EXHIBIT 10.55

 

 

 

Amended and Restated

Revolving Credit and Security Agreement

 

between

 

SRI/Surgical Express, Inc.

 

“Borrower”

 

and

 

Wachovia Bank, National Association

And

SouthTrust Bank

 

“Banks”

 

and

 

Wachovia Bank, National Association

 

“Agent”

 

Dated: As of June 26, 2003

 

 

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TABLE OF CONTENTS

 

          Page

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  1.

  

Definitions

   1

  2.

  

The Loan

   1     

2.1.   Revolving Loan

   1     

2.2.   Revolving Notes

   1     

2.3.   Collections Account

   1     

2.4.   Treasury Services

   2     

2.5.   Advances

   2     

2.6.   Repayment of Loan

   2     

2.7.   Overdue Amounts

   3     

2.8.   Calculation of Interest

   3     

2.9.   Letters of Credit

   3     

2.10. Fees

   3     

2.11. Statement of Account

   4

  3.

  

Conditions Precedent to Borrowing

   4     

3.1.   Conditions Precedent to Initial Advance

   4     

3.2.   Conditions Precedent to Each Advance

   5

  4.

  

Representations and Warranties

   6     

4.1.   Valid Existence and Power

   6     

4.2.   Authority

   6     

4.3.   Financial Condition

   6     

4.4.   Litigation

   6     

4.5.   Agreements, Etc

   7     

4.6.   Authorizations

   7     

4.7.   Title

   7     

4.8.   Collateral

   7     

4.9.   Jurisdiction of Organization; Location

   7     

4.10. Taxes

   7     

4.11. Labor Law Matters

   8     

4.12. Accounts

   8     

4.13. Judgment Liens

   8     

4.14. Subsidiaries

   8     

4.15. Environmental

   8     

4.16. ERISA

   8     

4.17. Investment Company Act

   9     

4.18. Names

   9     

4.19. Insider

   9     

4.20. Compliance with Covenants; No Default

   9     

4.21. Full Disclosure

   9     

4.22. Additional Representations

   9     

4.23. Perfection Certificate

   9

  5.

  

Affirmative Covenants of Borrower

   9     

5.1.   Use of Loan Proceeds

   9

 

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5.2.   Maintenance of Business and Properties

   10     

5.3.   Insurance

   10     

5.4.   Notice of Certain Events

   10     

5.5.   Inspections

   10     

5.6.   Financial Information

   10     

5.7.   Maintenance of Existence and Rights

   11     

5.8.   Payment of Taxes, Etc

   11     

5.9.   Subordination

   12     

5.10. Compliance; Hazardous Materials

   12     

5.11. Compliance with Assignment Laws

   12     

5.12. Further Assurances

   12     

5.13. Covenants Regarding Collateral

   12

  6.

  

Negative Covenants of Borrower

   13     

6.1.   Debt

   13     

6.2.   Liens

   13     

6.3.   Dividends

   13     

6.4.   Loans and Other Investments

   13     

6.5.   Change in Business

   13     

6.6.   Accounts

   13     

6.7.   Transactions with Affiliates

   14     

6.8.   No Change in Name, Offices; Removal of Collateral

   14     

6.9.   No Sale, Leaseback

   14     

6.10. Margin Stock

   14     

6.11. Tangible Collateral

   14     

6.12. Subsidiaries

   14     

6.13. Liquidation, Mergers, Consolidations and Dispositions of Substantial
Assets

   14     

6.14. Change of Fiscal Year or Accounting Methods

   14

  7.

  

Other Covenants of Borrower

   15     

7.1.   Financial Covenants

   15

  8.

  

Default

   15     

8.1.   Events of Default

   15     

8.2.   Remedies

   17     

8.3.   Receiver

   17     

8.4.   Deposits; Insurance

   17     

8.5.   Priorities

   18     

8.6.   Ratable Payments

   18     

8.7.   Sharing of Payments

   18

  9.

  

Security Agreement

   19     

9.1.   Security Interest

   19     

9.2.   Financing Statements; Power of Attorney

   19     

9.3.   Entry

   20     

9.4.   Other Rights

   20     

9.5.   Accounts

   20     

9.6.   Waiver of Marshaling

   20     

9.7.   Control

   20

 

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10.

  

The Agent

   21     

10.1.   Appointment and Powers

   21     

10.2.   Responsibility

   21     

10.3.   Agent’s Indemnification

   21     

10.4.   Rights as a Bank

   22     

10.5.   Credit Investigation

   22     

10.6.   Disputes

   22     

10.7.   Unanimous Consent of the Banks

   22     

10.8.   Resignation

   22     

10.9.   Expenses

   22     

10.10. Agent Capacity

   23     

10.11. Unanimous Decisions

   23     

10.12. Direct Action

   23

11.

  

Miscellaneous

   23     

11.1.   No Waiver, Remedies Cumulative

   23     

11.2.   Survival of Representations

   23     

11.3.   Indemnity By Borrower; Expenses

   23     

11.4.   Notices

   24     

11.5.   Governing Law

   25     

11.6.   Successors and Assigns

   25     

11.7.   Counterparts

   25     

11.8.   Usury

   25     

11.9.   Powers

   25     

11.10. Approvals

   25     

11.11. Participations

   25     

11.12. Dealings with Multiple Borrowers

   25     

11.13. Waiver of Certain Defenses

   26     

11.14. Integration

   26     

11.15. Limitation on Liability; Waiver of Punitive Damages

   26     

11.16. Waiver of Jury Trial

   26     

11.17. No Novation; Ratification

   27     

11.18. Other Provisions

   27

SCHEDULE OF EXHIBITS

   29

 

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AMENDED AND RESTATED

REVOLVING CREDIT AND SECURITY AGREEMENT

 

THIS AGREEMENT (the “Agreement”), dated as of June 26, 2003, between
SRI/SURGICAL EXPRESS, INC. (“SRI”), a Florida corporation “Borrower”), WACHOVIA
BANK, NATIONAL ASSOCIATION, a national banking association (“Wachovia”) and
SOUTHTRUST BANK, an Alabama banking corporation (“SouthTrust” and together with
any other party becoming a “Bank” hereunder, collectively called “Banks”), and
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its
capacity as Agent hereunder (“Agent”);

 

W I T N E S S E T H :

 

In consideration of the premises and of the mutual covenants herein contained
and to induce Banks to extend, or continue to extend, credit to Borrower, the
parties agree that the Credit Agreement between the parties dated as of February
24, 1999, as amended to date (the “Original Agreement”) is amended and restated
in its entirety by this Agreement:

 

1. Definitions. Capitalized terms that are not otherwise defined herein shall
have the meanings set forth in Exhibit 1 hereto.

 

2. The Loan.

 

2.1. Revolving Loan. Each Bank agrees, severally and not jointly, on the terms
and conditions set forth in this Agreement, to make Advances and to issue
letters of credit on behalf of Borrower from time to time during the Revolving
Credit Period in amounts such that the aggregate principal amount of Advances
and the face amount of any letters of credit issued by such Bank at any one time
outstanding will not exceed Bank’s Commitment Percentage of the Maximum Loan
Amount (the “Loan” or “Loans”).

 

2.2. Revolving Notes. The Loans shall be evidenced by two promissory notes, each
in the face amount of $15,000,000, payable to Banks (the “Notes”) and the Loans
shall be payable in accordance with the terms of the Notes.

 

2.3. Collections Account.

 

(a) If required by Agent in its sole discretion, all payments on Accounts and
other Collateral shall be forwarded by Borrower to the Collections Account;
provided, however, Agent, in its sole discretion, after Default may require
Borrower to establish a lockbox under the control of Agent to which all Account
Debtors shall forward payments on the Accounts. Borrower shall pay all of
Agent’s standard fees and charges in connection with such lockbox arrangement
(if any) and Collections Account as such fees and charges may change from time
to time. In the event Agent requires a lockbox arrangement hereunder, Borrower
shall notify Account Debtors on the Accounts to forward payments on the Accounts
to the lockbox; provided, however, that after Default Agent shall have the right
to directly contact Account Debtors at any time to ensure that payments on the
Accounts are directed to the lockbox. All payment items received by Borrower on
Accounts and sale of Inventory and other Collateral shall be held by Borrower in
trust for the Secured Parties and not commingled with Borrower’s funds and shall
be deposited promptly by Borrower to the Collections Account. All such items
shall be the exclusive property of Agent upon the earlier of the receipt thereof
by Agent or by

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Borrower. Borrower hereby grants to Agent, as agent for the Secured Parties, a
security interest in and lien upon all items and balances held in the lockbox
and the Collections Account as collateral for the Indebtedness.

 

(b) Borrower hereby irrevocably appoints Agent (and any duly authorized Person
designated by Agent) as Borrower’s attorney-in-fact to endorse Borrower’s names
on any checks, drafts, money orders or other media of payment which come into
Agent’s possession or control; this power being coupled with an interest is
irrevocable so long as any of the Indebtedness remain outstanding. Such
endorsement by Agent under power of attorney shall, for all purposes, be deemed
to have been made by Borrower (prior to any subsequent endorsement by Agent) in
negotiation of the item.

 

(c) For the purpose of calculating interest due under this Agreement, payment
items received into the Collections Account shall be deemed applied by Agent on
account of the Secured Obligations as collected by Agent, subject to chargebacks
for uncollected payment items. No payment item received by Agent shall
constitute payment of any Secured Obligation until such item is actually
collected by Agent and credited to the Collections Account; provided, however,
Agent shall have the right to charge back to the Collections Account (or any
other account of Borrower maintained with Agent) any item which is returned for
inability to collect, plus accrued interest during the period of Banks’
provisional credit for such item prior to receiving notice of dishonor.

 

2.4. Treasury Services. If Borrower subscribes to Wachovia’s treasury services
and such services are applicable to Wachovia’s Loan, the terms of such services,
as set forth in the Services Agreement, shall control matters related to such
services, including but not limited to the manner in which LIBOR Index-Based
Rate Advances are made and repaid.

 

2.5. Advances. Subject to Section 2.4, Advances shall be requested and made as
set forth in the Notes; provided, however, that each Bank reserves the right to
require a written Advance Request in form satisfactory to it.

 

2.6. Repayment of Loan.

 

(a) Interest on the Loan shall accrue and be payable as set forth in the Notes.
The Notes provide that the Loan shall mature, and the principal amount thereof
and all accrued and unpaid interest, fees, expenses and other amounts payable
under the Loan Documents shall be due and payable, on the Termination Date.

 

(b) Subject to the terms of any Services Agreement to which Borrower may
subscribe, Borrower shall make each payment of principal of and interest on the
Loan and fees hereunder as provided in the Notes on the date when due, without
set off, counterclaim or other deduction, in immediately available funds to each
Bank. Whenever any payment of principal of, or interest on, the Loan or of fees
shall be due on a day which is not a Business Day, the date for payment thereof
shall be extended to the next succeeding Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.

 

(c) Any prepayment shall not affect Borrower’s obligation to continue making
payments under any swap agreement (as defined in 11 U.S.C. § 101), which shall
remain in full force and effect notwithstanding such prepayment, subject to the
terms of such swap agreement.

 

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2.7. Overdue Amounts. The Notes provide for payment of interest at the Default
Rate set forth in the Notes. Any other payments hereunder not made as and when
due shall bear interest from the date due until paid at the Default Rate, in
Agent’s discretion.

 

2.8. Calculation of Interest. All interest under the Notes or hereunder and all
fees hereunder shall be calculated on the basis of the Actual/360 Computation,
as defined in the Notes.

 

2.9. Letters of Credit.

 

(a) At its discretion each Bank (“LOC Issuer”) may from time to time issue,
extend or renew letters of credit for the account of Borrower or its Affiliates
in an aggregate amount outstanding not exceeding the lesser of (i) the LOC
Issuer’s Commitment Percentage of the Maximum Amount less outstanding Advances
or (ii) $1,000,000. The availability of Advances under the LOC Issuer’s Loan
shall be reduced by outstanding obligations of the LOC Issuer under any letters
of credit. All payments made by an LOC Issuer under any such letters of credit
(whether or not a Borrower is the account party or drawer) and all fees,
commissions, discounts and other amounts owed or to be owed to the LOC Issuer in
connection therewith, shall be deemed to be Advances under the LOC Issuer’s
Note, shall be secured by the Collateral, and shall be repaid on demand.
Borrower shall complete and sign such applications and supplemental agreements
and provide such other documentation as the LOC Issuer may require. The form and
substance of all letters of credit, including expiration dates, shall be subject
to the LOC Issuer’s approval. Borrower unconditionally guarantees all
obligations of any Affiliate or other Person with respect to letters of credit
issued by the LOC Issuer for the account of such Affiliate or other Person. Upon
a Default, Borrower shall, on demand, deliver to Agent good funds equal to the
LOC Issuer’s maximum liability under all outstanding letters of credit issued
hereunder, to be held as cash Collateral for Borrower’s reimbursement
obligations and other Indebtedness.

