and at meetings of the Board of Directors and shall have such other powers and perform such other duties as may from time to time be assigned to him by these Bylaws or by the Board of Directors. SECTION 3.3 POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be the chief executive officer of the Corporation. The Chief Executive Officer 6 shall, subject to the control of the Board of Directors, have general charge and control of all its business and affairs, shall have all powers and shall perform all duties incident to the office of Chief Executive Officer and shall report to the Board of Directors of the Corporation. SECTION 3.4 POWERS AND DUTIES OF THE CHIEF OPERATING OFFICER. The Chief Operating Officer shall be the chief operating officer of the Corporation, and shall report to the Chief Executive Officer of the Corporation or such other officer as the Board of Directors may designate. He shall have all powers and perform all duties incident to the office of Chief Operating Officer, oversee the conduct and affairs of the business of the Corporation and shall have such other powers and perform such other duties as may from time to time be assigned him by these Bylaws or by the Board of Directors or the Chief Executive Officer. SECTION 3.5 POWERS AND DUTIES OF THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall receive and deposit all moneys and other valuables belonging to the Corporation in the name and to the credit of the Corporation and shall disburse the same only in such manner as the Board of Directors or the appropriate officers of the Corporation may from time to time determine, shall render to the Chief Executive Officer and the Board of Directors, whenever they request it, an account of all of his or her transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall perform such further duties as the Board of Directors may require. SECTION 3.6 POWERS AND DUTIES OF THE VICE PRESIDENTS. Each Vice President shall have all powers and shall perform all duties incident to the office of Vice President and shall have such other powers and perform such other duties as may from time to time be assigned to him by these Bylaws or by the Board of Directors, the Chief Executive Officer or the Chief Operating Officer. SECTION 3.7 POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the shareholders in books provided for that purpose; he shall attend to the giving or serving of all notices of the Corporation; he shall have custody of the corporate seal of the Corporation and shall affix the same to such documents and other papers as the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer shall authorize and direct; he shall have charge of the stock certificate books, transfer books and stock ledgers and such other books and papers as the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer shall direct, all of which shall at all reasonable times be open to the examination of any Director, upon application, at the office of the Corporation, during business hours; and whenever required by the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer shall render statements of such accounts; and he shall have all powers and shall perform all duties incident to the office of Secretary and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these Bylaws or by the Board of Directors, the Chief Executive Officer or the Chief Operating Officer. SECTION 3.8 POWERS AND DUTIES OF THE TREASURER. The Treasurer shall have custody of, and when proper shall pay out, disburse or otherwise dispose of, all funds and securities of 7 the Corporation which may have come into his hands; he may endorse on behalf of the Corporation for collection checks, notes and other obligations and shall deposit the same to the credit of the Corporation in such bank or banks or depositary or depositaries as the Board of Directors may designate; he shall sign all receipts and vouchers for payments made to the Corporation; he shall enter or cause to be entered regularly in the books of the Corporation kept for the purpose full and accurate accounts of all moneys received or paid or otherwise disposed of by him and whenever required by the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer shall render statements of such accounts; he shall, at all reasonable times, exhibit his books and accounts to any Director of the Corporation upon application at the office of the Corporation during business hours; and he shall have all powers and he shall perform all duties incident to the office of Treasurer and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these Bylaws or by the Board of Directors, the Chief Executive Officer or the Chief Operating Officer. SECTION 3.9 ADDITIONAL OFFICERS. The Board of Directors may from time to time elect such other officers (who may but need not be Directors), including a Controller, Assistant Treasurers, Assistant Secretaries and Assistant Controllers, as the Board of Directors may deem advisable and such officers shall have such authority and shall perform such duties as may from time to time be assigned to them by the Board of Directors, the Chief Executive Officer or the Chief Operating Officer. The Board of Directors may from time to time by resolution delegate to any Assistant Treasurer or Assistant Treasurers any of the powers or duties herein assigned to the Treasurer; and may similarly delegate to any Assistant Secretary or Assistant Secretaries any of the powers or duties herein assigned to the Secretary. SECTION 3.10 VOTING UPON STOCKS. Unless otherwise ordered by the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or in the name of the Corporation to execute proxies to vote, at any meeting of shareholders of any corporation in which the Corporation may hold stock, or to execute any consent in lieu of such a meeting, and at any such meeting or by any such consent shall possess and may exercise, in person or by proxy, any and all rights, powers and privileges incident to the ownership of such stock. The Board of Directors may from time to time, by resolution, confer like powers upon any other person or persons. SECTION 3.11 COMPENSATION OF OFFICERS. The officers of the Corporation shall be entitled to receive such compensation for their services as shall from time to time be determined by the Board of Directors. 8 ARTICLE IV. INDEMNIFICATION SECTION 4.1 NATURE OF INDEMNITY. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a Director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (1) such indemnification shall be limited to expenses (including attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (2) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the North Carolina Business Court or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the North Carolina Business Court or such other court shall deem proper. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. SECTION 4.2 SUCCESSFUL DEFENSE. To the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 4.1 or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. SECTION 4.3 DETERMINATION THAT INDEMNIFICATION IS PROPER. Any indemnification of a Director or officer of the Corporation under Section 4.1 (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the Director or 9 officer is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 4.1. Any indemnification of an employee or agent of the Corporation under Section 4.1 (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 4.1. Any such determination shall be made (1) by a majority vote of the Directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the shareholders. SECTION 4.4 ADVANCE PAYMENT OF EXPENSES. Unless the Board of Directors otherwise determines in a specific case, expenses incurred by a Director or officer in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article IV. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may authorize the Corporation's legal counsel to represent such Director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. SECTION 4.5 SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each Director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the North Carolina Business Corporation Act are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such Director, officer, employee or agent. The indemnification provided by this Article IV shall not be deemed exclusive of any other rights to which a person indemnified may be entitled under any bylaw, agreement, vote of shareholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The Corporation may enter into an agreement with any of its Directors, officers, employees or agents providing for indemnification and advancement of expenses, including attorneys fees, that may change, enhance, qualify or limit any right to indemnification or advancement of expenses created by this Article IV. SECTION 4.6 SEVERABILITY. If this Article IV or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgment, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, 10 administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article IV that shall not have been invalidated and to the fullest extent permitted by applicable law. SECTION 4.7 SUBROGATION. In the event of payment of indemnification to a person described in Section 4.1, the Corporation shall be subrogated to the extent of such payment to any right of recovery such person may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery. SECTION 4.8 NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under this Article IV to make any payment in connection with any claim made against a person described in Section 4.1 to the extent such person has otherwise received payment (under any insurance policy, bylaw or otherwise) of the amounts otherwise payable as indemnity hereunder. ARTICLE V. STOCK-SEAL-FISCAL YEAR SECTION 5.1 CERTIFICATES FOR SHARES OF STOCK. The certificates for shares of stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation, as shall be approved by the Board of Directors. All certificates shall be signed by the Executive Chairman, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall not be valid unless so signed. In case any officer or officers who shall have signed any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates had not ceased to be such officer or officers of the Corporation. All certificates for shares of stock shall be consecutively numbered as the same are issued. The name of the person owning the shares represented thereby with the number of such shares and the date of issue thereof shall be entered on the books of the Corporation. Except as hereinafter provided, all certificates surrendered to the Corporation for transfer shall be canceled, and no new certificates shall be issued until former certificates for the same number of shares have been surrendered and canceled. SECTION 5.2 LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a person owning a certificate for shares of stock of the Corporation alleges that it has been lost, stolen or destroyed, he or she shall file in the office of the Corporation an affidavit setting forth, to the best of his or 11 her knowledge and belief, the time, place and circumstances of the loss, theft or destruction, and, if required by the Board of Directors, a bond of indemnity or other indemnification sufficient in the opinion of the Board of Directors to indemnify the Corporation and its agents against any claim that may be made against it or them on account of the alleged loss, theft or destruction of any such certificate or the issuance of a new certificate in replacement therefor. Thereupon the Corporation may cause to be issued to such person a new certificate in replacement for the certificate alleged to have been lost, stolen or destroyed. Upon the stub of every new certificate so issued shall be noted the fact of such issue and the number, date and the name of the registered owner of the lost, stolen or destroyed certificate in lieu of which the new certificate is issued. SECTION 5.3 TRANSFER OF SHARES. Shares of stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof, in person or by his or her attorney duly authorized in writing, upon surrender and cancellation of certificates for the number of shares of stock to be transferred, except as provided in Section 5.2. SECTION 5.4 REGULATIONS. The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. SECTION 5.5 RECORD DATE. The Board of Directors may fix a future date as the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote or to take any other action. Such record date may not be more than 70 days before the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day before the first notice of the meeting is delivered to shareholders; the record date for determining shareholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is delivered to the Corporation; and the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. The Board of Directors may fix a date as the record date for determining shareholders entitled to a distribution or share dividend. If no record date is fixed by the Board of Directors for such determination, it is the date the Board of Directors authorizes the distribution or share dividend. SECTION 5.6 DIVIDENDS. Subject to the provisions of the Articles of Incorporation, the Board of Directors shall have power to declare and pay dividends upon shares of stock of the Corporation, but only out of funds available for the payment of dividends as provided by law. 12 Subject to the provisions of the Articles of Incorporation, any dividends declared upon the stock of the Corporation shall be payable on such date or dates as the Board of Directors shall determine. If the date fixed for the payment of any dividend shall in any year fall upon a legal holiday, then the dividend payable on such date shall be paid on the next day not a legal holiday. SECTION 5.7 CORPORATE SEAL. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be kept in the custody of the Secretary. A duplicate of the seal may be kept and be used by any officer of the Corporation designated by the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer. SECTION 5.8 FISCAL YEAR. The fiscal year of the Corporation shall be such fiscal year as the Board of Directors from time to time by resolution shall determine. ARTICLE VI. MISCELLANEOUS PROVISIONS SECTION 6.1 CHECKS, NOTES, ETC. All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board of Directors, countersigned by such officers of the Corporation and/or other persons as the Board of Directors from time to time shall designate. Checks, drafts, bills of exchange, acceptances, notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Treasurer and/or such other officers or persons as the Board of Directors from time to time may designate. SECTION 6.2 LOANS. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board of Directors. When authorized to do so, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances. SECTION 6.3 CONTRACTS. Except as otherwise provided in these Bylaws or by law or as otherwise directed by the Board of Directors, the Executive Chairman, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Vice President shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall 13 be affixed thereto by any of such officers or the Secretary or an Assistant Secretary. The Board of Directors, the Executive Chairman, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Vice President designated by the Board of Directors may authorize any other officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board of Directors or any such officer may be general or confined to specific instances. SECTION 6.4 WAIVERS OF NOTICE. Whenever any notice whatever is required to be given by law, by the Articles of Incorporation or by these Bylaws to any person or persons, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto. SECTION 6.5 OFFICES OUTSIDE OF NORTH CAROLINA. Except as otherwise required by the laws of the State of North Carolina, the Corporation may have an office or offices and keep its books, documents and papers outside of the State of North Carolina at such place or places as from time to time may be determined by the Board of Directors, the Executive Chairman, the Chief Executive Officer or the Chief Operating Officer. SECTION 6.6 DEFINITIONS. Unless the context otherwise requires, terms used in these Bylaws shall have the meanings assigned to them in the North Carolina Business Corporation Act to the extent defined therein. ARTICLE VII. AMENDMENTS Subject to the Stockholders Agreement, these Bylaws and any amendment thereof may be altered, amended or repealed, or new Bylaws may be adopted, by the Board of Directors at any regular or special meeting by the affirmative vote of a majority of all of the members of the Board of Directors, provided in the case of any special meeting at which all of the members of the Board of Directors are not present, that the notice of such meeting shall have stated that the amendment of these Bylaws was one of the purposes of the meeting; but these Bylaws and any amendment thereof may be altered, amended or repealed or new Bylaws may be adopted by the holders of a majority of the total outstanding stock of the Corporation entitled to vote at any annual meeting or at any special meeting, provided, in the case of any special meeting, that notice of such proposed alteration, amendment, repeal or adoption is included in the notice of the meeting. These Bylaws may not be amended in any manner inconsistent with the Stockholders Agreement. 14 EX-4.1 5 g85608exv4w1.txt SPECIMEN STOCK CERTIFICATE [Front of Stock Certificate] INCORPORATED UNDER THE LAWS OF STATE OF NORTH CAROLINA QUINTILES TRANSNATIONAL CORP. Common Stock $0.01 Par Value Per Share This Certifies that ______________[SPECIMEN]_________________________________ Is the owner of ______________________________ Shares of the Capital Stock of Quintiles Transnational Corp. Transferable only on the books of the Corporation by the holder hereof in Person or by Attorney upon surrender of this Certificate properly endorsed. IN WITNESS WHEREOF. The said Corporation has caused this Certificate to be signed By its duly authorized officers and its Corporate Seal to be hereunto affixed this ______ day of ____________________A.D. 20______ - ------------------------------ ------------------------------------ Secretary Chairman of the Board [Back of Stock Certificate] Quintiles Transnational Corp. Certificate For ______ Shares Of Capital Stock ISSUED TO _________________________________ DATED _________________________________ For Value Received, _____ hereby sell, assign, and transfer unto ________________________________________________________________________________ _________________________________________________________________________ Shares of the Capital Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _____________________________________________ to transfer the said Stock on the books of the within named Corporation with full power of substitution in the premises. Dated ______________ ______ In presence of ___________________________ _____________________________________________ Notice: The signature of this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. 2 EX-4.2 6 g85608exv4w2.txt INDENTURE DATED AS OF SEPTEMBER 25, 2003 ================================================================================ QUINTILES TRANSNATIONAL CORP., the Subsidiary Guarantors named herein and WELLS FARGO BANK MINNESOTA, N.A., as Trustee ------------------------ INDENTURE Dated as of September 25, 2003 ------------------------ $450,000,000 10% Senior Subordinated Notes Due 2013 ================================================================================ CROSS-REFERENCE TABLE

- ----------------------- N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture TABLE OF CONTENTS