 

(b) Any letter of credit issued hereunder shall be governed, as applicable, by
the Uniform Customs and Practice for Documentary Credits, International Chamber
of Commerce (“ICC”) Publication 500 or any subsequent revision or restatement
thereof adopted by the ICC and in use by Bank or the International Standby
Practices, ICC Publication 590 or any subsequent revision or restatement thereof
adopted by the ICC and in use by the LOC Issuer, except to the extent that the
terms of such publication would limit or diminish rights granted to the LOC
Issuer hereunder or in any other Loan Document.

 

2.10. Fees.

 

(a) Borrower shall pay to each Bank a non-refundable facility fee equal to 0.25%
of such Bank’s Commitment Percentage of the Maximum Amount, payable on the date
of this Agreement.

 

(b) Borrower shall pay each Bank a Non-Use Fee equal to the Applicable Margin
for Commitment Fee multiplied by the difference between Bank’s Commitment
Percentage of the Maximum Amount and the average daily principal amounts
outstanding under such Bank’s Note (plus any outstanding stated amounts of
letters of credit), calculated in arrears and paid as of the end of each March,
June, September and December and on the Termination Date.

 

3

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(c) At the time of issuance of a letter of credit, the Borrower shall pay the
LOC Issuer a fee equal to the Applicable Margin for LIBOR Loans and LOCs
multiplied by the stated amount of the letter of credit. The Borrower shall also
pay the LOC Issuer’s standard fees for transfers, amendment and draws under
letters of credit.

 

2.11. Statement of Account. If any Bank provides Borrower with a statement of
account on a periodic basis, such statement will be presumed complete and
accurate and will be definitive and binding on Borrower, unless objected to with
specificity by Borrower in writing within forty-five (45) days after receipt.

 

3. Conditions Precedent to Borrowing. Prior to any Advance, the following
conditions shall have been satisfied, in the sole opinion of each Bank and its
counsel:

 

3.1. Conditions Precedent to Initial Advance. In addition to any other
requirement set forth in this Agreement, Banks will not make the initial Advance
under the Loan unless and until the following conditions shall have been
satisfied:

 

(a) Loan Documents. Borrower and each other party to any Loan Document, as
applicable, shall have executed and delivered this Agreement, the Notes, and
other required Loan Documents, all in form and substance satisfactory to Banks.

 

(b) Supporting Documents. Borrower shall cause to be delivered to Banks the
following documents:

 

(i) A copy of the governing instruments of Borrower and each Subsidiary, and a
good standing certificate of Borrower and each Subsidiary, certified by the
appropriate official of its state of incorporation and the State of Florida, if
different;

 

(ii) Incumbency certificate and certified resolutions of the board of directors
(or other appropriate governing body) of Borrower and each other Person
executing any Loan Documents, signed by the Secretary or another authorized
officer of Borrower or such other Person, authorizing the execution, delivery
and performance of the Loan Documents;

 

(iii) The legal opinion of Borrower’s legal counsel addressed to Banks regarding
such matters as Banks and their counsel may request;

 

(iv) Satisfactory evidence of payment of all fees due and reimbursement of all
costs incurred by Banks, and evidence of payment to other parties of all fees or
costs which Borrower is required under this Agreement to pay;

 

(v) UCC-11 searches and other Lien searches showing no existing security
interests in or Liens on the Collateral other than Permitted Liens;

 

(vi) Any lien waivers required by Banks pursuant to Section 5.13(c) hereof; and

 

(vii) A satisfactory Perfection Certificate duly completed by Borrower.

 

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(c) Insurance. Borrower shall have delivered to Agent satisfactory evidence of
insurance meeting the requirements of Section 5.3.

 

(d) Perfection of Liens. UCC-1 financing statements and, if applicable,
certificates of title covering the Collateral executed by Borrower shall duly
have been recorded or filed in the manner and places required by law to
establish, preserve, protect and perfect the interests and rights created or
intended to be created by the Security Agreements; and all taxes, fees and other
charges in connection with the execution, delivery and filing of the Security
Agreements and the financing statements shall duly have been paid.

 

(e) Intentionally deleted.

 

(f) Additional Documents. Borrower shall have delivered to Banks or Agent all
additional opinions, documents, certificates and other assurances that Banks or
Agent or their counsel may require.

 

(g) Payment of Fees. Borrower shall have paid all fees, costs and expenses as
required by the Loan Documents in connection with the Closing.

 

3.2. Conditions Precedent to Each Advance. The following conditions, in addition
to any other requirements set forth in this Agreement, shall have been met or
performed by the Advance Date with respect to any Advance Request and each
Advance Request (whether or not a written Advance Request is required) shall be
deemed to be a representation that all such conditions have been satisfied:

 

(a) Advance Request. Subject to Section 2.4, Borrower shall have delivered to
each Bank an Advance Request and other information, as required by the Notes or
this Agreement.

 

(b) No Default. No Default shall have occurred and be continuing or could occur
upon the making of the Advance in question and, if Borrower is required to
deliver a written Advance Request, Borrower shall have delivered to Agent an
officer’s certificate to such effect, which may be incorporated in the Advance
Request. Any Advance Request shall be deemed to be a representation by Borrower
that no Default exists.

 

(c) Correctness of Representations. All representations and warranties made by
Borrower herein or otherwise in writing in connection herewith shall be true and
correct in all material respects with the same effect as though the
representations and warranties had been made on and as of the proposed Advance
Date, Borrower shall have delivered to Bank an officer’s certificate to such
effect, which may be incorporated in the Advance Request.

 

(d) No Adverse Change. There shall have been no change which could have a
Material Adverse Effect on Borrower or any Subsidiary since the date of the most
recent financial statements of such Person delivered to Agent or Banks from time
to time.

 

(e) Limitations Not Exceeded. The proposed Advance shall not cause the
outstanding principal balance of the Loan to exceed Bank’s Commitment Percentage
of the Maximum Loan Amount.

 

5

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(f) Further Assurances. Borrower shall have delivered such further documentation
or assurances as Agent or any Bank may reasonably require.

 

4. Representations and Warranties. In order to induce Banks to enter into this
Agreement and to make the Loan provided for herein, each Borrower makes the
following representations and warranties, all of which shall survive the
execution and delivery of the Loan Documents. The representations are qualified
by reference to the Schedule of Exceptions that Borrower has separately
furnished to Bank. Unless otherwise specified, such representations and
warranties shall be deemed made as of the date hereof and as of the date of any
Advance Request by Borrower:

 

4.1. Valid Existence and Power. Borrower and each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified or licensed to transact
business in all places where the failure to be so qualified would have a
Material Adverse Effect on it. Borrower and each other Person which is a party
to any Loan Document (other thank Banks and Agent) has the power to make and
perform the Loan Documents executed by it and all such instruments will
constitute the legal, valid and binding obligations of such Person, enforceable
in accordance with their respective terms, subject only to bankruptcy and
similar laws affecting creditors’ rights generally. Borrower is organized under
the laws of Florida and has not changed the jurisdiction of its organization
within the five years preceding the date hereof except as previously reported to
Bank.

 

4.2. Authority. The execution, delivery and performance thereof by Borrower and
each other Person (other than Banks and Agent) executing any Loan Document have
been duly authorized by all necessary action of such Person, and do not and will
not violate any provision of law or regulation, or any writ, order or decree of
any court or governmental or regulatory authority or agency or any provision of
the governing instruments of such Person, and do not and will not, with the
passage of time or the giving of notice, result in a breach of, or constitute a
default or require any consent under, or result in the creation of any Lien upon
any property or assets of such Person pursuant to, any law, regulation,
instrument or agreement to which any such Person is a party or by which any such
Person or its respective properties may be subject, bound or affected.

 

4.3. Financial Condition. Other than as disclosed in financial statements
delivered on or prior to the date hereof to Banks, neither Borrower nor any
Subsidiary has any direct or contingent obligations or liabilities (including
any guarantees or leases) or any material unrealized or anticipated losses from
any commitments of such Person except as described on Schedule 4.3 (if any). All
such financial statements have been prepared in accordance with GAAP and fairly
present the financial condition of Borrower or Subsidiary, as the case may be,
as of the date thereof. Borrower is not aware of any material adverse fact
(other than facts which are generally available to the public and not particular
to Borrower, such as general economic or industry trends) concerning the
conditions or future prospects of Borrower or any Subsidiary or any Guarantor
which has not been fully disclosed to Bank, including any adverse change in the
operations or financial condition of such Person since the date of the most
recent financial statements delivered to Bank. Borrower is Solvent, and after
consummation of the transactions set forth in this Agreement and the other Loan
documents, Borrower will be Solvent.

 

4.4. Litigation. Except as disclosed on Schedule 4.4 (if any), there are no
suits or proceedings pending, or to the knowledge of Borrower threatened, before
any court or

 

6

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by or before any governmental or regulatory authority, commission, bureau or
agency or public regulatory body against or affecting Borrower or any Subsidiary
or their assets, which if adversely determined would have a Material Adverse
Effect on the financial condition or business of Borrower or such Subsidiary.

 

4.5. Agreements, Etc. Neither Borrower nor any Subsidiary is a party to any
agreement or instrument or subject to any court order, governmental decree or
any charter or other corporate restriction, materially and adversely affecting
its business, assets, operations or condition (financial or otherwise), nor is
any such Person in default in the performance, observance or fulfillment of any
of the material obligations, covenants or conditions contained in any agreement
or instrument to which it is a party, or any law, regulation, decree, order or
the like which default could have a Material Adverse Effect.

 

4.6. Authorizations. All authorizations, consents, approvals and licenses
required under applicable law or regulation for the ownership or operation of
the property owned or operated by Borrower or any Subsidiary or for the conduct
of any business in which it is engaged have been duly issued and are in full
force and effect, and it is not in default, nor has any event occurred which
with the passage of time or the giving of notice, or both, would constitute a
default, under any of the terms or provisions of any part thereof, or under any
order, decree, ruling, regulation, closing agreement or other decision or
instrument of any governmental commission, bureau or other administrative agency
or public regulatory body having jurisdiction over such Person, which default
would have a Material Adverse Effect on such Person. Except as noted herein, no
approval, consent or authorization of, or filing or registration with, any
governmental commission, bureau or other regulatory authority or agency is
required with respect to the execution, delivery or performance of any Loan
Document.

 

4.7. Title. Borrower and each Subsidiary has good title to all of the assets
shown in its financial statements free and clear of all Liens, except Permitted
Liens. Borrower alone has full ownership rights in all Collateral.

 

4.8. Collateral. The security interests granted to Agent and/or Banks herein and
pursuant to any other Security Agreement (a) constitute and, as to subsequently
acquired property included in the Collateral covered by the Security Agreement,
will constitute, security interests under the Code entitled to all of the
rights, benefits and priorities provided by the Code and (b) are, and as to such
subsequently acquired Collateral will be, fully perfected, superior and prior to
the rights of all third persons, now existing or hereafter arising, subject only
to Permitted Liens. All of the Collateral is intended for use solely in
Borrower’s business.

 

4.9. Jurisdiction of Organization; Location. The jurisdiction in which Borrower
is organized, existing and in good standing, the chief executive office of
Borrower where Borrower’s business records are located, all of Borrower’s other
places of business and any other places where any Collateral is kept, are all
correctly and completed indicated on Schedule 4.9. The Collateral is located and
shall at all times be kept and maintained only at Borrower’s location or
locations as described on Schedule 4.9 herein. Except as described in Schedule
4.9, no such Collateral is attached or affixed to any real property so as to be
classified as a fixture unless Agent has otherwise agreed in writing. Borrower
has not changed its legal status or the jurisdiction in which it is organized or
moved its chief executive office within the five (5) years preceding the date
hereof.