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-v- INDENTURE, dated as of September 25, 2003, between QUINTILES TRANSNATIONAL CORP., a North Carolina corporation, as issuer (the "Company" or "Quintiles"), the Subsidiary Guarantors named herein and WELLS FARGO BANK MINNESOTA, N.A., a National Banking Association, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Notes. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Debt" means Debt of a Person existing at the time such Person becomes a Restricted Subsidiary or merges or consolidates with or into the Company or a Restricted Subsidiary, or assumed in connection with the acquisition of assets from such Person and, in any case, such Debt was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such merger, consolidation or acquisition. Acquired Debt shall be deemed to be Incurred on the date the acquired Person becomes a Restricted Subsidiary or the date of such merger, consolidation or acquisition. "Acquisition Corp." means Pharma Services Acquisition Corp., a North Carolina corporation. "Additional Assets" means: (a) any Property (other than cash, Temporary Cash Investments and securities) to be owned by the Company or a Restricted Subsidiary and used in the business of the Company or a Restricted Subsidiary in a Related Business; (b) Capital Stock of a Person that is or becomes a Restricted Subsidiary upon or as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary from any Person other than the Company or an Affiliate of the Company; provided, however, that, in the case of this clause (b), such Restricted Subsidiary is primarily engaged in a Related Business; or (c) (i) any Property (other than cash or Temporary Cash Investments) including securities to be owned by the Company or a Restricted Subsidiary and used in the business of the Company or a Restricted Subsidiary in a Related Business and (ii) any Capital Stock of a Person, in each case which constitutes or is acquired in connection with a Permitted PharmaBio Investment made in accordance with the other provisions of this Indenture. -2- "Additional Interest" has the meaning set forth in Exhibit A. "Additional Notes" has the meaning set forth in Section 2.01. "Affiliate" of any specified Person means: (a) any Person who is a director or officer of: (1) such specified Person, (2) any Subsidiary of such specified Person, or (3) any Person described in clause (b) below. (b) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.12 and 4.14 and the definition of "Additional Assets" only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. Notwithstanding the foregoing, so long as Verispan is not a Subsidiary of the Company it shall not constitute an Affiliate of the Company. "Affiliate Transaction" has the meaning set forth in Section 4.14(a). "Agent" means any Registrar, Paying Agent, or agent for service or notices and demands. "Agent Members" has the meaning set forth in Section 2.16(a). "Allocable Excess Proceeds" has the meaning set forth in Section 4.12(d). "amend" means amend, modify, supplement, restate or amend and restate, including successively; and "amending" and "amended" have correlative meanings. "Asian Subsidiary Equity Offering" means a sale of Capital Stock by (i) any Subsidiary of the Company that is organized and operating primarily in India, Japan or Korea or (ii) a Non-U.S. Subsidiary of the Company that is a holding company and that has as its primary asset equity interests in a Subsidiary identified in clause (i). -3- "Asset Sale" means any sale, transfer, issuance or other disposition (or series of related sales, transfers, issuances or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (b) all or substantially all of the properties and assets of any division or line of business of the Company or any Restricted Subsidiary or (c) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary; other than, in the case of clause (a), (b) or (c) above, (1) any disposition by the Company or a Restricted Subsidiary to the Company, a Restricted Subsidiary or any Person (if after giving effect to such transfer such other Person becomes a Restricted Subsidiary), (2) any disposition that constitutes a Permitted Investment or Restricted Payment permitted by Section 4.10, (3) any disposition effected in compliance with Section 5.01, (4) any sale or other disposition of cash or Temporary Cash Investments in the ordinary course of business, (5) any disposition of obsolete, worn out or permanently retired equipment or facilities or other property that is no longer used or useful in the ordinary course of the business of the Company or any Restricted Subsidiary, (6) for purposes of Section 4.12, any disposition the net proceeds of which to the Company and the Restricted Subsidiaries do not exceed $5.0 million in any transaction or series of related transactions in any twelve-month period, (7) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business, (8) any release of intangible claims or rights in connection with the loss or settlement of a bona fide lawsuit, dispute or other controversy, -4- (9) any sale or disposition deemed to occur in connection with creating or granting any Liens not prohibited by the Indenture, (10) the surrender or waiver of contract rights or the settlement, release, surrender of contract, tort or other claims of any kind, (11) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof, and (12) any sale or exchange of equipment in connection with the purchase or other acquisition of equipment of substantially equivalent or greater Fair Market Value and which is usable in a Related Business. "Average Life" means, as of any date of determination, with respect to any Debt or Preferred Stock, the quotient obtained by dividing: (a) the sum of the products of (1) the number of years (rounded to the nearest one-twelfth of one year) from the date of determination to the dates of each successive scheduled principal payment of such Debt or redemption or similar payment with respect to such Preferred Stock multiplied by (2) the amount of such payment by (b) the sum of all such payments. "Bankruptcy Law" means Title 11, United States Code, or any similar U.S. Federal or state law. "Bioglan" means Bioglan Pharmaceuticals Company, a North Carolina corporation. "Board of Directors" means, with respect to any Person, the board of directors, or any equivalent management entity, of such Person or any committee thereof duly authorized to act on behalf of such board. "Board Resolution" means, with respect to any Person, a copy of a resolution of such Person's Board of Directors, certified by the Secretary or an Assistant Secretary, or an equivalent officer, of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banking institutions in New York City are authorized or required by law to close. "Capital Lease Obligations" means any obligation under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; and the amount of -5- Debt represented by such obligation shall be the capitalized amount of such obligations determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. For purposes of Section 4.11, a Capital Lease Obligation shall be deemed secured by a Lien on the Property being leased. "Capital Stock" means, with respect to any Person, any shares or other equivalents (however designated) of any class of corporate stock or partnership interests or any other participations, rights, warrants, options or other interests in the nature of an equity interest in such Person, including Preferred Stock, but excluding any debt security convertible or exchangeable into such equity interest prior to conversion or exchange. "Capital Stock Sale Proceeds" means the aggregate cash proceeds or Fair Market Value of Property (other than Debt received) received by the Company from the issuance or sale (other than to a Restricted Subsidiary or to an employee stock ownership plan or trust established by the Company or a Restricted Subsidiary for the benefit of its employees and except to the extent that any purchase made pursuant to such issuance or sale is financed by the Company or a Restricted Subsidiary) by the Company of its Capital Stock (including upon the exercise of options, warrants or rights) (other than Disqualified Stock) or warrants, options or rights to purchase its Capital Stock (other than Disqualified Stock) after the Issue Date (other than in connection with the Merger), net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually Incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Change of Control" means the occurrence of any of the following events: (1) prior to a Public Equity Offering, the Permitted Holders cease to "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, a majority in the aggregate of the total voting power of the Voting Stock of Holding or the Company, whether as a result of issuance of securities of Holding or the Company, any merger, consolidation, liquidation or dissolution of Holding or the Company, or any direct or indirect transfer of securities by Holding, the Company or otherwise (for purposes of this clause (1), the Permitted Holders shall be deemed to beneficially own any Voting Stock of a Person (the "specified person") held by any other Person (the "other entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the other entity); (2) following a Public Equity Offering, any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, that beneficially owns (as defined in clause (1) above, except that for purposes -6- of this clause (2) such person shall be deemed to "beneficially own" all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, more than 40% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designated for election of a majority of the Board of Directors of the Company (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by a parent entity, if such other person beneficially owns (as defined in this clause (2)), directly or indirectly, more than 40% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for electing a majority of the Board of Directors of such parent entity); (3) individuals who after the first board meeting following a Public Equity Offering constituted the Board of Directors of Holding together with any new directors whose election by such Board of Directors of Holding or whose nomination for election by such shareholders of Holding was approved or nominated by a vote of a majority of the directors of Holding at the beginning of such period, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board of Directors of the Company and Holding then in office; (4) the adoption of a plan relating to the liquidation or dissolution of the Company; or (5) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person other than (i) a transaction in which the survivor or transferee is a Person that is controlled by the Permitted Holders or (ii) a transaction following which (A) in the case of a merger or consolidation transaction, Holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and (B) in the case of a sale of assets transaction, each -7- transferee becomes an obligor in respect of the Notes and a Subsidiary of the transferor of such assets. "Change of Control Offer" has the meaning set forth in Section 4.08(a). "Change of Control Payment Date" has the meaning set forth in Section 4.08(b). "Change of Control Purchase Price" has the meaning set forth in Section 4.08(a). "Commission" means the U.S. Securities and Exchange Commission. "Commodity Price Protection Agreement" means, in respect of a Person, any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in commodity prices. "Company" or "Quintiles" means the party named as such in the first paragraph of this Indenture until a successor replaces such party pursuant to Article Five and thereafter means the successor. "Consolidated EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus in each case, without duplication: (a) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income; (b) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; (c) depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and non-cash reduction of revenues received in connection with Permitted PharmaBio Investments of such Person and its Restricted Subsidiaries for such period, to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income; (d) expenses or charges relating to the refinancing or repayment of Debt, including the write-off of deferred refinancing costs and any premiums relating to such refinancing or repayment of such Person, to the extent such charges were deducted in computing such Consolidated Net Income; and -8- (e) any non-cash charges reducing Consolidated Net Income for such period (excluding any such non-cash charge to the extent that it represents an accrual of or a reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period); minus any non-cash items increasing Consolidated Net Income for such period (without duplication, excluding any reversal of a reserve for cash expense, if the establishment of such reserve had previously decreased Consolidated Net Income). "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (1) the aggregate of the net interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including, without limitation: (a) any amortization of debt discount; (b) the net costs under Interest Rate Agreements; (c) all capitalized interest; and (d) the interest portion of any deferred payment obligation, but excluding amortization of deferred financing costs; and (2) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means for any Person, for any period, the consolidated net income (loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis prior to any adjustment to net income for any preferred stock (other than Disqualified Stock) as determined in accordance with GAAP; provided, however, that there shall not be included in such Consolidated Net Income: (a) the net income (or loss) of any Person in which the Person in question or any of its Restricted Subsidiaries has less than a 100% interest (as long as the net income (or loss) of such Person is not required to be consolidated into the net income of the Person in question in accordance with GAAP) except for the amount of dividends or distributions paid to the Person in question or to such Subsidiary; (b) the net income (or loss) of any Restricted Subsidiary of the Person in question that is subject to any contractual restriction or limitation or legal prohibition on the payment of dividends and the making of other distributions (other than, if applicable, pursuant to the Notes, this Indenture or the Credit Agreement) to the extent of such restriction, limitation or prohibition; (c) any net gain or loss realized upon the sale or other disposition of any Property of such Person or any of its consolidated Subsidiaries (including pursuant to any sale and leaseback transaction) that is not sold or otherwise disposed of in the ordinary -9- course of business and any gains and losses attributable to discontinued operations; provided, however, that any net gain or loss realized upon the sale or other disposition of Permitted PharmaBio Investments shall be included in such Consolidated Net Income whether or not disposed of in the ordinary course of business; (d) any net after-tax extraordinary gain or loss; (e) the cumulative effect of a change in accounting principles; (f) any non-cash compensation expense realized for grants of stock appreciation or similar rights, stock options, Capital Stock or other rights to officers, directors and employees of such Person or a Subsidiary of such Person, provided that such rights (if redeemable), options or other rights can be redeemed at the option of the Holder only for Capital Stock of such Person (other than Disqualified Stock) or Capital Stock of a direct or indirect parent of such Person; (g) to the extent non-cash, any unusual, non-operating or non-recurring gain or loss (including to the extent related to the Merger); (h) expenses or charges (whether cash or non-cash) related to the Merger (including legal, accounting and debt issuance costs) and any restructuring related thereto, including any refunding or refinancing expenses related to Debt repaid or refinanced; and (i) gains or losses due to fluctuations in currency values and the related tax effect. For purposes of calculating Consolidated Net Income in any period, purchase price allocation adjustments to the balance sheet and any amortization or purchase price allocation adjustments, in each case, related to the Merger shall be excluded and as such considered to be zero. Notwithstanding the foregoing, to avoid duplication, for purposes of Section 4.10 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under subsection (3)(iv) thereof. "Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 213 Court Street, Middletown, CT 06457, Attention: Corporate Trust Services, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address -10- as such successor Trustee may designate from time to time by notice to the Holders and the Company). "Covenant Defeasance" has the meaning set forth in Section 9.01(b). "CPI Increase Amount" means with respect to any calendar year an amount equal to the Management Payment permitted to be paid pursuant to Section 4.10 hereof for the prior calendar year times the percentage of the increase from such preceding calendar year in the Urban Wage Earners and Clerical Workers Consumer Price Index for the New York Metropolitan Area, such amount to be calculated in March of each year, beginning in March 2005. "Credit Agreement" means the Credit Agreement, dated as of the Issue Date, among Holding, Pharma Services Intermediate Holding Corp., the Company and the lenders party thereto in their capacities as lenders thereunder and Citicorp North America, Inc., as administrative agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified (including to increase the amount of available borrowings thereunder or to add Restricted Subsidiaries as additional borrowers or guarantors thereunder) from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries as additional borrowers or guarantors thereunder) all or any portion of the Debt under such agreement, or any successor or replacement agreement, and whether by the same or any other agent, lender or group of lenders. "Credit Facility" means the Credit Agreement and one or more debt or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables or inventory financing (including through the sale of receivables or inventory to such lenders or to special purpose, bankruptcy remote entities formed to borrow from such lenders against such receivables or inventory) or trade letters of credit, or other forms of guarantees or assurances that one or more times refinances, replaces, supplements, modifies or amends such credit facility (including increasing the amount of available borrowings thereunder or adding obligors as additional borrowers or guarantors thereunder) all or any portion of the Debt under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders). "Currency Exchange Protection Agreement" means, in respect of a Person, any foreign exchange contract, currency swap agreement, futures contract, currency option, synthetic cap or other similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates. "Custodian" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. -11- "Cymbalta Investment" means an Investment by the Company in an amount not to exceed $40.0 million pursuant to an agreement dated July 18, 2002 between the Company and Lilly to support the commercialization efforts for a drug named Cymbalta(TM). "Debt" means, with respect to any Person on any date of determination (without duplication): (a) the principal of and premium (if any, but only in the event such premium has become due) in respect of: (1) debt of such Person for borrowed money, and (2) debt evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (b) all Capital Lease Obligations of such Person; (c) all obligations of such Person issued or assumed as the deferred purchase price of Property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable for goods and services arising in the ordinary course of business); (d) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit, performance bonds or surety bonds securing obligations (other than obligations described in (a) through (c) above) provided in the ordinary course of business of such Person to the extent such letters of credit and bonds are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the 30th Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit or bond); (e) the amount of all obligations of such Person with respect to the Repayment of any Disqualified Stock or, with respect to any Subsidiary of such Person that is not a Subsidiary Guarantor, any Preferred Stock (measured, in each case, at the greatest of its voluntary or involuntary maximum fixed repurchase price or liquidation value on the date of the determination but excluding, in each case, any accrued dividends for any current period not yet payable); (f) all obligations of other Persons of the type referred to in clauses (a) through (e) above, and all accrued dividends of other Persons currently payable, the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; -12- (g) all obligations of the type referred to in clauses (a) through (f) above of other Persons, the payment of which is secured by any Lien on any Property of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the Fair Market Value of such Property or the amount of the obligation so secured; and (h) to the extent not otherwise included in this definition, Hedging Obligations of such Person and all obligations under Interest Rate Agreements. The amount of Debt of any Person at any date shall be the amount necessary to extinguish in full as of such date the outstanding balance at such date of all unconditional obligations as described above including, without limitation, all interest that has been capitalized, and without giving effect to any call premiums in respect thereof. The amount of Debt represented by a Hedging Obligation shall be equal to: (1) zero if such Hedging Obligation has been Incurred pursuant to Section 4.09(b)(6),(7) or (8), or (2) the marked-to-market value of such Hedging Obligation to the counterparty thereof if not Incurred pursuant to such clauses. For purposes of this definition, the maximum fixed repurchase price of any Preferred Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Preferred Stock as if such Preferred Stock were purchased on any date on which Debt will be required to be determined pursuant to this Indenture at its Fair Market Value if such price is based upon, or measured by, the fair market value of such Preferred Stock determined in good faith by the Board of Directors of the Company; provided, however, that if such Preferred Stock is not then permitted in accordance with the terms of such Preferred Stock to be redeemed, repaid or repurchased, the redemption, repayment or repurchase price shall be the book value of such Preferred Stock as reflected in the most recent financial statements of such Person. Notwithstanding the foregoing, Debt shall not (i) mean obligations to provide services, including without limitation, the provisions of sales force personnel and related expenses, arising pursuant to agreements entered into in connection with Permitted PharmaBio Investments, so long as such obligations are expected to be treated as expenses (and not capitalized) on the income statement of such Person and (ii) include unearned income to the extent it relates to the receipt of cash in the ordinary course of business in respect of revenues that have not been recognized on such Person's income statement. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. -13- "Depository" means, with respect to the Notes issued in the form of one or more Global Notes, The Depository Trust Company or another Person designated as Depository by the Company, which Person must be a clearing agency registered under the Exchange Act. "Designated Senior Debt" means: (1) the Debt under the Credit Agreement; and (2) any other Senior Debt of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Debt as "Designated Senior Debt" for purposes of this Indenture; provided that the Company shall so advise the Trustee. "DG Equity Rollover Agreement" means the rollover agreement, dated as of August 28, 2003, by and among Holding, Dr. Dennis B. Gillings, Joan H. Gillings, Susan Ashley Gillings, the Gillings Family Foundation, the Gillings Family Limited Partnership and the GFEF Limited Partnership. "Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in either case at the option of the holder thereof) or upon the happening of an event: (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (c) is convertible or exchangeable at the option of the holder thereof for Debt or Disqualified Stock, on or prior to, in the case of clause (a), (b) or (c), the 91st day after the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders the right to require the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of a Change of Control occurring prior to the 91st day after the Stated Maturity of the Notes shall not constitute Disqualified Stock if the Change of Control provisions applicable to such Disqualified Stock are no more favorable to the holders of such Disqualified Stock than the provisions of this Indenture with respect to a Change of Control and such Disqualified Stock specifically provides that the issuer thereof will not repurchase or -14- redeem any such Capital Stock pursuant to such provisions prior to the Company's completing a Change of Control Offer. "Event of Default" has the meaning set forth in Section 6.01. "Excess Proceeds" has the meaning set forth in Section 4.12(d). "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. "Exchange Offer" has the meaning set forth in Section 8 of Exhibit A. "Exchange Securities" has the meaning provided in the Registration Rights Agreement. "Fair Market Value" means, with respect to any Property, the price that could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined, except as otherwise provided, (a) if such Property has a Fair Market Value equal to or less than $10 million, by any Officer of the Company, or (b) if such Property has a Fair Market Value in excess of $10 million, by a majority of the Board of Directors of the Company and evidenced by a Board Resolution. "Fee Agreement" shall mean the Fee Agreement, dated August 28, 2003, among Holding, OEP and Dennis B. Gillings, governing the payment by Holding of OEP's and Dennis B. Gillings' and their respective affiliates' fees and expenses related to the Merger. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Pro Forma Consolidated EBITDA of such Person for such period to the Fixed Charges of such Person for such period. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (a) the Pro forma Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period whether paid or accrued, determined in accordance with GAAP; (b) all commissions, discounts and other fees and charges Incurred in respect of letters of credit or bankers' acceptance financings, determined in accordance with GAAP, and net payments or receipts (if any) pursuant to Hedging Obligations to the extent such Hedging Obligations related to Debt that is not itself a Hedging Obligation; -15- (c) any interest expense on Debt of any Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon); (d) amortization or write-off of Debt discount in connection with any Debt of such Person and any Restricted Subsidiary, on a consolidated basis in accordance with GAAP; and (e) the product of (a) all dividend payments (other than any payments to the referent Person or any of its Restricted Subsidiaries and any dividends payable in the form of Capital Stock) on any series of Preferred Stock or Disqualified Stock of such Person and its Restricted Subsidiaries, times (b) (x) if the dividends are not deductible for income tax purposes based on the law in effect at the time of payment, a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory income tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP as estimated by the chief financial officer of such Person in good faith or (y) if such dividends are deductible by such Person for income tax purposes based on law in effect at the time of payment, one. "GAAP" means United States generally accepted accounting principles as in effect on the Issue Date. "Global Notes" has the meaning set forth in Section 2.16(a). "Government Obligations" means any security issued or guaranteed as to principal or interest by the United States, or by a Person controlled or supervised by and acting as an instrumentality of the government of the United States pursuant to the authority granted by the Congress of the United States or any certificate of deposit for any of the foregoing. "guarantee" or "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) Debt of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee against loss in respect thereof (in whole or in part); -16- provided, however, that the term "guarantee" or "Guarantee" shall not include: (1) endorsements for collection or deposit in the ordinary course of business, or (2) a contractual commitment by one Person to invest in another Person for so long as such Investment is reasonably expected to constitute a "Permitted Investment." The term "guarantee" or "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Guarantor Senior Debt" has the meaning set forth in Section 11.08. "Hedging Obligations" of any Person means any obligation of such Person pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement, Commodity Price Protection Agreement or any other similar agreement or arrangement. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Note register. "Holding" means Pharma Services Holding, Inc., a Delaware corporation, so long as it is the direct or indirect parent of Quintiles. "Incur" means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by merger, conversion, exchange or otherwise), extend, assume, Guarantee or become liable in respect of such Debt or other obligation or (if earlier) the recording, as required pursuant to GAAP or otherwise, of any such Debt or obligation on the balance sheet of such Person (and "Incurrence" and "Incurred" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP or the application thereof that results in an obligation of such Person that exists at such time, and is not theretofore classified as Debt, becoming Debt shall not be deemed an Incurrence of such Debt; provided further, however, that amortization of debt discount, accrual or capitalization of dividends and interest, including the accrual of deferred accrued interest, the accretion of principal, and the payment of interest or dividends in the form of additional securities shall not, in any such case, be deemed to be the Incurrence of Debt; provided that in the case of Debt or Preferred Stock sold at a discount or for which interest or dividends are capitalized or accrued or accreted, the amount of such Debt or outstanding Preferred Stock Incurred shall at all times be the then current accreted value or shall include all capitalized interest. "Indenture" means this Indenture as amended, restated or supplemented from time to time. -17- "Independent Financial Advisor" means an accounting, appraisal or investment banking firm of national standing or any third party appraiser or recognized expert with experience in appraising the terms and conditions of the type of transaction or series of related transactions for which an opinion is required, provided that such firm or appraiser is not an Affiliate of the Company. "Initial Purchasers" means Citigroup Global Markets Inc., ABN AMRO Incorporated and Banc One Capital Markets, Inc. "interest" means, with respect to the Notes, interest and Additional Interest. "Interest Payment Date" means April 1 and October 1 of each year. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate option agreement, interest rate future agreement or other similar agreement designed to protect against fluctuations in interest rates. "Investment" by any Person means any loan, advance or other extension of credit (other than advances or extensions of credit and receivables in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person or acquired as part of the assets acquired in connection with an acquisition of assets otherwise permitted by this Indenture and also excluding advances to officers and employees in the ordinary course of business) or capital contribution (by means of transfers of cash or other Property to others) or payments for Property or services for the account or use of others (other than expenses Incurred in the ordinary course of business, including without limitation, the provisions of sales force personnel and related expenses or as required pursuant to agreements entered into in connection with Permitted PharmaBio Investments so long as such items are expected to be treated as expenses (and not capitalized) on the income statement of such Person) to, or Incurrence of a Guarantee of any obligation of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person, or the making of upfront, milestone, marketing or other similar payment by any Person to any other Person in connection with the Person's obtaining a right to receive royalty or other payments in the future. "Investment" shall include the Fair Market Value of the Investment of (A) a Restricted Subsidiary in any Person at the time such Restricted Subsidiary becomes a Restricted Subsidiary of the Company and (B) the Company and a Restricted Subsidiary in any Subsidiary of the Company at the time that any such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the Company or such Restricted Subsidiary, as the case may be, shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary (proportionate to its equity interest in such Subsidiary) of an amount (if positive) equal to: (a) its "Investment" in such Subsidiary at the time of such redesignation, less -18- (b) the portion (proportionate to its equity interest in such Subsidiary) of the Fair Market Value of its Investment in such Subsidiary at the time of such redesignation. In determining the amount of any Investment made by transfer of any Property other than cash, such Property shall be valued at its Fair Market Value at the time of such Investment. "Investment Grade Ratings" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P. "Investor Stockholder" means OEP, TPG and Temasek. "Issue Date" means the date on which the Notes are initially issued (exclusive of any Additional Notes). "Legal Defeasance" has the meaning set forth in Section 9.01(b). "Legal Holiday" has the meaning set forth in Section 12.07. "Lien" means, with respect to any Property of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement on or with respect to such Property (including any Capital Lease Obligation, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any sale and leaseback transaction). "Management Agreements" means (i) the consulting agreement, dated as of September 25, 2003, by and between OEP, GF Management Company, LLC, TPG GenPar III L.P., Holding and Perseus-Soros Management LLC, and (ii) the consulting agreement, dated as of September 25, 2003, by and between Cassia Fund Management Pte Ltd. and Holding, in each case as in effect on the Issue Date. "Management Payment" shall have the meaning set forth in Section 4.10(b)(12). "Maturity Date" when used with respect to any Note, means the date on which the principal amount of such Note becomes due and payable as therein or herein provided. "Merger" means the consummation of the merger of Acquisition Corp. with and into Quintiles to occur in accordance with the terms of the Merger Agreement and the transactions related thereto. -19- "Merger Agreement" means the Agreement and Plan of Merger among Quintiles, Holding and Acquisition Corp., dated as of April 10, 2003, as amended as of August 18, 2003, as in effect on the Issue Date. "Merger Date" means the date on which the Merger is consummated and becomes effective in accordance with the Merger Agreement and the laws of the State of North Carolina. "Moody's" means Moody's Investor Services, Inc. or any successor rating agency. "Net Available Cash" from any Asset Sale means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only, in each case, as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Debt or other obligations or liabilities relating to the Property that is the subject of such Asset Sale or received in any other non-cash form), in each case net of: (a) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses Incurred, and all U.S. Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Sale, (b) all payments made on any Debt that is secured by any Property subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such Property, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale, (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale, (d) brokerage commissions and other reasonable fees and expenses (including, without limitation, any severance, pension or shutdown cost and fees and expenses of counsel, accountants, investment bankers and other financial advisors or consultants) related to such Asset Sale, and (e) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the Property disposed in such Asset Sale and retained by the Company or a Restricted Subsidiary after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities relating to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale and any deductions relating to escrowed amounts. -20- "Non-payment Default" has the meaning set forth in Section 11.02(a). "Non-Recourse Debt" means Debt (a) as to which neither the Company nor any Restricted Subsidiary provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Debt) or is directly or indirectly liable (as a guarantor or otherwise) or as to which there is any recourse to the assets of the Company or any Restricted Subsidiary; and (b) no default with respect to which (including any rights that the Holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Debt of the Company or any Restricted Subsidiary to declare a default under such other Debt or cause the payment thereof to be accelerated or payable prior to its stated maturity. "Non-U.S. Person" means a Person who is not a U.S. person, as defined in Regulation S. "Non-U.S. Subsidiary" means any Restricted Subsidiary of the Company that is or becomes organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. "Notes" means the 10% Senior Subordinated Notes due 2013 issued by the Company, including, without limitation, the Exchange Securities, treated as a single class of securities, as amended from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Notice of Default" shall have the meaning set forth in Section 6.01. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Debt, including any guarantees thereof, and in all cases whether direct or indirect, absolute or contingent, now outstanding or hereafter created, assumed or incurred and including, without limitation, interest accruing subsequent to the filing of a petition in bankruptcy or the commencement of any insolvency, reorganization or similar proceedings at the rate provided in the relevant documentation, whether or not an allowed claim, and any obligation to redeem or defease any of the foregoing. "OEP" means One Equity Partners LLC. "OEP Subscription Agreement" means the subscription agreement dated as of August 28, 2003 between OEP and Holding. -21- "Offer Amount" has the meaning set forth in Section 4.12(f). "Offer Period" has the meaning set forth in Section 4.12(f). "Offering Memorandum" means the offering memorandum dated September 12, 2003 relating to the offering of Notes on the Issue Date. "Officer" means the Chief Executive Officer, the President, the Chief Financial Officer or any Vice President, the Treasurer or the Secretary of the specified Person. "Officers' Certificate" means a certificate signed by an Officer of the specified Person and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company, a Subsidiary Guarantor or the Trustee. "Paying Agent" has the meaning set forth in Section 2.04. "Payment Blockage Notice" has the meaning set forth in Section 11.02(a). "Payment Blockage Period" has the meaning set forth in Section 11.02(a). "Payment Default" means any default which occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, premium, if any, or interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Designated Senior Debt (including, without limitation, guarantees of the foregoing items which constitute such Senior Debt). "Permitted Asset Swap" means any transfer of a Permitted PharmaBio Investment by the Company or any of its Restricted Subsidiaries in which the consideration received by the transferor is another Permitted PharmaBio Investment; provided that the aggregate Fair Market Value at the time of the consummation of the Permitted Asset Swap (as determined in good faith by the Board of Directors of the Company) of the Permitted PharmaBio Investment being transferred by the Company or such Restricted Subsidiary is not greater than the aggregate Fair Market Value at the time of the consummation of the Permitted Asset Swap (as determined in good faith by the Board of Directors of the Company) of the Permitted PharmaBio Investment received by the Company or such Restricted Subsidiary in such exchange; and provided, further, that, with respect to any transaction or series of related transactions that constitute a Permitted Asset Swap with an aggregate Fair Market Value in excess of $50.0 million, the Company, prior to consummation thereof, shall be required to obtain a written opinion from an Independent Financial Advisor to the effect that such transaction or series of related transactions are fair, from a financial point of view, to the Company or such Restricted Subsidiary, taken as a whole. -22- "Permitted Debt" has the meaning set forth in Section 4.09(b). "Permitted Holders" means Dr. Dennis B. Gillings, the Gillings Family Limited Partnership, the GFEF Limited Partnership, GF Management Company, LLC, the Gillings Family Foundation, OEP, Temasek and TPG and each of such Persons' Affiliates and Permitted Transferees. "Permitted Investment" means any Investment by the Company or a Restricted Subsidiary in: (a) the Company, any Restricted Subsidiary or any Person that will, upon the making of such Investment, become a Restricted Subsidiary, or that is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary; provided that the primary business of such Restricted Subsidiary is a Related Business, including, without limitation, the Merger and the transactions contemplated thereby; (b) cash or Temporary Cash Investments; (c) receivables owing to the Company or a Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or such Restricted Subsidiary deems reasonable under the circumstances; (d) payroll, travel, commission and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (e) loans and advances, including a program to provide such loans and advances, to employees, directors and consultants either made in the ordinary course of business consistent with past practices or as approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be; provided that such loans and advances do not exceed $8.0 million at any one time outstanding; (f) stock, obligations or other securities received in settlement or good faith compromise of debts owing to the Company or a Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor; (g) any Person to the extent such Investment represents non-cash consideration received in connection with an asset sale, including an Asset Sale or a Permitted Asset Swap consummated in compliance with Section 4.12 hereof; -23- (h) the Notes and, if issued, any Additional Note; (i) Interest Rate Agreements, Currency Exchange Protection Agreements, Hedging Obligations and Commodity Price Protection Agreement, in each case permitted under Section 4.09 hereof; (j) existence on the Issue Date and any Investment that replaces, refinances or refunds such an Investment, provided that the new Investment is in an amount that does not exceed that amount replaced, refinanced or refunded and is made in the same Person as the Investment replaced, refinanced or refunded; (k) prepaid expenses, negotiable instruments held for deposit or collection and lease, utility and worker's compensation, performance and other similar deposits provided to third parties in the ordinary course of business; (l) Investments, the consideration for which consists solely of Capital Stock of the Company; (m) other Investments that do not exceed $50.0 million outstanding at any one time in the aggregate (with the amount of each Investment being measured as of the time made and without giving effect to subsequent changes in value); (n) Investments in a Related Business that do not exceed $100.0 million outstanding at any one time in the aggregate (with the amount of each Investment being measured as of the time made and without giving effect to subsequent changes in value); (o) any Person where such Investment was acquired by the Company or any Restricted Subsidiary (1) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (2) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or such other transfer of title with respect to any secured Investment in default; (p) negotiable instruments held for deposit or collection in the ordinary course of business; (q) guarantees by the Company or a Restricted Subsidiary of Debt otherwise permitted to be Incurred by the Company or a Restricted Subsidiary under this Indenture and the creation of Liens on the assets of the Company or a Restricted Subsidiary in compliance with Section 4.11 hereof; (r) the Cymbalta Investment; and -24- (s) Permitted PharmaBio Investments in an amount not to exceed at any one time outstanding the net reduction in Permitted PharmaBio Investments (with the amount of each Permitted PharmaBio Investment being measured as of the time made and without giving effect to subsequent changes in value) in existence on the Issue Date resulting from dividends, repayments of loans or advances, return of capital or other transfers, sales or liquidations of Property or any other disposition or repayment of such Permitted PharmaBio Investments, in each case to the Company or any Restricted Subsidiary from any Person (other than the Company or a Restricted Subsidiary), less the cost of the disposition of such Permitted PharmaBio Investments. "Permitted Liens" means: (a) Liens securing the Notes and the Subsidiary Guarantees; (b) Liens securing Debt permitted to be Incurred under clause (b)(3) of Section 4.09 hereof; provided that any such Lien may not extend to any Property of the Company or any Restricted Subsidiary other than the Property acquired, constructed or leased with the proceeds of such Debt and any improvements or accessions to such Property; (c) Liens for taxes, assessments or governmental charges or levies on the Property of the Company or any Restricted Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings; provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (d) Liens imposed by law or regulation, such as statutory Liens or landlords', carriers', warehousemen's and mechanics' Liens, Liens in favor of customs or revenue authorities and other similar Liens, on the Property of the Company or any Restricted Subsidiary arising in the ordinary course of business and securing payment of obligations that are not more than 60 days past due or are being contested in good faith and by appropriate proceedings or Liens arising solely by virtue of any statutory or common law provisions relating to customs, duties, bankers' liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depositary institution; (e) Liens on the Property of the Company or any Restricted Subsidiary Incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance bids, trade contracts, letters of credit, bankers' acceptances, performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a customary manner, in each case which are not Incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of Property and which do not in the aggregate -25- impair in any material respect the use of Property in the operation of the business of the Company and the Restricted Subsidiaries taken as a whole; (f) Liens on Property at the time the Company or any Restricted Subsidiary acquired such Property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided, however, that any such Lien may not extend to any other Property of the Company or any Restricted Subsidiary; provided, further, however, that such Liens shall not have been Incurred in anticipation of or in connection with the transaction or series of related transactions pursuant to which such Property was acquired by the Company or any Restricted Subsidiary; (g) Liens on the Property of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that any such Lien may not extend to any other Property of the Company or any other Restricted Subsidiary that is not a direct or, prior to such time, indirect Subsidiary of such Person; provided, further, however, that any such Lien was not Incurred in anticipation of or in connection with the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary; (h) pledges or deposits by the Company or any Restricted Subsidiary under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company or any Restricted Subsidiary is party, or deposits to secure public or statutory obligations of the Company or any Restricted Subsidiary, or deposits for the payment of rent, in each case Incurred in the ordinary course of business; (i) utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character; (j) any provision for the retention of title to any Property by the vendor or transferor of such Property which Property is acquired by the Company or a Restricted Subsidiary in a transaction entered into in the ordinary course of business of the Company or a Restricted Subsidiary and for which kind of transaction it is normal market practice for such retention of title provision to be included; (k) Liens arising by means of any judgment, decree or order of any court, to the extent not otherwise resulting in an Event of Default, and any Liens that are customarily required to protect or enforce rights in any administrative, arbitration or other court proceedings in the ordinary course of business; -26- (l) Liens on and pledges of the Capital Stock of any Unrestricted Subsidiary to secure Debt of that Unrestricted Subsidiary; (m) (1) mortgages, Liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary has easement rights or on any real property leased by the Company or any Restricted Subsidiary or similar agreements relating thereto and (2) any condemnation or eminent domain proceedings or compulsory purchase order affecting real property; (n) Liens existing on the Issue Date; (o) Liens in favor of the Company or any Restricted Subsidiary; (p) Liens on the Property of the Company or any Restricted Subsidiary to secure any Refinancing of Debt, in whole or in part, secured by any Lien described in the foregoing clause (a), (f), (g) or (n); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured the Debt being Refinanced; (q) Liens on Permitted PharmaBio Investments consisting of call rights, purchase options, transfer restrictions or other similar Liens imposed in connection therewith; (r) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; and (s) Liens in the form of licenses, leases or subleases granted or created by the Company or any Restricted Subsidiary, which licenses, leases or subleases do not interfere, individually or in the aggregate, in any material respect with the business of the Company or such Restricted Subsidiary or individually or in the aggregate materially impair the use (for its intended purpose) or the value of the Property subject thereto. "Permitted PharmaBio Investments" means the Investments by the Company or any Restricted Subsidiary in any Person (including Bioglan but excluding any other Subsidiary) that is involved in the development and production of pharmaceutical products, or in other lines of business within the pharmaceutical services or biotechnology industry or related or complementary businesses in the healthcare industry including without limitation biotechnology consumer marketing and information technology, pharmaco-economics consulting and pharmaco-genomics. -27- "Permitted Refinancing Debt" means any Debt that Refinances any other Debt, that is Incurred in accordance with Section 4.09(a) hereof or that is Incurred under clause (b)(2), (3), (5), (14), or previously Incurred under clause (b)(16) of the definition of "Permitted Debt," including any successive Refinancings, so long as: (a) such Debt is in an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) not in excess of the sum of: (1) the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) and any accrued but unpaid interest then outstanding of the Debt being Refinanced, and (2) an amount necessary to pay any fees and expenses, including premiums, tender and defeasance costs, related to such Refinancing, (b) in the case of the Refinancing of term Debt, the Average Life of such Debt is equal to or greater than the Average Life of the Debt being Refinanced, (c) in the case of the Refinancing of term Debt, the final Stated Maturity of the Debt being Incurred is no earlier than the final Stated Maturity of the Debt being Refinanced, and (d) in the case of the Refinancing of Debt of the Company or a Subsidiary Guarantor: (1) the new Debt shall be issued by the same issuer of the Debt being Refinanced or by the Company; and (2) if the Debt being Refinanced constitutes Subordinated Obligations of the Company or a Subsidiary Guarantor, the new Debt shall be subordinated to the Notes or the relevant Subsidiary Guarantee, as applicable, at least to the same extent as the Subordinated Obligations; provided, however, that Permitted Refinancing Debt shall not include: (x) Debt of a Restricted Subsidiary (other than a Subsidiary Guarantor) that Refinances Debt of the Company or a Subsidiary Guarantor, or (y) Debt of the Company or a Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary. "Permitted Transferee" means (i) with respect to any Permitted Holder who is a natural person, (A) such Person's estate, spouse, heirs, ancestors, lineal descendants (including by adoption and stepchildren, and the lineal descendants thereof), legatees, legal representatives -28- or trustees of a bona fide trust of which one or more of the foregoing or such Permitted Holder is or are the controlling trustees, principal beneficiaries or grantors thereof, whether through the ownership of voting securities, by contract or otherwise, and (B) any entity controlled, directly or indirectly, by any Persons referred to in the preceding clause (A) and (ii) with respect to any Investor Stockholder, (A) any other Investor Stockholder or any of their Permitted Transferees, (B) any director, officer or general partner, limited partner, manager, member or Affiliate of any Investor Stockholder or any of their Permitted Transferees, or (C) any director, officer, general partner or limited partner of any Affiliate of any Investor Stockholder or any of their Permitted Transferees. "Person" means any individual, corporation, company (including any limited liability company), association, partnership, joint venture, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Physical Notes" means certificated Notes in registered form in substantially the form set forth in Exhibit A. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of any other class of Capital Stock issued by such Person. "Prepayment Offer" has the meaning set forth in Section 4.12(d). "Private Placement Legend" means the legend initially set forth on the Rule 144A Notes and Other Notes that are Restricted Notes in the form set forth in Exhibit B. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms hereof, a calculation performed in accordance with the terms of this Indenture and (to the extent not conflicting with such terms) Article 11 of Regulation S-X promulgated under the Securities Act (as in effect on the Issue Date). "Pro Forma Consolidated EBITDA" means, for any Person for any period, the Consolidated EBITDA of such Person on a pro forma basis; provided that if, since the beginning of the relevant period, 1. (x) any Person was designated as an Unrestricted Subsidiary or redesignated as or otherwise became a Restricted Subsidiary, such event shall be deemed to have occurred on the first day of the applicable reference period, or (y) any Person that subsequently became a Restricted Subsidiary or was merged with or into such Person or any Restricted Subsidiary since the beginning of the period shall have made any Investment in any Person or made any acquisition, disposition, merger or consolidation that would have required adjustment pursuant to this definition, then in each case, Pro Forma Consolidated EBITDA shall be -29- calculated giving pro forma effect thereto for such period as if such designation, Investment, acquisition, disposition, merger or consolidation had occurred at the beginning of the applicable reference period; and 2. in the event that pro forma effect is being given to any Repayment of Debt, Pro Forma Consolidated EBITDA for such period shall be calculated as if such Person or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to Repay such Debt. "Pro Forma Consolidated Interest Expense" means, with respect to any period, Consolidated Interest Expense adjusted (without duplication) to give pro forma effect to any Incurrence of Debt that remains outstanding at the end of the period or any Repayment of Debt since the beginning of the relevant period as if such Incurrence or Repayment had occurred on the first day of such period. If any Debt bears a floating or fluctuating rate of interest and is being given pro forma effect, the interest expense on such Debt shall be calculated as if the base interest rate in effect for such floating or fluctuating rate of interest on the date of determination were in effect for the whole period (taking into account any Interest Rate Agreement applicable to such Debt if such Interest Rate Agreement had when entered into a term of at least 12 months or, if shorter, the term of the Debt). In the event the Capital Stock of any Restricted Subsidiary is sold during the period, the Debt of such Restricted Subsidiary shall be deemed to have been repaid during such period to the extent the Company and the continuing Restricted Subsidiaries are no longer liable for such Debt after such sale. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock in, and other securities of, any other Person. For purposes of any calculation required pursuant to this Indenture, the value of any Property shall be its Fair Market Value. "Public Equity Offering" means an underwritten public offering of common stock of the Company or Holding after the Issue Date, pursuant to an effective registration statement filed under the Securities Act. "Purchase Date" has the meaning set forth in Section 4.12(e). "Purchase Money Debt" means Debt: (a) consisting of the deferred purchase price of Property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds, in each case where the maturity of such Debt does not exceed the anticipated useful life of the Property being financed, and -30- (b) Incurred to finance the acquisition, construction or lease by the Company or a Restricted Subsidiary of such Property, including additions and improvements thereto; provided, however, that such Debt is Incurred within 180 days after the acquisition, completion of the construction, addition or improvement or lease of such Property by the Company or such Restricted Subsidiary. "Qualified Equity Offering" means any public or private offering for cash of Capital Stock (other than Disqualified Stock) of the Company other than (i) public offerings of Capital Stock registered on Form S-8 or (ii) other issuances upon the exercise of options of employees of Holding or any of its Subsidiaries. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A promulgated under the Securities Act. "Redemption Date" when used with respect to any Note to be redeemed pursuant to paragraph 5 of the Notes means the date fixed for such redemption pursuant to the terms of the Notes. "Refinance" means, in respect of any Debt, to refinance, extend, renew, refund, repay, prepay, repurchase, redeem, defease or retire, or to issue other Debt, in exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall have correlative meanings. "Registrar" has the meaning set forth in Section 2.04. "Registration Rights Agreement" means the registration rights agreement, dated the Issue Date, among Quintiles, the Subsidiary Guarantors and the Initial Purchasers and any future registration rights agreement entered into in connection with the issuance of the Additional Notes provided for, inter alia, the exchange of Exchange Notes for such Additional Notes. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" has the meaning set forth in Section 2.16(a). "Regulation S Notes" has the meaning set forth in Section 2.02. "Related Business" means any business that is the same as or related, ancillary, incidental or complementary to the business of the Company on the Issue Date or any reasonable extension, development or expansion of the business of the Company, including the Permitted PharmaBio Investments. -31- "Repay" means, in respect of any Debt, to repay, prepay, repurchase, redeem, legally defease or otherwise retire such Debt with the effect that the Debt is no longer an obligation of the Person who had Incurred such Debt or any of its Restricted Subsidiaries. "Repayment" and "Repaid" shall have correlative meanings. For purposes of Section 4.12 and the definition of "Fixed Charge Coverage Ratio," Debt shall be considered to have been Repaid only to the extent the related loan commitment, if any, shall have been permanently reduced in connection therewith. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Required Filing Dates" has the meaning set forth in Section 4.17. "Required Rating Agencies" means both Moody's and S&P or their respective successors; provided that if either Moody's or S&P (or their respective successors) is no longer conducting business or is no longer rating companies in the pharmaceutical and biotechnological industries generally, then "Required Rating Agencies" means either Moody's or S&P (or their respective successors), as applicable. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer in the Corporate Trust Office of the Trustee including any vice president, assistant vice president or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, and to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Global Notes" has the meaning set forth in Section 2.16(a). "Restricted Payment" means: (a) any dividend or distribution (whether made in cash, securities or other Property) declared or paid by the Company or any Restricted Subsidiary on or with respect to any shares of its Capital Stock except for (i) any dividend or distribution that is made solely to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, to the other shareholders of such Restricted Subsidiary on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis) or (ii) any dividend or distribution payable solely in shares of Capital Stock (other than Disqualified Stock) of the Company or a -32- Restricted Subsidiary or in options, warrants or other rights to acquire shares of Capital Stock (other than Disqualified Stock) of the Company; (b) the purchase, repurchase, redemption, acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary (other than from the Company or a Restricted Subsidiary or any entity that becomes a Restricted Subsidiary as a result of such transactions) or securities exchangeable for or convertible into any such Capital Stock, including the exercise of any option to exchange any Capital Stock (other than for or into Capital Stock of the Company that is not Disqualified Stock) ; provided that, notwithstanding anything in this definition to the contrary, the purchase, repurchase, redemption, acquisition or retirement for value of any Disqualified Stock of the Company or any Restricted Subsidiary at its scheduled mandatory redemption date shall only constitute a Restricted Payment to the extent (and only to the extent) that the issuance of such Disqualified Stock increased the amount available for Restricted Payments pursuant to Section 4.10(a)(3)(iii); (c) the purchase, repurchase, redemption, acquisition or retirement for value, prior to the date for any scheduled maturity, sinking fund or amortization or other installment payment, of any Subordinated Obligation (other than the purchase, repurchase or other acquisition of any Subordinated Obligation purchased in anticipation of satisfying a scheduled maturity, sinking fund or amortization or other installment obligation, in each case due within one year of the date of acquisition); (d) any Investment (other than Permitted Investments and Guarantees by Restricted Subsidiaries of Debt Incurred pursuant to Section 4.09) in any Person; or (e) the issuance, sale or other disposition of Capital Stock of any Restricted Subsidiary to a Person (other than the Company or another Restricted Subsidiary) if the result thereof is that such Restricted Subsidiary shall cease to be a Subsidiary of the Company, in which event the amount of such "Restricted Payment" shall be the Fair Market Value of the remaining interest, if any, in such former Restricted Subsidiary held by the Company or the Restricted Subsidiaries to the extent not a Permitted Investment under clause (g) of the definition of "Permitted Investment." "Restricted Note" has the same meaning as "Restricted Security" set forth in Rule 144(a)(3) promulgated under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Note is a Restricted Note. "Restricted Subsidiary" means each Subsidiary of the Company as of the Issue Date and thereafter unless such Subsidiary is designated an Unrestricted Subsidiary in accordance with the provisions of this Indenture. -33- "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 144A Notes" has the meaning set forth in Section 2.02. "S&P" means Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc., or any successor rating agency. "Securities Act" means the U.S. Securities Act of 1933, as amended. "Senior Debt" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Debt of the Company or a Subsidiary Guarantor, as the case may be, whether outstanding on the Issue Date or thereafter created, Incurred or assumed and any amendments, renewals, modifications, extensions, refinancings and refundings of such Debt, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinated in right of payment to any other Debt of such Person. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on and all other amounts owing in respect of: (1) all monetary obligations (including Guarantees thereof) of every nature of the Company or a Subsidiary Guarantor under the Credit Facility, including, without limitation, obligations (including Guarantees) to pay principal, premium (if any), any interest, reimbursement obligations under letters of credit, fees, expenses and indemnities; (2) all obligations under Interest Rate Agreements (including Guarantees thereof); (3) all obligations under Currency Exchange Protection Agreements (including Guarantees thereof); and (4) all obligations under Commodity Price Protection Agreements (including Guarantees thereof) in each case whether outstanding on the Issue Date or thereafter Incurred. -34- Notwithstanding the foregoing, "Senior Debt" shall not include: (1) any Debt of the Company to a Subsidiary of the Company or any Debt of a Subsidiary Guarantor to the Company or another Subsidiary of the Company; (2) any Debt to, or guaranteed on behalf of, any director, officer or employee, in such capacities of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation); (3) Debt to trade creditors and other amounts Incurred (but not under the Credit Facility) in connection with obtaining goods, materials or services including, without limitation, accounts payable; (4) obligations in respect of any Capital Stock, including Disqualified Stock; (5) any liability for federal, state, local or other taxes owed or owing by the Company or any Subsidiary Guarantor; (6) that portion of any Debt Incurred in violation of this Indenture; (7) Debt that, when Incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the issuer of such Debt; and (8) any Debt that is, by its express terms, subordinated in right of payment to any other Debt of the Company or a Subsidiary Guarantor. "Senior Subordinated Debt" means (i) with respect to the Company, the Notes and any other Debt of the Company that specifically provides that such Debt is to have the same rank as the Notes in right of payment and is not subordinated by its terms in right of payment to any Debt or other obligation of the Company which is not Senior Debt and (ii) with respect to any Subsidiary Guarantor, the Subsidiary Guarantees and any other Debt of such Subsidiary Guarantors that specifically provides that such Debt is to have the same rank as Subsidiary Guarantees of the Notes in right of payment and is not subordinated by its terms in right or payment to any Debt or other obligation of such Subsidiary Guarantor which is not Senior Debt. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the Commission. "Stated Maturity" means (a) with respect to any debt security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision -35- providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred) and (b) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Subordinated Obligation" means any Debt of the Company or any Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that is subordinate or junior in right of payment to the Notes or such entity's Subsidiary Guarantee pursuant to a written agreement to that effect. "Subscription Agreements" means the OEP Subscription Agreement, the TPG Subscription Agreement, the Temasek Subscription Agreement and similar agreements with other Persons making cash equity investments, as contemplated by the Transactions. "Subsidiary" means, in respect of any Person, any corporation, company (including any limited liability company), association, partnership, joint venture or other business entity of which a majority of the total voting power of the Voting Stock is at the time owned or controlled, directly or indirectly, by: (a) such Person, (b) such Person and one or more Subsidiaries of such Person, or (c) one or more Subsidiaries of such Person. For the avoidance of doubt, Quintiles Treasury EEIG, a European Economic Interest Group organized under the auspices of the European Union, shall constitute a Subsidiary on the Issue Date. Notwithstanding the foregoing, Verispan shall not constitute a Subsidiary on the Issue Date. "Subsidiary Guarantee" means a Guarantee on the terms set forth in Article Ten of this Indenture by a Subsidiary Guarantor of the Company's obligations with respect to the Notes. "Subsidiary Guarantor" means (i) all the Restricted Subsidiaries of the Company organized under the laws of any State of the United States or any province or territory thereof, (ii) each other Restricted Subsidiary of the Company that is a guarantor of the obligations of the Company or a domestic Restricted Subsidiary under the Credit Agreement and (iii) each Restricted Subsidiary that executes a Subsidiary Guarantee in accordance with Section 4.18 hereof, in each case until such time as such Subsidiary Guarantor shall be released in accordance with Section 10.03. -36- "Surviving Person" has the meaning set forth in Section 5.01(a)(1). "Temasek" means Temasek Life Science Investments Private Limited, a Singapore corporation. "Temasek Subscription Agreement" means the subscription agreement dated as of August 28, 2003 between Temasek and Holding. "Temporary Cash Investments" means: (a) any Government Obligation, maturing not more than one year after the date of acquisition, issued by the United States or any member state of the European Union or any instrumentality or agency thereof, and constituting a general obligation of the United States or any member state of the European Union; (b) any certificate of deposit, maturing not more than one year after the date of acquisition, issued by, or time deposit of, a commercial banking institution that is a member of the U.S. Federal Reserve System and that has combined capital and surplus and undivided profits of not less than $500 million, whose debt has a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P (or, in the case of non-U.S. Subsidiaries of the Company, any local office of any commercial bank organized under the laws of the relevant jurisdiction or any political subdivision thereof which has a combined capital surplus and undivided profits in excess of $500 million (or the foreign currency equivalent thereof)); (c) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and existing under the laws of the United States, any state thereof or the District of Columbia with a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; (d) any money market deposit accounts issued or offered by a commercial bank organized in the United States having capital and surplus and undivided profits in excess of $500 million; provided that the short-term debt of such commercial bank has a rating, at the time of Investment, of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; (e) repurchase obligations and reverse repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (a) or (b) entered into with a bank meeting the qualifications described in clause (b) above; -37- (f) investments in securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, or by any political subdivision or taxing authority thereof, and rated at least "A-1" by S&P or "P-1" by Moody's; (g) interests in funds investing substantially all their assets in securities of the types described in clauses (a) through (f); and (h) interests in mutual funds with a rating of AAA- or higher that invest all of their assets in short-term securities, instruments and obligations which carry a minimum rating of "A-2" by S&P or "P-2" by Moody's and which are managed by a bank meeting the qualifications in clause (b) above. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in Section 8.03). "Total Leverage Ratio" means, for any four fiscal quarter period, the ratio of (a) Debt, other than (i) Guarantees by such Person of Debt or other monetary or financial obligations of others, (ii) all payments that such Person would have to make in the event of an early termination, on the date Debt of such Person is being determined, in respect of outstanding interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements, and (iii) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, surety bonds and performance bonds, whether or not matured, of the Company and its Subsidiaries net of cash as of such date, to (b) Consolidated EBITDA for such period. For periods ending prior to the one year anniversary of the Merger Date, Consolidated EBITDA shall be determined on a pro forma basis to give effect to the Merger as if it had occurred on the first day of such period. "TPG" means TPG Quintiles Holdco LLC, a limited liability company organized under the laws of Delaware. "TPG Subscription Agreement" means the subscription agreement dated as of August 28, 2003 between TPG and Holding. "Transactions" means, collectively, the consummation of the Merger, including the equity investments in Holding by GF Management, LLC, OEP, TPG and Temasek and their respective Affiliates, the closing of the Credit Agreement and the consummation of the offering of the Notes. "Trustee" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. -38- "Unrestricted Subsidiary" means: (a) any Subsidiary of the Company that at the time of determination is designated as an Unrestricted Subsidiary as permitted or required pursuant to Section 4.15 and is not thereafter redesignated as a Restricted Subsidiary as permitted pursuant thereto; and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Stock" of any Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Restricted Subsidiary" means, at any time, a Restricted Subsidiary all the Voting Stock of which (except directors' qualifying shares and shares required by applicable law to be held by a Person other than the Company) is at such time owned, directly or indirectly, by the Company and its other Wholly Owned Subsidiaries. "Verispan" means Verispan L.L.C., a limited liability company organized under the laws of Delaware. SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the portion of such provision required to be incorporated herein in order for this Indenture to be qualified under the TIA is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes. "indenture securityholder" means a Holder or Noteholder. "indenture to be qualified" means this Indenture. "obligor on this indenture securities" means the Company, the Subsidiary Guarantors or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by Commission rule have the meanings therein assigned to them. -39- SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it herein, whether defined expressly or by reference; (2) "or" is not exclusive; (3) words in the singular include the plural, and in the plural include the singular; (4) words used herein implying any gender shall apply to both genders; (5) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subsection; (6) unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP as in effect on the Issue Date; (7) "$," "U.S. Dollars" and "United States Dollars" each refer to United States dollars, or such other money of the United States that at the time of payment is legal tender for payment of public and private debts; and (8) whenever in this Indenture there is mentioned, in any context, principal, interest or any other amount payable under or with respect to any Note, such mention shall be deemed to include mention of the payment of Additional Interest to the extent that, in such context, Additional Interest, was or would be payable in respect thereof. ARTICLE TWO THE SECURITIES SECTION 2.01. Amount of Notes. The Trustee shall initially authenticate the Notes for original issue on the Issue Date in an aggregate principal amount of $450 million upon a written order of the Company in the form of an Officers' Certificate of the Company (other than as provided in Section 2.08). The Trustee shall authenticate additional Notes ("Additional Notes") thereafter in unlimited aggregate principal amount (so long as permitted by the terms of this Indenture, including, without limitation, Section 4.09) for original issue upon a written order of the Company in the form of an Officers' Certificate in aggregate principal amount as specified in such order (other -40- than as provided in Section 2.08). Each such written order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated. SECTION 2.02. Form and Dating. The Notes and the Trustee's certificate of authentication with respect thereto shall be substantially in the form set forth in Exhibit A, which is incorporated in and forms a part of this Indenture. The Notes may have notations, legends or endorsements required by law, rule or usage to which the Company is subject. Without limiting the generality of the foregoing, Notes offered and sold to Qualified Institutional Buyers in reliance on Rule 144A ("Rule 144A Notes") shall bear the legend and include the form of assignment set forth in Exhibit B, Notes offered and sold in offshore transactions in reliance on Regulation S ("Regulation S Notes") shall bear the legend and include the form of assignment set forth in Exhibit C. Each Note shall be dated the date of its authentication. The terms and provisions contained in the Notes shall constitute, and are expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and agree to be bound thereby. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. SECTION 2.03. Execution and Authentication. The Notes shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President or any Vice President. The signature of any of these officers on the Notes may be manual or facsimile. If an Officer whose signature is on a Note was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Note shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Note to the Trustee for cancellation as provided in Section 2.12, for all purposes of this Indenture such Note shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. -41- The Notes shall be issuable only in fully registered form without coupons in denominations of $1,000 and integral multiples of $1,000. SECTION 2.04. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar"), and an office or agency where Notes may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon the Company, if any, in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more additional Paying Agents. The term "Paying Agent" includes any additional Paying Agent. The Company shall enter into an appropriate agency agreement, which shall incorporate the provisions of the TIA, with any Agent that is not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07. The Company initially appoints the Trustee as Registrar, Paying Agent and Agent for service of notices and demands in connection with the Notes and this Indenture and the Company may change the Paying Agent without prior notice to the Holders. The Company or any of its Subsidiaries may act as Paying Agent. SECTION 2.05. Paying Agent To Hold Money in Trust. Each Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of or premium or interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes or the Subsidiary Guarantors), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder; provided that if the Company or an Affiliate thereof acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default specified in Section 6.01(1) or (2), upon written request to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making such payment, the Paying Agent shall have no further liability for the money delivered to the Trustee. -42- SECTION 2.06. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least five Business Days before each Interest Payment Date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders, provided that, as long as the Trustee is the Registrar, no such list need be furnished. SECTION 2.07. Transfer and Exchange. Subject to Sections 2.16 and 2.17, when Notes are presented to the Registrar with a request from the Holder of such Notes to register a transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer as requested. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorneys duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall issue and execute and the Trustee shall authenticate new Notes (and the Subsidiary Guarantors shall execute the Subsidiary Guarantee thereon) evidencing such transfer or exchange at the Registrar's request. No service charge shall be made to the Holder for any registration of transfer or exchange. The Company may require from the Holder payment of a sum sufficient to cover any transfer taxes or other governmental charge that may be imposed in relation to a transfer or exchange, but this provision shall not apply to any exchange pursuant to Section 2.11, 3.06, 4.08, 4.12 or 8.05 (in which events the Company shall be responsible for the payment of such taxes). The Registrar shall not be required to exchange or register a transfer of any Note for a period of 15 days immediately preceding the redemption of Notes, except the unredeemed portion of any Note being redeemed in part. Any Holder of the Global Note shall, by acceptance of such Global Note, agree that transfers of the beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Global Note shall be required to be reflected in a book entry. Except as expressly provided herein, neither the Trustee nor the Registrar shall have any duty to monitor the Company's compliance with or have any responsibility with respect to the Company's compliance with any Federal or state securities laws. SECTION 2.08. Replacement Notes. If a mutilated Note is surrendered to the Registrar or the Trustee, or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall -43- issue and the Trustee shall authenticate a replacement Note (and the Subsidiary Guarantors shall execute the Subsidiary Guarantee thereon) if the Holder of such Note furnishes to the Company and the Trustee evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Note and if the requirements of Section 8-405 of the New York Uniform Commercial Code as in effect on the date of this Indenture are met. If required by the Trustee or the Company, an indemnity bond shall be posted, sufficient in the judgment of all to protect the Company, the Subsidiary Guarantors, the Trustee or any Paying Agent from any loss that any of them may suffer if such Note is replaced. The Company may charge such Holder for the Company's reasonable out-of-pocket expenses in replacing such Note and the Trustee may charge the Company for the Trustee's expenses (including, without limitation, attorneys' fees and disbursements) in replacing such Note. Every replacement Note shall constitute a contractual obligation of the Company. SECTION 2.09. Outstanding Notes. The Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for (a) those canceled by it, (b) those delivered to it for cancellation, (c) to the extent set forth in Sections 9.01 and 9.02, on or after the date on which the conditions set forth in Section 9.01 or 9.02 have been satisfied, those Notes theretofore authenticated and delivered by the Trustee hereunder and (d) those described in this Section 2.09 as not outstanding. Subject to Section 2.10, a Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.08, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser in whose hands such Note is a legal, valid and binding obligation of the Company. If the Paying Agent holds, in its capacity as such, on any Maturity Date, money sufficient to pay all accrued interest and principal with respect to the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. SECTION 2.10. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any declaration of acceleration or notice of default or direction, waiver or consent or any amendment, modification or other change to this Indenture, Notes owned by the Company or any other Affiliate of the Company shall be disregarded as though they were not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent or any amendment, modification or other change to this Indenture, only Notes as to which a Responsible Officer of the Trustee has actually received an Officers' Certificate stating that such Notes are so owned shall be so -44- disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee established to the satisfaction of the Trustee the pledgee's right so to act with respect to the Notes and that the pledgee is not the Company, a Subsidiary Guarantor, any other obligor on the Notes or any of their respective Affiliates. SECTION 2.11. Temporary Notes. Until definitive Notes are prepared and ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. SECTION 2.12. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall deliver such canceled Notes to the Company. The Company may not reissue or resell, or issue new Notes to replace, Notes that the Company has redeemed or paid, or that have been delivered to the Trustee for cancellation. SECTION 2.13. Defaulted Interest. If the Company defaults on a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent permitted by law) any interest payable on the defaulted interest, in accordance with the terms hereof, to the Persons who are Holders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Company shall fix such special record date and payment date in a manner satisfactory to the Trustee. At least 10 days before such special record date, the Company shall mail to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest, and interest payable on defaulted interest, if any, to be paid. The Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Notes may be listed and, upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this sentence, such manner of payment shall be deemed practicable by the Trustee. -45- SECTION 2.14. CUSIP Number. The Company in issuing the Notes may use a "CUSIP" number, and if so, such CUSIP number shall be included in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any such CUSIP number used by the Company in connection with the issuance of the Notes and of any change in the CUSIP number. SECTION 2.15. Deposit of Moneys. Prior to 10:00 a.m., New York City time, on each Interest Payment Date and Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Trustee to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. The principal and interest on Global Notes shall be payable to the Depository or its nominee, as the case may be, as the sole registered owner and the sole Holder of the Global Notes represented thereby. The principal and interest on Physical Notes shall be payable, either in person or by mail, at the office of the Paying Agent. SECTION 2.16. Book-Entry Provisions for Global Notes. (a) Rule 144A Notes shall be represented by one or more Notes in registered, global form without interest coupons (collectively, the "Restricted Global Notes"). Regulation S Notes initially shall be represented by one or more Notes in registered, global form without interest coupons (collectively, the "Regulation S Global Note," and, together with the Restricted Global Note and any other global notes representing Notes, the "Global Notes"). The Global Notes shall bear legends as set forth in Exhibit D. The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, in each case for credit to an account of DTC or an Agent Member, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit B with respect to Restricted Global Notes and Exhibit C with respect to Regulation S Global Notes. Members of, or direct or indirect participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization (which may be in electronic form) furnished by the Depository or impair, as -46- between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of Global Notes shall be limited to transfer in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.17. In addition, a Global Note shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the Company that it is unwilling or unable to continue as depository for such Global Note or (y) has ceased to be a clearing agency registered under the Exchange Act and with respect to (x) or (y) the Company thereupon fails to appoint a successor depository within 90 days of such notice or cessation, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of such Physical Notes in exchange for any or all of the Notes represented by the Global Notes or (iii) there shall have occurred and be continuing an Event of Default with respect to the Notes. In all cases, Physical Notes delivered in exchange for any Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository (in accordance with its customary procedures). (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall upon receipt of a written order from the Company authenticate and make available for delivery, one or more Physical Notes of like tenor and amount. (d) In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Note delivered in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d) shall, except as otherwise provided by paragraphs (a) and (c) of Section 2.17, bear the Private Placement Legend or, in the case of the Regulation S Global Note, the legend set forth in Exhibit C, in each case, unless the Company determine otherwise in compliance with applicable law. (f) Any beneficial interest in one of the Global Notes that is transferred to a Person who takes delivery in the form of an interest in another Global Note shall, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note and, accordingly, shall thereafter be subject to all transfer restrictions and other procedures -47- applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (g) The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.17. Special Transfer Provisions. (a) Transfers to QIBs. The following provisions shall apply with respect to the registration or any proposed registration of transfer of a Note constituting a Restricted Note to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on such Holder's Note stating, or to a transferee who has advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the Global Note, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (b) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. Persons. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Note to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Note whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date) or (y)(1) in the case of a transfer to an Institutional Accredited Investor -48- which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit G hereto and any legal opinions and certifications required thereby and the proposed transferor has delivered to the Company a legal opinion in form satisfactory to the Company as set forth in the Private Placement Legend or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit E hereto; (ii) if the proposed transferor is a Participant holding a beneficial interest in the Global Note, upon receipt by the Registrar of (x) the certificate, if any, required by Section 2.17(b)(i) and (y) written instructions given in accordance with the Depositary's and the Registrar's procedures; whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred and (b) the Company shall execute and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount; and (iii) in the case of a transfer to a Non-U.S. Person, if the proposed transferee is a Participant, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in a Regulation S Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of such Regulation S Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (c) Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (ii) such Note has been sold pursuant to an effective registration statement under the Securities Act and the Registrar has received an Officers' Certificate from the Company to such effect or (iii) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither the Company nor an Affiliate of the Company has held any beneficial interest in such Note or portion thereof at any time since the Issue Date). -49- (d) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. (e) Certain Transfers in Connection with and After the Exchange Offer Under the Registration Rights Agreement. Notwithstanding any other provision of this Indenture: (i) no Exchange Securities may be exchanged by the Holder thereof for a Note issued on the Issue Date; (ii) accrued and unpaid interest on the Notes issued on the Issue Date being exchanged in the Exchange Offer shall be due and payable on the next Interest Payment Date for the Exchange Securities following the Exchange Offer and shall be paid to the Holder on the relevant record date of the Exchange Securities issued in respect of the Note issued on the Issue Date being exchanged; and (iii) interest on the Note issued on the Issue Date being exchanged in the Exchange Offer shall cease to accrue on the date of completion of the Exchange Offer and interest on the Exchange Securities to be issued in the Exchange Offer shall accrue from the date of the completion of the Exchange Offer. The Registrar shall retain for a period of two years copies of all letters, notices and other written communications received pursuant to Section 2.16 or this Section 2.17. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable notice to the Registrar. SECTION 2.18. Computation of Interest. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE THREE REDEMPTION SECTION 3.01. Election To Redeem; Notices to Trustee. If the Company elects to redeem Notes pursuant to paragraph 5 of the Notes, at least 30 days prior to the Redemption Date (unless a shorter notice shall be agreed to in writing by the Trustee) but not more than 60 days before the Redemption Date, the Company shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and -50- the redemption price, and deliver to the Trustee, no later than two Business Days prior to the Redemption Date, an Officers' Certificate stating that such redemption will comply with the conditions contained in paragraph 5 of the Notes. Notice given to the Trustee pursuant to this Section 3.01 may not be revoked after the time that notice is given to Holders pursuant to Section 3.03. SECTION 3.02. Selection by Trustee of Notes To Be Redeemed. The Trustee shall select the Notes to be redeemed, if the Notes are then listed on a national securities exchange, in accordance with the rules of such exchange or, if the Notes are not so listed, either on a pro rata basis or by lot, or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate; provided that, in the case of a redemption pursuant to paragraph 5(c) of the Notes, the Trustee shall select the Notes only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to procedures of the Depository). The Trustee shall promptly notify the Company of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. The Trustee may select for redemption portions of the principal of the Notes that have denominations larger than $1,000. For redemptions pursuant to paragraph 5 of the Notes, Notes and portions thereof the Trustee selects shall be redeemed in amounts of $1,000 or whole multiples of $1,000. For all purposes of this Indenture unless the context otherwise requires, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. In the event the Company is requested to make a Change of Control Offer or Offer to Purchase and the amounts available for any such offer is not evenly divisible by $1,000, the Trustee shall promptly refund to the Company any remaining funds, which in no event shall exceed $1,000. SECTION 3.03. Notice of Redemption. At least 30 days, and no more than 60 days, before a Redemption Date, the Company shall mail, or cause to be mailed, a notice of redemption by first-class mail to each Holder of Notes to be redeemed at his or her last address as the same appears on the registry books maintained by the Registrar pursuant to Section 2.04. The notice shall identify the Notes to be redeemed (including the CUSIP numbers thereof) and shall state: (1) the Redemption Date; (2) the appropriate calculation of the redemption price; (3) if fewer than all outstanding Notes are to be redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date -51- and upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date; (7) which subsection of paragraph 5 of the Notes is the provision of the Notes pursuant to which the redemption is occurring; and (8) the aggregate principal amount of Notes that are being redeemed. At the Company's written request made at least five Business Days prior to the date on which notice is to be given, the Trustee shall give the notice of redemption in the Company's name and at the Company's sole expense. SECTION 3.04. Effect of Notice of Redemption. Once the notice of redemption described in Section 3.03 is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price, including any premium, plus interest accrued to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price, including any premium, plus interest accrued to the Redemption Date; provided that if the Redemption Date is after a regular record date and on or prior to the Interest Payment Date, the accrued interest shall be payable to the Holder of the redeemed Notes registered on the relevant record date; and provided, further, that if a Redemption Date is a Legal Holiday, payment shall be made on the next succeeding Business Day and no interest shall accrue for the period from such Redemption Date to such succeeding Business Day. Such notice, if mailed in the manner provided in Section 3.03 shall be conclusively presumed to have been given whether or not the Holder receives such notice. SECTION 3.05. Deposit of Redemption Price. On or prior to 10:00 a.m., New York City time, on each Redemption Date, the Company shall deposit with the Paying Agent in immediately available funds money sufficient to pay the redemption price of, including premium, if any, and accrued interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation. -52- On and after any Redemption Date, if money sufficient to pay the redemption price of, including premium, if any, and accrued interest on Notes called for redemption shall have been made available in accordance with the immediately preceding paragraph, the Notes called for redemption will cease to accrue interest and the only right of the Holders of such Notes will be to receive payment of the redemption price of and, subject to the first proviso in Section 3.04, accrued and unpaid interest on such Notes to the Redemption Date. If any Note surrendered for redemption shall not be so paid, interest will be paid, from the Redemption Date until such redemption payment is made, on the unpaid principal of the Note and any interest not paid on such unpaid principal, in each case at the rate and in the manner provided in the Notes. SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder thereof a new Note equal in principal amount to the unredeemed portion of the original Note in the name of the Holder upon cancellation of the original Note surrendered except that if a Global Note is so surrendered, the Company shall execute and the Trustee shall authenticate and deliver to the Depository, a new Global Note in denomination equal to and in exchange for the unredeemed portion of the principal of the Global Note so surrendered. SECTION 3.07. Other Mandatory Redemption. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. The Company shall pay the principal of and interest on the Notes in accordance with the terms of the Notes and this Indenture. An installment of principal or interest shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date money designated for and sufficient to pay such installment. The Company shall pay interest on overdue principal (including post-petition interest in a proceeding under any Bankruptcy Law), and overdue interest, to the extent lawful, at the rate specified in the Notes. -53- SECTION 4.02. Maintenance of Office or Agency. (a) The Company shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company or any Subsidiary Guarantor in respect of the Notes, the Subsidiary Guarantees and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee and the Company and each Subsidiary Guarantor hereby appoint the Trustee as their agent to receive all such presentations, surrenders, notices and demands. (b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.04. SECTION 4.03. Legal Existence. Subject to Article Five, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence, and the corporate, partnership or other existence of each Restricted Subsidiary, in accordance with the respective organizational documents (as the same may be amended from time to time) of each Restricted Subsidiary and the material rights (charter and statutory), and franchises of the Company and the Restricted Subsidiaries; provided that the Company shall not be required to preserve any such right, franchise, or the corporate, partnership or other existence of the Company or any of its Restricted Subsidiaries if the Company in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.04. Maintenance of Properties; Insurance; Compliance with Law. (a) The Company shall, and shall cause each of its Restricted Subsidiaries to, at all times cause all material properties used or useful in the conduct of their respective businesses to be maintained and kept in good condition, repair and working order (reasonable -54- wear and tear excepted) and supplied with all necessary equipment, and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.04(a) shall prevent the Company or any of its Restricted Subsidiaries from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the reasonable judgment of the Company, desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and not adverse in any material respect to the Holders. (b) The Company shall, and shall cause each of its Restricted Subsidiaries to, keep at all times all of their material properties which are of an insurable nature insured against such loss or damage with insurers believed by the Company to be responsible to the extent that Property of a similar character is usually so insured by corporations similarly situated and owning like Properties in accordance with good business practice. Subject to the proviso in Section 4.04(a), the Company shall, and shall cause each of its Restricted Subsidiaries to, use the proceeds from any such insurance policy to repair, replace or otherwise restore the Property to which such proceeds relate. (c) The Company shall, and shall cause each of its Restricted Subsidiaries to comply with all statutes, laws, ordinances or government rules and regulations to which they are subject, the non-compliance with which would materially adversely affect the business, financial condition or results of operations of the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.05. Waiver of Stay, Extension or Usury Laws. The Company and each of the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead (as a defense or otherwise) or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law which may affect the covenants or the performance of this Indenture; and (to the extent that they may lawfully do so) each of the Company and the Subsidiary Guarantors hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.06. Compliance Certificate. (a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company commencing with the Company's fiscal year ending December 31, 2003 an Officers' Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating -55- whether or not to the best knowledge of the signers thereof the Company and any Restricted Subsidiary is in default in the performance and observance of any of the terms, provisions and conditions of Section 5.01 or Sections 4.01 to 4.19, inclusive, and if the Company shall be in default, specifying all such defaults, the nature and status thereof of which they may have knowledge and what action the Company and the Subsidiary Guarantors are taking or propose to take with respect thereto. Such determination shall be made without regard to notice requirements or periods of grace. (b) The Company shall deliver to the Trustee, as soon as possible and in any event no later than 30 Business Days after the Company becomes aware or should reasonably become aware of the occurrence of a Default or an Event of Default or an event which, with notice or the lapse of time or both, would constitute a Default or Event of Default, an Officers' Certificate setting forth the details of such Default or Event of Default, and the action which the Company or the Subsidiary Guarantors are taking or propose to take with respect to such Default or Event of Default. (c) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, a written statement by the Company's independent public accountants stating whether, in connection with their audit of the Company's financial statements, any event which would constitute an Event of Default as defined herein insofar as they relate to accounting matters has come to their attention and, if such an Event of Default has come to their attention, specifying the nature and period of the existence thereof. SECTION 4.07. Payment of Taxes and Other Claims. The Company shall, and shall cause each of its Restricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or Property of the Company or any of its Subsidiaries, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the Property of the Company or any of its Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 4.08. Repurchase at the Option of Holders upon Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest -56- payment date) (the "Change of Control Purchase Price"); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Notes pursuant to this Section 4.08 in the event that it has mailed the notice to exercise its right to redeem all the Notes pursuant to paragraph 5 of the Notes at any time prior to the requirement to consummate the Change of Control Offer and redeems the Notes in accordance with such notice. (b) Within 30 days following any Change of Control, or, at the Company's option, prior to the consummation of such Change of Control but after it is publicly announced, the Company shall send, by first-class mail, with a copy to the Trustee, to each Holder of Notes, at such Holder's address appearing in the Note register, a notice stating: (1) that a Change of Control has occurred or will occur and a Change of Control Offer is being made pursuant to this Section 4.08 and that all Notes timely tendered will be accepted for payment; (2) the Change of Control Purchase Price and the purchase date (the "Change of Control Payment Date"), which shall be, subject to any contrary requirements of applicable law, a Business Day and a point in time occurring after the consummation of the Change of Control and not later than 60 days from the date such notice is mailed; (3) the circumstances and relevant facts regarding the Change of Control; (4) if the notice is mailed prior to a Change of Control, that the Change of Control Offer is conditioned on the Change of Control occurring and Notes will not be accepted for payment unless and until the Change of Control is consummated; and (5) the procedures that Holders of Notes must follow in order to tender their Notes (or portions thereof) for payment, and the procedures that Holders of Notes must follow in order to withdraw an election to tender Notes (or portions thereof) for payment. Holders electing to have a Note purchased shall be required to surrender the Note, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Change of Control Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives, not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission, electronic mail or letter setting forth the name of the Holder, the principal amount of the Note that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Note purchased. (c) On or prior to the Change of Control Payment Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or any of its Subsidiaries is acting as the Paying Agent, segregate and hold in trust) in cash an amount equal -57- to the Change of Control Purchase Price payable to the Holders entitled thereto, to be held for payment in accordance with the provisions of this Section 4.08. On the Change of Control Payment Date, the Company or its Agent shall deliver to the Trustee the Notes or portions thereof that have been properly tendered to and are to be accepted by the Company for payment. (d) The Trustee or the Paying Agent shall, on the Change of Control Payment Date, mail or deliver payment to each tendering Holder of the Change of Control Purchase Price. In the event that the aggregate Change of Control Purchase Price is less than the amount delivered by the Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent, as the case may be, shall deliver the excess to the Company immediately after the Change of Control Payment Date. (e) Notwithstanding the foregoing, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party has made an offer to purchase (an "Alternate Offer"), in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.08 applicable to a Change of Control made by the Company, any and all Notes properly tendered and purchases all Notes properly tendered not withdrawn in accordance with the terms of such Alternate Offer. (f) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) and Rule 14e-1 of the Exchange Act and any other applicable securities laws or regulations in connection with the repurchase of Notes pursuant to a Change of Control Offer, including any applicable securities laws of the United States. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.08, the Company shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the provisions of this Section 4.08 by virtue of such compliance with these securities laws or regulations. SECTION 4.09. Limitation on Debt. (a) The Company shall not and shall not permit any Restricted Subsidiary to, Incur any Debt; provided, however, that the Company or any Restricted Subsidiary may Incur Debt and the Company or any Restricted Subsidiary may Incur Acquired Debt if the Company's Fixed Charge Coverage Ratio for the most recently ended four fiscal quarters for which financial statements have been filed with the Commission or delivered to the Trustee (which, for periods prior to the quarter ended June 30, 2004, will include periods prior to the Issue Date) pursuant to the covenant described in Section 4.17 preceding the date on which such Debt is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis (including pro forma application of the net proceeds therefrom for such four-quarter period), as if the additional Debt (including Acquired Debt) had been Incurred at the beginning of such four-quarter period, with any revolving credit facility being deemed to be utilized only to the extent of amounts outstanding thereunder. -58- (b) Notwithstanding the immediately preceding paragraph, any or all of the following Debt (collectively, "Permitted Debt") may be Incurred at any time and without compliance with the immediately preceding paragraph: (1) Debt of the Company or any Subsidiary Guarantor under a Credit Facility; provided that the aggregate principal amount of all such Debt under Credit Facilities shall not exceed the greater of (x) $385.0 million at any time outstanding less (i) the amount of any permanent mandatory repayments of principal of term loans made under a Credit Facility and (ii) the amount of any permanent mandatory repayments of principal of revolving loans made under a Credit Facility which was incurred under this clause (1) which are accompanied by a corresponding permanent commitment reduction, in each case under clauses (i) and (ii) which are made with Net Available Cash from Asset Sales as required as a result of a sale of assets and (y) the product of 2.00 and the Company's Consolidated EBITDA for the most recently ended four fiscal quarters for which financial statements have been filed with the Commission or delivered to the Trustee pursuant to Section 4.17; (2) the Notes (excluding any Additional Notes) and related Subsidiary Guarantees and any Notes and related Subsidiary Guarantees issued in exchange for the Notes (excluding any Additional Notes) and related Subsidiary Guarantees pursuant to the Registration Rights Agreement; (3) Debt of the Company or any Restricted Subsidiary in respect of Capital Lease Obligations and Purchase Money Debt; provided that: i. the aggregate principal amount of such Debt secured thereby does not exceed the Fair Market Value (on the date of the Incurrence thereof) of the Property acquired, constructed or leased, and ii. the aggregate principal amount of all Debt Incurred and then outstanding pursuant to this Section 4.09(b)(3) and Permitted Refinancing of Debt Incurred and then outstanding pursuant to this Section 4.09(b)(3) does not exceed $75.0 million; (4) Debt (1) of the Company owing to and held by any Restricted Subsidiary and (2) of a Restricted Subsidiary owing to and held by the Company or any other Restricted Subsidiary; provided, however, that any subsequent issue or transfer of Capital Stock or other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Debt (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Debt by the issuer thereof not permitted by this Section 4.09(b)(4); -59- (5) Debt Incurred and outstanding on or prior to the date on which such Person was acquired by the Company or any Restricted Subsidiary or assumed by the Company or any Restricted Subsidiary at the time of acquisition of all or any portion of the assets (or any business or product line of another Person) (other than Debt Incurred in connection with or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Restricted Subsidiary or was acquired by the Company); provided, however, at the time of such acquisition and after giving effect thereto, the aggregate principal amount of all the Debt Incurred and then outstanding pursuant to this Section 4.09(b)(5) and Permitted Refinancing Debt Incurred to Refinance Debt Incurred pursuant to this Section 4.09(b)(5) does not exceed $25.0 million; (6) Debt under Interest Rate Agreements entered into by the Company or a Restricted Subsidiary in the ordinary course of the financial management of the Company or a Restricted Subsidiary and not for speculative purposes; (7) Debt under Currency Exchange Protection Agreements entered into by the Company or a Restricted Subsidiary in the ordinary course of the financial management of the Company or a Restricted Subsidiary and not for speculative purposes; (8) Debt under Commodity Price Protection Agreements entered into by the Company or a Restricted Subsidiary in the ordinary course of the financial management of the Company or a Restricted Subsidiary and not for speculative purposes; (9) Debt of the Company or a Restricted Subsidiary in connection with (a) one or more letters of credit issued by any of them in the ordinary course of business with respect to trade payables relating to the purchase of materials by such Persons and (b) other letters of credit, surety, performance, appeal or similar bonds, banker's acceptances, completion guarantees or similar instruments issued in the ordinary course of business of the Company or a Restricted Subsidiary, including letters of credit or similar instruments pursuant to self-insurance and workers' compensation obligations; provided that upon the drawing of such letters of credit or other instrument, such obligations are reimbursed within 30 days following such drawing; provided, further, that with respect to clauses (a) and (b) above, such Debt is not in connection with the borrowing of money or the obtaining of advances; (10) Debt of the Company or a Restricted Subsidiary arising from the honoring by a bank or other financial institution of a check, draft or similar instrument written in the ordinary course of business and drawn against insufficient funds; provided that such Debt remains outstanding for ten Business Days or less; (11) Debt of the Company or a Restricted Subsidiary arising from agreements for indemnification, purchase price adjustment obligations and earn-outs or other similar -60- obligations, in each case, Incurred or assumed in connection with the acquisition or disposition of any Property and including by way of merger or consolidation; provided that the maximum assumable liability in respect of all such obligations shall at no time exceed the gross proceeds actually received by the Company and the Restricted Subsidiaries, including the Fair Market Value of non-cash proceeds; (12) Debt of the Company or a Restricted Subsidiary consisting of a Guarantee of, or a Lien securing, Debt of the Company or a Restricted Subsidiary; provided that such Debt constitutes Debt that is permitted to be Incurred pursuant to this Section 4.09, but subject to compliance with the other provisions described in Article Four; (13) Debt of the Company or a Restricted Subsidiary in respect of netting services, overdraft protection and otherwise in connection with deposit accounts; provided that such Debt remains outstanding for ten Business Days or less; (14) Debt of the Company or a Restricted Subsidiary that was outstanding on the Issue Date and is not otherwise described in Sections 4.09(b)(1) through (13) above; (15) Guarantees in the ordinary course of business of the obligations of suppliers, customers, franchisers and licensees; (16) Permitted Refinancing Debt; and (17) Debt of the Company or a Restricted Subsidiary or the issuance of Disqualified Stock in a principal amount or liquidation value, as applicable, outstanding at any one time not to exceed $100.0 million in the aggregate for all such Debt and Disqualified Stock (which Debt may, but need not, be incurred, in whole or in part, under a Credit Facility). For the purposes of determining compliance with this Section 4.09, in the event that an item of Debt meets the criteria of more than one of the types of Debt permitted by this Section 4.09 or is entitled to be Incurred pursuant to Section 4.09(a), the Company in its sole discretion shall be permitted to classify on the date of its Incurrence, or later reclassify, all or a portion of such item of Debt in any manner that complies with this Section 4.09. Debt permitted by this Section 4.09 need not be permitted solely by reference to one provision permitting such Debt but may be permitted in part by one such provision and in part by one or more other provisions of this Section 4.09 permitting such Debt. For the purposes of determining any particular amount of Debt under this Section 4.09, (a) Guarantees, Liens, obligations with respect to letters of credit and other obligations supporting Debt otherwise included in the determination of a particular amount will not be -61- included and (b) any Liens granted to the Holders of the Notes that are permitted by Section 4.11 will not be treated as Debt. For purposes of determining compliance with any dollar-denominated restriction on the Incurrence of Debt, with respect to any Debt which is denominated in a foreign currency, the dollar-equivalent principal amount of such Debt Incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Debt was Incurred, and any such foreign-denominated Debt may be Refinanced or replaced or subsequently Refinanced or replaced in an amount equal to the dollar equivalent principal amount of such Debt on the date of such refinancing or replacement whether or not such amount is greater or less than the dollar-equivalent principal amount of the Debt on the date of initial Incurrence. If obligations in respect of letters of credit are Incurred pursuant to the Credit Facility and are being treated as Incurred pursuant to Section 4.09(b)(1) and the letters of credit relate to other Debt, then such other Debt shall be deemed not Incurred. Notwithstanding any other provision of this Section 4.09, neither the Company nor any Subsidiary Guarantor shall Incur any Debt that is expressly subordinated in right of payment to any other Debt of the Company or such Subsidiary Guarantor unless such Debt is pari passu with or is expressly subordinated in right of payment to the Notes. No Debt will be deemed to be Senior Debt solely by virtue of being secured on a first or junior priority basis. SECTION 4.10. Limitation on Restricted Payments. (a) The Company shall not make, and shall not permit any Restricted Subsidiary to make, any Restricted Payment if at the time of, and after giving effect to, such proposed Restricted Payment, (1) a Default or Event of Default shall have occurred and be continuing, (2) the Company could not Incur at least $1.00 of additional Debt pursuant to Section 4.09(a), or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made since the Issue Date (the amount of any Restricted Payment, if made other than in cash, to be based upon Fair Market Value) would exceed an amount equal to the sum of: (i) 50% of the aggregate amount of Consolidated Net Income accrued on a cumulative basis during the period (treated as one accounting period) from the first day of the fiscal quarter in which the Issue Date occurs to the end of the most recent fiscal quarter ended prior to the date of such proposed Restricted Payment for which financial statements are available pursuant to Section 4.17 (or -62- if the aggregate amount of cumulative Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit), plus (ii) 100% of Capital Stock Sale Proceeds and cash capital contributions after the Issue Date by a Person who is not the Company or a Restricted Subsidiary of the Company, plus (without duplication) (iii) the aggregate net cash proceeds received by the Company or a Restricted Subsidiary from the issuance or sale after the Issue Date of convertible or exchangeable Debt or Disqualified Stock that has been converted into or exchanged for its Capital Stock (other than Disqualified Stock) together with the aggregate net cash proceeds received by the Company or a Restricted Subsidiary at the time of such conversion or exchange, but excluding: (x) any such Debt issued or sold to the Company or a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or a Restricted Subsidiary for the benefit of its employees and (y) the aggregate amount of any cash or other Property distributed by the Company or a Restricted Subsidiary upon any such conversion or exchange, plus (without duplication), (iv) an amount equal to the sum of: A. the net reduction in Investments made after the Issue Date in any Person other than the Company or a Restricted Subsidiary resulting from dividends, repayments of loans or advances, return of capital or other transfers, sales or liquidations of Property or any other disposition or repayment of such Investments, in each case to the Company or any Restricted Subsidiary from any Person (other than the Company or a Restricted Subsidiary), less the cost of the disposition of such Investments; and B. the Fair Market Value of the Investment of the Company and the Restricted Subsidiaries in an Unrestricted Subsidiary or other Person at the time such Unrestricted Subsidiary or other Person is designated a Restricted Subsidiary; provided, however, that the sum of (A) and (B) described in this Section 4.10(a)(3)(iv) shall not exceed the sum of the amount of Investments made prior to the date of determination (and treated as a Restricted Payment) by the Company or a Restricted Subsidiary in such Person, plus (v) $15.0 million. (b) Notwithstanding the foregoing limitation, the Company or a Restricted Subsidiary may: -63- (1) pay dividends on Capital Stock of the Company within 60 days of the declaration thereof if, on said declaration date, such dividends could have been paid in compliance with this Indenture (such dividend to be included in the calculation of the amount of Restricted Payments only at the time such dividend is paid); (2) purchase, repurchase, redeem, legally defease, acquire or retire for value Capital Stock of the Company, or options, warrants or other rights to acquire such Capital Stock, or Subordinated Obligations in exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock (other than Disqualified Stock) of the Company or options, warrants or other rights to acquire such Capital Stock (other than any such Capital Stock (or options, warrants or other rights to acquire such Capital Stock) issued or sold to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or such Restricted Subsidiary for the benefit of its employees and except to the extent that any purchase made pursuant to such issuance or sale is financed by the Company or a Restricted Subsidiary) or a capital contribution to the Company from a person other than the Company or a Restricted Subsidiary; provided, however, that such purchase, repurchase, redemption, legal defeasance, acquisition or retirement shall not be included in the calculation of the amount of Restricted Payments and the Capital Stock Sale Proceeds from such exchange or sale shall not be included in the calculation pursuant to Section 4.10(a)(3) above; (3) purchase, repurchase, redeem, legally defease, acquire or retire for value any Subordinated Obligations in exchange for or out of the proceeds of the substantially concurrent sale of Capital Stock (other than Disqualified Stock) of the Company or options, warrants or other rights to acquire such Capital Stock (other than any such Capital Stock (or options, warrants or other rights to acquire such Capital Stock) issued or sold to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or such Restricted Subsidiary for the benefit of its employees and except to the extent that any purchase made pursuant to such issuance or sale is financed by the Company or a Restricted Subsidiary) or a capital contribution to the Company from a person other than the Company or a Restricted Subsidiary; provided that such purchase, repurchase, redemption, legal defeasance, acquisition or retirement shall not be included in the calculation of the amount of Restricted Payments and the Capital Stock Sale Proceeds from such exchange or sale shall not be included in the calculation pursuant to Section 4.10(a)(3)(ii) above; (4) purchase, repurchase, redeem, legally defease, acquire or retire for value any Subordinated Obligations of the Company or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent sale of, Permitted Refinancing Debt; provided that such purchase, repurchase, redemption, legal defeasance, acquisition or retirement shall not be included in the calculation of the amount of Restricted Payments; -64- (5) so long as no Default has occurred and is continuing, repurchase or otherwise acquire, or pay dividends directly or indirectly to Holding to provide Holding amounts to repurchase or otherwise acquire, shares of, or options to purchase shares of, the Company's or Holding's Capital Stock from their respective employees, former employees, directors or former directors, consultants or former consultants (or permitted transferees of such employees, former employees, directors or former directors or consultants or former consultants), pursuant to the terms of agreements (including, without limitation, employment agreements) or plans or in each case amendments thereto approved by the Board of Directors of the Company or Holding, as the case may be, under which such individuals purchase or sell, or are granted the option to purchase or sell, shares of such Capital Stock; provided that the aggregate amount of all such repurchases and other acquisitions and dividends (other than such repurchases or other acquisitions or dividends made in connection with the Merger, which shall not be limited) shall not exceed $5.0 million in any calendar year (any such amounts not used in a calendar year shall be available for use in any subsequent year) plus the proceeds of any "key man" life insurance policies that are used to make such repurchases of shares owned by the "key man" or his estate; provided, further, that such repurchase or other acquisition or dividend shall not be included in the calculation of the amount of Restricted Payments and the Capital Stock Sale Proceeds from such sales shall not be included in the calculation pursuant to Section 4.10(a)(3)(ii) above; (6) make cash payments, or pay dividends directly or indirectly to Holding to provide Holding amounts to make cash payments, in lieu of issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for the Company's or Holding's Capital Stock; provided that any such payments and dividends shall not be included in the calculation of the amount of Restricted Payments; (7) repurchase, or pay dividends directly or indirectly to Holding to provide Holding amounts to repurchase, the Company's or Holding's Capital Stock to the extent such repurchase is deemed to occur upon a cashless exercise of stock options or warrants; provided that all such repurchases and dividends shall not be included in the calculation of the amount of Restricted Payments and no proceeds in respect of the issuance of such Capital Stock shall be deemed to have been received for the purposes of Section 4.10(a)(3)(ii) above; (8) repurchase or redeem, or pay dividends directly or indirectly to Holding to provide Holding amounts to repurchase or redeem, preferred stock purchase rights issued in connection with any shareholder rights plan of the Company or Holding, as the case may be; provided that any such payments shall not be included in the calculation of the amount of Restricted Payments; -65- (9) so long as no Default or Event of Default shall have occurred and be continuing, repurchase any Subordinated Obligations or Disqualified Stock of the Company or a Restricted Subsidiary at a purchase price not greater than 101% of the principal amount or liquidation preference of such Subordinated Obligation or Disqualified Stock plus accrued and unpaid interest or dividends, as appropriate, in the event of a Change of Control pursuant to a provision similar to Section 4.08 in the documents governing such Subordinated Obligation or Disqualified Stock; provided that prior to consummating any such repurchase, the Company has made the Change of Control Offer required by this Indenture and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; provided, further, that such payments shall be included in the calculation of the amount of Restricted Payments; (10) so long as no Default or Event of Default shall have occurred and be continuing, following an Asset Sale, to the extent permitted by Section 4.12 and using the Net Available Cash generated from such Asset Sale, repurchase any Subordinated Obligation or Disqualified Stock of the Company or a Subsidiary Guarantor at a purchase price not greater than 100% of the principal amount or liquidation preference of such Subordinated Obligation or Disqualified Stock plus accrued and unpaid interest or dividends, as appropriate, pursuant to a provision similar to Section 4.12 in the documents governing such Subordinated Obligation or Disqualified Stock; provided that prior to consummating any such repurchase, the Company has made the Prepayment Offer required by this Indenture and has repurchased all Notes validly tendered for payment in connection with such Prepayment Offer; provided, further, that such payments shall be included in the calculation of the amount of Restricted Payments; (11) so long as no Default or Event of Default shall have occurred and be continuing, the Company and any Restricted Subsidiary may pay dividends directly or indirectly to Holding to provide Holding amounts to purchase its common stock for contribution to employee stock purchase and deferred compensation plans, in the ordinary course of business; provided that the aggregate amount of dividends paid in reliance on this Section 4.10(b)(11) shall not exceed $5.0 million in any calendar year; provided, further, that such payments shall be included in the calculation of the amount of Restricted Payments; (12) so long as no Default or Event of Default shall have occurred and be continuing, make payments directly or indirectly to Holding to pay fee and expenses (A) pursuant to the Management Agreements (x) promptly on or after the Issue Date, to fund the one time transaction fees related to the Transactions not to exceed an aggregate amount of $20 million and (y) thereafter, not to exceed in any calendar year the aggregate amount of $3.75 million plus an amount equal to the cumulative CPI Increase Amount for each calendar year following the Issue Date (the "Management Payment") and (B) pursuant to the Fee Agreement, the Subscription Agreements, the DG Equity -66- Rollover Agreement, as well as in connection with the Transactions, not to exceed the aggregate amount of $140 million collectively (including (A)(x) above); provided that no payments to Holding with respect to such fees and expenses described in this clause (12) shall be paid, to the extent the Company has already paid such fees and expenses; provided, further, however, that such payments shall be excluded in the calculation of the amount of Restricted Payments; (13) dividends paid directly or indirectly to Holding to be used by Holding solely to pay its franchise taxes and other fees required to maintain its corporate existence and to pay other taxes and general corporate and overhead expenses (including salaries and other compensation of employees) incurred by Holding in the ordinary course of its business as a holding company for the Company; provided, however, that such dividends shall not exceed $500,000 in any calendar year; provided, further, however, that such dividends shall be excluded in the calculation of the amount of Restricted Payments; (14) dividends, distributions or advances paid directly or indirectly to Holding to be used by Holding to pay consolidated combined or similar Federal, state and local taxes payable by Holding and directly attributable to (or arising as a result of) the operations of the Company and its Subsidiaries; provided, however, that (A) the amount of such dividends, distributions or advances paid shall not exceed the amount that would be due with respect to a consolidated, combined or similar Federal, state or local tax return that included the Company and its Subsidiaries and (B) such dividends, distributions or advances paid pursuant to this Section 4.10(b)(14) are used by Holding for such purposes within 90 days of the receipt of such dividends; provided, further, however, that such dividends, distributions or advances paid shall be excluded in the calculation of the amount of Restricted Payments; (15) so long as no Default or Event of Default shall have occurred and be continuing, make any other Restricted Payment so long as the Total Leverage Ratio, after giving effect to such Restricted Payment, is less than 2.80x; provided, however, that the aggregate amount of such payments pursuant to this Section 4.10(b)(15) shall not exceed $75.0 million; provided, further, however, that such payments made shall be included in the calculation of the amount of Restricted Payments; and (16) so long as no Default or Event of Default shall have occurred and be continuing, make any other Restricted Payment which, together with all other Restricted Payments made pursuant to this Section 4.10(b)(16) since the Issue Date, does not exceed $25.0 million; provided that such payments shall be included in the calculation of the amount of Restricted Payments. The amount of any non cash Restricted Payment shall be deemed to be equal to the Fair Market Value thereof at the date of making such Restricted Payment. -67- SECTION 4.11. Limitation on Liens. (a) The Company shall not, and shall not permit any Subsidiary Guarantor to, Incur or suffer to exist any Lien (other than Permitted Liens and Liens securing Senior Debt) upon any of its Property (including Capital Stock of a Subsidiary Guarantor and intercompany notes), or any interest therein or any income or profits therefrom, unless: (1) in the case of a Lien securing Subordinated Obligations, the Notes and the related Note Guarantees are secured by a Lien on such Property or such interest therein or such income or profits therefrom that is senior in priority to the Lien securing such Subordinated Obligations for so long as such Subordinated Obligations are so secured; and (2) in the case of a Lien securing Senior Subordinated Debt, the Notes and the related Subsidiary Guarantees are equally and ratably secured by a Lien on such Property or such interest therein or profits therefrom for so long as such Senior Subordinated Debt is so secured. SECTION 4.12. Limitation on Asset Sales. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, consummate any Asset Sale unless: (1) the Company or such Restricted Subsidiary receives consideration at least equal to the Fair Market Value (as of the time of such Asset Sale) of the Property subject to such Asset Sale; (2) in the case of Asset Sales which are not Permitted Asset Swaps, at least 75% of the consideration paid to the Company (as measured at the time of such Asset Sale without giving effect to any future change in the value of such consideration following consummation of the Asset Sale) or such Restricted Subsidiary in connection with such Asset Sale is in the form of (A) cash or Temporary Cash Investments; (B) the assumption by the purchaser of liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee of such Restricted Subsidiary) as a result of which the Company and the Restricted Subsidiaries are no longer obligated with respect to such liabilities; (C) any securities, notes or other obligations received by the Company or a Restricted Subsidiary from such transferee that are converted into cash (to the extent of the cash received) within 90 days after receipt; (D) Properties to be used by the Company or a Restricted Subsidiary in a Related Business or Capital Stock of an entity engaged in a Related Business so long as the receipt of such Capital Stock is a Permitted Investment or otherwise complies with Section 4.10; or (E) a combination of the consideration specified in clauses (A) through (D); and -68- (3) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Sale complies with the foregoing 4.12(a) (1) and (2). (b) The Net Available Cash (or any portion thereof) from Asset Sales may be applied by the Company or a Restricted Subsidiary, to the extent the Company or a Restricted Subsidiary elects (or is required by the terms of any Debt): (1) to permanently prepay or permanently repay, repurchase or redeem any (i) Senior Debt, (ii) Debt which had been secured by the assets sold in the relevant Asset Sale and (iii) Debt of a Restricted Subsidiary that is not a Subsidiary Guarantor; or (2) to reinvest in Additional Assets (including by means of an Investment in Additional Assets with Net Available Cash received by the Company or a Restricted Subsidiary); or (3) a combination of repayment and reinvestment permitted by the foregoing Sections 4.12(b)(1) and (2). (c) Pending the final application of the Net Available Cash (or any portion thereof), the Company or a Restricted Subsidiary may temporarily repay Senior Debt or otherwise invest such Net Available Cash in Temporary Cash Investments. (d) Any Net Available Cash from an Asian Subsidiary Equity Offering may be retained by the Subsidiary making the Equity Offering and/or used for any purpose not restricted by this Indenture until such time as such Net Available Cash is repatriated to the United States, if at all, at which time it shall be applied as set forth above within 365 days of repatriation or, if not applied within such 365 day period following repatriation, as set forth below. Subject to the immediately preceding sentence, any Net Available Cash from an Asset Sale not applied in accordance with Section 4.12(b) within 365 days (or if a binding agreement to reinvest has been entered into within 365 days, such reinvestment occurs within 90 days of the end of the 365 day period) from the date of the receipt of such Net Available Cash shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an offer to purchase (the "Prepayment Offer") the Notes and any other Debt of the Company outstanding on the date of the Prepayment Offer that is pari passu in right of payment with the Notes or a Subsidiary Guarantee and subject to terms and conditions in respect of Asset Sales similar in all material respects to the covenant described hereunder and requiring the Company to make an offer to purchase such Debt at substantially the same time as the Prepayment Offer, which offer shall be in the amount of the Allocable Excess Proceeds, on a pro rata basis according to principal amount, at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the procedures (including prorating in the event of oversubscription) set forth herein. To the extent that any portion of the amount of Net -69- Available Cash remains after compliance with the preceding sentence, the Company or such Restricted Subsidiary may use such remaining amount for any purpose not restricted by this Indenture and the amount of Excess Proceeds will be reset to zero. The term "Allocable Excess Proceeds" will mean the product of: (a) the Excess Proceeds and (b) a fraction, (1) the numerator of which is the aggregate principal amount of the Notes outstanding on the date of the Prepayment Offer, together with any accrued and unpaid interest, and (2) the denominator of which is the sum of (A) the aggregate principal amount of the Notes outstanding on the date of the Prepayment Offer, together with any accrued and unpaid interest, and (B) the aggregate principal amount of other Debt of the Company or a Subsidiary Guarantor outstanding on the date of the Prepayment Offer that is pari passu in right of payment with the Notes or a Subsidiary Guarantee, as the case may be, and subject to terms and conditions in respect of Asset Sales similar in all material respects to this Section 4.12 and requiring the Company or a Subsidiary Guarantor to make an offer to purchase such Debt at substantially the same time as the Prepayment Offer (subject to proration in the event that such amount is less than the aggregate offer price of all Notes tendered). (e) Within 15 Business Days after the Company is obligated to make a Prepayment Offer as described in Section 4.12(d), the Company shall send a written notice, by first-class mail, to the Holders of Notes with a copy to the Trustee, accompanied by such information regarding the Company and the Subsidiary Guarantors as the Company in good faith believes will enable such Holders to make an informed decision with respect to such Prepayment Offer. Such notice shall state, among other things, the purchase price and the purchase date (the "Purchase Date"), which shall be, subject to any contrary requirements of applicable law, a Business Day no earlier than 20 Business Days nor later than 60 Business Days from the date such notice is mailed. (f) Not later than the date upon which written notice of a Prepayment Offer is delivered to the Holders of the Notes as provided in Section 4.12(e), the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Prepayment Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Sales pursuant to which such Prepayment Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.12(b). On or before the Purchase Date, the Company shall also irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or a Wholly -70- Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary Cash Investments (other than in those enumerated in clause (b) of the definition of Temporary Cash Investments), maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by the opening of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section 4.12. Upon the expiration of the period for which the Prepayment Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancellation the Notes or portions thereof that have been properly tendered to and are to be accepted by the Company. The Trustee or the Paying Agent shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price payable with respect to Notes validly tendered by such Holder. In the event that the aggregate purchase price of the Notes delivered by the Company to the Trustee is less than the Offer Amount, the Trustee or the Paying Agent shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section 4.12. (g) Holders electing to have a Note purchased shall be required to surrender the Note, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date a telegram, telex, facsimile transmission, electronic mail or letter setting forth the name of the Holder, the principal amount of the Note that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Note purchased. If at the expiration of the Offer Period the aggregate principal of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on pro rata basis for all Notes (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. (h) At the time the Company or its agent delivers Notes to the Trustee that are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Notes are to be accepted by the Company pursuant to and in accordance with the terms of this Section 4.12. A Note shall be deemed to have been accepted for purchase at the time the Trustee or the Paying Agent mails or delivers payment therefor to the surrendering Holder. (i) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) and Rule 14e-1 of the Exchange Act and any other applicable securities laws or regulations in connection with the repurchase of Notes pursuant to the covenant described hereunder, including any applicable securities laws of the United States. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.12 described hereunder, the Company shall comply with the applicable securities laws -71- and regulations and will not be deemed to have breached its obligations under this Section 4.12 by virtue thereof. (j) At its option, the Company may satisfy, in whole or in part, its obligation to make a Prepayment Offer hereunder by delivering to the Trustee (i) Notes which have been acquired (other than pursuant to a Prepayment Offer) by the Company no more than 90 days prior to or 365 days after the date of such Asset Sale, together with an Officers' Certificate stating the election of the Company to have credited against its obligation hereunder the principal amount of Notes so delivered and ordering the Trustee to cancel such Notes, (ii) an Officers' Certificate stating the election of the Company to have credited against its obligation hereunder a specified principal amount of Notes which have been acquired (other than pursuant to a Prepayment Offer) no more than 90 days prior to or 365 days after the date of such Asset Sale by the Company and theretofore surrendered to the Trustee for cancellation, or (iii) a combination of the foregoing. All Notes made the basis of a credit hereunder shall be credited at the principal amount thereof. SECTION 4.13. Limitation on Restrictions on Distributions from Restricted Subsidiaries. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist any consensual restriction on the right of any Restricted Subsidiary to: (1) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock to the Company or any other Restricted Subsidiary, (2) pay any Debt or other obligation owed to the Company or any other Restricted Subsidiary, (3) make any loans or advances to the Company or any other Restricted Subsidiary, or (4) transfer any of its Property to the Company or any other Restricted Subsidiary. (b) The foregoing limitations will not apply: (1) with respect to Section 4.13(a)(1)(2)(3) and (4), to restrictions which are: (A) in effect on the Issue Date (as such restrictions may be amended from time to time; provided that any such amendment is not materially more restrictive as to such Restricted Subsidiary); -72- (B) imposed by the Notes or this Indenture, or by indentures governing other Debt the Company or a Subsidiary Guarantor Incurs (and, if such Debt is Guaranteed, by the guarantors of such Debt) ranking on a parity with the Notes or the Subsidiary Guarantees; provided that the restrictions imposed by such indentures are no more restrictive than the restrictions imposed by this Indenture; (C) imposed by a Credit Facility with respect to Debt permitted to be Incurred on or subsequent to the date hereof pursuant to Section 4.09(b)(1); (D) relating to Debt of a Restricted Subsidiary existing at the time it became a Restricted Subsidiary if such restriction was not created in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or a Restricted Subsidiary (as such restrictions may be amended from time to time in a manner not materially more restrictive as to such Restricted Subsidiary); (E) that result from the Refinancing of Debt Incurred pursuant to an agreement referred to in Section 4.13(b)(1)(A),(B) or (D) above; provided such restriction is no less favorable in any material respect to the Holders of the Notes than those restrictions under the agreement evidencing the Debt so Refinanced when taken as a whole; (F) restrictions on cash or other deposits or net worth imposed by leases or other agreements entered into in the ordinary course of business; (G) any encumbrances or restrictions required by any foreign or U.S. governmental, local or regulatory authority having jurisdiction over the Company or any Restricted Subsidiary or any of their businesses in connection with any development grant made or other assistance provided to the Company or any Restricted Subsidiary by such governmental authority; (H) customary provisions in joint venture or similar agreements or other arrangements with minority investors in Restricted Subsidiaries and customary provisions in Debt incurred by Restricted Subsidiaries organized outside the United States; provided, however, that such encumbrance or restriction is applicable only to such Restricted Subsidiary; and provided, further, that the Company determines that any such encumbrance or restriction will not materially affect the ability of the Company to make any anticipated payments of principal or interest on the Notes; (I) customary restrictions contained in asset sale, stock sale, merger and other similar agreements limiting the transfer, disposition or distribution of -73- Property pending the closing of such sale, including any restriction imposed with respect to such Restricted Subsidiary pursuant to an agreement to dispose of all or substantially all the Capital Stock or assets of such Restricted Subsidiary; (J) customary restrictions imposed on the transfer of copyrighted or patented materials or other intellectual property and customary provisions in agreements that restrict the assignment of such agreements or any rights thereunder or in leases governing leasehold interests; (K) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions of assets (including Capital Stock) by that Restricted Subsidiary pending its sale or other disposition; (L) restrictions on Debt Incurred by Non-U.S. Subsidiaries; provided that such restrictions are then customary for Debt of such type Incurred in such jurisdiction; or (M) restrictions resulting from any U.S. or foreign law, rule, regulation or order applicable to the Company or any Restricted Subsidiary. (2) with respect to Section 4.13(a)(4) only, to restrictions: (A) relating to Debt that is permitted to be Incurred and secured without also securing the Notes pursuant to Section 4.11 that limit the right of the debtor to dispose of the Property securing such Debt; (B) encumbering Property at the time such Property was acquired by the Company or any Restricted Subsidiary, so long as such restrictions relate solely to the Property so acquired and were not created in connection with or in anticipation of such acquisition; (C) resulting from customary provisions restricting subletting or assignment of leases or customary provisions in other agreements that restrict assignment of such agreements or rights thereunder; (D) imposed by virtue of any transfer of, agreement to transfer, option or right with respect to or Lien on any Property of the Company or the relevant Restricted Subsidiary not otherwise prohibited by this Indenture; or (E) imposed under any Purchase Money Debt or Capital Lease Obligation in the ordinary course of business with respect only to the Property the subject thereof. -74- SECTION 4.14. Limitation on Transactions with Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or suffer to exist any transaction or series of related transactions (including the purchase, sale, transfer, assignment, lease, conveyance or exchange of any Property or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"), unless: (1) the terms of such Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable arm's length transaction with a Person that is not an Affiliate of the Company, (2) if such Affiliate Transaction involves aggregate payments or value in excess of $10.0 million, a majority of the disinterested members of the Board of Directors of the Company or, if there is only one disinterested director, such disinterested director determines that such Affiliate Transaction complies with Section 4.14(a)(1) of this covenant as evidenced in the minutes or other evidence of Board action, and (3) if such Affiliate Transaction involves aggregate payments or value in excess of $50.0 million, the Company obtains a written opinion from an Independent Financial Advisor to the effect that (i) the consideration to be paid or received in connection with such Affiliate Transaction is fair, from a financial point of view, to the Company or such Restricted Subsidiary, as applicable, or (ii) is not less favorable to the Company and its Restricted Subsidiaries than could reasonably be expected to be obtained at the time in an arm's length transaction with a Person who was not an Affiliate. For purposes of this Section 4.14(a)(3) only, any contract or series of related contracts for the rendering of services entered into in the ordinary course of business by the Company or any Restricted Subsidiary with any other Person will not be deemed to be in excess of $50.0 million if, when entered into, (x) the payments made or to be made by the Company and the Restricted Subsidiaries, and (y) the value of services performed by the Company and the Restricted Subsidiaries in connection with such contract or series of related contracts do not exceed, and are not then reasonably expected by the Board of Directors of the Company in its good faith judgment to exceed, $50.0 million. (b) Notwithstanding the foregoing limitation, the Company or any Restricted Subsidiary may make, engage in, enter into or suffer to exist the following: (1) any transaction or series of related transactions between or among the Company or one or more Restricted Subsidiaries or between or among two or more Restricted Subsidiaries; -75- (2) any Restricted Payment permitted to be made pursuant to Section 4.10 hereof or any Permitted Investment; (3) the payment of reasonable compensation (including awards or grants in cash, securities or other payments) for the personal services of officers, directors, consultants and employees of the Company or any Restricted Subsidiary in the ordinary course of business; (4) entering into, or adoption or modification or amendment to, or transaction or other arrangements or payments or reimbursements pursuant to employment agreements, collective bargaining agreements, employee benefit plans or arrangements for employees, officers or directors, including vacation plans, health and life insurance plans, deferred compensation plans, directors' and officers' indemnification arrangements and retirement or savings plans, stock option, stock ownership and similar plans so long as the Board of Directors of the Company in good faith shall have approved the terms thereof; (5) loans and advances to officers, directors or employees (or guarantees of third party loans to officers, directors or employees) made in the ordinary course of business; provided that such loans and advances do not exceed $8.0 million in the aggregate at any one time outstanding; (6) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Company or the Restricted Subsidiary, as the case may be, or are on terms no less favorable than might reasonably have been obtained at such time from an unaffiliated party; provided that such transactions are approved by a majority of disinterested directors of the Board of Directors of the Company or, if there is only one disinterested director, such director; (7) payments pursuant to the Management Agreements as in effect on the Issue Date or any amendment or replacement thereto or any transaction contemplated thereby (including pursuant to any amendment or replacement thereto) so long as such amendment or replacement agreement is not materially less favorable to the Holders of the Notes than the original agreements in effect on the Issue Date; (8) transactions with Persons in their capacity as Holders of Debt or Capital Stock, of the Company or any Restricted Subsidiary where such Persons are treated no more favorably than Holders of such Debt or Capital Stock generally; (9) sale or issuance of Capital Stock (other than Disqualified Stock) of the Company to Affiliates of the Company; -76- (10) transactions pursuant to any agreement as in effect on the Issue Date as the same may be amended or replaced from time to time in any manner not materially less favorable to the Holders of the Notes and any agreement or replacement thereto as in effect on the Issue Date and described in the Offering Memorandum under the caption "Certain Relationships and Related Party Transactions" and "Management -- Management Arrangements" or any transaction contemplated thereby, including pursuant to any amendment or any replacement thereto so long as any such amendment or replacement thereto is not materially less favorable to the Holders of the Notes than the original agreement as in effect on the Issue Date; (11) any transaction permitted by Section 5.01; (12) any tax sharing or arrangement and payments pursuant thereto among the Company and its Subsidiaries and other Persons (including Holding) with which the Company or any of its Subsidiaries is required or permitted to file a consolidated tax return or with which the Company or any of its Restricted Subsidiaries is or could be a part of a consolidated group for tax purposes in amounts not otherwise prohibited by this Indenture; (13) any change of control or severance payments made to employees of the Company on or after the Issue Date in connection with the Merger, as required by agreements in effect on the Issue Date; and (14) payment pursuant to the Fee Agreement, Subscription Agreements, and DG Equity Rollover Agreement each as in effect on the Issue Date or any amendment or replacement thereto so long as such amendment or replacement thereto is not materially less favorable to the Holders of the Notes than the original Fee Agreement, Subscription Agreements, and DG Equity Rollover Agreement each as in effect on the Issue Date. SECTION 4.15. Designation of Restricted and Unrestricted Subsidiaries. (a) By resolution of the Board of Directors of the Company, any Subsidiary (or entity to become a Subsidiary) of the Company may be designated to be an Unrestricted Subsidiary if: (1) the Subsidiary (or entity to become a Subsidiary) to be so designated does not own any Capital Stock or Debt of, or own or hold any Lien on any Property of, the Company or any Restricted Subsidiary and does not have any Debt other than Non-Recourse Debt, and (2) the Company would be permitted under Section 4.10 to make a Restricted Payment in an amount equal to the Fair Market Value of the Investment in such Subsidiary (or entity to become a Subsidiary). For the purposes of this provision, in the -77- event the Fair Market Value of such assets exceeds $50.0 million, such Fair Market Value shall be determined by an Independent Financial Advisor. Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company will be classified as a Restricted Subsidiary at the time it becomes a Subsidiary. If at any time an Unrestricted Subsidiary ceases to satisfy clause (a)(1) above, unless the Company is then able to redesignate such Unrestricted Subsidiary as a Restricted Subsidiary pursuant to this Section 4.15, the Company shall be in default of this Section 4.15. (b) Except as provided in this Section 4.15, and except as otherwise set forth in the definition of an "Unrestricted Subsidiary," no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. In addition, neither the Company nor any Restricted Subsidiary shall at any time be directly or indirectly liable for any Debt that provides that the holder thereof may (with the passage of time or notice or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its Stated Maturity upon the occurrence of a default with respect to any Debt, Lien or other obligation of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary). (c) By resolution of the Board of Directors of the Company, any Unrestricted Subsidiary may be designated to be a Restricted Subsidiary if, immediately after giving pro forma effect to such designation, (x) the Company could Incur at least $1.00 of additional Debt pursuant to Section 4.09(a) and (y) no Default or Event of Default shall have occurred and be continuing or would result therefrom. (d) Any such designation or redesignation will be evidenced to the Trustee by filing with the Trustee the Board Resolutions giving effect to such designation or redesignation and an Officers' Certificate of the Company that: (x) certifies that such designation or redesignation complies with the foregoing provisions of this Section 4.15, and (y) gives the effective date of such designation or redesignation, such filing with the Trustee to occur on or before the time financial statements are filed with the Commission or the Trustee pursuant to Section 4.17 in respect of the fiscal quarter in which such designation or redesignation is made (or, in the case of a designation or redesignation made during the last fiscal quarter of the fiscal year, on or before the time financial statements in respect of such fiscal year are filed with the Commission or the Trustee pursuant to Section 4.17). -78- SECTION 4.16. Limitation on Company's Business. The Company will not and will not permit any Restricted Subsidiaries to engage in any business other than the business Quintiles is engaged in on the Issue Date or a Related Business. SECTION 4.17. Reports. Following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, whether or not the Company is then subject to Section 13(a) or 15(d) of the Exchange Act, the Company will electronically file with the Commission, so long as the Notes are outstanding, the annual reports, quarterly reports and other periodic reports that it would be required to file with the Commission pursuant to such Section 13(a) or 15(d) if the Company were so subject, and such documents will be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would be required so to file such documents if it were so subject, unless, in any case, such filings are not then permitted by the Commission. If such filings with the Commission are not then permitted by the Commission, or such filings are not yet required in accordance with the above paragraph or are not generally available on the Internet free of charge, the Company will, without charge to the Holders, within 15 days of each Required Filing Date, transmit by mail to Holders, as their names and addresses appear in the Note register, and file with the Trustee copies of the annual reports, quarterly reports and other periodic reports that the Company would be required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if it were subject to such Section 13(a) or 15(d) and, promptly upon written request, supply copies of such documents to any prospective Holder or beneficial owner at the Company's cost. So long as any of the Notes remain restricted under Rule 144, the Company will make available upon request to any prospective purchaser of Notes or beneficial owner of Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. SECTION 4.18. Creation of Subsidiaries; Additional Subsidiary Guarantees. (a) The Company will cause (i) each future domestic Restricted Subsidiary and (ii) any Restricted Subsidiary of the Company that guarantees any other Debt of the Company or a domestic Restricted Subsidiary to, at the same time, execute and deliver to the Trustee, a supplemental indenture providing for the Guarantee of the payment of the Notes by such Restricted Subsidiary on the same terms and conditions as set forth herein. (b) The Subsidiary Guarantee of a Subsidiary Guarantor will be released if -79- (1) any Subsidiary Guarantor is designated as an Unrestricted Subsidiary in accordance with Section 4.15; or (2) in connection with the sale (including, by way of consolidation or merger) of (A) that number of shares of Capital Stock of such Subsidiary Guarantor such that a Subsidiary Guarantor is no longer a Subsidiary of the Company or another Restricted Subsidiary or (B) all or substantially all of the assets of a Subsidiary Guarantor to a Person that is not the Company or another Restricted Subsidiary of the Company; provided that such sale complies with Section 4.12. (c) In the event a Subsidiary becomes a Subsidiary Guarantor after the Issue Date solely because it Guarantees other Debt, then upon the full and unconditional release of the Guarantee of such other Debt (provided that the Trustee is given two Business Days' written notice of such other release) such Subsidiary Guarantee of such Subsidiary Guarantor shall also be released. SECTION 4.19. Covenant Suspension. (a) During any period of time that the Notes have Investment Grade Ratings from the Required Rating Agencies, the Company and the Restricted Subsidiaries will not be subject to the following provisions of the Indenture: - Section 4.08 - Section 4.09 - Section 4.10 - Section 4.12 - Section 4.13 - Section 4.14 - Section 4.15(c)(x) - Section 4.16 and - Section 5.01(a)(4) and (b)(4) (collectively, the "Suspended Covenants"). -80- (b) In the event that the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding sentence and, subsequently, a Required Rating Agency withdraws its rating or downgrades the rating assigned to the Notes so that the Notes no longer have Investment Grade Ratings from the Required Rating Agencies or a Default or Event of Default occurs and is continuing, then the Company and the Restricted Subsidiaries will from such time and thereafter again be subject to the Suspended Covenants and compliance with the Suspended Covenants with respect to Restricted Payments made after the time of such withdrawal, Default or Event of Default will be calculated in accordance with Section 4.10 as though such covenant had been in effect during the entire period of time from the Issue Date. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Property. (a) The Company shall not merge or consolidate with or into any other Person (other than a merger of a Wholly Owned Restricted Subsidiary into the Company) or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all its Property in any one transaction or series of related transactions, unless: (1) the Company shall be the surviving Person (the "Surviving Person") or the Surviving Person (if other than the Company) formed by such merger or consolidation or to which such sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (2) the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form reasonably satisfactory to the Trustee, executed and delivered to the Trustee by such Surviving Person, the due and punctual payment of the principal amount of the Notes, any accrued and unpaid interest on such principal amount, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by such Person; (3) immediately before and after giving effect to such transaction or series of related transactions on a pro forma basis (and treating, for purposes of this Section 5.01(a)(3) and Sections 5.01(a)(4) and (5) below, any Debt that becomes, or is anticipated to become, an obligation of the Surviving Person or any Restricted Subsidiary as a result of such transaction or series of related transactions as having been Incurred by the Surviving Person or Restricted Subsidiary at the time of such transaction or series of -81- related transactions), no Default or Event of Default shall have occurred and be continuing; (4) immediately after giving effect to such transaction or series of related transactions on a pro forma basis, the Company or the Surviving Person (if other than the Company), would be able to Incur at least $1.00 of additional Debt pursuant to Section 4.09(a); provided, however, that this Section 5.01(a)(4) will not be applicable to (i) the Company or a Restricted Subsidiary consolidating with, merging into, conveying, transferring or leasing all or part of its properties and assets, as applicable to the Company or another Subsidiary Guarantor or (ii) the Company or a Restricted Subsidiary merging with an Affiliate of the Company that is organized in any state of the United States with no material assets or liabilities and which merger is solely for the purpose of reincorporating the Company or a Restricted Subsidiary in another jurisdiction; and (5) the Surviving Person shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction and the supplemental indenture, if any, in respect thereof comply with this Section 5.01 and that all conditions precedent herein provided for relating to such transaction have been satisfied. (b) None of the Subsidiary Guarantors shall merge or consolidate with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all its Property in any one transaction or series of related transactions (other than (i) a merger of a Subsidiary Guarantor with or into another Subsidiary Guarantor or the Company, or a Wholly Owned Subsidiary (other than an Unrestricted Subsidiary) into such Subsidiary Guarantor, (ii) a merger or consolidation of a Subsidiary Guarantor in connection with the sale of such Subsidiary Guarantor to a non Affiliate third party that does not become an Affiliate as a result of such transaction and is otherwise permitted under this Indenture, (iii) any transaction which constitutes an Asset Sale made in compliance with Section 4.12 or (iv) a merger of a Subsidiary Guarantor with an Affiliate that is organized in any state of the United States with no material assets or liabilities and which merger is solely for the purpose of reincorporating such person in another jurisdiction in the United States) unless: (1) the Surviving Person (if not such Subsidiary Guarantor) formed by such merger or consolidation or to which such sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation, limited liability company, trust, partnership or similar entity organized and existing under the laws of United States of America, any State thereof or the District of Columbia; (2) the Surviving Person (if other than such Subsidiary Guarantor) expressly assumes, by Subsidiary Guarantee in form satisfactory to the Trustee, executed and delivered to the Trustee by such Surviving Person, the due and punctual performance and -82- observance of all the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee; (3) immediately before and after giving effect to such transaction or series of related transactions on a pro forma basis (and treating, for purposes of this Section 5.01(b)(3) and Sections 5.01(b)(4) and (5) below, any Debt that becomes, or is anticipated to become, an obligation of the Surviving Person, the Company or any Restricted Subsidiary as a result of such transaction or series of related transactions as having been Incurred by the Surviving Person, the Company or such Restricted Subsidiary at the time of such transaction or series of related transactions), no Default or Event of Default shall have occurred and be continuing; (4) immediately after giving effect to such transaction or series of related transactions on a pro forma basis, the Company would be able to Incur at least $1.00 of additional Debt under Section 4.09(a); and (5) the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction and such Subsidiary Guarantee, if any, in respect thereof comply with this Section 5.01 and that all conditions precedent herein provided for relating to such transaction have been satisfied. (c) The Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, its predecessor under this Indenture. SECTION 5.02. Successor Person Substituted. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of either the Company or any Restricted Subsidiary in accordance with Section 5.01 above, the successor corporation formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power the Company or such Restricted Subsidiary under this Indenture with the same effect as if such successor corporation had been named as the Company or such Restricted Subsidiary herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Notes. ARTICLE SIX DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. The following events shall be "Events of Default": -83- (1) the Company defaults in any payment of interest on any Note when the same becomes due and payable and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal or premium amount of any Note when the same becomes due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, required repurchase or otherwise; (3) a breach of Section 5.01; (4) a breach of any covenant or agreement in the Notes or in this Indenture (other than a failure that is the subject of the foregoing Section 6.01(1), (2) or (3)) and such failure continues for 60 days after written notice demanding that such default be remedied is given to the Company as specified in this Section 6.01; (5) a default by the Company or any Restricted Subsidiary under any Debt of the Company or any Restricted Subsidiary that results in acceleration of the final maturity of such Debt, or the failure to pay any such Debt at final maturity, in an aggregate principal amount in excess of $20 million, unless the Company or such Restricted Subsidiary is contesting such acceleration in good faith; (6) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary insolvency proceeding; (B) consents to the entry of an order for relief against it in an involuntary insolvency proceeding or consents to its dissolution or winding-up; (C) consents to the appointment of a Custodian of it or for any substantial part of its Property; or (D) makes a general assignment for the benefit of its creditors. or takes any comparable action under any foreign laws relating to insolvency; provided, however, that the liquidation of any Restricted Subsidiary into another Restricted Subsidiary, other than as part of a credit reorganization, shall not constitute an Event of Default under this Section 6.01(6); (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against any Significant Subsidiary in an involuntary insolvency proceeding; -84- (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its Property; (C) orders the winding up, liquidation or dissolution of the Company or any Significant Subsidiary; (D) orders the presentation of any plan or arrangement, compromise reorganization of the Company or any Significant Subsidiary; or (E) grants any similar relief under any foreign laws; and in each such case the order or decree remains unstayed and in effect for 90 days; (8) any judgment or judgments for the payment of money in an unsecured aggregate amount (net of any amount covered by insurance issued by a reputable and creditworthy insurer that has not contested coverage or reserved rights with respect to the underlying claim) in excess of $20 million at the time are entered against the Company or any Restricted Subsidiary and shall not be waived, satisfied or discharged for any period of 60 consecutive days after such judgment becomes final and nonappealable; or (9) (a) any Subsidiary Guarantee from a Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee) or (b) or any Subsidiary Guarantor that is a Significant Subsidiary denies or disaffirms its obligations under its Subsidiary Guarantee. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. A Default under Section 6.01(4) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of the Notes then outstanding notify the Company (and in the case of such notice by Holders, the Trustee) of the Default and the Company or the Restricted Subsidiary, as applicable does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default and any event that with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. -85- SECTION 6.02. Acceleration of Maturity; Rescission. If an Event of Default with respect to the Notes (other than an Event of Default specified in Sections 6.01(6) and 6.01(7)) shall have occurred and be continuing, the Trustee or the registered Holders of not less than 25% in aggregate principal amount of the Notes then outstanding may declare to be immediately due and payable the principal amount of all the Notes then outstanding by written notice to the Company and the Trustee, plus accrued but unpaid interest to the date of acceleration. In case an Event of Default specified in Sections 6.01(6) or 6.01(7) shall occur, such amount with respect to all the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or the Holders of the Notes. After any such acceleration, but before a judgment or decree based on acceleration is obtained by the Trustee, the registered Holders of a majority in aggregate principal amount of the Notes then outstanding may rescind and annul such acceleration if (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and all other amounts due to the Trustee under Section 7.07 and (v) in the event of the cure or waiver of an Event of Default of the type described in either Section 6.01 (6) or (7), the Trustee shall have received an Officers' Certificate to the effect that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. In the event of a declaration of acceleration of the Notes because an Event of Default described in Section 6.01(5) has occurred and is continuing, the declaration of acceleration of the Notes shall be automatically annulled if the Payment Default or other default triggering such Event of Default pursuant to Section 6.01(5) shall be remedied or cured by the Company or a Restricted Subsidiary or waived by the holders of the relevant Debt within the grace period provided applicable to such default provided for in the documentation governing such Debt and if (a) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (b) all existing Events of Default, except nonpayment of principal, premium or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. Subject to Section 7.01, in case an Event of Default shall occur and be continuing, the Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders of the Notes, unless such Holders shall have offered to the Trustee reasonable indemnity. Subject to Section 7.07, the Holders of a majority in aggregate principal amount of the Notes then outstanding will have the right to direct -86- the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, or premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture and may take any necessary action requested of it as Trustee to settle, compromise, adjust or otherwise conclude any proceedings to which it is a party. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. Any such proceeding instituted by the Trustee may be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provisions for the payment of the reasonable compensation, expenses, disbursements of the Trustee and its counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative, to the extent permitted by law. Any costs associated with actions taken by the Trustee under this Section 6.03 shall be reimbursed to the Trustee by the Company. SECTION 6.04. Waiver of Past Defaults and Events of Default. Provided the Notes are not then due and payable by reason of a declaration of acceleration, the Holders of a majority in principal amount of Notes at the time outstanding may on behalf of the Holders of all the Notes waive any past Default with respect to such Notes and its consequences by providing written notice thereof to the Company and the Trustee, except a Default (1) in the payment of interest on or the principal of any Note or (2) in respect of a covenant or provision hereof which under this Indenture cannot be modified or amended without the consent of the Holder of each outstanding Note affected. In the case of any such waiver, the Company, the Trustee and the Holders of the Notes will be restored to their former positions and rights under this Indenture, respectively; provided that no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. SECTION 6.05. Control by Majority. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith -87- may be unduly prejudicial to the rights of Holders of the Notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of the Notes. SECTION 6.06. Limitation on Suits. No Holder of Notes will have any right to institute any proceeding with respect to this Indenture, or for the appointment of a receiver or trustee, or for any remedy hereunder unless: (1) the Holder gives the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to institute such proceeding or to pursue such remedy as trustee; (3) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) during such 60-day period, the Holders of at least a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of, and premium, if any, or interest on, such Note on or after the respective due date expressed in such Note. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee or stockholder of the Company, or any Subsidiary Guarantor, shall have any liability for any obligations of the Company, or any Subsidiary Guarantor, under the Notes, the Subsidiary Guarantees or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the U.S. federal securities laws. -88- SECTION 6.08. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of or premium, if any, or interest, if any, on such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes shall not be impaired or affected without the consent of the Holder. SECTION 6.09. Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any Subsidiary Guarantor (or any other obligor on the Notes) for the whole amount of unpaid principal and accrued interest remaining unpaid. SECTION 6.10. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07) and the Holders allowed in any judicial proceedings relative to the Company or any Subsidiary Guarantor (or any other obligor upon the Notes), its creditors or its Property and, unless prohibited by law, shall be entitled and empowered to collect and receive any monies or other Property payable or deliverable on any such claims and to distribute the same after deduction of its charges and expenses to the extent that any such charges and expenses are not paid out of the estate in any such proceedings and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan or reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceedings. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered. -89- SECTION 6.11. Priorities. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest (including Additional Interest, if any) as to each, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes; and THIRD: to the Company or, to the extent the Trustee collects any amount from any Subsidiary Guarantor, to such Subsidiary Guarantor. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.11. SECTION 6.12. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.12 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.08 or a suit by Holders of more than 10% in principal amount of the Notes then outstanding. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default actually known to a Responsible Officer of the Trustee has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: -90- (1) The Trustee need perform only such duties as are specifically set forth in this Indenture and no others. (2) In the absence of bad faith or willful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate, subject to the requirement in the preceding sentence, if applicable. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of Section 7.01(b). (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction of the Holders of a majority in aggregate principal amount of the Notes received by it pursuant to the terms hereof. (4) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its rights, powers or duties if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, Sections 7.01(a), (b), (c) and (e) shall govern every provision of this Indenture that in any way relates to the Trustee. (e) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity -91- satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company or any Subsidiary Guarantor. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by the law. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (1) The Trustee may conclusively rely on any document (whether in its original or facsimile form) reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may request an Officers' Certificate or an Opinion of Counsel, or both, which shall conform to the provisions of Section 12.05. The Trustee shall be protected and shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (3) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed by it with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers; provided that the Trustee's conduct does not constitute willful misconduct, negligence or bad faith. (5) The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters relating to the Notes or this Indenture shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (6) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other person employed to act hereunder. (7) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, -92- request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books records, and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (8) The Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. (9) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture. (10) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not suspended. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for or otherwise deal with either of the Company or any Subsidiary Guarantor, or any Affiliate thereof, with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, shall be subject to Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes or any Subsidiary Guarantee, it shall not be accountable for the Company's or any Subsidiary Guarantor's use of the proceeds from the sale of Notes or any money paid to the Company or any Subsidiary Guarantor pursuant to the terms of this Indenture and it shall not be responsible for any statement in the Notes, Subsidiary Guarantee or this Indenture other than its certificate of authentication, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in any Statement of -93- Eligibility and Qualification on Form T-1 to be supplied to the Company will be true and accurate subject to the qualifications set forth therein. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall give to each Holder a notice of the Default within 90 days after it occurs in the manner and to the extent provided in the TIA and otherwise as provided in this Indenture. Except in the case of a Default in payment of the principal of or interest on any Note (including payments pursuant to a redemption or repurchase of the Notes pursuant to the provisions of this Indenture), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.06. Reports by Trustee to Holders. If required by TIA Section 313(a), within 60 days after May 15 of any year, commencing 2004 the Trustee shall mail to each Holder a brief report dated as of such date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c) and TIA Section 313(d). Reports pursuant to this Section 7.06 shall be transmitted by mail: (1) to all Holders of Notes, as the names and addresses of such Holders appear on the Registrar's books; and (2) to such Holders of Notes as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose. A copy of each report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange on which the Notes are listed. The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or delisted therefrom. SECTION 7.07. Compensation and Indemnity. The Company and the Subsidiary Guarantors shall pay to the Trustee and Agents from time to time such compensation for their services hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) as shall be agreed upon in writing. The Company and the Subsidiary Guarantors shall reimburse the Trustee and Agents upon request for all reasonable disbursements, expenses and advances incurred or made by them in connection with the Trustee's duties under this Indenture, including the reasonable compensation, disbursements and expenses of the Trustee's agents and external -94- counsel, except any expense disbursement or advance as may be attributable to its willful misconduct, negligence or bad faith. The Company and the Subsidiary Guarantors, jointly and severally, shall fully indemnify each of the Trustee and any predecessor Trustee for, and hold each of them harmless against, any and all loss, damage, claim, liability or expense, including without limitation taxes (other than taxes based on the income of the Trustee or such Agent) and reasonable attorneys' fees and expenses incurred by each of them in connection with the acceptance or performance of its duties under this Indenture including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder (including, without limitation, settlement costs). The Trustee or Agent shall notify the Company and the Subsidiary Guarantors in writing promptly of any claim (a "Claim") of which a Responsible Officer of the Trustee has actual knowledge asserted against the Trustee or Agent for which it may seek indemnity; provided that the failure by the Trustee or Agent to so notify the Company and the Subsidiary Guarantors shall not relieve the Company and Subsidiary Guarantors of their obligations hereunder except to the extent the Company and the Subsidiary Guarantors are actually prejudiced thereby. In the event that a conflict of interest exists, the Trustee may have separate counsel, which counsel must be reasonably acceptable to the Company and the Company shall pay the reasonable fees and expenses of such counsel. In all other cases, unless it elects not to, the Company shall be entitled to retain counsel and control the defense of any action upon which the referent Claim is based. Notwithstanding the foregoing, the Company and the Subsidiary Guarantors need not reimburse the Trustee for any expense or indemnify it against any loss or liability to have been incurred by the Trustee through its own willful misconduct, negligence or bad faith. To secure the payment obligations of the Company and the Subsidiary Guarantors in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or Property held or collected by the Trustee and such money or Property held in trust to pay principal of and interest on particular Notes. The obligations of the Company and the Subsidiary Guarantors under this Section 7.07 to compensate and indemnify the Trustee, Agents and each predecessor Trustee and to pay or reimburse the Trustee, Agents and each predecessor Trustee for expenses, disbursements and advances shall be joint and several liabilities of the Company and each of the Subsidiary Guarantors and shall survive the resignation or removal of the Trustee and the satisfaction, discharge or other termination of this Indenture, including any termination or rejection hereof under any Bankruptcy Law. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(6) or (7) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. -95- For purposes of this Section 7.07, the term "Trustee" shall include any trustee appointed pursuant to this Article Seven. SECTION 7.08. Replacement of Trustee. The Trustee shall comply with Section 313(b) of the TIA, to the extent applicable. The Trustee may resign by so notifying the Company and the Subsidiary Guarantors in writing no later than 15 Business Days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by notifying the Company and the removed Trustee in writing and may appoint a successor Trustee with the Company's written consent, which consent shall not be unreasonably withheld. The Company may remove the Trustee at its election if: (1) the Trustee fails to comply with Section 7.10 or Section 310 of the TIA; (2) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under Bankruptcy Law; (3) a receiver or other public officer takes charge of the Trustee or its Property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, the Subsidiary Guarantors or the Holders of a majority in principal amount of the outstanding Notes may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company and the Subsidiary Guarantors. Immediately following such delivery, the retiring Trustee shall, subject to its rights under Section 7.07, transfer all Property held by it as Trustee to the successor Trustee, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each -96- Holder. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Consolidation, Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, subject to Section 7.10, the successor corporation without any further act shall be the successor Trustee; provided such entity shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5) in every respect. The Trustee (together with its corporate parent) shall have a combined capital and surplus of at least $50 million as set forth in the most recent applicable published annual report of condition. The Trustee shall comply with TIA Section 310(b), including the provision in Section 310(b)(1). SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. SECTION 7.12. Paying Agents. The Company shall cause each Paying Agent other than the Trustee to execute and deliver to it and the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 7.12: (A) that it will hold all sums held by it as agent for the payment of principal of, or premium, if any, or interest on, the Notes (whether such sums have been paid to it by the Company or by any obligor on the Notes) in trust for the benefit of Holders of the Notes or the Trustee; (B) that it will at any time during the continuance of any Event of Default, upon written request from the Trustee, deliver to the Trustee all sums so held in trust by it together with a full accounting thereof; and (C) that it will give the Trustee written notice within three (3) Business Days of any failure of the Company (or by any obligor on the Notes) in the payment of any installment of the principal of, premium, if any, or interest on, the Notes when the same shall be due and payable. -97- ARTICLE EIGHT MODIFICATION AND WAIVER SECTION 8.01. Without Consent of Holders. (a) The Company and the Trustee may amend this Indenture without the consent of any Holder, for any of the following purposes to: (1) cure any ambiguity, omission, defect or inconsistency; (2) comply with Section 5.01; (3) provide for uncertificated Notes in addition to or in place of certificated Notes; (4) add additional Subsidiary Guarantees with respect to the Notes; (5) secure the Notes; (6) add to the covenants of the Company or the Subsidiary Guarantors for the benefit of the Holders of the Notes or to surrender any right or power conferred upon the Company or the Subsidiary Guarantors; (7) make any change that does not adversely affect the rights of any Holder of the Notes in any material respect; (8) comply with any requirement of the Commission in connection with the qualification of this Indenture under the Trust Indenture Act; (9) provide for the issuance of Additional Notes in accordance with this Indenture, including the issuance of Additional Notes as restricted securities under the Securities Act and substantially identical Additional Notes pursuant to an Exchange Offer registered with the Commission; or (10) evidence and provide the acceptance of the appointment of a successor Trustee pursuant to the terms of this Indenture. SECTION 8.02. With Consent of Holders. (a) This Indenture may be amended with the consent of the registered Holders of a majority in aggregate principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes) and any past default or compliance with any provisions may also be waived (except a default in the payment of -98- principal, premium or interest and under Section 8.02(b) below) with the consent of the registered Holders of at least a majority in aggregate principal amount of the Notes then outstanding. (b) However, without the consent of each Holder of an outstanding Note, no amendment may, (1) reduce the amount of Notes whose holders must consent to an amendment, supplement or waiver, (2) reduce the rate of or change the time for payment of interest on any Note, (3) reduce the principal of or change the Stated Maturity of any Note, (4) make any Note payable in money other than that stated in the Note, (5) impair the right of any Holder of the Notes to receive payment of principal of and interest on such Holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes or the Subsidiary Guarantees, (6) (A) release any Subsidiary Guarantor that is a Significant Subsidiary from its obligations under the Subsidiary Guarantees or this Indenture other than pursuant to the terms of this Indenture, or (B) release any security interest that may have been granted in favor of the Holders of the Notes pursuant to Section 4.11 other than pursuant to the terms of this Indenture, (7) modify the provisions of Section 4.08 or the related definitions at any time on or after the Company is obligated to make a Change of Control Offer, or (8) modify or change any provision of this Indenture or the related definitions affecting the subordination or ranking of the Notes or any Subsidiary Guarantee in a manner which adversely affects the Holders. (c) The consent of the Holders of the Notes shall not be necessary to approve the particular form of any proposed amendment. It shall be sufficient if such consent approves the substance of the proposed amendment. (d) After an amendment that requires the consent of the Holders of Notes becomes effective, the Company shall mail to each registered Holder of the Notes at such Holder's address appearing in the security register a notice briefly describing such amendment. However, the failure to give such notice to all Holders of the Notes, or any defect therein, shall not impair or affect the validity of the amendment. -99- (e) Upon the written request of the Company accompanied by a board resolution authorizing the execution of any such supplemental indenture, and upon the receipt by the Trustee of evidence reasonably satisfactory to the Trustee of the consent of the Holders as aforesaid and upon receipt by the Trustee of the documents described in Section 8.06, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affect the Trustee's own rights, duties or immunities under this Indenture, in which case the Trustee may, but shall not be obligated to, enter into such supplemental indenture. Notwithstanding the foregoing, without the consents of the requisite lenders under the Credit Agreement, no amendment may be made to the subordination provisions described in Section 10.06 and Article XI. SECTION 8.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 8.04. Revocation and Effect of Consents. (a) After an amendment, supplement, waiver or other action becomes effective, a consent to it by a Holder of a Note is a continuing consent conclusive and binding upon such Holder and every subsequent Holder of the same Note or portion thereof, and of any Note issued upon the transfer thereof or in exchange therefor or in place thereof, even if notation of the consent is not made on any such Note. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement, or waiver. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date unless the consent of the requisite number of Holders has been obtained. SECTION 8.05. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee (in accordance with the specific written direction of the Company) shall request the Holder of the Note (in accordance with the specific written direction of the Company) to deliver it to the Trustee. In such case, the Trustee shall place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue, the Guarantors shall endorse and -100- the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 8.06. Trustee To Sign Amendments, etc. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Eight if the amendment, supplement or waiver does not affect the rights, duties, liabilities or immunities of the Trustee. If it does affect the rights, duties, liabilities or immunities of the Trustee, the Trustee may, but need not, sign such amendment, supplement or waiver. In signing or refusing to sign such amendment, supplement or waiver the Trustee shall be entitled to receive and, subject to Section 7.01, shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating, in addition to the matters required by Section 12.04, that such amendment, supplement or waiver is authorized or permitted by this Indenture and is a legal, valid and binding obligation of the Company and the Subsidiary Guarantors, enforceable against the Company and the Subsidiary Guarantors in accordance with its terms (subject to customary exceptions). ARTICLE NINE DISCHARGE OF INDENTURE; DEFEASANCE SECTION 9.01. Discharge of Liability on Notes; Defeasance. (a) This Indenture shall be discharged and shall cease to be of further effect as to all Notes, and Subsidiary Guarantees, issued hereunder when: (i) either (x) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or (y) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Obligations, or a combination of cash in U.S. dollars and non-callable Government Obligations, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; (ii) no Default or Event of Default has occurred and is continuing on the date of the deposit and after giving effect thereto, other than a Default or Event of Default -101- resulting from the borrowing of funds to be applied to such deposit and guaranteeing of any lien securing such borrowing; (iii) the Company or the Subsidiary Guarantors have paid or caused to be paid all sums payable by them under this Indenture; and (iv) in the event of a deposit as provided in clause (i)(x) above the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the Redemption Date, as the case may be. In addition, at the cost and expense of the Company, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Subject to Sections 9.01(c) and 9.02, the Company may, at its option and at any time, elect to terminate some or all of its obligations and the obligations of the Subsidiary Guarantors under the outstanding Notes, the Subsidiary Guarantees and this Indenture (hereinafter, "Legal Defeasance") except for obligations under Sections 2.04, 2.07 and 2.08 and obligations under the TIA. At any time, the Company may terminate its and the Subsidiary Guarantors' obligations (i) under Sections 4.08 through 4.19, (ii) under Sections 6.01(5), (6) and (7), (8) (with respect to Significant Subsidiaries) and (9) and (iii) under Sections 5.01(a)(4) and (b)(4)on a date the conditions set forth in Section 9.02 are satisfied (hereinafter, "Covenant Defeasance") and thereafter, any omission to comply with any covenant referred to in clause (b)(i) above will not constitute a Default or Event of Default with respect to the Notes. The Company may exercise its Legal Defeasance option notwithstanding its prior exercise of its Covenant Defeasance option. (c) If the Company exercises its Legal Defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its Covenant Defeasance option, payment of the Notes may not be accelerated because of an Event of Default as described in Section 6.01(3) (insofar as such Event of Default applies to obligations under Sections 5.01(a)(4) and (b)(4)), under Section 6.01(4) (insofar as such Event of Default applies to obligations under Sections 4.08 through 4.19), under Sections 6.01(5), (6), (7) (in the case of Sections 6.01 (6) and (7), with respect to Significant Subsidiaries only) or under Section 6.01(8) or (9) or the failure of the Company to comply with Section 5.01(b)(4). If the Company exercises its Legal Defeasance option, each Subsidiary Guarantor, if any, shall be released from all its obligations under its Subsidiary Guarantee, and the Trustee shall execute a release of such Subsidiary Guarantee. If the Company exercises its Covenant Defeasance option, each Subsidiary Guarantor, if any, shall be released from its obligations under its Subsidiary Guarantee. -102- (d) Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (e) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.04, 2.06, 2.07, 2.08, 7.07, 9.05 and 9.06 shall survive until such time as the Notes have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 9.05 and 9.06 shall survive. SECTION 9.02. Conditions to Defeasance. The Legal Defeasance option or the Covenant Defeasance option, in Section 9.01, may be exercised only if: (a) the Company irrevocably deposits in trust with the Trustee money or Government Obligations, or a combination thereof, for the payment of principal of and interest on the Notes to maturity or redemption, as the case may be; (b) the Company delivers to the Trustee a certificate from an internationally recognized firm of independent certified public accountants expressing their opinion that the payments of principal, premium, if any, and interest when due and without reinvestment on the deposited Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal, premium, if any, and interest when due on all the Notes to maturity or redemption, as the case may be; (c) 123 days pass after the deposit is made and during the 123-day period no Default described in Section 6.01(7) occurs with respect to the Company or any other Person making such deposit which is continuing at the end of the period; (d) no Default or Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto, other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit and the guaranteeing of any lien securing such borrowings; (e) such deposit does not constitute a default under any other material agreement or instrument binding on the Company; (f) in the case of an election of Legal Defeasance under Section 9.01, the Company delivers to the Trustee an Opinion of Counsel stating that: (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or -103- (2) since the date of this Indenture there has been a change in the applicable U.S. federal income tax law, to the effect, in either case, that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance election and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same time as would have been the case if such election had not occurred; (g) in the case of an election of Covenant Defeasance under Section 9.01, the Company delivers to the Trustee an Opinion of Counsel to the effect that the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such election had not occurred; and (h) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to an election under 9.01 have been complied with as required by this Indenture. SECTION 9.03. Deposited Money and Government Obligations To Be Held in Trust; Other Miscellaneous Provisions. All money and Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 9.02(a) in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent, to the Holders of such Notes, of all sums due and to become due thereon in respect of principal, premium, if any, and accrued interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Subsidiary Guarantors shall (on a joint and several basis) pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 9.02(a) or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Nine to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon a request of the Company any money or Government Obligations held by it as provided in Section 9.02(a) which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. -104- SECTION 9.04. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or Government Obligations in accordance with Section 9.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and each Subsidiary Guarantor's obligations under this Indenture, the Notes and the Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to this Article Nine until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Obligations in accordance with Section 9.01; provided that if the Company or the Subsidiary Guarantors have made any payment of principal of, premium, if any, or accrued interest on any Notes because of the reinstatement of their obligations, the Company or the Subsidiary Guarantors, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Obligations held by the Trustee or Paying Agent. SECTION 9.05. Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon written demand of the Company, be paid to the Trustee, or if sufficient moneys have been deposited pursuant to Section 9.02(a), to the Company upon a request of the Company (or, if such moneys had been deposited by the Subsidiary Guarantors, to such Subsidiary Guarantors), and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 9.06. Moneys Held by Trustee. Any moneys deposited with the Trustee or any Paying Agent or then held by the Company or the Subsidiary Guarantors in trust for the payment of the principal of or premium, if any, or interest on any Note that are not applied but remain unclaimed by the Holder of such Note for two years after the date upon which the principal of or premium, if any, or interest on such Note shall have respectively become due and payable shall be repaid to the Company (or, if appropriate, the Subsidiary Guarantors) upon a request of the Company, or if such moneys are then held by the Company or the Subsidiary Guarantors in trust, such moneys shall be released from such trust; and the Holder of such Note entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company and the Subsidiary Guarantors for the payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided that the Trustee or any such Paying Agent, before being required to make any such repayment, may, at the expense of the Company and the Subsidiary Guarantors, either mail to each Holder affected, at the address shown in the register of the Notes maintained by the Registrar pursuant to Section 2.04, or cause to be published once a week for two successive weeks, in a newspaper published in the English language, customarily published each Business Day and of general circulation in the City of New York, New York, a notice that such money remains unclaimed and that, after a date specified therein, which shall not be less -105- than 30 days from the date of such mailing or publication, any unclaimed balance of such moneys then remaining will be repaid to the Company. After payment to the Company or the Subsidiary Guarantors or the release of any money held in trust by the Company or any Subsidiary Guarantors, as the case may be, Holders entitled to the money must look only to the Company and the Subsidiary Guarantors for payment as general creditors unless applicable abandoned property law designates another Person. ARTICLE TEN SUBSIDIARY GUARANTEE OF SECURITIES SECTION 10.01. Subsidiary Guarantee. The Subsidiary Guarantors, fully and unconditionally, jointly and severally, on an unsecured senior subordinated basis, guarantee to each Holder (i) the due and punctual payment of the principal of, premium (if any) and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest on the Notes, to the extent lawful, and the due and punctual payment of all other obligations and due and punctual performance of all obligations of the Company to the Holders or the Trustee all in accordance with the terms of such Note, this Indenture and the Registration Rights Agreement, and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration or otherwise. Each Subsidiary Guarantor agrees that its obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note, this Indenture or the Registration Rights Agreement, any waiver, modification or indulgence granted to the Company with respect thereto by the Holder of such Note, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or such Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand for payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to any such Note or the Debt evidenced thereby and all demands whatsoever, and covenants that this Subsidiary Guarantee will not be discharged as to any such Note except by payment in full of the principal thereof, premium (if any) and interest thereon. Each Subsidiary Guarantor hereby agrees that, as between such Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of -106- such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor for the purpose of this Subsidiary Guarantee. The Subsidiary Guarantee of any Subsidiary Guarantor may be released pursuant to Section 4.18 or Section 10.03. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of any Holder under the Subsidiary Guarantees. SECTION 10.02. Execution and Delivery of Subsidiary Guarantee. To further evidence the Subsidiary Guarantee set forth in Section 10.01, each Subsidiary Guarantor hereby agrees, on the Issue Date, that a notation of such Subsidiary Guarantee, substantially in the form included in Exhibit F hereto, shall be endorsed on each Note authenticated and delivered by the Trustee on the Issue Date and such Subsidiary Guarantee shall be executed by either manual or facsimile signature of an Officer or an Officer of a general partner, as the case may be, of each Subsidiary Guarantor. The validity and enforceability of any Subsidiary Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Each of the Subsidiary Guarantors hereby agrees that its Subsidiary Guarantee set forth in Section 10.01 shall be in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer of a Subsidiary Guarantor whose signature is on this Indenture or a Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which such Subsidiary Guarantee is endorsed or at any time thereafter, such Subsidiary Guarantor's Subsidiary Guarantee of such Note shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Subsidiary Guarantee executed in accordance with Section 10.2 set forth in this Indenture on behalf of the Subsidiary Guarantor. SECTION 10.03. Release of Subsidiary Guarantors. The Subsidiary Guarantee of any Subsidiary Guarantor will be automatically and unconditionally released and discharged upon any of the following: (A) in connection with the sale of (A) that number of shares of Capital Stock of such Subsidiary Guarantor such that such Subsidiary Guarantor is no longer a Subsidiary of the Company or another Restricted Subsidiary or (B) all or substantially all of the assets of such Subsidiary Guarantor to a Person that is not the Company or another -107- Restricted Subsidiary of the Company; provided that such sale complies with Section 4.12; (B) the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the provisions of this Indenture; and in each such case, the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to such transactions have been complied with and that such release is authorized and permitted hereunder. In addition, in the event a Subsidiary becomes a Subsidiary Guarantor solely because it Guarantees other Debt, then upon the full and unconditional release of the Guarantee of such other Debt (provided that the Trustee is given two Business Days written notice of such other release) such Subsidiary Guarantee of such Subsidiary Guarantor shall also be released. The Trustee shall execute any documents reasonably requested by either the Company or a Subsidiary Guarantor in order to evidence the release of such Subsidiary Guarantor from its obligations under its Subsidiary Guarantee endorsed on the Notes and under this Article Ten. SECTION 10.04. Waiver of Subrogation. Until all the obligations under the Notes and the Subsidiary Guarantees are satisfied in full, each Subsidiary Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Subsidiary Guarantor's obligations under its Subsidiary Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Notes against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other Property or by set-off or in any other manner, payment or Note on account of such claim or other rights. If any amount shall be paid to any Subsidiary Guarantor in violation of the preceding sentence and the Notes shall not have been paid in full, such amount shall have been deemed to have been paid to such Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Notes, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Notes, whether matured or unmatured, in accordance with the terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 10.04 is knowingly made in contemplation of such benefits. -108- SECTION 10.05. Notice to Trustee. The Company or any Subsidiary Guarantor shall give prompt written notice to the Trustee of any fact known to the Company or any such Subsidiary Guarantor which would prohibit the making of any payment to or by the Trustee at its Corporate Trust Office in respect of the Subsidiary Guarantees. Notwithstanding the provisions of this Article Ten or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Subsidiary Guarantees, unless and until the Trustee shall have received written notice thereof from the Company no later than one Business Day prior to such payment; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of this Section 10.05, and subject to the provisions of Sections 7.01 and 7.02, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice referred to in this Section 10.05 at least one Business Day prior to the date upon which by the terms hereof any such payment may become payable for any purpose under this Indenture (including, without limitation, the payment of the principal of, premium, if any, or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it less than one Business Day prior to such date. SECTION 10.06. Subordination of Subsidiary Guarantee. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee pursuant to this Article Ten shall be junior and subordinated to the Senior Debt of such Subsidiary Guarantor on the same basis as the Notes are junior and subordinated to the Senior Debt of the Company. For the purposes of the foregoing sentence, and notwithstanding anything to the contrary contained herein, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Subsidiary Guarantors (or any Persons acting on their behalf) only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article Eleven, and the Holders of Senior Debt shall have the same rights and remedies provided for in Article Eleven. ARTICLE ELEVEN SUBORDINATION SECTION 11.01. Notes Subordinated to Senior Debt. The Debt evidenced by the Notes and the Subsidiary Guarantees will be unsecured senior subordinated obligations of the Company and the Subsidiary Guarantors, as the case may be. The Notes shall in all respects rank pari passu with all other senior subordinated debt of the Company. The terms of the subordination provisions described in this Article Eleven -109- with respect to the Company's obligations under the Notes apply equally to each Subsidiary Guarantor and the Obligations of such Subsidiary Guarantors under their respective Subsidiary Guarantees. Anything herein to the contrary notwithstanding, the Company, for itself and its successors, and each Holder agrees that the payment of all Obligations owing on, or relating to, the Notes to the Holders is subordinated, to the extent and in the manner provided in this Article Eleven, to the prior payment in full in cash or Temporary Cash Investments (or any other consideration acceptable to the holders of Senior Debt) of all Obligations on Senior Debt (including all Obligations with respect to each Credit Facility), whether outstanding on the Issue Date or thereafter Incurred. Notwithstanding the provisions of this Article Eleven, payments and distributions made relating to the Notes pursuant to a trust fund established under Section 9.03 pursuant to the terms of Article Nine (so long as all of the applicable conditions contained in Article Nine were satisfied at the time of such payment) shall not be subordinated to Senior Debt under this Article Eleven. This Article Eleven shall constitute a continuing benefit to all Persons who become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 11.02. Suspension of Payment When Senior Debt Is in Default. (a) Neither the Company nor any Subsidiary Guarantor shall be permitted to pay principal of, premium, if any, or interest (or other amounts) on the Notes or Subsidiary Guarantee, as the case may be, or make any further deposit pursuant to Section 9.02 and may not repurchase, redeem or otherwise retire for value or make any payment of any kind with respect to any Notes (collectively, "pay the Notes") if: (1) a Payment Default on any Designated Senior Debt (including upon any acceleration of the maturity thereof) occurs and is continuing; or (2) any other default (other than a Payment Default) on any Designated Senior Debt occurs and is continuing that permits Holders of Designated Senior Debt to accelerate the maturity thereof (a "Non-payment Default") and, if the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Representative of any Designated Senior Debt, then during the period (the "Payment Blockage Period") beginning upon the delivery of such Payment Blockage Notice and ending on the earliest of (x) the date on which such Non-payment Default is cured or waived or will have ceased to exist (so long as no other Non-payment Default exists), (y) 180 days after the date on which the applicable Payment Blockage Notice is received, and (z) the date on which the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Payment Blockage Period, neither the -110- Company nor any other Person on its behalf shall (i) pay the Notes or (ii) acquire any of the Notes for cash or Property or otherwise. Payments on a Note or any Subsidiary Guaranty may and shall be resumed: (1) in the case of a Payment Default upon the date on which such default is cured or waived or will have ceased to exist; and (2) in the case of a Non-payment Default, upon the termination of such Payment Blockage Period. (b) Notwithstanding anything herein to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 180 days from the date the applicable Payment Blockage Notice is received by the Trustee and (y) only one such Payment Blockage Period may be commenced in any 360-day period, regardless of the number of defaults with respect to such period. (c) No known default (other than a Payment Default) that existed upon the commencement of a Payment Blockage Notice (whether or not such default is on the same Designated Senior Debt) shall be made the basis for the commencement of any other Payment Blockage Notice, unless such default has been cured or waived or will have ceased to exist for a period of not less than 90 consecutive days subsequent to the commencement of such initial Payment Blockage Notice (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of such Payment Blockage Notice that, in either case, would give rise to an a default pursuant to any provisions under which a default previously existed or was continuing shall constitute a new a default for this purpose). (d) Unsecured Debt is not deemed to be subordinate or junior to secured Debt merely because it is unsecured or because the secured Debt receives priority in respect of asset sales, cash flows or other prepayments and Debt which has different security or different priorities in the same security will not be deemed subordinate or junior to secured Debt no matter what the differences are. (e) If payment or distribution of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of Senior Debt or the Representative of such holders of the acceleration. (f) No provision contained in this Indenture or the Notes will affect the Company's obligation, which is absolute and unconditional, to pay the Notes when due. The subordination provisions of this Indenture and the Notes will not prevent the occurrence of any Default or Event of Default under this Indenture or limit the rights of the Trustee or any Holder to pursue any other rights or remedies with respect to the Notes. -111- (g) The terms of the subordination provisions described above will not apply to payments from money or of Government Obligations, or a combination thereof, held in trust and deposited at a time when permitted by the subordination provisions of this Section by the Trustee for the payment of principal of, premium (if any) and interest on the Notes pursuant to Section 9.02. (h) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 11.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Designated Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. (i) The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt. Nothing contained in this Article Eleven shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Notes and all other Obligations owing under the Notes pursuant to Article Six or to pursue any rights or remedies hereunder (subject to the rights, if any, under this Article Eleven, of the holders of Senior Debt in respect of cash, Property or securities of the Company received upon the exercise of any such remedy); provided that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or Temporary Cash Investments before the Holders are entitled to receive any payment of any kind or character with respect to Obligations owing on, or with respect to, the Notes. SECTION 11.03. Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company. (a) Upon any payment or distribution of assets of either the Company or any Subsidiary Guarantor or its Property of any kind or character, whether in cash, Property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or any Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or any Subsidiary Guarantor or its assets, whether voluntary or involuntary, all Obligations in respect of Senior Debt due or to become due shall first be paid in full in cash, Temporary Cash Investments or any other consideration acceptable to the holders of Senior Debt (including interest after the commencement of any bankruptcy or other like proceeding at the rate specified in the applicable Senior Debt whether or not such interest is an allowed claim in any such proceeding), before any payment or distribution of any kind or character is made on account of any Obligations on, or with respect to, the Notes or for -112- the acquisition of any of the Notes for cash or Property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company or any Subsidiary Guarantor of any kind or character, whether in cash, Property or securities, to which the Holders or the Trustee would be entitled, except for the provisions hereof, shall be paid by the Company or any Subsidiary Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee if received by it, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Temporary Cash Investments after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding paragraph) of the Company's obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or Temporary Cash Investments, shall have no force or effect for purposes of the subordination provisions contained in this Article Eleven, with any turnover of payments as otherwise calculated pursuant to this Article Eleven to be made as if no such diminution had occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, Property or securities, shall be received by the Trustee or any Holder when such payment or distribution is prohibited by this Section 11.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been -113- paid in full in cash or Temporary Cash Investments, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. SECTION 11.04. Payments May Be Paid Prior to Dissolution. Nothing contained in this Article Eleven or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Sections 11.02 and 11.03, from making payments at any time for the purpose of making payments of principal of and interest on the Obligations owing under the Notes, or from depositing with the Trustee any monies for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 11.02 or 11.03, the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of, and interest on, the Obligations owing under the Notes to the Holders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable the Trustee shall have actually received the written notice provided for in Section 11.13, Section 11.02(a)(2) or in the last sentence of this Section 11.04 (provided that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Sections 11.02 and/or 11.03 (and such payments) shall otherwise be subject to the provisions of Sections 11.02 and 11.03). The Company shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Company, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 11.05. Holders To Be Subrogated to Rights of Holders of Senior Debt. Subject to the payment in full in cash or Temporary Cash Investments of all Senior Debt, the Holders shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, Property or securities of the Company applicable to the Senior Debt until the Obligations owing under the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company, or by or on behalf of the Holders by virtue of this Article Eleven, which otherwise would have been made to the Holders shall, as between the Company and the Holders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Eleven are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. SECTION 11.06. Obligations of the Company Unconditional. Nothing contained in this Article Eleven or elsewhere in this Indenture is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Holders, the Obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and any interest on the Obligations owing under the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall -114- affect the relative rights of the Holders and creditors of the Company other than the holders of Senior Debt, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Eleven, of the holders of Senior Debt in respect of cash, Property or securities of the Company received upon the exercise of any such remedy. SECTION 11.07. Reliance on Judicial Order or Certificate of Liquidating Agent. Whenever a distribution is to be made or a notice given to holders of Designated Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article Eleven, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Debt of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eleven. Nothing in this Article Eleven shall apply to the claims of, or payments to, the Trustee in its capacity as such under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Eleven, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Eleven, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 11.08. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt. No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by -115- any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt or Senior Debt of any Subsidiary Guarantor ("Guarantor Senior Debt") may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article Eleven or the obligations hereunder of the Holders to the holders of the Senior Debt or Guarantor Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt or Guarantor Senior Debt, or otherwise amend or supplement in any manner Senior Debt or Guarantor Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt or Guarantor Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any Property pledged, mortgaged or otherwise securing Senior Debt or Guarantor Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt or Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 11.09. Holders Authorize Trustee To Effectuate Subordination of Obligations. Each Holder authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination provided in this Article Eleven, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Company, the filing of a claim for the unpaid balance of its Obligations owing under the Notes and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative shall have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Obligations owing under the Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. -116- SECTION 11.10. This Article Eleven Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Obligations owing under the Notes by reason of any provision of this Article Eleven will not be construed as preventing the occurrence of an Event of Default. SECTION 11.11. Amendments or Modifications to Article Eleven. No amendment of, or supplement or waiver to, this Indenture shall adversely affect the rights of any holder of Senior Debt under this Article Eleven or Article Twelve without the consent of such holder of Senior Debt. Notwithstanding anything to the contrary contained in this Indenture (but without limiting the provisions of the immediately preceding sentence), no amendment or modification to any provision of this Article Eleven or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any Senior Debt then outstanding) shall be permitted without the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes) or, if required by Section 8.02, by each Holder affected. SECTION 11.12. Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 11.13. Notice to Trustee; Rights of Trustee and Paying Agent. The Company shall give prompt written notice to the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee or any Holder in respect of the Notes or under any Subsidiary Guarantee pursuant to the provisions of this Article Eleven although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Notwithstanding the provisions of this Article Eleven or any other provision of this Indenture, neither the Trustee nor any Paying Agent shall be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee or such Paying Agent, and (in the absence of actual knowledge that the respective payment will violate the applicable provisions of this Article Eleven) the Trustee and such Paying Agent may continue to make payments on the Notes, unless the Trustee or such Paying Agent shall have received, at least one Business Day prior to the date of such payment, written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article Eleven (although the receipt of such payment shall otherwise be subject to the applicable provisions of this Article Eleven). Only the Company, a Subsidiary Guarantor, a holder of Senior Debt or a Representative thereof may give the notice. Nothing in this Article Eleven shall impair the claims of, or payments to, the Trustee in its -117- capacity as such under or pursuant to Section 7.07. Nothing in this Section 11.13 is intended to or shall relieve any Holder of Notes from the obligations imposed under Sections 11.02 and 11.03 with respect to other distributions received in violation of the provisions hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. If any provision of this Indenture modifies any TIA provision that may be so modified, such TIA provision shall be deemed to apply to this Indenture as so modified. If any provision of this Indenture excludes any TIA provision that may be so excluded, such TIA provision shall be excluded from this Indenture. The provisions of TIA Sections 310 through 317 that impose duties on any Person (including the provisions automatically deemed included unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 12.02. Notices. Except for notice or communications to Holders, any notice or communication shall be given in writing and when received if delivered in person, when receipt is acknowledged if sent by facsimile, on the next Business Day if timely delivered by a nationally recognized courier service that guarantees overnight delivery or two Business Days after deposit if mailed by first-class mail, postage prepaid, addressed as follows: If to the Company and/or the Subsidiary Guarantors: Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 200 Durham, North Carolina 27703-8411 Attn: General Counsel -118- With a copy to: Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. 2500 First Union Capital Center Post Office Box 2611 Raleigh, North Carolina 27602-2611 Fax: (919) 821-6800 Telephone: (919) 821-1220 Attn: Gerald F. Roach, Esq. Lee M. Kirby, Esq. and Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Fax: 212-309-6273 Phone: 212-309-6000 Attn: Ira White, Esq. If to the Trustee, Registrar or Paying Agent: Wells Fargo Bank Minnesota, N.A. 213 Court Street Suite 703 Middletown, CT 06457 Fax: 860 704-6219 Telephone: 860-704-6217 Attn: Corporate Trust Services Such notices or communications shall be effective when received and shall be sufficiently given if so given within the time prescribed in this Indenture. The Company, the Subsidiary Guarantors or the Trustee by written notice to the others may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed to him by first-class mail, postage prepaid, at his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication to a Holder is -119- mailed in the manner provided above, it shall be deemed duly given, whether or not the addressee receives it. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. SECTION 12.03. Communications by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company or any Subsidiary Guarantor to the Trustee to take any action under this Indenture (except for the issuance of Notes on the Issue Date), the Company or such Subsidiary Guarantor shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 12.05 below) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (which shall include the statements set forth in Section 12.05 below) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 12.05. Statements Required in Certificate and Opinion. Each certificate (other than certificates provided pursuant to Section 4.06) and opinion with respect to compliance by or on behalf of the Company or any Subsidiary Guarantor with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person delivering such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; -120- (3) a statement that, in the opinion of such Person, it or he has made such examination or investigation as is necessary to enable it or him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such covenant or condition has been complied with. SECTION 12.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or meetings of Holders. The Registrar and Paying Agent may make reasonable rules for their functions. SECTION 12.07. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or other day on which (i) commercial banks in the City of New York are authorized or required by law to close or (ii) the New York Stock Exchange is not open for trading. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 12.08. Governing Law. This Indenture, the Notes and the Subsidiary Guarantees shall be governed by and construed in accordance with the laws of the State of New York, but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. SECTION 12.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan, security or debt agreement of the Company or any Subsidiary thereof. No such indenture, loan, security or debt agreement may be used to interpret this Indenture. SECTION 12.10. Successors. All agreements of the Company and the Subsidiary Guarantors in this Indenture and the Notes shall bind their respective successors. All agreements of the Trustee, any additional trustee and any Paying Agents in this Indenture shall bind its successor. SECTION 12.11. Multiple Counterparts. The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement. -121- SECTION 12.12. Table of Contents, Headings, etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 12.13. Separability. Each provision of this Indenture shall be considered separable and if for any reason any provision which is not essential to the effectuation of the basic purpose of this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. [Signature Pages Follow] S-1 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed all as of the date and year first written above. QUINTILES TRANSNATIONAL CORP. By: /s/ John S. Russell ------------------------------------ John S. Russell Executive Vice President S-2 BENEFIT HOLDING, INC. BENEFIT TRANSNATIONAL HOLDING CORP. BIOGLAN PHARMACEUTICALS COMPANY INNOVEX (NORTH AMERICA) INC. INNOVEX AMERICA HOLDING COMPANY INNOVEX MERGER CORP. MEDCOM, INC. PHARMABIO DEVELOPMENT, INC. PHARMA INFORMATICS, INC. PMSI DATABASE SERVICES, INC. PMSI FINANCE LIMITED PMSI HOLDINGS LIMITED PMSI SCOTT-LEVIN, INC. Q.E.D COMMUNICATIONS, INC. QFINANCE, INC. QUINTILES ASIA, INC. QUINTILES CLINICAL SUPPLIES AMERICAS, INC. QUINTILES FEDERATED SERVICES, INC. QUINTILES, INC. QUINTILES INFORMATICS, INC. QUINTILES LABORATORIES LIMITED QUINTILES LATIN AMERICA, INC. QUINTILES PACIFIC, INC. QUINTILES PHASE ONE SERVICES, INC. QUINTILES SCOTT-LEVIN, INC. QUINTILES TECHNOLOGIES, INC. SOURCE INFORMATICS EUROPEAN FINANCE, INC. SOURCE INFORMATICS EUROPEAN HOLDINGS, INC. THE LEWIN GROUP, INC. By: /s/ John S. Russell -------------------------------------- John S. Russell President S-3 INNOVEX, L.P. INNOVEX AMERICAN HOLDING COMPANY, as General Partner By: /s/ John S. Russell ---------------------------------------- John S. Russell President MSM GROUP LIMITED PARTNERSHIP, as Limited Partner QUINTILES PACIFIC, INC., as General Partner By: /s/ John S. Russell ------------------------------------ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: /s/ John S. Russell ------------------------------------ John S. Russell President S-4 INNOVEX NEVADA LIMITED PARTNERSHIP QUINTILES PACIFIC, INC., as General Partner By: /s/ John S. Russell ---------------------------------------- John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: /s/ John S. Russell ---------------------------------------- John S. Russell President S-5 INNOVEX SUPPORT SERVICES LIMITED PARTNERSHIP INNOVEX AMERICA HOLDING COMPANY, as General Partner By: /s/ John S. Russell ---------------------------------------- John S. Russell President INNOVEX NEVADA LIMITED PARTNERSHIP, as Limited Partner QUINTILES PACIFIC, INC. as General Partner By: /s/ John S. Russell ------------------------------------ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: /s/ John S. Russell ------------------------------------ John S. Russell President S-6 MSM GROUP LIMITED PARTNERSHIP QUINTILES PACIFIC, INC., as General Partner By: /s/ John S. Russell ---------------------------------------- John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: /s/ John S. Russell ---------------------------------------- John S. Russell President S-7 QUINTILES TRANSFER, L.L.C. QUINTILES PACIFIC, INC., as sole Member By: /s/ John S. Russell ---------------------------------------- John S. Russell President S-8 SOURCE INFORMATICS EUROPEAN HOLDINGS, LLC SOURCE INFORMATICS EUROPEAN HOLDINGS, INC., as sole Member By: /s/ John S. Russell ---------------------------------------- John S. Russell President S-9 QUINTILES AUSTRIAN HOLDINGS, LLC QUINTILES TRANSNATIONAL CORP. as sole Member By: /s/ John S. Russell ---------------------------------------- John S. Russell Executive Vice President S-10 WELLS FARGO BANK MINNESOTA, N.A., as Trustee By: /s/ Joseph O'Donnell ---------------------------------------- Name: Joseph O'Donnell Title: EXHIBIT A CUSIP QUINTILES TRANSNATIONAL CORP. No. $ $ 10% SENIOR SUBORDINATED NOTE DUE 2013 QUINTILES TRANSNATIONAL CORP., a North Carolina corporation, as issuer (the "Company"), for value received, promises to pay to CEDE & CO. or registered assigns the principal sum of $ on , 2013. Interest Payment Dates: April 1 and October 1 Record Dates: March 15 and September 15. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. A-1 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by one of its duly authorized officers. QUINTILES TRANSNATIONAL CORP. By: _________________________________ John S. Russell Executive Vice President A-2 Certificate of Authentication This is one of the 10% Senior Subordinated Notes Due 2013 referred to in the within-mentioned Indenture. WELLS FARGO BANK MINNESOTA, N.A., as Trustee By: _________________________________ Dated: A-3 [FORM OF REVERSE OF NOTE] QUINTILES TRANSNATIONAL CORP. 10% SENIOR SUBORDINATED NOTE DUE 2013 1. Interest. QUINTILES TRANSNATIONAL CORP., a North Carolina corporation, as issuer (the "Company"), promises to pay, until the principal hereof is paid or made available for payment, interest on the principal amount set forth on the face hereof at a rate of 10% per annum. Interest hereon will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid, from and including September 25, 2003 to but excluding the date on which interest is paid. Interest shall be payable in arrears on each April 1 and October 1, commencing April 1, 2004.* Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and on overdue interest (to the full extent permitted by law) at the rate borne by the Notes. 2. Method of Payment. The Company will pay interest hereon (except defaulted interest) to the Persons who are registered Holders at the close of business on March 15 or September 15 immediately preceding the interest payment date (whether or not a Business Day). Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay to the Paying Agent principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. If a Holder has given wire transfer instructions to the Company, the Company may pay, or cause to be paid by the Paying Agent, all principal, interest and Additional Interest (as defined herein), if any, on the Holder's Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the Paying Agent and Registrar unless the Company elects to make interest payments by check mailed to the Holders at their address set forth in the register of Holders. 3. Paying Agent and Registrar. Initially, Wells Fargo Bank Minnesota, N.A. (the "Trustee") will act as a Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to the Holders. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. - ------------------- * With respect to Additional Notes, Interest will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid, from and including the date such Additional Notes are issued. A-4 4. Indenture. The Company issued the Notes under an Indenture dated as of September 25, 2003 (the "Indenture") between the Company, the Subsidiary Guarantors and the Trustee. This is one of an issue of Notes of the Company issued, or to be issued, under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended from time to time. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of them. Each Holder of a Note agrees to and shall be bound by such provisions. Capitalized and certain other terms used herein and not otherwise defined have the meanings set forth in the Indenture. 5. Optional Redemption. (a) Except as set forth below, the Notes will not be redeemable at the option of the Company prior to October 1, 2008. Thereafter, the Company may redeem all or any portion of the Notes, at any time or from time to time, upon not less than 30 nor more than 60 days' prior notice, at the following redemption prices, plus accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on October 1 of the years set forth below and are expressed as percentages of principal amount:

(b) At any time on or prior to October 1, 2008, the Notes may also be redeemed or purchased, by or on behalf of the Company, in whole, or any portion thereof, at the Company's option (a "Pre-2008 Redemption"), at a price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to the date of redemption or purchase pursuant to such Pre-2008 Redemption (the "Pre-2008 Redemption Date") (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Such Pre-2008 Redemption or purchase may be made upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the Redemption Date. The Company may provide in such notice that payment of such price and performance of the Company's obligations with respect to such redemption or purchase may be performed by another Person. "Applicable Premium" means, with respect to a Note at any Pre-2008 Redemption Date, the excess of (A) the present value at such Pre-2008 Redemption Date of (1) the redemption price of such Note on October 1, 2008 (as set forth in the table above) plus (2) all required remaining scheduled interest payments due on such Notes through October 1, 2008, computed using a discount rate equal to the Treasury Rate plus 50 basis points over (B) the A-5 principal amount of such Note on such Pre-2008 Redemption Date. Calculation of the Applicable Premium will be made by the Company or on behalf of the Company by such Person (other than the Trustee) as the Company shall designate. "Treasury Rate" means, with respect to a Pre-2008 Redemption Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business days prior to such Pre-2008 Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Pre-2008 Redemption Date to October 1, 2008; provided, however, that if the period from such Pre-2008 Redemption Date to October 1, 2008 is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such Pre-2008 Redemption Date to October 1, 2008 is less than one year, the weekly average yield on actually traded United States Treasury Securities adjusted to a constant maturity of one year shall be used. Any notice to Holders of the Notes of a Pre-2008 Redemption hereunder needs to include the appropriate calculation of the redemption price, but does not need to include the redemption price itself. The actual redemption price, calculated as described above, must be set forth in an Officers' Certificate of the Company delivered to the Trustee no later than two Business days prior to the Pre-2008 Redemption Date. (c) From time to time prior to October 1, 2006, the Company may redeem up to a maximum of 40% of the aggregate principal amount of the Notes issued under the Indenture prior to such date, with the proceeds of one or more Qualified Equity Offerings, at a redemption price equal to 110% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption, at least 60% of the aggregate principal amount of Notes issued under the Indenture prior to such date remains outstanding. Any such redemption shall be made within 120 days of such Qualified Equity Offering upon not less than 30 nor more than 60 days' prior notice. (d) The Trustee will select Notes called for redemption pursuant to this paragraph 5 as set forth in the Indenture; provided that no Notes of $1,000 or less shall be redeemed in part. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption pursuant to this paragraph 5 hereto become due on the date fixed for redemption. On and after the Redemption Date, interest stops accruing on Notes or portions of them called for redemption. A-6 6. Notice of Redemption. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. 7. Offers To Purchase. The Indenture provides that upon the occurrence of a Change of Control or an Asset Sale and subject to further limitations contained therein, the Company shall make an offer to purchase outstanding Notes in accordance with the procedures set forth in the Indenture. 8. Registration Rights. (a) Pursuant to a Registration Rights Agreement among the Company, the Subsidiary Guarantors and the Initial Purchasers named therein (the "Registration Rights Agreement") and subject to the further limitations and conditions set forth therein, the Company will be obligated to consummate an exchange offer (the "Exchange Offer") pursuant to which the Holder of this Note shall have the right to exchange this Note for Notes which have been registered under the Securities Act, in like principal amount and having substantially identical terms as the Notes. (b) If (i) within 180 days after the Issue Date of the Notes, neither the Exchange Offer Registration Statement nor, if required to be filed pursuant to section 3(a)(i), (ii) or (iii) of the Registration Rights Agreement, any Shelf Registration Statement has been filed with the Commission; (ii) within 30 days after a Shelf Registration Statement is required to be filed pursuant to Section 3(a)(i), (ii) or (iii), so long as such 30th day is a day after the 180th day following the Issue Date, the Shelf Registration Statement has not been filed with Commission; (iii) within 270 days after the Issue Date of the Notes, the Exchange Offer Registration Statement has not been declared effective as required by Section 2(a) of the Registration Rights Agreement; (iv) within 300 days after the Issue Date of the Notes, neither the Exchange Offer has been consummated nor, if required to be filed pursuant to section 3(a)(i), (ii) or (iii) of the Registration Rights Agreement, the Shelf Registration Statement has been declared effective; (v) within 60 days of the day on which the obligation to file a Shelf Registration Statement arises solely pursuant to Section 3(a)(iv) of the Registration Rights Agreement the Company and Subsidiary Guarantors fail to file such Shelf Registration Statement, with the Commission; (vi) within 60 days of the day on which the obligation to have a Shelf Registration Statement declared effective arises solely pursuant to Section 3(a)(iv) of the Registration Rights Agreement, such Shelf Registration Statement has not been declared effective; or (vii) after either the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or fails to be useable (subject, in the case of the Shelf Registration Statement, to the exceptions set forth in the Registration Rights Agreement) in connection with resales of the Notes or Exchange Securities other than in accordance with and during the periods specified in Sections 2 and 3 of the Registration Rights Agreement (each such event referred to in clauses (i) through (vii), a "Registration Default"), "Additional Interest" (as defined in the Registration Rights Agreement) will accrue on the terms and in the amounts set forth in the Registration Rights Agreement. A-7 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay to it any taxes and fees required by law or permitted by the Indenture. The Registrar shall not be required to exchange or register a transfer of any Note for a period of 15 days immediately preceding the redemption of Notes, except the unredeemed portion of any Note being redeemed in part. 10. Persons Deemed Owners. The registered Holder of this Note may be treated as the owner of this Note for all purposes. 11. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to the money must look to the Company for payment as general creditors unless an "abandoned property" law designates another Person. 12. Amendment, Supplement, Waiver, Etc. The Company, the Subsidiary Guarantors, if any, and the Trustee (if a party thereto) may, without the consent of the Holders of any outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, providing for the assumption by a successor to the Company of its obligations under the Indenture and making any change that does not materially and adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Company, the Subsidiary Guarantors, if any, and the Trustee with the consent of the Holders of not less than a majority of the aggregate principal amount of the outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes to be affected. 13. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur additional Debt, pay dividends on, redeem or repurchase its Capital Stock, make certain investments, sell assets, create restrictions on the payment of dividends or other amounts to the Company from its Restricted Subsidiaries, enter into transactions with Affiliates, expand into unrelated businesses, create liens or consolidate, merge or sell all or substantially all of the assets of the Company and its Restricted Subsidiaries and requires the Company to provide reports to Holders of the Notes. Such limitations are subject to a number of important qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations. A-8 14. Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture and the transaction complies with the terms of Article Five of the Indenture, the predecessor corporation will, except as provided in Article Five, be released from those obligations. 15. Defaults and Remedies. Events of Default are set forth in the Indenture. Subject to certain limitations in the Indenture, if an Event of Default (other than an Event of Default specified in Sections 6.01(6) and 6.01(7) of the Indenture) occurs and is continuing, then, and in each and every such case, either the Trustee, by notice in writing to the Company, or the Holders of not less than 25% of the principal amount of the Notes then outstanding, by notice in writing to the Company and the Trustee, may, and the Trustee at the request of such Holders shall, declare due and payable, if not already due and payable, the principal of and any accrued and unpaid interest on all of the Notes; and upon any such declaration all such amounts upon such Notes shall become and be immediately due and payable, anything in the Indenture or in the Notes to the contrary notwithstanding. If an Event of Default specified in Sections 6.01(6) and 6.01(7) of the Indenture occurs, then the principal of and any accrued and unpaid interest on all of the Notes shall immediately become due and payable without any declaration or other act on the part of the Trustee or any Holder. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal, premium, if any, or interest on the Notes or a default in the observance or performance of any of the obligations of the Company under Article Five of the Indenture) if it determines that withholding notice is in their best interests. 16. Trustee Dealings with Company. Subject to certain limitations imposed by the Trust Indenture Act, the Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 17. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, agent, member or stockholder or Affiliate of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. No past, present or future director, officer, employee, incorporator, agent or stockholder or Affiliate of any of the Subsidiary Guarantors, as such, shall have any liability for any obligations of the Subsidiary Guarantors under the Subsidiary Guarantees, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes and Subsidiary Guarantees by accepting a Note and a Subsidiary Guarantee waives and releases all such liabilities. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees. A-9 18. Discharge. The Company's obligations pursuant to the Indenture will be discharged, except for obligations pursuant to certain sections thereof, subject to the terms of the Indenture, upon the payment of all the Notes or upon the irrevocable deposit with the Trustee of United States dollars or Government Obligations sufficient to pay when due principal of and interest on the Notes to maturity or redemption, as the case may be. 19. Subsidiary Guarantees. The Notes will be entitled to the benefits of certain Subsidiary Guarantees made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Subsidiary Guarantors, the Trustee and the Holders. 20. Authentication. This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note. 21. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. The Trustee, the Company and the Subsidiary Guarantors agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to the Indenture or the Notes. 22. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 200 Durham, North Carolina 27703-8411 Attn: General Counsel With a copy to: Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. 2500 First Union Capital Center Post Office Box 2611 Raleigh, North Carolina 27602-2611 A-10 ASSIGNMENT I or we assign and transfer this Note to: ________________________________________________________________________________ (Insert assignee's social security or tax I.D. number) ________________________________________________________________________________ (Print or type name, address and zip code of assignee) and irrevocably appoint: Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. Date: _______________ Your Signature: ____________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ______________________________ SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have all or any part of this Note purchased by the Company pursuant to Section 4.08 or Section 4.12 of the Indenture, check the appropriate box: [ ] Section 4.08 [ ] Section 4.12 If you want to have only part of the Note purchased by the Company pursuant to Section 4.08 or Section 4.12 of the Indenture, state the amount you elect to have purchased: $ ____________________________ (multiple of $1,000) Date: ________________________ Your Signature: ____________________________________ (Sign exactly as your name appears on the face of this Note) ______________________________ Signature Guaranteed SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-12 EXHIBIT B [FORM OF LEGEND FOR 144A SECURITIES AND OTHER SECURITIES THAT ARE RESTRICTED SECURITIES] THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A) (1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"); (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULES 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE GOVERNING THIS NOTE CONTAINS A B-1 PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. B-2 [FORM OF ASSIGNMENT FOR 144A SECURITIES AND OTHER SECURITIES THAT ARE RESTRICTED SECURITIES] I or we assign and transfer this Note to: ________________________________________________________________________________ (Insert assignee's social security or tax I.D. number) ________________________________________________________________________________ (Print or type name, address and zip code of assignee) and irrevocably appoint: Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. [Check One] [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. or [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been satisfied. Date: _________________ Your Signature: ____________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ___________________________________________________________ SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-3 TO BE COMPLETED BY TRANSFEROR IF (a) ABOVE IS CHECKED The transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act, and, accordingly, the transferor hereby further certifies that the beneficial interest or certificated Note is being transferred to a Person that the transferor reasonably believed and believes is purchasing the beneficial interest or certificated Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such transfer is in compliance with any applicable securities laws of any state of the United States. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or certificated Note will be subject to the restrictions on transfer enumerated on the Rule 144A Notes and/or the certificated Note and in the Indenture and the Securities Act. Dated: _____________________ ________________________________________________ NOTICE: To be executed by an executive officer B-4 EXHIBIT C [FORM OF LEGEND FOR REGULATION S NOTE] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (A) (1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"); (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULES 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND C-1 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE GOVERNING THIS NOTE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. C-2 [FORM OF ASSIGNMENT FOR REGULATION S NOTE] I or we assign and transfer this Note to: ________________________________________________________________________________ (Insert assignee's social security or tax I.D. number) ________________________________________________________________________________ (Print or type name, address and zip code of assignee) and irrevocably appoint: Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. [Check One] [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act provided by Regulation S thereunder. or [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been satisfied. Date: ______________ Your Signature: ________________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ___________________________________________________________ SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. C-3 TO BE COMPLETED BY TRANSFEROR IF (a) ABOVE IS CHECKED The transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the transferor hereby further certifies that (i) the transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the transferee was outside the United States or such transferor and any Person acting on its behalf reasonably believed and believes that the transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the restricted period under Regulation S, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an initial purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or certificated Note will be subject to the restrictions on transfer enumerated on the Regulation S Notes and/or the certificated Note and in the Indenture and the Securities Act. Dated: ______________________ ______________________________________________ NOTICE: To be executed by an executive officer C-4 EXHIBIT D [FORM OF LEGEND FOR GLOBAL NOTE] ANY GLOBAL NOTE AUTHENTICATED AND DELIVERED HEREUNDER SHALL BEAR A LEGEND (WHICH WOULD BE IN ADDITION TO ANY OTHER LEGENDS REQUIRED IN THE CASE OF A RESTRICTED NOTE) IN SUBSTANTIALLY THE FOLLOWING FORM: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. D-1 EXHIBIT E Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Wells Fargo Bank Minnesota, N.A. 213 Court Street Suite 703 Middletown, CT 06457 Attention: Corporate Trust Services Re: Quintiles Transnational Corp., a North Carolina corporation, as issuer (the "Company"), 10% Senior Subordinated Notes Due 2013 (the "Notes") Dear Sirs: In connection with our proposed sale of $ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a U.S. person or to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 904(a) of Regulation S; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. E-1 You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: _____________________________ E-2 EXHIBIT F SUBSIDIARY GUARANTEES Each of the undersigned (the "Subsidiary Guarantors") hereby jointly and severally unconditionally guarantees, to the extent set forth in the Indenture dated as of September 25, 2003 by and among Quintiles Transnational Corp., a North Carolina corporation, as issuer (the "Company"), the Subsidiary Guarantors, as guarantors, and Wells Fargo Bank Minnesota, N.A., as Trustee (as amended, restated or supplemented from time to time, the "Indenture"), and subject to the provisions of the Indenture, (a) the due and punctual payment of the principal of, and premium, if any, and interest on the Notes, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on overdue principal of, and premium and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms set forth in Article Ten of the Indenture, and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Subsidiary Guarantors to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article Ten of the Indenture, and reference is hereby made to the Indenture for the precise terms and limitations of this Subsidiary Guarantee. Each Holder of the Note to which this Subsidiary Guarantee is endorsed, by accepting such Note, agrees to and shall be bound by such provisions. Each Subsidiary Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by such Subsidiary Guarantor after giving effect to all of its other contingent and fixed liabilities without rendering such Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. [Signatures on Following Pages] F-1 IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this Subsidiary Guarantee to be signed by a duly authorized officer. BENEFIT HOLDING, INC. BENEFIT TRANSNATIONAL HOLDING CORP. BIOGLAN PHARMACEUTICALS COMPANY INNOVEX (NORTH AMERICA) INC. INNOVEX AMERICA HOLDING COMPANY INNOVEX MERGER CORP. MEDCOM, INC. PHARMABIO DEVELOPMENT, INC. PHARMA INFORMATICS, INC. PMSI DATABASE SERVICES, INC. PMSI FINANCE LIMITED PMSI HOLDINGS LIMITED PMSI SCOTT-LEVIN, INC. Q.E.D COMMUNICATIONS, INC. QFINANCE, INC. QUINTILES ASIA, INC. QUINTILES CLINICAL SUPPLIES AMERICAS, INC. QUINTILES FEDERATED SERVICES, INC. QUINTILES, INC. QUINTILES INFORMATICS, INC. QUINTILES LABORATORIES LIMITED QUINTILES LATIN AMERICA, INC. QUINTILES PACIFIC, INC. QUINTILES PHASE ONE SERVICES, INC. QUINTILES SCOTT-LEVIN, INC. QUINTILES TECHNOLOGIES, INC. SOURCE INFORMATICS EUROPEAN FINANCE, INC. SOURCE INFORMATICS EUROPEAN HOLDINGS, INC. THE LEWIN GROUP, INC. By: ______________________________________ John S. Russell President F-2 INNOVEX, L.P. INNOVEX AMERICAN HOLDING COMPANY, as General Partner By: ______________________________________ John S. Russell President MSM GROUP LIMITED PARTNERSHIP, as Limited Partner QUINTILES PACIFIC, INC., as General Partner By: ___________________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: ___________________________________ John S. Russell President F-3 INNOVEX NEVADA LIMITED PARTNERSHIP QUINTILES PACIFIC, INC., as General Partner By: ___________________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: ___________________________________ John S. Russell President F-4 INNOVEX SUPPORT SERVICES LIMITED PARTNERSHIP INNOVEX AMERICA HOLDING COMPANY, as General Partner By: ___________________________________ John S. Russell President INNOVEX NEVADA LIMITED PARTNERSHIP, as Limited Partner QUINTILES PACIFIC, INC. as General Partner By: _______________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: _______________________________ John S. Russell President F-5 MSM GROUP LIMITED PARTNERSHIP QUINTILES PACIFIC, INC., as General Partner By: ___________________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: ___________________________________ John S. Russell President F-6 QUINTILES TRANSFER, L.L.C. QUINTILES PACIFIC, INC., as sole Member By: ___________________________________ John S. Russell President F-7 SOURCE INFORMATICS EUROPEAN HOLDINGS, LLC SOURCE INFORMATICS EUROPEAN HOLDINGS, INC., as sole Member By: ___________________________________ John S. Russell President F-8 QUINTILES AUSTRIAN HOLDINGS, LLC Quintiles Transnational Corp. as sole Member By: ___________________________________ John S. Russell Executive Vice President F-9 EXHIBIT G [FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR] Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 200 Durham, North Carolina 27703-8411 Wells Fargo Bank Minnesota, N.A. 213 Court Street Suite 703 Middletown, CT 06457 Re: 10% SENIOR SUBORDINATED NOTES DUE 2013 Reference is hereby made to the Indenture, dated as of September 25, 2003 (the "Indenture"), between Quintiles Transnational Corp., as issuer (the "Company"), and Wells Fargo Bank Minnesota, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $450 million aggregate principal amount of: (b) [ ] a beneficial interest in a Global Note, or (c) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any G-1 accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, prior to the expiration of the holding period applicable to sales of the Senior Notes under Rule 144(k) of the Securities Act, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant to the provisions of Rule 144(k) under the Securities Act, (E) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to the Company) or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. G-2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. __________________________________________ [Insert Name of Transferor] By: ______________________________________ Name: Title: Dated: _____________, _____ G-3 EX-4.3 7 g85608exv4w3.txt REGISTRATION RIGHTS AGREEMENT DATED AS OF 9-25-03 QUINTILES TRANSNATIONAL CORP. $450,000,000 10% SENIOR SUBORDINATED NOTES DUE 2013 REGISTRATION RIGHTS AGREEMENT New York, New York September 25, 2003 Citigroup Global Markets Inc. As Representatives of the Initial Purchasers named in Schedule I hereto c/o Citigroup Global Markets Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Quintiles Transnational Corp., a corporation organized under the laws of the State of North Carolina ("Quintiles"), proposes, among other things, to issue and sell to the several initial purchasers named in Schedule I hereto (the "Initial Purchasers"), for whom you are acting as representatives (the "Representatives"), $450,000,000 aggregate principal amount of its 10% Senior Subordinated Notes due 2013 (the "Notes") upon the terms set forth in a purchase agreement dated September 12, 2003 (the "Purchase Agreement") relating to the initial placement of the Notes (the "Initial Placement"). The Notes are being issued in connection with the consummation of the merger of Pharma Services Acquisition Corp., a North Carolina corporation ("Acquisition Corp"), with and into Quintiles, as described in the Final Memorandum (as defined herein). The Notes will be guaranteed (the "Guarantees") on an unsecured senior subordinated basis by all of the subsidiaries of Quintiles that are organized in the United States and, as required under the Indenture (as defined herein), any future domestic subsidiaries and any subsidiary that guarantees Quintiles' or any of its domestic subsidiaries' debt (collectively, the "Subsidiary Guarantors"). References herein to the "Securities" refer to the Notes and the Guarantees collectively. To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, the Issuers (as defined herein) hereby agree with you for your benefit and the benefit of the registered holders from time to time of Securities and Exchange Securities (as defined herein) (including the Initial Purchasers) (each a "Holder" and, together, the "Holders" for as long as such Person holds Securities), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following defined terms shall have the following respective meanings: -2- "Act" shall mean the Securities Act of 1933, as amended. "Affiliate" of, or Person "affiliated" with, any specified Person shall mean any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. For purposes of this definition, "control" of a Person shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled by" and "under common control with" shall have meanings correlative to the foregoing. "Agreement" shall have the meaning set forth in the preamble hereto. "Banc One" means Banc One Capital Markets, Inc., an Initial Purchaser named in Schedule I hereto. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Conduct Rules" shall have the meaning set forth in Section 4(t) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Offer Registration Period" shall mean the up to 90-day period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Issuers on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchange Securities" shall mean debt securities of the Issuers identical in all material respects to the Securities (except that the additional interest provisions, the transfer -3- restrictions and the restrictive legends shall be modified or eliminated, as appropriate) and to be issued under the Indenture. "Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from any Issuer or any Affiliate of any Issuer) for Exchange Securities. "Final Memorandum" shall have the meaning set forth in the Purchase Agreement. "Guarantees" shall have the meaning set forth in the preamble hereto. "Holder(s)" shall have the meaning set forth in the preamble hereto. "Indenture" shall mean the Indenture relating to the Securities, to be dated as of the original issuance of the Securities, among the Issuers and Wells Fargo Bank Minnesota, N.A., as trustee, as amended, amended and restated or supplemented from time to time in accordance with the terms thereof. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Initial Purchasers" shall have the meaning set forth in the preamble hereto. "Inspector" shall have the meaning set forth in Section 4(q)(ii). "Issuers" shall mean Quintiles and the Subsidiary Guarantors. "Losses" shall have the meaning set forth in Section 6(d) hereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities and Exchange Securities, as the case may be, registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "Notes" shall have the meaning set forth in the preamble hereto. "Person" shall mean an individual, trustee, corporation, partnership, limited liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. -4- "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the Exchange Securities covered by such Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Quintiles" shall have the meaning set forth in the preamble hereto. "Registered Exchange Offer" shall mean the proposed offer of the Issuers to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer a like aggregate principal amount of Exchange Securities in exchange for the Securities. "Registration Default" shall have the meaning set forth in Section 3(c). "Registration Default Period" shall have the meaning set forth in Section 3(c). "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the Exchange Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Representatives" shall have the meaning set forth in the preamble hereto. "Securities" shall mean the Notes and the Guarantees. "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" shall have the meaning set forth in Section 3(b)(ii) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Issuers prepared and filed with the Commission pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or Exchange Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any successor or similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, -5- including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Subsidiary Guarantors" shall have the meaning set forth in the preamble hereto. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "underwriter" shall mean any Person deemed an "underwriter," under the Act, of Securities or Exchange Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer. (a) To the extent not prohibited by any applicable law or any applicable interpretation or any applicable policy of the staff of the Commission, (i) the Issuers shall use their reasonable best efforts to prepare and, not later than 180 days following the Closing Date (or if such 180th day is not a Business Day, the next succeeding Business Day), file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer and (ii) the Issuers shall use their respective reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Act not later than 270 days following the Closing Date (or if such 270th day is not a Business Day, the next succeeding Business Day). (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder is not an Affiliate of any Issuer, acquires the Exchange Securities in the ordinary course of such Holder's business, is not engaged in and does not intend to engage in and has no arrangements or understandings with any Person to participate in the distribution of the Exchange Securities, is not a broker-dealer tendering Securities directly acquired from any Issuer for its own account and is not prohibited by any law, interpretation or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Act and under state securities or blue sky laws. (c) In connection with the Registered Exchange Offer, the Issuers shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; -6- (ii) keep the Registered Exchange Offer open for not less than 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (iii) if the Issuers receive notice from an Exchanging Dealer that such Exchanging Dealer holds Securities acquired for the account of such Exchanging Dealer as a result of market making or other trading activities, use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective under the Act, supplemented and amended as required under the Act to ensure that it is available for sales of Exchange Securities by Exchanging Dealers during the Exchange Offer Registration Period; (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee or an Affiliate of the Trustee; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last Business Day on which the Registered Exchange Offer is open by sending to the entity specified in the Prospectus, a facsimile or letter setting forth the name of such Holder, the principal amount of the Securities delivered for exchange and a statement that such Holder is withdrawing such Holder's election to have such Securities exchanged; (vi) prior to effectiveness of the Exchange Offer Registration Statement, if requested by the Commission, provide a supplemental letter to the Commission (A) stating that the Issuers are conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988) and Morgan Stanley and Co. Incorporated (pub. avail. June 5, 1991); and (B) including a representation that the Issuers have not entered into any arrangement or understanding with any Person to distribute the Exchange Securities to be received in the Registered Exchange Offer and that, to the best of the Issuers' information and belief, each Holder participating in the Registered Exchange Offer is acquiring the Exchange Securities in the ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Securities; and (vii) comply in all material respects with all applicable laws relating to the Registered Exchange Offer. (d) Promptly after the close of the Registered Exchange Offer, the Issuers shall: -7- (i) accept for exchange all Securities validly tendered and not validly withdrawn pursuant to the Registered Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and letter of transmittal, which shall be an exhibit thereto; (ii) deliver to the Trustee for cancellation in accordance with Section 4(r) hereof all Securities so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of Exchange Securities equal to the principal amount of the Securities of such Holder so accepted for exchange; provided that in the case of any Securities held in global form by a depository, authentication and delivery to such depository of one or more replacement Securities in global form in an equivalent amount thereto for the account of such Holders in accordance with the Indenture shall satisfy such authentication and delivery requirement. (e) Each Holder, by tendering Securities for exchange for Exchange Securities, acknowledges and agrees that any Broker-Dealer and any such Holder using the Registered Exchange Offer to participate in a distribution of the Exchange Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Morgan Stanley and Co. Incorporated (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation (pub. avail. May 13, 1988), as interpreted in Shearman & Sterling (pub. avail. July 2, 1993) and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction and must be covered by an effective registration statement containing the selling security holder information required by Items 507 and 508 of Regulation S-K, as applicable, under the Act if the resales are of Exchange Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from any Issuer or one of its Affiliates. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Issuers in writing (which may be contained in the letter of transmittal contemplated by the Registered Exchange Offer) that, at the time of the consummation of the Registered Exchange Offer: (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business; (ii) such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Act; and (iii) such Holder is not an Affiliate of any Issuer. -8- (f) If any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the written request of such Initial Purchaser, the Issuers shall issue and deliver to such Initial Purchaser or the Person purchasing Exchange Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, or Exchange Securities, as the case may be, a like principal amount of the Securities (the "Private Exchange Securities") of Quintiles that are identical in all material respects to the Exchange Securities except for the placement of a restrictive legal legend on such Private Exchange Securities. The Issuers shall use their respective reasonable best efforts to cause the CUSIP Service Bureau to issue the same CUSIP number for such Private Exchange Securities as for Exchange Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. (a) If (i) Banc One notifies Quintiles in writing that it reasonably believes it or any of its affiliates is required by applicable law or the Commission's policy to deliver a Prospectus in connection with market-making resales of the Securities; (ii) due to any change in law, applicable interpretations thereof or changes in policy by the Commission's staff, the Issuers determine upon advice of their outside counsel that they are not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; (iii) for any other reason the Exchange Offer Registration Statement is not declared effective within 270 days, or the Registered Exchange Offer is not consummated within 300 days, after the Issue Date; or (iv) prior to the 20th day following consummation of the Registered Exchange Offer the Company receives written notice that (A) any Initial Purchaser so requests with respect to Securities (or Private Exchange Securities) that are not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (B) any Holder (other than an Initial Purchaser or Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer; or (C) in the case of any Initial Purchaser that participates in the Registered Exchange Offer or acquires Private Exchange Securities pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely tradeable Exchange Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Items 507 and 508 of Regulation S-K, as applicable, under the Act in connection with sales of Exchange Securities acquired in exchange for such Securities shall result in such Exchange Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of Exchange Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such Exchange Securities being not "freely tradeable"), the Issuers shall effect a Shelf Registration Statement in accordance with Section 3(b) hereof. For all purposes of this Agreement, the obligation to have a Shelf Registration Statement declared effective under Section 3(a)(iv) shall be deemed to arise as set forth in Section 3(b)(i). The obligation to file a Shelf Registration Statement -9- under Section 3(a)(iv) shall be deemed to arise on the later of the 180th day after the Issue Date or the day the Company receives notice relating to a Section 3(a)(iv) Shelf Registration Statement. (b) (i) The Issuers shall as promptly as reasonably practicable (but in no event more than 30 days after so required or requested pursuant to Section 3(a)(i), (ii) or (iii) and no later than the later of the 60th day after so required pursuant to Section 3(a)(iv) or the 180th day after the Issue Date), file with the Commission, and thereafter shall use their respective reasonable best efforts to cause to be declared effective under the Act (within 180 days after so required or requested pursuant to Section 3(a)(i), (ii) or (iii) or within 60 days of the filing date of a Shelf Registration Statement required or requested pursuant to Section 3(a)(iv)), a Shelf Registration Statement relating to the offer and sale of the Securities or the Exchange Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by a majority of such Holders and set forth in such Shelf Registration Statement; provided, however, that nothing in this Section 3(b) shall require the filing of a Shelf Registration Statement prior to the deadline for filing the Exchange Offer Registration Statement set forth in Section 2(a); provided, further, that a Shelf Registration Statement requested pursuant to Section 3(a)(i) shall be declared effective no later than the first business day following the consummation of the Registered Exchange Offer; provided, further, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided, further, that with respect to Exchange Securities or Private Exchange Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Issuers may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Items 507 and 508 of Regulation S-K, as applicable, in satisfaction of their obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Issuers shall use their respective reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the original issuance date of the Securities or such shorter period that will terminate when all the Securities or Exchange Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding (in any such case, such period being called the "Shelf Registration Period"); provided, however, upon notice from Banc One pursuant to Section 3(a)(i) hereof, on or prior to the date specified for such filings in this Agreement such Shelf Registration Period shall be extended for the purpose of covering resales of the Securities, Private Exchange Securities or Exchange Securities by Banc One until such time as Banc One shall -10- have notified Quintiles that neither it nor any of its Affiliates is required by applicable law or the Commission's policy to deliver a Prospectus in connection with any resale of Securities, Exchange Securities or Private Exchange Securities. The Company shall be deemed not to have used its reasonable best efforts to keep a Shelf Registration Statement effective during the Shelf Registration Period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to use such Shelf Registration Statement to offer and sell such Securities covered by such Shelf Registration Statement at any time during the Shelf Registration Period, unless such action is (x) required by the Commission, applicable law or otherwise undertaken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, and (y) permitted pursuant to Section 4(k)(ii) hereof. (c) In the event that: (i) within 180 days after the Issue Date, neither the Exchange Offer Registration Statement nor, if required to be filed pursuant to Section 3(a)(i), (ii) or (iii) above, any Shelf Registration Statement has been filed with the Commission; (ii) within 30 days after a Shelf Registration Statement is required to be filed pursuant to Section 3(a)(i), (ii) or (iii), so long as such 30th day is a day after the 180th day following the Issue Date, the Shelf Registration Statement has not been filed with Commission; (iii) within 270 days after the Issue Date, the Exchange Offer Registration Statement has not been declared effective as required by Section 2(a); (iv) within 300 days after the Issue Date, neither the Exchange Offer has been consummated nor, if required to be filed pursuant to Section 3(a)(i), (ii) or (iii) above, the Shelf Registration Statement has been declared effective; (v) within 60 days of the day on which the obligation to file a Shelf Registration Statement arises pursuant solely to Section 3(a)(iv) above, the Issuers fail to file such Shelf Registration Statement with the Commission; (vi) within 60 days of the day on which the obligation to have a Shelf Registration Statement declared effective arises pursuant solely to Section 3(a)(iv) above, such Shelf Registration Statement has not been declared effective; or (vii) after either the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or fails to be usable in connection with resales of Securities or Exchange Securities in accordance with and during the periods specified in this Agreement, other than as permitted pursuant to Section 3(b)(ii) and Section 4(k)(ii). -11- (each such event a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, as liquidated damages for such Registration Default, additional interest will accrue on the aggregate principal amount solely those Securities and Exchange Securities subject to such Registration Default (in addition to the stated interest on the Securities and Exchange Securities) from and including the date on which any such Registration Default shall occur to, but excluding the date that is the earlier of (1) the date on which all Registration Defaults applicable to the subject Securities and Exchange Securities have been cured or (2) the date on which all the Securities and Exchange Securities otherwise become freely transferable by Holders other than Affiliates of the Issuers without further registration under the Act. Additional interest will accrue at an initial rate of 0.25% per annum, which rate shall increase by 0.25% per annum for each subsequent 90-day period during which such Registration Default continues up to a maximum of 1.00% per annum. If, after the cure of all Registration Defaults then in effect, there is a subsequent Registration Default, the rate of additional interest for such subsequent Registration Default shall initially be 0.25% regardless of the rate in effect with respect to any prior Registration Default at the time of cure of such Registration Default. Notwithstanding the foregoing, the amount of additional interest payable shall not increase because more than one Registration Default has occurred and is pending. 4. Additional Registration Procedures. In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply: (a) the Issuers shall: (i) furnish to each of you or your counsel, not less than three Business Days prior to the filing thereof with the Commission, a copy of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, and each amendment thereto and each amendment or supplement, if any, to the Prospectus included therein (and upon written request, all documents incorporated by reference therein after the initial filing) and shall use their reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably propose within a reasonable time prior to such filing; (ii) in the case of an Exchange Offer Registration Statement, to the extent permitted by the Act, include the information in substantially the form set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in substantially the form set forth in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in substantially the form set forth in Annex C hereto in the underwriting or plan of distribution section of the Prospectus -12- contained in the Exchange Offer Registration Statement, and in substantially the form set forth in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; and (iii) in the case of a Shelf Registration Statement, subject to clause (n) below, include the names of the Holders that propose to sell Securities or Exchange Securities pursuant to the Shelf Registration Statement as selling security holders and the applicable information required by Items 507 and 508 of Regulation S-K as provided by the Holders. (b) The Company shall ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act; and (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Issuers shall advise you, the Holders of Securities or Exchange Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to any Issuer a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall confirm such advice in writing (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Issuers shall have remedied the basis for such suspension): (i) when a Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; -13- (iv) of the receipt by any Issuer of any notification with respect to the suspension of the qualification of the Securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading; provided that such notice need not identify the reasons for such event that requires such change in the Registration Statement. (d) The Issuers shall use their respective reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the Securities therein for sale in any jurisdiction at the earliest possible time. (e) The Issuers shall furnish to each Holder of Securities or Exchange Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including, upon written request, all material incorporated therein by reference and exhibits thereto (including exhibits incorporated by reference therein). (f) The Issuers shall, during the Shelf Registration Period, deliver to each Holder of Securities or Exchange Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Issuers consent to the use (in all cases in accordance with applicable law and subject to compliance with the terms of this Agreement) of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Issuers shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including, upon written request, all material incorporated by reference therein, and all exhibits thereto (including exhibits incorporated by reference therein). (h) The Issuers shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other Person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus -14- included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such Person may reasonably request. The Issuers consent to the use (in all cases in accordance with applicable law and subject to compliance with the terms of this Agreement) of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other Person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement. (i) Prior to the Registered Exchange Offer or any other offering of Securities or Exchange Securities pursuant to any Registration Statement, the Issuers shall arrange, if necessary, for the qualification of the Securities or the Exchange Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and will maintain such qualification in effect so long as required; provided that in no event shall any Issuer be obligated (i) to qualify to do business in any jurisdiction where it is not then so qualified or (ii) to take any action that would subject it to taxation or service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, in any such jurisdiction where it is not then so subject. (j) The Issuers shall cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Exchange Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request. (k) (i) Upon the occurrence of any event contemplated by subsections (c)(ii) through (v) above, the Issuers shall promptly prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to Initial Purchasers, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 hereof and the Shelf Registration Statement provided for in Section 3(b) hereof shall each be extended by the number of days from and including the date of the giving of a notice of suspension pursuant to Section 4(c) hereof to and including the date when the Initial Purchasers, the Holders and any known Exchanging Dealer shall have -15- received such amended or supplemented Prospectus pursuant to this Section 4; or (ii) Upon the occurrence or existence of any pending corporate development or any other material event that, in the reasonable judgment of Quintiles, makes it appropriate to suspend the availability of a Shelf Registration Statement and the related Prospectus, Quintiles shall give notice (without notice of the nature or details of such events) to the Holders that the availability of the Shelf Registration is suspended and, upon actual receipt of any such notice, each Holder agrees not to sell any registrable Securities pursuant to the Shelf Registration until such Holder's receipt of copies of the supplemented or amended Prospectus provided for in Section 4(h) hereof, or until it is advised in writing by Quintiles that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The period during which the availability of the Shelf Registration and any Prospectus is suspended shall not exceed 45 days in any three-month period or 90 days in any twelve-month period. Notwithstanding this Section 4(k), in no event shall the Issuers be required to maintain the effectiveness of any Exchange Offer Registration Statement or Shelf Registration Statement beyond the second anniversary of the original Issue Date of the Securities, except as set forth in Section 3(b)(ii). As soon as practicable following receipt of notice from the Issuers in accordance with Sections 4(c) or (k) hereof, as the case maybe, each Holder and Exchanging Dealer agrees to suspend use of the Prospectus until such Holder and Exchanging Dealer receives copies of the amended or supplemented Prospectus or until it receives written notice from the Issuers that the use of the applicable Prospectus may be resumed. (l) Not later than the effective date of any Registration Statement, the Issuers shall provide a CUSIP number for the Securities or the Exchange Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or Exchange Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Issuers shall comply with all applicable rules and regulations of the Commission and make generally available to their security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Issuers shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner. -16- (o) The Issuers may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Issuers such information regarding the Holder and the distribution of such Securities as the Issuers may from time to time reasonably require for inclusion in such Registration Statement. The Issuers may exclude from such Shelf Registration Statement the Securities or Exchange Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request and the failure to include such Securities or Exchange Securities of any such Holder shall not be deemed to be a default hereunder. Each Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder, regarding such Holder, not materially misleading. (p) In the case of any Shelf Registration Statement, the Issuers shall enter into such and take all other appropriate actions (including, if requested by Holders representing 10% of the aggregate principal amount of Securities covered by such Shelf Registration Statement, an underwriting agreement in customary form) in order to expedite or facilitate the registration or the disposition of the Securities or Exchange Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any, with respect to all parties to be indemnified pursuant to Section 6). (q) In the case of any Shelf Registration Statement, the Issuers shall: (i) upon written request and reasonable advance notice, make reasonably available for inspection by the Holders of Securities or Exchange Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of each Issuer during normal business hours at the offices where such information is typically kept; (ii) upon written request and reasonable advance notice, cause the officers, directors and employees of each Issuer to supply all relevant information reasonably requested by the Holders or any such underwriter or attorney in connection with any such Shelf Registration Statement (each an "Inspector") as is customary for similar due diligence examinations during normal business hours at the offices where such information is typically kept; provided, however, that each Inspector shall agree in writing that any confidential information referred to in Section 4(q)(i) above or this Section 4(q)(ii) shall be kept confidential by such Inspector, unless such disclosure is -17- made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party (other than an Affiliate of such Inspector) without an accompanying obligation of confidentiality; provided, further, that prior written notice shall be provided as soon as practicable to the applicable Issuer of the potential disclosure of any information in connection with a court proceeding or required by law to permit such Issuer to obtain a protective order or take such other action to prevent disclosure of such information; (iii) make such representations and warranties to the Holders of Securities or Exchange Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement as may be reasonably requested; (iv) obtain opinions of counsel to the Issuers (which may be the Issuers' internal counsel) and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder (if then customary in underwritten offerings) and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of Quintiles (and, if necessary, any other independent certified public accountants of any Issuer or any subsidiary of any Issuer or of any business acquired by any Issuer for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed to the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(l) and with any customary conditions contained in the underwriting agreement or other customary agreement entered into by the Issuers. The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(q) shall be performed at each closing under any underwriting or similar agreement as and to the extent required thereunder. -18- (r) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to Quintiles (or to such other Person as directed by Quintiles) in exchange for the Exchange Securities, Quintiles shall mark, or caused to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the Exchange Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (s) The Issuers will use their respective reasonable best efforts if the Securities have been rated prior to the initial sale of such Securities pursuant to the Purchase Agreement, to confirm such ratings will apply to the Securities or the Exchange Securities, as the case may be, covered by an Exchange Offer Registration Statement. (t) In the event that any Broker-Dealer shall underwrite any Securities or Exchange Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules of the National Association of Securities Dealers, Inc. (the "Conduct Rules")) thereof, whether as a Holder or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Issuers shall assist such Broker-Dealer in complying with the requirements of such Conduct Rules, including, without limitation, by: (i) if such Conduct Rules shall so require, engaging a "qualified independent underwriter" (as defined in such Rules) to participate in the preparation of the Registration Statement, to exercise usual standards of due diligence with respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities or Exchange Securities; (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and (iii) providing such information to such Broker-Dealer as may be required in order for such Broker-Dealer to comply with the requirements of such Conduct Rules. (u) The Issuers shall cooperate with the Holders participating in the disposition of the Securities and one counsel acting on behalf of all such Holders in connection with the filings, if any, required to be made with the NASD. (v) The Issuers shall use their respective reasonable best efforts to take all other steps necessary to effect the registration of the Securities or the Exchange Securities, as the case may be, covered by a Registration Statement. -19- 5. Registration Expenses. The Issuers shall bear all expenses incurred in connection with the performance of their obligations under Sections 2, 3 and 4 hereof, and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of such one firm or counsel acting in connection therewith. Each Holder shall pay all commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Securities. 6. Indemnification and Contribution. (a) The Issuers jointly and severally agree to indemnify and hold harmless each Holder of Securities or Exchange Securities, as the case may be, covered by any Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each Person who controls any such Holder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal, state or foreign statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement as originally filed or in any amendment thereof, or in any preliminary prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and jointly and severally agree to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Issuers will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to any Issuer by or on behalf of any such Holder relating to such Holder specifically for inclusion therein. Each Issuer also jointly and severally agrees to indemnify or contribute as provided in Section 6(d) (below) to Losses of each underwriter of Securities or Exchange Securities, as the case may be, registered under a Shelf Registration Statement, its directors, officers, employees or agents and each Person who controls such underwriter on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. -20- (b) Each Holder of Securities covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees to indemnify and hold harmless each of the Issuers, each of their respective directors, officers or agents and each Person who controls any Issuer within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Issuers to each such Holder, but only in reliance upon and conformity with written information relating to such Holder furnished to the Issuers by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ one firm of separate counsel (in addition to one local counsel firm), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with an actual conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded, based upon the advice of counsel, that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general circumstances, be liable for the fees and -21- expenses of only one firm of attorneys (in addition to one local counsel) at any time for all such indemnified parties. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and (ii) does not include a statement as to, or an admission of, fault or culpability or failure to act by or on behalf of any indemnified party. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent Holder of any Security or Exchange Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security or, in the case of an Exchange Security, applicable to the Security that was exchangeable into such Exchange Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. The relative benefits received by the Issuers shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum. The relative benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or Exchange Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among -22- other things, whether any alleged untrue statement of a material fact or omission to state a material fact relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each Person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each Person who controls any Issuer within the meaning of either the Act or the Exchange Act, each officer of any Issuer who shall have signed the Registration Statement and each director of any Issuer shall have the same rights to contribution as the Issuers, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 6 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Issuers or any of the officers, directors or controlling Persons referred to in this Section 6, and will survive the sale by a Holder of Securities covered by a Registration Statement. 7. Underwritten Registrations. (a) If any of the Securities or Exchange Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriter(s) shall be selected by the Majority Holders and shall be reasonably satisfactory to Quintiles. (b) No Person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such Person (i) agrees to sell such Person's Securities or Exchange Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements; and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. No Inconsistent Agreements. No Issuer has, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 9. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or -23- supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (i) the Issuers and (ii) the Majority Holders; provided that, with respect to any matter that directly or indirectly affects any rights of any Initial Purchaser hereunder, the Issuers shall obtain the written consent of each of the Initial Purchasers against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or Exchange Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or Exchange Securities, as the case may be, being sold rather than registered under such Registration Statement. 10. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (a) if to a Holder, at the most current address given by such Holder to the Issuers in accordance with the provisions of this Section 10, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Citigroup Global Markets Inc.; (b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (c) if to the Issuers, initially at their address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given at the time delivered personally, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day, if timely delivered to a nationally recognized air courier guaranteeing overnight delivery. The Initial Purchasers or the Issuers by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 11. Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including, without the need for an express assignment or any consent, by the Issuers and subsequent Holders of Securities and Exchange Securities. The Issuers hereby agree to extend the benefits of this Agreement to any Holder of Securities or Exchange Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto; provided, -24- however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Securities or Exchange Securities in violation of the terms of the Indenture or Purchase Agreement. 12. Counterparts. This Agreement may be in signed counterparts, each of which shall be an original and all of which together shall constitute one and the same agreement. 13. Headings. The headings used herein are for convenience only and shall not affect the construction hereof. 14. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 15. Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted with respect to the Securities and Exchange Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 16. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 17. Securities Held by the Issuers, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or Exchange Securities is required hereunder, Securities or Exchange Securities, as applicable, held by any Issuer or its Affiliates (other than subsequent Holders of Securities or Exchange Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or Exchange Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 18. Submission to Jurisdiction. By the execution and delivery of this Agreement, each Issuer submits to the non-exclusive jurisdiction of any federal or state court in the State of New York in any suit or proceeding arising out of or relating to this Agreement or brought under federal or state securities laws. By receiving the rights and benefits under this Agreement, each Holder also submits to the non-exclusive jurisdiction of any federal or -25- state court in the State of New York in any suit or proceeding arising out of or relating to this Agreement or brought under federal or state securities laws. [Signature Page Follows] -26- If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among each Issuer and the several Initial Purchasers. Very truly yours, QUINTILES TRANSNATIONAL CORP. By: _________________________ John S. Russell Executive Vice President -27- BENEFIT HOLDING, INC. BENEFIT TRANSNATIONAL HOLDING CORP. BIOGLAN PHARMACEUTICALS COMPANY INNOVEX (NORTH AMERICA) INC. INNOVEX AMERICA HOLDING COMPANY INNOVEX MERGER CORP. MEDCOM, INC. PHARMABIO DEVELOPMENT, INC. PHARMA INFORMATICS, INC. PMSI DATABASE SERVICES, INC. PMSI FINANCE LIMITED PMSI HOLDINGS LIMITED PMSI SCOTT-LEVIN, INC. Q.E.D COMMUNICATIONS, INC. QFINANCE, INC. QUINTILES ASIA, INC. QUINTILES CLINICAL SUPPLIES AMERICAS, INC. QUINTILES FEDERATED SERVICES, INC. QUINTILES, INC. QUINTILES INFORMATICS, INC. QUINTILES LABORATORIES LIMITED QUINTILES LATIN AMERICA, INC. QUINTILES PACIFIC, INC. QUINTILES PHASE ONE SERVICES, INC. QUINTILES SCOTT-LEVIN, INC. QUINTILES TECHNOLOGIES, INC. SOURCE INFORMATICS EUROPEAN FINANCE, INC. SOURCE INFORMATICS EUROPEAN HOLDINGS, INC. THE LEWIN GROUP, INC. By:_________________________________________ John S. Russell President -28- INNOVEX, L.P. INNOVEX AMERICAN HOLDING COMPANY, as General Partner By: _______________________________ John S. Russell President MSM GROUP LIMITED PARTNERSHIP, as Limited Partner QUINTILES PACIFIC, INC., as General Partner By: _______________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: _______________________________ John S. Russell President -29- INNOVEX NEVADA LIMITED PARTNERSHIP QUINTILES PACIFIC, INC., as General Partner By: _______________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: _______________________________ John S. Russell President -30- INNOVEX SUPPORT SERVICES LIMITED PARTNERSHIP INNOVEX AMERICA HOLDING COMPANY, as General Partner By: _______________________________ John S. Russell President INNOVEX NEVADA LIMITED PARTNERSHIP, as Limited Partner QUINTILES PACIFIC, INC. as General Partner By: _______________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: _______________________________ John S. Russell President -31- MSM GROUP LIMITED PARTNERSHIP QUINTILES PACIFIC, INC., as General Partner By: _______________________________ John S. Russell President INNOVEX (NORTH AMERICA) INC., as Limited Partner By: _______________________________ John S. Russell President -32- QUINTILES TRANSFER, L.L.C. QUINTILES PACIFIC, INC., as sole Member By: _______________________________ John S. Russell President -33- SOURCE INFORMATICS EUROPEAN HOLDINGS, LLC SOURCE INFORMATICS EUROPEAN HOLDINGS, INC., as sole Member By: _______________________________ John S. Russell President -34- QUINTILES AUSTRIAN HOLDINGS, LLC Quintiles Transnational Corp. as sole Member By: _______________________________ John S. Russell Executive Vice President -35- The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Citigroup Global Markets Inc. By: ________________________________ Name: Title: For itself and the other several Initial Purchasers named in Schedule I to the foregoing Agreement. SCHEDULE I Initial Purchasers: Citigroup Global Markets Inc. ABN AMRO Incorporated Banc One Capital Markets, Inc. Sch. I-1 ANNEX A Each Broker-Dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Issuers have agreed that, starting on the expiration date and ending on the close of business 90 days after the expiration date, they will make this Prospectus available to any Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." A-1 ANNEX B Each Broker-Dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." B-1 ANNEX C Plan of Distribution Each Broker-Dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Issuers have agreed that, starting on the expiration date and ending on the close of business 180 days after the expiration date, they will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until ___________, 200__, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. The Issuers will not receive any proceeds from any sale of Exchange Securities by Broker-Dealers. Exchange Securities received by Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Broker-Dealer and/or the purchasers of any such Exchange Securities. Any Broker-Dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Act and any profit of any such resale of Exchange Securities and any commissions or concessions received by any such Persons may be deemed to be underwriting compensation under the Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. For a period of 90 days after the Expiration Date, the Issuers will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Broker-Dealer that requests such documents in the letter of transmittal. The Issuers have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holder of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Act. C-1 ANNEX D [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: _________________________________________ Address: _________________________________________ _________________________________________ If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the Exchange Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities and it has no arrangements or understandings with any Person to participate in a distribution of the Exchange Securities. If the undersigned is a Broker-Dealer that will receive Exchange Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for Exchange Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Act. D-1 EX-10.1 8 g85608exv10w1.txt CREDIT AGREEMENT DATED SEPTEMBER 25, 2003 EXECUTION COPY CREDIT AGREEMENT Dated September 25, 2003 among QUINTILES TRANSNATIONAL CORP., as the Borrower, PHARMA SERVICES HOLDING, INC. and PHARMA SERVICES INTERMEDIATE HOLDING CORP., as Parent Guarantors, THE LENDERS REFERRED TO HEREIN -------------------- CITIGROUP GLOBAL MARKETS INC., as Sole Lead Arranger and Sole Bookrunner and CITICORP NORTH AMERICA, INC., as Administrative Agent, -------------------- ABN AMRO BANK N. V. and BANC ONE MEZZANINE CORPORATION as Co-Syndication Agents and RESIDENTIAL FUNDING CORPORATION, (DBA GMAC--RFC HEALTH CAPITAL) as Documentation Agent -------------------- TABLE OF CONTENTS