 

4.10. Taxes. Borrower and each Subsidiary has filed all federal and state income
and other tax returns which are required to be filed, and have paid all taxes as
shown on

 

7

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said returns and all taxes, including withholding, FICA and ad valorem taxes,
shown on all assessments received by it to the extent that such taxes have
become due. Neither Borrower nor any Subsidiary is subject to any federal, state
or local tax Liens nor has such Person received any notice of deficiency or
other official notice to pay any taxes. Borrower and each Subsidiary has paid
all sales and excise taxes payable by it.

 

4.11. Labor Law Matters. No goods or services have been or will be produced by
Borrower or any Subsidiary in violation of any applicable labor laws or
regulations or any collective bargaining agreement or other labor agreements or
in violation of any minimum wage, wage-and-hour or other similar laws or
regulations.

 

4.12. Accounts. Each Account, Instrument, Chattel Paper and other writing
constituting any portion of the Collateral (a) is genuine and enforceable in
accordance with its terms except for such limits thereon arising from bankruptcy
and similar laws relating to creditors’ rights; (b) is not subject to any
deduction or discount (other than as stated in the invoice and disclosed to
Agent), defense, set off, claim or counterclaim of a material nature against
Borrower except as to which Borrower has notified Agent in writing; (c) is not
subject to any other circumstances that would impair the validity,
enforceability or amount of such Collateral except as to which Borrower has
notified Agent in writing; (d) arises from a bona fide sale of goods or delivery
of services in the ordinary course and in accordance with the terms and
conditions of any applicable purchase order, contract or agreement; (e) is free
of all Liens other than Permitted Liens; and (f) is for a liquidated amount
maturing as stated in the invoice therefor.

 

4.13. Judgment Liens. Neither Borrower nor any Subsidiary, nor any of their
assets, are subject to any unpaid judgments (whether or not stayed) or any
judgment liens in any jurisdiction.

 

4.14. Subsidiaries. If Borrower has any Subsidiaries, they are listed on Exhibit
4.14.

 

4.15. Environmental. Except as disclosed on Schedule 4.15, and except for
ordinary and customary amounts of solvents, cleaners and similar materials used
in the ordinary course of Borrower’s business and in strict compliance in all
material respects with all Environmental Laws, neither Borrower, nor to
Borrower’s best knowledge any other previous owner or operator of any real
property currently owned or operated by Borrower, has generated, stored or
disposed of any Regulated Material on any portion of such property, or
transferred any Regulated Material from such property to any other location in
material violation of any applicable Environmental Laws. Except as disclosed on
Schedule 4.15, no Regulated Material has been generated, stored or disposed of
on any portion of the real property currently owned or operated by Borrower by
any other Person, or is now located on such property. Except as disclosed on
Schedule 4.15, Borrower is in full compliance in all material respects with all
applicable Environmental Laws and Borrower has not been notified of any action,
suit, proceeding or investigation which calls into question compliance by
Borrower with any Environmental Laws or which seeks to suspend, revoke or
terminate any license, permit or approval necessary for the generation,
handling, storage, treatment or disposal of any Regulated Material.

 

4.16. ERISA. Borrower has furnished to Agent true and complete copies of the
latest annual report required to be filed pursuant to Section 104 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with
respect to each employee benefit

 

8

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plan or other plan maintained for employees of Borrower or any Subsidiary and
covered by Title IV of ERISA (a “Plan”), and no Termination Event (as
hereinafter defined) with respect to any Plan has occurred and is continuing.
For the purposes of this Agreement, a “Termination Event” shall mean a
“reportable event” as defined in Section 4043(b) of ERISA, or the filing of a
notice of intent to terminate under Section 4041 of ERISA. Neither Borrower nor
any Subsidiary has any unfunded liability with respect to any such Plan.

 

4.17. Investment Company Act. Neither Borrower nor any Subsidiary is an
“investment company” as defined in the Investment Company Act of 1940, as
amended.

 

4.18. Names. Borrower currently conducts all business only under its legal name
as set forth above in the introductory section of this Agreement. Except as
disclosed on Exhibit 4.18, during the preceding five (5) years Borrower has not
(i) been known as or used any other corporate, fictitious or trade name, (ii)
been the surviving entity of a merger or consolidation or (iii) acquired all or
substantially all of the assets of any Person.

 

4.19. Insider. Borrower is not, and no Person having “control” (as that term is
defined in 12 U.S.C. § 375(b)(5) or in regulations promulgated pursuant thereto)
of Borrower is, an “executive officer,” “director,” or “principal shareholder”
(as those terms are defined in 12 U.S.C. § 375(b) or in regulations promulgated
pursuant thereto) of any Bank, of a bank holding company of which any Bank is a
subsidiary, or of any subsidiary of a bank holding company of which any Bank is
a subsidiary.

 

4.20. Compliance with Covenants; No Default. Borrower is, and upon funding of
the Loan will be, in compliance with all of the covenants hereof. No Default has
occurred, and the execution, delivery and performance of the Loan Documents and
the funding of the Loan will not cause a Default.

 

4.21. Full Disclosure. There is no material fact which is known or which should
be known by Borrower that Borrower has not disclosed to Agent which is
reasonably likely to have a Material Adverse Effect. No Loan Document, nor any
agreement, document, certificate or statement delivered by Borrower to Agent or
any Bank contains any untrue statement of a material fact or omits to state any
material fact which is known or which should be known by Borrower necessary to
keep the other statements from being misleading.

 

4.22. Additional Representations. Any additional representations or warranties
set forth on Schedule 4.22 (if any) hereto are true and correct in all material
respects.

 

4.23. Perfection Certificate. All representations, warranties and statements
made by Borrower in the Perfection Certificate executed and delivered by
Borrower to Agent in connection with the Loan are true and correct in all
material respects as of the date hereof.

 

5. Affirmative Covenants of Borrower. Unless Banks otherwise agree in writing in
their discretion, Borrower covenants and agrees that from the date hereof and
until payment in full of the Indebtedness and the formal termination of this
Agreement, Borrower and each Subsidiary:

 

5.1. Use of Loan Proceeds. Shall use the proceeds of the Loan only for working
capital to be used in the operation of Borrower’s business and, to the extent
not in violation of this Agreement, for capital expenditures and repurchase of
Borrower’s stock, and furnish Bank all evidence that it may reasonably require
with respect to such use.

 

9

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5.2. Maintenance of Business and Properties. Shall at all times maintain,
preserve and protect all Collateral and all the remainder of its material
property used or useful in the conduct of its business, and keep the same in
good repair, working order and condition, and from time to time make, or cause
to be made, all material needful and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be conducted properly and in accordance with standards
generally accepted in businesses of a similar type and size at all times, and
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of its business.

 

5.3. Insurance. Shall maintain such liability insurance, workers’ compensation
insurance, business interruption insurance and casualty insurance as may be
required by the Security Agreements or by law, or which may be customary and
usual for prudent businesses in its industry or as may be reasonably required by
Agent and shall insure and keep insured all Collateral and other properties in
good and responsible insurance companies satisfactory to Agent. All hazard
insurance covering Collateral shall be in amounts and shall contain co-insurance
and deductible provisions approved by Agent, shall name and directly insure
Agent as secured party and loss payee under a long-form New York standard loss
payee clause acceptable to Agent, or its equivalent, and shall not be terminable
except upon thirty (30) days’ written notice to Agent. Borrower shall furnish to
Agent copies of all such policies.

 

5.4. Notice of Certain Events. Shall provide to Agent and each Bank immediate
notice of (a) the occurrence of a Default and what action (if any) Borrower is
taking to correct the same, (b) any material litigation or material changes in
existing litigation or any judgment against it or its assets, (c) any material
damage or loss to property, (d) any notice from taxing authorities as to claimed
material deficiencies or any tax lien or any notice relating to alleged ERISA
violations, (e) any Reportable Event, as defined in ERISA, (f) any rejection,
return, offset, dispute, loss or other circumstance having a Material Adverse
Effect on any Collateral, (g) the cancellation or termination of, or any default
under, any material agreement to which Borrower is a party or by which any of
its properties are bound, or any acceleration of the maturity of any Debt of
Borrower; (h) any loss or threatened loss of material licenses or permits; and
(i) any material notices or other communications from the Securities and
Exchange Commission or other regulatory agency.

 

5.5. Inspections. Shall permit inspections of the Collateral and the records of
such Person pertaining thereto and verification of the Accounts, at such times
and in such manner as may be reasonably required by Agent and shall further
permit such inspections, reviews and field examinations of its other records and
its properties (with such reasonable frequency and at such reasonable times as
Bank may desire) by Agent as Agent may deem necessary or desirable from time to
time. The cost of such field examinations, reviews, verifications and
inspections shall be borne by Borrower.

 

5.6. Financial Information. Shall maintain books and records in accordance with
GAAP and shall furnish to Agent the following periodic financial information:

 

(a) Interim Statements. Within forty-five (45) days after the end of each fiscal
quarter, a consolidated and consolidating balance sheet of Borrower and its
Subsidiaries at the end of that period and a consolidated and consolidating
income statement and statement of cash flows for that period (and for the
portion of the fiscal year ending with such period), together with all
supporting schedules, setting forth in comparative form the figures for the same
period of the preceding fiscal year, and certified by the chief financial
officer

 

10

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of Borrower as true and correct and fairly representing the financial condition
of Borrower and its Subsidiaries and that such statements are prepared in
accordance with GAAP, except without footnotes and subject to normal year-end
audit adjustments;

 

(b) Annual Statements. Within ninety (90) days after the end of each fiscal
year, a detailed audited financial report of Borrower and its Subsidiaries
containing a consolidated and consolidating balance sheet at the end of that
period and a consolidated and consolidating income statement and statement of
cash flows for that period, setting forth in comparative form the figures for
the preceding fiscal year, together with all supporting schedules and footnotes,
and containing an audit opinion of independent certified public accountants
acceptable to Agent that the financial statements were prepared in accordance
with GAAP. Borrower shall obtain such written acknowledgments from Borrower’s
independent certified public accountants as Agent may require permitting Bank to
rely on such annual financial statements. Any management letter, supplemental
letter, or other document accompanying the report will also be provided to
Agent. In addition, promptly upon receipt, one copy of each written report
submitted to Borrower by independent accountants for any other annual, quarterly
or special audit will be provided to Agent and each Bank;

 

(c) Officer’s Certificates. Together with each report required by Subsections
(a) and (b), a compliance certificate in form satisfactory to Bank, and a
certificate of its president or chief financial officer that no Default then
exists or if a Default exists, the nature and duration thereof and Borrower’s
intention with respect thereto, and in addition, shall cause Borrower’s
independent auditors (if applicable) to submit to Agent and each Bank, together
with its audit report, a statement that, in the course of such audit, it
discovered no circumstances which it believes would result in a Default or if it
discovered any such circumstances, the nature and duration thereof;

 

(d) Operating Budget and Cash Flow Projections. As soon as practicable and in
any event not later than 30 days prior to the end of each fiscal year, an annual
operating budget together with annual cash flow projections of the Borrower and
its Subsidiaries for the upcoming fiscal year, each in form and substance
reasonably satisfactory to the Agent.

 

(e) Shareholder/SEC Communications. Promptly after filing or mailing, copies of
all periodic or special reports, proxy statements and other reports to and
communications with the Securities and Exchange Commission, any stock exchange
and the Shareholders of the Borrower.

 

(f) Other Information. Such other information reasonably requested by Agent or
any Bank from time to time concerning the business, properties or financial
condition of Borrower and its Subsidiaries.

 

5.7. Maintenance of Existence and Rights. Shall preserve and maintain its
corporate existence, authorities to transact business, rights and franchises,
trade names, patents, trademarks and permits necessary to the conduct of its
business.

 

5.8. Payment of Taxes, Etc. Shall pay before delinquent all of its debts and
taxes, except that Agent shall not unreasonably withhold its consent to
nonpayment of taxes being actively contested in accordance with law (provided
that Agent may require bonding or other assurances).

 

11

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5.9. Subordination. Shall cause all debt and other obligations now or hereafter
owed to any Affiliate to be subordinated in right of payment and security to the
Indebtedness in accordance with subordination agreements satisfactory to Agent.

 

5.10. Compliance; Hazardous Materials. Shall strictly comply in all material
respects with all laws, regulations, ordinances and other legal requirements,
specifically including, without limitation, ERISA, all securities laws and all
laws relating to hazardous materials and the environment. Unless approved in
writing by Agent, neither Borrower nor any Subsidiary shall engage in the
storage, manufacture, disposition, processing, handling, use or transportation
of any hazardous or toxic materials, whether or not in compliance with
applicable laws and regulations except for ordinary and customary amounts of
solvents, cleaners and similar materials used in the ordinary course of
Borrower’s business in strict compliance in all material respects with all
Environmental Laws.

 

5.11. Compliance with Assignment Laws. Shall if required by Agent comply with
the Federal Assignment of Claims Act and any other applicable law relating to
assignment of government contracts.

 

5.12. Further Assurances. Shall take such further action and provide to Agent
and Banks such further assurances as may be reasonably requested to ensure
compliance with the intent of this Agreement and the other Loan Documents.

 

5.13. Covenants Regarding Collateral. Borrower makes the following covenants
with Agent and Banks regarding the Collateral for itself and each Subsidiary:

 

(a) Borrower will use the Collateral only in the ordinary course of its business
and will not permit the Collateral to be used in violation of any applicable law
or policy of insurance;

 

(b) Borrower, as agent for Banks, will defend the Collateral against all claims
and demands of all Persons, except for Permitted Liens;

 

(c) Borrower shall obtain and deliver to Agent, by August 31, 2003,
subordination agreements satisfactory to Agent subordinating all landlord’s,
mortgagee’s or other lienholder’s enforcement rights against the Collateral and
assuring Agent’s access to the Collateral in exercise of its rights hereunder
(“Landlord Subordinations”) from all landlords under leases requiring the
landlord to provide a Landlord Subordination and (ii) use diligent efforts to
obtain Landlord Subordinations by such date from all other landlords, keeping
the Agent informed of its efforts. The Borrower shall, at the time of renewal of
a lease, obtain a Landlord Subordination if not previously obtained;

 

(d) Borrower will promptly deliver to Agent all promissory notes, drafts, trade
acceptances, chattel paper, Instruments or documents of title which are
Collateral, appropriately endorsed to Agent’s order, and Borrower will not
create or permit any Subsidiary to create any Electronic Chattel Paper without
taking all steps deemed necessary by Bank to confer control of the Electronic
Chattel Paper upon Agent in accordance with the Code;

 

(e) Except for sales of Inventory in the ordinary course of business, will not
sell, assign, lease, transfer, pledge, hypothecate or otherwise dispose of or
encumber any Collateral or any interest therein;

 

12

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(f) shall promptly notify Agent of any future patents, trademarks or copyrights
owned by Borrower or any Subsidiary and any license agreements entered into by
Borrower or any Subsidiary authorizing said Person to use any patents,
trademarks or copyrights owned by third parties;

 

(g) shall give Agent at least thirty (30) days’ prior written notice of any new
trade or fictitious name. Borrower’s or any Subsidiary’s use of any trade or
fictitious name shall be in compliance with all laws regarding the use of such
names; and

 

(h) shall comply with all covenants in the 1999 Security Agreement.

 

6. Negative Covenants of Borrower. Unless permitted in writing by Banks in their
discretion, each Borrower covenants and agrees that from the date hereof and
until payment in full of the Indebtedness and the formal termination of this
Agreement, such Borrower and each Subsidiary:

 

6.1. Debt. Shall not create or permit to exist any Debt, including any
guaranties or other contingent obligations, except Permitted Debt.

 

6.2. Liens. Shall not create or permit any Liens on any of its property except
Permitted Liens.

 

6.3. Dividends. Shall not pay or declare any dividends (other than stock
dividends) or other distribution or purchase, redeem or otherwise acquire any
stock or other equity interests or pay or acquire any debt subordinate to the
Indebtedness unless, after giving effect thereto, there shall be no Default
hereunder.

 

6.4. Loans and Other Investments. Shall not make or permit to exist any advances
or loans to, or guarantee or become contingently liable, directly or indirectly,
in connection with the obligations, leases, stock or dividends of, or own,
purchase or make any commitment to purchase any stock, bonds, notes, debentures
or other securities of, or any interest in, or make any capital contributions to
(all of which are sometimes collectively referred to herein as “Investments”)
any Person except for (a) purchases of direct obligations of the federal
government, (b) deposits in commercial banks, (c) commercial paper of any U.S.
corporation having the highest ratings then given by the Moody’s Investors
Services, Inc. or Standard & Poor’s Corporation, (d) existing investments in
Subsidiaries, (e) endorsement of negotiable instruments for collection in the
ordinary course of business, and (f) other Investments not exceeding $1,000,000
in the aggregate.

 

6.5. Change in Business. Shall not enter into any business which is
substantially different from the business in which it is presently engaged.

 

6.6. Accounts. (a) Shall not sell, assign or discount any of its Accounts,
Chattel Paper or any promissory notes held by it other than the discount of such
notes in the ordinary course of business for collection; and (b) shall notify
Agent promptly in writing of any discount, offset or other deductions not shown
on the face of an Account invoice and any dispute over an Account, and any
information relating to an adverse change in any Account Debtor’s financial
condition or ability to pay its obligations, that is reasonably likely to have a
Material Adverse Effect.

 

13

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6.7. Transactions with Affiliates. Shall not directly or indirectly purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
pay any management fees to or otherwise deal with, in the ordinary course of
business or otherwise, any Affiliate (other than a Subsidiary); provided,
however, that any acts or transactions prohibited by this Section may be
performed or engaged in after written notice to Agent if upon terms not less
favorable to Borrower or such Subsidiary than if no such relationship existed.
Banks acknowledge notice of directors’ fees payable to Messrs. Boosales and
Peterson and consulting arrangements with those Persons.

 

6.8. No Change in Name, Offices; Removal of Collateral. Shall not, unless it
shall have given sixty (60) days’ advance written notice thereof to Agent, (a)
change its name or the location of its chief executive office or other office
where books or records are kept, or change the jurisdiction in which Borrower is
organized, or (b) permit any Inventory or other tangible Collateral to be
located at any location other than as specified in Section 4.9.

 

6.9. No Sale, Leaseback. Shall not enter into any sale-and-leaseback or similar
transaction.

 

6.10. Margin Stock. Shall not use any proceeds of the Loan to purchase or carry
any margin stock (within the meaning of Regulation U of the Board of Governors
of Federal Reserve System) or extend credit to others for the purpose of
purchasing or carrying any margin stock.

 

6.11. Tangible Collateral. Shall not, except as otherwise provided herein, allow
any Inventory or other tangible Collateral to be commingled with, or become an
accession to or part of, any property of any other Person so long as such
property is Collateral; nor allow any tangible Collateral to become a fixture
except fixtures shown on Exhibit 4.9.

 

6.12. Subsidiaries. Shall not acquire, form or dispose of any Subsidiaries or
permit any Subsidiary to issue capital stock except to its parent provided that
the Banks shall not unreasonably withhold consent to acquisition of a Subsidiary
if such Subsidiary shall join in this Agreement and all Loan Documents as a
Borrower, no Default exists or would exist and Banks receive evidence
satisfactory to them that such acquisition will not have a Material Adverse
Effect on Borrower.

 

6.13. Liquidation, Mergers, Consolidations and Dispositions of Substantial
Assets. Shall not dissolve or liquidate, or become a party to any merger or
consolidation, or acquire by purchase, lease or otherwise, all or a substantial
part (more than 10% in the aggregate during the term hereof) of the assets of
any Person, or sell, transfer, lease or otherwise dispose of all or a
substantial part (more than 10% in the aggregate during the term hereof) of its
property or assets, except for the sale of Inventory in the ordinary course of
business, or sell or dispose of any equity ownership interests in any
Subsidiary; provided, however, that the Banks shall not unreasonably withhold
their consent to an acquisition of or merger with another entity provided the
Borrower is the surviving entity and the Borrower has provided evidence
reasonably satisfactory to the Banks that no Default will exist and such
transaction will not have a Material Adverse Effect on Borrower.

 

6.14. Change of Fiscal Year or Accounting Methods. Shall not change its fiscal
year or, in any material respect, its accounting methods except to comply with
GAAP (in which event Borrower shall notify Agent and Banks in writing of such
change).

 

14

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7. Other Covenants of Borrower

 

7.1. Financial Covenants. Borrower covenants and agrees that from the date
hereof and until payment in full of the Indebtedness and the formal termination
of this Agreement, Borrower and each Subsidiary shall comply with the following
additional covenants:

 

(a) Consolidated Leverage Ratio. Borrower shall maintain, on a consolidated
basis, a Consolidated Leverage Ratio of not more than 2.50 to 1.00, measured as
of the end of each fiscal quarter for the four fiscal quarters then ended.
“Consolidated Leverage Ratio” shall mean the sum of all Funded Debt divided by
the sum of earnings before interest, taxes, depreciation and amortization of
good will and reusable surgical products. “Funded Debt” shall mean, as applied
to any person, the sum of all Debt for borrowed money (including, without
limitation, capital lease obligations, subordinated debt, and unreimbursed
drawings under letters of credit) or evidenced by a note, bond, debenture or
similar instrument of that person, and shall, in addition, include contingent
reimbursement obligations for outstanding letters of credit (to the extent not
resulting in double-counting).

 

(b) Deposit Relationship. Borrower shall maintain its primary depository
accounts with Banks.

 

(c) Funds Flow Coverage Ratio. Borrower shall, on a consolidated basis,
maintain, a Funds Flow Coverage Ratio of not less than 2.50 to 1.00, measured as
of the end of each fiscal quarter. “Funds Flow Coverage Ratio” shall mean (i)
the sum, for the four fiscal quarters then ended, of net income after taxes plus
depreciation, amortization of good will and interest minus all dividends,
withdrawals and non-cash income divided by (ii) the sum of all current
maturities of long-term debt and capital lease obligations, plus interest.

 

(d) Tangible Net Worth. Borrower shall, at the end of each fiscal quarter
beginning June 30, 2003, maintain a Tangible Net Worth of at least $47,000,000
plus 75% of cumulative net income (to the extent positive) generated after March
31, 2003. “Total Liabilities” shall mean all liabilities of Borrower, including
capitalized leases and all reserves for deferred taxes and other deferred sums
appearing on the liabilities side of a balance sheet of Borrower, in accordance
with GAAP applied on a consistent basis. “Tangible Net Worth” shall mean the
total assets of Borrower minus Total Liabilities. For purposes of this
computation, the aggregate amount owing from any officers, stockholders or other
Affiliates of Borrower and the aggregate amount of any intangible assets of
Borrower including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets.

 

8. Default.

 

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

 

(a) There shall occur any default by Borrower in the payment, when due, of any
principal of or interest on any Note, any amounts due hereunder or any other
Loan Document, or any other Indebtedness and such default shall continue for
more than three (3) days; or

 

 

(b) There shall occur any default by Borrower or any other party to any Loan
Document (other than Bank or Agent) in the performance of any agreement,
covenant

 

15

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or obligation contained in this Agreement or such Loan Document not provided for
elsewhere in this Section 8, provided that, with respect to defaults under other
Loan Documents, such default shall have continued beyond any applicable grace
period and, with respect to defaults under Sections 5.2, 5.5, 5.8, 5.10, 6.1,
6.4, 6.5, 6.7, 6.9 and 6.14 of this Agreement, such default shall continue for
more than 30 days after written notice of default from the Agent or any Bank; or

 

(c) Any representation or warranty made by Borrower or any other party to any
Loan Document (other than Bank or Agent) herein or therein or in any certificate
or report furnished in connection herewith or therewith shall prove to have been
untrue or incorrect in any material respect when made; or

 

(d) Any other obligation now or hereafter owed by Borrower or any Subsidiary to
any Bank or any affiliate of any Bank shall be in default and not cured within
the grace period, if any, provided therein, or any such Person shall be in
default under any obligation in excess of $500,000 owed to any other obligee,
which default entitles the obligee to accelerate any such obligations or
exercise other remedies with respect thereto; or

 

(e) Borrower or any Subsidiary shall (A) voluntarily dissolve, liquidate or
terminate operations or apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of such
Person or of all or of a substantial part of its assets, (B) admit in writing
its inability, or be generally unable, to pay its debts as the debts become due,
(C) make a general assignment for the benefit of its creditors, (D) commence a
voluntary case under the federal Bankruptcy Code (as now or hereafter in
effect), (E) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, (F) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
under Bankruptcy Code, or (G) take any corporate action for the purpose of
effecting any of the foregoing; or

 

(f) An involuntary petition or complaint shall be filed against Borrower or any
Subsidiary bankruptcy relief or reorganization or the appointment of a receiver,
custodian, trustee, intervenor or liquidator of such Borrower or any Subsidiary,
of all or substantially all of its assets, and such petition or complaint shall
not have been dismissed within sixty (60) days of the filing thereof; or an
order, order for relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving or ordering any of
the foregoing actions; or

 

(g) A judgment in excess of $500,000 shall be rendered against Borrower or any
Subsidiary and shall remain undischarged, undismissed and unstayed for more than
ten (10) days (except judgments validly covered by insurance) or there shall
occur any levy upon, or attachment, garnishment or other seizure of, any
material portion of the Collateral or other assets of Borrower, any Subsidiary
or any Guarantor by reason of the issuance of any tax levy, judicial attachment
or garnishment or levy of execution; or

 

(h) A “default” or “event of default” as defined in the ELLF Participation
Agreement or other ELLF Document (as defined in the 1999 Security Agreement)
shall occur and not be cured within any applicable grace period; or

 

(i) Loss, theft, damage or destruction of any material portion of the tangible
Collateral for which there is either no insurance coverage or for which, in the
reasonable opinion of Agent, there is insufficient insurance coverage.