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-iv- EXHIBIT A Form of Administrative Questionnaire EXHIBIT B Form of Borrowing Request EXHIBIT C Form of Assignment and Acceptance EXHIBIT D Form of Collateral Sharing Agreement EXHIBIT E Form of Compliance Certificate EXHIBIT F-1 Form of Term B Note EXHIBIT F-2 Form of Revolving Note EXHIBIT G Form of Closing Certificate EXHIBIT H Form of Subsidiary Guarantee Agreement EXHIBIT I Form of Pledge Agreement EXHIBIT J Form of Security Agreement EXHIBIT K-1 Form of Opinion of Morgan, Lewis & Bockius LLP EXHIBIT K-2 Form of Opinion of Smith, Anderson, Blount, Mitchell & Jernigan, L.L.P. EXHIBIT L Form of U.S. Local Counsel Opinion EXHIBIT M Form of Solvency Certificate EXHIBIT N Form of Mortgage EXHIBIT O Form of Officers' Certificate EXHIBIT P Form of Landlord Subordination SCHEDULE 2.01 Lenders and Commitments SCHEDULE 3.02 Non-Contravention SCHEDULE 3.03 Government Approvals SCHEDULE 3.09 Material Adverse Effect SCHEDULE 3.10 Litigation SCHEDULE 3.13(b) Leased, Subleased and Owned Real Property SCHEDULE 3.16 Environmental Warranties SCHEDULE 3.19 Insurance SCHEDULE 3.24(d) Mortgage Filing Offices SCHEDULE 4.01(c) Local Counsel SCHEDULE 4.01(w) Non-U.S. Subsidiaries SCHEDULE 4.01(y)(A) Mortgaged Properties SCHEDULE 4.01(y)(C) Title Insurance Amounts SCHEDULE 6.01(a)(iii) Existing Indebtedness SCHEDULE 6.01(a)(xx) Employment Agreements SCHEDULE 6.02 Existing Liens SCHEDULE 6.04 Existing Investments SCHEDULE 6.08 Transactions with Affiliates SCHEDULE 6.09 Existing Restrictions -v- CREDIT AGREEMENT (this "Agreement") dated September 25, 2003, among QUINTILES TRANSNATIONAL CORP., a North Carolina corporation (the "Borrower"); PHARMA SERVICES HOLDING, INC., a Delaware corporation (the "Parent"); PHARMA SERVICES INTERMEDIATE HOLDING CORP., a Delaware corporation (the "Intermediate Parent"); the financial institutions listed on Schedule 2.01, as such Schedule may from time to time be supplemented and amended (the "Lenders"); CITICORP NORTH AMERICA, INC., as administrative agent (in such capacity, the "Administrative Agent") for the Lenders; RESIDENTIAL FUNDING CORPORATION (DBA GMAC -- RFC HEALTH CAPITAL) ("RFC"), as documentation agent (in such capacity, the "Documentation Agent"); and CITIGROUP GLOBAL MARKETS INC. ("CGMI"), as sole lead arranger and sole bookrunner (the "Lead Arranger") and ABN AMRO BANK N.V. ("ABN"), as co-syndication agent and BANC ONE MEZZANINE CORPORATION ("Banc One"), as co-syndication agent (and together with ABN, the "Syndication Agents"). The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" means a Borrowing comprised of ABR Loans. "ABR Loan" means any Loan bearing interest at the Alternate Base Rate in accordance with the provisions of Article II. "Acquisition Consideration" shall mean the purchase consideration for any Permitted Acquisition and all other payments by the Borrower or any of its Subsidiaries in exchange for, or as part of, or in connection with any Permitted Acquisition, whether paid in cash or by exchange of Equity Interests or of assets or otherwise and whether payable at or prior to the consummation of such Permitted Acquisition or deferred for payment at any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments representing the purchase price and any assumptions of Indebtedness, "earn-outs" and other agreements to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any person or business (such "earn-outs" and other payments, "Contingent Payment Agreements"); provided that (i) ordinary course indemnification obligations shall be excluded from Acquisition Consideration, (ii) amounts paid to officers or employees of the Borrower or any of its Subsidiaries (after giving effect to such Permitted Acquisition) and accounted for as operating expenses under GAAP relating to compensation shall be excluded from Acquisition Consideration, (iii) amounts in excess of the discounted present value of payments reasonably anticipated to be made under Contingent Payment Agreements, the calculation of which is set forth in an officer's certificate signed by the chief financial officer of the Borrower and delivered to the Administrative Agent on or prior to the date of such Permitted Acquisition, shall be excluded from Acquisition Consideration; provided that such excluded payments under Contingent Payment Agreements shall be included in Acquisition Consideration if actually paid, but shall not create or result in a Default under Section 6.04(xii) if the amount in such clause is exceeded solely by virtue of any such excluded payments or a combination thereof, and (iv) in the event that the Borrower delivers an officer's certificate signed by the chief financial officer of the Borrower and certifying that specified amounts previously included in Acquisition Consideration with respect to Contingent Payment Agreements are not to be paid, then such amounts shall be deducted from Acquisition Consideration. "Acquisition Corp." means Pharma Services Acquisition Corp., a North Carolina corporation. "Additional Collateral" shall have the meaning assigned to such term in Section 5.11. "Adjusted LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" has the meaning assigned to such term in the preamble hereto. "Administrative Questionnaire" means an Administrative Questionnaire in the form of Exhibit A. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Each Unrestricted Subsidiary shall be deemed an Affiliate of the Borrower and its Subsidiaries. Verispan and its Subsidiaries shall be deemed not to be Affiliates of any Loan Party so long as Verispan is not a Subsidiary of any Loan Party. "Agent Fees" has the meaning assigned to such term in Section 2.11(c). "Agent Parties" has the meaning assigned to such term in Section 10.17(c). -2- "Agents" means the Administrative Agent and the Collateral Agent. "Aggregate Foreign Currency Exposure" means the aggregate amount of the Foreign Currency Lenders' Foreign Currency Exposure. "Aggregate Revolving Credit Exposure" means the aggregate amount of the Revolving Lenders' Revolving Credit Exposures. "Agreement" has the meaning assigned to such term in the preamble hereto. "Alternate Base Rate" means for any day, a rate per annum equal to the highest of (a) the Administrative Agent's Base Rate in effect on such day, (b) 0.5% per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the next previous Friday by the Administrative Agent on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by the Administrative Agent from three New York certificate of deposit dealers of recognized standing selected by the Administrative Agent, in either case adjusted to the nearest 0.25% or, if there is no nearest 0.25%, to the next higher 0.25% (the "Certificate of Deposit Rate"), and (c) the Federal Funds Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Base Rate, the Certificate of Deposit Rate or the Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the Base Rate, the Certificate of Deposit Rate or the Federal Funds Rate, respectively. "Annual Management Payment" has the meaning assigned to such term in Section 6.07(iv)(b). "Anti-Terrorism Laws" has the meaning assigned to such term in Section 3.25. "Applicable Currency" has the meaning assigned to such term in Section 2.13. "Applicable Rate" means, for any day, (i) in the case of Revolving Loans, the applicable rate per annum as set forth in the table below under the caption "ABR Revolving Spread," in the case of ABR Revolving Loans and under the caption "Eurocurrency Revolving Loan Spread," in the case of Eurocurrency Loans that are Revolving Loans in each case based upon the Total Leverage Ratio as of the most recent determination date, and (ii) in the case of Term B Loans that are ABR Loans, 3.25% and in the case of Term B Loans that are Eurocurrency Loans, 4.25%. -3-