 

16

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8.2. Remedies. Upon the occurrence of a Default, all Banks may give written
notice to Agent requiring Agent to notify Borrower of such Default (a “Default
Declaration”). Upon the occurrence of a Default described in Subsection 8.1(a)
or a monetary default of event of default described in Subsection 8.1(h), any
Bank may give written notice to Agent requiring Agent to issue a Default
Declaration. Advances shall be made and letters of credit issued after the date
of a Default Declaration only with the consent of all Banks in amounts agreed to
by all Banks. If an Event of Default shall have occurred and be continuing,
Agent shall, at the direction of all Banks, (or if any Bank if the Event of
Default is described in Subsection 8.1(a) or is a monetary event of default
described in Subsection 8.1(h)) take any or all of the following actions:

 

(a) Agent may declare any or all Indebtedness (other than Indebtedness under any
swap agreements, as defined in 11 U.S.C. § 101, between Borrower and any Bank or
any affiliate of such Bank, which shall be governed by the default and
termination provisions of said swap agreements) to be immediately due and
payable, terminate Banks’ obligations to make Advances to Borrower, bring suit
against Borrower to collect the Indebtedness, exercise any remedy available to
Agent or any Bank hereunder or at law and take any action or exercise any remedy
provided herein or in the Security Agreements or any other Loan Document or
under applicable law. No remedy shall be exclusive of other remedies or impair
the right of Agent or any Bank to exercise any other remedies.

 

(b) Without waiving any of its other rights hereunder or under any other Loan
Document, Agent shall have all rights and remedies of a secured party under the
Code (and the Uniform Commercial Code of any other applicable jurisdiction) and
such other rights and remedies as may be available hereunder, under other
applicable law or pursuant to contract. If requested by Agent, Borrower will
promptly assemble the Collateral and make it available to Agent at a place to be
designated by Agent. Borrower agrees that any notice by Agent of the sale or
disposition of the Collateral or any other intended action hereunder, whether
required by the Code or otherwise, shall constitute reasonable notice to
Borrower if the notice is mailed to Borrower by regular or certified mail,
postage prepaid, at least five days before the action to be taken. Borrower
shall be liable for any deficiencies in the event the proceeds of the
disposition of the Collateral do not satisfy the Indebtedness in full.

 

(c) Agent may demand, collect and sue for all amounts owed pursuant to Accounts,
General Intangibles, Chattel Paper, Instruments, Documents or for proceeds of
any Collateral (either in Borrower’ names or Agent’s name at the latter’s
option), with the right to enforce, compromise, settle or discharge any such
amounts.

 

8.3. Receiver. In addition to any other remedy available to it, Agent shall have
the absolute right, upon the occurrence of an Event of Default, to seek and
obtain the appointment of a receiver to take possession of and operate and/or
dispose of the business and assets of Borrower and any costs and expenses
incurred by Agent in connection with such receivership shall bear interest at
the Default Rate, at Agent’s option, and shall be secured by all Collateral.

 

8.4. Deposits; Insurance. After the occurrence of an Event of Default, Borrower
authorizes Agent to collect and apply against the Secured Obligation any cash or
deposit accounts in its possession, and any refund of insurance premiums or any
insurance proceeds payable on account of the loss or damage to any of the
Collateral and irrevocably appoints Agent as its attorney-in-fact to endorse any
check or draft or take other action necessary to obtain such funds.

 

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8.5. Priorities. On and after the date of a Default Declaration and during the
continuance of an Event of Default, subject to Section 11 of the 1999 Security
Agreement, if Banks or Agent collect any money pursuant to this Agreement, the
Notes or under the Security Agreements, they shall apply the money in the
following order, after application of such money to any Person having a prior
claim thereon:

 

First: to the reasonable costs and expenses of collection and enforcement,
including reasonable attorneys’ fees and costs, whether or not suit be brought
and including such fees and costs on appeal and in insolvency proceedings;

 

Second: to the Agent to reimburse the Agent for the Agent’s expenses;

 

Third: to Banks, pari passu in accordance with the outstanding amount of
Indebtedness (including principal and accrued interest) owed to them as of the
date of the Default Declaration, including Indebtedness relating to outstanding
letters of credit; and

 

Fourth: to Borrower or as otherwise payable pursuant to applicable law or order.

 

An LOC Issuer may hold funds to which it is entitled as cash collateral for any
contingent obligations under outstanding letters of credit and the Borrower
hereby grants a security interest in such funds and all income therefrom and
proceeds thereof. To the extent of any conflict with this Agreement, the
provisions of Section 11 of the 1999 Security Agreement shall prevail.

 

8.6. Ratable Payments. During the continuance of an Event of Default, Borrower
shall not pay any amounts due under any Indebtedness, or purchase any Note or
interest therein and no Bank shall accept such payments or sell such interest,
unless all Banks shall be treated ratably according to the respective
outstanding balance of their Indebtedness as of the date of the Default
Declaration and, at the election of the Agent, all payments shall be made to the
Agent for distribution in accordance with this Agreement and the 1999 Security
Agreement. It is the intention of this Agreement that all Banks shall be treated
pari passu as to Indebtedness owed to them as of the date of a Default
Declaration.

 

8.7. Sharing of Payments. Each Bank agrees that if it shall, during the
continuance of an Event of Default, through the exercise of a right of setoff or
counterclaim against 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 Bank under any
applicable bankruptcy, insolvency or other similar law or otherwise, expiration
of letter of credit obligations or by any other means, obtain payment or
reduction (voluntary or involuntary) in respect of any Indebtedness as a result
of which its unpaid Indebtedness shall be disproportionately reduced after the
date of a Default Declaration, it shall be deemed simultaneously to have
purchased from such other Banks at face value, and shall promptly pay to such
other Banks the purchase price for, a participation in the Notes or other
Indebtedness (including contingent obligations relating to letters of credit) of
such other Banks, so that theaggregate unpaid principal amount of the
Indebtedness and participations in Indebtedness held by each Bank shall be in
the same proportion to the aggregate unpaid amount of all Indebtedness then
outstanding as the principal amount of its Indebtedness prior to such exercise
of setoff or counterclaim or other event was to the principal amount of all
Indebtedness outstanding prior to such exercise of setoff or counterclaim or
other event; provided, however, that if any such purchase or purchases or
adjustments shall be made

 

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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 adjustment restored
without interest. Borrower expressly consents to the foregoing arrangements and
agrees that any Bank holding a participation in Indebtedness so purchased may
exercise any and all rights of setoff or counterclaim with respect to any and
all moneys owing by Borrower to such Bank by reason thereof as fully as if such
Bank had made a loan directly to Borrower in the amount of such participation.
The intent of this section is to maintain the relative shares of Indebtedness
among the Banks after the date of a Default Declaration.

 

9. Security Agreement.

 

9.1. Security Interest.

 

(a) As security for the payment and performance of any and all Indebtedness and
the performance of all obligations and covenants of Borrower to any Bank and/or
Agent and affiliates hereunder and under the other Loan Documents, certain or
contingent, now existing or hereafter arising, which are now, or may at any time
or times hereafter be owing by Borrower to any Bank or Agent, but subject to the
security interests and priorities in the 1999 Security Agreement, Borrower
hereby grants to Agent, as collateral agent for Banks on a pari passu basis, a
continuing security interest in and general lien upon and right of set-off
against, all right, title and interest of Borrower in and to the Collateral,
whether now owned or hereafter acquired by Borrower.

 

(b) Except as herein or by applicable law otherwise expressly provided, Agent
shall not be obligated to exercise any degree of care in connection with any
Collateral in its possession, to take any steps necessary to preserve any rights
in any of the Collateral or to preserve any rights therein against prior
parties, and Borrower agrees to take such steps. In any case Agent shall be
deemed to have exercised reasonable care if it shall have taken such steps for
the care and preservation of the Collateral or rights therein as Borrower may
have reasonably requested Agent to take and Agent’s omission to take any action
not requested by Borrower shall not be deemed a failure to exercise reasonable
care. No segregation or specific allocation by Agent of specified items of
Collateral against any liability of Borrower shall waive or affect any security
interest in or Lien against other items of Collateral or any of Agent’s options,
powers or rights under this Agreement or otherwise arising.

 

(c) Agent may at any time and from time to time, with or without notice to
Borrower, (i) transfer into the name of Agent or the name of Agent’s nominee any
of the Collateral, (ii) notify any Account Debtor or other obligor of any
Collateral to make payment thereon direct to Agent of any amounts due or to
become due thereon and (iii) receive and after a Default direct the disposition
of any proceeds of any Collateral.

 

(d) All rights of Agent and Banks herein shall be in addition to any rights they
may have under the 1999 Security Agreement or other Loan Documents.

 

9.2. Financing Statements; Power of Attorney. Borrower authorizes Agent at
Borrower’s expense to file any financing statements and/or amendments thereto
relating to the Collateral (without Borrower’s signature thereon) which Agent
deems appropriate that (a) indicate the Collateral (i) as “all assets” of
Borrower or words of similar effect, if appropriate, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the Code, or (ii) by specific Collateral category, and (b) provide any other
information

 

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required by Part 5 of Article 9 of the Code for the sufficiency or filing office
acceptance of any financing statement or amendment. Borrower irrevocably
appoints Agent as its attorney-in-fact to execute any such financing statements
and/or control agreements in Borrower’s name and to perform all other acts, at
Borrower’s expense, which Agent deems appropriate to perfect and to continue
perfection of the security interest of Agent. Borrower hereby appoints Agent as
Borrower’s attorney-in-fact to endorse, present and collect on behalf of
Borrower and in Borrower’s name any draft, checks or other documents necessary
or desirable to collect any amounts which Borrower may be owed. Agent is hereby
granted a license or other right to use, without charge, Borrower’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any Property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling any Collateral,
and Borrower’s rights under all licenses and all franchise agreements shall
inure to Agent’s benefit. The proceeds realized from the sale or other
disposition of any Collateral may be applied as provided in the 1999 Security
Agreement and this Agreement.

 

9.3. Entry. Borrower hereby irrevocably consents to any act by Agent or any Bank
or its agents in entering upon any premises for the purposes of either (i)
inspecting the Collateral or (ii) taking possession of the Collateral and
Borrower hereby waives its right to assert against Agent or any Bank or its
agents any claim based upon trespass or any similar cause of action for entering
upon any premises where the Collateral may be located.

 

9.4. Other Rights. Borrower authorizes Agent without affecting Borrower’s
obligations hereunder or under any other Loan Document from time to time (i) to
take from any party and hold additional Collateral or guaranties for the payment
of the Secured Obligations, including the Indebtedness, or any part thereof, and
to exchange, enforce or release such collateral or guaranty of payment of the
Secured Obligations, including the Indebtedness, or any part thereof and to
release or substitute any endorser or guarantor or any party who has given any
security interest in any collateral as security for the payment of the Secured
Obligations, including the Indebtedness, or any part thereof or any party in any
way obligated to pay the Secured Obligations, including the Indebtedness, or any
part thereof; and (ii) upon the occurrence of any Event of Default to direct the
manner of the disposition of the Collateral and the enforcement of any
endorsements, guaranties, letters of credit or other security relating to the
Secured Obligations, including the Indebtedness, or any part thereof as Bank in
its sole discretion may determine.

 

9.5. Accounts. After any Event of Default, Agent may notify any Account Debtor
of Agent’s security interest and may direct such Account Debtor to make payment
directly to Agent for application against the Secured Obligations, including the
Indebtedness. Any such payments received by or on behalf of Borrower at any time
shall be the property of Agent, shall be held in trust for Agent and not
commingled with any other assets of any Person (except to the extent they may be
commingled with other assets of Borrower in an account with Agent) and shall be
immediately delivered to Agent in the form received. Agent shall have the right
to apply any proceeds of Collateral to such of the Indebtedness as it may
determine.

 

9.6. Waiver of Marshaling. Borrower hereby waives any right it may have to
require marshaling of its assets.

 

9.7. Control. Each Borrower will cooperate with Agent in obtaining control of,
or control agreements with respect to, Collateral for which control or a control
agreement is required for perfection of the Agent’s security interest under the
Code.

 

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10. The Agent

 

10.1. Appointment and Powers. Each of Banks hereby appoints Agent as agent for
Banks hereunder, and authorizes the Agent to take such action as Agent on its
behalf and to exercise such powers as are specifically delegated to the Agent by
the terms hereof and, in addition, as “Agent” under the 1999 Security Agreement,
or by separate agreement, specifically including, without limitation, the
enforcement of this Agreement, the 1999 Security Agreement and the other Loan
Documents, together with such powers as are reasonably incidental thereto.
Without limiting the generality of the foregoing, the Agent is appointed as the
collateral agent of Banks and the other Secured Parties for purposes of
perfecting the Liens and security interests of Banks in the Collateral. The
Agent shall be named as mortgagee/grantee and secured party under the Security
Agreements. The Agent shall be entitled to engage counsel, accountants and other
professionals of the Agent’s choosing. The Agent shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement, the Notes or any Loan Document, or to
enforce such performance, or to inspect the property (including the books and
records) of Borrower or any of its Affiliates; and the Agent shall not be
required to take any action (i) which exposes the Agent to personal liability;
(ii) which is contrary to this Agreement or the Notes or applicable law; or
(iii) unless the Agent, in Agent’s sole discretion, determines that funds are
available to pay all fees and expenses of the Agent. The Agent is appointed to
act as agent upon the express terms and conditions contained in this Article.

 

10.2. Responsibility. The Agent (i) makes no representation or warranty to any
Bank and shall not be responsible to any Bank for any oral or written recitals,
reports, statements, warranties or representations made in or in connection with
this Agreement, or any Note or any Loan Document; (ii) shall not be responsible
for the due execution, legality, validity, enforceability, genuineness,
sufficiency, collectibility or value of this Agreement, any Note or any Loan
Document or any other instrument or document furnished pursuant thereto; (iii)
may treat the payee of any Note as the owner thereof until the Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to the Agent; (iv) may execute any of the Agent’s duties under
this Agreement by or through employees, agents and attorneys in fact and shall
not be answerable for the default or misconduct of any such employee, agent or
attorney-in-fact selected by the Agent with reasonable care; (v) may (but shall
not be required to) consult with legal counsel, independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by the Agent in accordance with advice of such
counsel, accountants or experts; (vi) shall be entitled to rely upon any notice,
consent, waiver, amendment, certificate, affidavit, letter, telegram, telex,
cable or other document or communication believed by the Agent to be genuine and
signed or sent by the proper party or parties, and may rely upon statements
contained therein without further inquiry or investigation. Neither the Agent
nor any of Agent’s agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the Notes, except for his, its or their own gross negligence or willful
misconduct.

 

10.3. Agent’s Indemnification. Banks agree to indemnify and reimburse the Agent
(to the extent not reimbursed by Borrower), ratably in accordance with their
Commitment Percentages from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments and suits, and reasonable costs,
expenses and disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent as such in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by the Agent under this Agreement or any other Loan Document,

 

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provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent’s gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank agrees to reimburse
the Agent promptly upon demand for its Commitment Percentage of any
out-of-pocket expenses (including counsel and accounting fees) incurred by the
Agent in connection with the preparation, execution, administration or
enforcement of, or the preservation of any rights under, this Agreement or any
other Loan Document to the extent that the Agent is not reimbursed for such
expenses by Borrower. The Agent shall have the right to deduct from any funds in
its possession or control such amounts as may be owing to the Agent.

 

10.4. Rights as a Bank. With respect to any Indebtedness which it may hold or
acquire, the Agent, in its individual capacity as a Bank and/or ELLF Lender (as
defined in the 1999 Security Agreement), shall have, and may exercise, the same
rights and powers under this Agreement and the Loan Documents as any other Bank
has under this Agreement and Loan Documents.

 

10.5. Credit Investigation. Each of the Banks severally represents and warrants
to each of the other Banks and to the Agent that it has made its own independent
investigation and evaluation of the financial condition and affairs of Borrower
and its Affiliates, and all Collateral, in connection with such Bank’s execution
and delivery of this Agreement and the making of its Loans and has not relied on
any information or evaluation provided by any other Bank or the Agent in
connection with any of the foregoing; and each Bank represents and warrants to
each other Bank and to the Agent that it shall continue to make its own
independent investigation and evaluation of the credit-worthiness of Borrower
and its Affiliates, and all the Collateral, while any Indebtedness is
outstanding.

 

10.6. Disputes. If at any time, there should be any dispute as to any action to
be taken by the Agent or if the Agent is unsure of its right or obligation to
undertake the action, or to refrain from taking any action, the Agent may
request written instructions from Banks, in which case Banks shall promptly
respond to such request. Agent shall be entitled to rely upon written
instructions signed by Banks.

 

10.7. Unanimous Consent of the Banks. If at any time a dispute should arise as
to any property or funds under the control of the Agent, the Agent shall have
the right to interplead such property or funds into the custody and control of a
court of appropriate jurisdiction and shall thereupon be relieved of further
liabilities and responsibilities with respect thereto. Any expenses, including
attorneys’ fees, incurred by Agent in connection with such interpleader shall be
paid by Banks as set forth in Section 10.3 above.

 

10.8. Resignation. The Agent may, with reasonable cause as determined in its
sole discretion, resign as such at any time upon 30 calendar days’ prior written
notice to Borrower and Banks, effective at the end of said 30 days or upon the
earlier appointment of a successor. If the Agent resigns, Banks shall appoint a
successor, which may be one of the Banks, provided that so long as no Default or
Event of Default exists, Borrower shall have the right to consent to appointment
of an Agent that is not one of the Banks. Such successor, upon its acceptance of
such appointment, shall become the Agent upon the express conditions contained
in this Article 10.

 

10.9. Expenses. Borrower agrees to pay the reasonable expenses of the Agent
within ten days following receipt of an invoice therefor, together with a
statement in reasonable detail setting forth the calculation thereof.

 

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10.10. Agent Capacity. The Agent is acting solely as agent for Banks and not in
Agent’s personal capacity. Neither the Agent personally nor any of the Agent’s
assets shall have any liability hereunder and, in the event of a dispute,
Borrower and each of Banks agrees to look solely to any assets or interests of
the Agent held on behalf of Banks to satisfy any judgment which may result in
such party’s action against the Agent from such dispute. Borrower agrees to
exculpate the Agent and the Agent’s personal assets with respect to any claims
that Borrower now has or may hereafter have with respect to any actions taken or
omitted by the Agent on behalf of Banks.

 

10.11. Unanimous Decisions. Material decisions respecting the Agent’s
non-ministerial functions hereunder, including all enforcement action shall be
undertaken by joint action of the Banks. No Bank shall accelerate its Note,
elect accrual of interest at the Default Rate or exercise any remedy hereunder
or under its Note upon agreement of all Banks.

 

10.12. Direct Action. At the election of all Banks the Banks may jointly
exercise any and all rights of the Agent under all Loan Documents and may cause
the security interests and liens encumbering Collateral to be assigned to the
Banks.

 

11. Miscellaneous.

 

11.1 No Waiver, Remedies Cumulative. No failure on the part of Agent to
exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and are in addition to any other remedies provided by law, any Loan Document or
otherwise.

 

11.2 Survival of Representations. All representations and warranties made herein
shall survive the making of the Loan hereunder and the delivery of the Notes,
and shall continue in full force and effect so long as any Indebtedness is
outstanding, there exists any commitment by Bank to Borrower, and until this
Agreement is formally terminated in writing.

 

11.3 Indemnity By Borrower; Expenses. In addition to all other Indebtedness,
Borrower agrees to defend, protect, indemnify and hold harmless Agent, each Bank
and their Affiliates and all of their respective officers, directors, employees,
attorneys, consultants and agents from and against any and all losses, damages,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, attorneys’ and paralegals’ fees, costs and expenses)
incurred by such indemnitees, whether prior to or from and after the date
hereof, as a result of or arising from or relating to (i) the due diligence
effort (including, without limitation, public record search, recording fees,
examinations and investigations of the properties of Borrower and Borrower’s
operations), negotiation, preparation, execution and/or performance of any of
the Loan Documents or of any document executed in connection with the
transactions contemplated thereby and the perfection of Agent’s Liens in the
Collateral, maintenance of the Loan by Bank, and any and all amendments,
modifications, and supplements of any of the Loan Documents or restructuring of
the Indebtedness, (ii) any suit, investigation, action or proceeding by any
Person (other than Borrower), whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any Person under any statute,
regulation or common law principle, arising from or in connection with Bank’s
furnishing of funds to Borrower under this Agreement, (iii) Agent’s and each
Bank’s preservation,

 

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administration and enforcement of its rights under the Loan Documents and
applicable law, including the reasonable fees and disbursements of counsel for
Agent and such Bank in connection therewith, whether suit be brought or not and
whether incurred at trial or on appeal, and all costs of repossession, storage,
disposition, protection and collection of Collateral, (iv) periodic field exams,
audits and appraisals performed by Bank; and/or (v) any matter relating to the
financing transactions contemplated by the Loan Documents or by any document
execution in connection with the transactions contemplated thereby, other than,
in each case, for such loss, damage, liability, obligation, penalty, fee, cost
or expense arising from such indemnitee’s gross negligence or willful
misconduct. If Borrower should fail to pay any tax or other amount required by
this Agreement to be paid or which may be reasonably necessary to protect or
preserve any Collateral or Borrower’s Agent’s or Bank’s interests therein, Agent
and each Bank may make such payment and the amount thereof shall be payable on
demand, shall bear interest at the Default Rate from the date of demand until
paid and shall be deemed to be Indebtedness entitled to the benefit and security
of the Loan Documents. In addition, each Borrower agrees to pay and save Agent
and each Bank harmless against any liability for payment of any state
documentary stamp taxes, intangible taxes or similar taxes (including interest
or penalties, if any) which may now or hereafter be determined to be payable in
respect to the execution, delivery or recording of any Loan Document or the
making of any Advance, whether originally thought to be due or not, and
regardless of any mistake of fact or law on the part of Agent, Bank or Borrower
with respect to the applicability of such tax. Borrower’s obligation for
indemnification for all of the foregoing losses, damages, liabilities,
obligations, penalties, fees, costs and expenses of Agent and Bank shall be part
of the Indebtedness, secured by the Collateral, chargeable against Borrower’s
loan account, and shall survive termination of this Agreement.

 

11.4 Notices. Any notice or other communication hereunder or under the Notes to
any party hereto or thereto shall be by hand delivery, overnight delivery via
nationally recognized overnight delivery service, or registered or certified
United States mail and unless otherwise provided herein shall be deemed to have
been given or made when delivered, telegraphed, telexed, faxed or three (3)
Business Days after having been deposited in the United States mail, postage
prepaid, addressed to the party at its address specified below (or at any other
address that the party may hereafter specify to the other parties in writing):

 

      

Wachovia:

 

Wachovia Bank, National Association

              

Mail Code VA 7391

              

P.O. Box 13327

              

Roanoke, VA 24040

          

With copies to:

 

Wachovia Bank, National Association

              

Mail VA 7391

              

10 South Jefferson Street

              

Roanoke, VA 24011

          

SouthTrust:

 

SouthTrust Bank

              

420 North 20th Street

              

Birmingham, AL 35203

          

Borrower:

 

SRI/Surgical Express, Inc.

              

12425 Race Track Road

              

Tampa, FL 33626

              

Attn: Chief Financial Officer

   

 

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11.5 Governing Law. This Agreement and the Loan Documents shall be deemed
contracts made under the laws of the State of the Jurisdiction and shall be
governed by and construed in accordance with the laws of said state (excluding
its conflict of laws provisions if such provisions would require application of
the laws of another jurisdiction) except insofar as the laws of another
jurisdiction may, by reason of mandatory provisions of law, govern the
perfection, priority and enforcement of security interests in the Collateral.