For purposes of the foregoing, (i) the Total Leverage Ratio shall be determined as of the end of each fiscal quarter of the Borrower's fiscal year based upon the Borrower's consolidated financial statements delivered pursuant to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting from a change in the Total Leverage Ratio shall be effective three (3) Business Days after the date on which the Administrative Agent shall have received the applicable financial statements and a Compliance Certificate calculating the Total Leverage Ratio. If at any time the Borrower has not submitted to the Administrative Agent the applicable information as and when required under Section 5.01(a) or (b), the Applicable Rate shall be the highest rate set forth in the table above until such time as the Borrower has provided the information required under Section 5.01(a) or (b). Within one (1) Business Day of receipt of the applicable information as and when required under Section 5.01(a) or (b), the Administrative Agent shall give each Lender telefacsimile or telephonic notice (confirmed in writing) of the Applicable Rate in effect from such date. Notwithstanding the foregoing, the Applicable Rate during the period from the Effective Date until the date that is six months after the Effective Date (the "Initial Period") shall be determined as if the Total Leverage Ratio were greater than or equal to 3.5:1.00. At the end of the Initial Period, the Applicable Rate shall be determined with reference to the last Compliance Certificate delivered by the Borrower. "Asset Sale" means any direct or indirect sale, transfer, lease, conveyance or other disposition by the Parent Guarantors, the Borrower or any of the Restricted Subsidiaries of any of its property or assets, including any sale or issuance of any Equity Interests of any Subsidiary (including, without limitation, Equity Interests of an Unrestricted Subsidiary), except (a) sales, dispositions and leases permitted by Sections 6.05(i), (ii), (iii), (iv), (v) and (vi), subsection (ii)(A) of Section 6.05(vii) and Sections 6.05(viii) and (ix) and (b) any such transaction or series of transactions which, if an Asset Sale, would not generate Net Proceeds in excess of $5.0 million (and, when taken together with all other such transactions, in excess of $5.0 million in any twelve-month period). "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04(b)), and accepted by the Administrative Agent, in the form of Exhibit C or such other form as shall be approved by the Administrative Agent. -4- "Authorized Officer" means, with respect to the Borrower, those of its officers whose signature and incumbency have been certified to the Administrative Agent and the Lenders pursuant to Section 4.01(d) or any successor thereto. "Available Revolving Credit Commitment" means as to any Revolving Lender, at any time of determination, an amount equal to such Revolving Lender's Revolving Credit Commitment at such time minus such Revolving Lender's Revolving Credit Exposure at such time. "Base Amount" has the meaning assigned to such term in Section 6.16. "Base Rate" means the rate of interest per annum publicly announced from time to time by the Administrative Agent as its base rate in effect at its principal office in New York City (the Base Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors) (any change in such rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change). "Bioglan" means Bioglan Pharmaceuticals Company, a North Carolina Corporation. "Board" means the Board of Governors of the Federal Reserve System of the United States. "Borrower" shall have the meaning ascribed to such term in the preamble to this Agreement. "Borrower's Portion of Excess Cash Flow" means, for any Fiscal Year, that portion of Excess Cash Flow that the Borrower is not required to utilize to repay Loans pursuant to Section 2.06(c)(v). "Borrowing" means a Loan or group of Loans to the Borrower of the same Class and Type made (including through a conversion or continuation) by the applicable Lenders on a single date and as to which a single Interest Period is in effect. "Borrowing Date" means any Business Day specified in a notice pursuant to Section 2.02 or 2.05 as a date on which the Borrower requests Loans to be made hereunder. "Borrowing Request" has the meaning assigned to such term in Section 2.02(a). "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close; provided that (i) when used in connection with a Eurocurrency Loan, "Business Day" also shall exclude any day on which dealings in foreign currencies and exchange between banks may not be carried on in London, England and (ii) when used in connection with a Loan denominated in Euros, "Business Day" shall also exclude any day on which the TARGET payment system is not open for the settlement of payments in Euros. -5- "Calculation Date" means (a) the last Business Day of each calendar month and (b) solely with respect to any Foreign Currency Borrowing, the Business Day immediately preceding the date on which such Borrowing is to be made. "Capital Expenditures" means, for any period, (a) any and all expenditures made by the Borrower or any of its Restricted Subsidiaries in such period for assets added to or reflected in its property, plant and equipment accounts or other similar capital asset accounts or comparable items or any other capital expenditures that are, or should be, set forth as "additions to plant, property and equipment" on the financial statement prepared in accordance with GAAP, whether such asset is purchased for cash or financed as an account payable or by the incurrence of Indebtedness, accrued as a liability or otherwise and (b) all Capital Lease Obligations of the Borrower and its Restricted Subsidiaries incurred during such period; provided that Capital Expenditures shall not include expenditures for Permitted PharmaBio Investments or Permitted Acquisitions. "Capital Lease Obligations" means all monetary or financial obligations of the Borrower and its Restricted Subsidiaries under any leasing or similar arrangement conveying the right to use real or personal property, or a combination thereof, which, in accordance with GAAP, would or should be classified and accounted for as capital leases, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date on which such lease may be terminated by the lessee without payment of a penalty. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List. "CGMI" has the meaning assigned to such term in the preamble hereto. "Change in Control" means (a) prior to a Public Equity Offering, the Permitted Holders ceasing to own, directly or indirectly, Equity Interests representing at least a majority of the voting power of the total outstanding Equity Interests of the Parent; (b) following a Public Equity Offering, any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause that person or group shall be deemed to have "beneficial ownership" of all securities that that person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Equity Interests representing more than 35% of the voting power of the total outstanding Equity Interests of the Parent, and the Permitted Holders shall at such time own a lower percentage of the voting power of the total outstanding Equity Interests of the Parent and shall not have at such time the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Parent; (c) following a Public Equity Offering, occupation of a majority of the -6- seats (other than vacant seats) on the board of directors of the Parent by Persons who were neither (i) nominated by the board of directors of the Parent nor (ii) appointed by directors so nominated; (d) at any time, the Parent shall cease to own directly 100% of the outstanding Equity Interests of the Intermediate Parent or the Parent shall cease to own directly or indirectly 100% of the outstanding Equity Interests of the Borrower; or (e) the occurrence of a "change of control" under the Subordinated Notes Indenture, any Permitted Discount Notes or any Permitted Subordinated Indebtedness. "Charges" has the meaning assigned to such term in Section 10.09. "Class" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term B Loans, Foreign Currency Loans or Swingline Loans, and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment or Term B Commitment, and when used in reference to any Lender, refers to whether such Lender is a Revolving Lender or a Term B Lender. "Closing Certificate" means a certificate substantially in the form of Exhibit G. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means any and all "Collateral," "Mortgaged Property" or "Trust Property," as defined in any applicable Security Document. "Collateral Account" means the collateral account or sub-account established and maintained by the Collateral Agent in its name as Collateral Agent for the benefit of the Secured Parties, in accordance with the provisions of the Security Agreement. "Collateral Agent" means Citicorp North America, Inc., in its capacity as collateral agent for the Secured Parties under the Security Documents. "Collateral Sharing Agreement" means the Collateral Sharing Agreement, substantially in the form of Exhibit D, between the Borrower and the Collateral Agent for the benefit of the Secured Parties. "Commitment" means, with respect to any Lender, such Lender's Revolving Credit Commitment or Term B Commitment or any combination thereof (as the context requires). "Commitment Fee" has the meaning assigned to such term in Section 2.11(a). "Commitment Fee Average Daily Amount" has the meaning assigned to such term in Section 2.11(a). "Commitment Fee Termination Date" has the meaning assigned to such term in Section 2.11(a). -7- "Commitment Letter" means the Commitment Letter dated April 10, 2003 among the Administrative Agent, the Lead Arranger, the Parent, OEP and GF Management Company LLC. "Commitment Percentage" means the percentage of the Total Revolving Credit Commitment represented by such Lender's Revolving Credit Commitment. If the Revolving Credit Commitments have terminated or expired, the Commitment Percentage shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments. "Communications" has the meaning assigned to such term in Section 10.17(a). "Compliance Certificate" has the meaning assigned to such term in Section 5.01(b) and shall be substantially in the form of Exhibit E. "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining or otherwise reducing such Consolidated Net Income (in each case, other than to the extent attributable to Unrestricted Subsidiaries), the sum of (i) Consolidated Interest Expense less cash interest income actually received for such period, (ii) consolidated income tax expense for such period, (iii) all amounts properly attributable to depreciation, amortization and non-cash reductions of revenues in connection with Permitted PharmaBio Investments for such period, (iv) any non-cash deductions from Consolidated Net Income for such period due to the write-down of any assets or any non-recurring event (other than any deductions which require or represent the accrual of a reserve for the payment of cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period), (v) extraordinary losses for such period and any losses realized in connection with any sale or disposition of assets outside the ordinary course of business during such period (other than Permitted PharmaBio Investments), (vi) with respect to any disposition of a Permitted PharmaBio Investment during such period, any previous write-up of the value of such Permitted PharmaBio Investment that is not otherwise included (and has not been previously included) in Consolidated EBITDA, (vii) restructuring charges related to the Transactions that are incurred within one year of the Effective Date, fees and expenses (including legal, accounting, debt issuance costs) paid in connection with the Transactions and (viii) severance payments and charges as a result of the Merger pursuant to employment agreements existing on the Effective Date paid within 18 months of the Effective Date and any payments made or charges in lieu of or as a replacement for such severance payments (including retention payments paid or expenses as an incentive to retained employees and severance payments allocated to non-competition provisions contained in such employment agreements) so long as (A) such replacement payments are actually made within 18 months of the Effective Date or allocated to a non-competition provision entered into within 18 months after the Effective Date and (B) the total replacement payments plus any severance payments made to any Person does not exceed the amount of severance payments originally due, minus (b) without duplication and to the extent included in determining such Consolidated Net Income, any (i) extraordinary gains for such period and any gains realized in connection with any sale or disposition of assets outside the ordinary course of business (other than Permitted PharmaBio Investments) during such period, -8- (ii) any non-cash additions to Consolidated Net Income during such period due to the write-up of any assets or any non-recurring event and (iii) any amounts paid by the Borrower directly or indirectly to the Parent pursuant to Section 6.07(iv), all determined on a consolidated basis in accordance with GAAP. For purposes of determining compliance with Sections 6.13 through 6.15 only, (x) if Consolidated EBITDA is being calculated for Test Periods including one or more Fiscal Quarters during the Cymbalta Ramp Up Period, Consolidated EBITDA shall be calculated to exclude Net Cymbalta Expenses during such Fiscal Quarters not to exceed (A) $25.0 million per Fiscal Quarter and (B) $125.0 million in the aggregate and (y) calculations of Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for periods prior to the Effective Date shall be determined on a pro forma basis to give effect to the consummation of the Transactions as if they occurred on the first day of such period. "Consolidated Indebtedness" means, at a particular date, the aggregate stated balance sheet amount of all Indebtedness of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP at such date. For purposes of determining compliance with Sections 6.14 and 6.15 only, Consolidated Indebtedness as of the last day of a Test Period shall be reduced by the amount of cash (not to exceed $50.0 million in the aggregate) of the Borrower and its Restricted Subsidiaries shown on a consolidated balance sheet in accordance with GAAP as of the last day of such Test Period. "Consolidated Interest Expense" means, with respect to the Borrower and its Restricted Subsidiaries on a consolidated basis for any period, the sum of (a) gross interest expense for such period, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to Hedging Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense, and (b) capitalized interest. "Consolidated Net Income" means, for any period, the net income or loss of the Borrower and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that (i) the income or loss of any Person (other than consolidated Restricted Subsidiaries of the Borrower) in which any other Person (other than the Borrower or any of its Restricted Subsidiaries) has a joint interest shall be excluded therefrom, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Restricted Subsidiaries by such Person during such period, which shall be included in Consolidated Net Income for such period, (ii) the cumulative effect of a change in accounting principles during such period shall be excluded therefrom, (iii) any net after-tax income (loss) from discontinued operations and any net after-tax gains or losses on disposal of discontinued operations shall be excluded therefrom, (iv) the income or loss of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Borrower or any of its Restricted Subsidiaries or that Person's assets are acquired by the Borrower or any of its Restricted Subsidiaries shall be excluded therefrom, (v) the income of any consolidated Restricted Subsidiary shall be excluded therefrom to the extent that declaration of payment of both dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, de- -9- cree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary and (vi) for purposes of calculating Consolidated Net Income in any period, purchase price allocation adjustments to the balance sheet and amortization of any purchase price allocation adjustments, in each case related to the Merger, shall be excluded and as such considered to be zero. "Consolidated Operating Assets" means, with respect to any Person as at any date of determination, the total assets of such Person and its Restricted Subsidiaries which should properly be classified as operating assets in the calculation of changes in operating assets on a consolidated statement of cash flows of such Person and its Restricted Subsidiaries in accordance with GAAP. "Consolidated Operating Liabilities" means, with respect to any Person as at any date of determination, the total liabilities of such Person and its Restricted Subsidiaries which should properly be classified as operating liabilities in the calculation of changes in operating liabilities on a consolidated statement of cash flows of such Person and its Restricted Subsidiaries in accordance with GAAP. "Contested Collateral Lien Conditions" means (a) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; and (b) in the event the amount of any such Lien shall exceed $5.0 million and shall not be fully covered by insurance (less any deductible) as to which the insurer has acknowledged responsibility to pay and discharge such Lien, the Loan Party or its applicable Subsidiary shall either obtain a bond or maintain cash reserves, in either case, in an amount sufficient to pay and discharge such Lien and the Collateral Agent's reasonable estimate of all interest and penalties related thereto. "Contingent Payment Agreements" has the meaning assigned to such term in the definition of "Acquisition Consideration." "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and "controlling" and "controlled" have meanings correlative thereto. "CPI Increase Amount" means with respect to any calendar year an amount equal to the Annual Management Payment permitted to be paid under Section 6.07(iv)(b) and 6.08(v)(b) for the prior calendar year times the percentage of the increase from such preceding calendar year in the Urban Wage Earners and Clerical Workers Consumer Price Index for the New York Metropolitan Area, such amount to be calculated in March of each year, beginning in March 2005. "Credit Event" has the meaning assigned to such term in Section 4.02. "Cumulative Consolidated Net Income" means 50% of the cumulative Consolidated Net Income (or if such cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Borrower and its Restricted Subsidiaries since the beginning of the first com- -10- plete Fiscal Quarter beginning after the Effective Date to the end of the last fiscal period for which financial statements have been provided to the Lenders pursuant to Section 5.01(a) or (b). "Cumulative Excess Cash Flow" means the sum of (A) for each Fiscal Year beginning after December 31, 2003, (a) 50% of the Borrower's Portion of Excess Cash Flow for such Fiscal Year if the Total Leverage Ratio for the Test Period ending as of the end of such Fiscal Year is greater than or equal to 3.25x or (b) 100% of the Borrower's Portion of Excess Cash Flow for such Fiscal Year if the Total Leverage Ratio for the Test Period ending as of the end of such Fiscal Year is less than 3.25x, less (B) if Excess Cash Flow is less than zero for any Fiscal Year beginning after December 31, 2003, 100% of such negative Excess Cash Flow. "Currency of Payment" has the meaning assigned to such term in Section 10.19. "Cymbalta(TM) Launch" means the commencement by the Borrower of its commercialization efforts for Cymbalta(TM) in the United States, pursuant to an agreement entered into in July 2002 with Eli Lilly and Company. "Cymbalta(TM) Ramp Up Period" means the period from the first day of the first Fiscal Quarter in which the Borrower and its Restricted Subsidiaries expend cash amounts in excess of $10.0 million during such Fiscal Quarter relating to the Cymbalta(TM) Launch (net of all royalties relating to Cymbalta(TM) and net of other fees from Eli Lilly received by the Borrower or its Restricted Subsidiaries with respect to Cymbalta(TM) during such Fiscal Quarter) to and including the last day of the sixth Fiscal Quarter after such Fiscal Quarter. "Debt Incurrence" has the meaning assigned to such term in Section 2.06(c)(ii). "Default" means any Event of Default, any Event of Termination and any event or condition which upon notice, lapse of time or both would constitute an Event of Default or Event of Termination. "Default Rate" has the meaning assigned to such term in Section 2.09(c)(ii). "Designated Asian Subsidiary" means (i) any Non-U.S. Subsidiary organized in and operating primarily in India, Japan or Korea and identified as a Designated Asian Subsidiary either on Schedule 6.04 or by subsequent written notice to the Administrative Agent and (ii) any Non-U.S. Subsidiary that is a holding company and that has as its only asset Equity Interests of a Non-U.S. Subsidiary identified in clause (i). "Destruction" means any and all damage to, or loss or destruction of, or loss of title to, all or any portion of the Property of the Parent Guarantors, the Borrower or any of the Restricted Subsidiaries. "DG Equity Rollover" means the retention of $95,200,000 in aggregate amount of Equity Interests in the Borrower by Dr. Dennis B. Gillings and his affiliates and selected shareholders of the Borrower including directors and members of senior management in connection with the Merger; provided, however, that not less than 5,862,068 shares of the Borrower's com- -11- mon stock held by Dr. Gillings and his affiliates and all options to purchase shares of Borrower's common stock held by Dr. Gillings will be delivered to the Parent in exchange for Equity Interests of the Parent. "DG Equity Rollover Agreement" means the rollover agreement, dated as of August 28, 2003, as amended, by and among the Parent, Dr. Dennis B. Gillings, Joan H. Gillings, Susan Ashley Gillings, the Gillings Family Foundation, the Gillings Family Limited Partnership and the GFEF Limited Partnership. "Documentation Agent" has the meaning assigned to such term in the preamble hereto. "Dollar Equivalent" means, on any date of determination, (a) with respect to any amount in Dollars, such amount and (b) with respect to any amount in Pounds Sterling or Euros, the equivalent in Dollars of such amount, determined by the Administrative Agent pursuant to Section 1.04 using the Exchange Rate with respect to either Pounds Sterling or Euros, as the case may be, at the time in effect under the provisions of such Section. "Dollar Portion" has the meaning provided for such term in Section 2.04. "Dollars" or "$" means lawful money of the United States of America. "Domestic Subsidiary" means any Restricted Subsidiary of the Borrower that is not a Non-U.S. Subsidiary. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 10.08). "Embargoed Person" has the meaning assigned to such term in Section 6.19. "EMU Legislation" means the legislative measures of the European Union for the introduction of, change over to or operation of the Euro in one or more member states. "Environment" means ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna, or as otherwise defined in any applicable Environmental Law. "Environmental Claim" means any written accusation, allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any other Person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the Environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon: (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to any Hazardous Material; (c) the presence, use, handling, transportation, storage, treatment or disposal of -12- any Hazardous Material; or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "Environmental Laws" means any and all applicable treaties, laws (including common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the Environment, preservation or reclamation of natural resources, the management, Release or threatened Release of, or exposure to, any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including, but not limited to, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight costs, fines, penalties or indemnities), of the Parent Guarantors, the Borrower or any of their Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials or (d) the Release or threatened Release of any Hazardous Materials into the Environment. "Environmental Permit" means any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person. "Equity Investments" means the OEP Equity Investment and the DG Equity Rollover. "Equity Issuance" has the meaning assigned thereto in Section 2.06(c)(i). "Equity Rights" means all securities convertible or exchangeable for Equity Interests and all warrants, options or other rights to purchase or subscribe for any Equity Interests, whether or not presently convertible, exchangeable or exercisable. "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with any Loan Party, is treated as a single employer under Section 414(b) or (c) of the Code, and for the purpose of Section 302 of ERISA and/or Section 412, 4971, 4977, 4980D, 4980E and/or each "applicable section" under Section 414(t)(2) of the Code, within the meaning of Section 414(b), (c), (m) or (o) of the Code. "ERISA Event" means (a) any "reportable event," as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan (other than an -13- event for which the 30-day notice period is waived by regulation); (b) the existence with respect to any Pension Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (d) the incurrence by any Loan Party or ERISA Affiliate of any liability under Title IV of ERISA with respect to any Pension Plan; (e) the receipt by any Loan Party or ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Pension Plan, to appoint a trustee to administer any Pension Plan, or to take any other action with respect to a Pension Plan that could result in material liability to a Loan Party or a Subsidiary, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of or the appointment of a trustee to administer, any Pension Plan; (f) the incurrence by any Loan Party or ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; (g) the receipt by a Loan Party or ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Pension Plan which could result in the imposition of a lien or the posting of a bond or other security; or (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could result in liability to a Loan Party or any of the Subsidiaries. "Euro" or "E" means the single currency of the European Union as constituted by the treaty of European Union and as referred to in the EMU Legislation. "Eurocurrency Borrowing" means a Borrowing comprised of Eurocurrency Loans. "Eurocurrency Loan" means any Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Eurocurrency Revolving Credit Borrowing" means a Revolving Credit Borrowing or Foreign Currency Borrowing comprised of Eurocurrency Loans. "Event of Default" has the meaning assigned to such term in Section 7.01. "Event of Termination" has the meaning assigned to such term in Section 7.01. "Excess Cash Flow" means, without duplication, for any Person for any period for which such amount is being determined: (a) Consolidated Net Income (exclusive of any non-cash write-up of assets and inclusive of any non-cash write-down of assets and without giving effect to clause (iii) of the definition thereof with respect to any cash net after-tax income from discontinued operations or after-tax gain on disposal of discontinued operations) adjusted -14- to (A) exclude any amount of gain included in both (x) Consolidated Net Income and (y) Net Proceeds actually applied to the prepayment of the Loans pursuant to Section 2.06(c)(iii) or (iv); and (B) include the gain on any sale or disposition of a Permitted PharmaBio Investment to the extent not already included in Consolidated Net Income; plus (b) the amount of depreciation, amortization of intangibles, deferred taxes (which may be positive or negative for this purpose) and other non-cash expenses and non-cash amortization of revenues received in connection with Permitted PharmaBio Investments which, pursuant to GAAP, were deducted in determining such Consolidated Net Income of such Person; plus (c) the amount by which working capital for such period decreased (i.e., the decrease in Consolidated Operating Assets (excluding cash and Permitted Investments) of such Person minus Consolidated Operating Liabilities (excluding (A) changes in current liabilities for borrowed money and (B) cash or Permitted Investments which are Net Proceeds required to be applied to the prepayment of the Loans pursuant to Section 2.06(c)) of such Person from the beginning to the end of such period); minus (d) the amount by which working capital for such period increased (i.e., the increase in Consolidated Operating Assets (excluding cash and Permitted Investments) of such Person minus Consolidated Operating Liabilities (excluding (A) changes in current liabilities for borrowed money and (B) cash or Permitted Investments which are Net Proceeds required to be applied to the prepayment of the Loans pursuant to Section 2.06(c)) of such Person from the beginning to the end of such period); minus (e) the amount of Capital Expenditures that are paid from internally generated funds in such period; minus (f) payments of principal under the Term B Loans on the Installment Payment Dates pursuant to Section 2.06(d) made during such period; minus (g) scheduled payments of principal of Indebtedness permitted to be incurred under Section 6.01(a)(iii) to the extent such payment is made from internally generated funds; minus (h) optional prepayments of principal under the Term B Loans from internally generated funds made during such period; minus (i) the amount of any increase (but not any decrease) in advances from customers accounted for as unearned income in accordance with GAAP. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Rate" means, on any day, for purposes of determining the Dollar Equivalent of any other currency, the rate at which such other currency may be exchanged into -15- Dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Telerate Page for such currency. In the event that such rate does not appear on any Telerate Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such an agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m., local time, on such date for the purchase of Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct in the absence of facts or circumstances indicating that it has been made in error. "Excluded Debt Issuance" means any issuance of Indebtedness permitted by Section 6.01(a) (other than Section 6.01(a)(xvi)). "Excluded Equity Issuance" means the issuance of Equity Interests or Equity Rights of the Parent in the ordinary course to directors, officers or employees of the Borrower or its Subsidiaries. "Executive Order" has the meaning assigned to such term in Section 3.25 and Section 6.19. "Facilities" has the meaning assigned to such term in Section 10.16(a). "Federal Funds Rate" means, for any day, the weighted average of the rates (rounded upwards, if necessary, to the nearest 1/100th of 1%) on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York; provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate for such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day which is a Business Day, the Federal Funds Rate for such day shall be the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Agreement" means the Fee Agreement, dated as of August 28, 2003, among the Parent, OEP and Dennis B. Gillings, governing the payment by the Parent of OEP's and Dennis B. Gillings' and their respective Affiliates fees and expenses related to the Merger. "Fee Letter" means the Fee Letter dated April 10, 2003 among the Administrative Agent, the Lead Arranger, GF Management Company, LLC, OEP and the Parent. "Fees" means the Commitment Fees, the LC Fees and the Agent Fees. -16- "Financial Officer" of any corporation, partnership or other entity means the chief financial officer, the principal accounting officer, Treasurer or Controller of such corporation, partnership or other entity. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "2003 Fiscal Year") refer to the Fiscal Year ending on December 31 occurring during such calendar year. "Foreign Currency Borrowing" means Foreign Currency Loans made on the same day by the Foreign Currency Lenders ratably according to their respective Foreign Currency Sublimits then in effect. "Foreign Currency Exposure" means, with respect to any Foreign Currency Lender at any time, the Dollar Equivalent of the aggregate principal amount of all Foreign Currency Loans made by such Foreign Currency Lender and outstanding at such time. The Foreign Currency Exposure of any Revolving Lender at any time shall be the sum of (without duplication) (A) its Commitment Percentage of the Foreign Currency Exposure of all Foreign Currency Lenders at such time and (B) the Foreign Currency Exposure of all Foreign Currency Lenders that has been converted into Revolving Dollar Loans pursuant to Section 2.04 and in respect of which such Revolving Lender has made, or is required to make, payments to the Foreign Currency Lenders under such Section 2.04. "Foreign Currency Intercompany Notes" means any promissory note made by any Non-U.S. Subsidiary of the Borrower, as intercompany borrower, to the Borrower, evidencing all advances made with proceeds of Loans to such Non-U.S. Subsidiary by the Borrower from time to time, in form and substance reasonably satisfactory to the Administrative Agent. "Foreign Currency Lender" means the Revolving Lender (or Affiliate of a Revolving Lender) identified on Schedule 2.01 on the date hereof as a "Foreign Currency Lender" with the Foreign Currency Sublimit set forth thereon and any other Revolving Lender that (a) agrees, with the approval of the Administrative Agent and the Borrower, which approval shall not be unreasonably withheld (provided, however, that after the occurrence and during the continuance of any Default or Event of Default, such approval by the Borrower shall not be required), to act, or cause one of its Affiliates to act, as a Foreign Currency Lender with a Foreign Currency Sublimit agreed to by the Administrative Agent and the Borrower (provided, however, that no Revolving Lender or Affiliate thereof shall become a Foreign Currency Lender to the extent, after giving effect to such Revolving Lender or Affiliate thereof becoming a Foreign Currency Lender with the proposed Foreign Currency Sublimit, the aggregate Foreign Currency Sublimit amount would exceed the Maximum Foreign Currency Sublimit) and (b) whether directly or through an Affiliate thereof, at the time of such agreement by such Foreign Currency Lender, can, on its own, make Foreign Currency Loans to the Borrower the interest payments with respect to which can be made free of withholding taxes. -17- "Foreign Currency Loans" means the Revolving Loans made by the Revolving Lender in Pounds Sterling or Euros pursuant to clause (iii) of the first sentence of Section 2.01(a). "Foreign Currency Ratable Portion" means, with respect to any Foreign Currency Lender (a) at any time prior to the reduction of the Foreign Currency Sublimits to zero, the percentage obtained by dividing (i) the Foreign Currency Sublimit of such Lender in effect at such time by (ii) the aggregate Foreign Currency Sublimits of all Foreign Currency Lenders in effect at such time and (b) at any time thereafter, the percentage obtained by dividing (i) the aggregate outstanding principal amount of all Foreign Currency Loans outstanding at such time and owing to such Foreign Currency Lender by (ii) the aggregate outstanding principal amount of all Foreign Currency Loans outstanding at such time. "Foreign Currency Sublimit" means, with respect to each Foreign Currency Lender, the Dollar amount set forth opposite such Foreign Currency Lender's name on Schedule 2.01 under the caption "Foreign Currency Sublimit," as amended to reflect each Assignment and Acceptance executed by such Foreign Currency Lender and as such amount may be reduced pursuant to this Agreement. The aggregate Foreign Currency Sublimits on the Effective Date shall be the Maximum Foreign Currency Sublimit. "Foreign Excess Cash Flow" shall mean the Excess Cash Flow of the Non-U.S. Restricted Subsidiaries determined on a consolidated basis as if a separate consolidated group, without regard to the Borrower or the Domestic Subsidiaries. "Foreign Plan" means any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to outside the United States by any Loan Party or any Subsidiary primarily for the benefit of employees of any Loan Party or any Subsidiary employed outside the United States. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis. "Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body, including any central bank. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof (including pursuant to a "synthetic lease"), (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any -18- letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of the obligation under any Guarantee shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made (including principal, interest and fees) and (b) the maximum amount for which such guarantor may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and the maximum amount for which such guarantor may be liable are not stated or determinable, in which case the amount of the obligation under such Guarantee shall be such guarantor's maximum reasonably anticipated liability in respect thereof as determined by the guarantor in good faith; irrespective, in any such case, of any amount thereof that would, in accordance with GAAP, be required to be reflected on a balance sheet of such Person. "Guarantee Agreement" means the Subsidiary Guarantee Agreement, substantially in the form of Exhibit H, made by the Domestic Subsidiaries in favor of the Administrative Agent for the benefit of the Secured Parties. "Hazardous Materials" means all pollutants, contaminants, wastes, substances, chemicals, materials and constituents, including without limitation, crude oil, petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls ("PCBs") or PCB-containing materials or equipment of any nature which can give rise to Environmental Liability under, or are regulated pursuant to, any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement and all other similar agreements or arrangements designed to alter the risks of any Person arising from fluctuations in interest rate, currency values or commodity prices. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Borrower, any qualification or exception to such opinion or certification: (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower to be in default of any of its obligations under any of Sections 6.13 through 6.16, inclusive. "Increased Cost Lender" has the meaning assigned thereto in Section 2.21. -19- "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding obligations to pay salary or benefits under deferred compensation or other benefit programs), (d) all obligations of such Person under conditional sale or other title retention agreements (excluding the deferred purchase price of Permitted PharmaBio Investments) relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding the deferred purchase price of Permitted PharmaBio Investments and current accounts payable incurred in the ordinary course of business), (f) all Indebtedness (excluding prepaid interest thereon) of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness or other monetary or financial obligations of others, (h) all Capital Lease Obligations of such Person, (i) all payments that such Person would have to make in the event of an early termination, on the date Indebtedness of such Person is being determined, in respect of outstanding interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements, (j) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (k) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, surety bonds and performance bonds, whether or not matured. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is directly liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the foregoing, Indebtedness shall not (i) include obligations to provide services, including without limitation, the provisions of sales force personnel and related expenses, arising pursuant to agreements entered into in connection with Permitted PharmaBio Investments, so long as such obligations are expected to be treated as expenses (and not capitalized) on the income statement of such Person) and (ii) include unearned income to the extent it relates solely to the receipt of cash in the ordinary course of business in respect of revenues that have not been recognized on such Person's income statement. "Indemnitee" has the meaning assigned to such term in Section 10.05(b). "Independent Financial Advisor" means an accounting, appraisal or investment banking firm of national standing or as otherwise approved by the Administrative Agent or any third party appraiser with experience in appraising the terms and conditions of the type of transaction or series of related transactions for which an opinion is required, provided that such firm or appraiser is not an Affiliate of the Borrower. "Information Memorandum" means (i) the Confidential Information Memorandum dated as of June 2003 and posted electronically on Intralinks (and all related updates) relating to the Borrower and this Agreement and (ii) the Offering Memorandum of the Borrower dated September 12, 2003 related to the Subordinated Notes. -20- "Initial Management Payment" has the meaning assigned to such term in Section 6.07(iv)(a). "Installment Payment Date" has the meaning assigned to such term in Section 2.06(d). "Interest Expense Coverage Ratio" means, for any Test Period, the ratio of (a) Consolidated EBITDA to (b) Net Cash Interest Expense, in each case for such Test Period. For Test Periods ending prior to the one year anniversary of the Effective Date, Net Cash Interest Expense shall be determined on a pro forma basis to give effect to the Transactions as if they occurred on the first day of such Test Period. "Interest Payment Date" means, with respect to any Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, (a) each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing and, in addition, (b) the date of any refinancing of such Borrowing with a Borrowing of a different Type. "Interest Period" means (a) as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing (including any date on which such Borrowing shall have been converted from a Borrowing of a different Type) or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months (or if available to all Lenders, 9 or 12 months) thereafter, as the Borrower may elect; provided that prior to the 31st day after the Effective Date, the Borrower shall only be permitted to request Interest Periods of seven days, or (b) as to any ABR Borrowing (other than a Swingline Borrowing), the period commencing on the date of such Borrowing (including any date on which such Borrowing shall have been converted from a Borrowing of a different Type) or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the earliest of (i) the next succeeding March 31, June 30, September 30 or December 31, (ii) the Revolving Credit Maturity Date and (iii) the date such Borrowing is prepaid in accordance with Section 2.06 or converted in accordance with Section 2.03 and (c) as to any Swingline Loan, a period commencing on the date of such Loan and ending on the earliest of (i) the fifth Business Day thereafter, (ii) the Revolving Credit Maturity Date and (iii) the date such Loan is prepaid in accordance with Section 2.06; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Intermediate Parent" has the meaning assigned to such term in the preamble hereto. -21- "Investment" has the meaning assigned to such term in Section 6.04. "Investor Stockholder" shall mean OEP, TPG and Temasek. "Issuing Bank" means an affiliate of Citicorp North America, Inc., in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.07(i), and any other Revolving Lender approved by the Administrative Agent and the Borrower. The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. "LC Disbursement" means a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Commitment Percentage of the total LC Exposure at such time. "LC Fees" has the meaning assigned to such term in Section 2.11(b). "Lead Arranger" has the meaning assigned to such term in the preamble hereto. "Lender Affiliate" means (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit and is managed or administered by a Lender, an Affiliate of a Lender or by the same investment advisor as a Lender or by an Affiliate of such investment advisor, any other fund that invests in bank loans and similar extensions and is managed or administered by a Lender, and Affiliate of a Lender or by the same investment advisor as a Lender or by an Affiliate of such investment advisor. "Lenders" has the meaning assigned to such term in the preamble hereto. "Letter of Credit" means any letter of credit issued pursuant to this Agreement. "LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, (a) in the case of a Borrowing of Dollars, the rate appearing on Page 3750 of the Telerate Service and (b) in the case of a Borrowing of Pounds Sterling or Euros, the British Bankers Association Interest Settlement Rate appearing on the appropriate page of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing -22- quotations of interest rates applicable to dollar deposits in the London interbank market) in the currency of such Borrowing at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for Dollar, Euro or Pound Sterling deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which Dollar, Pound Sterling or Euro, as applicable, deposits for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, as of the day two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, deed to secure debt, lien, pledge, encumbrance, charge, assignment, hypothecation or security interest in or on such asset or any filing of any financing statement under the UCC as in effect in the applicable state or jurisdiction or any other similar notice or lien under any similar notice or recording statute of any Governmental Authority, in each of the foregoing cases whether voluntary or imposed by law, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset, (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities, (d) in the case of any investment property or deposit account, any contract or other agreement, express or implied, under which any Person has the right to control such investment property or deposit account and (e) any other agreement intended to create any of the foregoing. "Loan Documents" means this Agreement, the Fee Letter (for purposes of Section 7.01(a) only), the Collateral Sharing Agreement, the Guarantee Agreement, the Security Documents and, if requested by a Lender pursuant to Section 2.08(e), each Note. "Loan Parties" means the Borrower, the Parent Guarantors and the Subsidiary Loan Parties. "Loan Party Information" has the meaning assigned to such term in Section 10.16(b). "Loans" means the Revolving Loans, the Swingline Loans, the Foreign Currency Loans and the Term B Loans. "Management Agreements" means (i) the Management Agreement dated as of September 25, 2003 among the Parent, OEP, GF Management Company, LLC, TPG GenPar III, L.P. and Perseus-Soros Management LLC, as in effect on the Effective Date, and (ii) the Management Agreement dated as of September 25, 2003 between the Parent and Cassia Fund Management Pte Ltd., in each case as in effect on the Effective Date. "Material Adverse Effect" means a materially adverse effect on (a) the business, assets, operations, properties or financial condition (including, but not limited to, contingent liabilities) of the Loan Parties and their consolidated Subsidiaries taken as a whole, (b) the ability of the Loan Parties to perform their obligations under the Loan Documents, (c) the rights of or -23- benefits available to the Lenders under the Loan Documents or (d) the value of the Collateral or the validity, enforceability, perfection or priority of the Liens granted to the Collateral Agent (for its benefit and for the benefit of the other Secured Parties) on the Collateral pursuant to the Security Documents. "Material Indebtedness" means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Parent Guarantors, the Borrower or the Borrower's Subsidiaries, individually or in an aggregate principal amount exceeding $15.0 million. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of either Parent Guarantor, the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Parent Guarantor, the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maximum Foreign Currency Sublimit" means US$25,000,000, as such amount may be reduced hereunder from time to time. "Maximum Rate" has the meaning assigned to such term in Section 10.09. "Merger" means the merger of Acquisition Corp. with and into the Borrower pursuant to the terms of the Merger Agreement, with the Borrower surviving. "Merger Agreement" means the merger agreement dated as of April 10, 2003 by and among the Borrower, the Parent and Acquisition Corp. and as amended as of August 18, 2003, as in effect on the Effective Date. "Merger Documents" means the Merger Agreement and all related schedules, material documents and attachments. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Obligations, including any amendment thereto. Each Mortgage shall be substantially in the form of Exhibit N or otherwise satisfactory in form and substance to the Collateral Agent. "Mortgaged Property" means, initially, each parcel of Real Property identified on Schedule 4.01(y)(A), and each other parcel of Real Property with respect to which a Mortgage is granted pursuant to Section 5.11. "Multiemployer Plan" means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (i) to which any Loan Party or ERISA Affiliate is then making or accruing an obligation to make contributions, (ii) to which any Loan Party or ERISA Affiliate has within the preceding six plan years made contributions, including any Person which ceased to be -24- an ERISA Affiliate during such six year period, or (iii) with respect to which Loan Party or any Subsidiary could incur liability. "Net Cash Interest Expense" means, for any period, Consolidated Interest Expense for such period, less (A) the sum of, to the extent included in Consolidated Interest Expense, (1) interest expense actually "paid in kind" in that period, (2) the amortization of any financing fees paid by, or on behalf of, the Borrower or any of its Restricted Subsidiaries, and (3) the amortization of debt discounts or capitalization of interest not otherwise paid in cash, if any, and (B) cash interest income actually received in that period. For purposes of determining Net Cash Interest Expense for any Test Period that includes or is after the date that cash interest becomes payable under the Permitted Discount Notes, Consolidated Interest Expense shall be determined on a consolidated basis for the Intermediate Parent, the Borrower and the Restricted Subsidiaries after such date. "Net Cymbalta(TM) Expenses" means, to the extent reducing Consolidated EBITDA during any Fiscal Quarter, all cash amounts expended by the Borrower or its Restricted Subsidiaries during the Cymbalta(TM) Ramp Up Period relating to the Cymbalta(TM) Launch by the Borrower, net of all royalties relating to Cymbalta(TM) received by the Borrower or its Restricted Subsidiaries during such Fiscal Quarter. "Net Proceeds" means, with respect to any Equity Issuance, Debt Incurrence, Asset Sale, Destruction or Taking, the cash proceeds actually received in respect of such event, including (i) any cash received in respect of any non-cash proceeds, but only as and when received, (ii) in the case of a Destruction, insurance proceeds in excess of $5.0 million, and (iii) in the case of a Taking, condemnation awards and similar payments in excess of $5.0 million, net of the sum of (i) all reasonable fees and out-of-pocket expenses paid by the Borrower and its Subsidiaries to third parties in connection with such event, (ii) the amount of all taxes paid (or reasonably estimated to be payable) by the Parent Guarantors, the Borrower and the Restricted Subsidiaries, and (iii) in the case of an Asset Sale, the amount of all payments required to be made by the Parent Guarantors, the Borrower and the Restricted Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by a Prior Lien (as defined in the Security Agreement or applicable Mortgage) on such asset and the amount of any reserves established by the Parent Guarantors, the Borrower and the Restricted Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding two years, and that are directly attributable to such event (as determined reasonably and in good faith by the Borrower); provided that any amount by which such reserves are reduced for reasons other than payment of any such contingent liabilities shall be considered "Net Proceeds" upon such reduction. "New Investment Subsidiary" has the meaning assigned thereto in Section 5.19. "Non-Consenting Lender" has the meaning assigned thereto in Section 2.21. "Non-Operating Investment" means any loans, warrants, equity securities or other Investments that do not, other than through their sale or any write up or write down of their value prior to their sale, produce any operating income, other than interest income on loans, to the Bor- -25- rower (whether positive or negative) and are not convertible or exchangeable into a security or other Investment that produces, other than through their sale or any write up or write down of their value prior to their sale, any such operating income to the Borrower. "Non-U.S. Jurisdiction" means each jurisdiction of organization of a Subsidiary of the Borrower other than the United States (or any State thereof) or the District of Columbia. "Non-U.S. Pledge Agreements" means one or more pledge agreements in form and substance reasonably satisfactory to the Collateral Agent covering 65% of the voting Equity Interests and 100% of non-voting Equity Interests owned by a Subsidiary Loan Party in the Non-U.S. Subsidiaries listed in Schedule 4.01(w). "Non-U.S. Subsidiary" means any Restricted Subsidiary of the Borrower that is or becomes organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. "Note" means a note substantially in the form of Exhibit F-1 or F-2. "Obligations" means the unpaid principal of and interest on (including interest accruing after the maturity of the Loans made to the Borrower and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans made to or LC Disbursements made pursuant to Letters of Credit issued for the account of the Borrower and all other obligations and liabilities of the Borrower to any Agent, the Issuing Bank or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement or any other document made, delivered or given in connection herewith, whether on account of principal, interest, fees, indemnities, costs or expenses (including, without limitation, all reasonable fees, charges and disbursements of counsel, or otherwise). "OEP" means One Equity Partners LLC, a limited liability company organized under the laws of the State of Delaware. "OEP Equity Investment" means gross cash proceeds in an amount not less than $454,800,000 to purchase equity by OEP, Temasek, TPG and other Persons in the Parent pursuant to the Subscription Agreements, with such amounts (net of permitted fees and expenses) to be contributed on the Effective Date as a common equity contribution to the Intermediate Parent and then to the Borrower, provided, that in no event shall OEP make an initial cash equity investment of less than $200,000,000. "OEP Subscription Agreement" means the subscription agreement dated as of August 28, 2003 between OEP and the Parent. "Organic Document" means (i) relative to each Person that is a corporation, its charter, its by-laws and all shareholder agreements, voting trusts and similar arrangements -26- applicable to any of its authorized shares of capital stock, (ii) relative to each Person that is a partnership, its partnership agreement and any other similar arrangements applicable to any partnership or other equity interests in the Person and (iii) relative to any Person that is any other type of legal entity, such documents as shall be comparable to the foregoing. "Other List" has the meaning provided to such terms in Section 6.19. "Other Taxes" means any and all stamp, documentary or similar Taxes, or any other excise or property Taxes or similar levies that arise on account of any payment made or required to be made under any Loan Document or Note or from the execution, delivery, registration, recording or enforcement of any Loan Document or Note. "Parent" has the meaning assigned to such term in the preamble hereto. "Parent Guarantors" means each of the Parent and Intermediate Parent. "Participant" has the meaning assigned to such term in Section 10.04(f). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Pension Plan" means a "pension plan," as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Plan) and to which any Loan Party or any ERISA Affiliate may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Perfection Certificate" means a certificate in the form of Annex II to the Security Agreement or any other form approved by the Collateral Agent. "Permitted Acquisition" means any acquisition, whether by purchase, merger, consolidation or otherwise, by the Borrower or any Subsidiary Loan Party of all or substantially all the assets of, or all the Equity Interests in, a Person or a division, line of business or other business unit of a Person so long as (a) such acquisition shall not have been preceded by a tender offer that has not been approved or otherwise recommended by the board of directors of such Person, (b) such assets are to be used in, or such Person so acquired is engaged in, as the case may be, a business of the type conducted by the Borrower and its Restricted Subsidiaries on the Effective Date or in a business reasonably related thereto (including without limitation any Permitted PharmaBio Investment), (c) immediately after giving effect thereto, (i) no Default has occurred and is continuing or would result therefrom, (ii) all transactions related thereto are consummated in all material respects in accordance with applicable laws, (iii) all the Equity Interests of each Domestic Subsidiary formed for the purpose of or resulting from such acquisition shall be owned directly by the Borrower or a Subsidiary Loan Party and all actions required to be taken under Sections 5.11, 5.12 and 5.16 shall have been taken, (iv) the Borrower and its Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to such acquisi- -27- tion, with the covenants contained in Sections 6.13 through 6.16 recomputed as at the date of the last ended Test Period, as if such acquisition (and any related incurrence or repayment of Indebtedness) had occurred on the first day of the relevant Test Period (provided that any acquisition that occurs prior to the first Test Period under such Sections shall be deemed to have occurred after the end of such first Test Period), (v) any Indebtedness or any Preferred Stock that is incurred, acquired or assumed in connection with such acquisition shall be in compliance with Section 6.01, (vi) after giving effect to such acquisition and any Revolving Credit Borrowings made in connection therewith, the sum of (A) the Total Revolving Credit Commitment less the Revolving Credit Exposure of all Revolving Lenders, plus (B) cash and/or Permitted Investments on the latest balance sheet of the Borrower that has been delivered to Lenders pursuant to Section 5.01(a) or (b) (with such Permitted Investments valued at the amount set forth on such balance sheet), shall not be less than $75.0 million and (vii) the Borrower has delivered to the Administrative Agent an officers' certificate to the effect set forth in clauses (a), (b) and (c)(i) through (vi) above, together with all relevant financial information for the Person or assets to be acquired. "Permitted Discount Notes" means senior discount notes issued by the Intermediate Parent, (a) the terms of which notes (i) do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation or redemption or repurchase at the option of the holder thereof prior to the final maturity date of the Subordinated Notes (other than in connection with the occurrence of a "change of control" or "asset sale" upon substantially the same terms set forth in the Subordinated Notes), (ii) do not provide for any cash interest payments prior to the earlier of (A) the date that is the five year anniversary of the date of issuance of such Permitted Discount Notes and (B) the date that is the seven year anniversary of the Effective Date and (iii) do not have the benefit of Guarantees or any other credit support from the Borrower and its Subsidiaries and (b) the covenants, events of default and other terms of which (other than interest rate and redemption premiums), taken as a whole, are not more restrictive to the Borrower and its Subsidiaries than those in the Subordinated Notes (as reasonably determined by the Administrative Agent) (it being understood that changes to the covenants and events of default that are necessary for an issuance of notes by a holding company shall not be deemed more restrictive). "Permitted Holders" means each of OEP, Dr. Dennis B. Gillings, the Gillings Family Limited Partnership, the GFEF Limited Partnership, GF Management Company, LLC, the Gillings Family Foundation, Temasek and TPG and each of their respective Affiliates and Permitted Transferees. "Permitted Investments" means: (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or any member state of the European Union (as it exists on the Effective Date) or issued by any agency or instrumentality thereof and backed by the full faith and credit of the United States of America or such member state of the European Union, in each case maturing within one year from the date of acquisition thereof; (b) marketable direct obligations issued by any State of the United States of America or any political subdivision of any such State or any public instrumentality -28- thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (c) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (d) time deposits, demand deposits, certificates of deposit, Eurodollar time deposits or bankers' acceptances maturing within one year from the date of acquisition thereof or overnight bank deposits, in each case, issued by any bank organized under the laws of any member state of the European Union (as it exists on the Effective Date), the United States of America or any State thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $500.0 million; (e) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (d) above; and (f) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (a) through (e) above. "Permitted Lien" has the meaning assigned to such term in Section 6.02. "Permitted PharmaBio Investments" means Investments by the Borrower or any Subsidiary Loan Party in any Person (other than a Subsidiary with the exception of Bioglan) that is involved in the development and production of pharmaceutical products, or in other lines of business within the pharmaceutical services or biotechnology industry or related or complementary businesses in the healthcare industry including consumer marketing and information technology, pharmaco-economics consulting and pharmaco-genomics, that exist as of the Effective Date (as identified on Schedule 6.04) or permitted to be made after the Effective Date pursuant to Section 6.04(x) or (xi). "Permitted PharmaBio Swaps" means the exchange by the Borrower or any Subsidiary Loan Party of a Permitted PharmaBio Investment with a Person that is not an Affiliate of the Borrower for an Investment of equal fair value as determined by the board of directors of the Borrower in good faith that would constitute a Permitted PharmaBio Investment; provided that, with respect to any transaction or series of related transactions that constitute a Permitted PharmaBio Swap with an aggregate fair value in excess of $50.0 million, the Borrower, prior to consummation thereof, shall be required to obtain written opinion from an Independent Financial Advisor to the effect that such transaction or series or related transactions are fair, from a financial point of view, to the Borrower or such Subsidiary Loan Party, taken as a whole. For the avoidance of doubt, if with respect to any disposition of any Permitted PharmaBio Investment the consideration received therefor includes both cash and another Permitted PharmaBio Investment, then for the purposes of determining compliance with Section 6.05, such transaction shall -29- be analyzed as a Permitted PharmaBio Swap to the extent of the fair value of such other Permitted PharmaBio Investment received in exchange therefor pursuant to Section 6.05(v)(B) and a separate sale of the remaining portion of such Permitted PharmaBio Investment for cash which must comply with Section 6.05(v)(A); provided that the amount of cash and the fair value of such other Permitted PharmaBio Investment so received shall be at least equal to the fair value of the Permitted PharmaBio Investment so disposed of. "Permitted Subordinated Indebtedness" means (a) additional Subordinated Notes issued after the Effective Date under the Subordinated Notes Indenture and (b) other subordinated notes issued by the Borrower, (i) the terms of which notes (A) do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the final maturity date of the Subordinated Notes or (B) provide for subordination to the Obligations under the Loan Documents to substantially the same extent as the Subordinated Notes Indenture, (ii) the covenants, events of default, Subsidiary guaranties and other terms of which (other than interest rate and redemption premiums), taken as a whole, are not more restrictive to the Borrower and its Subsidiaries than those in the Subordinated Notes (as reasonably determined by the Administrative Agent) and (iii) no Subsidiary of the Borrower or the Parent Guarantors is an obligor under such notes that is not an obligor under the Subordinated Notes. "Permitted Transferee" means (i) with respect to any Permitted Holder who is a natural person, (A) such Person's estate, spouse, heir, ancestors, lineal descendants (including by adoption and step children, and the lineal descendants thereof), legatees, legal representatives or trustee of a bona fide trust of which one or more of the foregoing or such Permitted Holder is or are the controlling trustees, principal beneficiaries or grantors thereof, whether through the ownership of voting securities, by contract or otherwise, and (B) any entity controlled, directly or indirectly, by any Persons referred to in the preceding clause (A) and (ii) with respect to any Investor Stockholders, (A) any other Investor Stockholder or any of their Permitted Transferees, (B) any director, officer, or general partner, limited partner, manager, member or Affiliate of any Investor Stockholder or any of their Permitted Transferees, or (C) any director, officer, general partner or limited partner of any Affiliate of any Investor Stockholder or any of their Permitted Transferees. "Person" means any natural person, corporation, trust, joint venture, association, company, partnership, limited liability company or government, or any agency or political subdivision thereof. "Plan" means any Pension Plan or Welfare Plan. "Platform" has the meaning assigned to such term in Section 10.17(b). "Pledge Agreement" means the Pledge Agreement, substantially in the form of Exhibit I, among the Loan Parties and the Collateral Agent for the benefit of the Secured Parties. "Pledged Securities" has the meaning provided in the Pledge Agreement. "Pound Sterling" or "(pound)" means the lawful currency of the United Kingdom. -30- "Preferred Stock" means, with respect to any Person, any and all preferred or preference Equity Interests (however designated) of such Person whether or not outstanding or issued on the Effective Date. "Prepayment Date" has the meaning assigned to such term in Section 2.06(f). "Pro Rata Percentage" of any Revolving Lender at any time means the percentage of the aggregate Available Revolving Credit Commitment represented by such Lender's Available Revolving Credit Commitment. "Projected Financial Statements" has the meaning assigned to such term in Section 3.18(c). "Property" means any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including any ownership interests of any Person. "Public Equity Offering" means an underwritten public offering of Equity Interests of the Parent after the Effective Date, pursuant to an effective registration statement filed under the Securities Act. "Real Property" means all right, title and interest of any Loan Party or any of its respective Domestic Subsidiaries in and to a parcel of real property owned, leased or operated (including, without limitation, any leasehold estate) by any Loan Party or any of its respective Domestic Subsidiaries together with, in each case, all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof. "Register" shall have the meaning given such term in Section 10.04(d). "Regulation U" means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents, trutees and advisors of such Person and such Person's Affiliates. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment. "Remedial Action" means (a) "remedial action" as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any Governmental Au- -31- thority or voluntarily undertaken to: (i) clean up, remove, treat, abate or otherwise take corrective action to address any Hazardous Material in the Environment; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health, welfare or the Environment; or (iii) perform studies and investigations in connection with, or as a precondition to, (i) or (ii) above. "Requirement of Law" means, as to any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or assets or to which such Person or any of its property or assets is subject. "Requisite Foreign Currency Lenders" means, collectively, Foreign Currency Lenders having more than fifty percent (50%) of (i) the aggregate outstanding amount of the Foreign Currency Sublimits or (ii) after the Revolving Credit Maturity Date, the Dollar Equivalent of the Foreign Currency Loans. "Requisite Lenders" means, at any time, Lenders having more than fifty percent (50%) of the sum of (a) the aggregate amount of the Revolving Credit Commitments or, after the Revolving Credit Maturity Date, the Revolving Credit Exposure and (b) the aggregate outstanding amount of all Term B Loans; provided, that if at any time any Revolving Lender (together with its Affiliates) holds more than 50% of the aggregate Revolving Credit Commitments or Revolving Credit Exposure, as applicable, the "Requisite Lenders" shall require holders of 66.3% of the aggregate Revolving Credit Commitments or, after the Revolving Credit Maturity Date, the Revolving Credit Exposure. "Requisite Revolving Lenders" means, collectively, Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the Revolving Credit Commitments or, after the Revolving Credit Maturity Date, the Revolving Credit Exposure. "Reset Date" has the meaning assigned to such term in Section 1.04(a). "Responsible Officer" of any corporation, partnership or other entity means any executive officer or Financial Officer of such corporation, partnership or other entity and any other officer or similar official thereof responsible for the administration of the obligations of such corporation, partnership or other entity in respect of this Agreement. "Restricted Payment" means any direct or indirect dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests or Equity Rights in either Parent Guarantor, the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests or Equity Rights in either Parent Guarantor, the Borrower or any Restricted Subsidiary. The granting of security by any Restricted Subsidiary pursuant to the terms of this Agreement shall not be considered a Restricted Payment. -32- "Restricted Subsidiary" means each Subsidiary of the Borrower that is not an Unrestricted Subsidiary. "Revolving Credit Borrowing" means a Borrowing comprised of Revolving Dollar Loans. "Revolving Credit Borrowing Request" means a Borrowing Request in connection with a Revolving Credit Borrowing. "Revolving Credit Commitment" means, with respect to each Revolving Lender, the commitment of such Revolving Lender to make Revolving Loans and to acquire participations in Letters of Credit, Swingline Loans and Foreign Currency Loans hereunder, expressed in each case as an amount representing the maximum principal amount of such Revolving Lender's Revolving Credit Exposure hereunder, as the same may be reduced from time to time pursuant to the provisions of this Agreement. The initial amount of each Revolving Lender's Revolving Credit Commitment is set forth on Schedule 2.01 (in the case of Revolving Credit Commitments in effect on the Effective Date) or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Credit Commitment, as applicable. The aggregate amount of the Revolving Lenders' Revolving Credit Commitments as of the Effective Date is $75.0 million. "Revolving Credit Commitment Period" means the period from and including the Effective Date to but not including the Revolving Credit Maturity Date or any earlier date on which the Revolving Credit Commitments to make Revolving Loans pursuant to Section 2.01 shall terminate as provided herein. "Revolving Credit Exposure" means with respect to any Revolving Lender at any time, the sum of (a) the aggregate principal amount at such time of all outstanding Revolving Dollar Loans of such Revolving Lender, plus (b) such Revolving Lender's LC Exposure at such time, plus (c) such Revolving Lender's Commitment Percentage of the aggregate principal amount at such time of all outstanding Swingline Loans, plus (d) such Revolving Lender's Foreign Currency Exposure at such time. "Revolving Credit Maturity Date" means September 25, 2008, the fifth anniversary of the Effective Date. "Revolving Dollar Lender" means each Revolving Lender other than the Foreign Currency Lender. "Revolving Dollar Loans" means the revolving loans made by the Revolving Lenders in Dollars to the Borrower pursuant to clause (ii) of Section 2.01(a). Each Revolving Dollar Loan shall be a Eurocurrency Revolving Loan or an ABR Revolving Loan. "Revolving Lender" means a Lender with a commitment to make Revolving Loans or with any Revolving Credit Exposure, in its capacity as such. -33- "Revolving Loans" means Foreign Currency Loans and Revolving Dollar Loans. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies. "SDN List" has the meaning provided to such term in Section 6.19 "SEC" means the Securities and Exchange Commission. "Secured Parties" has the meaning assigned to such term in the Security Agreement. "Security Agreement" means the Security Agreement, substantially in the form of Exhibit J, among the Loan Parties and the Collateral Agent for the benefit of the Secured Parties. "Security Documents" means the Security Agreement, the Pledge Agreement, the Non-U.S. Pledge Agreements, the Mortgages, the Perfection Certificate, Cash Management Agreements (as defined in the Security Agreement) and Hedging Agreements executed by the Loan Parties and the Collateral Agent and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.11, 5.12 or 5.16 to secure any of the Obligations. "Senior Indebtedness" of the Borrower means, without duplication: (a) all Consolidated Indebtedness under this Agreement or any Loan Documents whether outstanding on the Effective Date or thereafter incurred; and (b) any other Consolidated Indebtedness permitted to be incurred under Section 6.01, whether outstanding on the Effective Date or thereafter incurred, except the Subordinated Notes and any Permitted Subordinated Indebtedness. "Senior Leverage Ratio" means, for any Test Period, the ratio of (a) Senior Indebtedness as of such date to (b) Consolidated EBITDA for such Test Period. For purposes of calculating the Senior Leverage Ratio, Consolidated EBITDA shall be calculated on a pro forma basis in accordance with Regulation S-X under the Exchange Act to give effect to any Permitted Acquisition consummated during the applicable Test Period as if such Permitted Acquisition were consummated on the first day of such Test Period. "Series A Preferred Stock" means the preferred stock of the Parent designated in the Parent's Amended and Restated Certificate of Incorporation filed on September 24, 2003, as "Series A Redeemable Preferred Stock." "Statutory Reserve Rate" means a fraction (expressed as a decimal) the numerator of which is the number one and the denominator of which is the number one minus the aggregate (expressed as a decimal) of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by any Governmental Authority of the United States or of the jurisdiction of such currency or any jurisdiction in which -34- Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Loans in such currency are determined. Such reserve percentages shall include those imposed pursuant to Regulation D of the Board. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any other applicable law, rule or regulation and without regard to whether any Lender actually obtains or maintains eurocurrency funding for its Eurocurrency Loans. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subordinated Notes" means $450,000,000 aggregate principal amount of 10.0% Senior Subordinated Notes due 2013 of the Borrower issued on the Effective Date. "Subordinated Notes Documents" shall mean the Subordinated Notes, the Subordinated Notes Indenture and all other material documents executed and delivered with respect to the Subordinated Notes or the Subordinated Notes Indenture, as in effect on the Effective Date and as the same may be modified, supplemented, restated and/or amended from time to time in accordance with the terms hereof and thereof. "Subordinated Notes Indenture" shall mean the Indenture, dated as of September 25, 2003, between the Borrower, the Subsidiary Loan Parties and Wells Fargo Bank Minnesota N.A., as Trustee, as in effect on the Effective Date and as the same may be modified, supplemented and/or amended from time to time in accordance with the terms hereof and thereof. "Subordination Provisions" has the meaning assigned to such term in Section 7.01(l). "Subscription Agreements" means the OEP Subscription Agreement, the TPG Subscription Agreement, the Temasek Subscription Agreement and similar agreements with other Persons making cash equity investments, as contemplated by the definition of "OEP Equity Investment." "Subsidiary" means, with respect to any Person, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person; (ii) any partnership of which more than 50% of the outstanding partnership interests having the power to act as a general partner of such partnership (irrespective of whether at the time any partnership interests other than general partnership interests of such partnership shall or might have voting power upon the occurrence of any contingency) are at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person; or (iii) any other legal entity the accounts of which would or should be consolidated with those of such Person on a consoli- -35- dated balance sheet of such Person prepared in accordance with GAAP. Unless otherwise indicated, when used in this Agreement, the term "Subsidiary" shall refer to a Subsidiary of the Borrower. "Subsidiary Loan Party" means each of the Borrower's Domestic Subsidiaries that guarantee the Obligations pursuant to the Guarantee Agreement, as identified on Schedule 6.04. "Survey" means a survey of any Mortgaged Property (and all improvements thereon): (i) prepared by a surveyor or engineer licensed to perform surveys in the state where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction (i.e., outside of the perimeter and height of improvements shown on such survey) on the site of such Mortgaged Property, in which event such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, (iii) certified by the surveyor (in a manner reasonably acceptable to the Collateral Agent) to the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) and issue a survey endorsement. "Swingline Commitment" means the commitment of the Swingline Lender to make Loans pursuant to Section 2.05. "Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Revolving Lender at any time shall be its Commitment Percentage of the total Swingline Exposure at such time. "Swingline Lender" means Citicorp North America, Inc., in its capacity as lender of Swingline Loans. "Swingline Loan" has the meaning assigned to such term in Section 2.05(a). "Syndication Agents" has the meaning assigned to such term in the preamble hereto. "Taking" means any taking of any Property of either of the Parent Guarantors, the Borrower or any Restricted Subsidiary or any portion thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition or use of any Property of either of the Parent Guarantors, the Borrower or any Restricted Subsidiary or any portion thereof, by any Governmental Authority. "Taxes" has the meaning assigned to such term in Section 2.17(a). -36- "Temasek" means Temasek Life Science Investments Private Limited, a Singapore Corporation. "Temasek Subscription Agreement" means the subscription agreement dated as of August 28, 2003 between Temasek and the Parent. "Term B Borrowing" means a Borrowing comprised of Term B Loans on the Effective Date. "Term B Borrowing Request" means a Borrowing Request in connection with a Term B Borrowing made on the Effective Date. "Term B Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make a Term B Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Term B Loan to be made by such Lender hereunder, as the same may be reduced from time to time pursuant to the provisions of this Agreement. The initial amount of each Lender's Term B Commitment is set forth on Schedule 2.01 (in the case of Term B Commitments in effect on the Effective Date) or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Term B Commitment, as applicable. The initial aggregate amount of the Lenders' Term B Commitments is $310.0 million. "Term B Lender" means a Lender with a Term B Commitment or an outstanding Term B Loan, in its capacity as such. "Term B Loan Maturity Date" means September 25, 2009, the sixth anniversary of the Effective Date. "Term B Loans" means the Loans made pursuant to clause (i) of Section 2.01(a). "Terminated Lender" has the meaning assigned thereto in Section 2.21. "Test Period" means (i) for the covenants contained in Sections 6.13 through 6.15, the four consecutive complete Fiscal Quarters of the Borrower then last ended as of each date listed under Test Period and (ii) for all other provisions in this Agreement, the four consecutive complete Fiscal Quarters of the Borrower ended as of the time indicated. Compliance with such covenants shall be tested, as of the end of each Test Period, on the date on which the financial statements pursuant to Section 5.01(a) or (b) have been, or should have been, delivered for the applicable fiscal period. "Title Company" means First American Title Insurance Company, Chicago Title Insurance Company or such other title insurance or abstract company as shall be approved by the Collateral Agent. "Total Leverage Ratio" means, for any Test Period, the ratio of (a) Consolidated Indebtedness as of such date to (b) Consolidated EBITDA for such Test Period. For purposes of -37- calculating the Total Leverage Ratio, Consolidated EBITDA shall be calculated on a pro forma basis in accordance with Regulation S-X under the Exchange Act to give effect to any Permitted Acquisition consummated during the applicable Test Period as if such Permitted Acquisition were consummated on the first day of such Test Period. "Total Revolving Credit Commitment" means, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. "TPG" means TPG Quintiles Holdco LLC, a limited liability company organized under the laws of the State of Delaware. "TPG Subscription Agreement" means the subscription agreement dated as of August 28, 2003 between TPG and the Parent. "Transactions" means the execution and delivery by each Loan Party of each of the Loan Documents and the Borrowing of the Term B Loans hereunder, the issuance of the Subordinated Notes, the Equity Investments, the Merger and the payment of Fees and expenses in connection with the foregoing. "Transferee" has the meaning assigned to such term in Section 2.17(a). "Type" when used in respect of any Loan or Borrowing, refers to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall include the Adjusted LIBO Rate and the Alternate Base Rate. "UCC" shall mean the Uniform Commercial Code as in effect in the applicable state or jurisdiction. "Unrefunded Swingline Loans" has the meaning assigned thereto in Section 2.05(c). "Unrestricted Subsidiary" means any Subsidiary of the Borrower, that, at the time of determination, shall be an Unrestricted Subsidiary (as designated by the board of directors of the Borrower, as provided below). The board of directors of the Borrower may designate any Subsidiary of the Borrower (including any newly acquired or newly formed Subsidiary at or prior to the time it is so formed or acquired), to be an Unrestricted Subsidiary if (a) no Default is existing or will occur as a consequence thereof, (b) such Subsidiary does not own any Capital Stock of, or own or hold any Lien on any property of, the Borrower or any of its Subsidiaries (other than Unrestricted Subsidiaries), (c) such Subsidiary and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee, or otherwise become directly or indirectly liable with respect any Indebtedness pursuant to which the lender has recourse to any property of the Borrower or any of its Subsidiaries (other than Unrestricted Subsidiaries) and (d) either (A) at the time of such designation such Subsidiary shall not have more than de minimis assets or (B) the Borrower shall be permitted to make an Investment in such Subsidiary in an amount equal to the fair market value of the Borrower's Equity Interests in such Subsidiary pursuant to Section 6.04(xiii). Any Subsidiary of an Unrestricted Subsidiary -38- shall be an Unrestricted Subsidiary for purposes of this Agreement. The board of directors of the Borrower may redesignate an Unrestricted Subsidiary of the Borrower to be a Restricted Subsidiary if (i) no Default is existing or will occur as a consequence thereof, (ii) such Subsidiary is a Wholly Owned U.S. Subsidiary and becomes a party to the Guarantee Agreement, Security Agreement and the Pledge Agreement, (iii) after giving effect to such redesignation and the incurrence of any Indebtedness incurred by such Subsidiary since the last day of the immediately preceding Test Period on a pro forma basis as if it was incurred on the first day of the immediately preceding Test Period (but tested as if the applicable ratio were the ratio for the next succeeding Test Period), the Borrower would be in compliance with Sections 6.13 through 6.16, inclusive, and (iv) all Indebtedness, Liens and Investments of such Subsidiary outstanding immediately after such designation would, if incurred at such time, have been permitted to be incurred (and shall be deemed to have been incurred) for all purposes of this Agreement. Each such designation shall be evidenced by filing with the Administrative Agent a certified copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Verispan" means Verispan, L.L.C, a limited liability company organized under the laws of the State of Delaware. "Welfare Plan" means a "welfare plan," as such term is defined in Section 3(1) of ERISA, that is maintained or contributed to by a Loan Party or any Subsidiary or with respect to which a Loan Party or any Subsidiary could incur liability. "Wholly Owned" means, with respect to a Subsidiary, a Subsidiary all of the voting stock of which (except directors' qualifying shares and shares required by applicable law to be held by a Person other than the Borrower) is at such time owned, directly or indirectly, by the Borrower and its other Wholly Owned Subsidiaries. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan" or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Credit Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Credit Borrowing"). SECTION 1.03. Terms Generally. (a) The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (i) any -39- reference in this Agreement to any Loan Document means such document as amended, restated, supplemented or otherwise modified from time to time and (ii) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with the covenants contained in Article VI, all accounting terms herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP as in effect on the Effective Date and applied on a basis consistent with the application used in the financial statements referred to in Section 3.07. (b) If any payment under this Agreement or any other Loan Document shall be due on any day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and in the case of any payment accruing interest, interest thereon shall be paid for the period of such extension. SECTION 1.04. Exchange Rates. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date, the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to Pounds Sterling or Euros and (ii) give written notice thereof to the Lenders and the Borrower. The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a "Reset Date") or other date of determination, shall remain effective until the next succeeding Reset Date, and shall for purposes of this Agreement (other than Section 2.04, Section 10.19 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between U.S. Dollars and Pounds Sterling or Euros. (b) Not later than 5:00 p.m., New York City time, on each Reset Date and on each date on which Foreign Currency Loans are made, the Administrative Agent shall (i) determine the aggregate amount of the Dollar Equivalent of the Revolving Credit Exposure and the Foreign Currency Sublimits and the Maximum Foreign Currency Sublimit then outstanding (after giving effect to any Loans made or repaid or Letters of Credit issued, drawn or expired on such date) and (ii) notify the Lenders and the Borrower of the results of such determination. ARTICLE II THE CREDITS SECTION 2.01. Credit Commitments. (a) Subject to the terms and conditions hereof, (i) each Term B Lender severally agrees to make a Term B Loan in Dollars to the Borrower on the Effective Date in a principal amount not exceeding its Term B Commitment, (ii) each Revolving Lender severally agrees to make Revolving Dollar Loans to the Borrower from time to time during the Revolving Credit Commitment Period and (iii) each Foreign Currency Lender severally agrees to make Foreign Currency Loans to the Borrower from time to time during the Revolving Credit Commitment Period. Amounts repaid or prepaid in respect of Term B Loans may not be reborrowed. During the Revolving Credit Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Dollar Loans or Foreign Currency Loans in whole or in part, and reborrowing, all in accordance -40- with the terms and conditions hereof. Notwithstanding anything to the contrary contained in this Agreement, in no event may (A) Revolving Dollar Loans or Foreign Currency Loans be borrowed under this Article II if, after giving effect thereto (and to any concurrent repayment or prepayment of Loans), (i) the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment then in effect or (ii) the Revolving Credit Exposure of any Revolving Lender would exceed such Revolving Lender's Revolving Credit Commitment and (B) Foreign Currency Loans be borrowed under this Article II if, after giving effect thereto (and to any concurrent repayment or prepayment of Foreign Currency Loans), (i) the Aggregate Foreign Currency Exposure would exceed the Maximum Foreign Currency Sublimit or (ii) the Foreign Currency Exposure of any Foreign Currency Lender would exceed its Foreign Currency Sublimit. (b) The Revolving Loans and Term B Loans may from time to time be (i) Eurocurrency Loans, (ii) ABR Loans if such Loans are not Foreign Currency Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.02 and 2.03; provided that no such Loan shall be made as or converted to a Eurocurrency Loan after the day that is one month prior to the Revolving Credit Maturity Date or the Term B Loan Maturity Date, as applicable. (c) Each Loan (other than a Swingline Loan or Foreign Currency Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. SECTION 2.02. Procedure for Borrowing. (a) The Borrower may borrow under the Revolving Credit Commitments (subject to the limitations in Section 2.01(a)) or the Term B Commitments by giving the Administrative Agent notice substantially in the form of Exhibit B (a "Borrowing Request"), which notice must be received by the Administrative Agent prior to (a) 11:00 a.m., New York City time, three Business Days prior to the requested Borrowing Date, in the case of a Eurocurrency Borrowing, or (b) 11:00 a.m., New York City time, on the Business Day prior to the requested Borrowing Date, in the case of an ABR Borrowing. The Borrowing Request for each Borrowing shall specify (i) whether the requested Borrowing is to be a Revolving Credit Borrowing, a Term B Borrowing or a Foreign Currency Borrowing, (ii) the amount to be borrowed in the currency of such Borrowing, (iii) the requested Borrowing Date (which must be the Effective Date, in the case of a Term B Borrowing), (iv) whether the Borrowing is to be of Eurocurrency Loans or ABR Loans, (v) if the Borrowing is to be of Eurocurrency Loans, the length of the initial Interest Period therefor, and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of this Agreement. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. -41- (b) Each Borrowing shall be in a minimum aggregate principal amount of (i) $5.0 million, L5.0 million or E5.0 million, as applicable, or an integral multiple of $1.0 million, L1.0 million or E1.0 million, as applicable, in excess thereof or (ii) in the case of a Revolving Credit Borrowing, if less, the aggregate amount of the then Available Revolving Credit Commitments. (c) Upon receipt of the Term B Borrowing Request, the Administrative Agent shall promptly notify each Term B Lender of the aggregate amount of the Term B Borrowing and of the amount of such Term B Lender's pro rata portion thereof, which shall be based on their respective Term B Commitments. Each Term B Lender will make the amount of its pro rata portion of the Term B Borrowing available to the Administrative Agent for the account of the Borrower at the New York office of the Administrative Agent specified in Section 10.01 prior to 10:00 a.m., New York City time, on the Effective Date in funds immediately available to the Administrative Agent. Amounts so received by the Administrative Agent will promptly be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Term B Lenders and in like funds as received by the Administrative Agent. (d) After the Effective Date, upon receipt of a Revolving Credit Borrowing Request (other than a Revolving Borrowing Request in respect of a Foreign Currency Borrowing), the Administrative Agent shall promptly notify each Revolving Lender of the aggregate amount of such Revolving Credit Borrowing and of the amount of such Revolving Lender's pro rata portion thereof, which shall be based on the respective Available Revolving Credit Commitments of all the Revolving Lenders. Each Revolving Lender will make the amount of its pro rata portion of each such Revolving Credit Borrowing available to the Administrative Agent for the account of the Borrower at the New York office of the Administrative Agent specified in Section 10.01 prior to 12:00 p.m., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Amounts so received by the Administrative Agent will promptly be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Revolving Lenders and in like funds as received by the Administrative Agent; provided that if on the Borrowing Date of any Revolving Loans to be made to the Borrower, any Swingline Loans made to the Borrower or LC Disbursements for the account of the Borrower shall be then outstanding, the proceeds of such Revolving Loans shall first be applied to pay in full such Swingline Loans or LC Disbursements, with any remaining proceeds to be made available to the Borrower as provided above; and provided, further, that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.07(e) shall be remitted by the Administrative Agent to the Issuing Bank. (e) After the Effective Date, upon receipt of a Revolving Credit Borrowing Request in respect of a Foreign Currency Borrowing, the Administrative Agent shall promptly notify each Foreign Currency Lender of the requested currency and the aggregate amount (in both the requested currency and the Dollar Equivalent thereof) of such Foreign Currency Bor- -42- rowing and of the amount of such Foreign Currency Lender's Foreign Currency Ratable Portion thereof. Each Foreign Currency Lender will make the amount of its Foreign Currency Ratable Portion of each such Foreign Currency Borrowing in the requested currency available to the Administrative Agent for the account of the Borrower at the New York office of the Administrative Agent specified in Section 10.01 prior to 12:00 p.m., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Amounts so received by the Administrative Agent will promptly be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Foreign Currency Lenders and in like funds as received by the Administrative Agent. SECTION 2.03. Conversion and Continuation Options for Loans. (a) The Borrower may elect from time to time to convert (i) Eurocurrency Loans that are in Dollars to ABR Loans, by giving the Administrative Agent prior notice of such election not later than 11:00 a.m., New York City time, on the Business Day prior to a requested conversion or (ii) ABR Loans to Eurocurrency Loans by giving the Administrative Agent prior notice of such election not later than 11:00 a.m., New York City time, three Business Days prior to a requested conversion; provided that if any such conversion of Eurocurrency Loans is made other than on the last day of an Interest Period with respect thereto, the Borrower shall pay any amounts due to the Lenders pursuant to Section 2.18 as a result of such conversion. Any such notice of conversion to Eurocurrency Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of the outstanding Eurocurrency Loans or ABR Loans may be converted as provided herein; provided that (i) no Loan may be converted into a Eurocurrency Loan when any Default or Event of Default has occurred and is continuing, and (ii) no Loan may be converted into a Eurocurrency Loan after the date that is one month prior to the Revolving Credit Maturity Date or the Term B Loan Maturity Date, as applicable. (b) Any Eurocurrency Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving prior notice to the Administrative Agent, not later than 11:00 a.m., New York City time, three Business Days prior to a requested continuation setting forth the length of the next Interest Period to be applicable to such Loans; provided that no Eurocurrency Loan (other than a Foreign Currency Loan) may be continued as such (i) when any Default or Event of Default has occurred and is continuing, and (ii) after the date that is one month prior to the Revolving Credit Maturity Date or the Term B Loan Maturity Date, as applicable; and provided, further, that if the Borrower shall fail to give any required notice as described above in this Section 2.03 or if such continuation is not permitted pursuant to the preceding proviso, then such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period (in which case the Administrative Agent shall notify the Borrower of such conversion). (c) In connection with any Eurocurrency Loans, there shall be no more than ten (10) Interest Periods outstanding at any time. (d) This Section shall not apply to Swingline Loans. -43- SECTION 2.04. Provisions Relating to Foreign Currency Loans. (a) At any time (i) after the occurrence and during the continuance of any Default or Event of Default or an Event of Termination, the Administrative Agent may (and, upon the request of any Foreign Currency Lender, shall), or (ii) upon the replacement of any Foreign Currency Loan with a Revolving Dollar Loan pursuant to Section 2.13 or 2.15 or this Section the Administrative Agent shall, demand that each Revolving Dollar Lender pay in Dollars to the Administrative Agent, for the account of the Foreign Currency Lenders, in the manner provided in clause (b) below, such Revolving Dollar Lender's Pro Rata Percentage of the Dollar Equivalent (utilizing, with respect to each Foreign Currency Loan, the Exchange Rate at the time such Foreign Currency Loan was borrowed) of the Aggregate Foreign Currency Exposure and related accrued but unpaid interest at such time, which demand shall be made through the Administrative Agent, shall be in writing and shall specify the outstanding principal amount and interest of Foreign Currency Loans. (b) Each demand referred to in clause (a) above shall be delivered to each Revolving Dollar Lender, together with a statement prepared by the Administrative Agent setting forth in reasonable detail the Aggregate Foreign Currency Exposure and Dollar Equivalent thereof (utilizing, with respect to each Foreign Currency Loan, the Exchange Rate at the time such Foreign Currency Loan was borrowed), and whether or not the conditions set forth in Section 4.03 or 2.01(a) shall be satisfied (which conditions the Revolving Lenders hereby irrevocably waive), each Revolving Dollar Lender shall, before 11:00 a.m. (New York time) on the Business Day next succeeding the date of such Revolving Dollar Lender's receipt of such demand, make available to the Administrative Agent, in immediately available funds in Dollars for the account of each Foreign Currency Lender, its Pro Rata Percentage of the Dollar Equivalent (utilizing, with respect to each Foreign Currency Loan, the Exchange Rate at the time such Foreign Currency Loan was borrowed) of the Aggregate Foreign Currency Exposure and related accrued but unpaid interest at such time (with respect to each such Revolving Dollar Lender, its "Dollar Portion"). Upon such payment by a Revolving Dollar Lender, such Revolving Dollar Lender shall, except as provided in clause (c) below, be deemed to have made a Revolving Dollar Loan to the Borrower in the principal amount of such payment and bearing interest at the Alternate Base Rate. The Administrative Agent shall forward such payments by the Revolving Dollar Lenders (or cause such payments to be forwarded) to the Foreign Currency Lenders according to their respective Foreign Currency Sublimits. To the extent that any Revolving Dollar Lender fails to make its Dollar Portion available to the Administrative Agent for the accounts of the Foreign Currency Lenders, the Borrower agrees to pay such Dollar Portion on demand in immediately available funds in Dollars for the benefit of the Foreign Currency Lenders (as payment for the Foreign Currency Loans). As of the date of any such demand, the Foreign Currency Loans (together with any interest then accrued thereon) shall, immediately and without further action, become due and payable and, to the extent not otherwise repaid hereunder, the Borrower agrees, as a separate and independent obligation, to pay to the Administrative Agent, for the account of any Foreign Currency Lender entitled thereto, any amounts to which any Foreign Currency Lender may be entitled pursuant to Section 2.18 or Section 10.19 and which shall not otherwise have been repaid by the Revolving Dollar Lenders pursuant to this Section 2.04. (c) Upon the occurrence of an Event of Default under Section 7.01(i), the Foreign Currency Loans shall automatically, immediately, and without notice of any kind, convert -44- to Revolving Dollar Loans (based upon the Dollar Equivalent of the Aggregate Foreign Currency Exposure at the time of the occurrence of such Event of Default) and bearing interest at the rate applicable to Revolving Dollar Loans bearing interest based on the Alternate Base Rate, whereupon each Revolving Dollar Lender shall acquire, without recourse or warranty, an undivided participation in each Foreign Currency Loan otherwise required to be repaid by such Revolving Dollar Lender pursuant to clause (b) above, which participation shall be in a principal amount equal to such Revolving Dollar Lender's Dollar Portion by paying to the Administrative Agent for the benefit of the Foreign Currency Lenders on the date on which such Revolving Dollar Lender would otherwise have been required to make a payment in respect of such Foreign Currency Loan pursuant to clause (b) above, in immediately available funds in Dollars, an amount equal to such Revolving Lender's Dollar Portion. If all or part of such amount is not in fact made available by such Revolving Dollar Lender to the Administrative Agent on such date, the Foreign Currency Lenders shall be entitled to recover any such unpaid amount on demand from such Revolving Dollar Lender together with interest accrued from such date at the Alternate Base Rate. As of the date of any such Event of Default under Section 7.01(i), all Foreign Currency Loans (together with any interest then accrued thereon) shall, immediately and without further action, become due and payable and, to the extent not otherwise repaid hereunder, the Borrower agrees, as a separate and independent obligation, to pay to the Administrative Agent, for the account of any Foreign Currency Lender entitled thereto, any amounts to which any Foreign Currency Lender may be entitled to pursuant to Section 2.18 or Section 10.19 and which shall not otherwise have been repaid by the Revolving Dollar Lenders pursuant to this Section 2.04. (d) From and after the date on which any Revolving Lender (i) is deemed to have made a Revolving Dollar Loan pursuant to clause (b) above with respect to any Foreign Currency Loan or (ii) purchases an undivided participation interest in a Foreign Currency Loan pursuant to clause (c) above, the Administrative Agent and the Foreign Currency Lenders shall promptly distribute to such Revolving Dollar Lender such Revolving Dollar Lender's Pro Rata Percentage of all payments of principal amount and interest received by the Administrative Agent or the Foreign Currency Lenders on account of such Foreign Currency Loan in excess of those received pursuant to clause (b) or (c) above. (e) Notwithstanding the foregoing, a Revolving Dollar Lender shall not have any obligation to acquire a participation in a Foreign Currency Loan pursuant to the foregoing paragraphs if a Default or Event of Default or Event of Termination shall have occurred and be continuing at the time such Foreign Currency Loan was made and such Revolving Dollar Lender shall have notified the Foreign Currency Lenders in writing prior to the time such Foreign Currency Loan was made, that such Default or Event of Default or such Event of Termination has occurred and that such Revolving Dollar Lender will not acquire participations in Foreign Currency Loans made while such Default or Event of Default or such Event of Termination is continuing. SECTION 2.05. Swingline Loans. (a) Subject to the terms and conditions hereof, the Swingline Lender agrees to make swingline loans (individually, a "Swingline Loan" and collectively, the "Swingline Loans") to the Borrower from time to time during the Revolving -45- Credit Commitment Period in accordance with the procedures set forth in this Section 2.05; provided that (i) the aggregate principal amount of all Swingline Loans shall not exceed $15.0 million at any one time outstanding, (ii) the principal amount of any Borrowing of Swingline Loans may not exceed the aggregate amount of the Available Revolving Credit Commitments of all Revolving Lenders immediately prior to such Borrowing or result in the Aggregate Revolving Credit Exposure then outstanding exceeding the Total Revolving Credit Commitments then in effect, and (iii) in no event may Swingline Loans be borrowed hereunder if (x) a Default or Event of Default or Event of Termination shall have occurred and be continuing and (y) such Default or Event of Default or Event of Termination shall not have been subsequently cured or waived. Amounts borrowed under this Section 2.05 may be repaid and, up to but excluding the Revolving Credit Maturity Date, reborrowed. All Swingline Loans shall at all times be ABR Loans. The Borrower shall give the Administrative Agent notice of any Swingline Loan requested hereunder (which notice must be received by the Administrative Agent prior to 11:00 a.m., New York City time, on the requested Borrowing Date) specifying (A) the amount to be borrowed, and (B) the requested Borrowing Date. Upon receipt of such notice, the Administrative Agent shall promptly notify the Swingline Lender of the aggregate amount of such Borrowing. Not later than 2:00 p.m., New York City time, on the Borrowing Date specified in such notice the Swingline Lender shall make such Swingline Loan available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent set forth in Section 10.01 in funds immediately available to the Administrative Agent. Amounts so received by the Administrative Agent will promptly be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the amount made available to the Administrative Agent by the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.07(e), by remittance to the Issuing Bank) and in like funds as received by the Administrative Agent. Each Borrowing pursuant to this Section 2.05 shall be in a minimum principal amount of $500,000 or an integral multiple of $100,000 in excess thereof. (b) Notwithstanding the occurrence of any Default or Event of Default or Event of Termination or noncompliance with the conditions precedent set forth in Article IV or the minimum borrowing amounts specified in Section 2.02, if any Swingline Loan shall remain outstanding at 10:00 a.m., New York City time, on the seventh Business Day following the Borrowing Date thereof and if by such time on such seventh Business Day the Administrative Agent shall have received neither (i) a Borrowing Request delivered by the Borrower pursuant to Section 2.02 requesting that Revolving Loans be made pursuant to Section 2.01 on the immediately succeeding Business Day in an amount at least equal to the aggregate principal amount of such Swingline Loan, nor (ii) any other notice satisfactory to the Administrative Agent indicating the Borrower's intent to repay such Swingline Loan on the immediately succeeding Business Day with funds obtained from other sources, the Administrative Agent shall be deemed to have received a Borrowing Request from the Borrower pursuant to Section 2.02 requesting that ABR Revolving Loans be made pursuant to Section 2.01 on such immediately succeeding Business Day in an amount equal to the amount of such Swingline Loan, and the procedures set forth in Section 2.02 shall be followed in making such ABR Revolving Loans; provided that for the purposes of determining each Revolving Lender's Pro Rata Percentage with respect to such Borrowing, the Swingline Loan to be repaid with the proceeds of such Borrowing shall be deemed to not -46- be outstanding. The proceeds of such ABR Revolving Loans shall be applied to repay such Swingline Loan. (c) If, for any reason, ABR Revolving Loans may not be, or are not, made pursuant to paragraph (b) of this Section 2.05 to repay any Swingline Loan as required by such paragraph, effective on the date such ABR Revolving Loans would otherwise have been made, each Revolving Lender severally, unconditionally and irrevocably agrees that it shall, without regard to the occurrence of any Default or Event of Default, purchase a participating interest in such Swingline Loan ("Unrefunded Swingline Loan") in an amount equal to such Revolving Lender's Pro Rata Percentage of the aggregate amount of the ABR Revolving Loans which would otherwise have been made pursuant to paragraph (b) of this Section 2.05. Each Revolving Lender will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation, and the proceeds of such participations shall be distributed by the Administrative Agent to the Swingline Lender. All payments by the Revolving Lenders in respect of Unrefunded Swingline Loans and participations therein shall be made in accordance with Section 2.14. (d) Notwithstanding the foregoing, a Lender shall not have any obligation to acquire a participation in a Swingline Loan pursuant to the foregoing paragraphs if a Default or Event of Default or Event of Termination shall have occurred and be continuing at the time such Swingline Loan was made and such Lender shall have notified the Swingline Lender in writing prior to the time such Swingline Loan was made, that such Default or Event of Default or such Event of Termination has occurred and that such Lender will not acquire participations in Swingline Loans made while such Default or Event of Default or such Event of Termination is continuing. SECTION 2.06. Optional and Mandatory Prepayments of Loans; Repayments of Term B Loans. (a) The Borrower may at any time and from time to time prepay the Loans (subject, in the case of Eurocurrency Loans, to compliance with the terms of Section 2.18), in whole or in part, subject to Section 2.06(e), upon irrevocable notice to the Administrative Agent not later than 12:00 noon, New York City time, two Business Days prior to the date of such prepayment, specifying (i) the date and amount of prepayment, and (ii) the Class of Loans to be prepaid and whether the prepayment is of Eurocurrency Loans, ABR Loans or a combination thereof (including in the case of Eurocurrency Loans, the Borrowing to which such prepayment is to be applied and, if of a combination thereof, the amount allocable to each). Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Loans (other than Swingline Loans) shall be in an aggregate principal amount of $5.0 million, (pound)5.0 million or (euro)5.0 million, as applicable, or a whole multiple of $1.0 million, (pound)1.0 million or (euro)1.0 million, as applicable, in excess thereof (or, if less, the remaining outstanding principal amount thereof). Partial prepayments of Swingline Loans shall be in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof (or, if less, the remaining outstanding principal amount thereof). -47- (b) In the event and on such occasion that the Aggregate Revolving Credit Exposure exceeds the Total Revolving Credit Commitment, the Borrower shall prepay Revolving Credit Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in the account established with the Administrative Agent pursuant to Section 2.07(j)) in an aggregate amount equal to such excess. In the event and on such occasion that the Aggregate Foreign Currency Exposure exceeds the Maximum Foreign Currency Sublimit, the Borrower shall prepay Foreign Currency Borrowings in an aggregate amount equal to such excess. (c) (i) If, subsequent to the Effective Date, either Parent Guarantor or the Borrower shall issue any Equity Interests or Equity Rights (it being understood that the issuance of debt securities convertible into, or exchangeable or exercisable for, any Equity Interest or Equity Right shall be governed by Section 2.06(c)(ii) below) (other than any Excluded Equity Issuance) (each, an "Equity Issuance"), 50% of the Net Proceeds thereof shall be applied immediately after receipt thereof toward the prepayment of the Term B Loans in accordance with Section 2.06(e) below. (ii) If, subsequent to the Effective Date, either Parent Guarantor, the Borrower or any of the Restricted Subsidiaries shall incur or permit the incurrence of any Indebtedness (including pursuant to debt securities which are convertible into, or exchangeable or exercisable for, any Equity Interest or Equity Rights) (other than Excluded Debt Issuances) (each, a "Debt Incurrence"), 100% of the Net Proceeds thereof shall be applied immediately after receipt thereof toward the prepayment of the Term B Loans in accordance with Section 2.06(e) below; provided that if at the time of such Debt Incurrence, the Total Leverage Ratio as of the last Test Period for which a Compliance Certificate has been delivered determined on a pro forma basis after giving effect to such Debt Incurrence is less than 3.0x, then only 50% of the Net Proceeds thereof shall be so applied. (iii) If, subsequent to the Effective Date, either Parent Guarantor, the Borrower or any of the Restricted Subsidiaries shall receive Net Proceeds from any Asset Sale, 100% of such Net Proceeds shall be applied immediately after receipt thereof toward the prepayment of the Term B Loans in accordance with Section 2.06(e) below; provided that (x) the Net Proceeds from Asset Sales permitted by Section 6.05 shall not be required to be applied as provided herein if and to the extent that (1) no Default or Event of Default then exists or would arise therefrom and (2) the Borrower delivers an officers' certificate to the Administrative Agent on or prior to the date of such Asset Sale stating that such Net Proceeds shall be reinvested in assets of the Borrower or any Restricted Subsidiary otherwise permitted to be acquired pursuant to this Agreement in each case within 270 days (subject to Section 6.05(vii), if applicable) following the date of such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), (y) all such Net Proceeds shall be held in the Collateral Account and released therefrom only in accordance with the terms of the Security Agreement, and (z) if all or any portion of such Net Proceeds not so applied as provided herein is not so used within such 270-day period (subject to Section 6.05(vii), if applicable), such remaining portion shall be applied on the last day of such period as specified in this subsection (c)(iii); provided, further, if the Property subject to such Asset Sale constituted Collateral under the Security Documents, then any capital assets pur- -48- chased with the Net Proceeds thereof pursuant to this subsection shall be mortgaged or pledged, as the case may be, to the Collateral Agent, for its benefit and for the benefit of the other Secured Parties in accordance with Section 5.11. (iv) If, subsequent to the Effective Date, either Parent Guarantor, the Borrower or any of the Restricted Subsidiaries shall receive proceeds from insurance recoveries in respect of any Destruction or any proceeds or awards in respect of any Taking, 100% of the Net Proceeds thereof shall be applied immediately after receipt thereof toward the prepayment of the Term B Loans in accordance with Section 2.06(e) below; provided that (x) so long as no Default or Event of Default then exists or would arise therefrom, such Net Proceeds shall not be required to be so applied to the extent that the Borrower has delivered an officers' certificate to the Administrative Agent promptly following the receipt of such Net Proceeds stating that such proceeds shall be used to (1) repair, replace or restore any Property in respect of which such Net Proceeds were paid or (2) fund the substitution of other Property used or usable in the business of the Borrower or the Restricted Subsidiaries, in each case within 270 days following the date of the receipt of such Net Proceeds, (y) all such Net Proceeds shall be held in the Collateral Account and released therefrom only in accordance with the terms of the Security Agreement, and (z) if all or any portion of such Net Proceeds not required to be applied to the prepayment of Term B Loans pursuant to the preceding proviso is not so used within 270 days after the date of the receipt of such Net Proceeds, such remaining portion shall be applied on the last day of such period as specified in this subsection (c)(iv); provided, further, if the Property subject to such Destruction or Taking constituted Collateral under the Security Documents, then any replacement or substitution Property purchased with the Net Proceeds thereof pursuant to this subsection shall be mortgaged or pledged, as the case may be, to the Collateral Agent, for its benefit and for the benefit of the other Secured Parties in accordance with Section 5.11. (v) If, for any Fiscal Year of the Borrower commencing with its Fiscal Year ending on December 31, 2004, there shall be Excess Cash Flow of the Borrower and the Restricted Subsidiaries for such Fiscal Year, 50% of such Excess Cash Flow shall be applied not later than 150 days after the end of such Fiscal Year toward prepayment of the Term B Loans in accordance with Section 2.06(e) below; provided that for the Fiscal Year ending on December 31, 2004, Excess Cash Flow to be applied toward the prepayment of the Term B Loans pursuant to this Section 2.06(c)(v) shall be reduced by Foreign Excess Cash Flow, if positive. (d) The Term B Loans shall be repaid in consecutive quarterly installments on the dates set forth below (each such day, an "Installment Payment Date"), commencing on December 31, 2003, in an aggregate amount equal to the amount specified below for each such Installment Payment Date.