 

11.6 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of Borrower, Agent and Banks, and their respective
successors and assigns; provided, that Borrower may not assign any of their
rights hereunder without the prior written consent of Agent, and any such
assignment made without such consent will be void.

 

11.7 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and all of which when taken
together shall constitute but one and the same instrument.

 

11.8 Usury. Regardless of any other provision of this Agreement, the Notes or in
any other Loan Document, if for any reason the effective interest should exceed
the maximum lawful interest, the effective interest shall be deemed reduced to,
and shall be, such maximum lawful interest, and (i) the amount which would be
excessive interest shall be deemed applied to the reduction of the principal
balance of the Notes and not to the payment of interest, and (ii) if the loan
evidenced by the Notes has been or is thereby paid in full, the excess shall be
returned to the party paying same, such application to the principal balance of
the Note or the refunding of excess to be a complete settlement and acquittance
thereof.

 

11.9 Powers. All powers of attorney granted to Agent are coupled with an
interest and are irrevocable.

 

11.10 Approvals. If this Agreement calls for the approval or consent of Agent or
Banks, such approval or consent may be given or withheld in the discretion of
Agent or Banks unless otherwise specified herein.

 

11.11 Participations. Each Bank shall have the right to enter into one or more
participation with other lenders with respect to the Indebtedness. Upon prior
notice to Borrower of such participation, Borrower shall thereafter furnish to
such participant any information furnished by Borrower to Agent pursuant to the
terms of the Loan Documents. Nothing in this Agreement or any other Loan
Document shall prohibit Banks from pledging or assigning this Agreement and
Banks’ rights under any of the other Loan Documents, including collateral
therefor, to any Federal Reserve Bank in accordance with applicable law.

 

11.12 Dealings with Multiple Borrowers. All Indebtedness, representations,
warranties, covenants and indemnities set forth in the Notes, this Agreement and
the other Loan Documents shall be joint and several obligations of each Person
named as a Borrower. Agent or Banks shall have the right to deal with any
individual of Borrower with regard to all matters concerning the rights and
obligations of Agent or Banks hereunder and pursuant to applicable law with
regard to the transactions contemplated under the Loan Documents. All actions or
inactions of the officers, managers, members and/or agents of Borrower with
regard to the transactions contemplated under the Loan Documents shall be deemed
with full authority and binding upon all Borrowers hereunder. Each Borrower
hereby appoints each other Borrower as

 

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its true and lawful attorney-in-fact, with full right and power, for purposes of
exercising all rights of such Person hereunder and under applicable law with
regard to the transactions contemplated under the Loan Documents. The foregoing
is a material inducement to the agreement of Banks to enter into the terms
hereof and to consummate the transactions contemplated hereby.

 

11.13 Waiver of Certain Defenses. To the fullest extent permitted by applicable
law, upon the occurrence of any Event of Default, no Borrower or anyone claiming
by or under such Borrower will claim or seek to take advantage of any law
requiring Agent or Bank to attempt to realize upon any Collateral or collateral
of any surety or guarantor, or any appraisement, evaluation, stay, extension,
homestead, redemption or exemption laws now or hereafter in force in order to
prevent or hinder the enforcement of this Agreement. Each Borrower, for itself
and all who may at any time claim through or under Borrower, hereby expressly
waives to the fullest extent permitted by law the benefit of all such laws. All
rights of Agent and Bank and all obligations of Borrower hereunder shall be
absolute and unconditional irrespective of (i) any change in the time, manner or
place of payment of, or any other term of, all or any of the Indebtedness, or
any other amendment or waiver of or any consent to any departure from any
provision of the Loan Documents, (ii) any exchange, release or non-perfection of
any other collateral given as security for the Indebtedness, or any release or
amendment or waiver of or consent to departure from any guaranty for all or any
of the Indebtedness, or (iii) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Borrower or any third
party, other than payment and performance in full of the Indebtedness.

 

11.14. Integration. This Agreement and the other Loan Documents constitute the
sole agreement of the parties with respect to the subject matter hereof and
thereof and supersede all oral negotiations and prior writings with respect to
the subject matter hereof and thereof.

 

11.15. Limitation on Liability; Waiver of Punitive Damages. EACH OF THE PARTIES
HERETO, INCLUDING AGENT AND BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY
JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY
BETWEEN OR AMONG THEM (A “DISPUTE”) THAT MAY ARISE OUT OF OR BE IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR
DOCUMENT BETWEEN OR AMONG THEM OR THE INDEBTEDNESS AND OBLIGATIONS EVIDENCED
HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE
LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2)
PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY
RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE
IN THE FUTURE IN CONNECTION WITH ANY DISPUTE, WHETHER THE DISPUTE IS RESOLVED BY
ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE.

 

11.16. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER
BY EXECUTION HEREOF AND AGENT AND EACH BANK BY ACCEPTANCE HEREOF, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY

 

26

--------------------------------------------------------------------------------

PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO
ENTER INTO AND ACCEPT THIS AGREEMENT. EACH OF THE PARTIES AGREES THAT THE TERMS
HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF
DISPUTES BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER
DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO OR
BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS AGREEMENT.

 

11.17. No Novation; Ratification. The Notes provide that Indebtedness
outstanding under the Original Agreement and Notes as therein defined, to the
extent owed to the Banks, shall continue in full force and effect as obligations
under the Notes and nothing herein shall be deemed a novation thereof. The
security interests of the Agent under the 1999 Security Agreement shall continue
to secure the Indebtedness hereunder and nothing herein shall impair any
priority currently benefiting the Agent or Banks.

 

11.18 Other Provisions. Any other or additional terms and conditions set forth
in Exhibit 11.14 (if any) are hereby incorporated herein.

 

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

 

[signatures on separate pages]

 

 

27

--------------------------------------------------------------------------------

SIGNATURE PAGE TO

REVOLVING CREDIT AND SECURITY AGREEMENT

 

 

WACHOVIA BANK, NATIONAL

ASSOCIATION, as Agent for Banks

 

By:

   

--------------------------------------------------------------------------------

Its ___________________________ President

 

 

WACHOVIA BANK, NATIONAL

ASSOCIATION

 

By:

   

--------------------------------------------------------------------------------

Its ___________________________ President

 

SOUTHTRUST BANK

 

By:

   

--------------------------------------------------------------------------------

Its ___________________________ President

 

SRI/SURGICAL EXPRESS, INC.

 

By:

   

--------------------------------------------------------------------------------

Its ___________________________ President

 

 

28

--------------------------------------------------------------------------------

EXHIBITS

 

(If any exhibit is omitted, the information called for therein

shall be considered “None” or “Not Applicable”)

 

Exhibit

--------------------------------------------------------------------------------

           

Section Reference

--------------------------------------------------------------------------------

  

Title

--------------------------------------------------------------------------------

    

  1

           

1 (“Definitions”)

  

Definitions

    

  1.1A

           

1.1 (“Collateral”)

  

Additional Collateral

    

  1.1C

           

1.1 (“Permitted Debt”)

  

Permitted Debt

    

  1.1D

           

1.1 (“Permitted Liens”)

  

Permitted Liens

    

11.14

           

11.14 (“Other Provisions”)

  

Additional Terms

                              

 

 

SCHEDULES

 

Schedules referred to in the text of this Agreement are contained in a separate
Disclosure Schedule for Credit Agreement delivered by the Borrower to the Bank
and Agent, which Schedules Borrower represented to be true, complete and
correct.

 

29

--------------------------------------------------------------------------------

EXHIBIT 1

 

Definitions

 

1.1   Defined Terms:

 

“1999 Security Agreement” means the Security Agreement dated as of February 24,
1999 by and among the Borrower, the Agent and others, as amended by First
Amendment to Pledge Agreement and Security Agreement dated as of June 27, 2000
and by Second Amendment to Security Agreement of even date herewith, and as it
may hereafter be amended or modified.

 

“Accession” has the meaning set forth in the Code.

 

“Account” has the meaning set forth in the Code, together with any guaranties,
letters of credit, Letter-of-Credit Right, and other security therefor,
including Supporting Obligations.

 

“Account Debtor” means a Person who is obligated under any Account, Chattel
Paper, General Intangible or Instrument.

 

“Advance” means an advance of proceeds of the Loan to Borrower or the issuance
of a letter of credit or bankers acceptance on behalf of Borrower pursuant to
this Agreement.

 

“Advance Date” means the date on which an Advance is made.

 

“Advance Request” means the written request for an Advance under the Loan and
shall also include presentments triggering an automatic Advance under the
Services Agreement and telephonic requests as described in the Notes.

 

“Affiliate” of a Person means (a) any Person directly or indirectly owning 5% or
more of the voting stock or rights of such named Person or of which the named
Person owns 5% or more of such voting stock or rights; (b) any Person
controlling, controlled by or under common control with such named Person; (c)
any officer, director or employee of such named Person or any Affiliate of the
named Person; and (d) any family member of the named Person or any Affiliate of
such named Person.

 

“Applicable Margin for Commitment Fee” has the meaning set forth in the fourth
column of the following table:

 

Tier

Levels

--------------------------------------------------------------------------------

 

Consolidated

Leverage Ratio

--------------------------------------------------------------------------------

 

Applicable Margin for

LIBOR Loans or

LOCs

(basis points)

--------------------------------------------------------------------------------

 

Applicable

Margin for

Commitment

(Unused) Fee

(basis points)

--------------------------------------------------------------------------------

I

  <1.25:1.00   200 bps   25 bps

II

  ³ 1.25:1.00 < 1.75:1.00   225 bps   25 bps

III

  ³ 1.75:1.00 < 2.25:1.00   260 bps   30 bps

IV

  ³ 2.25:1.00 £ 2.50:1.00   300 bps   35 bps

 

The Applicable Margin for LIBOR Loans or LOCs and Applicable Margin for
Commitment Fee (“Applicable Margins”) shall be determined and adjusted on the
first day of the fiscal quarter

--------------------------------------------------------------------------------

(each a “Calculation Date”) following the date on which the Agent receives the
financial statements required by Section 5.6(a) or 5.6(b), as applicable, and
the related compliance certificate provided by Borrower in accordance with the
provisions of Section 5.6(c); provided, however, that if Borrower fails to
provide such financial statements and compliance certificate to the Agent as
required by and within the time limits set forth in Section 5.6, the Applicable
Margin from the date of such failure shall be based on Tier Level IV until five
Business Days after an appropriate compliance certificate is provided, whereupon
the Tier Level shall be determined by the then current Consolidated Leverage
Ratio until the next Calculation Date. Except as set forth above, each
Applicable Margin shall be effective from one Calculation Date until the next
Calculation Date.

 

“Applicable Margin for LIBOR Loans or LOCs” means margin as set forth in the
third column of the table above under the definition of “Applicable Margin for
Commitment.”

 

“Business Day” means a weekday on which commercial banks are open for business
in Tampa, Florida.

 

“Chattel Paper” has the meaning set forth in the Code, including Electronic
Chattel Paper, together with any guaranties, letters of credit, Letter-of-Credit
Right, and other security therefor, including Supporting Obligations.

 

“Code” means the Uniform Commercial Code presently and hereafter enacted in the
Jurisdiction. Any term used in this Agreement and in any financing statement
filed in connection herewith which is defined in the Code and not otherwise
defined in this Agreement or in any other Loan Document has the meaning given to
the term in the Code.

 

“Collateral” means all property of each Borrower, wherever located and whether
now owned by Borrower or hereafter acquired, including, but not limited to: (a)
all Inventory; (b) all General Intangibles; (c) all Accounts; (d) all Chattel
Paper; (e) all Instruments and Documents and any other instrument or intangible
representing payment for goods or services; (f) all Equipment; (g) all
Investment Property; (h) all Deposit Accounts and funds on deposit therein,
including, but not limited to, the Collections Account or funds otherwise on
deposit with or under the control of Agent, any Bank or its agents or
correspondents; (i) all Fixtures; (j) all “Collateral” as defined in the 1999
Security Agreement; and (k) all parts, replacements, substitutions, profits,
products, Accessions and cash and non-cash proceeds and Supporting Obligations
of any of the foregoing (including insurance proceeds payable by reason of loss
or damage thereto) in any form and wherever located. Collateral shall include
all written or electronically recorded books and records relating to any such
Collateral and other rights relating thereto. Collateral shall also include all
property subject to the Mortgages.