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(e) Prepayments of Term B Loans pursuant to Sections 2.06(a) and (c) shall be applied pro rata to remaining installments of principal of such Term B Loans. Except as otherwise may be directed by the Borrower, any prepayment of Loans pursuant to this Section 2.06 shall be applied, first, to any ABR Loans then outstanding and the balance of such prepayment, if any, to the Eurocurrency Loans then outstanding. (f) If on any day on which Loans would otherwise be required to be prepaid pursuant to this Section 2.06, but for the operation of this Section 2.06(f) (each a "Prepayment Date"), the amount of such required prepayment exceeds the then outstanding aggregate principal amount of ABR Loans which are of the Type required to be prepaid and no Default or Event of Default exists or is continuing, then on such Prepayment Date, (i) the Borrower shall deposit Dollars into the Collateral Account in an amount equal to such excess, and only the outstanding ABR Loans which are of the Type required to be prepaid shall be required to be prepaid on such Prepayment Date, and (ii) on the last day of each Interest Period after such Prepayment Date in effect with respect to a Eurocurrency Loan which is of the Type required to be prepaid, the Administrative Agent is irrevocably authorized and directed to apply funds from the Collateral Account (and liquidate investments held in the Collateral Account as necessary) to prepay such Eurocurrency Loans for which the Interest Period is then ending to the extent funds are available in the Collateral Account. For avoidance of doubt, all such Eurocurrency Loans shall continue to bear interest until repaid. (g) Any optional prepayment of Term B Loans pursuant to Section 2.06(a) (other than with the proceeds from any sale of Equity Interests of Bioglan or any sale of Bioglan through merger, consolidation or any sale of its assets) and any mandatory prepayment of Term -50- B Loans pursuant to Section 2.06(c)(ii) during the periods set forth below shall be made with the premium (expressed as a percentage of the principal amount being prepaid) set forth opposite the periods below:

SECTION 2.07. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Credit Commitment Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed $25.0 million and (ii) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment. With respect to any Letter of Credit which contains any "evergreen" automatic renewal provision, the Issuing Bank shall be deemed to have consented to any such extension or renewal provided that all of the requirements of this Section 2.07 are met and no Default or Event of Default exists and is continuing. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Credit Maturity Date. -51- (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender's Commitment Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Revolving Lender's Commitment Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or an Event of Default or reduction or termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, if such payment is made from the proceeds of Revolving Credit Loans, or 2:00 p.m., New York City time, if such payment is made from cash or is made from the proceeds of a Swingline Loan, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.02 or 2.04 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Revolving Lender's Commitment Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Commitment Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.02 with respect to Loans made by such Revolving Lender (and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Re- -52- volving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Revolving Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. The Borrower's obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section 2.07 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder. Neither the Administrative Agent, the Revolving Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issu- -53- ing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement. (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section 2.07, then Section 2.09(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section 2.07 to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.11(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Requisite Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in a collateral account reasonably satisfactory to the Collateral Agent an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (a) of Section 7.01 or any Event of Default described in clause (i) of Section 7.01. Each such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations of the Borrower under this Agreement and the Borrower hereby grants the Collateral Agent a security interest in respect of each such deposit and the collateral account in which such deposits are held. -54- The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over the collateral account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Collateral Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in the collateral account. Moneys deposited in the collateral account pursuant to this Section 2.07(j) shall be applied by the Collateral Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Defaults or Events of Default have been cured or waived. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the relevant Lenders (i) in respect of Revolving Credit Borrowings and Foreign Currency Borrowings, on the Revolving Credit Maturity Date (or such earlier date as, and to the extent that, such Revolving Dollar Loan or Foreign Currency Loan becomes due and payable pursuant to Section 2.04, 2.05, 2.06, 2.12 or Article VII), the unpaid principal amount of each Revolving Dollar Loan and Foreign Currency Loan and each Swingline Loan made to it by each such Lender, in the applicable currency of such Loan, and (ii) in respect of Term B Borrowings, on the Term B Loan Maturity Date (or such earlier date as, and to the extent that, such Term B Loan becomes due and payable pursuant to Section 2.06 or Article VII), the unpaid principal amount of each Term B Loan held by each such Term B Lender. The Borrower hereby further agrees to pay interest in immediately available funds at the applicable office of the Administrative Agent (as specified in Section 2.14(a)) on the unpaid principal amount of the Revolving Dollar Loans, Foreign Currency Loans, Swingline Loans and Term B Loans made to it from time to time from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.09. All payments required hereunder shall be made in the currency of such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to the appropriate lending office of such Lender resulting from each Loan made by such lending office of such Lender from time to time, including the amounts of principal and interest payable and paid to such lending office of such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain the Register pursuant to Section 10.04, and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount of each such Loan, the Class and Type of each such Loan and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in re- -55- spect of each such Loan and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of each such Loan and each Lender's share thereof. (d) The entries made in the Register and accounts maintained pursuant to paragraphs (b) and (c) of this Section 2.08 and the Notes maintained pursuant to paragraph (e) of this Section 2.08 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. (e) The Loans of each Class made by each Lender to the Borrower shall, if requested by the applicable Lender (which request shall be made to the Administrative Agent), be evidenced by a single Note duly executed on behalf of the Borrower, in substantially the form attached hereto as Exhibit F-1 or F-2, as applicable, with the blanks appropriately filled, payable to the order of such Lender. SECTION 2.09. Interest Rates and Payment Dates. (a) Each Eurocurrency Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) for each day during each Interest Period with respect thereto at a rate per annum equal to: (i) in the case of a Eurocurrency Revolving Loan, (A) the LIBO Rate determined for such Interest Period, plus (B) the Applicable Rate; or (ii) in the case of a Eurocurrency Term B Loan, (A) the LIBO Rate determined for such Interest Period plus (B) the Applicable Rate. (b) Each ABR Loan (including each Swingline Loan) shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, or over a year of 360 days when the Alternate Base Rate is determined by reference to clause (c) of the definition of "Alternate Base Rate") at a rate per annum equal to the Alternate Base Rate plus the Applicable Rate. (c) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any Fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity thereof or by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum (the "Default Rate")which is (x) in the case of overdue principal (except as otherwise provided in clause (y) below), the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 2.09 plus 2.00% per annum or (y) in the case of any overdue interest, Fee or other amount, the rate described in Section 2.09(b) applicable to an ABR Revolving Loan plus 2.00% per annum, in each case from the date of such nonpayment to (but excluding) the date on which such amount is paid in full (after as well as before judgment). -56- (d) Interest shall be payable in arrears on each Interest Payment Date and on the Term B Loan Maturity Date and Revolving Credit Maturity Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. Interest in respect of each Loan shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. Interest on each Loan shall be paid in the same currency as the currency in which the Loan is made. SECTION 2.10. Computation of Interest. Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. SECTION 2.11. Fees. (a) The Borrower agrees to pay a commitment fee (a "Commitment Fee") to each Revolving Lender, for which payment will be made in arrears through the Administrative Agent on the last day of March, June, September and December beginning after the Effective Date, and on the Commitment Fee Termination Date (as defined below). The Commitment Fee due to each Revolving Lender shall commence to accrue for a period commencing on the Effective Date and shall cease to accrue on the date (the "Commitment Fee Termination Date") that is the later of (i) the date on which the Revolving Credit Commitment of such Revolving Lender shall be terminated as provided herein and (ii) the first date after the end of the Revolving Credit Commitment Period. The Commitment Fee accrued to each Revolving Lender shall equal 0.50% per annum multiplied by such Lender's Commitment Fee Average Daily Amount (as defined below) for the applicable quarter (or shorter period commencing on the date of this Agreement and ending with such Lender's Commitment Fee Termination Date). A Revolving Lender's "Commitment Fee Average Daily Amount" with respect to a calculation period shall equal the average daily amount during such period calculated using the daily amount of such Revolving Lender's Revolving Credit Commitment less such Revolving Lender's Revolving Credit Exposure (excluding clause (c) and, in the case of Revolving Lenders that are not also Foreign Currency Lenders, clause (d) of the definition thereof for purposes of determining the Commitment Fee Average Daily Amount only) for any applicable days during such Revolving Lender's Revolving Credit Commitment Period. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to the Applicable Rate for Eurocurrency Revolving Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Revolving Lender's Revolving Credit Commitment terminates and the date on which such Revolving Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion -57- thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Credit Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees (collectively, "LC Fees") accrued through and including the last day of March, June, September and December of each calendar year during the Revolving Credit Commitment Period shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Credit Commitments terminate and any such fees accruing after the date on which the Revolving Credit Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand therefor. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) The Borrower agrees to pay to the Administrative Agent the annual administrative fee set forth in the Fee Letter (the "Agent Fees"). (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution. Once paid, none of the Fees shall be refundable. SECTION 2.12. Termination, Reduction or Adjustment of Commitments. (a) Unless previously terminated, (i) the Term B Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date and (ii) the Revolving Credit Commitments shall terminate on the Revolving Credit Maturity Date. (b) The Borrower shall have the right, upon one Business Day's notice to the Administrative Agent, to terminate or, from time to time, reduce the amount of the Revolving Credit Commitments; provided that no such termination or reduction of Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any repayments of the Loans made on the effective date thereof, (i) the Aggregate Revolving Credit Exposure then outstanding would exceed the Total Revolving Credit Commitment then in effect or (ii) the Aggregate Foreign Currency Exposure then outstanding would exceed the Maximum Foreign Currency Sublimit then in effect. Any such reduction shall be in an amount equal to $5.0 million or a whole multiple of $1.0 million in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. (c) If any prepayment of Term B Borrowings would otherwise be required pursuant to Section 2.06 but cannot be made because there are no Term B Borrowings outstanding, or because the amount of the required prepayment exceeds the outstanding amount of Term B Borrowings, then, on the date that such prepayment is required, the Revolving Credit Commitments shall be permanently reduced by an aggregate amount equal to the amount of the required prepayment, or the excess of such amount over the outstanding amount of Term B Borrowings, as the case may be. -58- (d) The Borrower shall pay to the Administrative Agent for the account of the applicable Revolving Lenders, on each date of termination or reduction of the Revolving Credit Commitments, the Commitment Fee on the amount of the Revolving Credit Commitments so terminated or reduced accrued to the date of such termination or reduction. (e) Each reduction in the Revolving Credit Commitments shall reduce the Swingline Commitment of the Swingline Lender, and the Maximum Foreign Currency Sublimit and the Foreign Currency Sublimit of each Foreign Currency Lender, by an equal percentage. SECTION 2.13. Inability to Determine Interest Rate; Unavailability of Deposits; Inadequacy of Interest Rate. If prior to 11:00 a.m., London time, two Business Days before the first day of any Interest Period, including an initial Interest Period, for a requested Eurocurrency Borrowing: (i) the Administrative Agent shall have determined in good faith (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market generally, adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for the currency in which any Eurocurrency Loan is denominated or the currency specified in the Borrowing Request for such Eurocurrency Borrowing (the "Applicable Currency") for such Interest Period, or (ii) the Administrative Agent shall have received notice from a majority in interest of the Lenders of the applicable Class that the Adjusted LIBO Rate determined or to be determined for such Interest Period for such Applicable Currency will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, then the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders by 12:00 noon, New York City time, on the same day. The Administrative Agent shall give telecopy or telephonic notice to the Borrower and the Lenders as soon as practicable after the circumstances giving rise to such notice no longer exist, and until such notice has been given, any affected Eurocurrency Loans of the Applicable Currency shall not be (x) converted or continued pursuant to Section 2.03 or (y) made pursuant to a Borrowing Request, and shall be continued or made as ABR Loans (including the requirement that all Foreign Currency Loans shall be replaced by Revolving Dollar Loans pursuant to Section 2.04(a)(ii)), as the case may be. SECTION 2.14. Pro Rata Treatment and Payments. (a) Each reduction of the Revolving Credit Commitments of the Revolving Lenders shall be made pro rata according to the amounts of such Revolving Lenders' Commitment Percentages. Each payment (including each prepayment) by the Borrower on account of principal of and interest on Loans which are ABR Loans shall be made pro rata according to the respective outstanding principal amounts of such ABR Loans then held by the Lenders of the applicable Class. Each payment (including each prepayment) by the Borrower on account of principal of and interest on Loans which are Eurocurrency Loans designated by the Borrower to be applied to a particular Eurocurrency Borrowing shall be made pro rata according to the respective outstanding principal amounts of such -59- Loans then held by the Lenders of the applicable Class. Each payment (including each prepayment) by the Borrower on account of principal of and interest on Swingline Loans and Foreign Currency Loans shall be made pro rata according to the respective outstanding principal amounts of the Swingline Loans or Foreign Currency Loans, as applicable, or participating interests therein, as the case may be, then held by the relevant Lenders. All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 10:00 a.m., New York time, on the due date thereof to the Administrative Agent, for the account of the Lenders of the applicable Class, at the Administrative Agent's New York office specified in Section 10.01 in the currency in which the applicable obligation is denominated (except as set forth in Section 2.04) and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders entitled thereto in the same currency as received and promptly upon receipt in like funds as received. If any payment hereunder (other than payments on Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Subject to Section 2.13, unless the Administrative Agent shall have been notified in writing by any Lender prior to a Borrowing that such Lender will not make the amount that would constitute its share of such Borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section 2.14(b) shall be conclusive in the absence of manifest error. If such Lender's share of such Borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Revolving Loans hereunder, on demand, from the Borrower, but without prejudice to any right or claim that the Borrower may have against such Lender. (c) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the -60- amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. SECTION 2.15. Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law, or in the interpretation or application thereof, shall make it unlawful for any Lender to make or maintain Eurocurrency Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurocurrency Loans, continue Eurocurrency Loans as such and convert ABR Loans to Eurocurrency Loans shall forthwith be suspended until such time as the making or maintaining of Eurocurrency Loans shall no longer be unlawful, and (b) such Lender's Loans then outstanding as Eurocurrency Loans, if any, shall be converted automatically to ABR Loans (including the requirement that all Foreign Currency Loans shall be replaced by Revolving Dollar Loans pursuant to Section 2.04(a)(ii)) on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. SECTION 2.16. Requirements. (a) If at any time any Lender or the Issuing Bank determines that the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order (other than any change by way of imposition or increase of reserve requirements included in determining the Adjusted LIBO Rate) or the compliance by such Lender or the Issuing Bank with any guideline, request or directive from any central bank or other Governmental Authority (whether or not having the force of law), shall have the effect of increasing the cost to such Lender or the Issuing Bank for agreeing to make or making, funding or maintaining any Eurocurrency Loans or participating in, issuing or maintaining any Letter of Credit, then the Borrower shall from time to time, within five days of demand therefor by such Lender or the Issuing Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender or the Issuing Bank, as applicable, additional amounts sufficient to compensate such Lender or the Issuing Bank for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender or the Issuing Bank, shall be conclusive and binding for all purposes, absent manifest error. Such Lender or the Issuing Bank, as applicable, shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender or the Issuing Bank, as applicable, for such increased cost or reduced amount. Such additional amounts shall be payable directly to such Lender or the Issuing Bank, as applicable, within five days of the Borrower's receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. (b) If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority after the date hereof affects or would affect the amount of capital required or expected to be maintained by any Lender or the Issuing Bank (or a holding company control- -61- ling such Lender or the Issuing Bank) and such Lender or the Issuing Bank determines (in its sole and absolute discretion) that the rate of return on its capital (or the capital of its holding company, as the case may be) as a consequence of its Revolving Credit Commitment or the Loans made by it or its participations in Swingline Loans or Foreign Currency Loans or any issuance, participation or maintenance of Letters of Credit is reduced to a level below that which such Lender or the Issuing Bank (or its holding company) could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender or the Issuing Bank to the Borrower, the Borrower shall immediately pay directly to such Lender or the Issuing Bank, as the case may be, additional amounts sufficient to compensate such Lender or the Issuing Bank (or its holding company) for such reduction in rate of return. A statement of such Lender or the Issuing Bank as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. In determining such amount, such Lender or the Issuing Bank may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable. (c) In the event that the Issuing Bank or any Lender determines that any event or circumstance that will lead to a claim under this Section 2.16 has occurred or will occur, the Issuing Bank or such Lender will use its best efforts to so notify the Borrower; provided that any failure to provide such notice shall in no way impair the rights of the Issuing Bank or such Lender to demand and receive compensation under this Section 2.16, but without prejudice to any claims of the Borrower for compensation for actual damages sustained as a result of any failure to observe this undertaking. SECTION 2.17. Taxes. (a) All payments by the Borrower of principal of, and interest on, the Loans and all other amounts payable under the Loan Documents and the Notes shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority on the Administrative Agent, the Issuing Bank, any Lender or any assignee of such Lender or the Issuing Bank, as the case may be, or a Participant or a change in designation of the lending office of a Lender or the Issuing Bank, as the case may be (a "Transferee"), but excluding taxes imposed on or measured by the recipient's net income (or franchise taxes imposed in lieu thereof) that are imposed by a taxing authority in a jurisdiction in which the recipient is incorporated or organized or maintains its principal place of business or a lending office (such non-excluded items and any interest, penalties and related reasonable costs and expenses, being called "Taxes"), unless required by applicable law, rule or regulation. In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; -62- (ii) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (iii) pay to the Administrative Agent for its account or the account of a Lender, the Issuing Bank or the Transferee, as the case may be, such additional amount or amounts as are necessary to ensure that the net amount actually received by the Administrative Agent, such Lender, the Issuing Bank or such Transferee, as the case may be, will equal the full amount the Administrative Agent, such Lender, the Issuing Bank or such Transferee, as the case may be, would have received had no such withholding or deduction been required (including withholding or deduction in respect of additional amounts payable under this Section 2.17). Moreover, if any Taxes are directly asserted, whether or not correctly asserted, against the Administrative Agent, the Issuing Bank or any Lender or Transferee with respect to any payment received by the Administrative Agent, the Issuing Bank or such Lender or Transferee hereunder, the Borrower will promptly indemnify each such party for the full amount of such Taxes. (b) If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for its account or the account of the Issuing Bank, the respective Lenders or Transferees, the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent, the Issuing Bank, the Lenders and the Transferees for any incremental Taxes that may become payable by the Administrative Agent, the Issuing Bank or any Lender or Transferee as a result of any such failure. For purposes of this Section 2.17, a distribution hereunder by the Administrative Agent to or for the account of the Issuing Bank or any Lender or Transferee shall be deemed a payment by the Borrower. (c) Each Lender or Transferee that is organized under the laws of a jurisdiction other than the United States of America or any state or political subdivision thereof shall, on or prior to the Effective Date (in the case of each Lender that is a party hereto on the Effective Date) or on or prior to the date of any assignment, participation or change in the designated lending office hereunder (in the case of a Transferee) and thereafter as reasonably requested from time to time by the Borrower or the Administrative Agent, execute and deliver, if legally able to do so, to the Borrower and the Administrative Agent one or more (as the Borrower or the Administrative Agent may reasonably request) United States Internal Revenue Service Forms W-8BEN or such other forms or documents (or successor forms or documents) reasonably requested by the Borrower, appropriately completed, as may be applicable to establish the extent, if any, to which a payment to such Lender or Transferee is exempt from or entitled to a reduced rate of withholding or deduction of Taxes imposed by the United States. If a Lender or Transferee becomes aware of any fact that would cause any form previously provided by such Lender or Transferee pursuant to this paragraph (c) to become untrue in any material respect, or would prevent such Lender or Transferee from providing a renewal form upon expiration of the form previously provided, such Lender or Transferee shall promptly notify the Borrower and the Administrative Agent. -63- (d) The Borrower shall not be required to indemnify or to pay any additional amounts to the Administrative Agent, the Issuing Bank or any Lender or Transferee with respect to any Taxes imposed by the United States pursuant to Section 2.17(a), Section 2.17(b) or this Section 2.17(d) to the extent that (i) any obligation to withhold, deduct or pay amounts with respect to such Tax existed on the date the Administrative Agent, the Issuing Bank or such Lender or Transferee became a party to this Agreement or otherwise became a Transferee (and, in such case, the Borrower may deduct and withhold such Tax from payments to the Administrative Agent, the Issuing Bank, such Lender or Transferee); provided that this clause (i) shall not apply to a party that is not an original party to this Agreement (a "Subsequent Party") to the extent that the Borrower's obligations with respect to such Subsequent Party on the date such party becomes a Subsequent Party do not exceed the Borrower's obligations with respect to the Subsequent Party's predecessor immediately prior thereto, or (ii) any Lender or Transferee fails to comply in full with the provisions of paragraph (c) above (and, in such case, the Borrower may deduct and withhold all Taxes required by law as a result of such noncompliance from payments to the Administrative Agent, the Issuing Bank or such Lender or Transferee). (e) In addition, the Borrower shall pay all Other Taxes imposed to the relevant Governmental Authority imposing such Other Taxes in accordance with applicable law. SECTION 2.18. Indemnity. In the event any Lender shall incur any loss or expense (including any loss (other than lost profit) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a Eurocurrency Loan) as a result of any conversion of a Eurocurrency Loan to an ABR Loan or repayment or prepayment of the principal amount of any Eurocurrency Loan on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 2.03, 2.04, 2.06, 2.08, 2.13, 2.15, 2.16 or 2.21 or otherwise, or any failure to borrow or convert any Eurocurrency Loan after notice thereof shall have been given hereunder, whether by reason of any failure to satisfy a condition to such Borrowing or otherwise, then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 2.19. Change of Lending Office. Each Lender (or Transferee) agrees that, upon the occurrence of any event giving rise to the operation of Section 2.15, 2.16 or 2.17 with respect to such Lender (or Transferee), it will, if requested by the Borrower, use commercially reasonable efforts (subject to overall policy considerations of such Lender (or Transferee)) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its respective lending offices to suffer no material economic, legal or regulatory disadvantage; and provided, further, that nothing in this Section 2.19 shall affect or postpone any of the Obligations of the Borrower or the rights of any Lender (or Transferee) pursuant to Sections 2.15, 2.16 and 2.17. -64- SECTION 2.20. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loans or participations in LC Disbursements which at the time shall be due and payable as a result of which the unpaid principal portion of its Loans and participations in LC Disbursements which at the time shall be due and payable shall be proportionately less than the unpaid principal portion of such Loans and participations in LC Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in such Loans and participations in LC Disbursements of such other Lender, so that the aggregate unpaid principal amount of such Loans and participations in LC Disbursements held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all such Loans and participations in LC Disbursements as prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustments restored without interest. The Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in a Loan or an LC Disbursement deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender by reason thereof as fully as if such Lender were a direct creditor directly to the Borrower in the amount of such participation. SECTION 2.21. Assignment of Commitments Under Certain Circumstances. In the event that (a) any Lender shall have delivered a notice or certificate pursuant to Section 2.16, or the Borrower shall be required to make additional payments to any Lender under Section 2.17 (each, an "Increased Cost Lender"), or (b) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof that fall within the proviso to the first sentence of Section 10.08(b), the consent of all Lenders would have been obtained but for one or more Lenders representing no more than 25% of the aggregate amount of Term B Loans outstanding and the Revolving Credit Commitments (or after the Revolving Credit Maturity Date, the Revolving Credit Exposure) failure to consent (each such Lender, a "Non-Consenting Lender"); then, with respect to each such Increased Cost Lender or Non-Consenting Lender (the "Terminated Lender"), the Borrower shall have the right, but not the obligation, at its own expense, upon notice to such Terminated Lender and the Administrative Agent, to replace such Terminated Lender with an assignee (in accordance with and subject to the restrictions contained in Section 10.04) approved by the Administrative Agent, the Issuing Bank, the Swingline Lender and Foreign Currency Lender (which approval shall not be unreasonably withheld), and such Terminated Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 10.04) all its interests, rights and obligations under this Agreement to such assignee; provided, however, that no Terminated Lender shall be obligated to make any such assignment unless (i) such assignment -65- shall not conflict with any law or any rule, regulation or order of any Governmental Authority and (ii) such assignee or the Borrower shall pay to the affected Terminated Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Terminated Lender and participations in LC Disbursements, Swingline Loans and Foreign Currency Loans held by such Terminated Lender and all commitment fees and other fees owed to such Terminated Lender hereunder and all other amounts accrued for such Terminated Lender's account or owed to it hereunder (including, without limitation, any Commitment Fees). ARTICLE III REPRESENTATIONS AND WARRANTIES In order to induce the Lenders and the Administrative Agent to enter into this Agreement and to extend credit hereunder and under the other Loan Documents, the Loan Parties, jointly and severally, make the representations and warranties set forth in this Article III on the Effective Date (after giving effect to the Transactions) and upon the occurrence of each Credit Event thereafter: SECTION 3.01. Organization, etc. Each Loan Party (a) is a corporation or other form of legal entity, and each of its Subsidiaries is a corporation, partnership or other form of legal entity, duly organized and validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as the case may be, (b) has the requisite corporate or other power and authority to carry on its business as now conducted, (c) is duly qualified to do business and is in good standing as a foreign corporation or foreign partnership (or comparable foreign qualification, if applicable, in the case of any other form of legal entity), as the case may be, in each jurisdiction where the nature of its business requires such qualification, except where the failure to so qualify will not result in a Material Adverse Effect, and (d) has full power and authority and holds all requisite material governmental licenses, permits and other approvals to enter into and perform its obligations under this Agreement and each other Loan Document to which it is a party and to own or hold under lease its Property and to conduct its business substantially as currently conducted by it. SECTION 3.02. Due Authorization, Non-Contravention, etc. Assuming the execution and delivery of this Agreement by each of the other parties hereto, the execution, delivery and performance by each Loan Party of this Agreement and each other Loan Document to which it is a party, the borrowing of the Loans, the use of the proceeds thereof and the issuance of the Letters of Credit hereunder are within each Loan Party's corporate, partnership or comparable powers, as the case may be, have been duly authorized by all necessary corporate, partnership or comparable and, if required, stockholder action, as the case may be, and do not (a) contravene the Organic Documents of any Loan Party or any of its respective Subsidiaries; -66- (b) subject to the receipt of government approvals set forth on Schedule 3.03, contravene any law or governmental regulation or court decree or order binding on or affecting any Loan Party or any of its respective Subsidiaries; (c) except as set forth on Schedule 3.02, violate or result in a default under any indenture, agreement or other instrument binding upon any Loan Party or any of its respective Subsidiaries; or (d) result in, or require the creation or imposition of, any Lien on any assets of any Loan Party or any of its respective Subsidiaries that would have or could reasonably be expected to have a Material Adverse Effect, except Liens created under the Loan Documents. SECTION 3.03. Government Approval, Regulation, etc. Except as set forth on Schedule 3.03, no consent, authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower or any other Loan Party of this Agreement or any other Loan Document, the borrowing of the Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, nor for the consummation of the Transactions, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect Liens under the Security Documents. No Loan Party or any of its respective Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 3.04. Validity, etc. This Agreement and each other Loan Document to which any Loan Party is to be a party has been duly executed and delivered by such Loan Party and constitutes, assuming the due execution and delivery of this Agreement and such other Loan Document by each of the other parties thereto, the legal, valid and binding obligation of such Loan Party enforceable in accordance with its respective terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally and to general principles of equity. SECTION 3.05. Activities of Parent Guarantors and Acquisition Corp. As of the Effective Date, each of the Parent Guarantors and Acquisition Corp. has had no operations, assets or liabilities. SECTION 3.06. Representations and Warranties in the Merger Agreement. (a) Each of the representations and warranties set forth in Article III of the Merger Agreement remains true and correct (unless expressly stated to relate to an earlier date, in which case such representations and warranties were true and correct as of such earlier date). (b) Subject to the qualifications set forth in Section 7.3(a) of the Merger Agreement, each of the representations and warranties set forth in Article IV of the Merger -67- Agreement remains true and correct (unless expressly stated to relate to an earlier date, in which case such representations and warranties were true and correct as of such earlier date). SECTION 3.07. Financial Information. (a) The consolidated balance sheets of the Borrower and its Subsidiaries as of December 31, 2001 and 2002, reported on by PricewaterhouseCoopers LLP in the case of the balance sheet dated as of December 31, 2002, independent public accountants, and as of June 30, 2003, certified by the Borrower's chief financial officer, and the related consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for the three years ended December 31, 2002, copies of which have been furnished to the Administrative Agent and each Lender, have been prepared in accordance with GAAP consistently applied (except as may be indicated therein or in the notes thereto), and present fairly in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended. (b) Except as disclosed in the financial statements referred to above or the notes thereto or in the Information Memorandum, none of the Borrower or its Subsidiaries or the Parent Guarantors has, as of the Effective Date, any material (i) Indebtedness, (ii) contingent liabilities, (iii) long-term commitments or (iv) unrealized losses. SECTION 3.08. [Reserved]. SECTION 3.09. No Material Adverse Change. Since December 31, 2002, no event or circumstance (other than to the extent the Lenders have been reasonably apprised of such event or occurrence pursuant to Schedule 3.09 as in effect on the Effective Date) has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect. SECTION 3.10. Litigation. Except as set forth on Schedule 3.10, there is no pending or, to the knowledge of the Loan Parties, threatened litigation, action or proceeding (including, without limitation, any existing or new litigation relating to the Merger) affecting any Loan Party or any of its Subsidiaries, or any of their respective operations or properties, or the ability of the parties to consummate the transactions contemplated hereby, which has had or could reasonably be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the transactions contemplated hereby or thereby. SECTION 3.11. Compliance with Laws and Agreements. None of the Borrower or any of its Subsidiaries has violated, is in violation of or has been given written notice of any violation of any laws (other than Environmental Laws, which are the subject of Section 3.16), regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except for any violations which could not reasonably be expected to result in a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 3.12. Subsidiaries. Schedule 6.04 (a) sets forth the name of (i) each Subsidiary and the direct or indirect ownership interest of the Parent Guarantors and the Bor- -68- rower therein and (ii) Investments of the Parent Guarantors, the Borrower and each Subsidiary in Persons other than Subsidiaries and (b) identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date. SECTION 3.13. Ownership of Properties. (a) Each of the Borrower and its Subsidiaries has good and legal fee simple title to (or other similar legal title in jurisdictions outside the United States of America), or valid leasehold interests in, or easements or other limited property interests in, or is licensed to use, all its material properties and assets (including all Mortgaged Properties), except for defects in title (or such other rights as referenced above, as applicable) that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes and except where the failure to have such title (or such other rights as referenced above, as applicable) in the aggregate could not reasonably be expected to have a Material Adverse Effect. All such material properties and assets are free and clear of Liens, other than Permitted Liens. (b) As of the Effective Date, Schedule 3.13(b) contains and will contain a true and complete list of each parcel of Real Property (i) owned in fee by any Loan Party as of the date hereof and describes the type of interest therein held by such Loan Party and (ii) leased, subleased or otherwise occupied by any Loan Party, as lessee, as of the date hereof and describes the type of interest therein held by such Loan Party and whether such lease, sublease or other instrument requires the consent of the landlord thereunder or other parties thereto to the Transactions. (c) Each of the Borrower and its Subsidiaries has complied with all obligations under all leases to which it is a party, except where the failure to comply would not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. Each of the Borrower and its Subsidiaries enjoys peaceful and undisturbed possession under all such leases, other than leases in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. (d) Each of the Borrower and its Subsidiaries owns, possesses, is licensed or otherwise has the right to use, or could obtain ownership or possession of, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary for the present conduct of its business, without any known conflict with the rights of others, except where such conflicts could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (e) As of the Effective Date, no Loan Party or any of its respective Subsidiaries has received any written notice of any actual pending or threatened condemnation proceeding affecting any of the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Effective Date. -69- (f) Neither the Borrower nor any of its Subsidiaries is obligated on the Effective Date under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein. SECTION 3.14. Taxes. Each of the Borrower and its Subsidiaries has timely filed all federal, foreign and all other material income tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges due, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; provided that any such contest of taxes or charges with respect to Collateral shall satisfy the Contested Collateral Lien Conditions. SECTION 3.15. Pension and Welfare Plans. (a) No ERISA Event has occurred or is reasonably expected to occur which could reasonably be expected to have a Material Adverse Effect or give rise to a Lien on the assets of any Loan Party or a Subsidiary. The Borrower and its Subsidiaries and their ERISA Affiliates are in compliance in all respects with the presently applicable provisions of ERISA and the Code with respect to each Plan except for failures to so comply which could not reasonably be expected to have a Material Adverse Effect. No condition exists or event or transaction has occurred with respect to any Plan which reasonably might result in the incurrence by the Borrower or any of its Subsidiaries or any ERISA Affiliate of any liability, fine or penalty which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries has any contingent liability with respect to post-retirement benefits provided by the Borrower or any of its Subsidiaries under a Welfare Plan, other than (i) liability for continuation coverage described in Part 6 of Subtitle B of Title I of ERISA, (ii) liabilities under employment agreements existing on the Effective Date and (iii) liabilities that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) Except as could not reasonably be expected to have a Material Adverse Effect or as set forth on Schedule 3.15(b), (i) each Foreign Plan has been maintained in compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities, and (ii) neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Plan. SECTION 3.16. Environmental Warranties. Except as set forth on Schedule 3.16: (a) All facilities and property owned, leased or operated by the Borrower or any of its Subsidiaries, and all operations conducted thereon, are in compliance with all Environmental Laws, except for such noncompliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. -70- (b) There are no pending or threatened (in writing): (i) Environmental Claims received by the Borrower or any of its Subsidiaries, or (ii) written claims, complaints, notices or inquiries received by the Borrower or any of its Subsidiaries regarding Environmental Liability, in each case which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (c) There have been no Releases of Hazardous Materials at, on, under or from any property now or, to any Loan Party's knowledge, previously owned, leased or operated by the Borrower or any of its Subsidiaries that, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect. (d) The Borrower and its Subsidiaries have been issued and are in compliance with all Environmental Permits necessary for their operations, facilities and businesses and each is in full force and effect, except for such Environmental Permits which, if not so obtained or as to which the Borrower and its Subsidiaries are not in compliance, or are not in effect, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (e) No property now or, to any Loan Party's knowledge, previously owned, leased or operated by the Borrower or any of its Subsidiaries is listed or proposed (with respect to owned property only) for listing on the CERCLIS or on any similar state list of sites requiring investigation or clean-up, or on the National Priorities List pursuant to CERCLA. (f) There are no underground storage tanks, active or abandoned, including petroleum storage tanks, surface impoundments or disposal areas, on or under any property now or, to any Loan Party's knowledge (without independent investigation or inquiry), previously owned or leased by the Borrower or any of its Subsidiaries which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (g) Neither the Borrower nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which would reasonably be expected to lead to any Environmental Claim against the Borrower or such Subsidiary that could reasonably be expected to have a Material Adverse Effect. (h) No liens have been recorded pursuant to any Environmental Law with respect to any property or other assets currently owned or leased by the Borrower or its Subsidiaries. -71- (i) Neither the Borrower nor any of its Subsidiaries is currently conducting any Remedial Action pursuant to any Environmental Law, nor has any of the Loan Parties or any of their respective Subsidiaries assumed by contract, agreement or operation of law any obligation under Environmental Law, the cost of which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (j) There are no polychlorinated biphenyls or friable asbestos present at any property owned, leased or operated by the Borrower or any of its Subsidiaries, which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. SECTION 3.17. Regulations U and X. The Loans, the use of the proceeds thereof, this Agreement and the transactions contemplated hereby will not result in a violation of or be inconsistent with any provision of Regulation U or X. SECTION 3.18. Disclosure; Accuracy of Information; Pro Forma Balance Sheets and Projected Financial Statements. (a) The Loan Parties have disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which they or any of their Subsidiaries is subject, and all other matters known to any of them that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither this Agreement nor the factual statements in any other document, certificate or statement furnished to the Administrative Agent or any Lender by or on behalf of any Loan Party in connection herewith (including, without limitation, the Information Memorandum) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained herein and therein not misleading, in light of the circumstances under which they were made; provided that to the extent this or any such document, certificate or statement (including without limitation the Information Memorandum) was based upon or constitutes a forecast, projection or internal summary analysis, the Loan Parties represent only that they acted in good faith and utilized reasonable assumptions and due care in the preparation of such document, certificate or statement for the purposes intended. (b) Not less than one week prior to the Effective Date, the Borrower shall have furnished to the Lenders the pro forma consolidated balance sheet as of June 30, 2003, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) was prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Information Memorandum, (ii) accurately reflects all adjustments necessary to give effect to the Transactions and (iii) presents fairly the pro forma financial position of the Borrower and its consolidated Subsidiaries as of the Effective Date, as if the Transactions had occurred on such date. (c) Not less than one week prior to the Effective Date, the Borrower shall have furnished to the Lenders pro forma consolidated income statement projections for the Borrower and its Subsidiaries, pro forma consolidated balance sheet projections for the Borrower and its Subsidiaries and pro forma consolidated cash flow projections for the Borrower and its Subsidiaries, all for the Fiscal Years ending 2004 through 2008, inclusive (the "Projected Financial Statements"), which give effect to the Transactions and all Indebtedness and Liens incurred -72- or created in connection with the Transactions. The assumptions made in preparing the Projected Financial Statements are reasonable as of the date of such projections and all material assumptions with respect to the Projected Financial Statements are set forth therein. The Projected Financial Statements present a good faith estimate of the consolidated financial information contained therein at the date thereof, it being recognized by the Administrative Agent and the Lenders, however, that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the projections probably will differ from the projected results and that the difference may be material. SECTION 3.19. Insurance. As of the Effective Date, set forth on Schedule 3.19 is a summary of all insurance policies maintained by the Borrower and each of its Subsidiaries with financially sound and responsible insurers (a) with respect to its properties material to the business of the Borrower and its Subsidiaries against such casualties and contingencies and of such types and in such amounts as are customary in the case of similar businesses operating in the same or similar locations, and (b) required to be maintained pursuant to the Security Documents. SECTION 3.20. Labor Matters. Except as could not reasonably be expected to have a Material Adverse Effect, (a) there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of any Loan Party, threatened; (b) the hours worked by and payments made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters; and (c) all payments due from the Borrower or any Subsidiary, or for which any claim may be made against the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or such Subsidiary. SECTION 3.21. Solvency. Immediately following the making of each Loan and after giving effect to the application of the proceeds of such Loans, and in the case of the Subsidiary Loan Parties, after giving effect to the terms of the Guarantee Agreement, (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted. SECTION 3.22. Securities. The common stock of each of the Parent Guarantors' and the Borrower's Subsidiaries has been validly issued and fully paid and is nonassessable and free of preemptive rights that have not been waived. The Equity Interests of each Subsidiary held, directly or indirectly, by the Borrower are owned, directly or indirectly, by the Borrower and, after the Effective Date, by the Parent Guarantors, free and clear of all Liens. There are not, -73- as of the Effective Date, any existing options, warrants, calls, subscriptions, convertible or exchangeable securities, rights, agreements, commitments or arrangements for any Person to acquire any common stock of the Borrower or its Subsidiaries or any other securities convertible into, exchangeable for or evidencing the right to subscribe for any such common stock, except as disclosed in the financial statements delivered pursuant to Sections 5.01(a) and (b) or otherwise disclosed to the Lenders prior to the Effective Date. SECTION 3.23. Indebtedness Outstanding. Set forth on Schedule 6.01(a)(iii) hereto is a list and description of (a) all Indebtedness (without giving effect to clause (k) in the definition of "Indebtedness") of the Borrower and its Subsidiaries (other than the Loans) outstanding on the Effective Date and (b) all Indebtedness of the Borrower and its Subsidiaries that will be repaid, defeased, transferred or otherwise terminated on or prior to the Effective Date. Schedule 6.02 hereto is a list and description of all Liens (other than Liens permitted by Sections 6.02(iii), (v), (ix), (x), (xii) and (xiii)) of the Borrower and its Subsidiaries outstanding on the Effective Date. SECTION 3.24. Security Documents. (a) The Pledge Agreement and each Non-U.S. Pledge Agreement is effective to create in favor of the Collateral Agent for its benefit and the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement or Non-U.S. Pledge Agreement, as applicable) and, when such Collateral is delivered to the Collateral Agent, the Pledge Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the pledgor thereunder in such Collateral. (b) (i) The Security Agreement is effective to create in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and (ii) when (x) financing statements in appropriate form are filed in the offices specified on Schedule 7 to the Perfection Certificate and (y) upon the taking of possession or control by the Collateral Agent of any such Collateral in which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Security Agreement), the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property (as defined in the Security Agreement)) to the extent such Lien and security interest can be perfected by the filing of a financing statement pursuant to the UCC or by possession or control by the Collateral Agent, in each case prior and superior in right to any other Person, other than with respect to Permitted Liens. (c) When the filings in clause (b)(ii)(x) above are made and when the Security Agreement (or a summary thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document -74- in the United States Patent and Trademark Office or the United States Copyright Office, as applicable (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Effective Date), in each case prior and superior in right to any other Person other than with respect to Permitted Liens. (d) Each Mortgage executed and delivered as of the Effective Date is, or, to the extent any Mortgage is duly executed and delivered thereafter by the relevant Loan Party, such Mortgage will be, effective to create (subject to Permitted Encumbrances (as defined in each Mortgage)) in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, a legal, valid and enforceable Lien on and security interest in all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, if and when the Mortgages are filed in the offices specified on Schedule 3.24(d), no other recordings of filings will be necessary to give constructive notice to third Persons of, and to otherwise establish of record the Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Permitted Encumbrances. SECTION 3.25. Anti-Terrorism Laws. (a) None of the Loan Parties or, to the knowledge of any of the Loan Parties, any of their Affiliates is in violation of any laws relating to terrorism or money laundering ("Anti-Terrorism Laws"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (for the purposes of this Section 3.25 only, the "Executive Order"), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) No Loan Party or, to the knowledge of any of the Loan Parties, any of their Affiliates or their respective brokers or other agents acting or benefiting in any capacity in connection with the Loans is any of the following: (i) a Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a Person or entity owned or controlled by, or acting for or on behalf of, any Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a Person or entity that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; or -75- (v) a Person or entity that is named as a "specially designated national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list. (c) No Loan Party or, to the knowledge of any Loan Party, any of its brokers or other agents acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. ARTICLE IV CONDITIONS SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.08) and subject to satisfaction of the conditions set forth in Section 4.02: (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received counterparts of the Guarantee Agreement signed on behalf of each Domestic Subsidiary. (c) The Administrative Agent shall have received, on behalf of itself and the Lenders, favorable written opinions of each of (i) Morgan Lewis & Bockius LLP, New York counsel for the Loan Parties, substantially in the form of Exhibit K-1, (ii) Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., counsel for the Loan Parties, substantially in the form of Exhibit K-2, (iii) local counsel to the Loan Parties and to each of the Non-U.S. Subsidiaries in each of the Non-U.S. Jurisdictions (in each case unless, and to the extent, otherwise agreed by the Administrative Agent) referred to in Schedule 4.01(c), in each case reasonably satisfactory to the Administrative Agent, which opinions shall (x) be addressed to the Administrative Agent and the Lenders and be dated the Effective Date, (y) cover the perfection and priority of the security interests granted in respect of the Equity Interests of Persons organized in such Non-U.S. Jurisdiction, and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request and (z) be in form, scope and substance reasonably satisfactory to the Administrative Agent, and (iv) local counsel to the Loan Parties as speci- -76- fied on Schedule 4.01(c) in the forms of Exhibit L and reasonably satisfactory to the Agents, which opinions (x) shall be addressed to the Administrative Agent and each of the Lenders and be dated the Effective Date, (y) shall cover the enforceability of the respective Mortgage and perfection of the Liens and security interests granted pursuant to the relevant Security Documents and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request and (z) shall be in form and substance reasonably satisfactory to the Administrative Agent. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in Sections 4.01 and 4.02(b) and (c) substantially in the form of Exhibit G. (e) The Administrative Agent shall have received from each Loan Party a certificate, dated the Effective Date, signed by the Secretary of such Loan Party and attested to by an Authorized Officer of such Loan Party together with copies of the certificate of incorporation, by-laws or equivalent organizational documents of such Loan Party, and the resolutions of such Loan Party authorizing the Transactions on or prior to the Effective Date. (f) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel. (g) [Reserved] (h) All documents executed or submitted in connection with this Agreement, the Borrowings hereunder and the other Loan Documents shall be reasonably satisfactory to the Lenders. (i) The issuance of the Subordinated Notes by the Borrower shall have been consummated on the Effective Date and shall have terms and conditions consistent with and as set forth in the Offering Memorandum dated September 25, 2003. On the Effective Date, (x) the Administrative Agent shall have received true and correct copies of all Subordinated Notes Documents, certified as such by an appropriate officer of the Borrower, (y) all such Subordinated Notes Documents, and all terms and conditions thereof, shall be in form and substance reasonably satisfactory to the Lenders and (z) all such Subordinated Notes Documents shall be in full force and effect. Each of the conditions precedent to the consummation of the issuance of the Subordinated Notes as set forth in the Subordinated Notes Documents shall have been satisfied in all material respects and not waived except with the consent of the Administrative Agent. -77- (j) There shall not have occurred any event or circumstance (other than to the extent the Lenders have been reasonably apprised of such event or occurrence pursuant to Schedule 3.09 as in effect on the Effective Date) since December 31, 2002 that, individually or in the aggregate with such other events or circumstances, has, or could reasonably be expected to have, a Material Adverse Effect. (k) The Borrower shall have delivered to the Lenders (a) audited consolidated balance sheets for the two Fiscal Years ended before the Effective Date and related statements of income, stockholders' equity and cash flows of the Borrower for the three Fiscal Years ended before the Effective Date and (b) to the extent available, unaudited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Borrower for each completed Fiscal Quarter since the date of such audited financial statements (and, to the extent available, for each completed month since the last such quarter), which audited and unaudited financial statements (i) shall be in form and scope satisfactory to the Lenders and (ii) shall not be materially inconsistent with the financial statements previously provided to the Lenders. (l) Except as set forth on Schedule 3.10, no litigation or administrative proceeding or development in any litigation or administrative proceeding (including, without limitation, existing or new litigation relating to the Merger) by any entity (private or governmental) shall be pending or, to the knowledge of the Borrower, threatened (i) with respect to the Transactions or any documentation executed in connection therewith (including any Loan Document) or the transactions contemplated thereby or (ii) which has had, or could reasonably be expected to have, a Material Adverse Effect. (m) The Borrower shall have obtained a senior secured debt rating in respect of the Loans from each of S&P and Moody's, and the Loans shall continue to be rated on the Effective Date. (n) All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Loan Documents to occur on or prior to the Effective Date shall be in form and substance reasonably satisfactory to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings, governmental approvals, good standing certificates and bring down telegrams or facsimiles, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. (o) The Lenders shall have received a certificate of the chief financial officer of the Borrower in form of Exhibit M and reasonably satisfactory to the Administrative Agent, confirming the solvency of each of the Loan Parties on a consolidated basis after giving effect to the Transactions. (p) Each of the OEP Equity Investment and the DG Equity Rollover shall have been consummated, and all documentation relating to the OEP Equity Investment -78- and the DG Equity Rollover shall be in form and substance satisfactory to the Administrative Agent. (q) The Administrative Agent shall be satisfied that the Borrower shall have cash in an amount not less than $579,222,000 available to fund in part the merger consideration under the Merger Agreement. (r) The merger of Acquisition Corp. with and into the Borrower with the Borrower surviving shall have been consummated in accordance with the Merger Agreement and all other related documents. On the Effective Date, (x) the Administrative Agent shall have received true and correct copies of all Merger Documents, certified as such by an appropriate officer of the Borrower, (y) all changes to the Merger Documents, and all changes to the terms and conditions thereof, shall be in form and substance reasonably satisfactory to the Administrative Agent and (z) all Merger Documents shall be in full force and effect. Each of the conditions precedent to the consummation of the Merger as set forth in the Merger Documents shall have been satisfied in all material respects and not waived, consented to or approved except with the consent of the Administrative Agent, to the reasonable satisfaction of the Administrative Agent. (s) After giving effect to the Transactions, none of the Parent Guarantors or the Borrower or their respective consolidated Subsidiaries shall have outstanding any Indebtedness other than (a) the Loans and other extensions of credit under this Agreement, (b) the Subordinated Notes and (c) Indebtedness specified on Schedule 6.01(a)(iii) to remain outstanding after the Effective Date or as otherwise permitted to be incurred (and such Indebtedness shall be deemed to have been incurred as of the Effective Date) under Section 6.01(a). (t) All requisite material governmental authorities and third parties shall have approved or consented to the Transactions to the extent required, all applicable appeal periods shall have expired and there shall be no judicial or regulatory action by a governmental agency, actual or threatened, that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Transactions. (u) The Administrative Agent shall have received all Fees payable to the Administrative Agent or any Lender on or prior to the Effective Date under the Fee Letter and all other amounts due and payable pursuant to the Loan Documents on or prior to the Effective Date, including reimbursement or payment of all reasonable out-of-pocket expenses (including reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP and domestic and foreign local counsel) required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document. (v) The Lenders shall be satisfied that the amount and nature of any environmental and employee health and safety liabilities and exposures to which the Parent Guarantors, the Borrower and their consolidated Subsidiaries may be subject after giving effect to the Transactions could not be reasonably expected to have a Material Adverse Effect. -79- (w) The Collateral Agent shall have received (i) counterparts of the Pledge Agreement signed by each Loan Party and covering pledges of (A) 100% of the Equity Interests held directly by the Parent in the Intermediate Parent, by the Intermediate Parent in the Borrower, by the Borrower in all of its Domestic Subsidiaries and each Subsidiary Loan Party in its domestic Subsidiaries and (B) 65% of the voting Equity Interests and 100% of the non-voting Equity Interests held directly by any Loan Party in any Non-U.S. Subsidiary, (ii) counterparts of the Non-U.S. Pledge Agreements signed by the applicable Loan Party and covering pledges of 65% of the voting Equity Interests and 100% of the non-voting Equity Interests of the "first tier" Non-U.S. Subsidiaries of the Borrower or the applicable Subsidiary Loan Party identified on Schedule 4.01(w) and (iii) promissory notes evidencing all Indebtedness for liabilities over $500,000 owed to any Loan Party by the Borrower or any Subsidiary as of the Effective Date, in each case, together with undated stock powers or other instruments of transfer, endorsed in blank. (x) The Collateral Agent shall have received counterparts of the Security Agreement signed by each Loan Party together with the following in form and substance satisfactory to the Collateral Agent: (A) certificates of insurance required under the Security Documents; (B) appropriate financing statements or comparable documents authorized by (and executed by, to the extent applicable) the appropriate entities in proper form for filing under the provisions of the UCC and applicable domestic or local laws, rules or regulations in each of the offices where such filing is necessary or appropriate, in the Collateral Agent's sole discretion, to grant to the Collateral Agent a perfected first priority Lien on such Collateral, superior and prior to the rights of all third persons other than the holders of Permitted Liens; (C) UCC, judgment and tax lien, bankruptcy and pending lawsuit search reports listing all effective financing statements or comparable documents which name any applicable Loan Party as debtor and which are filed in those jurisdictions in which, any Loan Party is organized, any of such Collateral is located and the jurisdictions in which any applicable Loan Party's principal place of business is located in the United States, together with copies of such existing financing statements, none of which shall encumber such Collateral covered or intended or purported to be covered by the Security Documents other than Permitted Liens; (D) evidence of the preparation for recording or filing, as applicable, of all recordings and filings of each such Security Document, including, without limitation, with the United States Patent and Trademark Office and the United States Copyright Office, and delivery and recordation, if necessary, of such other security and other documents, including, without limitation, UCC-3 termination statements with respect to UCC filings that do not constitute Permitted Liens, as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the Liens created, or purported or intended to be created, by such Security Documents; -80- (E) with respect to leased Mortgaged Property, if Inventory (as defined in the Security Agreement), Equipment (as defined in the Security Agreement) or other personal property of any Loan Party or its Subsidiaries is maintained on such premises, the Borrower shall use its commercially reasonable efforts to deliver a Landlord Subordination substantially in the form of Exhibit P attached hereto with respect thereto; (F) evidence that all other actions reasonably necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interest created by the Security Documents have been taken; and (G) a completed Perfection Certificate dated the Effective Date and signed by an executive officer or Financial Officer of the Borrower, together with all attachments contemplated thereby, including the results of a search of the UCC (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are Permitted Liens or have been released. (y) The Collateral Agent shall have received the following documents and instruments: (A) Mortgages encumbering each Mortgaged Property in which the applicable Loan Party holds a fee ownership or leasehold interest (as indicated on Schedule 4.01(y)(A) hereto) in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, duly executed and acknowledged by the applicable Loan Party, and otherwise in form for recording in the recording office where each such Mortgaged Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be legally required in connection with the recording or filing thereof to create a lien under applicable law, and such UCC-1 financing statements and other similar statements as are contemplated by the counsel opinions described in Section 4.01(c)(iv) in respect of such Mortgage, all of which shall be in form and substance reasonably satisfactory to the Collateral Agent, and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction, if any, which Mortgage and financing statements and other instruments shall when recorded be effective to create a Lien on such Mortgaged Property subject to no other Liens other than the Permitted Encumbrances (as defined in such Mortgage); (B) with respect to each Mortgaged Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments, in form reasonably acceptable to the Collateral Agent, as necessary or required to consummate the transactions contemplated hereby or as shall reasonably be deemed necessary by the Collateral Agent in order for the owner or holder of the fee or leasehold interest constituting such Mortgaged Property to -81- grant the Lien contemplated by the Mortgage with respect to such Mortgaged Property; (C) with respect to each Mortgage indicated on Schedule 4.01(y)(A), a policy (or commitment to issue a policy) of title insurance insuring (or committing to insure) the Lien of such Mortgage as a valid first mortgage Lien on the real property or leasehold interest, as the case may be, and fixtures described therein in an amount not less than the amount set forth on Schedule 4.01(y)(C) (110% of the fair market value thereof), which policies (or commitments) shall, to the extent the same are available within each particular state in which the applicable Mortgaged Property is located, (w) be issued by the Title Company, (x) include such reinsurance arrangements (with provisions for direct access) as shall be reasonably acceptable to the Collateral Agent, (y) contain a "tie-in" or "cluster" endorsement (if available under applicable law) (i.e., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount) and have been supplemented by such endorsements as shall be reasonably requested by the Collateral Agent (including, without limitation, endorsements, to the extent available in each jurisdiction at commercially reasonably rates, on matters relating to usury, first loss, last dollar, zoning, contiguity, variable rate, revolving credit, doing business, access, survey, address and so-called comprehensive coverage over covenants and restrictions) and (z) contain only such exceptions to title as shall be agreed to by the Collateral Agent on or prior to the Effective Date with respect to such Mortgaged Property, in each case, subject to Permitted Encumbrances as defined in the Mortgage encumbering each such Mortgaged Property; (D) with respect to each Mortgaged Property, policies or certificates of insurance as required by the Mortgage relating thereto, which policies or certificates shall comply with the insurance requirements contained in such Mortgage; (E) with respect to each Mortgaged Property indicated on Schedule 4.01(y)(A), a Survey in form reasonably acceptable to the Collateral Agent (it is intended and agreed that a Survey will be required only for each Mortgaged Property owned in fee and whole building leases); (F) with respect to each Mortgaged Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as shall be reasonably required to induce the Title Company to issue the policy or policies (or commitment) and endorsements contemplated in subparagraph (C) above; (G) evidence reasonably acceptable to the Collateral Agent of payment by the appropriate Loan Party or Subsidiary thereof of all applicable title insurance premiums, search and examination charges, survey costs and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the re- -82- cording of the Mortgages and issuance of the title insurance policies referred to in subparagraph (C) above; (H) with respect to each Real Property or Mortgaged Property, copies of all leases or other agreements relating to possessory interests to which any Loan Party or Subsidiary thereof is a party. To the extent any of the foregoing in which any Loan Party is a landlord or sublandlord affect any Mortgaged Property, such agreement shall be subordinate to the Mortgage to be recorded against such Mortgaged Property and otherwise acceptable to the Collateral Agent; and (I) with respect to each Mortgaged Property indicated on Schedule 4.01(y)(A), an Officers' Certificate substantially in the form of Exhibit O attached hereto. (z) The Administrative Agent shall have received subordination agreements (to the extent legally permitted) in form and substance satisfactory to it covering all intercompany notes or other obligations owed by a Loan Party to a Subsidiary of the Borrower that is not a Loan Party. (aa) The Borrower shall have delivered to the Collateral Agent certificates of insurance with respect to all existing insurance coverage maintained by the Borrower and the Subsidiary Loan Parties which certificates shall comply with Section 5.04 hereof and shall provide evidence that the insurance coverage required by Section 5.04 and the Security Documents is in effect in form and substance satisfactory to the Collateral Agent. SECTION 4.02. Conditions to Each Credit Event. The agreement of each Lender to make any Loan (excluding continuations and conversions of Loans) and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit (such event being called a "Credit Event") requested to be made by it on any date is subject to the satisfaction of the following conditions: (a) The Administrative Agent shall have received a notice of such Credit Event as required by Section 2.02, 2.04, 2.05 or 2.07, as applicable (or such notice shall have been deemed given in accordance with Section 2.04(b)). (b) The representations and warranties set forth in Article III hereof and in the other Loan Documents shall be true and correct with the same effect as if then made (unless expressly stated to relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date). (c) At the time of and immediately after such Credit Event, no Default or Event of Default shall have occurred and be continuing. Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event, as to the matters specified in paragraphs (b) and (c) of this Section 4.02. -83- ARTICLE V AFFIRMATIVE COVENANTS Each Loan Party hereby covenants and agrees with the Lenders that on or after the Effective Date and until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees and other amounts payable hereunder or under any other Loan Document have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed: SECTION 5.01. Financial Information, Reports, Notices, etc. The Borrower will furnish, or will cause to be furnished, to each Lender and the Administrative Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 50 days (or five days after such shorter period for the filing of the Borrower's Form 10-Q as may be required by the SEC) after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and its Restricted Subsidiaries and similar consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of earnings and cash flow of the Borrower and its Restricted Subsidiaries and similar consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for such Fiscal Quarter and for the same period in the prior Fiscal Year and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by a Financial Officer of the Borrower; (b) as soon as available and in any event within 95 days (or five days after such shorter period as may be required for the filing of the Borrower's Form 10-K by the SEC) after the end of each Fiscal Year of the Borrower, a copy of the annual audit report for such Fiscal Year for the Borrower and its Subsidiaries, including therein a consolidated balance sheet of the Borrower and its Restricted Subsidiaries and a similar consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Borrower and its Restricted Subsidiaries and similar consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for such Fiscal Year, in each case certified (without any Impermissible Qualification) in a manner acceptable to the Administrative Agent by PricewaterhouseCoopers LLP or other independent public accountants reasonably acceptable to the Administrative Agent, together with a certificate from a Financial Officer of the Borrower (a "Compliance Certificate") containing a computation in reasonable detail of, and showing compliance with, each of the financial ratios and restrictions contained in Sections 6.13 through 6.16, inclusive, and to the effect that, in making the examination necessary for the signing of such certificate, such Financial Officer has not become aware of any Default or Event of Default that has occurred and is continuing, or, if such Financial Officer has become aware of such Default or Event of Default, describing such Default or Event of Default and the steps, if any, being taken to cure it, and concurrently -84- with the delivery of the foregoing financial statements, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines); (c) as soon as available and in any event within 30 days after the end of each of the first two months of each Fiscal Quarter of the Borrower, a consolidated balance sheet of the Borrower and its Restricted Subsidiaries and a similar balance sheet of the Borrower and its Subsidiaries as of the end of such month and consolidated statements of earnings and cash flow of the Borrower and its Restricted Subsidiaries and similar consolidated statements of earnings of the Borrower and its Subsidiaries for such month and for the same period in the prior Fiscal Year and for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, certified by a Financial Officer of the Borrower; (d) as soon as available and in any event within 50 days (or five days after such shorter period as may be required for the filing of the Borrower's Form 10-Q by the SEC) after the end of each Fiscal Quarter, a Compliance Certificate containing a computation in reasonable detail of, and showing compliance with, each of the financial ratios and restrictions contained in Sections 6.13 through 6.16, inclusive, and to the effect that, in making the examination necessary for the signing of such certificate, such Financial Officers have not become aware of any Default or Event of Default that has occurred and is continuing, or, if such Financial Officers have become aware of such Default or Event of Default, describing such Default or Event of Default and the steps, if any, being taken to cure it; (e) no later than January 31 of each Fiscal Year of the Borrower, a detailed consolidated budget by Fiscal Quarter for such Fiscal Year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for each Fiscal Quarter during such Fiscal Year) and the succeeding Fiscal Years through the Term B Loan Maturity Date (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of each such Fiscal Year) having the same level of detail as the projections referred to in Section 3.18(c) and, promptly when available, any significant revisions of such budgets; (f) promptly upon receipt thereof, copies of all reports submitted to the Borrower by independent certified public accountants in connection with each annual, interim or special audit of the books of the Borrower or any of its Subsidiaries made by such accountants, including any management letters submitted by such accountants to management in connection with their annual audit; (g) as soon as possible and in any event within three Business Days after a Responsible Officer of the Borrower becomes aware of the occurrence of any Default or Event of Default, a statement of such Responsible Officer setting forth details of such -85- Default or Event of Default and the action which the Borrower has taken and proposes to take with respect thereto; (h) as soon as possible and in any event within five Business Days after a Responsible Officer becoming aware of (i) the occurrence of any adverse development with respect to any litigation, action or proceeding described in Section 3.10 that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or (ii) the commencement of any litigation, action or proceeding of the type described in Section 3.10 that could reasonably be expected to have a Material Adverse Effect or that purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, notice thereof and copies of all documentation relating thereto; (i) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any of its security holders, and all reports, registration statements (other than on Form S-8 or any successor form) or other materials (including affidavits with respect to reports) which the Borrower or any of its Subsidiaries or any of their officers files with the SEC or any national securities exchange; (j) promptly upon becoming aware of the taking of any specific actions by the Borrower or any other Person to terminate any Pension Plan (other than a termination pursuant to Section 4041(b) of ERISA which can be completed without the Borrower or any ERISA Affiliate having to provide more than $1.0 million in addition to the normal contribution required for the plan year in which termination occurs to make such Pension Plan sufficient), or the occurrence of an ERISA Event which could result in a Lien on the assets of any Loan Party or a Subsidiary or in the incurrence by a Loan Party of any liability, fine or penalty which could reasonably be expected to have a Material Adverse Effect, or any increase in the contingent liability of a Loan Party with respect to any post-retirement Welfare Plan benefit if the increase in such contingent liability which could reasonably be expected to have a Material Adverse Effect, notice thereof and copies of all documentation relating thereto; (k) upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Loan Party or a Subsidiary thereof with the Internal Revenue Service with respect to each Pension Plan; (ii) the most recent actuarial valuation report for each Pension Plan sponsored, maintained or contributed to by any Loan Party or a Subsidiary thereof; (iii) all notices received by any Loan Party or a Subsidiary thereof from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan as the Administrative Agent shall reasonably request; (l) as soon as possible, after a Responsible Officer of the Borrower becomes aware of any notice of any other development that could reasonably be expected to have a Material Adverse Effect; -86- (m) on the 10th day of each month (or, if not a Business Day, the Business Day immediately following such day) a report setting forth the amount of aggregate unused availability on such date of Revolving Credit Commitments; (n) simultaneously with the delivery of financial statements pursuant to Sections 5.01(a) and (b), certifications by the chief executive officer and the chief financial officer or others to the extent required to be filed under the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, and/or the rules and regulations of the SEC, without any exceptions or qualifications; and (o) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request. SECTION 5.02. Compliance with Laws, etc. The Loan Parties will, and will cause each of their Subsidiaries to, comply in all respects with all applicable laws, rules, regulations and orders, except where such noncompliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, such compliance to include, subject to the foregoing (without limitation): (a) the maintenance and preservation of their and their Subsidiaries' existence and their qualification as a foreign corporation or partnership (or comparable foreign qualification, if applicable, in the case of any other form of legal entity), and (b) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon them or upon their property except as provided in Section 5.09. (c) Quintiles Ireland (Finance) Limited (the "Irish Company") effecting the financial assistance whitewash procedure set out in Section 60(2)-(11) of the Companies Act, 1963 of Ireland prior to the Irish Company guaranteeing or granting any security for any obligation hereunder or making any payment (whether envisaged by this Agreement or otherwise) which is to be used directly or indirectly to repay any facilities advanced hereunder which were or are to be used to acquire shares in the Irish Company or any shares of any holding company (as defined by reference to Section 155 of such Act) of the Irish Company. SECTION 5.03. Maintenance of Properties. Each Loan Party and each of its respective Restricted Subsidiaries will maintain, preserve, protect and keep its material properties and assets in good repair, working order and condition (reasonable wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times; provided that nothing in this Section 5.03 shall prevent any Loan Party from discontinuing the operation, maintenance or preservation of any of its properties or any of those of its Restricted Subsidiaries if such discontinuance is, in the reasonable commercial judgment of such Loan Party, desirable in the conduct of its or their business and does not in the aggregate have a Material Adverse Effect. -87- SECTION 5.04. Insurance. The Loan Parties will and will cause each of their respective Subsidiaries to maintain or cause to be maintained with financially sound and responsible insurers (a) insurance with respect to their properties material to the business of the Loan Parties and their respective Subsidiaries against such casualties and contingencies and of such types and in such amounts with such deductibles as is customary in the case of similar businesses operating in the same or similar locations and (b) all insurance required to be maintained pursuant to the Security Documents, and will, upon request of the Administrative Agent, furnish to each Lender at reasonable intervals a certificate of an Authorized Officer of the Borrower setting forth the nature and extent of all insurance maintained by the Loan Parties and their respective Subsidiaries in accordance with this Section. Each such insurance policy shall provide that (i) it may not be cancelled or otherwise terminated without at least thirty (30) days' prior written notice to the Collateral Agent (and to the extent any such policy is cancelled or renewed, the Borrower shall deliver a copy of the renewal or replacement policy (or other evidence thereof) to the Administrative Agent and the Collateral Agent, or insurance certificate with respect thereto, together with evidence satisfactory to the Administrative Agent and Collateral Agent of the payment of the premium therefor); (ii) the Collateral Agent is permitted to pay any premium therefor within thirty (30) days after receipt of any notice stating that such premium has not been paid when due; (iii) all losses thereunder shall be payable notwithstanding any act or negligence of any Loan Party or any of its Subsidiaries or its agents or employees which otherwise might have resulted in a forfeiture of all or a part of such insurance payments; (iv) to the extent such insurance policy constitutes property insurance, all losses payable thereunder in an amount in excess of $2.0 million (other than losses related to claims in respect of business interruption) shall be payable to the Collateral Agent, as an additional insured and as loss payee, pursuant to a standard non-contributory New York mortgagee endorsement and shall be in an amount at least sufficient to prevent coinsurance liability; provided that the Collateral Agent, as loss payee pursuant to the foregoing, shall not agree to the adjustment of any claim without the consent of the Borrower (such consent not to be unreasonably withheld or delayed); and (v) with respect to liability insurance, the Collateral Agent shall be named as an additional insured; provided, in the event that Borrower's or any Loan Parties' compliance with this Agreement with respect to the insurance requirements of this Section 5.04 will result in a default under any lease encumbered by a Mortgagee, Mortgagor need only comply with the provisions of this Agreement with respect to any such lease to the greatest extent possible without causing a default under any such lease. Notwithstanding the inclusion in each insurance policy of the provision described in clause (ii) of the immediately preceding sentence, in the event any Loan Party gives the Collateral Agent written notice that it does not intend to pay any premium relating to any insurance policy on which the Collateral Agent is named or to be named as an additional insured when due, the Collateral Agent shall not exercise its right to pay such premium so long as such Loan Party delivers to the Collateral Agent a replacement insurance policy or insurance certificate evidencing that such replacement policy or certificate provides the same insurance coverage required under this Section 5.04 as the policy being replaced by such Loan Party with no lapse in such coverage. SECTION 5.05. Books and Records; Visitation Rights. Each Loan Party will, and will cause each of its respective Subsidiaries to, keep books and records which accurately reflect its business affairs in all material respects and material transactions and permit the Administrative Agent and each Lender or any of their respective representatives, at reasonable times -88- and intervals, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant and, upon the reasonable request of the Administrative Agent or a Lender, to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate or partnership records. SECTION 5.06. Environmental Covenant. Each Loan Party will, and will cause each of its respective Subsidiaries to: (a) use and operate all of its facilities and properties in compliance with all Environmental Laws except for such noncompliance which, singly or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, keep all Environmental Permits in effect and remain in compliance therewith and handle all Hazardous Materials in compliance with all applicable Environmental Laws, except for any noncompliance that would not reasonably be expected to have a Material Adverse Effect; (b) promptly notify the Administrative Agent and provide copies of all written inquiries, claims, complaints or notices from any Person relating to the environmental condition of its facilities and properties or compliance with or liability under any Environmental Law which could reasonably be expected to have a Material Adverse Effect, and promptly cure and have dismissed with prejudice or contest in good faith any actions and proceedings relating thereto; (c) in the event of the presence of any Hazardous Material on any Mortgaged Property which is in violation of any Environmental Law or which could reasonably be expected to have Environmental Liability which violation or Environmental Liability could reasonably be expected to have a Material Adverse Effect, each applicable Loan Party and its Subsidiaries, upon discovery thereof, shall take all necessary steps to initiate and expeditiously complete all response, corrective and other action to mitigate and eliminate any such adverse effect in accordance with and to the extent required by applicable Environmental Laws, and shall keep the Administrative Agent informed of their actions; (d) at the written request of the Administrative Agent or the Requisite Lenders, which request shall specify in reasonable detail the basis therefor, each Loan Party will provide, at such Loan Party's sole cost and expense, an environmental site assessment report concerning any Mortgaged Property now or hereafter owned or leased by such Loan Party or any of its respective Subsidiaries, prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials and the potential cost of any Remedial Action in connection with such Hazardous Materials on, at, under or emanating from such Mortgaged Property pursuant to any applicable Environmental Law; provided that such request may be made only if (i) there has occurred and is continuing an Event of Default or (ii) the Administrative Agent or the Requisite Lenders reasonably believe that the Borrower or any such Mortgaged Property is not in compliance with Environmental Law and such noncompliance could reasonably be expected to have a Material Adverse Effect, or that circumstances exist that could reasonably be expected to form the basis of an Environ- -89- mental Claim against such Loan Party or to result in Environmental Liability, in each case that could reasonably be expected to have a Material Adverse Effect (in such events as are listed in this subparagraph, the environmental site assessment shall be focused upon the noncompliance or other circumstances as applicable). If any Loan Party fails to provide the same within 90 days after such request was made, the Administrative Agent may order the same, and such Loan Party shall grant and hereby grants to the Administrative Agent and the Requisite Lenders and their agents access to such Mortgaged Property and specifically grants the Administrative Agent and the Requisite Lenders an irrevocable non-exclusive license, subject to the rights of tenants, to perform such an assessment, all at such Loan Party's sole cost and expense; and (e) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 5.06. SECTION 5.07. Information Regarding Collateral. (a) Each year, at the time of delivery of annual financial statements with respect to the preceding Fiscal Year pursuant to clause (b) of Section 5.01, the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer and the chief legal officer of the Borrower (i) setting forth the information required pursuant to Sections 1, 2, 7, 8, 12, 13, 14, 15, 16, 17 and 18 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all UCC financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). SECTION 5.08. Existence; Conduct of Business. Each Loan Party will, and will cause each of its respective Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.09. Performance of Obligations. Each Loan Party and its respective Subsidiaries will perform all of their respective obligations under the terms of each mortgage, indenture, security agreement, other debt instrument and material contract by which they are bound or to which they are a party, except for such noncompliance as individual or in the aggregate would not have a Material Adverse Effect. SECTION 5.10. Casualty and Condemnation. Each Loan Party (a) will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other in- -90- sured damage to any Collateral in an amount in excess of $5.0 million or the commencement of any action or proceeding for the Taking of any Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Security Documents. SECTION 5.11. Pledge of Additional Collateral. In any event within 30 days after the acquisition of assets of the type that would have constituted Collateral on the Effective Date pursuant to the Security Documents (the "Additional Collateral"), each appropriate Loan Party will, and will cause its respective Restricted Subsidiaries to, take all necessary action, including the filing of appropriate financing statements under the provisions of the UCC, applicable domestic or local laws, rules or regulations in each of the offices where such filing is necessary or appropriate, or entering into or amending the Guarantee Agreement and the Security Documents, or in the case of the Equity Interests of a "first tier" Non-U.S. Subsidiary organized in a Non-U.S. Jurisdiction specified on Schedule 4.01(c), entering into a Non-U.S. Pledge Agreement providing for the relevant Loan Party to have an enforceable and perfected security interest in 65% of the voting Equity Interests and 100% of the non-voting Equity Interests in such Subsidiary, to grant to the Collateral Agent for its benefit and the benefit of the Secured Parties a perfected first priority Lien in such Collateral pursuant to and to the full extent required by the Security Documents and this Agreement (including, without limitation, satisfaction of the conditions set forth in subsections (c) and (x) of Section 4.01). In the event that any Loan Party or its respective Subsidiaries acquire an interest in additional Real Property having a fair market value in excess of $2.0 million as determined in good faith by the Borrower or renews or enters into any new lease of Real Property for a term of one (1) year or more (whether or not the subject of a leasehold mortgage under the Security Documents on the Effective Date) for space in excess of 50,000 rentable square feet and with respect to a facility where manufacturing and/or research activities are undertaken, the Borrower or the appropriate Loan Party or Restricted Subsidiary, as the case may be, and using its commercially reasonable efforts in respect of any such leases, will take such actions and execute such documents as the Collateral Agent shall reasonably require to confirm the Lien of a Mortgage, if applicable, or to create a new Mortgage (including, without limitation, satisfaction of the conditions set forth in subsections (c) and (y) of Section 4.01, if not previously fulfilled by the Borrower or such Loan Party with respect to such new Collateral). All actions taken by the parties in connection with the pledge of Additional Collateral, including, without limitation, costs of counsel for the Administrative Agent and the Collateral Agent, shall be for the account of the Borrower, which shall pay all sums due on demand. SECTION 5.12. Further Assurances. The Loan Parties will, and will cause each Restricted Subsidiary of a Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents and the delivery of appropriate opinions of counsel), which may be required under any applicable law, or which the Administrative Agent or the Requisite Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created by the Security Documents or the validity or priority of any -91- such Lien, all at the expense of the Loan Parties. The Loan Parties also agree to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. Without limiting the foregoing, the Loan Parties shall comply with the provisions of Section 2(a) of the Pledge Agreement (regarding actions in furtherance of perfecting the Lien of the Collateral Agent in certain Collateral) within the time periods specified (unless extended or waived by the Collateral Agent). SECTION 5.13. Use of Proceeds. The Borrower covenants and agrees that (i) the proceeds of the Term B Loan Borrowings hereunder will be used on the Effective Date to pay the aggregate Per Share Amount (as defined in the Merger Agreement) in the Merger and to pay Fees and expenses payable hereunder, (ii) all Revolving Credit Borrowings will be used for general corporate purposes; provided that if the proceeds thereof are used to make an Investment, after giving effect to such Borrowing, the sum of (A) the Total Revolving Credit Commitment less the Revolving Credit Exposure of all Revolving Lenders, plus (B) cash and/or Permitted Investments on the latest balance sheet of the Borrower that has been delivered to Lenders pursuant to Section 5.01(a) or (b) (with such Permitted Investments valued at the amount set forth on such balance sheet), shall not be less than $75.0 million and (iii) all Foreign Currency Loans shall be advanced to one or more Non-U.S. Subsidiaries pursuant to an Intercompany Note that is pledged to the Secured Parties pursuant to the Security Documents. SECTION 5.14. Payment of Taxes. Each Loan Party and its respective Subsidiaries will pay and discharge all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any Properties belonging to it, prior to the date on which material penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien or charge upon any Properties of such Loan Party or any of its respective Subsidiaries or cause a failure or forfeiture of title thereto; provided that neither such Loan Party nor any of its respective Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim that is being contested in good faith and by proper proceedings diligently conducted, which proceedings have the effect of preventing the forfeiture or sale of the Property or asset that may become subject to such Lien, if it has maintained adequate reserves with respect thereto in accordance with and to the extent required under GAAP; provided, further, that any such contest of any tax, assessment, charge, levy or claim with respect to Collateral shall satisfy the Contested Collateral Lien Conditions. SECTION 5.15. Equal Security for Loans and Notes. If any Loan Party shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Permitted Liens (unless prior written consent to the creation or assumption thereof shall have been obtained from the Administrative Agent and the Requisite Lenders), it shall make or cause to be made effective provisions whereby the Obligations will be secured by such Lien equally and ratably with any and all other assets or Property thereby secured as long as any such assets or Property shall be secured; provided that this covenant shall not be construed as -92- consent by the Administrative Agent and the Requisite Lenders to any violation by any Loan Party of the provisions of Section 6.02. SECTION 5.16. Guarantees. In the event that (i) any Domestic Subsidiary of the Borrower existing on the Effective Date has not previously executed the Guarantee Agreement, (ii) any Person becomes a Domestic Subsidiary of the Borrower after the Effective Date, or (iii) any Subsidiary that Guarantees any other Indebtedness of the Borrower or any Domestic Subsidiary, the Borrower will promptly notify the Administrative Agent of that fact and cause such Subsidiary to execute and deliver to the Administrative Agent a counterpart of the Guarantee Agreement and deliver to the Collateral Agent a counterpart of the Security Agreement and the Pledge Agreement and to take all such further actions and execute all such further documents and instruments (including actions, documents and certificates comparable to those described in Sections 4.01(c), (e) and (f)) as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to create in favor of the Collateral Agent, for the benefit itself and of the Secured Parties, a valid and perfected first priority Lien on all of the Property and assets of such Subsidiary described in the applicable forms of the Security Documents. SECTION 5.17. Subordination of Loans. Each Loan Party covenants and agrees that any existing and future loans from any Subsidiary that is not a Loan Party to either of the Parent Guarantors, the Borrower or any Subsidiary Loan Party shall be subordinated (to the extent legally permitted) to the Obligations pursuant to a written agreement to at least the same extent as the Subordinated Notes are subordinated to the Obligations. SECTION 5.18. Unrestricted Subsidiaries. Each Loan Party shall ensure that all financial statements of each Unrestricted Subsidiary distributed to any creditor of an Unrestricted Subsidiary clearly states the separateness of such Unrestricted Subsidiary from the Loan Parties. SECTION 5.19. Non-Pledgeable Permitted PharmaBio Investments. (a) Within 60 days after the Effective Date, unless otherwise extended or waived by the Administrative Agent in its reasonable discretion, the Borrower shall create a newly-formed Wholly Owned Domestic Subsidiary that will become a party to the Guarantee Agreement ("New Investment Subsidiary"), pledge 100% of the New Investment Subsidiary's Equity Interests pursuant to the Pledge Agreement and transfer to such New Investment Subsidiary all Permitted PharmaBio Investments (or other securities) owned by the Borrower or any Subsidiary Loan Party on the Effective Date and that are (i) not pledged in favor of the Collateral Agent under the Pledge Agreement and (ii) not subsequently disposed of; provided, however, the failure to transfer any security to such New Investment Subsidiary shall not constitute a breach of this covenant if such transfer is prohibited by the terms of any agreement related to such security and the applicable Loan Party has used commercially reasonable efforts to obtain all required consents to such transfer. (b) The New Investment Subsidiary shall not conduct any business or hold any assets or have any operations (other than holding Permitted PharmaBio Investments (or other securities) and actions reasonably related thereto). Each Loan Party shall promptly transfer any Permitted PharmaBio Investments (or other securities) acquired in the future by such Loan Party -93- (other than the New Investment Subsidiary) that are by their terms not permitted to be pledged under the Pledge Agreement to the New Investment Subsidiary; provided, however, the failure to transfer any security to such New Investment Subsidiary shall not constitute a breach of this covenant if such transfer is prohibited under the terms of any agreement related to such security and the applicable Loan Party has used commercially reasonable efforts to obtain all required consents to such transfer. SECTION 5.20. Additional Mortgages. (a) The Loan Parties, as appropriate, will use commercially reasonable efforts (unless waived or extended by the Collateral Agent in its discretion) to obtain, within sixty (60) days after the Effective Date, the property owners' consent to leasehold mortgage financing with respect to the properties located at 475 Brannan Street, San Francisco, CA and 10 Waterview Boulevard, Parsippany, NJ, and if such consent is so obtained with respect to either or both of such properties, the Loan Parties, as appropriate, will use commercially reasonably efforts to deliver within thirty (30) days thereafter the following: (i) a duly executed and acknowledged Mortgage, financing statements and other instruments meeting the requirements of Section 4.01(y)(A) hereof; (ii) such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as required by Section 4.01(y)(B); (iii) a policy of title insurance meeting the requirements of Section 4.01(y)(C); (iv) policies or certificates of insurance as required by Section 4.01(y)(D); (v) a Survey meeting the requirements of Section 4.01(y)(E); (vi) such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as required by Section 4.01(y)(F); (vii) evidence of payment of all applicable premiums, charges, costs, taxes, etc. as required by Section 4.01(y)(G); (viii) copies of all leases or other agreements, and subordination of such, as required by Section 4.01(y)(H); (ix) an Officers' Certificate as required by Section 4.01(y)(I); and (x) favorable written opinions of local counsel as required by Section 4.01(c)(iv). SECTION 5.21. Foreign Pledges. (a) Within 30 days after the Effective Date unless otherwise extended or waived by the Collateral Agent in its discretion, (i) the Borrower shall have authorized, executed and delivered all documents and taken all actions necessary or appropriate to grant in favor of the Collateral Agent a first priority pledge of 65% of the voting -94- Equity Interests and 100% of the non-voting Equity Interests in Quintiles AG under the laws of Switzerland (including, without limitation, the taking of all actions or the foreign equivalent, if applicable, and the delivery of all items, or their foreign equivalent, if applicable, of the type and nature enumerated in Section 4.01(w) of this Agreement, the delivery of all certificates, agreements or instruments representing such Equity Interest of Quintiles AG, accompanied by instruments of transfer endorsed in blank to the extent required or permitted under the jurisdiction or organization of the applicable issuer of such Equity Interests and the payment of all fees in connection therewith) and (ii) the Collateral Agent shall have received, on behalf of itself, the other Agents and the Lenders, a favorable written opinion of counsel in Switzerland as shall be acceptable to the Collateral Agent, (a) dated no later than such 30th day after the Effective Date, (b) addressed to the Collateral Agent and the Lenders and (c) covering such matters relating to the Security Documents and the Loan Documents as the Collateral Agent shall request. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all Fees and other amounts payable hereunder or under any other Loan Document have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each of the Loan Parties and their respective Subsidiaries (other than Unrestricted Subsidiaries, except as expressly specified below) agree with the Lenders that: SECTION 6.01. Indebtedness; Certain Equity Securities. (a) The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist (including by way of Guarantee) any Indebtedness, except: (i) Indebtedness incurred and outstanding under the Loan Documents; (ii) (A) Indebtedness of the Loan Parties incurred and outstanding under the Subordinated Notes in an aggregate principal amount not to exceed $450 million and (B) any refinancings thereof with Permitted Subordinated Indebtedness; provided that in the case of this clause (B) only, (x) no Default or Event of Default shall have occurred or be continuing or would result therefrom, (y) after giving effect to the incurrence of such Indebtedness (and any other Indebtedness incurred since the last day of the immediately preceding Test Period) on a pro forma basis as if it were incurred on the first day of the immediately preceding Test Period (but tested as if the applicable ratio were the ratio for the next succeeding Test Period), the Borrower would be in compliance with Sections 6.13 through 6.16, inclusive, and (z) the amount of such Indebtedness is not increased at the time of such refinancing, except by an amount equal to any reasonable prepayment premium on such Indebtedness being refinanced and fees and expenses reasonably incurred in connection with such refinancing; (iii) Indebtedness existing on the Effective Date and set forth in Schedule 6.01(a)(iii) and any renewals, refinancings and extensions thereof on terms and condi- -95- tions (other than interest rates and other terms which fluctuate with general market conditions) no less favorable to such Person than such existing Indebtedness; provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to any reasonable prepayment premium on such Indebtedness being refinanced and fees and expenses reasonably incurred in connection with such refinancing and by an amount equal to any existing commitment unutilized thereunder, and such refinanced Indebtedness matures no earlier than the Indebtedness being refinanced; (iv) (x) Indebtedness of the Borrower to any Subsidiary Loan Party (other than Bioglan) and of any Subsidiary Loan Party to the Borrower or any other Subsidiary Loan Party (other than Bioglan), or (y) Indebtedness of any Non-U.S. Subsidiary owed to a Wholly Owned Non-U.S. Subsidiary, including, pursuant to any cash management facility; (v) Guarantees by the Borrower of Indebtedness of any Subsidiary Loan Party and by any Subsidiary Loan Party (other than Bioglan) of Indebtedness of the Borrower or any other Subsidiary Loan Party (other than Bioglan), in each case, to the extent such Indebtedness was permitted to be incurred hereunder, and if such Indebtedness is subordinated to the Obligations under the Loan Documents, such Guarantee is as subordinated in right of payment to the Obligations; (vi) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its incurrence; (vii) Indebtedness of Non-U.S. Subsidiaries in an aggregate principal amount outstanding at any time not in excess of $40.0 million; provided that (x) no Default or Event of Default shall have occurred or be continuing or would result therefrom and (y) after giving effect to the incurrence of such Indebtedness (and any other Indebtedness incurred since the last day of the immediately preceding Test Period) on a pro forma basis as if it was incurred on the first day of the immediately preceding Test Period (but tested as if the applicable ratio were the ratio for the next succeeding Test Period), the Borrower would be in compliance with Sections 6.13 through 6.16, inclusive; (viii) (A) Indebtedness of any Non-U.S. Subsidiary to the Borrower or any Subsidiary Loan Party (other than Bioglan) in an aggregate principal amount outstanding at any time not in excess of $50.0 million; provided that any such Indebtedness that exceeds $500,000 in principal amount shall be evidenced by a promissory note and shall be pledged pursuant to the Pledge Agreement; and (B) Indebtedness of any Wholly Owned Non-U.S. Subsidiary in the form of a promissory note that is issued to the Borrower or a Subsidiary Loan Party (other than Bioglan) as a dividend or return of capital by such Wholly Owned Non-U.S. Subsidiary; provided that such promissory note is pledged pursuant to the Pledge Agreement; -96- (ix) Indebtedness of any Wholly Owned Non-U.S. Subsidiary (other than any Designated Asian Subsidiary) to the Borrower or any Subsidiary Loan Party representing (1) the deferred payment of the purchase price for the sale of Equity Interests of a Non-U.S. Subsidiary (other than any Designated Asian Subsidiary) by the Borrower or a Subsidiary Loan Party (other than Bioglan) to such Wholly Owned Non-U.S. Subsidiary, (2) an allocation of development costs for intellectual property used by such Wholly Owned Non-U.S. Subsidiary and (3) a management or other fee owed to the Borrower for services provided by the Borrower or a Subsidiary Loan Party (other than Bioglan) to such Wholly Owned Non-U.S. Subsidiary; provided that (a) in each case, such Indebtedness that exceeds $500,000 in principal amount individually or in the aggregate shall be evidenced by a promissory note and shall be pledged pursuant to the Pledge Agreement and (b) in the case of clause (1), 65% of the voting Equity Interests and 100% of the non-voting Equity Interests of such Wholly Owned Non-U.S. Subsidiary or the "first tier" holding company thereof that is a Wholly Owned Non-U.S. Subsidiary shall be pledged pursuant to a Non-U.S. Pledge Agreement; (x) Indebtedness of the Borrower or any Restricted Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof; provided that (A) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (x) shall not exceed $50.0 million at any time outstanding; (xi) Hedging Agreements entered into in the ordinary course of business and not for speculative purposes; (xii) Indebtedness owed to (including obligations in respect of letters of credit for the benefit of) any Person providing worker's compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any Restricted Subsidiary, pursuant to reimbursement or indemnification obligations to such Person; (xiii) Indebtedness of the Borrower and its Restricted Subsidiaries in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations and trade-related letters of credit, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (xiv) Indebtedness arising from agreements of the Borrower or any Restricted Subsidiary of the Borrower providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary, other than Guarantees of Indebt- -97- edness incurred by any Person acquiring all or any portion of such business, assets or a Restricted Subsidiary for the purpose of financing such acquisition; (xv) obligations in respect of performance and surety bonds and completion guarantees provided by the Borrower or any Restricted Subsidiary in the ordinary course of business; (xvi) Permitted Subordinated Indebtedness in an aggregate principal amount outstanding not to exceed $50.0 million; provided that (x) no Default or Event of Default shall have occurred or be continuing or would result therefrom and (y) after giving effect to the incurrence of such Indebtedness (and any other Indebtedness incurred since the last day of the immediately preceding Test Period) on a pro forma basis as if it was incurred on the first day of the immediately preceding Test Period (but tested as if the applicable ratio were the ratio for the next succeeding Test Period), the Borrower would be in compliance with Sections 6.13 through 6.16, inclusive; (xvii) Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Borrower in connection with a Permitted Acquisition, but only if such Indebtedness was not created or incurred in contemplation of such Person becoming a Restricted Subsidiary; provided that (x) no Default or Event of Default shall have occurred or be continuing or would result therefrom and (y) after giving effect to the incurrence of such Indebtedness (and any other Indebtedness incurred since the last day of the immediately preceding Test Period) on a pro forma basis as if it was incurred on the first day of the immediately preceding Test Period (but tested as if the applicable ratio were the ratio for the next succeeding Test Period), the Borrower would be in compliance with Sections 6.13 through 6.16, inclusive; (xviii) other unsecured Indebtedness of the Borrower or any Restricted Subsidiary in an aggregate principal amount not exceeding $50.0 million at any time outstanding; (xix) other secured Indebtedness of the Borrower or any Restricted Subsidiary in an aggregate principal amount not exceeding $10.0 million at any time outstanding; (xx) deferred payment obligations under the employment agreements identified on Schedule 6.01(a)(xx); (xxi) Indebtedness of any Loan Party owed to any Non-U.S. Subsidiary; provided, that such Indebtedness is subordinated (including, without limitation, a prohibition on enforcement) to the Obligations on terms and conditions satisfactory to the Administrative Agent; and (xxii) Permitted Discount Notes raising gross proceeds not to exceed $125.0 million issued by the Intermediate Parent; provided that within 60 days of the issuance of such Permitted Discount Notes, so long as no Default or Event of Default has occurred and is continuing, the Intermediate Parent (A) distributes the net proceeds of the issuance -98- of such Permitted Discount Notes to the Parent pursuant to Section 6.07(ix), (B) contributes the net proceeds of the issuance of such Permitted Discount Notes to the equity capital of the Borrower or (C) distributes and/or contributes such net proceeds in any combination of clauses (A) and (B) above; provided further, that during such 60 day period such net proceeds are held in a deposit account in which the Collateral Agent has a perfected first priority security interest. (b) The Loan Parties will not, nor will they permit any of their Restricted Subsidiaries to, directly or indirectly, issue any Preferred Stock or other preferred Equity Interest (other than a Non-U.S. Subsidiary issuing Preferred Stock or other preferred Equity Interest to the Borrower or a Subsidiary Loan Party that is permitted to be issued by Section 6.04(iv)) which (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (iii) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Preferred Stock or any other preferred Equity Interest described in this paragraph. SECTION 6.02. Liens. The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on any Property or asset now owned or hereafter acquired by them, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except the following (herein collectively referred to as "Permitted Liens"): (i) Liens in favor of the Collateral Agent under the Security Documents; (ii) Liens on assets acquired after the Effective Date existing at the time of acquisition thereof by the Borrower or any Restricted Subsidiary; provided that such Liens were not incurred in connection with, or in contemplation of, such acquisition and do not extend to any assets of the Borrower or any Restricted Subsidiary other than the specific assets so acquired; (iii) Liens to secure the performance of statutory obligations, surety or appeal bonds or performance bonds, landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's, attorney's or other like liens, in any case incurred in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; provided that (A) a reserve or other appropriate provision, if any, as is required by GAAP shall have been made therefor, (B) if such Lien is on Collateral, the Contested Collateral Lien Conditions shall at all times be satisfied and (C) such Liens relating to statutory obligations, surety or appeal bonds or performance bonds shall only extend to or cover cash and Permitted Investments not in the Collateral Account; (iv) Liens existing on the Effective Date and identified on Schedule 6.02 to the extent permitted by the applicable Security Documents; (v) Liens for taxes, assessments or governmental charges or claims or other like statutory Liens, in any case incurred in the ordinary course of business, that do not -99- secure Indebtedness for borrowed money and (A) that are not yet delinquent or (B) that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that (1) any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor and (2) if such Lien is on Collateral, the Contested Collateral Lien Conditions shall at all times be satisfied; (vi) Liens to secure Indebtedness (including Capital Lease Obligations) of the type described in Section 6.01(a)(x) covering only the assets acquired or improved with such Indebtedness; (vii) Liens on the assets of a Non-U.S. Subsidiary that are not otherwise Collateral which Liens secure such Non-U.S. Subsidiary's obligations under Indebtedness incurred pursuant to Section 6.01(a)(vii); (viii) Liens securing Indebtedness incurred to refinance Indebtedness secured by the Liens of the type described in clauses (ii) and (vii) of this Section 6.02; provided that any such Lien shall not extend to or cover any assets not securing the Indebtedness so refinanced; (ix) (A) Liens in the form of zoning restrictions, easements, licenses, reservations, covenants, conditions or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) that do not (1) secure Indebtedness or (2) have a Material Adverse Effect, individually or in the aggregate, or materially impair the use of the real property in the ordinary course of business of the Borrower and any Restricted Subsidiary at such real property and (B) with respect to leasehold interests in real property, mortgages, obligations, liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of such leased property encumbering the landlord's or owner's interest in such leased property; (x) Liens in the form of pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which the Borrower or any Subsidiary is a party, in each case, made in the ordinary course of business for amounts (A) not yet due and payable or (B) being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; provided that (1) a reserve or other appropriate provision, if any, as is required by GAAP shall have been made therefor, (2) if such Lien is on Collateral, the Contested Collateral Lien Conditions shall at all times be satisfied and (3) such Liens shall in no event encumber any Collateral other than cash and Cash Equivalents not in the Collateral Account; (xi) Liens resulting from operation of law with respect to any judgments, awards or orders to the extent that such judgments, awards or orders do not cause or constitute a Default under this Agreement; provided that if any such Liens are on Collateral, the Contested Collateral Lien Conditions shall at all times be satisfied; (xii) Liens in the form of licenses, leases or subleases granted or created by the Borrower or any Restricted Subsidiary, which licenses, leases or subleases do not inter- -100- fere, individually or in the aggregate, in any material respect with the business of the Borrower or such Restricted Subsidiary or individually or in the aggregate materially impair the use (for its intended purpose) or the value of the Property subject thereto; provided that (x) to the extent such licenses, leases or subleases relate to Mortgaged Property in existence as of the Effective Date, the Borrower or such Restricted Subsidiary shall use its commercially reasonable efforts to as soon as practicable cause such licenses, leases or subleases to be subordinated to the Lien granted and evidenced by the Security Documents in accordance with the provisions thereof and (y) with respect to Mortgaged Property, to the extent entered into after the Effective Date, such licenses, leases or subleases shall be subordinate to the Lien granted and evidenced by the Security Documents in accordance with the provisions thereof; provided, further, that any such Lien shall not extend to or cover any asset of the Parent Guarantors, the Borrower or any Subsidiary that is not the subject of any such license, lease or sublease; (xiii) Liens on fixtures or personal property held by or granted to landlords pursuant to leases to the extent that such Liens are not yet due and payable; provided that (i) with respect to any such Liens in existence on the Effective Date, the Borrower or any applicable Restricted Subsidiary has used its commercially reasonable efforts to obtain a landlord lien waiver reasonably satisfactory to the Collateral Agent and (ii) with respect to any leases entered into after the Effective Date, the Borrower or any applicable Restricted Subsidiary shall use its commercially reasonable efforts to (x) enter into a lease that does not grant a Lien on fixtures or personal property in favor of the landlord thereunder or (y) obtain a landlord lien waiver reasonably satisfactory to the Collateral Agent; (xiv) Liens on Permitted PharmaBio Investments consisting of call rights, purchase options or transfer restrictions by the issuer of the applicable securities or pursuant to shareholders agreements or other similar agreements; (xv) Liens on assets or property that does not constitute Collateral that secure Indebtedness permitted to be incurred pursuant to Section 6.01(a)(xix); and (xvi) Liens securing Indebtedness permitted by Section 6.01(a)(xvii); provided that such Liens existed prior to such Person becoming a Restricted Subsidiary, were not created in anticipation thereof and attach only to specific assets of such Person that is the subject of the Permitted Acquisition; provided, however, that (x) no Liens shall be permitted to exist, directly or indirectly, on any Collateral (as defined in the Pledge Agreement) or on any Securities (as defined in the Security Agreement), other than Liens in favor of the Collateral Agent and Liens permitted by Sections 6.02 (v), (xi) and (xiv) and (y) no Liens shall be permitted to exist, directly or indirectly, on a Permitted PharmaBio Investment, other than Liens in favor of the Collateral Agent and Liens permitted by Sections 6.02(v), (xi) and (xiv). SECTION 6.03. Fundamental Changes. (a) The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with them, or liq- -101- uidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default or Event of Default shall have occurred and be continuing, (i) any Wholly Owned Restricted Subsidiary (other than Bioglan) may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Wholly Owned Restricted Subsidiary (other than Bioglan) may merge with or into any Wholly Owned Restricted Subsidiary (other than Bioglan) in a transaction in which the surviving entity is a Wholly Owned Restricted Subsidiary and (if any party to such merger is a Subsidiary Loan Party) is a Subsidiary Loan Party, (iii) any Unrestricted Subsidiary may merge into another Unrestricted Subsidiary and (iv) Permitted Acquisitions may be consummated so long as the surviving person of any merger or consolidation is the Borrower, a Subsidiary Loan Party or a Wholly Owned Non-U.S. Subsidiary; provided that in connection with the foregoing, the appropriate Loan Parties shall take all actions necessary or reasonably requested by the Collateral Agent to maintain the perfection of or perfect, as the case may be, protect and preserve the Liens on the Collateral granted to the Collateral Agent pursuant to the Security Documents and otherwise comply with the provisions of Sections 5.11 and 5.12, in each case, on the terms set forth therein and to the extent applicable. (b) Notwithstanding the foregoing, any Subsidiary Loan Party may dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other Subsidiary Loan Party (other than Bioglan) (provided that in connection with the foregoing, the appropriate Loan Parties shall take all actions necessary or reasonably requested by the Collateral Agent to maintain the perfection of or perfect, as the case may be, protect and preserve the Liens on the Collateral granted to the Collateral Agent pursuant to the Security Documents and otherwise comply with the provisions of Sections 5.11 and 5.12, in each case, on the terms set forth therein and to the extent applicable), and any Restricted Subsidiary which is not a Subsidiary Loan Party other than Bioglan may dispose of assets to any other Wholly Owned Restricted Subsidiary which is not a Subsidiary Loan Party (other than Bioglan). (c) The Borrower will not, and will not permit any of its Subsidiaries (including Unrestricted Subsidiaries) to, directly or indirectly, engage in any business other than businesses of the type conducted by the Borrower and the Subsidiaries on the Effective Date and businesses reasonably related thereto. SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Wholly Owned Subsidiary prior to such merger) any Equity Interests in or evidences of Indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to or other extensions of credit, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or make any other payment for property or services for the account or use of any other Person (other than expenses incurred in the ordinary course of business or as required pursuant to agreements entered into in connection with Permitted PharmaBio Investments) or make any upfront milestone, marketing or other funding payment to another Person in connection with obtaining a right to receive royalty or other payments in the future, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person con- -102- stituting a business unit (each of the foregoing, an "Investment" and collectively, "Investments"), except: (i) Permitted Investments; (ii) Investments existing on the Effective Date (or in respect of which a binding commitment to make such Investment exists on the Effective Date) (including, without limitation, Permitted PharmaBio Investments as of the Effective Date) and set forth on Schedule 6.04; (iii) Investments by the Parent in the Intermediate Parent and by the Intermediate Parent in the Borrower and by or among the Borrower and the Restricted Subsidiaries in Subsidiary Loan Parties (other than Investments in Bioglan); provided that any such Investment held by a Loan Party shall be pledged pursuant to a Pledge Agreement; (iv) (a) Investments made after the Effective Date by the Borrower and its Restricted Subsidiaries in Equity Interests of Non-U.S. Subsidiaries and (b) Investments that would otherwise constitute a Permitted PharmaBio Investment or a Permitted Acquisition but for the fact that such Investment is made by a Wholly Owned Non-U.S. Subsidiary; provided, that the aggregate amount of Investments made pursuant to this clause (iv) shall not exceed $50.0 million at any time; provided, further, that such limitation shall not be applied to Investments specified in clause (a) consisting solely of the capitalization of loans to Non-U.S. Subsidiaries otherwise permitted under this Agreement; (v) Investments constituting Indebtedness permitted by Sections 6.01(a)(iv), (viii), (ix) and (xi); (vi) Guarantees constituting Indebtedness permitted by Section 6.01(a)(v); (vii) Investments by a Wholly Owned Non-U.S. Subsidiary in another Wholly Owned Non-U.S. Subsidiary; (viii) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (ix) loans and advances to employees of the Parent, the Borrower or their Restricted Subsidiaries (A) in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) not to exceed $8.0 million in the aggregate at any time outstanding or (B) for the purpose of purchasing Equity Interests in the Parent Guarantors not to exceed $5.0 million in the aggregate at any time outstanding; (x) Permitted PharmaBio Investments since the Effective Date not to exceed in the aggregate the sum of (x) $150.0 million plus (y) Cumulative Excess Cash Flow plus (z) any net cash amounts (for avoidance of doubt, excluding any Investment received in a Permitted PharmaBio Swap) received in respect of the sale or disposition or -103- satisfaction of obligations of or with respect to any Permitted PharmaBio Investments (other than the sale or disposition of marketable securities (as set forth on the Borrower's balance sheet in accordance with GAAP) held by the Borrower or any of its Subsidiaries on the Effective Date) to the extent such amount does not exceed the original amount of such Investment (exclusive of any write-up or write-down); (xi) Permitted PharmaBio Investments received in connection with a Permitted PharmaBio Swap; (xii) Permitted Acquisitions for aggregate Acquisition Consideration since the Effective Date not to exceed $200.0 million; and (xiii) other loans, advances and investments of the Borrower or any Subsidiary Loan Party not in excess of $15.0 million outstanding at any time. SECTION 6.05. Asset Sales. The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by them (including Equity Interests of an Unrestricted Subsidiary), nor will the Borrower permit any of its Subsidiaries (including any Unrestricted Subsidiaries) to, directly or indirectly, issue any additional Equity Interest in such Subsidiary, except: (i) sales of inventory or used, surplus, obsolete, outdated, inefficient or worn out equipment and other property in the ordinary course of business; (ii) sales, transfers and dispositions to the Borrower or any other Subsidiary Loan Party (other than sales, transfers and dispositions to Bioglan); provided that in connection with the foregoing, the appropriate Loan Parties shall take all actions necessary or reasonably requested by the Collateral Agent to maintain the perfection of or perfect, as the case may be, protect and preserve the Liens on the Collateral granted to the Collateral Agent pursuant to the Security Documents and otherwise comply with the provisions of Sections 5.11 and 5.12, in each case, on the terms set forth therein and to the extent applicable; (iii) the lease or sublease of Real Property in the ordinary course of business and not constituting a sale and leaseback transaction; (iv) sales of Permitted Investments; (v) (A) sales of Permitted PharmaBio Investments and (B) Permitted PharmaBio Swaps; provided, that, other than with respect to sales or swaps of Non-Operating Investments, after giving effect to such sale or swap (and any other sale or swap of Permitted PharmaBio Investments consummated since the last day of the immediately preceding Test Period) on a pro forma basis as if it was consummated on the first day of the immediately preceding Test Period (but tested as if the applicable ratio were the ratio for the -104- next succeeding Test Period), the Borrower would be in compliance with Sections 6.13 through 6.16, inclusive; (vi) transfers of assets which transfers constitute Investments that are permitted under Section 6.04; (vii) the issuance by any Designated Asian Subsidiary of its Equity Interests in connection with a public offering of Equity Interests or sale of Equity Interests to a strategic or an institutional investor, in each case for fair value; provided that (i) no such issuance shall result in the Borrower or any Restricted Subsidiary owning less than 65% of the outstanding Equity Interests on a fully diluted basis of such Designated Asian Subsidiary and (ii) the net proceeds from such issuance are either (A) retained by such Designated Asian Subsidiary and reinvested in its business or (B) applied toward the prepayment of Loans to the extent required by Section 2.06(c)(iii); provided, however, for purposes of this clause (B) only, all references to 270 days in Section 2.06(c) shall be deemed to refer to the date that is the earlier of (y) 270 days after the repatriation to the Borrower or any Subsidiary Loan Party of the net proceeds from such issuance and (z) 540 days following the date of such issuance; (viii) sales, transfers and dispositions of assets between Wholly Owned Non-U.S. Subsidiaries; (ix) sales, transfers and dispositions of assets as contemplated by Section 6.01(a)(ix)(1) hereof; and (x) sales, transfers and dispositions of assets (other than Equity Interests of a Restricted Subsidiary) not otherwise permitted under this Section; provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (x) shall not, in the aggregate, exceed $35.0 million during any Fiscal Year and $100.0 million in the aggregate and the Net Proceeds thereof are applied as required by Section 2.06(c)(iii); provided that all sales, transfers, leases and other dispositions permitted hereby shall be made for fair value and (x) for at least 75% cash consideration in the case of sales, transfers, leases and other dispositions permitted by clause (v)(A) and (y) for 100% cash consideration in the case of sales, transfers, leases and other dispositions permitted by clauses (iv), (vii), and (x). SECTION 6.06. Sale and Leaseback Transactions. The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, enter into any arrangement, directly or indirectly, whereby they shall sell or transfer any Property, real or personal, used or useful in their business, whether now owned or hereafter acquired, and thereafter rent or lease such Property or other Property that they intend to use for substantially the same purpose or purposes as the Property sold or transferred unless (i) the sale of such Property is permitted by Section 6.05 and (ii) any Lien arising in connection with the use of such Property by any Loan Party or a Restricted Subsidiary is permitted by Section 6.02. -105- SECTION 6.07. Restricted Payments. The Parent, the Intermediate Parent and the Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except: (i) Subsidiaries of the Borrower may declare and pay dividends to the Borrower or another Subsidiary ratably with respect to their Equity Interests; (ii) the Parent may pay dividends consisting solely of shares of its common stock or additional shares of the same class of shares on which the dividend is being paid; (iii) so long as no Default or Event of Default shall have occurred and be continuing, the Parent may purchase, redeem or acquire, and the Borrower may make payments, directly or indirectly, to the Parent in order for it to so purchase, redeem or acquire, any of its Equity Interests or Equity Rights from any of its or its Subsidiaries' present or former officers or employees upon the death, disability or termination of employment of such officer or employee, so long as the aggregate amount of payments under this clause (iii) shall not exceed $10.0 million in any Fiscal Year and $20.0 million in the aggregate since the Effective Date; (iv) so long as no Default or Event of Default shall have occurred and be continuing, payments, directly or indirectly, to the Parent to be used by the Parent to make (a) payments pursuant to the Management Agreements, upon the Effective Date, in an aggregate amount of $20 million (the "Initial Management Payment") and (b) immediately after the receipt thereof, additional payments pursuant to the Management Agreements, not to exceed in any calendar year the aggregate amount of $3.75 million plus an amount equal to the cumulative CPI Increase Amount for each calendar year following the Effective Date (the "Annual Management Payment"); (v) the Borrower may make payments, directly or indirectly, to the Parent in an amount not to exceed $500,000 during any Fiscal Year if the proceeds thereof are immediately used by the Parent to pay franchise taxes and other fees required to maintain the Parent's corporate existence, other taxes and general corporate and overhead expenses (including salaries and other compensation of employees) incurred by the Parent in the ordinary course of its business as a holding company for the Borrower; (vi) the Borrower may make payments, directly or indirectly, to the Parent to be used by the Parent to pay consolidated, combined or similar Federal, state and local taxes payable by the Parent and directly attributable to (or arising as a result of) the operations of the Borrower and its Subsidiaries; provided, however, that (A) the amount of such dividends, distributions or advances paid shall not exceed the amount that would be due with respect to a consolidated, combined or similar Federal, state or local tax return that included the Borrower and its Subsidiaries and (B) such payments pursuant to this clause (vi) are used by the Parent for such purposes within 90 days of the receipt of such payments; -106- (vii) the Borrower may make Restricted Payments, directly or indirectly, to the Intermediate Parent or the Parent pursuant to this clause (vii) in an amount not to exceed the sum of (A) $100.0 million and (B) Cumulative Consolidated Net Income since the Effective Date so long as (x) both before and after giving effect thereto, no Default or Event of Default has occurred and is continuing and (y) the Total Leverage Ratio as of the Test Period ending on the last day for which financial statements have been delivered to the Lenders pursuant to Section 5.01(a) or (b) on a pro forma basis for such Restricted Payment is less than 2.80x; (viii) the Borrower may make payments, directly or indirectly to the Parent to pay fees and expenses pursuant to the Fee Agreement, the Subscription Agreements and the DG Equity Rollover Agreement each as in effect on the Effective Date as well as in connection with the Transactions that have not been otherwise paid by the Borrower or Parent; provided that the aggregate amount of payments pursuant to this clause (viii) and pursuant to clause (iv)(a) of this Section 6.07 shall not exceed $140.0 million; and (ix) so long as no Default or Event of Default has occurred and is continuing, the Intermediate Parent may make payments to the Parent on the date of issuance of any Permitted Discount Notes or within 60 days thereafter, of the net proceeds from the sale of such Permitted Discount Notes to be utilized by the Parent to redeem Series A Preferred Stock. SECTION 6.08. Transactions with Affiliates. The Loan Parties will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of their Affiliates, unless such transactions are (i) either (A) in the ordinary course of the Borrower's business or (B) approved by a majority of those members of the board of directors of the Parent that are disinterested in the relevant transactions, and (ii) are at prices and on terms and conditions not less favorable to the Loan Party or such Restricted Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, except: (i) transactions between or among the Borrower and the Subsidiary Loan Parties not involving any other Affiliate and transactions among Subsidiaries not involving any Loan Party; (ii) any Restricted Payment permitted by Section 6.07 or any Investment (other than Permitted Acquisitions) permitted by Section 6.04; (iii) fees and compensation, benefits and incentive arrangements paid or provided to, and any indemnity provided on behalf of, officers, directors or employees of the Borrower or any Subsidiary as determined in good faith by the board of directors of the Borrower; (iv) loans and advances to employees permitted by Section 6.04(ix); -107- (v) (a) the Initial Management Payment and (b) so long as no Default or Event of Default has occurred and is continuing, the Annual Management Payment; (vi) any tax sharing arrangement and payments pursuant thereto among the Borrower and its Restricted Subsidiaries and other Persons (including the Parent) with which the Borrower or its Restricted Subsidiaries are required or permitted to file a consolidated, combined or similar tax return or with which the Borrower or any of its Restricted Subsidiaries is or could be a part of a consolidated, combined or similar group for tax purposes in amounts not otherwise prohibited by this Agreement; (vii) transactions between the Borrower and Dr. Gillings or his Affiliates identified on Schedule 6.08; (viii) any change of control or severance payments made to employees of the Borrower as a result of the Merger pursuant to agreements identified on Schedule 6.01(a)(xx) as in effect on the Effective Date; (ix) the issuance or sale of any Equity Interests of the Parent; and (x) payments pursuant to the Fee Agreement, the Subscription Agreements and the DG Equity Rollover Agreement, each as in effect on the Effective Date. SECTION 6.09. Restrictive Agreements. The Loan Parties will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of any Loan Party or any Restricted Subsidiary to create, incur or permit to exist any Lien upon any of its Property or assets, or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Restricted Subsidiary or to Guarantee Indebtedness of the Borrower or any other Restricted Subsidiary or to transfer property to the Borrower or any of its Restricted Subsidiaries; provided that the foregoing shall not apply to: (i) conditions imposed by law or any Loan Document; (ii) clause (a) shall not apply to assets encumbered by Permitted Liens as long as such restriction applies only to the asset encumbered by such Permitted Lien; (iii) restrictions and conditions existing on the Effective Date not otherwise excepted from this Section 6.09 identified on Schedule 6.09 (but shall not apply to any amendment or modification expanding the scope of any such restriction or condition); (iv) any agreement in effect at the time any Person becomes a Restricted Subsidiary of the Borrower; provided that such agreement was not entered into in contemplation of such Person becoming a Restricted Subsidiary; -108- (v) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary (or the assets of a Subsidiary) pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold (or whose assets are to be sold) and such sale is permitted hereunder; (vi) clause (a) shall not apply to Indebtedness of Non-U.S. Subsidiaries permitted by Section 6.01(a)(vii) so long as such Indebtedness does not restrict any Lien securing any of the Loan Documents; (vii) clause (b) shall not apply to Indebtedness of Non-U.S. Subsidiaries permitted by Section 6.01(a)(vii) which restrictions only apply to such Non-U.S. Subsidiaries and such encumbrances or restrictions will not materially affect the Borrower's ability to make any principal or interest payment on the Loans; and (viii) clause (a) shall not apply to customary provisions in leases and service contracts in the ordinary course between the Borrower and its customers and other contracts restricting the assignment thereof. SECTION 6.10. Amendments or Waivers of Certain Documents; Prepayments of Indebtedness. (a) The Loan Parties will not, and will not permit any Subsidiary to, directly or indirectly, amend or otherwise change (or waive) the terms of their Organic Documents, the documents governing any Indebtedness outstanding as of the date hereof, the Subordinated Notes, the Subordinated Notes Indenture, any documents governing Permitted Discount Notes or Permitted Subordinated Indebtedness, the Management Agreements, the Fee Agreement or the Merger Agreement, in each case, in a manner adverse to the Lenders. (b) The Loan Parties will not, and will not permit any Restricted Subsidiary to, make (or give any notice or offer in respect of) any voluntary or optional payment or mandatory prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before such Indebtedness is due for the purpose of paying such Indebtedness when due) or exchange of principal of any Indebtedness of the type referred to in Section 6.01(a)(ii) (except with the net proceeds of Permitted Subordinated Indebtedness as set forth in Section 6.01(a)(ii)) (xvi) or (xxii). SECTION 6.11. No Other "Designated Senior Indebtedness". Neither the Parent Guarantors nor the Borrower shall designate, or permit the designation of, any Indebtedness (other than under this Agreement or the other Loan Documents) as "Designated Senior Indebtedness" (or any equivalent term) under the Subordinated Notes Documents or any documents relating to Permitted Subordinated Indebtedness. SECTION 6.12. Limitation on Activities of Parent Guarantors. Notwithstanding anything to the contrary set forth herein, neither the Parent nor the Intermediate Parent shall conduct any business or hold or acquire any assets (other than the Equity Interests of the Borrower or the net proceeds of the Permitted Discount Notes to the extent permitted by Section 6.01(a)(xxii), in the case of the Intermediate Parent, or the Intermediate Parent, in the case of the -109- Parent) and shall have no operations other than holding such Equity Interests or such net proceeds, as applicable. SECTION 6.13. Interest Expense Coverage Ratio. The Borrower will not permit the Interest Expense Coverage Ratio for any Test Period ending on a date set forth below to be less than the ratio set forth below opposite such period:

SECTION 6.14. Total Leverage Ratio. The Borrower will not permit the Total Leverage Ratio for any Test Period ending on a date set forth below to exceed the ratio set forth opposite such period:

-110-

SECTION 6.15. Senior Leverage Ratio. The Borrower will not permit the Senior Leverage Ratio for any Test Period ending on a date set forth below to exceed the ratio set forth opposite such period:

-111-

SECTION 6.16. Capital Expenditures. The Borrower will not, and will not permit any of its Subsidiaries to, make or commit to make any Capital Expenditures, except that the Borrower and its Subsidiaries may make or commit to make Capital Expenditures not exceeding the amount set forth below (the "Base Amount") for each of the Fiscal Years of the Borrower set forth below:

provided that for any period set forth above, the Base Amount set forth above may be increased by a maximum of 50% of the Base Amount for any such period by carrying over to any such period any portion of the Base Amount (without giving effect to any increase) not spent in the immediately preceding period, and that Capital Expenditures in any period shall be deemed first made from the Base Amount applicable to such period in any given period; provided, further, that for avoidance of doubt, Capital Expenditures for the Fiscal Year ended December 31, 2003 shall include Capital Expenditures made or committed to be made by the Borrower prior to the Effective Date. SECTION 6.17. Maintenance of Corporate Separateness. The Loan Parties shall not permit any Unrestricted Subsidiary to (a) fail to satisfy customary corporate formalities, including (i) the holding of regular board of directors' and shareholders' meetings, (ii) the maintenance of separate corporate records and (iii) the maintenance of separate bank accounts in its own name; (b) fail to act solely in its own corporate name and through its authorized officers and agents; (c) commingle any of its money or other assets with any money or other assets of any Loan Party; or (d) take any action, or conduct its affairs in a manner which is reasonably likely to -112- result in the separate corporate existence of the Loan Parties from the Unrestricted Subsidiaries to be ignored or the assets and liabilities of any Unrestricted Subsidiary being substantively consolidated with those of any Loan Party in any bankruptcy, insolvency proceeding; or permit any Loan Party to make any payment to any creditor of any Unrestricted Subsidiary or provide any direct or indirect guarantee or other credit support for any Indebtedness or other obligations of any Unrestricted Subsidiary. SECTION 6.18. Anti-Terrorism Law. The Loan Parties shall not (i) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 3.25 above, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties' compliance with this Section 6.18). SECTION 6.19. Embargoed Person. At all times throughout the term of the Loans, (a) none of the funds or assets of the Loan Parties that are used to repay the Loans shall constitute property of, or shall be beneficially owned directly or, to the knowledge of any Loan Party, indirectly by, any Person subject to sanctions or trade restrictions under United States law ("Embargoed Person" or "Embargoed Persons") that is identified on (1) the "List of Specially Designated Nationals and Blocked Persons" (the "SDN List") maintained by the Office of Foreign Assets Control (OFAC), U.S. Department of the Treasury, and/or to the knowledge of any Loan Party, as of the date thereof, based upon reasonable inquiry by such Loan Party, on any other similar list ("Other List") maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law, or the Loans made by the Lenders would be in violation of law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders (collectively, "Executive Orders"), and (b) no Embargoed Person shall have any direct interest, and to the knowledge of any Loan Party, as of the date hereof, based upon reasonable inquiry by any Loan Party, indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law or the Loans are in violation of law. SECTION 6.20. Anti-Money Laundering. At all times throughout the term of the Loans, to the knowledge of any Loan Party, as of the date hereof, based upon reasonable inquiry by such Loan Party, none of the funds of such Loan Party that are used to repay the Loans shall be derived from any unlawful activity with the result that the investment in the Loan Parties (whether directly or indirectly), is prohibited by law or the Loans would be in violation of law. -113- ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Listing of Events of Default. Each of the following events or occurrences described in this Section 7.01 shall constitute (i) an "Event of Default", if any Loans, LC Disbursements or Letters of Credit are outstanding, and (ii) an "Event of Termination", if no Loans, LC Disbursements or Letters of Credit are outstanding: (a) The Borrower shall default (i) in the payment when due of any principal of any Loan (including, without limitation, on any Installment Payment Date) or any reimbursement obligation in respect of any LC Disbursement, (ii) in the payment when due of any interest on any Loan (and such default shall continue unremedied for a period of three Business Days), or (iii) in the payment when due of any Fee described in Section 2.11 or of any other previously invoiced amount (other than an amount described in clauses (i) and (ii)) payable under this Agreement or any other Loan Document (and such default shall continue unremedied for a period of three Business Days). (b) Any representation or warranty of the Borrower, the Parent Guarantors or any other Loan Party made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of the Parent Guarantors or any other Loan Party to the Administrative Agent, the Issuing Bank or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document is or shall be incorrect in any material respect when made or deemed made. (c) The Borrower shall default in the due performance and observance of any of its obligations under clause (g), (h) or (l) of Section 5.01, clause (a) of Section 5.02 (with respect to the maintenance and preservation of the Parent Guarantors' or the Borrower's corporate existence) or Article VI. (d) The Borrower, the Parent Guarantors or any other Loan Party shall default in the due performance and observance of any agreement (other than those specified in paragraphs (a) through (c) above) contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after the date of such default. (e) A default shall occur (i) in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Material Indebtedness or (ii) in the performance or observance of any obligation or condition with respect to any Material Indebtedness if the effect of such default referred to in this clause (ii) is to accelerate the maturity of any such Material Indebtedness or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause any such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity. -114- (f) Any judgment or order (or combination of judgments and orders) for the payment of money equal to or in excess of $10.0 million individually or in the aggregate (to the extent not fully covered by insurance (less any deductible) and as to which the insurer has acknowledged responsibility to pay such judgment or order) shall be rendered against the Borrower, either Parent Guarantor or any of their Subsidiaries (or any combination thereof) and (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order and not stayed; (ii) such judgment has not been stayed, vacated or discharged within 60 days of entry; or (iii) there shall be any period (after any applicable statutory grace period) of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect and such judgment is not fully insured against by a policy or policies of insurance (with reasonable or standard deductible provisions) issued by an insurer other than an Affiliate of the Borrower. (g) Any of the following events shall occur with respect to any Pension Plan: (i) the taking of any specific actions by a Loan Party, any ERISA Affiliate or any other Person to terminate a Pension Plan if, as a result of such termination, a Loan Party or any ERISA Affiliate could expect to incur a liability or obligation to such Pension Plan which could reasonably be expected to have a Material Adverse Effect; or (ii) an ERISA Event, or event of noncompliance with respect to Foreign Plans, shall have occurred that gives rise to a Lien on the assets of any Loan Party or a Subsidiary or, when taken together with all other ERISA Events and events of noncompliance with respect to Foreign Plans that have occurred, could reasonably be expected to have a Material Adverse Effect. (h) Any Change in Control shall occur. (i) The Borrower, either Parent Guarantor or any of their Subsidiaries shall (i) become insolvent or generally fail to pay debts as they become due; (ii) apply for, consent to or acquiesce in the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, such Parent Guarantor or any of such Subsidiaries or substantially all of the property of any thereof, or make a general assignment for the benefit of creditors; -115- (iii) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, such Parent Guarantor or any of such Subsidiaries or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged or stayed within 60 days, provided that the Borrower, each Parent Guarantor and each such Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower, such Parent Guarantor or any such Subsidiary and, if any such case or proceeding is not commenced by the Borrower, such Parent Guarantor or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower, such Parent Guarantor or such Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed and unstayed, provided that the Borrower, each Parent Guarantor and each such Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (v) take any corporate or partnership action (or comparable action, in the case of any other form of legal entity) authorizing, or in furtherance of, any of the foregoing. (j) The obligations of either Parent Guarantor under its Guarantee in Article IX or of any other Loan Party under the Guarantee Agreement shall cease to be in full force and effect or either Parent Guarantor or any such other Loan Party shall repudiate its obligations thereunder. (k) Any Lien purported to be created under any Security Document shall fail or cease to be (other than any Lien which is voluntarily released by the Collateral Agent), or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document, and such failure or cessation shall continue unremedied for five days. (l) The subordination provisions relating to the Subordinated Notes or any Permitted Subordinated Indebtedness (the "Subordination Provisions") shall fail in any material respect to be enforceable by the Lenders (which have not effectively waived the benefits thereof) in accordance with the terms thereof or the Borrower, the Parent Guarantors or any Subsidiary Loan Party shall, directly or indirectly, disavow or contest in any manner any of the Subordination Provisions. -116- SECTION 7.02. Action if Bankruptcy. If any Event of Default described in clauses (i) through (v) of Section 7.01(i) shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand, all of which are hereby waived by the Borrower. SECTION 7.03. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (i) through (v) of Section 7.01(i)) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Requisite Lenders, shall by written notice to the Borrower and each Lender declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment and/or, as the case may be, the Commitments shall terminate. SECTION 7.04. Action if Event of Termination. Upon the occurrence and continuation of any Event of Termination, the Requisite Lenders may, by notice from the Administrative Agent to the Borrower and the Lenders (except if an Event of Termination described in clauses (i) through (v) of Section 7.01(i) shall have occurred, in which case the Commitments (if not theretofore terminated) shall, without notice of any kind, automatically terminate) declare their Commitments terminated, and upon such declaration the Lenders shall have no further obligation to make any Loans hereunder. Upon such termination of the Commitments, all accrued fees and expenses shall be immediately due and payable. ARTICLE VIII THE AGENTS SECTION 8.01. The Agents. Citicorp North America, Inc. is hereby appointed to act as Administrative Agent and Collateral Agent on behalf of the Lenders. Each of the Lenders and each assignee of any such Lender hereby irrevocably authorizes each of the Agents to take such actions on behalf of such Lender or assignee and to exercise such powers as are specifically delegated to such Agent by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. Each Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans, all payments and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrower of any Default specified in this Agreement of which such Agent has actual knowledge acquired in connection with its agency hereunder; (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by such Agent, (d) to enter into the Security Documents on behalf of the Lenders and (e) to claim all Obligations owed to any Lender against the Borrower in its own name for the purpose of any Security Documents. -117- None of the Agents nor any of their Related Parties shall be liable to the Lenders as such for any action taken or omitted to be taken by any of them except to the extent finally judicially determined to have resulted from its or his or her own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by any Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents or other instruments or agreements. Each Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Requisite Lenders (or, when expressly required hereby, all the Lenders) and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of actual knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. None of the Agents nor any of their Related Parties shall have any responsibility to the Loan Parties on account of the failure of or delay in performance or breach by any Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Loan Parties of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each Agent may execute any and all duties hereunder by or through any of its Related Parties or any sub-agent appointed by it and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that no Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of any Loan Document unless it shall be requested in writing to do so by the Requisite Lenders. Subject to the appointment and acceptance of a successor Agent as provided below, any Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor. If no successor shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500.0 million or an Affiliate of any such bank. Upon the acceptance of any appointment as an Agent hereunder by such a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After an Agent's resignation hereunder, the provisions of this Article and Section 10.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Agent. -118- With respect to the Loans made by it hereunder, each Agent in its individual capacity and not as an Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and such Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. Notwithstanding anything to the contrary in this Agreement, neither CGMI, as a Lead Arranger, in such capacity, nor CGMI or Banc One, as Syndication Agents, or RFC, as Documentation Agent, shall have any obligations, duties or responsibilities, and shall incur any liabilities, under this Agreement or any other Loan Document. ARTICLE IX GUARANTEE SECTION 9.01. Guarantee of the Parent Guarantors. In order to induce the Administrative Agent, the Issuing Bank and the Lenders to execute and deliver this Agreement and to make or maintain the Loans and to issue Letters of Credit hereunder, and in consideration thereof, each of the Parent Guarantors hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, to the Agents, for the ratable benefit of the Secured Parties, the prompt and complete payment and performance by the Borrower when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, and each of the Parent Guarantors further agrees to pay any and all reasonable expenses (including, without limitation, all reasonable fees, charges and disbursements of counsel) which may be paid or incurred by the Agents, the Issuing Bank or any Lender in enforcing any of their rights under the Guarantee contained in this Article IX. The Guarantee contained in this Article IX, subject to Section 9.04, shall remain in full force and effect until all Letters of Credit have terminated, the Obligations are paid in full and the Commitments are terminated. Each of the Parent Guarantors agrees that whenever, at any time, or from time to time, it shall make any payment to any Agent, the Issuing Bank or any Lender on account of its liability under this Article IX, it will notify such Agent, the Issuing Bank or such Lender in writing that such payment is made under the Guarantee contained in this Article IX for such purpose. No payment or payments made by the Borrower or any other Person or received or collected by any Agent, the Issuing Bank or any Lender from the Borrower or any other Person by virtue of any action or proceeding or any setoff or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release -119- or otherwise affect the liability of such Parent Guarantor under this Article IX, which, notwithstanding any such payment or payments, shall remain liable for the unpaid and outstanding Obligations until, subject to Section 9.04, all Letters of Credit have terminated and the Obligations are paid in full and the Commitments are terminated. SECTION 9.02. Amendments, etc. with Respect to the Applicable Obligations. Each of the Parent Guarantors shall remain obligated under this Article IX notwithstanding that (i) without any reservation of rights against such Parent Guarantor, and (ii) without notice to or further assent by such Parent Guarantor, (x) any demand for payment of or reduction in the principal amount of any of the Obligations made by the Agents, the Syndication Agents, the Issuing Bank or any Lender may be rescinded by the Agents, the Syndication Agents, the Issuing Bank or such Lender, (y) any of the Obligations may be continued, and the applicable Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Agents, the Syndication Agents, the Issuing Bank or any Lender, and (z) this Agreement and any other documents executed and delivered in connection herewith may be amended, modified, supplemented or terminated, in whole or in part, as the Lenders (or the Requisite Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Agents, the Syndication Agents, the Issuing Bank or any Lender for the payment of the applicable Obligations may be sold, exchanged, waived, surrendered or released. None of the Agents, the Syndication Agents, the Issuing Bank or any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for the Guarantee contained in this Article IX or any property subject thereto. SECTION 9.03. Guarantee Absolute and Unconditional. Each of the Parent Guarantors waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Agents, the Syndication Agents, the Issuing Bank or any Lender upon the Guarantee contained in this Article IX or acceptance of the Guarantee contained in this Article IX; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the Guarantee contained in this Article IX, and all dealings between each of the Parent Guarantors, on the one hand, and the Agents, the Syndication Agents, the Issuing Bank and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon the Guarantee contained in this Article IX. The Agents, Syndication Agents, Issuing Bank and any Lender will, to the extent permitted by applicable law, request payment of any applicable Obligation from the Borrower before making any claim against either Parent Guarantor under this Article IX, but will have no further obligation to proceed against the Borrower or to defer for any period a claim against each of the Parent Guarantors hereunder. Except as expressly provided in the preceding sentence, each of the Parent Guarantors waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon such Parent Guarantor or the Borrower with respect to the Obligations. The Guarantee contained in this Article IX shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of this Agreement or any other Loan Document, any of the Obligations or any collateral security -120- therefor or Guarantee or right of offset with respect thereto at any time or from time to time held by any Agent, the Syndication Agents, the Issuing Bank or any Lender, (b) the legality under applicable laws of repayment by the Borrower of any Obligations or the adoption of any applicable laws purporting to render any Obligations null and void, (c) any defense, setoff or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by either Parent Guarantor or the Borrower against the Agents, the Syndication Agents, the Issuing Bank or any Lender, or (d) any other circumstance whatsoever (with or without notice to or knowledge of either Parent Guarantor or the Borrower) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for any Obligations, or of either Parent Guarantor under the Guarantee contained in this Article IX, in bankruptcy or in any other instance. When any Agent, the Syndication Agents, the Issuing Bank or any Lender is pursuing its rights and remedies under this Article IX against the Parent Guarantors, such Agent, the Syndication Agents, the Issuing Bank or such Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or Guarantee for the Obligations or any right of offset with respect thereto, and any failure by any Agent, the Syndication Agents, the Issuing Bank or any Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or Guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or of any such collateral security, Guarantee or right of offset, shall not relieve the Parent Guarantors of any liability under this Article IX, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Agents, the Syndication Agents, the Issuing Bank and the Lenders against the Parent Guarantors. SECTION 9.04. Reinstatement. The Guarantee contained in this Article IX shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by any Agent, the Syndication Agents, the Issuing Bank or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of its Property, or otherwise, all as though such payments had not been made. SECTION 9.05. Payments. Each of the Parent Guarantors hereby agrees that any payments in respect of the Obligations pursuant to this Article IX will be paid without setoff or counterclaim in the currency in which the applicable Loans are denominated at the office of the Administrative Agent specified in Section 10.01. SECTION 9.06. Independent Obligations. The obligations of each of the Parent Guarantors under the Guarantee contained in this Article IX are independent of the obligations of the Borrower, and a separate action or actions may be brought and prosecuted against each of the Parent Guarantors whether or not the Borrower is joined in any such action or actions. Each of the Parent Guarantors waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any pay- -121- ment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to the Parent Guarantors. ARTICLE X MISCELLANEOUS SECTION 10.01. Notices. (a) Except as set forth in Section 10.17, notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail, sent by telecopy or electronic mail, as follows: (i) if to the Borrower, to it at 4709 Creekstone Drive, Riverbirch Building, Suite 200, Durham, NC 27703 (telecopy: (919) 941-7345) (e-mail: john.russell@quintiles.com), with a copy to Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500 First Union Capital Center, P.O. Box 2611, Raleigh, NC 27602, attention: Gerald F. Roach, Esq. (telecopy: (919) 821-6800), and a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178, attention: Ira White, Esq. (telecopy: (212) 309-6273); (ii) if to the Administrative Agent to it at Citicorp North America, Inc., 390 Greenwich St., New York, New York 10013, attention: Allen Fisher (telecopy: (212) 723-6708) (e-mail: allen.fisher@citigroup.com), with a copy to Cahill Gordon & Reindel LLP, 80 Pine Street, New York, New York 10005, attention: William M. Hartnett, Esq. (telecopy: (212) 269-5420); (iii) if to the Syndication Agents, to ABN at 55 East 52nd Street, New York, New York 10055 and to Banc One at 1 Bank One Plaza, Mail Code ILI-0868, Chicago, IL 60603; (iv) if to the Documentation Agent, to RFC at 2711 North Haskell, Suite 900, Dallas, Texas 75204; (v) if to the Issuing Bank, to it at Citicorp North America, Inc., 390 Greenwich St., New York, New York 10013, attention: Allen Fisher (telecopy: (212) 723-6708) (e-mail: allen.fisher@citigroup.com), with a copy to Cahill Gordon & Reindel LLP, 80 Pine Street, New York, New York 10005, attention: William M. Hartnett, Esq. (telecopy: (212) 269-5420); and (vi) if to a Lender, to it at its address (or telecopy number) set forth in Schedule 2.01 or its Administrative Questionnaire or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or electronic mail or on the -122- date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 10.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 10.01. Each Loan Party and Lender hereunder agrees to notify the Administrative Agent in writing promptly of any change to the notice information provided above or in Schedule 2.01. (b) The Borrower shall forthwith on demand indemnify each Lender against any loss or liability which that Lender incurs (and that Lender shall not be liable to the Borrower in any respect) as a consequence of: (i) any Person to whom any notice or communication under or in connection with this Agreement is sent by the Borrower by telecopy failing to receive that notice or communication (unless directly caused by that Person's gross negligence or willful default); or (ii) any telecopy communication which reasonably appears to that Lender to have been sent by the Borrower having in fact been sent by a Person other than the Borrower. SECTION 10.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by Lenders hereto and shall survive the making by the Lenders of the Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. The provisions of Sections 2.16, 2.17, 2.18, 10.05 and 10.16 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.03. Binding Effect. Subject to Section 4.01, this Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. SECTION 10.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party (including any Affiliate of the Issuing Bank that issues any Let- -123- ter of Credit). All covenants, promises and agreements by or on behalf of the Borrower, the Agents or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in clause (f) below and, solely to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or a Lender Affiliate or in connection with the initial syndication of the Commitments and Loans, the Borrower and the Administrative Agent (and, in the case of any assignment of a Revolving Credit Commitment or any Lender's obligations in respect of its LC Exposure, Swingline Exposure or Foreign Currency Exposure, the Issuing Bank, the Swingline Lender and the Foreign Currency Lenders, as applicable) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or a Lender Affiliate or in connection with the initial syndication of the Commitments and Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than, in the case of the Term B Loans, $1.0 million and increments of $1.0 million in excess thereof and, in the case of the Revolving Loans, $5.0 million and increments of $1.0 million in excess thereof (or (A) if the aggregate amount of the Commitment or Loans of the assigning Lender is a lesser amount, the entire amount of such Commitment or Loans, or (B) in any other case, such lesser amount as the Borrower and the Administrative Agent otherwise agree), (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments and Loans, (iv) except in the case of the assignment to a Lender Affiliate of such Lender or an assignment required to be made pursuant to Section 2.21, the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 and, if applicable, the forms required by Section 2.17(c) hereof, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided, further, that any consent of the Borrower otherwise required under this paragraph shall not be required if a Default or an Event of Default has occurred and is continuing. Subject to acceptance and recording pursuant to paragraph (e) of this Section 10.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof (unless otherwise determined by the Administrative Agent), (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agree- -124- ment (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.16, 2.17, 2.18 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment, as well as to any Fees accrued for its account and not yet paid). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (f) of this Section. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Commitment, and the outstanding balances of its Loans and participations in Swingline Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements, if any, delivered pursuant to Section 5.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon either Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to such Agent by the terms hereof and any other Loan Document, together with such powers as are reasonably incidental thereto; (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender; and (viii) Schedule 2.01 shall be deemed to be amended to reflect the reduction of commitment of or deletion of the assigning Lender thereunder and the commitment of the assignee thereunder after giving effect thereto. (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in the City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements, and participations in Swingline Loans, owing to, each Lender pursuant to the terms hereof from -125- time to time (the "Register"). Except to the extent inconsistent with Section 2.08(d), the entries in the Register shall be conclusive and the Borrower, the Agents, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower, the Issuing Bank, the Swingline Lender, the Foreign Currency Lenders and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e). (f) Each Lender may without the consent of the Borrower, the Swingline Lender, the Foreign Currency Lender, the Issuing Bank or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) each Participant shall be entitled to the benefit of the cost protection provisions contained in Sections 2.16, 2.17 and 2.18 and the provisions of Section 5.01 to the same extent as if they were Lenders and had acquired its interest by assignment pursuant to paragraph (b) of this Section 10.04 (provided that no participant shall be entitled to receive any greater amount pursuant to such Sections than the Lender would have been entitled to receive in respect of the interest transferred unless either (x) such transfer to such Participant is made with the Borrower's prior written consent (not to be unreasonably withheld) or (y) a Default or an Event of Default has occurred and is continuing at the time of such participation), and (iv) the Borrower, the Agents, the Issuing Bank and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right (which each Lender agrees will not be limited by the terms of any participation agreement or other agreement with a participant) to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents (other than, without the consent of the Participant, amendments, modifications or waivers described in the first proviso of Section 10.08(b) that affect such Participant). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.06 as though it were a Lender, provided such Participant agrees to be subject to Section 2.21 as though it were a Lender. (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.04, disclose to the -126- assignee or participant or proposed assignee or participant any information relating to the Borrower and its Subsidiaries furnished to such Lender by or on behalf of any of the Loan Parties; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute a confidentiality agreement in form and substance consistent with provisions of Section 10.16. (h) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank and this Section 10.04 shall not apply to any such pledge or assignment of a security interest; provided that (x) no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto and (y) any foreclosure or similar action shall be subject to the provisions of Section 10.04(b) concerning assignments and shall not be effective to transfer any rights under this Agreement or in any Loan, Note or other instrument evidencing the rights of a Lender under this Agreement until the requirements of Section 10.04(b) concerning assignments are fully satisfied. In order to facilitate such a pledge or assignment, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder. (i) The Borrower shall not assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent and each Lender, and any attempted assignment without such consent shall be null and void. SECTION 10.05. Expenses; Indemnity. (a) The Loan Parties agree, jointly and severally, to pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, CGMI and its Affiliates, including the reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP, counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby contemplated shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Lead Arranger, the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement (including its rights under this Section), the other Loan Documents or the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any other counsel for the Administrative Agent, the Collateral Agent, the Lead Arranger, the Issuing Bank or any Lender; provided, however, that the Loan Parties shall not be obligated to pay for expenses incurred by a Lender in connection with the assignment of Loans to an assignee Lender (except pursuant to Section 2.21) or the sale of Loans to a participant pursuant to Section 10.04. -127- (b) Each of the Loan Parties, jointly and severally, agrees to indemnify the Administrative Agent, the Collateral Agent, the Syndication Agents, the Documentation Agent, the Lead Arranger, the Issuing Bank, each Lender, each Affiliate of any of the foregoing Persons and each of their respective Related Parties (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related reasonable expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties hereto or thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby, (ii) the use of the proceeds of the Loans or Letters of Credit (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release of Hazardous Materials on any property owned or operated by the Borrower or any of the Subsidiaries, or any Environmental Liability or Environmental Claim related in any way to the Borrower or the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related reasonable expenses are finally judicially determined to have arisen by reason of the Indemnitee's gross negligence or willful misconduct. (c) To the extent that the Loan Parties fail to promptly pay any amount to be paid by them to any Agent, the Lead Arranger, the Issuing Bank, the Foreign Currency Lender or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Agent, the Issuing Bank, Foreign Currency Lender or the Swingline Lender, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (other than syndication expenses); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the applicable Agent, the Lead Arranger, the Issuing Bank, Foreign Currency Lender or the Swingline Lender in its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the total Revolving Credit Exposures, outstanding Term B Loans and unused Commitments at the time. (d) To the extent permitted by applicable law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. (e) The provisions of this Section 10.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or -128- any other Loan Document, or any investigation made by or on behalf of the Administrative Agent or any Lender. All amounts due under this Section 10.05 shall be payable on written demand therefor. SECTION 10.06. Right of Setoff. If an Event of Default or Event of Termination shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. In connection with exercising its rights pursuant to the previous sentence, a Lender may at any time use any of the Borrower's credit balances with the Lender to purchase at the Lender's applicable spot rate of exchange any other currency or currencies which the Lender considers necessary to reduce or discharge any amount due by the Borrower to the Lender, and may apply that currency or those currencies in or towards payment of those amounts. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after making any such setoff. SECTION 10.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 10.08. Waivers; Amendment. (a) No failure or delay of either Agent, the Issuing Bank or any Lender in exercising any power or right hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default regardless of whether an Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. No notice or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement, any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, -129- pursuant to an agreement or agreements in writing entered into by the Borrower and the Requisite Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Agent and the Loan Party or Loan Parties or other Persons that are parties thereto, in each case with the consent of the Requisite Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of any Loan or LC Disbursement, or extend the final scheduled maturity date or any Installment Payment Date of the Loans or date for the payment of any interest on any Loan or the required date of reimbursement of any LC Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or LC Disbursement, or postpone the scheduled date of termination of any Commitment, without the prior written consent of each Lender affected thereby, (ii) change or extend the Commitment, Foreign Currency Sublimit or Maximum Foreign Currency Sublimit or decrease the Commitment Fee or LC Fee of any Lender without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.14, the provisions of this Section, the definition of "Requisite Lenders," or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder without the prior written consent of each Lender (or each Lender of such Class, as the case may be), (iv) release any Loan Party from its Guarantee under Article IX or a Guarantee Agreement (except as expressly provided herein or in such Guarantee Agreement), or limit its liability in respect of such Guarantee, without the written consent of each Lender, (v) release all or substantially all of the Collateral from the Liens of the Security Documents (except as expressly provided in this Agreement or the Security Documents) or subordinate the Liens under any Security Document, without the written consent of each Lender, (vi) amend Section 3.01 of the Collateral Sharing Agreement without the written consent of each Lender or (vii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority interest of the outstanding Loans and unused Commitments of each affected Class; provided, further, that no such agreement shall amend, modify or otherwise affect the rights or duties of either Agent, the Lead Arranger, the Issuing Bank, Foreign Currency Lender or the Swingline Lender hereunder or under any other Loan Document without the prior written consent of such Agent, the Lead Arranger, the Issuing Bank, Foreign Currency Lender or the Swingline Lender, as the case may be; provided, further, that (x) with respect to (i) any change to Section 2.06(c), (ii) any change to Section 2.06(g) or (iii) any amendment that changes the application of any optional or mandatory prepayments of the Loans to the remaining amortization payments under the Term B Loans, the consent of Term B Lenders representing more than 50% of the outstanding Term B Loans shall be required, (y) the consent of the Requisite Revolving Lenders shall be required with respect to any express amendment, modification, supplement or waiver of any condition precedent in Section 4.02 to any Revolving Credit Borrowing and (z) the consent of the Requisite Foreign Currency Lenders shall be required for any modification of Section 2.04 and any change to the definition of "Foreign Currency Lenders" or "Foreign Currency Ratable Portion" or any related definitions. (c) A Revolving Lender may allocate any proportion of its Revolving Credit Commitment or Revolving Credit Exposure with respect to any waiver, amendment, modifica- -130- tion, consent or any other action pursuant to this Section 10.08 or any other Loan Document in order to vote separate portions thereof differently with respect thereto. SECTION 10.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 10.10. Entire Agreement. This Agreement and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents; provided that any letter agreement relating to the subject matter hereof between the Borrower and a Lender shall remain effective in accordance with its terms. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11. SECTION 10.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provi- -131- sions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 10.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 10.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 10.15. Jurisdiction; Consent to Service of Process. (a) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or its properties in the courts of any jurisdiction. (b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court referred to in paragraph (a) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 10.16. Confidentiality. (a) The Loan Parties, the Lenders, the Administrative Agent and the Syndication Agents hereby agree that each of the Loan Parties, the Lenders, the Administrative Agent and the Syndication Agents and each of their respective officers, directors, employees, agents, accountants, attorneys and other advisors are, and have been -132- from the commencement of discussions with respect to the facilities established by this Agreement (the "Facilities"), permitted to disclose to any and all Persons, without limitation of any kind, the structure and "tax aspects" (as such terms are used in Code Sections 6011, 6111 and 6112 and the regulations promulgated thereunder) of the Facilities, and all materials of any kind (including opinions or other tax analyses) that are or have been provided to the Loan Parties, such Lender, the Administrative Agent or the Syndication Agents related to such structure and tax aspects. In this regard, each of the Loan Parties, the Lenders, the Administrative Agent and the Syndication Agents acknowledges and agrees that its disclosure of the structure or tax aspects of the Facilities is not limited in any way by an express or implied understanding or agreement, oral or written (whether or not such understanding or agreement is legally binding). Furthermore, each of the Loan Parties, the Lenders, the Administrative Agent and the Syndication Agents acknowledges and agrees that it does not know or have reason to know that its use or disclosure of information relating to the structure or tax aspects of the Facilities is limited in any other manner (such as where the Facilities are claimed to be proprietary or exclusive) for the benefit of any other Person. To the extent that disclosure of the structure or tax aspects of the Facilities by the Loan Parties, the Administrative Agent, the Syndication Agents or the Lenders is limited by any existing agreement between the Loan Parties, the Administrative Agent, the Syndication Agents or the Lenders, such limitation is agreed to be void ab initio and such agreement is hereby amended to permit disclosure of the structure and tax aspects of the Facilities as provided in this paragraph (a). (b) Subject to paragraph (a) of this Section 10.16, none of the Administrative Agent, the Syndication Agents or any Lender may disclose to any Person any confidential, proprietary or non-public information of the Loan Parties furnished to the Administrative Agent, the Syndication Agents or the Lenders by the Loan Parties (such information being referred to collectively herein as the "Loan Party Information"), except that each of the Administrative Agent, the Syndication Agents and the Lenders may disclose Loan Party Information (i) to its and its affiliates' employees, officers, directors, agents, accountants, attorneys and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Loan Party Information and instructed to keep such Loan Party Information confidential on substantially the same terms as provided herein), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section 10.16(b), to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (vii) to the extent such Loan Party Information (A) is or becomes generally available to the public on a nonconfidential basis other than as a result of a breach of this Section 10.16(b) by any party to this Agreement, or (B) is or becomes available to the Administrative Agent, the Syndication Agents or such Lender on a nonconfidential basis from a source other than the Loan Parties and (viii) with the consent of the Loan Parties. Nothing in this provision shall imply that any party has waived any privilege it may have with respect to advice it has received. -133- SECTION 10.17. Citigroup Direct Website Communications. (a) Each Loan Party hereby agrees that it will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Loan Documents, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information material, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, Borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefore, (iii) provides notice of any Default or Event of Default under this Agreement or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as "Communications"), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@citigroup.com. In addition, each Loan Party agrees to continue to provide the Communications to the Administrative Agent in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent. (b) Each Loan Party further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks, Fixed Income Direct or a substantially similar electronic transmission systems (the "Platform"). Each Loan Party acknowledges that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution. (c) THE PLATFORM IS PROVIDED "AS IS" AND "AS AVAILABLE". THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, "AGENT PARTIES") HAVE ANY LIABILITY TO THE LOAN PARTIES, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE LOAN PARTIES' OR THE ADMINISTRATIVE AGENT'S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO -134- HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The Administrative Agent agrees that the receipt of the Communications by the Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (i) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender's e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document. SECTION 10.18. Collateral Agent as Joint Creditor. Each of the Loan Parties and each of the Lenders agree that the Collateral Agent shall be the joint creditor (together with the relevant Lender) of each and every obligation of the Loan Parties towards each of the Lenders under or in connection with the Loan Documents, and that accordingly the Collateral Agent will have its own independent right to demand performance by the Loan Parties of those obligations. However, any discharge of any such obligation to the Collateral Agent or the relevant Lender shall, to the same extent, discharge the corresponding obligation owing to the other. SECTION 10.19. Currency of Payment. (a) Each payment owing by the Borrower hereunder shall be made in the relevant currency specified herein or, if not specified herein, specified in any other Loan Document executed by the Administrative Agent (the "Currency of Payment") at the place specified herein (such requirement is of the essence of this Agreement). If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder in a Currency of Payment into another currency, the parties hereto agree that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such Currency of Payment with such other currency at the spot rate of exchange quoted by the Administrative Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for delivery two Business Days thereafter. The obligations in respect of any sum due hereunder to any Secured Party shall, notwithstanding any adjudication expressed in a currency other than the Currency of Payment, be discharged only to the extent that, on the Business Day following receipt by such Secured Party of any sum adjudged to be so due in such other currency, such Secured Party may, in accordance with normal banking procedures, purchase the Currency of Payment with such other currency. The Borrower agrees that (a) if the amount of the Currency of Payment so purchased is less than the sum originally due to such Secured Party in the Currency of Payment, as a separate obligation and notwithstanding the result of any such adjudication, the Borrower shall immediately pay the shortfall (in the Currency of Payment) to such Secured Party and (b) if the amount of the Currency of Payment so purchased exceeds the sum originally due to such -135- Secured Party, such Secured Party shall promptly pay the excess over to the Borrower in the currency and to the extent actually received. (b) The Obligations owing to any Secured Party hereunder shall, notwithstanding any payment in a currency other than the Currency of Payment and notwithstanding any deemed conversion or replacement hereunder, be discharged only to the extent that, on the Business Day following receipt by such Secured Party of any amount in such other currency, such Secured Party may, in accordance with normal banking procedures, purchase the Currency of Payment with such other currency. The Borrower agrees that (i) if the amount of the Currency of Payment so purchased is less than the sum originally due to such Secured Party in the Currency of Payment, as a separate obligation and notwithstanding the result of any such adjudication, the Borrower shall immediately pay the shortfall (in the Currency of Payment) to such Secured Party and (ii) if the amount of the Currency of Payment so purchased exceeds the sum originally due to such Secured Party, such Secured Party shall promptly pay the excess over to the Borrower in the currency and to the extent actually received. SECTION 10.20. Relationship of Banc One Mezzanine Corporation. (a) Each of the parties to this Agreement (a) acknowledges that Banc One Mezzanine Corporation is a subsidiary of Bank One Corporation, as is OEP, (b) consents to these multiple roles, and further acknowledges that the fact that OEP and the Borrower are affiliates of Banc One Mezzanine Corporation does not mean that any action taken or proposal made by OEP or the Borrower (i) is acceptable to Banc One Mezzanine Corporation in its capacity as Co-Syndication Agent or Lender hereunder, (ii) is consistent with the terms of this Agreement or (iii) is or will be acceptable to any other Lenders, and (c) Banc One Mezzanine Corporation shall not be deemed to have knowledge of information known to the Borrower or OEP simply because they are affiliates. [Signature Pages Follow] -136- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. QUINTILES TRANSNATIONAL CORP., as Borrower By: -s- James L. Bierman ----------------------------------- Name: JAMES L. BIERMAN Title: PHARMA SERVICES HOLDING, INC., as a Parent Guarantor By: -s- Dennis B. Gillings ----------------------------------- Name: DENNIS B. GILLINGS Title: PHARMA SERVICES INTERMEDIATE HOLDING CORP., as a Parent Guarantor By: -s- Dennis B. Gillings ----------------------------------- Name: DENNIS B. GILLINGS Title: CITICORP NORTH AMERICA, INC., as Administrative Agent By: -s- Andrew Robinson ----------------------------------- Name: ANDREW ROBINSON Title: VICE PRESIDENT CITIGROUP GLOBAL MARKETS INC., as Sole Lead Arranger and Sole Bookrunner By: -s- Andrew Robinson ----------------------------------- Name: ANDREW ROBINSON Title: VICE PRESIDENT ABN AMRO BANK N. V., as Co-Syndication Agent By: -s- Alex Blodi ----------------------------------- Name: Alex Blodi Title: Director By: -s- Todd J. Miller ----------------------------------- Name: Todd J. Miller Title: Assistant Vice President BANC ONE MEZZANINE CORPORATION, as Co-Syndication Agent And Lender By: -s- Marsha A. Cruzan ----------------------------------- Name: MARSHA A. CRUZAN Title: MANAGING DIRECTOR S-1 ABN AMRO Bank N.V., as Revolving Lender By: -s- Alexander M. Blodi ----------------------------------- Name: Alexander M. Blodi Title: Director By: -s- Todd J. Miller ----------------------------------- Name: Todd. J. Miller Title: Assistant Vice President CITICORP NORTH AMERICA, INC., as Term B Lender By: -s- Andrew Robinson ----------------------------------- Name: ANDREW ROBINSON Title: VICE PRESIDENT CITICORP NORTH AMERICA, INC., as Revolving Lender By: -s- Andrew Robinson ----------------------------------- Name: ANDREW ROBINSON Title: VICE PRESIDENT Residential Funding Corporation, as Lender and Documentation Agent By: -s- Kevin Howell ----------------------------------- Name: Kevin Howell Title: Senior Vice President S-2 EX-10.2 9 g85608exv10w2.txt EXECUTIVE EMPLOYMENT AGREEMENT DATED 9-25-03 Exhibit 10.2 EXECUTION COPY EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into and made effective this 25th day of September, 2003, among DENNIS B. GILLINGS, Ph.D. ("Gillings"), PHARMA SERVICES HOLDING, INC. ("Pharma"), and QUINTILES TRANSNATIONAL CORP. (the "Company"). WHEREAS, Gillings is currently employed by the Company, which will become a wholly-owned subsidiary of Pharma upon the closing (the "Closing") of the transactions contemplated by the Merger Agreement among the Company, Pharma and Pharma Services Acquisition Corp. dated April 10, 2003, as amended, modified or restated from time to time; and WHEREAS, the Company recognizes Gillings as its founder and that his vision has been instrumental to its growth and success; therefore, the Company desires to provide for his continued employment with the Company following the Closing as its Executive Chairman and Chief Executive Officer ("CEO") and, effective upon the Closing, Pharma desires to employ Gillings as its Executive Chairman and CEO; and WHEREAS, in order to provide adequate assurances to Gillings, as an inducement to continue his valuable employment with the Company and commence employment with Pharma, the Company and Pharma desire to enter into this Agreement to set forth the terms of his employment; and WHEREAS, Gillings agrees that the terms of this Agreement will allow him to continue his employment with and to devote his best efforts to Pharma, the Company and all of their subsidiaries. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the parties agree as follows: 1. EMPLOYMENT. Effective upon the Closing, the Company will employ Gillings as Executive Chairman and CEO of the Company, with the duties, responsibilities and powers of such offices as customarily associated with such offices, and Gillings shall serve the Company in such capacities during the term of this Agreement. Gillings acknowledges that such duties, responsibilities and powers may be changed from time to time by the Board of Directors (the "Board") of the Company, and that the Board may hire a new CEO, in which case Gillings will resign his position as CEO. Gillings shall faithfully and diligently discharge his duties and responsibilities hereunder, shall use his reasonable best efforts to implement the policies established by the Board, and shall devote substantially all of his business time and attention to the affairs of the Company except as otherwise agreed by the Board. For so long as Gillings shall be employed as Executive Chairman and/or CEO of the Company, he shall serve as Executive Chairman and/or CEO of Pharma, without additional compensation therefor. 2. TERM. This Agreement shall become effective, and the term of this Agreement shall commence, on the date of the Closing and shall continue until terminated pursuant to Section 4. Notwithstanding termination of this Agreement, the rights and obligations of the Company and Gillings under Section 5 ("Compensation and Benefits Payable upon Termination"), Section 6 ("Non-Competition; Confidentiality"), Section 8 ("Arbitration"), Section 9 ("Counsel Fees") and Section 10 ("Additional Amount") of this Agreement shall continue until all such rights and obligations thereunder have been satisfied. Should the Closing not occur for any reason, this Agreement shall be null and void. 3. COMPENSATION AND BENEFITS. The Company shall pay or provide to Gillings the following items as compensation for his services: (i) An annual base salary of one million dollars ($1,000,000), payable in monthly installments, subject to all applicable withholding requirements, which annual base salary may be increased from time to time in accordance with the normal business practices of the Company; and (ii) The opportunity to earn an annual cash bonus based on the achievement of individual and/or Company-wide performance goals established and communicated to Gillings at the beginning of each bonus plan year by the Board or the Board's designee. In the event of termination of Gillings' employment for any reason, except termination by the Company pursuant to Section 4(c) ("Cause") or by Gillings pursuant to Section 4(i) ("Other Termination by Gillings"), Gillings shall receive (in addition to such other termination compensation provided herein) the annual cash bonus and incentive bonus (if any) for such year, prorated for the number of complete months Gillings was employed for such year prior to such termination (regardless of whether such bonus is declared on or after the Gillings employment is terminated); and (iii) Participation in all general benefit programs of the Company as may be adopted and maintained by the Company from time to time, including the Company's Flexible Benefits Plan, which includes medical, dental, life and general and long term disability insurance; 401(k) and any pension and profit sharing plans, as may be adopted and maintained by the Company from time to time; and (iv) Reasonable city/country club dues; and (v) An automobile selected by Gillings or, at his option, a comparable automobile allowance, in each case consistent with his position with the Company and its subsidiaries and for his use; and (vi) Ordinary and necessary expenses, in a reasonable amount, which Gillings incurs in performing his duties under this Agreement, including, but not limited to, travel, entertainment, professional dues and subscriptions, all dues, fees and expenses associated with membership in various professional business and civic associations and societies of which -2- Gillings' participation is in the best interest of the Company and its subsidiaries, as reasonably determined by Gillings; and (vii) Tax return preparation and reasonable financial planning, consultation and advice by the Company's accounting firm and/or legal counsel and/or financial consultants in each case as may be provided by the Company for most senior management of the Company; and (viii) Reimbursement to GF Management Company, LLC ("GFM") for the business use (related to Pharma, the Company and/or any of their subsidiaries) of the aircraft owned and/or operated by GFM as of the date hereof (or a substitute aircraft owned and/or operated by Gillings or an affiliate of Gillings anytime thereafter) at the rate of $10,794 per business flight hour. The per business flight hour rate is calculated by the reimbursement formula (the "Formula") shown in the spreadsheet attached hereto as Exhibit A. In connection with the foregoing, GFM shall deliver a monthly statement to the Company setting forth the number of business flight hours and a description of the business purpose thereof and the Company will reimburse GFM, on the basis of the number of business flight hours multiplied by the rate per business flight hour, by wire transfer of immediately available funds to an account designated in writing by GFM within fifteen (15) business days after receipt of such monthly statement. The Company and Gillings will reconcile the payments calculated under the Formula on an annual basis with the actual costs (such costs to include, without limitation, capital costs, interest expense and operating expenses) incurred by GFM or Gillings or his affiliates, as applicable for ownership and use of the aircraft and will make reasonable modifications (whether up or down) to the Formula and amounts reimbursed, should the payments under the Formula be materially different from the reconciliation to actual costs incurred by GFM. (ix) As of the date hereof, Gillings and his wife are the insureds under split-dollar insurance arrangements and understandings related thereto in effect among the Company, Gillings and certain irrevocable life insurance trusts created by Gillings. Under these arrangements, it was intended that the irrevocable insurance trusts would have certain death benefits payable upon the death of the last to die of Gillings and his spouse. As a result of regulatory, statutory, and other developments the arrangements may need to be modified, revised and/or terminated. The Company hereby agrees to the extent permitted by applicable law, to effect during or after Gillings employment such modification, revision and/or termination of these arrangements and understandings with Gillings and/or the irrevocable life insurance trusts, as reasonably necessary or appropriate, in a manner that will ultimately result in death benefits no less favorable to the trusts and Gillings, than those that would have been provided had such arrangements and understandings prior to the date hereof remained in place without change. Gillings agrees to cooperate in good faith with the Company to effect such modifications, revision and/or termination of these arrangements in response to regulatory, statutory and other developments in order to minimize the costs to the Company. (x) Group health coverage (including without limitation, hospitalization insurance (including major medical) and other health insurance benefits) following any termination of Gillings employment pursuant to Section 4, except termination by the Company pursuant to Section 4(c) ("Cause"), for Gillings and his spouse for his lifetime, and upon his death, for his surviving spouse until her death, in each case on the same basis as the Company or its subsidiaries provide group health coverage to their senior executives; provided that such -3- coverage shall be secondary to any coverage for which Gillings or his spouse become covered and Gillings agrees to make good faith applications to obtain such coverage. The above-stated items of compensation shall not be deemed all-inclusive, and Gillings may receive other compensation, as may from time to time be determined by the Board, including bonuses that may be provided by the Company under the Company's annual incentive bonus plans or any comparable bonus plan that may succeed such plans. 4. TERMINATION. Gillings' employment under this Agreement shall terminate: (a) Death. Upon the death of Gillings; or (b) Disability. Upon notice from the Company or Gillings to the other party if Gillings becomes "permanently disabled." For purposes of this Agreement, Gillings shall be deemed "Permanently disabled" six (6) months after the first date that he has become disabled by a medically determinable bodily or mental illness, disease, or injury, to the extent that he is prevented from performing his material and substantial duties of employment, and such disability has continued uninterrupted for six (6) months. If requested by the Company, Gillings shall submit at the Company's expense to an examination by a physician selected by the Company for the purpose of determining or confirming the existence or extent of any disability; or (c) Cause. Upon notice from the Company to Gillings for cause. For purposes of this Agreement, "cause" shall be defined as (i) a willful and continued failure by Gillings to perform his duties as Executive Chairman of the Company as established by the Board (other than due to disability), or (ii) a material breach by Gillings of his fiduciary duties of loyalty or care to the Company, or (iii) a willful violation of Gillings of any material provision of this Agreement, Section 7 of the Rollover Agreement between Pharma, Gillings and certain of his affiliates dated as of the date hereof (the "Rollover Agreement"), or (iv) a conviction of, or the entering of a plea of nolo contendere by Gillings for, any felony. In addition, if Gillings shall terminate his employment for a breach of this Agreement by the Company in accordance with Section 4(d), and it is ultimately determined that no reasonable basis existed for Gillings' termination on account of the alleged default of the Company, such event shall be deemed cause for termination by the Company. Any notice of termination of Gillings' employment with the Company for cause shall set forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of his employment under the provisions contained herein and the date of such termination. If the cause alleged by the Company shall be other than (iv) set forth above, Gillings shall be given the opportunity to explain and, if possible, to cease or correct the performance (or nonperformance) giving rise to such notice within a reasonable period of time from receipt of notice, but in no event to exceed thirty (30) days; and, upon failure, in the judgment of the Board, of Gillings to cease or correct such performance (or nonperformance) within such thirty (30) day period, Gillings' employment by the Company shall automatically be terminated; or -4- (d) Breach. Upon notice from Gillings to the Company of the Company's or Pharma's failure to comply with any material provision of this Agreement, provided that the Company or Pharma shall have thirty (30) days from the receipt of such notice to cure any default under this Agreement. If such default shall be cured within such thirty (30) day period, Gillings shall have no right to terminate his employment under the provisions of this Section 4(d); or (e) Change in Position, Duties. Upon notice from Gillings to the Company if Gillings is no longer elected Executive Chairman of the Company with the duties and powers of such office, as existed on the date of this Agreement, and which are customarily associated with such office; or (f) Improper Termination by Company. Upon notice from Gillings to the Company upon a purported termination of Gillings' employment by the Company for cause if it shall be ultimately determined that cause did not exist; or (g) Sale of the Pharma; Qualifying Offering. Upon a "Qualifying Offering", as defined in the Stockholders Agreement among the Company, Pharma and its shareholders (the "Stockholders Agreement"), or upon a sale (whether effected pursuant to Section 2.4(a) of the Stockholders Agreement or by merger, consolidation, recapitalization, reorganization, sale of securities, sale of assets or otherwise) in one transaction or series of related transactions to a Person or Persons that is not a Stockholder or a Permitted Transferee or Associate (as such terms are defined in the Stockholders Agreement) of any Stockholder or of any Permitted Transferee of any Stockholder pursuant to which such Person or Persons (together with its Affiliates) acquires (i) securities representing at least seventy-five percent (75%) of the voting power of the Common Stock of Pharma, assuming the conversion, exchange or exercise of all securities convertible, exchangeable or exercisable for or into Common Stock, or (ii) of all, or substantially all, of Pharma's assets on a consolidated basis (a "Sale of Pharma") if at least thirty (30) days prior to the consummation thereof, Gillings or the Company (at the direction of a majority of the Board) shall have delivered to the other party a written notice that Gillings employment shall not be extended beyond the consummation of such Qualifying Offering or Sale of Pharma, as the case may be; or (h) Other Termination by the Company. Upon notice from the Company to Gillings for any reason other than pursuant to Section 4(b), (c) or (g) above; or (i) Other Termination by Gillings. Upon notice from Gillings to the Company of his voluntary termination of employment, for any reason other than as set forth in Section 4(b), (d), (e), (f) or (g) above. 5. COMPENSATION AND BENEFITS PAYABLE UPON TERMINATION (a) Upon Gillings' termination of employment for any reason, the Company shall pay Gillings his full salary and other accrued benefits set forth in Section 3 through the date of termination, and, except as provided in Sections 3(ii), 3(x), 5(b) and 5(c), no other compensation or benefits shall be paid to Gillings hereunder; provided, however, that nothing herein shall be deemed to limit Gillings' rights under any other benefit, life insurance, retirement, 401(k), or -5- pension plan of the Company, and the terms of those plans, programs, or arrangements shall govern. (b) If Gillings' employment shall be terminated (i) by Gillings pursuant to Section 4(b) ("Disability"), 4(d) ("Breach"), Section 4(e) ("Change in Position, Duties"), Section 4(f) ("Improper Termination by Company"), Section 4(g) ("Sale of Pharma; Qualifying Offering"; except, in the case of a Sale of Pharma, where Gillings in his capacity as a stockholder either (a) is one of the "Majority Common Stockholders" (as defined in the Stockholders Agreement) or (b) votes in favor of such Sale of Pharma), or (ii) by the Company for any reason other than those set forth in Section 4(c) ("Cause") or Section 4(g) ("Sale of Pharma; Qualifying Offering"; except in the case of a Sale of Pharma, where Gillings as a stockholder either (a) is not one of the Majority Common Stockholders (as defined in the Stockholders Agreement) or (b) does not vote in favor of such Sale of Pharma), the Company shall pay to Gillings or his estate or beneficiaries, in addition to amounts payable under Section 5(a), an amount equal to 2.9 times the aggregate sum of (a) his then annual rate of base salary plus (b) an amount equal to the annual cash bonus, if any, paid or payable for the fiscal year ended immediately prior to such termination. Such amount shall be paid in equal monthly installments during the three year period following such termination, provided that as soon as practicable following such termination, the Company shall secure such payments through a letter of credit or similar arrangement, or deposit the present value of such payments into an escrow arrangement (such letter of credit, similar arrangement or escrow arrangement, the "Escrow Arrangement") reasonably acceptable to Gillings (including, without limitation, protection against other claims from creditors of the Company). In the event Gillings is required to recognize income tax as a result of the Escrow Arrangement, the Company will release a portion of the severance amounts secured by the Escrow Arrangement sufficient to permit Gillings to pay such taxes, and the severance amounts shall be reduced by the amount so released. In the event the Company does not release a sufficient portion of the Escrow Arrangement to satisfy Gillings' income tax liabilities and Gillings is subject to penalties due to such underpayment of these income tax liabilities, the Company shall pay such penalties and any income taxes due as a result of the Company's payment to Gillings of the penalties. In addition to the obligations of the Company under Section 5(a), the Company shall continue to pay Gillings' club dues, long term disability premiums, life insurance premiums, dental insurance premiums and automobile allowance for a period of three years from the date of termination of employment, and, during such three year period, Gillings and his spouse shall be entitled to any other benefits that would be provided to him/them as a result of his participation in any employee welfare benefit plans, as defined by the Employee Retirement Income Security Act of 1974, as amended, in which senior management of the Company is permitted to participate to the same extent and in any amount equal to that Gillings and his spouse would have received if Gillings had remained employed by the Company during such period. The compensation and benefits payable under this Section 5(b) are hereinafter referred to as "Severance Benefits." Nothing contained herein, however, shall require that Gillings be treated as an active participant in any plan provided only to active employees of the Company. The payment of Severance Benefits is in recognition and consideration of the past and continued services by Gillings to the Company and the release described below, and is not in any way to be construed as, and is in lieu of, a penalty or damages. Gillings shall not be required to mitigate the amount of any payment of Severance Benefits by seeking other employment or -6- otherwise; provided, however, if following termination of employment, Gillings breaches any of the restrictive covenants contained in Section 6(a), then the Company shall no longer be obligated to provide Severance Benefits. This forfeiture of Severance Benefits shall be in addition to any rights and remedies the Company may have under Section 6. The payment of Severance Benefits shall not affect any other sums or benefits otherwise payable to Gillings under any other employment compensation or benefit plan of the Company. The Company's obligation to provide the Severance Benefits is conditioned upon Gillings' execution of a customary release of all claims arising out of Gillings' employment against the Company and its affiliates and the expiration of any revocation period required by law relating thereto without revocation thereof. (c) The Company shall continue to provide the benefits described in paragraph (b) above on the same terms and conditions (e.g. employee contributions for certain benefits that are in effect for active employees who are similarly situated) as continue to be available for similarly situated employees of the Company during the period provided herein, with such changes as may be applicable to such other employees. The foregoing benefits are not intended to be a substitute for any available coverage benefits (the "COBRA Rights") under Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code") and such COBRA Rights shall not commence until after the extended period specified herein comes to an end, unless otherwise provided by law. Notwithstanding the foregoing, Gillings' rights to the foregoing benefits shall terminate as to any benefit for which he becomes covered for substantially similar benefits on substantially similar terms through a program of a subsequent employer or otherwise (such as through coverage obtained by Gillings' spouse) for as long as such coverage continues and provided that such terms are not less favorable to Gillings in any respect. 6. NON-COMPETITION; CONFIDENTIALITY. Gillings expressly covenants and agrees: (a) That from and after the date of the Closing through the latest of (x) five years from the date hereof, (y) three years following the date Gillings (or any Permitted Transferee thereof (as defined in the Stockholders Agreement)) cease to own any equity interest in Pharma, the Company or any of its subsidiaries and (z) the third anniversary of the date of termination of Gillings' employment for any reason (the "Non-Competition Period"), Gillings will not, and will not permit any of his Affiliates to, directly or indirectly, as an officer, director, stockholder, partner, associate, owner, employee, consultant, lender or otherwise, become or be interested in or associated with any other organization, corporation, firm or business which is engaged in the same or a competitive business with Pharma's business or with the business of the Company or any subsidiary of the Company in any geographical area in which Pharma, the Company or any of its subsidiaries is so engaged. It is agreed that ownership, directly or indirectly, of not more than one 1% percent of the issued and outstanding stock of a corporation, the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not be deemed in and of itself to be in violation of the preceding sentence. As used herein, "Affiliates" means, with respect to any Person, any other Person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such Person; "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by -7- contract or otherwise. As used herein "Person" means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization or other entity. (b) Gillings shall not, and shall not permit any of his Affiliates to, at any time during the Non-Competition Period, directly or indirectly, solicit, or interfere with Pharma's, the Company's or any of its subsidiaries' relationship with, or entice away from Pharma, the Company or any of its subsidiaries, any customer, supplier, Person, firm, or corporation who currently is doing business or at any time during the Non-Competition Period does business with Pharma, the Company or any of its subsidiaries or offer employment to or procure employment for any Person who currently, or at any time during the Non-Competition Period, is employed by Pharma, the Company or any of its subsidiaries. (c) Gillings shall not, at any time during or after the Non-Competition Period, use for any purpose other than in the performance of his work for Pharma, the Company or its subsidiaries, or divulge, or permit any of his Affiliates to divulge, directly or indirectly, to any entity or Person any material information acquired by Gillings concerning Pharma's, the Company's or any of its subsidiaries' formulae, computer programming techniques, documentation, software source codes, object codes, documentation, "know-how", processes, methods, research, development or marketing techniques, programs, materials or plans, client lists or any other of its or their trade secrets, confidential information, price lists, or pricing policies ("Confidential Information"), except information which is (i) in the public domain, or (ii) becomes public knowledge through no fault of Gillings, or (iii) is required to be disclosed by court order or other government process or the disclosure of which is necessary to enable Gillings to comply with applicable law or defend against claims. If Gillings shall be required to make disclosure pursuant to the provisions of clause (iii) of the preceding sentence, Gillings shall properly notify the Company and take, at the expense of the Company (unless the claim involves a dispute among Gillings and Pharma or the Company or any of its subsidiaries), all reasonably necessary steps requested by the Company to defend against the enforcement of such court order or other government process; and permit the Company to participate with counsel of its choice in any proceeding relating to the enforcement thereof. (d) All Developments that are at any time conceived, made or suggested by Gillings, whether acting alone or in conjunction with others, during Gillings' employment with Pharma, the Company, or any of its subsidiaries, or their predecessors shall be the sole and absolute property of the Company, free of any reserved or other rights of any kind on Gillings' part. During the Non-Competition Period and thereafter, Gillings shall promptly make full disclosure of all such Developments to the Company and do all acts and things (including, among others, the execution and delivery under oath of patent and copyright applications and instruments of assignment) deemed by the Company to be necessary or desirable at any time in order to effect the full assignment to the Company of Gillings' right and title, if any, to such Developments. For purposes of this Agreement, the term "Developments" includes, by way of example but without limitation, Confidential Information, and all findings, discoveries, developments, programs, designs, inventions, improvements, methods, practices and techniques, whether or not patentable, relating to the present and planned future activities of Pharma, the Company or any of its subsidiaries and all products or services sold, rented, leased, rendered or otherwise made available to customers by Pharma, the Company or any of its subsidiaries as well as products and -8- services in any stage of development by Pharma, the Company or any of its subsidiaries but not yet commercialized or not generally available. (e) Gillings agrees that the restrictive covenants contained above in this Section 6 are reasonably necessary to protect Pharma's, the Company's and its subsidiaries' legitimate business interests, are reasonable with respect to time and territory and scope of activities prohibited, and do not interfere with public interest or public policy. Gillings further agrees that the descriptions of the restrictive covenants contained above in this Section 6 are sufficiently accurate and definite and Gillings understands the scope and meaning of the covenants. If any particular provision of Section 6 of this Agreement is adjudicated to be invalid or unenforceable or shall for any reason be held to be excessively broad as to duration, geographic scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with applicable law and such provision shall be deemed modified and amended to the extent necessary to render such provision enforceable. (f) Gillings agrees that a breach or violation of any of the restrictive covenants contained in this Section 6 will result in immediate and irreparable harm to Pharma, the Company and its subsidiaries in an amount which may be impossible to ascertain at the time of any breach or violation, and that an award of monetary damages will not be adequate relief to Pharma, the Company or its subsidiaries for such harm. Therefore, Gillings agrees that his failure to perform or comply with any or all of the restrictive covenants shall give rise to a right for Pharma, the Company and/or any of its subsidiaries to obtain judicial enforcement of any or all of the restrictive covenants by a decree of specific performance or other injunctive relief. Gillings agrees such remedy, however, shall be cumulative and in addition to any other remedy Pharma, the Company and/or any of its subsidiaries may have. In any action by Pharma, the Company, and/or any of its subsidiaries to enforce the provisions of this Section 6 or to recover damages hereunder, the party prevailing in such action shall have the right to recover from the other party its reasonable attorneys' fees incurred in prosecuting such action. (g) For each month during the Non-Competition Period following the termination of Gillings' employment for any reason, the Company shall pay Gillings an amount equal to the sum of his annual rate of base salary in effect immediately prior to the termination of his employment plus an amount equal to the annual cash bonus, if any, paid or payable for the fiscal year ended immediately prior to such termination, divided by 12; provided, however, that no such payments shall be made for the first three (3) years of the Non-Competition Period following the termination of Gillings' employment where such termination is under circumstances which entitle Gillings to Severance Benefits set forth in Section 5(b), without regard to the execution of a release as set forth in Section 5(b). The Company may, by written notice at least thirty (30) days in advance of the date any such monthly payment is due, cease all further payments under this Section 6(g) and relieve Gillings of his obligation to comply with the non-competition covenant contained in Section 6(a) of this Agreement. 7. LEAVE OF ABSENCE. Gillings may take a voluntary leave of absence from his employment with the Company for such purposes and periods of time and upon such conditions as the Board in its sole discretion so permits. -9- 8. ARBITRATION. Except to the extent otherwise provided in Section 6(e) above, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration. Pharma and the Company on the one hand, and Gillings on the other hand, shall appoint one arbitrator and shall notify in writing the other of such appointment and request the other to appoint one arbitrator within thirty (30) days of receipt of such request. If the party so requested fails to appoint an arbitrator, the party making the request shall be entitled to designate two arbitrators. The two arbitrators shall select a third. The written decision of a majority of the arbitrators shall be binding upon Pharma, the Company and Gillings and enforceable by law. The arbitrators shall, by majority vote, determine the place for hearing, the rules of procedure, and allocation of the expenses of the arbitration. 9. COUNSEL FEES. If a dispute occurs between the Company and Gillings in connection with or arising under this Agreement in which Gillings prevails, the Company shall reimburse Gillings for all reasonable costs, including attorneys' fees, accounting fees, and any other necessary costs or expenses. 10. ADDITIONAL AMOUNT. (a) The Company shall pay to Gillings an amount (the "Additional Amount") equal to the excise tax under Section 4999 of the Code (the "Excise Tax"), if any, plus all taxes incurred with respect to such payment, if any, incurred by Gillings by reason of the payments under this Agreement and any other plan, agreement, or understanding between Gillings (but not his Affiliates), Pharma, and the Company or its subsidiaries or affiliates, other than payments made pursuant to this Section 10, (the "Separation Payments") constituting excess parachute payments pursuant to Code Section 280G. The Additional Amount shall also include an amount equal to (i) the Excise Tax and (ii) all federal, state, and local income and payroll taxes and Excise Tax incurred by Gillings with respect to receipt of the Additional Amount. (b) All determinations required to be made under this Section 10, including whether an Additional Amount is required and the amount of any Additional Amount, shall be made by the Company prior to the event triggering such determination. In computing taxes, the Company shall use the highest marginal federal, state, and local income tax rates applicable to Gillings and shall assume the full deductibility of state and local income taxes for purposes of computing federal income tax liability, unless Gillings demonstrates that he will not in fact be entitled to such a deduction for the year of payment. (c) The Additional Amount shall be paid to Gillings with the Separation Payments unless the Company at the same time as the payment of the Separation Payments determines that Gillings will not incur an Excise Tax on part or all of the Separation Payments. (d) The Additional Amount shall be subject to adjustment so as to avoid either an over- or underpayment of the Additional Amount to Gillings, including any adjustment as may be necessary if additional liability (including interest and penalties) is assessed under Code Section 280G despite the contrary determination of the Company as to the applicability of -10- Section 280G to the Separation Payments. In the event the Internal Revenue Service or other taxing authority or a court determines that there has been an underpayment of the Excise Tax, the Company will, on Gillings' behalf, and at the Company's cost, assume any challenge (or other response as the Company shall determine to be proper) to such assessment or imposition of additional liability and Gillings will assist and cooperate with the Company with respect to any such challenge or other response, provided that such challenge or other response is not likely to adversely affect Gillings' other tax positions. Should Gillings receive a refund of all or any portion of the Excise Tax previously paid, because the Excise Tax is determined to be less than the amount taken into account at the time the Additional Amount is paid, Gillings shall repay to the Company the portion of the Additional Amount paid in connection with such Excise Tax so refunded. 11. SUCCESSORS; BINDING AGREEMENT. (a) This Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Pharma and/or the Company, and the Company and/or Pharma shall require any such successor to assume expressly and agree to perform this Agreement. As used in this Agreement, "Company" and "Pharma" shall mean the Company and Pharma as hereinbefore respectively defined and any successor to its business and/or assets as aforesaid. (b) This Agreement shall inure to the benefit of and be enforceable by Gillings' personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If Gillings should die while any amount would still be payable hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Gillings' devisee, legatee or other designee or, if there is no such designee, to Gillings' estate. 12. VACATION. Gillings shall be entitled each calendar year to a vacation of six (6) weeks, during which time his compensation shall be paid in full. Such vacation shall be taken at such time or times as Gillings shall determine, taking into consideration the needs and requirements of Pharma and the Company for his services. 13. MISCELLANEOUS. (a) All notices required or permitted hereunder shall be given in writing by actual delivery, by reputable overnight courier or by registered or certified mail (postage prepaid) at the following addresses or at such other places as shall be designated in writing and shall be deemed received on the date actually delivered, on the next business day if sent by overnight courier, or the third business day if sent by registered or certified mail: Gillings: Dennis B. Gillings, Ph.D. c/o GF Management Company, LLC 4825 Creekstone Drive, Suite 130 Durham, NC 27703 -11- with a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attn: John M. Reiss, Esq. Pharma: Pharma Services Holding Corp. c/o One Equity Partners LLC 320 Park Avenue, 18th Floor New York, New York 10022 Attn: Richard Cashin with a copy to: Morgan Lewis & Bockius LLP 101 Park Avenue New York, New York 10078 Attn: Ira White, Esq. with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attn: Robert J. Raymond, Esq. with a copy to: Temasek Holdings (Pte) Limited 60B Orchard Road, #06-18, Tower 2 The Atrium@Orchard, Singapore 238891 Attention: S. Iswaran Company Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building Suite 200 Durham, NC 27703 Attn: John Russell, Esq. with a copy to: Morgan Lewis & Bockius LLP 101 Park Avenue New York, New York 10078 Attn: Ira White, Esq. with a copy to: Smith, Anderson, Blount, Dorsett, Mitchell & Jemigan, LLP 2500 First Union Capital Center Post Office Box 2611 Raleigh, NC 27602-2611 Attn: Gerald F. Roach, Esq. -12- with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attn: Robert J. Raymond, Esq. with a copy to: Temasek Holdings (Pte) Limited 60B Orchard Road, #06-18, Tower 2 The Atrium@Orchard, Singapore 238891 Attention: S. Iswaran (b) If any provision of this Agreement shall be determined to be void by any court of competent jurisdiction, then such determination shall not affect any other provision of this Agreement, all of which shall remain in full force and effect. (c) The failure of the parties to complain of any act or omission on the part of either party, no matter how long the same may continue, shall not be deemed to be a waiver of any of its rights hereunder. (d) This Agreement contains the entire agreement of the parties. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. It may be changed or terminated only by a writing signed by the party against whom enforcement of any waiver, change, modification, extension, discharge or termination is sought. (e) The recitals contained in this Agreement are expressly made a part hereof. (f) This Agreement shall replace and supersede the Employment Agreement between the Company and Gillings dated February 22, 1994, as such agreement was amended on October 26, 1999 and April 1, 2001 (the "Prior Agreement"), and neither the Company, Pharma nor any subsidiary shall have any obligations under the Prior Agreement. (g) This Agreement shall be governed by the laws of the State of North Carolina, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of North Carolina. -13- IN WITNESS WHEREOF, the undersigned individual has executed this Agreement under seal by adopting the word "SEAL" beside his name and the undersigned corporation has executed this Agreement under seal through its duly authorized officers as of the day and year first above written. /s/ Dennis B. Gillings, Ph.D.(SEAL) ------------------------------------- Dennis B. Gillings, Ph.D. QUINTILES TRANSNATIONAL CORP. By: /s/ John S. Russell ----------------------------------- ATTEST: [/s/ ILLEGIBLE] - ---------------------------------- Secretary (CORPORATE SEAL) PHARMA SERVICES HOLDING, INC. By: /s/ Dennis B. Gillings, Ph.D. ----------------------------------- ATTEST: /s/ James S. Rubin - ---------------------------------- Secretary (CORPORATE SEAL) -14- PROPOSED REIMBURSEMENT FOR BUSINESS USE OF AIRCRAFT EXHIBIT A BASED ON NETJETS G V PRICING

Capital Cost and Monthly Fee use NetJets 700 hours rates to reflect the cost of "empty flights" built into NetJets rates. EX-31.1 10 g85608exv31w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 302 Certification of CEO Pursuant to Section 302

Quintiles Transnational Corp. and Subsidiaries
Certification Pursuant To
Section 302 of the Sarbanes-Oxley Act of 2002

	1.		I have reviewed this quarterly report on Form 10-Q of Quintiles Transnational Corp.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

EX-31.2 11 g85608exv31w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 302 Certification of CFO Pursuant to Section 302

Quintiles Transnational Corp. and Subsidiaries
Certification Pursuant To
Section 302 of the Sarbanes-Oxley Act of 2002

	1.		I have reviewed this quarterly report on Form 10-Q of Quintiles Transnational Corp.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

EX-32.1 12 g85608exv32w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 906 Certification of CEO Pursuant to Section 906

Quintiles Transnational Corp. and Subsidiaries
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Quintiles Transnational Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2003, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis B. Gillings, Chairman of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

This Certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 13 g85608exv32w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 906 Certification of CFO Pursuant to Section 906

Quintiles Transnational Corp. and Subsidiaries
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Quintiles Transnational Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2003 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James L. Bierman, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1)		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

This certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.


North Carolina		56-1714315
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4709 Creekstone Dr., Suite 200 Durham, NC (Address of principal executive offices)		27703-8411 (Zip Code)


		Page

Part I. Financial Information
Item 1.	Financial Statements (unaudited)		2
	Condensed consolidated balance sheets — September 30, 2003 (successor) and December 31, 2002 (predecessor)		2
	Condensed consolidated statements of operations — September 26, 2003 through September 30, 2003 (successor); July 1, 2003 through September 25, 2003 (predecessor); January 1, 2003 through September 25, 2003 (predecessor); Three and nine months ended September 30, 2002 (predecessor)		3
	Condensed consolidated statements of cash flows — January 1, 2003 through September 25, 2003 (predecessor); September 26, 2003 through September 30, 2003 (successor); Nine months ended September 30, 2002 (predecessor)		4
	Notes to condensed consolidated financial statements — September 30, 2003		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3.	Quantitative and Qualitative Disclosure about Market Risk		51
Item 4.	Controls and Procedures		52
Part II. Other Information
Item 1.	Legal Proceedings		52
Item 2.	Changes in Securities and Use of Proceeds		54
Item 3.	Defaults upon Senior Securities — Not Applicable		54
Item 4.	Submission of Matters to a Vote of Security Holders		54
Item 5.	Other Information — Not Applicable		55
Item 6.	Exhibits and Reports on Form 8-K		55
Signatures			57
Exhibit Index			58


			September 30,			December 31,
			2003			2002

			Successor			Predecessor
			(Unaudited)			(Note 1)

			(In thousands,
			except share data)
ASSETS
Current assets:
	Cash and cash equivalents		$	333,157		$	644,284
	Trade accounts receivable and unbilled services, net			249,928			255,647
	Investments in debt securities			593			27,218
	Prepaid expenses			25,567			22,516
	Other current assets and receivables			53,945			42,654

		Total current assets		663,190			992,319
Property and equipment				311,099			475,543
Less accumulated depreciation				(661	)		(213,385	)

				310,438			262,158
Intangibles and other assets:
	Investments in debt securities			10,775			9,453
	Investments in marketable equity securities			59,846			64,926
	Investments in non-marketable equity securities and loans			45,478			46,449
	Investments in unconsolidated affiliates			121,153			121,101
	Commercial rights and royalties			10,813			1,786
	Accounts receivable — unbilled			33,450			59,750
	Advances to customer			70,000			70,000
	Goodwill			192,351			70,133
	Other identifiable intangibles, net			405,248			142,715
	Deferred income taxes			2,015			174,534
	Deposits and other assets			62,899			38,871

				1,014,028			799,718

		Total assets	$	1,987,656		$	2,054,195

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	325,926		$	238,269
	Credit arrangements			19,607			21,719
	Unearned income			167,125			141,718
	Income taxes payable			14,935			20,067
	Other current liabilities			2,858			2,073

		Total current liabilities		530,451			423,846
Long-term liabilities:
	Credit arrangements, less current portion			773,241			18,855
	Deferred income taxes			135,020			405
	Other liabilities			26,398			12,703

				934,659			31,963

		Total liabilities		1,465,110			455,809
Shareholders’ equity:
	Preferred stock, none issued and outstanding at September 30, 2003 and December 31, 2002			—			—
	Common stock and additional paid-in capital, 125,000,000 and 117,850,597 shares issued and outstanding at September 30, 2003 and December 31, 2002, respectively			521,727			881,927
	Retained earnings			819			716,465
	Accumulated other comprehensive income (loss)			—			(6	)

		Total shareholders’ equity		522,546			1,598,386

		Total liabilities and shareholders’ equity	$	1,987,656		$	2,054,195


	September									September			January 1,
	26, 2003									26, 2003
	Through			July 1, 2003			Three			Through			2003			Nine Months
				Through			Months						Through			Ended
							Ended
	September 30,			September 25,			September			September 30,			September 25,			September 30,
	2003			2003			30,			2003			2003			2002
							2002

	Successor			Predecessor			Predecessor			Successor			Predecessor			Predecessor

	(Unaudited)

	(In thousands, except per share data)
Gross revenues	$	22,992		$	467,182		$	490,965		$	22,992		$	1,498,822		$	1,482,494
Costs, expenses and other:
Costs of revenues		15,052			307,662			330,108			15,052			997,822			1,020,500
General and administrative		5,971			129,082			128,842			5,971			397,318			381,970
Interest (income) expense, net		1,033			(2,246	)		(3,256	)		1,033			(10,374	)		(9,954	)
Other (income) expense, net		(309	)		17			1,473			(309	)		(5,433	)		344
Transaction and restructuring		—			50,261			—			—			54,148			—

		21,747			484,776			457,167			21,747			1,433,481			1,392,860

Income (loss) before income taxes		1,245			(17,594	)		33,798			1,245			65,341			89,634
Income tax expense (benefit)		448			(14	)		11,602			448			28,184			30,028

Income (loss) before equity in earnings of unconsolidated affiliates and other		797			(17,580	)		22,196			797			37,157			59,606
Equity in earnings of unconsolidated affiliates and other		22			(12	)		(1,017	)		22			4			(540	)

Income (loss) from operations		819			(17,592	)		21,179			819			37,161			59,066
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes		—			—			—			—			—			45,659

Net income (loss)	$	819		$	(17,592	)	$	21,179		$	819		$	37,161		$	104,725

Basic net income (loss) per share:
Income (loss) from operations	$	0.01		$	(0.15	)	$	0.18		$	0.01		$	0.31		$	0.50
Cumulative effect of change in accounting principle		—			—			—			—			—			0.39

Basic net income (loss) per share	$	0.01		$	(0.15	)	$	0.18		$	0.01		$	0.31		$	0.89

Diluted net income (loss) per share:
Income (loss) from operations	$	0.01		$	(0.15	)	$	0.18		$	0.01		$	0.31		$	0.50
Cumulative effect of change in accounting principle		—			—			—			—			—			0.39

Diluted net income (loss) per share	$	0.01		$	(0.15	)	$	0.18		$	0.01		$	0.31		$	0.88

Shares used in computing net income (loss) per share:
Basic		125,000			118,560			117,694			125,000			118,358			118,240
Diluted		125,000			118,560			117,845			125,000			119,050			118,520


		September			January 1,
		26, 2003
		Through			2003			Nine Months
					Through			Ended
		September			September			September
		30,			30,			30,
		2003			2003			2002

		Successor			Predecessor			Predecessor

		(In thousands)

		(Unaudited)
Operating activities
	Net income	$	819		$	37,161		$	104,725
	Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes		—			—			(45,659	)

	Income from operations		819			37,161			59,066
Adjustments to reconcile income from operations to net cash provided by operating activities:
	Depreciation and amortization		1,655			65,871			65,387
	Restructuring charge (payments) accrual, net		—			283			(18,953	)
	Transaction costs		—			44,057			—
	(Gain) loss from sales and impairments of investments, net		(213	)		(27,363	)		(14,609	)
	Provision for (benefit from) deferred income tax expense		—			12,592			(7,432	)
	Change in operating assets and liabilities		(2,261	)		38,172			83,475
	Other		—			(904	)		1,967

Net cash provided by operating activities			—			169,869			168,901
Investing activities
Acquisition of property and equipment			—			(39,682	)		(30,608	)
Repurchase of common stock in going-private merger			(1,617,567	)		—			—
Payment of transaction costs in going-private merger			(16,073	)		(2,896	)		—
Acquisition of businesses, net of cash acquired			—			—			(25,450	)
Acquisition of intangible assets			—			(5,898	)		—
Advances to customer			—			—			(30,000	)
Acquisition of commercial rights and royalties			—			(17,710	)		(11,435	)
Proceeds from disposition of property and equipment			—			6,219			4,022
Proceeds from (purchases of) debt securities, net			—			25,267			(1,148	)
Purchases of equity securities and other investments			—			(10,645	)		(15,028	)
Proceeds from sale of equity securities and other investments			—			61,741			24,803
Advances to unconsolidated affiliates			—			—			(10,328	)

Net cash (used in) provided by investing activities			(1,633,640	)		16,396			(95,172	)
Financing activities
Borrowings			734,864			—			—
Principal payments on credit arrangements, net			(912	)		(13,219	)		(11,081	)
Capital contribution			390,549			—			—
Issuance of common stock, net (predecessor)			—			7,042			7,730
Repurchase of common stock			—			—			(27,024	)

Net cash provided by (used in) financing activities			1,124,501			(6,177	)		(30,375	)
Effect of foreign currency exchange rate changes on cash			—			17,924			8,992

(Decrease) increase in cash and cash equivalents			(509,139	)		198,012			52,346
Cash and cash equivalents at beginning of period			842,296			644,284			565,063

Cash and cash equivalents at end of period		$	333,157		$	842,296		$	617,409



	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2003			2002			2003			2002

Gross revenues	$	490,174		$	490,965		$	1,521,814		$	1,482,494
Loss from continuing operations		(35,806	)		(2,242	)		(22,233	)		(13,346	)
Net (loss) income		(35,806	)		(2,242	)		(22,233	)		32,313



	Employee Stock Options

	July 1 Through			Three Months Ended
	September 25,			September 30,
	2003			2002

Expected dividend yield		0	%		0	%
Risk-free interest rate		2.1	%		2.1	%
Expected volatility		40.0	%		40.0	%
Expected life (in years from vesting)		0.90			0.90


	September		December
	30,		31,
	2003		2002

	Successor		Predecessor
Commercial rights and royalties	$	10,813	$	1,786
Accounts receivable — unbilled		33,450		59,750
Advances to customer		70,000		70,000

Total commercial rights and royalties related assets	$	114,263	$	131,536


	2003		2004		2005		2006		2007		Thereafter		Total

Milestone payments	$	3,000	$	3,000	$	—	$	—	$	—	$	—	$	6,000
Sales force commitments		7,633		16,548		15,070		3,806		3,916		608		47,581
Licensing and distribution rights		1,346		2,588		1,332		—		—		—		5,266

	$	11,979	$	22,136	$	16,402	$	3,806	$	3,916	$	608	$	58,847


	Trading		Number of				Fair Market
Company	Symbol		Shares		Cost Basis		Value

Common Stock:
The Medicines Company		MDCO		1,330,320	$	34,522	$	34,522
Columbia Laboratories, Inc.		COB		1,178,359		14,234		14,234
Discovery Laboratories, Inc.		DSCO		1,359,567		9,789		9,789
Other						1,301		1,301

Total marketable equity securities					$	59,846	$	59,846


				Remaining Funding
Company		Cost Basis		Commitment

Venture capital funds		$	33,111	$	16,832
Equity investments (seven companies)			9,352		—
Convertible loans (three companies)			768		420
Loans (two companies)			2,247		6,366

	Total non-marketable equity securities and loans	$	45,478	$	23,618


				Accumulated
		Gross Amount		Amortization		Net Amount

Identifiable intangible assets:
	Software and related assets	$	156,667	$	306	$	56,361
	Commercial rights and royalties, licenses and customer relationships		203,902		687		203,215
	Trademarks, trade names and other		145,672		—		145,672

		$	406,241	$	993	$	405,248


Product development	$	102,706
Commercial services		29,311
PharmaBio development		60,334

	$	192,351


Facility		Interest Rates

$75.0 million		Either at LIBOR (1.13% at September 30, 2003) plus 3.25% or ABR (4.0% at September 30, 2003) plus 2.25%
£10.0 million (approximately $16.6 million) unsecured line of credit		Base (3.5% at September 30, 2003) plus 0.75%
£1.5 million (approximately $2.5 million) general banking facility with the same U.K. bank used for the issuance of guarantees		1% per annum fee for each guarantee issued


		September 30, 2003		December 31, 2002

		Successor		Predecessor
10% Subordinated Notes due 2013		$	450,000	$	—
Senior Term Loan (ABR — 4.0% at September 30, 2003 — plus 3.25%)			310,000		—
Missouri tax incentive bonds due October 2009
	(6.7% annual interest rate)		4,042		4,288
Other notes payable			5,166		7,269

			769,208		11,557
Capital leases			23,640		29,017

	Total credit arrangements	$	792,848	$	40,574


October to December 31, 2003.	$	1,464
2004		5,392
2005		5,153
2006		4,881
2007		4,060
2008		3,793
Thereafter		744,465

	$	769,208



	Activity January 1, 2003 Through September 25, 2003

	Balance at										Balance at
	December 31,					Revised		Write-Offs/			September 25,
	2002		Revisions			Accrual		Payments			2003

Severance and related costs	$	2,066	$	(1,042	)	$	1,024	$	(1,024	)	$	—
Exit costs		154		—			154		(20	)		134

	$	2,220	$	(1,042	)	$	1,178	$	(1,044	)	$	134



	Activity January 1, 2003 Through September 25, 2003

	Balance at										Balance at
	December 31,					Revised		Write-Offs/			September 25,
	2002		Revisions			Accrual		Payments			2003

Severance and related costs	$	1,306	$	(310	)	$	996	$	(996	)	$	—
Exit costs		3,381		6,403			9,784		(1,583	)		8,201

	$	4,687	$	6,093		$	10,780	$	(2,579	)	$	8,201



	Activity January 1, 2003 Through September 25, 2003

	Balance at									Balance at
	December 31,				Revised		Write-Offs/			September 25,
	2002		Revisions		Accrual		Payments			2003

Severance and related costs	$	117	$	—	$	117	$	(77	)	$	40
Exit costs		1,443		421		1,864		(1,443	)		421

	$	1,560	$	421	$	1,981	$	(1,520	)	$	461


		September 26,					Three			September 26,		January 1,
		2003		July 1, 2003			Months			2003		2003			Nine Months
		Through		Through			Ended			Through		Through			Ended
		September 30,		September 25,			September 30,			September 30,		September 25,			September 30,
		2003		2003			2002			2003		2003			2002

		Successor		Predecessor			Predecessor			Successor		Predecessor			Predecessor
Marketable equity and derivative securities:
	Gross realized gains	$	213	$	6,715		$	4,455		$	213	$	38,724		$	16,062
	Gross realized losses		—		—			—			—		—			(92	)
	Impairment losses		—		—			—			—		(282	)		—
Non-marketable equity securities and loans:
	Gross realized gains		—		—			—			—		—			—
	Gross realized losses		—		—			—			—		—			—
	Impairment losses		—		(7,801	)		(1,000	)		—		(10,269	)		(1,400	)

		$	213	$	(1,086	)	$	3,455		$	213	$	28,173		$	14,570


		September 26, 2003 Through		January 1, 2003 Through
		September 30, 2003		September 25, 2003

		Successor		Predecessor
Current:
	Federal	$	429	$	(429	)
	State		19		7,668
	Foreign		—		22,953

			448		30,192

Deferred expense (benefit):
	Federal and state		—		3,639
	Foreign		—		(5,647	)

			—		(2,008	)

		$	448	$	28,184


		September 30, 2003

		Successor
Deferred income tax liabilities:
	Depreciation and amortization	$	(98,193	)
	Prepaid expenses		(8,725	)
	Unrealized gain on equity investments		(14,371	)
	Undistributed foreign earnings		(83,406	)
	Deferred revenue and other		(11,664	)
	Other		(4,439	)
Deferred income tax assets:
	Depreciation and amortization		—
	Net operating and capital loss carryforwards		125,752
	Accrued expenses and unearned income		32,449
	Goodwill, net of amortization		59,900
	Other		13,349
Valuation allowance for deferred income tax assets			(124,502	)

Net deferred income tax liabilities		$	(113,850	)


	January 1, 2003
	Through
	September 25, 2003

	Predecessor
Excess (deficiency) of income tax over financial reporting:
Depreciation and amortization	$	6,276
Net operating and capital loss carryforwards		(5,031	)
Valuation allowance increase (decrease)		—
Accrued expenses and unearned income		(6,405	)
Prepaid expenses		2,921
Deferred revenue		(877	)
Other items, net		1,108

	$	(2,008	)



		September 26, 2003 Through September 30, 2003 — Successor

		Product		Commercial		PharmaBio
		Development		Services		Development		Eliminations			Consolidated

Service revenues:
	External	$	11,884	$	6,048	$	—	$	—		$	17,932
	Intersegment		—		518		—		(518	)		—

	Total net services		11,884		6,566		—		(518	)		17,932
	Reimbursed service costs		2,857		608		—		—			3,465

Gross service revenues			14,741		7,174		—		(518	)		21,397
Commercial rights and royalties			—		—		1,382		—			1,382
Investment			—		—		213		—			213

Total revenues		$	14,741	$	7,174	$	1,595	$	(518	)	$	22,992

Contribution (revenues less costs of revenues, excluding depreciation and amortization expense except as noted below):
		$	6,601	$	2,823	$	83	$	—		$	9,507



		July 1, 2003 Through September 25, 2003 — Predecessor

		Product		Commercial		PharmaBio
		Development		Services		Development			Eliminations			Consolidated

Service revenues:
	External	$	233,319	$	115,694	$	—		$	—		$	349,013
	Intersegment		—		10,789		—			(10,789	)		—

	Total net services		233,319		126,483		—			(10,789	)		349,013
	Reimbursed service costs		63,912		13,633		—			—			77,545

Gross service revenues			297,231		140,116		—			(10,789	)		426,558
Commercial rights and royalties			—		—		41,710			—			41,710
Investment			—		—		(1,086	)		—			(1,086	)

Total revenues		$	297,231	$	140,116	$	40,624		$	(10,789	)	$	467,182

Contribution (revenues less costs of revenues, excluding depreciation and amortization expense except as noted below):
		$	120,731	$	46,521	$	10,885		$	—		$	178,137



			Three Months Ended September 30, 2002 — Predecessor

			Product		Commercial				PharmaBio
			Development		Services		Informatics		Development		Eliminations			Consolidated

Service revenues:
	External		$	242,333	$	122,448	$	—	$	—	$	—		$	364,781
	Intersegment			—		13,194		—		—		(13,194	)		—

	Total net services			242,333		135,642		—		—		(13,194	)		364,781
	Reimbursed service costs			78,189		15,869		—		—		—			94,058

Gross service revenues				320,522		151,511		—		—		(13,194	)		458,839
Commercial rights and royalties				—		—		—		28,671		—			28,671
Investment				—		—		—		3,455		—			3,455

		Total revenues	$	320,522	$	151,511	$	—	$	32,126	$	(13,194	)	$	490,965

Contribution (revenues less costs of revenues, excluding depreciation and amortization expense except as noted below):
			$	125,912	$	52,759	$	—	$	3,023	$	—		$	181,694



			January 1, 2003 Through September 25, 2003 — Predecessor

			Product		Commercial		PharmaBio
			Development		Services		Development		Eliminations			Consolidated

Service revenues:
	External		$	734,729	$	362,273	$	—	$	—		$	1,097,002
	Intersegment			—		29,777		—		(29,777	)		—

	Total net services			734,729		392,050		—		(29,777	)		1,097,002
	Reimbursed service costs			225,695		42,988		—		—			268,683

Gross service revenues				960,424		435,038		—		(29,777	)		1,365,685
Commercial rights and royalties				—		—		104,964		—			104,964
Investment				—		—		28,173		—			28,173

		Total revenues	$	960,424	$	435,038	$	133,137	$	(29,777	)	$	1,498,822

Contribution (revenues less costs of revenues, excluding depreciation and amortization expense except as noted below):
			$	375,125	$	142,144	$	43,001	$	—		$	560,270



			Nine Months Ended September 30, 2002 — Predecessor

			Product		Commercial				PharmaBio
			Development		Services		Informatics		Development		Eliminations			Consolidated

Service revenues:
External			$	704,021	$	380,560	$	20,347	$	—	$	—		$	1,104,928
	Intersegment			—		36,748		—		—		(36,748	)		—

	Total net services			704,021		417,308		20,347		—		(36,748	)		1,104,928
	Reimbursed service costs			231,689		65,419		22		—		—			297,130

Gross service revenues				935,710		482,727		20,369		—		(36,748	)		1,402,058
Commercial rights and royalties				—		—		—		65,866		—			65,866
Investment				—		—		—		14,570		—			14,570

		Total revenues	$	935,710	$	482,727	$	20,369	$	80,436	$	(36,748	)	$	1,482,494

Contribution (revenues less costs of revenues, excluding
depreciation and amortization expense except as noted
below):			$	354,024	$	153,144	$	8,024	$	10,306	$	—		$	525,498


		September 26,		July 1,				September 26,		January 1,
		2003		2003		Three Months		2003		2003		Nine Months
		Through		Through		Ended		Through		Through		Ended
		September 30,		September 30,		September 30,		September 30,		September 25,		September 30,
		2003		2003		2002		2003		2003		2002

		Successor		Predecessor		Predecessor		Successor		Predecessor		Predecessor
Depreciation and amortization expense:
	Product development	$	1,078	$	13,768	$	14,762	$	1,078	$	43,142	$	43,876
	Commercial services		385		4,654		5,839		385		15,520		16,353
	Informatics		—		—		—		—		—		2,559
	PharmaBio Development (included in contribution)		87		1,512		763		87		6,602		1,882
	Corporate		105		194		236		105		607		717

Total depreciation and amortization expense		$	1,655	$	20,128	$	21,600	$	1,655	$	65,871	$	65,386


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*



	Total Net Revenues									Contribution

												% of Net					% of Net
	2003			2002			Growth %			2003		Revenues			2002		Revenues

Product development	$	245.2		$	242.3			1.2	%	$	127.3		51.9	%	$	125.9		52.0	%
Commercial services		133.0			135.6			(1.9	)		49.3		37.1			52.8		38.9
PharmaBio Development		42.2			32.1			31.4			11.0		26.0			3.0		9.4
Eliminations		(11.3	)		(13.2	)		(14.3	)		—		—			—		—

	$	409.2		$	396.9			3.1	%	$	187.6		45.9	%	$	181.7		45.8	%


	September 30, 2003			December 31, 2002

Trade service accounts receivable, net	$	131,596		$	129,748
Unbilled services		107,253			120,383
Unearned income		(166,276	)		(141,710	)

Net service receivables outstanding	$	72,573		$	108,421

Number of days of service revenues outstanding		15			21


	October 1
	to
	December 31,
	2003		2004		2005		2006		2007		2008		Thereafter		Total

Long-term debt	$	1,464	$	5,392	$	5,153	$	4,881	$	4,060	$	3,793	$	744,465	$	769,208
Obligations held under capital leases		6,333		10,168		5,154		815		599		221		1,288		24,578
Operating leases		17,013		53,203		35,439		26,873		22,382		15,590		67,323		237,823
Service Agreement		7,228		27,558		21,960		20,878		20,545		15,410		—		113,579
PharmaBio funding commitments in various commercial rights and royalties:
Milestone payments		3,000		3,000		—		—		—		—		—		6,000
Sales force commitments		7,633		16,548		15,070		3,806		3,916		608		—		47,581
Licensing and distribution rights		1,346		2,588		1,332		—		—		—		—		5,266
PharmaBio funding commitments to purchase non-marketable equity securities and loans:
Venture capital funds		4,340		12,492		—		—		—		—		—		16,832
Convertible loans		200		220		—		—		—		—		—		420
Loans		750		5,616		—		—		—		—		—		6,366

	$	49,307	$	136,785	$	84,108	$	57,253	$	51,502	$	35,622	$	813,076	$	1,227,653


	*Our substantial debt could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes.*


	*The senior subordinated notes and the senior secured credit facility contain covenants that limit our flexibility and prevent us from taking certain actions.*


	Despite our level of indebtedness, we and our parent companies are able to incur substantially more debt. Incurring such debt could further exacerbate the risks to our financial condition.


	Changes in aggregate spending, research and development budgets and outsourcing trends in the pharmaceutical and biotechnology industries could adversely affect our operating results and growth rate.


	*If we are unable to successfully develop and market potential new services, our growth could be adversely affected.*


	*Our plan to web-enable our product development and commercialization services may negatively impact our results in the short term.*