 

“Collections Account” means the controlled disbursement account maintained by
Borrower with Agent or any Bank to which collections, deposits and other
payments on or with respect to Collateral may be made pursuant to the terms
hereof, to which only Agent shall have access.

 

“Commitment Percentage” means, as to each Bank, fifty percent (50%).

 

“Consolidated Leverage Ratio” is defined in Section 7.1(a).

 

“Debt” means all liabilities of a Person as determined under GAAP and all
obligations which such Person has guaranteed or endorsed or is otherwise
secondarily or jointly liable for,

 

Bank:                                             

        Borrower:                                             

 

2

--------------------------------------------------------------------------------

and shall include, without limitation (a) all obligations for borrowed money or
purchased assets, (b) obligations secured by assets whether or not any personal
liability exists, (c) the capitalized amount of any capital or finance lease
obligations, (d) the unfunded portion of pension or benefit plans or other
similar liabilities, (e) obligations as a general partner, (f) contingent
obligations pursuant to guaranties, endorsements, letters of credit and other
secondary liabilities, (g) obligations for deposits, and (h) obligations under
swap agreements, as defined in 11 U.S.C. § 101.

 

“Default Rate” means the highest lawful rate of interest per annum specified in
any Note to apply after a default under such Note or, if no such rate is
specified, a rate equal to the lesser of (a) the Prime Rate plus two percent
(2%) per annum and (b) the highest rate of interest allowed by law.

 

“Deposit Account” has the meaning set forth in the Code.

 

“Dispute” has the meaning set forth in Section 11.15.

 

“Electronic Chattel Paper” has the meaning set forth in the Code.

 

“Environmental Laws” means, collectively the following acts and laws, as
amended: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Superfund Amendments and Reauthorization Act of 1986; the
Resource Conservation and Recovery Act; the Toxic Substances Act; the Clean
Water Act; the Clean Air Act; the Oil Pollution and Hazardous Substances Control
Act of 1978; and any other “Superfund” or “Superlien” law or any other federal,
state or local statute, law, ordinance, code, rule, regulation, order or decree
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect.

 

“Equipment” has the meaning set forth in the Code.

 

“Event of Default” means any event specified as such in Section 8.1 hereof
(“Events of Default”), provided that there shall have been satisfied any
requirement in connection with such event for the giving of notice or the lapse
of time, or both; “Default” or “default” means any of such events, whether or
not any such requirement for the giving of notice or the lapse of time or the
happening of any further condition, event or act shall have been satisfied.

 

“Fixtures” has the meaning set forth in the Code.

 

“GAAP” means generally accepted accounting principles as in effect in the United
States from time to time.

 

“General Intangibles” has the meaning set forth in the Code, together with any
guaranties, letters of credit, Letter-of-Credit Right and other security
therefor, including Supporting Obligations.

 

“Indebtedness” means all obligations now or hereafter owed to any Bank, by
Borrower hereunder or under the Notes or other Loan Documents including the
Loan, including, without limitation, amounts owed or to be owed under the terms
of the Loan Documents, or arising out of the transactions described therein,
including, without limitation, the Loan, sums advanced to pay overdrafts on any
account maintained by Borrower with Agent, reimbursement obligations

 

Bank:                                             

        Borrower:                                             

 

3

--------------------------------------------------------------------------------

for outstanding letters of credit issued for the account of Borrower or its
Affiliates, amounts paid by any Bank under letters of credit or drafts accepted
by such Bank for the account of Borrower or its Subsidiaries, together with all
interest accruing thereon, all existing and future obligations under any swap
agreements as defined in 11 U.S.C. § 101 between any Bank or any affiliate of
such Bank and Borrower whenever executed, all fees, all costs of collection,
attorneys’ fees and expenses of or advances by Bank which Bank pays or incurs in
discharge of obligations of Borrower or to inspect, repossess, protect,
preserve, store or dispose of any Collateral, whether such amounts are now due
or hereafter become due, direct or indirect and whether such amounts due are
from time to time reduced or entirely extinguished and thereafter re-incurred.

 

“Instrument” has the meaning set forth in the Code.

 

“Interest Period” shall have the meaning set forth in the Notes.

 

“Inventory” has the meaning set forth in the Code.

 

“Item” means any “item” as defined in Section 4-104 of the Code, and shall also
mean and include checks, drafts, money orders or other media of payment.

 

“Jurisdiction” means the State of Florida.

 

“Letter-of-Credit Right” has the meaning set forth in the Code.

 

“LIBOR-Based Rate” has the meaning set forth in the Notes.

 

“LIBOR Market Index Based Rate” shall have the meaning described in the Note
issued to Wachovia.

 

“LIBOR Tranche” means an Advance under a Note as to which the LIBOR-Based Rate
applies.

 

“Lien” means any mortgage, pledge, statutory lien or other lien arising by
operation of law, security interest, trust arrangement, security deed, financing
lease, collateral assignment or other encumbrance, conditional sale or title
retention agreement, or any other interest in property designed to secure the
repayment of Indebtedness, whether arising by agreement or under any statute or
law or otherwise.

 

“Loan” means a revolving loan from a Bank identified in Section 2.1 hereof.

 

“Loan Documents” means this Agreement, any other Security Agreements, any
agreement relating to letters of credit, any Note, any Guaranty Agreement, the
Advance Requests, UCC-1 financing statements, and all other documents and
instruments now or hereafter evidencing, describing, guaranteeing or securing
the Indebtedness contemplated hereby or delivered in connection herewith, as
they may be modified, amended, extended, renewed or substituted from time to
time, but does not include swap agreements (as defined in 11 U.S.C. § 101).

 

“LOC Issuer” has the meaning set forth in Section 2.9.

 

“Material Adverse Effect” means any (i) material adverse effect upon the
validity, performance or enforceability of any of the Loan Documents or any of
the transactions

 

Bank:                                             

        Borrower:                                             

 

4

--------------------------------------------------------------------------------

contemplated hereby or thereby, (ii) material adverse effect upon the
properties, business, prospects or condition (financial or otherwise) of
Borrower and/or any other Person obligated under any of the Loan Documents, or
(iii) material adverse effect upon the ability of Borrower or any other Person
to fulfill any obligation under any of the Loan Documents.

 

“Maximum Loan Amount” means $30,000,000.

 

“Net Cash Position” shall have the meaning set forth in Wachovia’s Services
Agreement.

 

“Note” or “Notes” shall have the meaning set forth in Section 2.2 and any other
promissory note now or hereafter evidencing any Indebtedness, and all
modifications, extensions and renewals thereof.

 

“Perfection Certificate” means a certificate executed by the chief executive
officer and chief legal officer of Borrower, substantially in the form of
Schedule 3.1 hereto.

 

“Permitted Debt” means (a) the Indebtedness; and (b) any other Debt listed on
Exhibit 1.1C hereto (if any) and any extensions, renewals, replacements,
modifications and refundings of any such Debt if, and to the extent, permitted
by Exhibit 1.1C; provided, however, that the principal amount of such Debt may
not be increased from the amount shown as outstanding on such exhibit.

 

“Permitted Liens” means (a) Liens securing the Indebtedness; (b) Liens for taxes
and other statutory Liens, landlord’s Liens and similar Liens arising out of
operation of law (provided they are subordinate to Agent’s Liens on the
Collateral) so long as the obligations secured thereby are not past due or are
being contested and the proceedings contesting such obligations have the effect
of preventing the forfeiture or sale of the property subject to such Lien; (c)
Liens described on Exhibit 1.1D hereto (if any), provided, however, that no debt
not now secured by such Liens shall become secured by such Liens hereafter and
such Liens shall not encumber any other assets.

 

“Person” means any natural person, corporation, unincorporated organization,
trust, joint-stock company, joint venture, association, company, limited or
general partnership, any government or any agency or political subdivision of
any government, or any other entity or organization.

 

“Prime Rate” shall mean the rate announced from time to time by Agent as its
prime rate, which is one of several interest rate indexes used by the Agent. The
Agent lends at rates, above or below its prime rate and such rate is not the
lowest or more favorable rate offered by the Agent.

 

“Regulated Materials” means any hazardous, toxic or dangerous waste, substance
or material, the generation, handling, storage, disposal, treatment or emission
of which is subject to any Environmental Law.

 

“Revolving Credit Period” means the period from and including the date of this
Agreement to but not including the Termination Date.

 

“Secured Parties” shall have the meaning set forth in the 1999 Security
Agreement.

 

“Secured Obligations” has the meaning set forth in the 1999 Security Agreement.

 

Bank:                                             

        Borrower:                                             

 

5

--------------------------------------------------------------------------------

“Security Agreements” means this Agreement as it relates to a security interest
in the Collateral, the 1999 Security Agreement and any other mortgage
instrument, security agreement or similar instrument now or hereafter executed
by Borrower or other Person granting Bank a security interest in any Collateral
to secure the Indebtedness.

 

“Services Agreement” means, as to Wachovia, any Sweep Plus Loan & Investment
Services Agreement or other similar agreement between Wachovia and Borrower, and
any modifications thereto.

 

“Solvent” means, as to any Person, that such Person has capital sufficient to
carry on its business and transactions in which it is currently engaged and all
business and transactions in which it is about to engage, is able to pay its
debts as they mature, and has assets having a fair valuation greater than its
liabilities, at fair valuation.

 

“Subsidiary” means any corporation, partnership or other entity in which
Borrower, directly or indirectly, owns more than fifty percent (50%) of the
stock, capital or income interests, or other beneficial interests, or which is
effectively controlled by such Person.

 

“Supporting Obligation” has the meaning set forth in the Code.

 

“Termination Date” means June 30, 2006, or such later date as may be designated
in writing by Banks.

 

1.2    Financial Terms. All financial terms used herein shall have the meanings
assigned to them under GAAP unless another meaning shall be specified.

 

Bank:                                             

        Borrower:                                             

 

6

--------------------------------------------------------------------------------

EXHIBIT 1.1A

 

Permitted Debt

 

None

 

Bank:                                             

        Borrower:                                             

--------------------------------------------------------------------------------

EXHIBIT 1.1C

 

Permitted Debt

 

The following shall be additional Permitted Debt:

 

1.    Debt not exceeding $750,000 in aggregate principal amount at any time
outstanding for Borrower and all Subsidiaries, incurred to purchase Equipment,
provided that the amount of such Debt shall not at any time exceed the purchase
price of the Equipment purchased.

 

2.    Debt representing hedging liabilities owed to any Bank, if any.

 

3.    Debt payable to suppliers and other trade creditors in the ordinary course
of business on ordinary and customary trade terms and which is not past due.

 

4.    Debt of any Subsidiary to Borrower or another Subsidiary.

 

5.    Endorsement of checks for collection in the ordinary course of business.

 

6.    Existing Debt owed to GE Capital under Equipment leases.

 

7.    $4,500,000 Industrial Development Revenue Bonds, Taxable Series 1999
(Chattanooga, Tennessee) and related letters of credit obligations.

 

8.    $5,200,000 Taxable Variable Rate Demand Bonds, Series 1999 (Stockton,
California) and related letters of credit obligations.

 

9.    Existing Debt for Capital Lease (Corporate Office facility Racetrack
Road).

 

Bank:                                             

        Borrower:                                             

--------------------------------------------------------------------------------

EXHIBIT 1.1D

 

Permitted Liens

 

The following shall be additional Permitted Liens:

 

1.    Deposits made in the ordinary course of business in connection with
workers’ compensation, unemployment insurance, social security and similar laws.

 

2.    Attachment, judgment and other similar non-tax Liens arising in connection
with court proceedings but only if and for so long as (a) the execution or
enforcement of such Liens is and continues to be effectively stayed and bonded
on appeal, (b) the validity and/or amount of the claims secured thereby are
being actively contested in good faith by appropriate legal proceedings and (c)
such Liens do not, in the aggregate, materially detract from the value of the
assets of the Person whose assets are subject to such Lien or materially impair
the use thereof in the operation of such Person’s business.

 

3.    Liens securing Permitted Debt incurred solely for the purpose of financing
the acquisition or lease of equipment or real property, provided that such Lien
does not secure more than the purchase price of such equipment or real property
and does not encumber property other than the purchased property.

 

4.    Liens securing Permitted Debt described in Items 7 and 8 of Exhibit 1.1C.

 

Bank:                                             

        Borrower:                                             

 

--------------------------------------------------------------------------------

EXHIBIT 11.14

 

Additional Terms

 

None

 

Bank:                                             

        Borrower: