EXHIBIT 10.1
 
 
 
 
REVOLVING CREDIT AND SECURITY AGREEMENT
 
 
 
 
between
 
 
 
 
WOMEN FIRST HEALTHCARE, INC.
 
 
 
 
and
 
 
 
 
CAPITALSOURCE FINANCE LLC
 
 
 
 
Dated as of
January 21, 2003
 

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REVOLVING CREDIT AGREEMENT
 
TABLE OF CONTENTS
 

              
Page
I.
  
DEFINITIONS
  
1
    
1.1
  
General Terms
  
1
II.
  
ADVANCES, PAYMENT AND INTEREST
  
1
    
2.1
  
The Revolving Facility
  
1
    
2.2
  
The Note; Maturity
  
2
    
2.3
  
Interest
  
2
    
2.4
  
Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate
  
2
    
2.5
  
Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox
  
3
    
2.6
  
Promise to Pay; Manner of Payment
  
4
    
2.7
  
Repayment of Excess Advances
  
4
    
2.8
  
Payments by Lender
  
4
    
2.9
  
Grant of Security Interest; Collateral
  
5
    
2.10
  
Collateral Administration
  
5
    
2.11
  
Power of Attorney
  
7
III.
  
FEES AND OTHER CHARGES
  
7
    
3.1
  
Commitment Fee
  
7
    
3.2
  
Unused Line Fee
  
7
    
3.3
  
Collateral Management Fee
  
7
    
3.4
  
Early Termination Fees
  
8
    
3.5
  
Computation of Fees; Lawful Limits
  
8
    
3.6
  
Default Rate of Interest
  
8
IV.
  
CONDITIONS PRECEDENT
  
8
    
4.1
  
Conditions to Initial Advance and Closing
  
8
    
4.2
  
Conditions to Each Advance
  
10
V.
  
REPRESENTATIONS AND WARRANTIES
  
10
    
5.1
  
Organization and Authority
  
11
    
5.2
  
Loan Documents
  
11
    
5.3
  
Subsidiaries, Capitalization and Ownership Interests
  
11
    
5.4
  
Properties
  
11
    
5.5
  
Other Agreements
  
12
    
5.6
  
Litigation
  
12
    
5.7
  
Hazardous Materials
  
12
    
5.8
  
Tax Returns; Governmental Reports
  
12
    
5.9
  
Financial Statements and Reports
  
13
    
5.10
  
Compliance with Law
  
13
    
5.11
  
Intellectual Property
  
13
    
5.12
  
Licenses and Permits; Labor
  
13
    
5.13
  
No Default
  
14
    
5.14
  
Disclosure
  
14
    
5.15
  
Existing Indebtedness; Investments, Guarantees and Certain Contracts
  
14
    
5.16
  
Other Agreements
  
14
    
5.17
  
Insurance
  
14
    
5.18
  
Names; Location of Offices, Records and Collateral
  
15

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5.19
  
Non-Subordination
  
15
    
5.20
  
Accounts
  
15
    
5.21
  
Survival
  
16
VI.
  
AFFIRMATIVE COVENANTS
  
16
    
6.1
  
Financial Statements, Reports and Other Information
  
16
    
6.2
  
Payment of Obligations
  
17
    
6.3
  
Conduct of Business and Maintenance of Existence and Assets
  
17
    
6.4
  
Compliance with Legal and Other Obligations
  
17
    
6.5
  
Insurance
  
18
    
6.6
  
True Books
  
18
    
6.7
  
Inspection; Periodic Audits
  
18
    
6.8
  
Further Assurances; Post Closing
  
18
    
6.9
  
Payment of Indebtedness
  
19
    
6.10
  
Lien Searches
  
19
    
6.11
  
Use of Proceeds
  
19
    
6.12
  
Collateral Documents; Security Interest in Collateral
  
19
    
6.13
  
Right of First Refusal
  
20
    
6.14
  
Taxes and Other Charges
  
20
VII.
  
NEGATIVE COVENANTS
  
20
    
7.1
  
Financial Covenants
  
21
    
7.2
  
Permitted Indebtedness
  
21
    
7.3
  
Permitted Liens
  
21
    
7.4
  
Investments; New Facilities or Collateral; Subsidiaries
  
22
    
7.5
  
Dividends; Redemptions
  
22
    
7.6
  
Transactions with Affiliates
  
23
    
7.7
  
Charter Documents; Fiscal Year; Dissolution; Use of Proceeds
  
23
    
7.8
  
Truth of Statements
  
23
VIII.
  
EVENTS OF DEFAULT
  
24
IX.
  
RIGHTS AND REMEDIES AFTER DEFAULT
  
26
    
9.1
  
Rights and Remedies
  
26
    
9.2
  
Application of Proceeds
  
27
    
9.3
  
Rights of Lender to Appoint Receiver
  
27
    
9.4
  
Rights and Remedies not Exclusive
  
27
X.
  
WAIVERS AND JUDICIAL PROCEEDINGS
  
27
    
10.1
  
Waivers
  
28
    
10.2
  
Delay; No Waiver of Defaults
  
28
    
10.3
  
Jury Waiver
  
28
XI.
  
EFFECTIVE DATE AND TERMINATION
  
28
    
11.1
  
Effectiveness and Termination
  
28
    
11.2
  
Survival
  
29
XII.
  
MISCELLANEOUS
  
29
    
12.1
  
Governing Law; Jurisdiction; Service of Process; Venue
  
29
    
12.2
  
Successors and Assigns; Participations; New Lenders
  
30
    
12.3
  
Application of Payments
  
31
    
12.4
  
Indemnity
  
31
    
12.5
  
Notice
  
31

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12.6
  
Severability; Captions; Counterparts; Facsimile Signatures
  
32
    
12.7
  
Expenses
  
32
    
12.8
  
Entire Agreement
  
32
    
12.9
  
Lender Approvals
  
33
    
12.10
  
Confidentiality and Publicity
  
33
    
1)
  
Minimum Outstanding Balance on the Revolving Facility
  
1
    
2)
  
Minimum EBITDA
  
1
    
3)
  
Fixed Charge Coverage Ratio (EBITDA/Fixed Charges)
  
1
    
4)
  
Net Worth
  
2
    
5)
  
Capital Expenditures and Operating Leases
  
2

 

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CREDIT AND SECURITY AGREEMENT
 
THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the “Agreement”) dated as of
January 21, 2003, is entered into between WOMEN FIRST HEALTHCARE, INC., a
Delaware corporation (“Borrower”), and CAPITALSOURCE FINANCE LLC, a Delaware
limited liability company (“Lender”).
 
WHEREAS, Borrower has requested that Lender make available to Borrower a
revolving credit facility (the “Revolving Facility”) in a maximum principal
amount at any time outstanding of up to FIVE MILLION AND NO/100 Dollars
($5,000,000) (the “Facility Cap”), the proceeds of which shall be used by
Borrower for general corporate purposes and working capital needs in connection
with its pharmaceutical marketing and sales business; and
 
WHEREAS, Lender is willing to make the Revolving Facility available to Borrower
upon the terms and subject to the conditions set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Borrower and Lender hereby agree as follows:
 
I.
 
DEFINITIONS

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

 
2.1      The Revolving Facility
 
(a)  Subject to the provisions of this Agreement, Lender shall make Advances to
Borrower under the Revolving Facility from time to time during the Term,
provided that notwithstanding any other provision of this Agreement, the
aggregate amount of all Advances at any one time outstanding under the Revolving
Facility shall not exceed either of (a) the Facility Cap and (b) the
Availability. The Revolving Facility is a revolving credit facility, which may
be drawn, repaid and redrawn, from time to time as permitted under this
Agreement. Any determination as to whether there is availability within the
Borrowing Base for Advances shall be made by Lender in its Permitted Discretion
and is final and binding upon Borrower. Unless otherwise permitted by Lender,
each Advance shall be in an amount of at least $1,000. Subject to the provisions
of this Agreement, Borrower may request Advances under the Revolving Facility up
to and including the value, in U.S. Dollars, of eighty-five percent (85%) of the
Borrowing Base minus, if applicable, amounts reserved pursuant to this Agreement
(such calculated amount being referred to herein as the “Availability”).
Advances under the Revolving Facility

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automatically shall be made for the payment of interest on the Note and other
Obligations on the date when due to the extent available and as provided for
herein.
 
(b)  Lender has established the above-referenced advance rate for Availability
and, in its Permitted Discretion, may further adjust the Availability and such
advance rate by applying percentages (known as “liquidity factors”) to Eligible
Receivables based upon Borrower’s actual recent collection history in a manner
consistent with Lender’s underwriting practices and procedures, including
without limitation Lender’s review and analysis of, among other things,
Borrower’s historical returns, rebates, discounts, credits and allowances
(collectively, the “Dilution Items”). Such liquidity factors and the advance
rate for Availability may be adjusted by Lender throughout the Term as warranted
by Lender’s underwriting practices and procedures in its Permitted Discretion.
Also, Lender shall have the right to establish from time to time, in its
Permitted Discretion, reserves against the Borrowing Base, which reserves shall
have the effect of reducing the amounts otherwise eligible to be disbursed to
Borrower under the Revolving Facility pursuant to this Agreement. Lender will
use commercially reasonable efforts to notify Borrower of such adjustments and
reserves at least three (3) Business Days prior to their implementation;
provided, however, that Lender need not provide such notification if a Default
or an Event of Default has occurred and is continuing, and any failure of Lender
to provide such notice shall not negate the effectiveness or application of any
such adjustments and/or reserves.
 
2.2      The Note; Maturity
 
(a)  All Advances under the Revolving Facility shall be evidenced by the Note,
payable to the order of Lender, duly executed and delivered by Borrower and
dated the Closing Date, evidencing the aggregate indebtedness of Borrower to
Lender resulting from Advances under the Revolving Facility from time to time.
Lender hereby is authorized, but is not obligated, to enter the amount of each
Advance under the Revolving Facility and the amount of each payment or
prepayment of principal or interest thereon in the appropriate spaces on the
reverse of or on an attachment to the Note. Lender will account to Borrower
monthly with a statement of Advances under the Revolving Facility and charges
and payments made pursuant to this Agreement, and in the absence of manifest
error, such accounting rendered by Lender shall be deemed final, binding and
conclusive unless Lender is notified by Borrower in writing to the contrary
within thirty (30) calendar days of Receipt of each accounting, which notice
shall be deemed an objection only to items specifically objected to therein.
 
(b)  All amounts outstanding under the Note and other Obligations shall be due
and payable in full, if not earlier in accordance with this Agreement, on the
earlier of (i) the occurrence of an Event of Default if required pursuant hereto
or Lender’s demand upon an Event of Default, and (ii) the last day of the Term
(such earlier date being the “Revolving Facility Maturity Date”).
 
2.3      Interest
 
Interest on outstanding Advances under the Note shall be payable monthly in
arrears on the first day of each calendar month at an annual rate of Prime Rate
plus 1.25%, provided, however, that, notwithstanding any provision of any Loan
Document, the interest on outstanding Advances under the Note shall be not less
than 6.0%, in each case calculated on the basis of a 360-day year and for the
actual number of calendar days elapsed in each interest calculation period.
Interest accrued on each Advance under the Note shall be due and payable on the
first day of each calendar month, in accordance with the procedures provided for
in Section 2.5 and Section 2.9, commencing February 1, 2003, and continuing
until the later of the expiration of the Term and the full performance and
irrevocable payment in full in cash of the Obligations and termination of this
Agreement.
 
2.4      Revolving Facility Disbursements; Requirement to Deliver Borrowing
Certificate

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(a)  So long as no Default or Event of Default shall have occurred and be
continuing, Borrower may give Lender irrevocable written notice requesting an
Advance under the Revolving Facility by delivering to Lender not later than
11:00 a.m. (New York City time) at least two (2) but not more than four (4)
Business Days before the proposed borrowing date of such requested Advance (the
“Borrowing Date”), a completed Borrowing Certificate and relevant supporting
documentation satisfactory to Lender, which shall (i) specify the proposed
Borrowing Date of such Advance which shall be a Business Day, (ii) specify the
principal amount of such requested Advance, (iii) certify the matters contained
in Section 4.2.
 
(b)  Each time a request for an Advance is made that would increase the balance
of the outstanding Advances to an amount greater than $1,500,000, and, in any
event and regardless of whether an Advance is being requested, within five (5)
Business Days after the end of each month during the Term (and more frequently
if Lender shall so request) until the Obligations are indefeasibly paid in cash
in full and this Agreement is terminated, Borrower shall deliver to Lender a
Borrowing Certificate accompanied by a separate detailed aging and categorizing
of Borrower’s accounts receivable and accounts payable and such other supporting
documentation with respect to the figures and information in the Borrowing
Certificate as Lender shall reasonably request from a credit or security
perspective or otherwise.
 
(c)  Lender shall also make additional Advances to Borrower without the
requirement of a Borrowing Certificate (“Automatic Advance”) after Lender has
received collections in the Concentration Account. The respective amounts of
such Automatic Advances shall be that amount, if any, necessary to make the
total outstanding Advances under the Revolving Facility equal to $1,500,000.
Lender will use its best efforts to make such Automatic Advances on a Business
Day that is within two (2) Business Days of the receipt of collections in the
Concentration Account by the Lender. Borrower hereby represents that any change
in the Borrowing Base that would reduce Availability to below $1,500,000 will be
reported to Lender within two (2) Business Days. Borrower further represents
that all representations and warranties made in the Borrowing Certificate most
recently submitted prior to an Automatic Advance shall apply to such Automatic
Advance and that Borrower shall notify Lender of any changes thereto.
 
(d)  On each Borrowing Date, Borrower irrevocably authorizes Lender to disburse
the proceeds of the requested Advance to the appropriate Borrower’s account(s)
as set forth on Schedule 2.4, in all cases for credit to the appropriate
Borrower (or to such other account as to which the appropriate Borrower shall
instruct Lender) via Federal funds wire transfer no later than 4:00 p.m. (New
York City time).
 
2.5      Revolving Facility Collections; Repayment; Borrowing Availability and
Lockbox
 
Borrower shall maintain one or more lockbox accounts (individually and
collectively, the “Lockbox Account”) with one or more banks acceptable to Lender
in its Permitted Discretion (each, a “Lockbox Bank”), and shall execute with
each Lockbox Bank one or more agreements acceptable to Lender in it Permitted
Discretion (individually and collectively, the “Lockbox Agreement”), and such
other agreements related thereto as Lender may require. All collections of
Borrower’s respective Accounts and all other cash payments received by Borrower
will be paid and delivered directly from Account Debtors and other Persons into
the appropriate Lockbox Account. The Lockbox Agreements shall provide that the
Lockbox Banks immediately will transfer all funds paid into the Lockbox Accounts
into a depository account or accounts maintained by Lender or an Affiliate of
Lender at such bank as Lender may communicate to Borrower from time to time (the
“Concentration Account”). Notwithstanding and without limiting any other
provision of any Loan Document, Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to the Lockbox Agreement

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and this Section 2.5 in such order and manner as determined by Lender. To the
extent that any Accounts collections of Borrower or any other cash payments
received by Borrower are not sent directly to the appropriate Lockbox Account
but are received by Borrower or any of its Affiliates, such collections and
proceeds shall be held in trust for the benefit of Lender and immediately
remitted (and in any event within two (2) Business Days), in the form received,
to the appropriate Lockbox Account for immediate transfer to the Concentration
Account. All funds transferred to the Concentration Account for application to
the Obligations under the Revolving Facility shall be applied to reduce the
Obligations under the Revolving Facility, but, for purposes of calculating
interest hereunder, shall be subject to a five (5) Business Day clearance
period. If as the result of collections of Accounts and/or any other cash
payments received by Borrower pursuant to this Section 2.5 a credit balance
exists with respect to the Concentration Account, such credit balance shall not
accrue interest in favor of Borrower, but shall be available to the appropriate
Borrower in accordance with the terms of this Agreement. If applicable, at any
time prior to the execution of all or any of the Lockbox Agreements and
operation of all or any of the Lockbox Accounts, Borrower and its Affiliates
shall direct all collections or proceeds they receive on Accounts to the
accounts(s) and in the manner specified by Lender in its sole discretion.
 
2.6      Promise to Pay; Manner of Payment
 
Borrower absolutely and unconditionally promises to pay principal, interest and
all other amounts payable hereunder, or under any other Loan Document, without
any right of rescission and without any deduction whatsoever, including any
deduction for any setoff, counterclaim or recoupment, and notwithstanding any
damage to, defects in or destruction of the Collateral or any other event,
including obsolescence of any property or improvements. All payments made by
Borrower (other than payments automatically paid through Advances under the
Revolving Facility as provided herein), shall be made only by wire transfer on
the date when due, without offset or counterclaim, in U.S. Dollars, in
immediately available funds to such account as may be indicated in writing by
Lender to Borrower from time to time. Any such payment received after 2:00 p.m.
(New York City time) on the date when due shall be deemed received on the
following Business Day. Whenever any payment hereunder shall be stated to be due
or shall become due and payable on a day other than a Business Day, the due date
thereof shall be extended to, and such payment shall be made on, the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of payment of any interest (at the interest rate
then in effect during such extension) and/or fees, as the case may be.
 
2.7      Repayment of Excess Advances
 
Any balance of Advances under the Revolving Facility outstanding at any time in
excess of the lesser of the Facility Cap or the Availability shall be
immediately due and payable by Borrower without the necessity of any demand, at
the Payment Office, whether or not a Default or Event of Default has occurred or
is continuing and shall be paid in the manner specified in Section 2.9.
 
2.8      Payments by Lender
 
Should any amount required to be paid under any Loan Document be unpaid, such
amount may be paid by Lender, which payment shall be deemed a request for an
Advance under the Revolving Facility as of the date such payment is due, and
Borrower irrevocably authorizes disbursement of any such funds to Lender by way
of direct payment of the relevant amount, interest or Obligations. No payment or
prepayment of any amount by Lender or any other Person shall entitle any Person
to be subrogated to the rights of Lender under any Loan Document unless and
until the Obligations have been fully performed and paid irrevocably in cash and
this Agreement has been terminated. Any sums expended by Lender as a result of
Borrower’s or any Guarantor’s failure to pay, perform or comply with

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any Loan Document or any of the Obligations may be charged to Borrower’s account
as an Advance under the Revolving Facility and added to the Obligations.
 
2.9      Grant of Security Interest; Collateral
 
(a)  To secure the payment and performance of the Obligations, Borrower hereby
grants to Lender a continuing security interest in and Lien upon, and pledges to
Lender, all of its right, title and interest in and to the following
(collectively and each individually, the “Collateral”), which security interest
is intended to be a first priority security interest:
 
(i)  all of such Borrower’s present and future Accounts, other than Accounts
described in Sections (b) through (u) of the definition of Eligible Receivables
in Appendix A, now owned or hereafter acquired, and all Instruments and Chattel
Paper relating to or arising out of any of the foregoing;
 
(ii)   all Lockbox Accounts;
 
(iii)  all Books and Records, whether now owned or hereafter acquired; and
 
(iv)  any and all additions to any of the foregoing, and any and all
replacements and proceeds (including insurance proceeds) of any of the
foregoing.
 
(b)  Notwithstanding the foregoing provisions of this Section 2.9, such grant of
a security interest shall not extend to, and the term “Collateral” shall not
include, any asset, interest or property of Borrower to the extent that (i) such
asset, interest or property is not assignable or capable of being encumbered as
a matter of law or under the terms of any license or other agreement applicable
thereto (but solely to the extent that any such restriction shall be enforceable
under applicable law) without the consent of the licensor thereof or other
applicable party thereto, and (ii) such consent has not been obtained; provided,
however, that the foregoing grant of a security interest shall extend to, and
the term “Collateral” shall include, each of the following: (1) any and all
proceeds of any such asset, interest or property included in subclauses (i)
through (iv) of clause (a) that is otherwise excluded to the extent that the
assignment, pledge or encumbrance of such proceeds is not so restricted, and (2)
upon obtaining the consent of any such licensor or other applicable party with
respect to any such otherwise excluded asset, interest or property included in
subclauses (i) through (iv) of clause (a), such asset, interest or property, as
well as any and all proceeds thereof that might theretofore have been excluded
from such grant of a security interest and from the term “Collateral.”
 
(c)  Upon the execution and delivery of this Agreement, and upon the proper
filing of the necessary financing statements without any further action, Lender
will have a good, valid and perfected first priority Lien and security interest
in the Collateral (other than with respect to property or assets covered by
Permitted Liens), subject to no transfer or other restrictions or Liens of any
kind in favor of any other Person except for Permitted Liens. No financing
statement relating to any of the Collateral is on file in any public office
except those (i) on behalf of Lender, and/or (ii) in connection with Permitted
Liens.
 
2.10    Collateral Administration
 
(a)  All tangible Collateral (excluding Lockbox Accounts) will at all times be
kept by Borrower at the locations set forth on Schedule 5.18B hereto and shall
not, without thirty (30) calendar days prior written notice to Lender, be moved
therefrom, and in any case shall not be moved outside the continental United
States.

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(b)  Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit such records to Lender on such
periodic bases as Lender may reasonably request. In addition, if after the
Closing Date, Accounts of Borrower in an aggregate face amount in excess of
$25,000 become ineligible because they fall within one of the specified
categories of ineligibility set forth in the definition of Eligible Receivables,
Borrower shall notify Lender of such occurrence on the first Business Day
following such occurrence and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence. If requested by Lender, Borrower shall execute and
deliver to Lender formal written assignments of all of its Accounts that are
Eligible Receivables monthly as Lender may request, including all Accounts that
are Eligible Receivables created since the date of the last assignment, together
with copies of claims, invoices and/or other information related thereto. To the
extent that collections from such assigned accounts exceed the amount of the
Obligations, such excess amount shall not accrue interest in favor of Borrower,
but shall be promptly provided to Borrower (and in any event within two (2)
Business Days of Lender’s receipt).
 
(c)  Whether or not an Event of Default has occurred, any of Lender’s officers,
employees, representatives or agents shall have the right, at any time during
normal business hours, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to any
Accounts of Borrower. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude such verification process.
 
(d)  To expedite collection, Borrower shall endeavor in the first instance to
make collection of its Accounts for Lender. Lender shall have the right at all
times after the occurrence and during the continuance of an Event of Default (i)
to notify Account Debtors owing Accounts that are Eligible Receivables to
Borrower that their Accounts have been assigned to Lender and (ii) to collect
such Accounts directly in its own name and to charge its reasonable and actual
collection costs and expenses, including reasonable attorney’s fees, to
Borrower.
 
(e)  Prior to the Closing, as and when determined by Lender in its Permitted
Discretion, Lender will perform the searches described in clauses (i) and (ii)
below against Borrower and any Guarantor (the results of which are to be
consistent with Borrower’s representations): (i) UCC searches with the Secretary
of State and local filing offices, as necessary, of each jurisdiction where
Borrower and/or any Guarantor maintains its respective executive offices, a
place of business or assets; and (ii) judgment, federal tax lien and corporate
and partnership tax lien searches, in each jurisdiction searched under clause
(i) above. After the Closing, as and when determined by Lender in its Permitted
Discretion, Lender will perform the searches described in clauses (x) and (y)
below against Borrower and Guarantors (the results of which are to be consistent
with Borrower’s representations and warranties under this Agreement), not more
often than quarterly at Borrower’s expense, unless a Default or an Event of
Default has occurred and is continuing in which case such searches shall be
conducted as often as Lender deems reasonably appropriate at Borrower’s expense:
(x) UCC searches with the Secretary of State and local filing offices, as
necessary, of each jurisdiction where Borrower and/or any Guarantor is
incorporated or formed; and (y) judgment, federal tax lien and corporate and
partnership tax lien searches, in each jurisdiction where Borrower and/or any
Guarantor maintain its respective executive offices, a place of business or
assets.
 
(f)  Borrower (i) shall direct each Account Debtor to make payments to the
appropriate Lockbox Account, and Borrower hereby authorizes Lender, upon any
failure to send such notices and directions within ten (10) calendar days after
the date of this Agreement (or ten (10) calendar days after the Person becomes
an Account Debtor), to send any and all similar notices and directions to such
Account Debtors, (ii) shall provide prompt written notice to its current bank to
transfer all items, collections and remittances in the Lockbox Accounts to the
Concentration Account, (iii) after the occurrence and during the continuance of
an Event of Default and upon Lender’s request, shall provide

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prompt written notice to each Account Debtor that Lender has been granted a lien
and security interest in, upon and to all Accounts applicable to such Account
Debtor and (iv) shall do anything further that may be lawfully and reasonably
required by Lender to secure Lender and effectuate the intentions of the Loan
Documents. At Lender’s request, Borrower shall immediately deliver to Lender all
items for which Lender must receive possession to obtain a perfected security
interest and all notes, certificates, and documents of title, Chattel Paper,
warehouse receipts, Instruments, and any other similar instruments constituting
Collateral.
 
2.11    Power of Attorney
 
Lender is hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower (without requiring Lender to act as such) with full power
of substitution to do the following: (i) upon the occurrence and during the
continuance of an Event of Default, endorse the name of Borrower upon any and
all checks, drafts, money orders, and other instruments for the payment of money
that are payable to such Person and constitute collections on its Accounts that
are Eligible Receivables; (ii) upon the occurrence and during the continuance of
an Event of Default, execute in the name of such Person any financing
statements, schedules, assignments, instruments, documents, and statements that
it is or they are obligated to give Lender under any of the Loan Documents; and
(iii) do such other and further acts and deeds in the name of such Person that
Lender may deem necessary or desirable to enforce any Account that is an
Eligible Receivable or other Collateral or to perfect Lender’s security interest
or lien in any Collateral. In addition, if any such Person breaches its
obligation hereunder to direct payments of Accounts that are Eligible
Receivables or the proceeds of any other Collateral to the appropriate Lockbox
Account, Lender, as the irrevocably made, constituted and appointed true and
lawful attorney for such Person pursuant to this paragraph, may, by the
signature or other act of any of Lender’s officers or authorized signatories
(without requiring any of them to do so), direct any federal, state or private
payor or fiscal intermediary to pay proceeds of Accounts that are Eligible
Receivables or any other Collateral to the appropriate Lockbox Account.
 
III.    FEES AND OTHER CHARGES
 
3.1      Commitment Fee
 
On or before the Closing Date, Borrower shall pay to Lender 1.0% of the Facility
Cap as a nonrefundable commitment fee.
 
3.2      Unused Line Fee
 
Borrower shall pay to Lender monthly an unused line fee (the “Unused Line Fee”)
in an amount equal to 0.05% (per month) of the difference derived by subtracting
(i) the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month, from (ii) the Facility Cap. The Unused
Line Fee shall be payable monthly in arrears on the first day of each successive
calendar month (starting with the month in which the Closing Date occurs).
 
3.3      Collateral Management Fee
 
Borrower shall pay Lender as additional interest a monthly collateral management
fee (the “Collateral Management Fee”) equal to .083% per month calculated on the
basis of the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month. The Collateral Management Fee shall be
payable monthly in arrears on the first day of each successive calendar month
(starting with the month in which the Closing Date occurs).

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3.4      Early Termination Fees
 
If (i) Borrower terminates the Revolving Facility under Section 11.1 hereof,
(ii) Lender demands or Borrower is otherwise required to make payment in full of
the Revolving Facility and/or Obligations relating to the Revolving Facility
upon the occurrence of an Event of Default, (iii) Lender accelerates the Note,
as permitted by this Agreement, or (iv) any payment or reduction of the
outstanding balance of the Note and/or the Revolving Facility is made during a
bankruptcy, reorganization or other proceeding or is made pursuant to any plan
of reorganization or liquidation or any Debtor Relief Law (each, a “revolver
termination”), then, at the effective date of any such revolver termination,
Borrower shall pay Lender (in addition to the then outstanding principal,
accrued interest and other Obligations relating to the Revolving Facility
pursuant to the terms of this Agreement and any other Loan Document), as yield
maintenance for the loss of bargain and not as a penalty, an amount equal to the
applicable Minimum Termination Fee. Notwithstanding any other provisions hereof,
no Minimum Termination Fee shall be due if Borrower merges or enters into a
business combination with another person and the surviving person becomes
Borrower hereunder, or enters into economically similar financing arrangements
with Lender.
 
3.5      Computation of Fees; Lawful Limits
 
All fees hereunder shall be computed on the basis of a year of 360 days and for
the actual number of days elapsed in each calculation period, as applicable. In
no contingency or event whatsoever, whether by reason of acceleration or
otherwise, shall the interest and other charges paid or agreed to be paid to
Lender for the use, forbearance or detention of money hereunder exceed the
maximum rate permissible under applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If, due to
any circumstance whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall exceed any such limit, then,
the obligation to be so fulfilled shall be reduced to such lawful limit, and, if
Lender shall have received interest or any other charges of any kind which might
be deemed to be interest under applicable law in excess of the maximum lawful
rate, then such excess shall be applied first to any unpaid fees and charges
hereunder, then to unpaid principal balance owed by Borrower hereunder, and if
the then remaining excess interest is greater than the previously unpaid
principal balance, Lender shall promptly refund such excess amount to Borrower
and the provisions hereof shall be deemed amended to provide for such
permissible rate. The terms and provisions of this Section 3.5 shall control to
the extent any other provision of any Loan Document is inconsistent herewith.
 
3.6      Default Rate of Interest
 
Upon the occurrence and during the continuation of an Event of Default, the
Applicable Rate of interest in effect at such time with respect to the
Obligations shall be increased by 2.0% per annum (the “Default Rate”).
 
IV.    CONDITIONS PRECEDENT
 
4.1      Conditions to Initial Advance and Closing
 
The obligations of Lender to consummate the transactions contemplated herein and
to make the initial Advance under the Revolving Facility (the “Initial Advance”)
are subject to the satisfaction, in the Permitted Discretion of Lender, of the
following:
 
(a)  (i) Borrower shall have delivered to Lender (A) the Loan Documents to which
it is a party, each duly executed by an authorized officer of Borrower and the
other parties thereto, and (B) a

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Borrowing Certificate for the Initial Advance under the Revolving Facility
executed by an authorized officer of Borrower;
 
(b)  all in form and substance satisfactory to Lender in its Permitted
Discretion, Lender shall have received (i) a report of Uniform Commercial Code
financing statement, tax and judgment lien searches performed with respect to
Borrower in each jurisdiction determined by Lender in its sole discretion, and
such report shall show no Liens on the Collateral (other than Permitted Liens),
(ii) each document (including, without limitation, any Uniform Commercial Code
financing statement) required by any Loan Document or under law or requested by
Lender to be filed, registered or recorded to create in favor of Lender, a
perfected, first priority security interest upon the Collateral, and (iii) at
Lender’s request, evidence of each such filing, registration or recordation and
of the payment by Borrower of any necessary fee, tax or expense relating
thereto;
 
(c)  Lender shall have received (i) the Charter and Good Standing Documents, all
in form and substance acceptable to Lender, (ii) a certificate of the corporate
secretary or assistant secretary of Borrower dated the Closing Date, as to the
incumbency and signature of the Persons executing the Loan Documents, in form
and substance acceptable to Lender, and (iii) the written legal opinion of
counsel for Borrower, in form and substance satisfactory to Lender and its
counsel;
 
(d)  Lender shall have received a certificate of the chief financial officer
(or, in the absence of a chief financial officer, the chief executive officer)
of Borrower and any Guarantor, in form and substance satisfactory to Lender
certifying the solvency of such Person (each, a “Solvency Certificate”);
 
(e)  Lender shall have completed examinations, the results of which shall be
satisfactory in form and substance to Lender, of the Collateral, the financial
statements and the books, records, business, obligations, financial condition
and operational state of Borrower and any Guarantor, and each such Person shall
have demonstrated to Lender’s satisfaction that (i) its operations comply, in
all respects deemed material by Lender, in its Permitted Discretion, with all
applicable federal, state, foreign and local laws, statutes and regulations,
(ii) its operations are not the subject of any governmental investigation,
evaluation or any remedial action which could result in any expenditure or
liability deemed material by Lender, in its Permitted Discretion, and (iii)
other than Permitted Indebtedness, it has no liability (whether contingent or
otherwise) that would reasonably give rise to a Material Adverse Effect as
determined by Lender, in its Permitted Discretion;
 
(f)  Lender shall have received all fees, charges and expenses payable to Lender
on or prior to the Closing Date pursuant to the Loan Documents;
 
(g)  all in form and substance satisfactory to Lender in its Permitted
Discretion, Lender shall have received such consents, approvals and agreements,
including, without limitation, any applicable Landlord Waivers and Consents with
respect to any and all leased properties where Borrower’s Books and Records are
kept, from such third parties as Lender and its counsel shall determine are
necessary or desirable with respect to (i) the Loan Documents and/or the
transactions contemplated thereby, and/or (ii) claims against Borrower or the
Collateral;
 
(h)  Borrower shall be in compliance with Section 6.5, and Lender shall have
received (i) certified copies of all such insurance policies, and (ii) original
certificates of such insurance policies confirming that they are in effect and
that the premiums due and owing with respect thereto have been paid in full and
naming Lender as an additional insured thereunder;

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(i)  all corporate and other proceedings, documents, instruments and other legal
matters in connection with the transactions contemplated by the Loan Documents
(including, but not limited to, those relating to corporate and capital
structures of Borrower) shall be satisfactory to Lender in its Permitted
Discretion;
 
(j)  Borrower shall have executed and filed IRS Form 8821 with the appropriate
office of the Internal Revenue Service;
 
(k)  Borrower shall have delivered to Lender copies of all CIBC Secured Notes
and other material agreements, documents or instruments related thereto; and
 
(l)  Lender shall have received such other documents, certificates, information
or legal opinions as Lender may reasonably request, all in form and substance
reasonably satisfactory to Lender.
 
4.2      Conditions to Each Advance
 
The obligations of Lender to make any Advance (including, without limitation,
the Initial Advance) are subject to the satisfaction, in the Permitted
Discretion of Lender, of the following additional conditions precedent:
 
(a)  Borrower shall have delivered to Lender a Borrowing Certificate for the
Advance executed by an authorized officer of Borrower, which shall constitute a
representation and warranty by Borrower as of the Borrowing Date of such Advance
that the conditions contained in this Section 4.2 have been satisfied;
 
(b)  each of the representation and warranties made by Borrower in or pursuant
to this Agreement shall be accurate before and after giving effect to such
Advance;
 
(c)  no Default or Event of Default shall have occurred or be continuing or
would exist after giving effect to the Advance under the Revolving Facility on
such date;
 
(d)  immediately after giving effect to the requested Advance, the aggregate
outstanding principal amount of Advances under the Revolving Facility shall not
exceed either the Availability and the Facility Cap;
 
(e)  except as disclosed in the historical financial statements, there shall be
no liabilities or obligations with respect to Borrower of any nature whatsoever
which, either individually or in the aggregate, would have a Material Adverse
Effect;
 
(f)  Lender shall have received all fees, charges and expenses due and payable
to Lender on or prior to such date pursuant to the Loan Documents; and
 
(g)  no Default or Event of Default shall have occurred or be continuing or
would exist after giving effect to the Advance under the Revolving Facility or
the funding of the Term Loan on such date.
 
V.    REPRESENTATIONS AND WARRANTIES

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Borrower represents and warrants as of the date hereof, the Closing Date, and
each Borrowing Date as follows:
 
5.1      Organization and Authority
 
Borrower is duly organized, validly existing and in good standing under the laws
of its state of formation. Borrower (i) has all requisite corporate or limited
liability company power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in the Loan
Documents, (ii) is duly qualified to do business in every jurisdiction in which
failure so to qualify would have a Material Adverse Effect, and (iii) has all
requisite corporate or limited liability company power and authority (A) to
execute, deliver and perform the Loan Documents to which it is a party, (B) to
borrow hereunder, (C) to consummate the transactions contemplated under the Loan
Documents, and (D) to grant the Liens with regard to the Collateral pursuant to
the Security Documents to which it is a party. Borrower is not an “investment
company” registered or required to be registered under the Investment Company
Act of 1940, as amended, or is controlled by such an “investment company.”
 
5.2      Loan Documents
 
The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party, and the consummation of the transactions contemplated
thereby, (i) have been duly authorized by all requisite action of Borrower and
have been duly executed and delivered by or on behalf of Borrower; (ii) do not
violate any provisions of (A) applicable law, statute, rule, regulation,
ordinance or tariff, (B) any order of any Governmental Authority binding on
Borrower or any of its properties, or (C) the certificate of incorporation or
bylaws (or any other equivalent governing agreement or document) of any such
Person, or any agreement between any such Person and its respective
stockholders, members, partners or equity owners or among any such stockholders,
members, partners or equity owners; (iii) except as have been properly waived,
are not in conflict with, and do not result in a breach or default of or
constitute an event of default, or an event, fact, condition or circumstance
which, with notice or passage of time, or both, would constitute or result in a
conflict, breach, default or event of default under, any material indenture,
agreement or other instrument to which any such Person is a party, or by which
the properties or assets of such Person are bound, the effect of which would
have a Material Adverse Effect; (iv) except as set forth herein or therein, will
not result in the creation or imposition of any Lien of any nature upon any of
the properties or assets of any such Person, and (v) except as set forth on
Schedule 5.2, do not require the consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority or any
other Person. When executed and delivered, each of the Loan Documents to which
Borrower is a party will constitute the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, subject to
the effect of any applicable bankruptcy, moratorium, insolvency, reorganization
or other similar law affecting the enforceability of creditors’ rights generally
and to the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law or in
equity).
 
5.3      Subsidiaries, Capitalization and Ownership Interests
 
Women First has one Subsidiary, As We Change. As We Change has no Subsidiaries.
Schedule 5.3 lists the directors and executive officers of Borrower. Except for
As We Change and as listed on Schedule 5.3, Borrower does not own an interest or
participates or engages in any joint venture, partnership or similar
arrangements with any Person.
 
5.4      Properties

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Borrower (i) has good, valid and marketable title to, or a valid leasehold
interest in or license to, all of its properties and assets that are material to
the conduct of its business, whether personal or real, subject to no transfer
restrictions or Liens of any kind except for Permitted Liens, and (ii) is in
compliance in all material respects with each lease that is material to the
conduct of its business to which it is a party or otherwise bound. Schedule 5.4
lists all real properties (and their locations) owned or leased by or to
Borrower at which any Books and Records are maintained and all leases (including
leases of leased real property) covering or with respect to such properties.
Borrower enjoys peaceful and undisturbed possession under all such leases and
such leases are all the leases necessary for the operation of such properties
and assets, are valid and subsisting and are in full force and effect.
 
5.5      Other Agreements
 
Except as set forth on Schedule 5.5, Borrower is not (i) a party to any
judgment, order or decree or any agreement, document or instrument, or subject
to any restriction, which would materially adversely affect its ability to
execute and deliver, or perform under, any Loan Document or to pay the
Obligations, (ii) in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained in any agreement, document or
instrument to which it is a party or to which any of its properties or assets
are subject, which default, if not remedied within any applicable grace or cure
period would have a Material Adverse Effect, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would
constitute or result in a conflict, breach, default or event of default under,
any of the foregoing which, if not remedied within any applicable grace or cure
period would have a Material Adverse Effect; or (iii) a party or subject to any
agreement, document or instrument with respect to, or obligation to pay any,
service or management fee with respect to the ownership, operation, leasing or
performance of any of its business or any facility.
 
5.6      Litigation
 
Except as set forth on Schedule 5.6, there is no action, suit, proceeding or
investigation pending or, to Borrower’s knowledge, threatened against Borrower
that (i) questions or could prevent the validity of any of the Loan Documents or
the right of Borrower to enter into any Loan Document or to consummate the
transactions contemplated thereby, (ii) would have, either individually or in
the aggregate, any Material Adverse Change or Material Adverse Effect, or (iii)
would reasonably be expected to result in any Change of Control or other change
in the current ownership, control or management of Borrower. Borrower is not
aware that there is any basis for the foregoing that would reasonably be
expected to result in any Change of Control. Borrower is not a party or subject
to any order, writ, injunction, judgment or decree of any Governmental
Authority. There is no action, suit, proceeding or investigation initiated by
Borrower currently pending. Borrower has no existing accrued and/or unpaid
Indebtedness to any Governmental Authority or any other governmental payor
unless such Indebtedness relates to taxes not yet due or which Borrower disputes
in good faith and maintains adequate reserves therefor.
 
5.7      Hazardous Materials
 
Borrower is in compliance in all material respects with all applicable
Environmental Laws. Borrower has not been notified of any action, suit,
proceeding or investigation (i) relating in any way to compliance by or
liability of Borrower under any Environmental Laws, or (ii) which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Substance,
which, in any case, would have a Material Adverse Effect.
 
5.8      Tax Returns; Governmental Reports

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Borrower (i) has filed all material federal, state, foreign (if applicable) and
local tax returns and other reports which are required by law to be filed by
Borrower, and (ii) has paid all material taxes, assessments, fees and other
governmental charges, including, without limitation, payroll and other
employment related taxes, in each case that are due and payable, except only for
items that Borrower is currently contesting in good faith and that are described
on Schedule 5.8.
 
5.9      Financial Statements and Reports
 
All financial statements and financial information relating to Borrower that
have been or may hereafter be delivered to Lender by Borrower fairly and
accurately present, in all material respects, the financial condition of
Borrower as of their respective dates, and have been prepared in accordance with
GAAP consistently applied with prior periods, except for changes required or
permitted by GAAP. Borrower has no material obligations or liabilities of any
kind not disclosed in such financial information or statements that would be
required to be disclosed therein in accordance with GAAP, and since the date of
the most recent financial statements submitted to Lender, there has not occurred
any Material Adverse Change, Material Adverse Effect or, to Borrower’s
knowledge, any other event or condition that would have a Material Adverse
Effect.
 
5.10    Compliance with Law
 
Borrower (i) is in compliance with all laws, statutes, rules, regulations,
ordinances and tariffs of any Governmental Authority applicable to Borrower
and/or Borrower’s business, assets or operations, including, without limitation,
ERISA, and (ii) is not in violation of any order of any Governmental Authority
or other board, except in the case of both clauses (i) and (ii), where
noncompliance or violation would have a Material Adverse Effect. There is no
event, fact, condition or circumstance which, with notice or passage of time, or
both, would constitute or result in any noncompliance with, or any violation of,
any of the foregoing, in each case except where noncompliance or violation would
have a Material Adverse Effect. Borrower has not received any notice that
Borrower is not in compliance in any material respect with any of the
requirements of any of the foregoing. Borrower has (a) not engaged in any
Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder, (b) not failed to meet any applicable minimum funding
requirements under Section 302 of ERISA in respect of its plans and no funding
requirements have been postponed or delayed, (c) no knowledge of any event or
occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any of the employee
benefit plans, (d) no fiduciary responsibility under ERISA for investments with
respect to any plan existing for the benefit of Persons other than its employees
or former employees, or (e) not withdrawn, completely or partially, from any
multi-employer pension plans so as to incur liability under the MultiEmployer
Pension Plan Amendments of 1980. With respect to Borrower, there exists no event
described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and
4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12
C.F.R. § 2615.3 has not been waived.
 
5.11    Intellectual Property
 
Except as described in the SEC Reports or as set forth on Schedule 5.11,
Borrower does not own, license or utilize, and is not a party to, any patents,
patent applications, trademarks, trademark applications, service marks,
registered copyrights, copyright applications, trade names that are material to
the conduct of Borrower’s business (collectively, the “Intellectual Property”).
Licenses or agreements arising from the purchase of “off the shelf” products
need not be listed on Schedule 5.11.
 
5.12    Licenses and Permits; Labor

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Borrower is in compliance with and has all Permits and Intellectual Property
necessary or required by applicable law or Governmental Authority for the
operation of its businesses except where the failure to be in compliance would
have a Material Adverse Effect. All of the foregoing are in full force and
effect and not in known conflict with the rights of others except as would have
a Material Adverse Effect. Borrower is not (i) in breach of or default under the
provisions of any of the foregoing, nor is there any event, fact, condition or
circumstance which, with notice or passage of time or both, would constitute or
result in a conflict, breach, default or event of default under, any of the
foregoing which, if not remedied within any applicable grace or cure period
would have a Material Adverse Effect, and/or (ii) has not been, involved in any
labor dispute, strike, walkout or union organization which would have a Material
Adverse Effect.
 
5.13    No Default
 
There does not exist any Default or Event of Default or any event, fact,
condition or circumstance which, with the giving of notice or passage of time or
both, would constitute or result in a Default or Event of Default.
 
5.14    Disclosure
 
No Loan Document nor any other agreement, document, certificate, or statement
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated by the Loan Documents, nor any representation or
warranty made by Borrower in any Loan Document, contains any untrue statement of
material fact or omits to state any fact necessary to make the statements
therein not materially misleading. There is no fact known to Borrower which has
not been disclosed to Lender in writing which would have a Material Adverse
Effect.
 
5.15    Existing Indebtedness; Investments, Guarantees and Certain Contracts
 
Except as described in the SEC Reports or contemplated by the Loan Documents or
as otherwise set forth on Schedule 5.15, Borrower (i) has no outstanding
Indebtedness, (ii) is not subject or party to any mortgage, note, indenture,
indemnity or guarantee of, with respect to or evidencing any Indebtedness of any
other Person, or (iii) does not own or hold any equity or long-term debt
investments in, and does not have any outstanding advances to or any outstanding
guarantees for the obligations of, or any outstanding borrowings from, any
Person. Borrower has performed all material obligations required to be performed
by Borrower pursuant to or connection with any items listed on Schedule 5.15 and
there has occurred no breach, default or event of default under any document
evidencing any such items or any fact, circumstance, condition or event which,
with the giving of notice or passage of time or both, would constitute or result
in a breach, default or event of default thereunder.
 
5.16    Other Agreements
 
Except as set forth on Schedule 5.16 (i) there are no existing or proposed
agreements, arrangements, understandings or transactions between Borrower and
any of Borrower’s officers, directors, stockholders, other interest holders,
employees or Affiliates or any members of their respective immediate families
except as described in the SEC Reports, and (ii) none of the foregoing Persons
are directly or indirectly, indebted to or have any direct or indirect
ownership, partnership or voting interest in, to Borrower’s knowledge, any
Affiliate of Borrower or any Person that competes with Borrower (except that any
such Persons may own stock in (but not exceeding two (2%) percent of the
outstanding capital stock of) any publicly traded company that may compete with
Borrower.
 
5.17    Insurance

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Borrower has in full force and effect such insurance policies as are customary
in its industry and as may be required pursuant to Section 6.5 hereof. All such
insurance policies are listed and described on Schedule 5.17.
 
5.18    Names; Location of Offices, Records and Collateral
 
During the preceding five (5) years, Borrower has not conducted business under
or used any name (whether corporate, partnership or assumed) other than as shown
on Schedule 5.18A. Borrower is the sole owner of all of its names listed on
Schedule 5.18A, and any and all business done and invoices issued in such names
are Borrower’s sales, business and invoices. Each trade name of Borrower
represents a division or trading style of Borrower. Borrower maintains its
places of business and chief executive offices only at the locations set forth
on Schedule 5.18B, and all Accounts of Borrower arise, originate and are
located, and all of the Collateral and all books and records in connection
therewith or in any way relating thereto or evidence the Collateral are located
and shall be only, in and at such locations. All of the Collateral is located
only in the continental United States.
 
5.19    Non-Subordination
 
The Obligations are not subordinated in any way to any other obligations of
Borrower or to the rights of any other Person.
 
5.20    Accounts
 
In determining which Accounts are Eligible Receivables, Lender may rely on all
statements and representations made by Borrower with respect to any Account.
Unless otherwise indicated in writing to Lender, each Account of Borrower (i) is
genuine and in all respects what it purports to be and is not evidenced by a
judgment, (ii) arises out of a completed, bona fide sale and delivery of goods
or rendering of services by Borrower in the ordinary course of business and in
accordance with the terms and conditions of all purchase orders, contracts,
certifications, participations, certificates of need and other documents
relating thereto or forming a part of the contract between Borrower and the
Account Debtor, (iii) is for a liquidated amount maturing as stated in a claim
or invoice covering such sale of goods or rendering of services, a copy of which
has been furnished or is available to Lender, (iv) together with Lender’s
security interest therein, is not, and to Borrower’s knowledge, will not be in
the future (by voluntary act or omission by Borrower), subject to any known
offset, lien, deduction, defense, dispute, counterclaim or other adverse
condition, is absolutely owing to Borrower and is not contingent in any respect
or for any reason (it being acknowledged by Lender that Account Debtors may be
entitled to return or exchange products in the event of the expiration of
applicable shelf-lives), (v) there are no facts, events or occurrences which in
any way impair the validity or enforceability thereof or tend to reduce the
amount payable thereunder from the face amount of the claim or invoice and
statements delivered to Lender with respect thereto, (vi) to the best of
Borrower’s knowledge(without undertaking any affirmative investigation or making
any inquiry), (A) the Account Debtor thereunder had the capacity to contract at
the time any contract or other document giving rise thereto was executed and (B)
such Account Debtor is solvent, (vii) to the best of Borrower’s
knowledge(without undertaking any affirmative investigation or making any
inquiry), there are no proceedings or actions which are threatened or pending
against any Account Debtor thereunder which would have a Material Adverse Change
in such Account Debtor’s financial condition or the collectability thereof,
(viii) has been billed and forwarded to the Account Debtor for payment in
accordance with applicable laws and is in compliance and conformance with any
requisite procedures, requirements and regulations governing payment by such
Account Debtor with respect to such Account, and (ix) Borrower has obtained and
currently has all material Permits necessary in the generation of its Accounts.

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5.21    Survival
 
Borrower makes the representations and warranties contained herein with the
knowledge and intention that Lender is relying and will rely thereon. All such
representations and warranties will survive the execution and delivery of this
Agreement and the making of the Advances under the Revolving Facility.
 
VI.    AFFIRMATIVE COVENANTS
 
Borrower covenants and agrees that, until full performance and satisfaction, and
indefeasible payment in full in cash, of all the Obligations and termination of
this Agreement:
 
6.1      Financial Statements, Reports and Other Information
 
(a)  Financial Reports.  Borrower shall furnish to Lender (i) as soon as
available and in any event within ninety (90) calendar days after the end of
each fiscal year of Borrower, audited annual consolidated financial statements
of Borrower, including the notes thereto, consisting of a consolidated balance
sheet at the end of such completed fiscal year and the related consolidated
statements of income, retained earnings, cash flows and owners’ equity for such
completed fiscal year, which financial statements shall be prepared and
certified without qualification by an independent certified public accounting
firm satisfactory to Lender (it being acknowledged that Ernst & Young LLP is
satisfactory to Lender, and (ii) as soon as available and in any event within
thirty (30) calendar days after the end of each calendar month, unaudited
consolidated financial statements of Borrower consisting of a balance sheet and
statements of income, retained earnings, cash flows and owners’ equity as of the
end of the immediately preceding calendar month. All such financial statements
shall be prepared in accordance with GAAP consistently applied with prior
periods (except for changes required or permitted by GAAP and except that the
monthly financial statements need not have footnotes, and will be subject to
year-end adjustments). With each fiscal year-end and fiscal quarter-end
financial statement, Borrower shall also deliver a certificate of its chief
financial officer stating that (A) such person has reviewed the relevant terms
of the Loan Documents and the condition of Borrower, (B) no Default or Event of
Default has occurred or is continuing, or, if any of the foregoing has occurred
or is continuing, specifying the nature and status and period of existence
thereof and the steps taken or proposed to be taken with respect thereto, and
(C) Borrower is in compliance with all financial covenants attached as Annex I
hereto, or, if Borrower is not in compliance with any such covenant, Borrower
shall so specify. Such certificate shall be accompanied by the calculations
necessary to show compliance with the financial covenants in a form satisfactory
to Lender.
 
(b)  Other Materials.  Borrower shall furnish to Lender: (i) for so long as
Borrower is required to make filings with the Securities and Exchange Commission
pursuant to Sections 13 and 15(d) of the Exchange Act, the annual reports,
quarterly reports, current reports, proxy statements and other documents that
Borrower has filed with the Securities and Exchange Commission pursuant to
Sections 13 and 15(d) of the Exchange Act, such documents to be furnished to
Lender within fifteen (15) days of the respective dates by which Borrower has
filed such documents, (ii) within thirty (30) calendar days after the end of
each calendar month for such month, a sales and collection report and accounts
receivable and accounts payable aging schedule, including a report of sales,
credits issued and collections received, all such reports showing a
reconciliation to the amounts reported in the monthly financial statements, and
(iii) as soon as available to, or as soon as prepared by, Borrower, such
additional information, documents, statements, reports and other materials as
Lender may reasonably request from a credit or security perspective from time to
time.

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(c)   Notices.  Borrower shall promptly, and in any event within five (5)
calendar days after Borrower or any authorized officer of Borrower obtains
knowledge thereof, notify Lender in writing of (i) any pending or threatened (in
writing) litigation, suit, investigation, arbitration, dispute resolution
proceeding or administrative proceeding brought or initiated by Borrower or
otherwise affecting or involving or relating to Borrower or any of its property
or assets to the extent (A) the amount in controversy exceeds $250,000 or (B) to
the extent any of the foregoing seeks injunctive relief, (ii) any Default or
Event of Default, which notice shall specify the nature and status thereof, the
period of existence thereof and what action is proposed to be taken with respect
thereto, (iii) any notice received by Borrower from any payor of a claim, suit
or other action that such payor has, claims or has filed against Borrower in an
amount in excess of $250,000, (iv) any matter(s) materially affecting the value,
enforceability or collectability of any of the Collateral, (v) of the default in
payment on, or the acceleration of the maturity of, any debt owed by Borrower or
of any other default by Borrower under any indenture, mortgage, agreement,
contract or other instrument to which any of it is a party or by which it is
bound if such default would have a Material Adverse Effect, (vi) receipt of any
notice or request from any Governmental Authority or governmental payor
regarding any liability or claim of liability in the amount of $100,000 or more,
(vii) Borrower entering into any agreement or commitment to cause or that may
result in any Change of Control, and/or (viii) if any Account of $100,000 or
more becomes evidenced or secured by an Instrument or Chattel Paper.
 
(d)   Consents.  Intentionally Omitted.
 
(e)   Operating Budget.  Borrower shall furnish to Lender on or prior to the
Closing Date and for each fiscal year of Borrower thereafter not less than
ninety (90) calendar days after the commencement of such fiscal year,
consolidated quarter by quarter projected operating budgets, annual projections,
profit and loss statements of and for Borrower for such upcoming fiscal year
(including an income statement for each quarter), in each case prepared in
accordance with GAAP (except for changes required or permitted by GAAP, and
except that the monthly financial statements need not have footnotes, and will
be subject to year-end adjustments) consistently applied with prior periods.
 
6.2      Payment of Obligations
 
Borrower shall make full and timely indefeasible payment in cash of the
principal of and interest on the Loans, Advances and all other Obligations.
 
6.3      Conduct of Business and Maintenance of Existence and Assets
 
Borrower shall (i) conduct its business in accordance with good business
practices customary to the industry, (ii) engage principally in the same or
similar lines of business substantially as heretofore conducted, (iii) collect
its Eligible Receivables in the ordinary course of business, (iv) maintain all
of its material properties, assets and equipment used or useful in its business
in good repair, working order and condition (normal wear and tear excepted and
except as may be disposed of in the ordinary course of business and in
accordance with the terms of the Loan Documents and otherwise as determined by
Borrower using commercially reasonable business judgment), (v) from time to time
to make all necessary or desirable repairs, renewals and replacements thereof,
as determined by Borrower using commercially reasonable business judgment, and
(vi) maintain and keep in full force and effect its existence and all material
Permits and qualifications to do business and good standing in each jurisdiction
in which the ownership or lease of property or the nature of its business makes
such Permits or qualification necessary and in which failure to maintain such
Permits or qualification would have a Material Adverse Effect.
 
6.4      Compliance with Legal and Other Obligations

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Borrower shall (i) comply in all material respects with all laws, statutes,
rules, regulations, ordinances and tariffs of all Governmental Authorities
applicable to it or its business, assets or operations, (ii) pay all taxes,
assessments, fees, governmental charges, claims for labor, supplies, rent and
all other obligations or liabilities of any kind, except liabilities being
contested in good faith and against which adequate reserves have been
established, (iii) perform in accordance with its terms each contract, agreement
or other arrangement to which it is a party or by which it or any of the
Collateral is bound, except where the failure to comply, pay or perform would
not have a Material Adverse Effect, and (iv) maintain and comply with all
Permits necessary to conduct its business and comply with any new or additional
requirements that may be imposed on it or its business, except where the failure
to maintain or comply would not have a Material Adverse Effect.
 
6.5      Insurance
 
Borrower shall (i) keep all of its insurable properties and assets adequately
insured in all material respects against losses, damages and hazards as are
customarily insured against by businesses engaging in similar activities or
owning similar assets or properties and at least the minimum amount required by
applicable law, including, without limitation, product liability insurance, as
applicable; and maintain general public liability insurance at all times against
liability on account of damage to persons and property having such limits,
deductibles, exclusions and co-insurance and other provisions as are customary
for a business engaged in activities similar to those of Borrower; and (ii)
maintain insurance under all applicable workers’ compensation laws; all of the
foregoing insurance policies to (A) be reasonably satisfactory in form and
substance to Lender, (B) name Lender as an additional insured thereunder, and
(C) expressly provide that they cannot be altered, amended, modified or canceled
without thirty (30) Business Days prior written notice to Lender.
 
6.6      True Books
 
Borrower shall (i) keep true, complete and accurate books of record and account
in accordance with commercially reasonable business practices in which true and
correct entries are made of all of its dealings and transactions in all material
respects; and (ii) set up and maintain on its books such reserves as may be
required by GAAP with respect to doubtful accounts and all taxes, assessments,
charges, levies and claims and with respect to its business, and include such
reserves in its quarterly as well as year end financial statements.
 
6.7      Inspection; Periodic Audits
 
Borrower shall permit the representatives of Lender, at the expense of Borrower,
from time to time during normal business hours upon reasonable notice, to (i)
visit and inspect any of its offices or properties or any other place where
Collateral is located to inspect the Collateral and/or to examine or audit all
of its books of account, records, reports and other papers, (ii) make copies and
extracts therefrom, and (iii) discuss its business, operations, prospects,
properties, assets, liabilities, condition and/or Accounts with its officers and
independent public accountants (and by this provision such officers and
accountants are authorized to discuss the foregoing). The inspections in
accordance with the preceding sentence shall be limited to no more than four (4)
times each calendar year; provided, however, that there should be no such
limitation on inspections during any period in which an Event of Default has
occurred and is continuing. Notwithstanding anything in this Agreement to the
contrary, Borrower shall not be required to provide information to Lender if
doing so would require Borrower to waive any applicable attorney/client
privilege or accountant/client privilege existent in connection with any pending
or threatened litigation.
 
6.8      Further Assurances; Post Closing

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At Borrower’s cost and expense, Borrower shall (i) within five (5) Business Days
after Lender’s demand, take such further actions, obtain such consents and
approvals and duly execute and deliver such further agreements, assignments,
instructions or documents as Lender may reasonably request with respect to the
purposes, terms and conditions of the Loan Documents and the consummation of the
transactions contemplated thereby, whether before, at or after the performance
and/or consummation of the transactions contemplated hereby or the occurrence of
a Default or Event of Default, (ii) without limiting and notwithstanding any
other provision of any Loan Document, execute and deliver, or cause to be
executed and delivered, such agreements and documents, and take or cause to be
taken such actions, and otherwise perform, observe and comply with such
obligations, as are set forth on Schedule 6.8, and (iii) upon the exercise by
Lender or any of its Affiliates of any power, right, privilege or remedy
pursuant to any Loan Document or under applicable law or at equity which
requires any consent, approval, registration, qualification or authorization of
any Governmental Authority, execute and deliver, or cause the execution and
delivery of, all applications, certificates, instruments and other documents
that may be so required for such consent, approval, registration, qualification
or authorization. Without limiting the foregoing, upon the exercise by Lender or
any of its Affiliates of any right or remedy under any Loan Document which
requires any consent, approval or registration with, consent, qualification or
authorization by, any Person, Borrower shall execute and deliver, or cause the
execution and delivery of, all applications, certificates, instruments and other
documents that Lender or its Affiliate may be required to obtain for such
consent, approval, registration, qualification or authorization.
 
6.9      Payment of Indebtedness
 
Except as otherwise prescribed in the Loan Documents, Borrower shall pay,
discharge or otherwise satisfy at or before maturity (subject to applicable
grace periods and, in the case of trade payables, to ordinary course payment
practices) all of its material obligations and liabilities, except when the
amount or validity thereof is being contested in good faith by appropriate
proceedings and such reserves as Lender may deem proper and necessary in its
Permitted Discretion shall have been made.
 
6.10    Lien Searches
 
If Liens other than Permitted Liens exist with respect to the Collateral,
Borrower immediately shall take, execute and deliver all actions, documents and
instruments necessary to release and terminate such Liens.
 
6.11    Use of Proceeds
 
Borrower shall use the proceeds from the Revolving Facility only for the
purposes set forth in the first “WHEREAS” clause of this Agreement.
 
6.12    Collateral Documents; Security Interest in Collateral
 
Borrower shall (i) execute, obtain, deliver, file, register and/or record any
and all financing statements, continuation statements, stock powers, instruments
and other documents, or cause the execution, filing, registration, recording or
delivery of any and all of the foregoing, that are necessary or required under
law or otherwise or reasonably requested by Lender to be executed, filed,
registered, obtained, delivered or recorded to create, maintain, perfect,
preserve, validate or otherwise protect the pledge of the Collateral to Lender
and Lender’s perfected first priority Lien on the Collateral (and Borrower
irrevocably grants Lender the right, at Lender’s option, to file any or all of
the foregoing), (ii) immediately upon learning thereof, report to Lender any
reclamation, return or repossession of goods in excess of $100,000 (individually
or in the aggregate), and (iii) defend the Collateral and Lender’s perfected
first priority Lien thereon against all claims and demands of all Persons at any
time claiming the

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same or any interest therein adverse to Lender, and pay all reasonable costs and
expenses (including, without limitation, reasonable in-house documentation and
diligence fees and legal expenses (in amounts not to exceed customary rates
charged by outside law firms) and reasonable attorneys’ fees and expenses) in
connection with such defense, which may at Lender’s discretion be added to the
Obligations.
 
6.13    Right of First Refusal
 
Intentionally Omitted.
 
6.14    Taxes and Other Charges
 
All payments and reimbursements to Lender made under any Loan Document shall be
free and clear of and without deduction for all taxes, levies, imposts,
deductions, assessments, charges or withholdings, and all liabilities with
respect thereto of any nature whatsoever, excluding taxes to the extent imposed
on Lender’s gross receipts or net income. If Borrower shall be required by law
to deduct any such amounts from or in respect of any sum payable under any Loan
Document to Lender, then the sum payable to Lender shall be increased as may be
necessary so that, after making all required deductions, Lender receives an
amount equal to the sum it would have received had no such deductions been made.
Notwithstanding any other provision of any Loan Document, if at any time after
the Closing (i) any change in any existing law, regulation, treaty or directive
or in the interpretation or application thereof, (ii) any new law, regulation,
treaty or directive enacted or any interpretation or application thereof, or
(iii) compliance by Lender with any new request or directive (whether or not
having the force of law) from any Governmental Authority: (A) subjects Lender to
any tax, levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation
of payments to Lender of any amount payable thereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax on
the overall net income of Lender), or (B) imposes on Lender any other condition
or increased cost in connection with the transactions contemplated thereby or
participations therein; and the result of any of the foregoing is to increase
the cost to Lender of making or continuing any Loan hereunder or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly pay
to Lender any additional amounts necessary to compensate Lender, on an after-tax
basis, for such additional cost or reduced amount as determined by Lender. If
Lender becomes entitled to claim any additional amounts pursuant to this Section
6.14 it shall promptly notify Borrower of the event by reason of which Lender
has become so entitled, and each such notice of additional amounts payable
pursuant to this Section 6.14 submitted by Lender to Borrower shall, absent
manifest error, be final, conclusive and binding for all purposes. Without
limiting or being limited by any other provision of any Loan Document, Borrower
at all times shall retain and use a Person acceptable to Lender (it being
acknowledged that Automatic Data Processing, Inc. (ADP) is acceptable to Lender)
to process, manage and pay its payroll taxes and shall cause to be delivered to
Lender within fifteen (15) calendar days after the end of each calendar month a
report of its payroll taxes for the immediately preceding calendar month and
evidence of payment thereof.
 
VII.    NEGATIVE COVENANTS
 
Borrower covenants and agrees that, until full performance and satisfaction, and
payment in full in cash, of all the Obligations and termination of this
Agreement:

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7.1      Financial Covenants
 
Borrower shall not violate the financial covenants set forth on Annex I to this
Agreement, which is incorporated herein and made a part hereof.
 
7.2      Permitted Indebtedness
 
Borrower shall not create, incur, assume or suffer to exist any Indebtedness,
except the following (collectively, “Permitted Indebtedness”): (i) Indebtedness
under the Loan Documents, (ii) any Indebtedness set forth on Schedule 7.2, (iii)
the incurrence by Borrower of additional unsecured Indebtedness and letters of
credit in an aggregate principal amount at any one time outstanding under this
clause (iii) (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of Borrower thereunder) not to exceed
$10,000,000 plus the aggregate amount of all repayments, optional or mandatory,
of the principal of any Indebtedness set forth on Schedule 7.2 (other than
repayments that are concurrently reborrowed), (iv) Capitalized Lease Obligations
incurred after the Closing Date and Indebtedness that is secured by purchase
money Liens in connection with the purchase by Borrower of equipment in the
normal course of business, provided that the aggregate amount thereof
outstanding at any time shall not exceed $1,000,000, (v) Indebtedness in
connection with advances made by a stockholder in order to cure any default of
the financial covenants set forth on Annex I; provided, however, that such
Indebtedness shall be on an unsecured basis, subordinated in right of repayment
and remedies to all of the Obligations and to all of Lender’s rights and in form
and substance satisfactory to Lender; (vi) accounts payable to trade creditors
and current operating expenses (other than for borrowed money) which are not
aged more than one hundred twenty (120) calendar days from the billing date or
more than thirty (30) days from the due date, in each case incurred in the
ordinary course of business and paid within such time period, unless the same
are being contested in good faith and by appropriate and lawful proceedings and
such reserves, if any, with respect thereto as are required by GAAP shall have
been reserved; and (vii) any Permitted Refinancing Indebtedness.
 
7.3      Permitted Liens
 
Borrower shall not create, incur, assume or suffer to exist any Lien upon, in or
against, or pledge of, any of the Collateral whether now owned or hereafter
acquired, except the following (collectively, “Permitted Liens”): (i) Liens
under the Loan Documents or otherwise arising in favor of Lender, (ii) Liens
imposed by law for taxes (other than payroll taxes), assessments or charges of
any Governmental Authority for claims not yet due or which are being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained by such Person in
accordance with GAAP to the satisfaction of Lender in its Permitted Discretion,
(iii) (A) statutory Liens of landlords and of carriers, warehousemen, mechanics,
materialmen, and (B) other Liens imposed by law or that arise by operation of
law in the ordinary course of business from the date of creation thereof, in
each case only for amounts not yet due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained by such Person in accordance
with GAAP to the satisfaction of Lender in its Permitted Discretion, (iv) Liens
(A) incurred or deposits made in the ordinary course of business (including,
without limitation, surety bonds and appeal bonds) in connection with workers’
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, leases, contracts (other than for
the repayment of Indebtedness), statutory obligations and other similar
obligations, or (B) arising as a result of progress payments under government
contracts, (v) purchase money Liens (A) securing Indebtedness permitted under
Section 7.2(iii), or (B) in connection with the purchase by such Person of
equipment in the normal course of business, provided that such payables shall
not exceed any limits on Indebtedness provided for herein and shall otherwise be

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Permitted Indebtedness hereunder, (vi) Liens necessary and desirable for the
operation of such Person’s business, provided Lender has consented to such Liens
in writing before their creation and existence and the priority of the Liens
permitted by this clause (vi) and the debt secured thereby are both subject and
subordinate in all respects to the Liens securing the Collateral and to the
Obligations and all of the rights and remedies of Lender, all in form and
substance satisfactory to Lender in its Permitted Discretion; (vii) Liens
disclosed on Schedule 7.3; (viii) easements, reservations, exceptions,
rights-of-way, covenants, conditions, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the aggregate,
are not substantial in amount and that do not in any case materially detract
from the value of the property subject thereto or interfere with the ordinary
conduct of business by Borrower; and (ix) Liens in respect of any writ of
execution, attachment, garnishment, judgment or award in an amount less than
$100,000, if (a) the time for appeal or petition for rehearing has not expired,
an appeal or appropriate proceeding for review is being prosecuted in good faith
and a stay of execution pending such appeal or proceeding for review has been
secured, or (b) the underlying claim is fully covered by insurance, the insurer
has acknowledged in writing its responsibility to pay such claim and no action
has been taken to enforce such execution, attachment, garnishment, judgment or
award.
 
7.4      Investments; New Facilities or Collateral; Subsidiaries
 
Borrower, directly or indirectly, shall not (i) purchase, own, hold, invest in
or otherwise acquire obligations or stock or securities of, or any other
interest in, or all or substantially all of the assets of, any Person or any
joint venture other than As We Change, unless such Person is or becomes a
Guarantor hereunder, or (ii) make or permit to exist any loans, advances or
guarantees to or for the benefit of any Person or assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable for or upon or incur
any obligation of any Person (other than those created by the Loan Documents and
Permitted Indebtedness and other than (A) trade credit extended in the ordinary
course of business, (B) advances for business travel and similar temporary
advances made in the ordinary course of business to officers, directors and
employees, (C) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business, (D)
existing loans to officers of Borrower, and (E) dividends, distributions,
payments, loans or investments by Borrower, As We Change or any other Person who
may become a Guarantor hereunder solely to, or in, one another. Borrower shall
have no Subsidiaries other than such Subsidiaries existing at Closing unless
Borrower shall provide to Lender prior written notice and such Subsidiary is or
becomes a Guarantor hereunder.
 
7.5      Dividends; Redemptions
 
Borrower shall not upon the occurrence and during the continuance of an Event of
Default and upon Lender’s request, (i) declare, pay or make any dividend or
distribution on any shares of capital stock or other equity securities or
interests (other than dividends or distributions payable in its stock, or
split-ups or reclassifications of its stock), (ii) apply any of its funds,
property or assets to the acquisition, redemption or other retirement of any
capital stock or other equity securities or interests or of any options to
purchase or acquire any of the foregoing (provided, however, that Borrower may
redeem its capital stock from terminated employees pursuant to, but only to the
extent required under, the terms of the related employment agreements as long as
no Default or Event of Default has occurred and is continuing or would be caused
by or result therefrom), (iii) otherwise make any payments or Distributions to
any stockholder, member, partner or other equity owner in such Person’s capacity
as such, or (iv) make any payment of any management fee to any Person with
respect to any facility owned, operated or leased by Borrower, except in the
cases of clauses (i), (ii) or (iii) for the accretion of stated value, mandatory
redemption and other requirements with respect to Borrower’s Senior Convertible
Redeemable Preferred Stock, Series A (the “Preferred Stock”) set forth in
Borrower’s Certificate of Designation of Preferences and Rights of the Preferred
Stock.

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7.6      Transactions with Affiliates
 
Borrower shall not enter into or consummate any transaction of any kind with any
of its Affiliates or any Guarantor or any of their respective Affiliates other
than: (i) salary, bonus, employee stock option and other compensation and
employment arrangements with directors or officers in the ordinary course of
business, provided, that no payment of any bonus shall be permitted if a Default
or Event of Default has occurred and remains in effect or would be caused by or
result from such payment, (ii) distributions and dividends permitted pursuant to
Section 7.4, (iii) transactions with Lender or any Affiliate of Lender, (iv)
dividends, distributions, payments, loans or investments by Borrower, As We
Change or any other Person who may become a Guarantor hereunder solely to, or
in, one another, and (v) transactions pursuant to written agreements entered
into by and between Borrower and one or more of its Affiliates that (A) are on
terms no less favorable to Borrower than those that would reasonably have been
obtained in a comparable transaction at such time on an arm’s-length basis
between unrelated parties of equal bargaining power, (B) in the case of a
transaction that involves an aggregate fair market value of more than $500,000,
have been approved by the Board of Directors of Borrower, and (C) in the case of
a transaction that involves an aggregate fair market value of more than
$1,000,000, have been approved by the Board of Directors of Borrower following
receipt of a favorable opinion as to the fairness of such transaction to
Borrower from a financial point of view from an independent financial advisor;
provided, that notwithstanding the foregoing Borrower shall not pursuant to this
clause (v) enter into or consummate any transaction or agreement pursuant to
which it becomes a party to any mortgage, note, indenture or guarantee
evidencing any Indebtedness of any of its Affiliates or otherwise to become
responsible or liable, as a guarantor, surety or otherwise, pursuant to
agreement for any Indebtedness of any such Affiliate.
 
7.7      Charter Documents; Fiscal Year; Dissolution; Use of Proceeds
 
Borrower shall not (i) amend, modify, restate or change its certificate of
incorporation or formation or bylaws or similar charter documents in a manner
that would be adverse to Lender, (ii) change its fiscal year unless Borrower
demonstrates to Lender’s satisfaction compliance with the covenants contained
herein for both the fiscal year in effect prior to any change and the new fiscal
year period by delivery to Lender of appropriate interim and annual pro forma,
historical and current compliance certificates for such periods and such other
information as Lender may reasonably request, (iii) amend, alter or suspend or
terminate or make provisional in any material way, any Permit, the loss of which
would not have a Material Adverse Effect, without the prior written consent of
Lender, which consent shall not be unreasonably withheld, (iv) wind up,
liquidate or dissolve (voluntarily or involuntarily), except for mergers into
another Borrower, or commence or suffer any proceedings seeking or that would
result in any of the foregoing, or (v) use any proceeds of any Advance for
“purchasing” or “carrying” “margin stock” as defined in Regulations U, T or X of
the Board of Governors of the Federal Reserve System.
 
7.8      Truth of Statements
 
Borrower shall not furnish to Lender any certificate or other document that
contains any untrue statement of a material fact or that omits to state a
material fact necessary to make it not misleading in light of the circumstances
under which it was furnished.
 
7.9      IRS Form 8821
 
Borrower shall not alter, amend, restate, or otherwise modify, or withdraw,
terminate or re-file the IRS Form 8821 required to be filed pursuant to the
Conditions Precedent in Section 4.1 hereof.
 

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VIII.    EVENTS OF DEFAULT
 
The occurrence of any one or more of the following shall constitute an “Event of
Default:”
 
(a)  Borrower shall fail to pay any amount on the Obligations or provided for in
any Loan Document when due (whether on any payment date, at maturity, by reason
of acceleration, by notice of intention to prepay, by required prepayment or
otherwise);
 
(b)  any representation, statement or warranty made or deemed made by Borrower
or any Guarantor in any Loan Document or in any other certificate, document,
report or opinion delivered in conjunction with any Loan Document to which it is
a party, shall not be true and correct in all material respects or shall have
been false or misleading in any material respect on the date when made or deemed
to have been made (except to the extent already qualified by materiality, in
which case it shall be true and correct in all respects and shall not be false
or misleading in any respect);
 
(c)  Borrower or any Guarantor or other party thereto other than Lender shall be
in violation, breach or default of, or shall fail to perform, observe or comply
with any covenant, obligation or agreement set forth in, any Loan Document and
such violation, breach, default or failure shall not be cured within the
applicable period set forth in the applicable Loan Document; provided that, with
respect to the affirmative covenants set forth in Article VI (other than
Sections 6.2, 6.3, 6.9 and 6.11 for which there shall be no cure period), there
shall be a thirty (30) calendar day cure period commencing from the earlier of
(i) Receipt by such Person of written notice of such breach, default, violation
or failure, and (ii) the time at which such Person or any authorized officer
thereof knew or became aware of such failure, violation, breach or default;
provided further, that with respect to Borrower’s Minimum Outstanding Balance
requirement set forth in the financial covenants of Annex I, if Borrower is
otherwise in compliance with such financial covenant and the provisions of
Section 2.4(c) hereof, then Borrower shall not be in violation, breach or
default of such financial covenant if Lender fails to make an Automatic Advance
in accordance with Section 2.4(c) hereof;
 
(d)  (i) any of the Loan Documents ceases to be in full force and effect, or
(ii) any Lien created thereunder ceases to constitute a valid perfected first
priority Lien on the Collateral in accordance with the terms thereof, or Lender
ceases to have a valid perfected first priority security interest in any of the
Collateral pledged to Lender pursuant to the Security Documents, other than, in
the case of clauses (i) and (ii), as a result of any action or omission by
Lender or as a result of a Permitted Lien;
 
(e)  one or more judgments or decrees is rendered against Borrower or Guarantor
in an amount in excess of $100,000 individually or $200,000 in the aggregate,
which is/are not satisfied, stayed, vacated or discharged of record within sixty
(60) calendar days of being rendered;
 
(f)  (i) any default occurs, which is not cured or waived, in the payment of any
amount with respect to any Indebtedness (other than the Obligations) of Borrower
or Guarantor in excess of $250,000, or (ii) any Indebtedness of Borrower or any
Guarantor for borrowed money in an amount in excess of $250,000 is declared to
be due and payable or is required to be prepaid (other than by a regularly
scheduled payment) prior to the stated maturity thereof, or any obligation of
such Person for the payment of Indebtedness for borrowed money in an amount in
excess of $250,000 (other than the Obligations) is not paid when due or within
any applicable grace period, or any such obligation becomes or is declared to be
due and payable before the expressed maturity thereof, or there occurs an event
which, with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due and
payable;

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(g)  Borrower or any Guarantor shall (i) be unable to pay its debts generally as
they become due, (ii) file a petition under any insolvency statute, (iii) make a
general assignment for the benefit of its creditors, (iv) commence a proceeding
for the appointment of a receiver, trustee, liquidator or conservator of itself
or of the whole or any substantial part of its property, or (v) file a petition
seeking reorganization or liquidation or similar relief under any Debtor Relief
Law or any other applicable law or statute;
 
(h)  (i) a court of competent jurisdiction shall (A) enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator of
Borrower or any Guarantor or the whole or any substantial part of any such
Person’s properties, which shall continue unstayed and in effect for a period of
sixty (60) calendar days, (B) shall approve a petition filed against Borrower or
any Guarantor seeking reorganization, liquidation or similar relief under the
any Debtor Relief Law or any other applicable law or statute, which is not
dismissed within sixty (60) calendar days or, (C) under the provisions of any
Debtor Relief Law or other applicable law or statute, assume custody or control
of Borrower or any Guarantor or of the whole or any substantial part of any such
Person’s properties, which is not irrevocably relinquished within sixty (60)
calendar days, or (ii) there is commenced against Borrower or any Guarantor any
proceeding or petition seeking reorganization, liquidation or similar relief
under any Debtor Relief Law or any other applicable law or statute, which (A) is
not unconditionally dismissed within sixty (60) calendar days after the date of
commencement, or (B) is with respect to which such Borrower or Guarantor takes
any action to indicate its approval of or consent to;
 
(i)  (i) any Change of Control occurs, (ii) any Material Adverse Effect or
Material Adverse Change occurs, or (iii) Borrower or Guarantor ceases any
material portion of its business operations as currently conducted;
 
(j)  Lender receives any indication or evidence that Borrower or any Guarantor
may have directly or indirectly been engaged in any type of activity which, in
Lender’s Permitted Discretion, might result in forfeiture of any property to any
Governmental Authority which shall have continued unremedied for a period of
thirty (30) calendar days after written notice from Lender;
 
(k)  an Event of Default as such term is defined under any other Loan Document
occurs and continues for more than any applicable grace period;
 
(l)  uninsured damage to, or loss, theft or destruction of, any portion of the
Collateral occurs that exceeds $50,000 in the aggregate;
 
(m)  Borrower or any Guarantor or any of their respective directors or senior
officers is criminally indicted or convicted under any law that could lead to a
forfeiture of any Collateral;
 
(n)  the issuance of any process for levy, attachment or garnishment or
execution upon or prior to any judgment seeking in any one instance or in the
aggregate a recovery of $50,000 or more against Borrower or any Guarantor or any
of their property or assets; or
 
(o)  Borrower or any Guarantor does, or enters into or becomes a party to any
agreement or commitment to do (except for clause (i) of subsection (i) above),
or cause to be done, any of the things described in this Article VIII or
otherwise prohibited by any Loan Document (subject to any cure periods set forth
therein);
 
then, and in any such event, notwithstanding any other provision of any Loan
Document, Lender may, by notice to Borrower (i) terminate its obligations to
make Advances hereunder, whereupon the same shall immediately terminate and (ii)
declare all or any of the Notes, all interest thereon and all other

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Obligations to be due and payable immediately (except in the case of an Event of
Default under Section VIII(d), (g), (h) or (i)(iii), in which event all of the
foregoing shall automatically and without further act by Lender be due and
payable, provided that, with respect to non-material breaches or violations that
constitute Events of Default under clause (ii) of Section VIII(d), there shall
be a five (5) Business Day cure period commencing from the earlier of (A)
Receipt by the applicable Person of written notice of such breach or violation
or of any event, fact or circumstance constituting or resulting in any of the
foregoing, and (B) the time at which such Person or any authorized officer
thereof knew or became aware, or should have known or been aware, of such breach
or violation and resulting Event of Default or of any event, fact or
circumstance constituting or resulting in any of the foregoing), in each case
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by Borrower.
 
IX.    RIGHTS AND REMEDIES AFTER DEFAULT
 
9.1      Rights and Remedies
 
(a)  In addition to the acceleration provisions set forth in Article VIII above,
upon the occurrence and continuation of an Event of Default, Lender shall have
the right to exercise any and all rights, options and remedies provided for in
any Loan Document, under the UCC or at law or in equity, including, without
limitation, the right to (i) apply any property of Borrower held by Lender to
reduce the Obligations, (ii) foreclose the Liens created under the Security
Documents, (iii) realize upon, take possession of and/or sell any Collateral or
securities pledged with or without judicial process, (iv) exercise all rights
and powers with respect to the Collateral as Borrower, as applicable, might
exercise, (v) collect and send notices regarding the Collateral, with or without
judicial process, (vi) by its own means or with judicial assistance, enter any
premises at which Collateral and/or pledged securities are located, or render
any of the foregoing unusable or dispose of the Collateral and/or pledged
securities on such premises without any liability for rent, storage, utilities,
or other sums, and no Borrower shall resist or interfere with such action, (vii)
at Borrower’s expense, require that all or any part of the Collateral be
assembled and made available to Lender at any place designated by Lender, (viii)
reduce or otherwise change the Facility Cap, and/or (ix) relinquish or abandon
any Collateral or securities pledged or any Lien thereon. Notwithstanding any
provision of any Loan Document, Lender, in its sole discretion, shall have the
right, at any time that Borrower fails to do so, and from time to time, without
prior notice, to: (i) obtain insurance covering any of the Collateral to the
extent required hereunder; (ii) pay for the performance of any of Obligations;
(iii) discharge taxes or Liens on any of the Collateral that are in violation of
any Loan Document unless Borrower is in good faith with due diligence by
appropriate proceedings contesting those items; and (iv) pay for the maintenance
and preservation of the Collateral. Such expenses and advances shall be added to
the Obligations until reimbursed to Lender and shall be secured by the
Collateral, and such payments by Lender shall not be construed as a waiver by
Lender of any Event of Default or any other rights or remedies of Lender.
 
(b)  Borrower agrees that notice received by it at least ten (10) calendar days
before the time of any intended public sale, or the time after which any private
sale or other disposition of Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized market may be sold immediately by Lender without
prior notice to Borrower. At any sale or disposition of Collateral or securities
pledged, Lender may (to the extent permitted by applicable law) purchase all or
any part thereof free from any right of redemption by Borrower which right is
hereby waived and released. Borrower covenants and agrees not to, and not to
permit or cause any of its Subsidiaries to, interfere with or impose any
obstacle to Lender’s exercise of its rights and remedies with respect to the
Collateral. Lender, in dealing with or disposing of the Collateral

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or any part thereof, shall not be required to give priority or preference to any
item of Collateral or otherwise to marshal assets or to take possession or sell
any Collateral with judicial process.
 
9.2      Application of Proceeds
 
In addition to any other rights, options and remedies Lender has under the Loan
Documents, the UCC, at law or in equity, all dividends, interest, rents, issues,
profits, fees, revenues, income and other proceeds collected or received from
collecting, holding, managing, renting, selling, or otherwise disposing of all
or any part of the Collateral or any proceeds thereof upon exercise of its
remedies hereunder shall be applied in the following order of priority:
(i) first, to the payment of all costs and expenses of such collection, storage,
lease, holding, operation, management, sale, disposition or delivery and of
conducting Borrower’s business and of maintenance, repairs, replacements,
alterations, additions and improvements of or to the Collateral, and to the
payment of all sums which Lender may be required or may elect to pay, if any,
for taxes, assessments, insurance and other charges upon the Collateral or any
part thereof, and all other payments that Lender may be required or authorized
to make under any provision of this Agreement (including, without limitation, in
each such case, reasonable in-house documentation and diligence fees and legal
expenses (in amounts not to exceed customary rates charged by outside law
firms), reasonable search, audit, recording, professional and filing fees and
expenses and reasonable attorneys’ fees and all expenses, liabilities and
advances made or incurred in connection therewith); (ii) second, to the payment
of all Obligations as provided herein; (iii) third, to the satisfaction of
Indebtedness secured by any subordinate security interest of record in the
Collateral if written notification of demand therefor is received before
distribution of the proceeds is completed, provided, that, if requested by
Lender, the holder of a subordinate security interest shall furnish reasonable
proof of its interest, and unless it does so, Lender need not address its
claims; and (iv) fourth, to the payment of any surplus then remaining to
Borrower, unless otherwise provided by law or directed by a court of competent
jurisdiction, provided that Borrower shall be liable for any deficiency if such
proceeds are insufficient to satisfy the Obligations or any of the other items
referred to in this section.
 
9.3      Rights of Lender to Appoint Receiver
 
Without limiting and in addition to any other rights, options and remedies
Lender has under the Loan Documents, the UCC, at law or in equity, upon the
occurrence and continuation of an Event of Default, Lender shall have the right
to apply for and have a receiver appointed by a court of competent jurisdiction
in any action taken by Lender to enforce its rights and remedies in order to
manage, protect and preserve the Collateral and continue the operation of the
business of Borrower and to collect all revenues and profits thereof and apply
the same to the payment of all expenses and other charges of such receivership
including the compensation of the receiver and to the payments as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
 
9.4      Rights and Remedies not Exclusive
 
Lender shall have the right in its sole discretion to determine which rights,
Liens and/or remedies Lender may at any time pursue, relinquish, subordinate or
modify, and such determination will not in any way modify or affect any of
Lender’s rights, Liens or remedies under any Loan Document, applicable law or
equity. The enumeration of any rights and remedies in any Loan Document is not
intended to be exhaustive, and all rights and remedies of Lender described in
any Loan Document are cumulative and are not alternative to or exclusive of any
other rights or remedies which Lender otherwise may have. The partial or
complete exercise of any right or remedy shall not preclude any other further
exercise of such or any other right or remedy.
 
X.    WAIVERS AND JUDICIAL PROCEEDINGS

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10.1    Waivers
 
Except as expressly provided for herein, Borrower hereby waives setoff,
counterclaim, demand, presentment, protest, all defenses with respect to any and
all instruments and all notices and demands of any description, and the pleading
of any statute of limitations as a defense to any demand under any Loan
Document. Borrower hereby waives any and all defenses and counterclaims it may
have or could interpose in any action or procedure brought by Lender to obtain
an order of court recognizing the assignment of, or Lien of Lender in and to,
any Collateral. With respect to any action hereunder, Lender conclusively may
rely upon, and shall incur no liability to Borrower in acting upon, any request
or other communication that Lender reasonably believes to have been given or
made by a person authorized on Borrower’s behalf, whether or not such person is
listed on the incumbency certificate delivered pursuant to Section 4.1 hereof.
In each such case, Borrower hereby waives the right to dispute Lender’s action
based upon such request or other communication, absent manifest error.
 
10.2    Delay; No Waiver of Defaults
 
No course of action or dealing, renewal, release or extension of any provision
of any Loan Document, or single or partial exercise of any such provision, or
delay, failure or omission on Lender’s part in enforcing any such provision
shall operate as a waiver of such provision or affect the liability of Borrower
or any Guarantor or preclude any other or further exercise of such provision. No
waiver by any party to any Loan Document of any one or more defaults by any
other party in the performance of any of the provisions of any Loan Document
shall operate or be construed as a waiver of any future default, whether of a
like or different nature, and each such waiver shall be limited solely to the
express terms and provisions of such waiver. Notwithstanding any other provision
of any Loan Document, by completing the Closing under this Agreement and/or by
making Advances, Lender does not waive any breach of any representation or
warranty of under any Loan Document, and all of Lender’s claims and rights
resulting from any such breach or misrepresentation are specifically reserved.
 
10.3    Jury Waiver
 
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY
CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH
PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS
TO TRIAL BY JURY.
 
XI.    EFFECTIVE DATE AND TERMINATION
 
11.1    Effectiveness and Termination
 
Subject to Lender’s right to terminate and cease making Advances upon or after
any Event of Default, this Agreement shall continue in full force and effect
until the full performance and payment in cash of all Obligations, unless
terminated sooner as provided in this Section 11.1. Borrower may terminate this
Agreement at any time upon not less than thirty (30) calendar days’ prior
written notice to Lender and upon full performance and payment in full in cash
of all Obligations (other than any

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contingent reimbursement and indemnification Obligations that are not due and
payable at or prior to the time that borrowings hereunder have been paid in full
which Obligations survive termination pursuant to Section 11.2) on or prior to
such 30th calendar day after Receipt by Lender of such written notice. All of
the Obligations (other than any contingent reimbursement and indemnification
Obligations that are not due and payable at or prior to the time that borrowings
hereunder have been paid in full which Obligations survive termination pursuant
to Section 11.2) shall be immediately due and payable upon any such termination
on the termination date stated in any notice of termination (the “Termination
Date”); provided that, notwithstanding any other provision of any Loan Document,
the Termination Date shall be effective no earlier than the first Business Day
of the month following the expiration of the thirty (30) calendar days’ prior
written notice period. Without limiting the foregoing, Borrower may terminate
the Agreement immediately upon notice and without any early termination or
revolver termination fee under Section 3.4 or otherwise, if Lender at any time
requires Borrower to pay any amounts to Lender pursuant to clause (B) of Section
6.14. The Liens granted to Lender under the Security Documents and the financing
statements filed pursuant thereto and the rights and powers of Lender shall
continue in full force and effect notwithstanding the fact that Borrower’s
borrowings hereunder may from time to time be in a zero or credit position until
all of the Obligations (other than any contingent reimbursement and
indemnification Obligations that are not due and payable at or prior to the time
that borrowings hereunder have been paid in full which Obligations survive
termination pursuant to Section 11.2) have been fully performed and paid in full
in cash; provided, that any Liens created hereunder shall be reinstated if at
any time any amount received by Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower
or upon the appointment of any intervenor or conservator of, or trustee or
similar official for, Borrower or any substantial part of its assets, or
otherwise, all as though such payments had not been made.
 
11.2    Survival
 
All obligations, covenants, agreements, representations, warranties, waivers and
indemnities made by Borrower in any Loan Document shall survive the execution
and delivery of the Loan Documents, the Closing, the making of the Advances and
any termination of this Agreement until all Obligations (other than any
contingent reimbursement and indemnification Obligations that are not due and
payable at or prior to the time that borrowings hereunder have been paid in full
which Obligations survive termination pursuant to Section 11.2) are fully
performed and paid in full in cash; provided, that this Agreement and all
obligations, covenants, agreements, representations, warranties, waivers and
indemnities made by Borrower in any Loan Document shall be reinstated if at any
time any amount received by Lender in respect of the Obligations is rescinded or
must otherwise be restored or returned by Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Borrower or upon the
appointment of any intervenor or conservator of, or trustee or similar official
for, Borrower or any substantial part of its assets, or otherwise, all as though
such payments had not been made. The obligations and provisions of Sections
10.1, 10.3, 11.1, 11.2, 12.4, 12.7 and 12.9 shall survive termination of the
Loan Documents and any payment, in full or in part, of the Obligations.
 
XII.    MISCELLANEOUS
 
12.1    Governing Law; Jurisdiction; Service of Process; Venue
 
The Loan Documents shall be governed by and construed in accordance with the
internal laws of the State of Maryland without giving effect to its choice of
law provisions. Any judicial proceeding against Borrower with respect to the
Obligations, any Loan Document or any related agreement may be brought in any
federal or state court of competent jurisdiction located in the State of

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Maryland. By execution and delivery of each Loan Document to which it is a
party, Borrower (i) accepts the non-exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby,
(ii) waives personal service of process, (iii) agrees that service of process
upon it may be made by certified or registered mail, return receipt requested,
pursuant to Section 12.5 hereof, (iv) waives any objection to jurisdiction and
venue of any action instituted hereunder and agrees not to assert any defense
based on lack of jurisdiction, venue or convenience, and (v) agrees that this
loan was made in Maryland, that Lender has accepted in Maryland Loan Documents
executed by Borrower and has disbursed Advances under the Loan Documents in
Maryland. Nothing shall affect the right of Lender to serve process in any
manner permitted by law or shall limit the right of Lender to bring proceedings
against Borrower in the courts of any other jurisdiction having jurisdiction.
Any judicial proceedings against Lender involving, directly or indirectly, the
Obligations, any Loan Document or any related agreement shall be brought only in
a federal or state court located in the State of Maryland. All parties
acknowledge that they participated in the negotiation and drafting of this
Agreement and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than
against any other.
 
12.2    Successors and Assigns; Participations; New Lenders
 
The Loan Documents shall inure to the benefit of Lender, Transferees and all
future holders of any Note, the Obligations and/or any of the Collateral, and
each of their respective successors and assigns. Each Loan Document shall be
binding upon the Persons other than Lender that are parties thereto and their
respective successors and assigns, and no such Person may assign, delegate or
transfer any Loan Document or any of its rights or obligations thereunder
without the prior written consent of Lender. No rights are intended to be
created under any Loan Document for the benefit of any third party donee,
creditor or incidental beneficiary of Borrower or any Guarantor. Nothing
contained in any Loan Document shall be construed as a delegation to Lender of
any other Person’s duty of performance. SUBJECT TO THIS SECTION 12.2, BORROWER
ACKNOWLEDGES AND AGREES THAT LENDER AT ANY TIME AND FROM TIME TO TIME MAY (I)
DIVIDE AND RESTATE ANY NOTE, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS
(EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A “TRANSFEREE”). Each Transferee
shall have all of the rights and benefits with respect to the Obligations,
Notes, Collateral and/or Loan Documents held by it as fully as if the original
holder thereof, and either Lender or any Transferee shall be designated as the
sole agent to manage the transactions and obligations contemplated therein;
provided that, notwithstanding anything to the contrary in any Loan Document,
(i) Lender or the applicable Transferee shall bear all expenses related to the
sale, assignment or granting of a participating interest in the Obligations and
Loan Documents, (ii) Borrower shall not be obligated to pay under this Agreement
to any Transferee any sum in excess of the sum which Borrower would have been
obligated to pay to Lender had such sale, assignment or granting of a
participation not been effected, (iii) Lender and each Transferee shall agree
that one agent shall be appointed by them, which agent shall act on their
collective behalf in making all decisions and taking all actions under the Loan
Documents, including, without limitation, the (a) granting of waivers and
consents under the Loan Documents, (b) making of amendments, supplements and
modifications to the Loan Documents, (c) declaration and recission of Events of
Default, and (d) enforcing the rights of the Lender under the Loan Documents,
unless in each case the decision or action of such agent would affect the Lender
and Transferee(s) interest in the Loan Documents disproportionately to one
another and (vi) Lender shall provide prior written notice to Borrower of any
such sale, assignment or granting of a participation indicating the name of the
proposed Transferee and shall obtain such Transferee’s written agreement to the
foregoing terms. Notwithstanding any other provision of any Loan Document,
Lender may disclose to any Transferee all information, reports, financial
statements, certificates and documents obtained under any provision of any Loan
Document.

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12.3    Application of Payments
 
To the extent that any payment made or received with respect to the Obligations
is subsequently invalidated, determined to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other Person under any Debtor Relief Law, common law or
equitable cause or any other law, then the Obligations intended to be satisfied
by such payment shall be revived and shall continue as if such payment had not
been received by Lender. Any payments with respect to the Obligations received
shall be credited and applied in such manner and order as Lender shall decide in
its sole discretion.
 
12.4    Indemnity
 
Borrower shall indemnify Lender, its Affiliates and its and their respective
managers, members, officers, employees, Affiliates, agents, representatives,
successors, assigns, accountants and attorneys (collectively, the “Indemnified
Persons”) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, reasonable fees
and disbursements of counsel and reasonable in-house documentation and diligence
fees and legal expenses) which may be imposed on, incurred by or asserted
against any Indemnified Person with respect to or arising out of, or in any
litigation, proceeding or investigation instituted or conducted by any Person
with respect to any aspect of, or any transaction contemplated by or referred to
in, or any matter related to, any Loan Document or any agreement, document or
transaction contemplated thereby, whether or not such Indemnified Person is a
party thereto, except to the extent that any of the foregoing arises out of the
gross negligence or willful misconduct of such Indemnified Person. If any
Indemnified Person uses in-house counsel for any purpose for which Borrower is
responsible to pay or indemnify, Borrower expressly agrees that its
indemnification obligations include reasonable charges for such work
commensurate with the fees that would otherwise be charged by outside legal
counsel selected by such Indemnified Person in its sole discretion for the work
performed. Lender agrees to give Borrower reasonable notice of any event of
which Lender becomes aware for which indemnification may be required under this
Section 12.4, and Borrower may elect (but is not obligated) to direct the
defense thereof, provided that the selection of counsel shall be subject to
Lender’s consent, which consent shall not be unreasonably withheld or delayed.
Any Indemnified Person may, in its reasonable discretion, take such actions as
it deems necessary and appropriate to investigate, defend or settle any event or
take other remedial or corrective actions with respect thereto as may be
necessary for the protection of such Indemnified Person or the Collateral.
Notwithstanding the foregoing, if any insurer agrees to undertake the defense of
an event (an “Insured Event”), Lender agrees not to exercise its right to select
counsel to defend the event if that would cause Borrower’s insurer to deny
coverage; provided, however, that Lender reserves the right to retain counsel to
represent any Indemnified Person with respect to an Insured Event at its sole
cost and expense. To the extent that Lender obtains recovery from a third party
other than an Indemnified Person of any of the amounts that Borrower has paid to
Lender pursuant to the indemnity set forth in this Section 12.4, then Lender
shall promptly pay to such Borrower the amount of such recovery.
 
12.5    Notice
 
Any notice or request under any Loan Document shall be given to any party to
this Agreement at such party’s address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party may
hereafter specify in a notice given in the manner required under this Section
12.5. Any notice or request hereunder shall be given only by, and shall be
deemed to have been received upon (each, a “Receipt”): (i) registered or
certified mail, return receipt requested, on the date on which such received as
indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one (1) Business Day after deposit with such courier, or
(iii) facsimile or

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electronic transmission, in each case upon telephone or further electronic
communication from the recipient acknowledging receipt (whether automatic or
manual from recipient), as applicable.
 
12.6    Severability; Captions; Counterparts; Facsimile Signatures
 
If any provision of any Loan Document is adjudicated to be invalid under
applicable laws or regulations, such provision shall be inapplicable to the
extent of such invalidity without affecting the validity or enforceability of
the remainder of the Loan Documents which shall be given effect so far as
possible. The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan
Documents. The Loan Documents may be executed in one or more counterparts (which
taken together, as applicable, shall constitute one and the same instrument) and
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will
be bound by its own facsimile signature and that it accepts the facsimile
signature of each other party.
 
12.7    Expenses
 
Borrower shall pay, whether or not the Closing occurs, all reasonable costs and
expenses incurred by Lender and/or its Affiliates in connection with this
Agreement and the other Loan Documents, including, without limitation,
documentation and diligence fees and expenses, all search, audit, appraisal,
recording, professional and filing fees and expenses and all other out-of-pocket
charges and expenses (including, without limitation, UCC and judgment and tax
lien searches and UCC filings and fees for post-Closing UCC and judgment and tax
lien searches and wire transfer fees and audit expenses), and reasonable
attorneys’ fees and expenses, (i) in any effort to enforce, protect or collect
payment of any Obligation or to enforce any Loan Document or any related
agreement, document or instrument, (ii) in connection with entering into,
negotiating, preparing, reviewing and executing the Loan Documents and/or any
related agreements, documents or instruments, (iii) arising in any way out of
administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Lender’s Liens in any
of the Collateral or securities pledged under the Loan Documents, whether
through judicial proceedings or otherwise, (v) in defending or prosecuting any
actions, claims or proceedings arising out of or relating to Lender’s
transactions with Borrower, (vi) in seeking, obtaining or receiving any advice
with respect to its rights and obligations under any Loan Document and any
related agreement, document or instrument, and/or (vii) in connection with any
modification, restatement, supplement, amendment, waiver or extension of any
Loan Document and/or any related agreement, document or instrument. All of the
foregoing shall be charged to Borrower’s account and shall be part of the
Obligations. If Lender or any of its Affiliates uses in-house counsel for any
purpose under any Loan Document for which Borrower is responsible to pay or
indemnify, Borrower expressly agrees that its Obligations include reasonable
charges for such work commensurate with the fees that would otherwise be charged
by outside legal counsel selected by Lender or such Affiliate in its sole
discretion for the work performed. Without limiting the foregoing, Borrower
shall pay all taxes (other than taxes based upon or measured by Lender’s income
or revenues or any personal property tax), if any, in connection with the
issuance of any Note and the filing and/or recording of any documents and/or
financing statements. Notwithstanding the foregoing, in the event the Closing
does not occur, the maximum costs and expenses that Borrower will pay shall be
$40,000.
 
12.8    Entire Agreement
 
This Agreement, the other Loan Documents to which Borrower is a party and that
certain Letter Agreement between Borrower and Lender, dated as of the Closing
Date, constitute the entire agreement between Borrower and Lender with respect
to the subject matter hereof and thereof, and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof or thereof.

32

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Any promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing signed by
Borrower and Lender. No provision of this Agreement may be changed, modified,
amended, restated, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing or in any other manner other than by an
agreement in writing signed by Lender and Borrower. Each party hereto
acknowledges that it has been advised by counsel in connection with the
negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions hereof.
 
12.9    Lender Approvals
 
Unless expressly provided herein to the contrary, any approval, consent, waiver
or satisfaction of Lender with respect to any matter that is subject of any Loan
Document may be granted or withheld by Lender in its sole and absolute
discretion.
 
12.10  Confidentiality and Publicity
 
(a)  Borrower agrees, and agrees to cause each of its Affiliates, (i) not to
transmit or disclose provision of any Loan Document to any Person (other than to
Borrower’s advisors and officers on a need-to-know basis) without Lender’s prior
written consent, (ii) to inform all Persons of the confidential nature of the
Loan Documents and to direct them not to disclose the same to any other Person
and to require each of them to be bound by these provisions; provided, however,
that Lender acknowledges that Borrower intends to file a copy of this Agreement
as an exhibit to its periodic reports and will be required to refer to certain
material provisions of the Loan Documents in its SEC filings from time to time,
and no consent of Lender is required in connection with these disclosures (the
“SEC Disclosures”). Lender reserves the right to review and approve all
materials that Borrower or any of its Affiliates prepares that contain Lender’s
name or describe or refer to any Loan Document, any of the terms thereof or any
of the transactions contemplated thereby, other than the SEC Disclosures.
Borrower shall not, and shall not permit any of its Affiliates to, use Lender’s
name (or the name of any of Lender’s Affiliates) in connection with any of its
business operations, other than the SEC Disclosures. Nothing contained in any
Loan Document is intended to permit or authorize Borrower or any of its
Affiliates to contract on behalf of Lender. Further, Borrower hereby agrees that
Lender or any Affiliate of Lender may (i) disclose a general description of
transactions arising under the Loan Documents for advertising, marketing or
other similar purposes and (ii) use Borrower’s or any Guarantor’s name, logo or
other indicia germane to such party in connection with such advertising,
marketing or other similar purposes.
 
(b)  Lender agrees that it shall keep confidential any proprietary information
given to it by Borrower (including information given to it pursuant to Section
6.7 or Section 6.1 or otherwise); provided, however, that this restriction shall
not apply to information which (i) has at the time in question entered the
public domain other than by reason of breach of this provision by Lender, (ii)
is required to be disclosed by law or by any order, rule or regulation of any
court or governmental agency, or authority, or is disclosed to any Transferee,
Affiliates, lenders and other funding sources of Lender, auditors, attorneys, or
agents of Lender so long as Lender requests that such Person or Persons keep
such information confidential in accordance with the terms of the
confidentiality provisions of this Section 12.10. With respect to clause (ii) of
the preceding sentence, Lender shall promptly notify Borrower and shall use
commercially reasonable efforts to obtain or provide Borrower with the
opportunity to obtain confidential treatment of such information by the court,
governmental agency, authority or other disclosee.
 
 
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

33

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IN WITNESS WHEREOF, each of the parties has duly executed this Revolving Credit
and Security Agreement as of the date first written above.
 
 
WOMEN FIRST HEALTHCARE, INC.
By:
 
/S/    CHARLES M. CAPORALE

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

   
Name:
 
Charles M. Caporale
   
Its:
 
Vice President, Chief Financial Officer,
     Treasurer and Secretary
 
Address for Notices for Borrower:
12220 El Camino Real, Suite 400
San Diego, CA 92130
Attention: President
Telephone: (858) 509-1171
FAX: (858) 509-1353

 
 
 
 
CAPITALSOURCE FINANCE LLC
By:
 
/S/    KATHLEEN M. MIKO

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

   
Name:
 
Kathleen M. Miko
   
Its:
 
Vice President
 
Address for Notices:
CapitalSource Finance LLC
4445 Willard Avenue, 12th Floor
Chevy Chase, MD 20815
Attention: Healthcare Finance Group, Portfolio Manager
Telephone: (301) 841-2700
FAX: (301) 841-2340
E-Mail: aheller@capitalsource.com

34

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ANNEX
         
Annex I
     
—
      
Financial Covenants
                          
EXHIBITS
         
Exhibit A
     
—
      
Borrowing Certificate
                          
SCHEDULES
         
Schedule 2.4
     
—
      
Borrower’s Accounts
         
Schedule 5.2
     
—
      
Required Consents
         
Schedule 5.3
     
—
      
Directors, Officers and Joint Ventures
         
Schedule 5.4
     
—
      
Real Property Owned or Leased; Leases
         
Schedule 5.5
     
—
      
Defaults; Service Fees; Managers
         
Schedule 5.6
     
—
      
Litigation
         
Schedule 5.8
     
—
      
Taxes
         
Schedule 5.11
     
—
      
Intellectual Property
         
Schedule 5.15
     
—
      
Existing Indebtedness
         
Schedule 5.16
     
—
      
Other Agreements
         
Schedule 5.17
     
—
      
Insurance
         
Schedule 5.18A
     
—
      
Corporate Names
         
Schedule 5.18B
     
—
      
Places of Business
         
Schedule 6.8
     
—
      
Further Assurances/Post Closing
         
Schedule 7.2
     
—
      
Permitted Indebtedness
         
Schedule 7.3
     
—
      
Permitted Liens
         

 

1

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ANNEX I
 
FINANCIAL COVENANTS
 
1)        Minimum Outstanding Balance on the Revolving Facility
 
From and after the first month after the Closing Date, the aggregate Advances
outstanding at any one time shall not be less than the lesser of (i) 100% of
Availability or (ii) $1,500,000.
 
2)        Minimum EBITDA
 
Borrower shall not, and shall not permit any of its Subsidiaries to, permit
Actual EBITDA for Borrower for the period of four consecutive Fiscal Quarters
ending on each date specified below to be less than the amount set forth
opposite such period below:
 
Date

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

                       
Actual
EBITDA Amount

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

March 31, 2003
                       
$11.3 million
June 30, 2003
                       
$12.3 million
September 30, 2003
                       
$13.3 million
December 31, 2003
                       
$14.5 million
March 31, 2004
                       
$15.5 million
June 30, 2004
                       
$16.5 million
September 30, 2004
                       
$17.5 million
December 31, 2004
                       
$18.5 million
March 31, 2005
                       
$18.5 million
June 30, 2005
                       
$18.5 million

 
3)        Fixed Charge Coverage Ratio (EBITDA/Fixed Charges)
 
Borrower shall not, and shall not permit any of its Subsidiaries to, permit the
Fixed Charge Coverage Ratio of Borrower for the period of four consecutive
Fiscal Quarters ending on each date specified below to be less than the amount
set forth opposite such period below:
 
Date

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

                         
Fixed Charge Coverage

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

March 31, 2003
                         
  2.0:1
June 30, 2003
                         
  2.0:1
September 30, 2003
                         
  2.0:1
December 31, 2003
                         
1.75:1
March 31, 2004
                         
  2.0:1
June 30, 2004
                         
  2.0:1
September 30, 2004
                         
  2.0:1
December 31, 2004
                         
  2.0:1
March 31, 2005
                         
  2.0:1
June 30, 2005
                         
  2.0:1

1

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

 
4)        Net Worth
 
Until full performance and satisfaction, and payment in full in cash, of all the
Obligations, Borrower shall not, and shall not permit any of its Subsidiaries to
permit Adjusted Net Worth of Borrower, as of the end of any Fiscal Quarter of
Borrower, to be less than 90% of the Net Worth of Borrower as of June 30, 2002,
increasing at the end of fiscal 2002 by 50% of Consolidated Net Income from July
1, 2002 to the end of fiscal 2002 and at the end of each Fiscal Year thereafter
by 50% of the Consolidated Net Income; provided that no adjustment shall be made
for any period in which Borrower has negative Consolidated Net Income.
 
5)        Capital Expenditures and Operating Leases
 
The Borrower shall not, and shall not permit any of its Subsidiaries to, make
any Capital Expenditures, during the Fiscal Years ending on each date specified
below to exceed the amount set forth opposite such period below:
 
Fiscal Year

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

  
Capital Expenditures

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

2003
  
$1.75 million
2004
  
$1.75 million

 
For purposes of the covenants set forth in this Annex I, the terms listed below
shall have the following meanings:
 
“Actual EBITDA” means, with respect to any Person, for any period, an amount
equal to (a) the sum of (1) Consolidated Net Income for such period; plus (2)
the provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income and
any provision for taxes utilized in computing net loss under clause (1) hereof;
plus (3) Consolidated Interest Expense; provided, however, for purposes of this
definition only, that dividends or distributions paid on Disqualified Capital
Stock shall not be included in the definition of Consolidated Interest Expense
to the extent such dividends or distributions have not been included in the
computation of Consolidated Net Income for such period; plus (4) depreciation
for such period on a consolidated basis; plus (5) amortization of intangibles
for such period on a consolidated basis; plus (6) the accretion of stated value
and dividends, if any, on the Preferred Stock and dividends on any other class
or series of preferred stock; plus (7) any other non-cash items reducing
Consolidated Net Income for such period; minus (b) the sum of (1) interest
income for such period, and (2) all non-cash items increasing Consolidated Net
Income for such period.
 
“Adjusted Net Worth” means, with respect to any Person, the Net Worth of such
Person, at any time, plus the sum of (i) cumulative charges associated with any
write-downs or write-offs of impaired assets or assets previously used in
discontinued operations made in accordance with FASB 142 under GAAP incurred by
such Person since July 1, 2002 and (ii) cumulative charges associated with the
early extinguishment of debt incurred by such Person since July 1, 2002.
 
“Capital Expenditure” means any amount paid or incurred in connection with the
purchase of real estate, plant, machinery, equipment or the expenditures in
connection with moving the manufacturing of a product from the former owner of
the product to a contract manufacturer or other similar expenditure (including
all renewals, improvements and replacements thereto, and all obligations under
any lease of any of the foregoing) which would be required to be capitalized and
shown on the consolidated balance sheet of Borrower in accordance with GAAP.

2

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

 
“Capital Stock” means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or membership interests, as the case may be, including each class of
common stock and preferred stock of such Person.
 
“Capitalized Lease Obligations” means with respect to any Person, Indebtedness
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount of such
Indebtedness shall be the capitalized amount of such obligations determined in
accordance with GAAP.
 
“Cash Interest Expense” shall mean, for any Person for any period, interest
expense for such period, determined on a consolidated basis in accordance with
GAAP, excluding (a) interest paid in kind or by accretion or addition to
principal, (b) amortization of commissions, discounts, fees, costs and other
charges paid in connection with the incurrence of Indebtedness and (c) other
interest costs not paid in cash.
 
“Consolidated Interest Expense” means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption “interest expense” or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to:
 
(1)    imputed interest included in Capitalized Lease Obligations;
 
(2)    all commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers’ acceptance financing;
 
(3)    the net costs associated with Interest Rate Agreements and other hedging
obligations;
 
(4)    amortization of debt issuance costs fees and expenses;
 
(5)    the interest portion of any deferred payment obligation;
 
(6)    amortization of discount or premium, if any; and
 
(7)    all other non-cash interest expense (other than interest allocated to
cost of sales));
 
plus, without duplication, all net capitalized interest for such period and all
interest incurred or paid under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any Person, plus
the amount of all dividends or distributions paid on Disqualified Capital Stock
(other than dividends paid or payable in shares of Capital Stock of Borrower).
 
“Consolidated Net Income” means, with respect to any Person, for any period, the
aggregate of the Net Income of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP; provided, however,
that (a) (1) the equity of the Person in question in the Net Income of any other
Person (the “other Person”) in which the Person in question or any of its
Subsidiaries has less than a 100% interest (which interest is not sufficient to
cause the Net Income of such other Person to be consolidated into the Net Income
of the Person in question in accordance with GAAP) for such period shall be
included in such Person’s Consolidated Net Income only to the extent of the
amount of dividends or distributions actually paid to the Person in question or
the Subsidiary (subject, in the case of a dividend or distribution to a
Subsidiary, to the limitations contained in clause (b) of this

3

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

 
definition of “Consolidated Net Income”), and (2) such Person’s equity in a net
loss of any such Person for such period shall be included in determining such
Person’s Consolidated Net Income; (b) the Net Income of any Subsidiary of the
Person in question that is subject to any restriction or limitation on the
payment of dividends or the making of other distributions shall be excluded to
the extent of such restriction or limitation, except that (1) subject to the
limitations contained in subclause (b)(2) of this definition of “Consolidated
Net Income”, the equity of such Person in the Net Income of any such Subsidiary
for such period shall be included in such Person’s Consolidated Net Income to
the extent of dividends or distributions that could have been paid by such
Subsidiary during such period to such Person or another Subsidiary (subject, in
the case of a dividend or distribution to another Subsidiary, to the limitations
contained in this clause), and (2) such Person’s equity in a net loss of any
such Subsidiary for such period shall be included in determining such
Consolidated Net Income; (c) any net gain or loss resulting from an asset sale
by the Person in question or any of its Subsidiaries other than in the ordinary
course of business shall be excluded; (d) extraordinary gains and losses shall
be excluded; (e) charges associated with any write-downs or write-offs of
impaired assets or assets previously used in discontinued operations made in
accordance with GAAP shall be excluded; (f) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued) shall be excluded; (g) charges associated with the early
extinguishment of debt shall be excluded; and (h) in the case of a successor to
the referent Person by consolidation or merger or as a transferee of the
referent Person’s assets, any earnings of the successor entity prior to such
consolidation, merger or transfer of assets shall be excluded.
 
“Disqualified Capital Stock” shall mean any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holders), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof, in whole
or in part, on or prior to the expiration of the Term for cash or securities
constituting Indebtedness.
 
“Existing Secured Debt” means any Indebtedness outstanding on the Closing Date
pursuant to the Securities Purchase Agreement dated June 29, 2001 between
Borrower and Elan Pharma International Limited and the Senior Secured Promissory
Note dated November 15, 2001 issued by Borrower to American Home Products
Corporation.
 
“Fiscal Quarter” means each quarterly accounting period of each fiscal year of
Borrower.
 
“Fixed Charge Coverage Ratio” means for any Person for any period, a fraction,
the numerator of which is Actual EBITDA of such Person for such period plus the
aggregate amount of rental expenses actually incurred by such Person and its
Subsidiaries during such period, and the denominator of which is Fixed Charges
for such period.
 
“Fixed Charges” means for any Person for any period, the sum of (a) regularly
scheduled mandatory principal payments on Indebtedness of such Person and its
Subsidiaries for such period, excluding the regularly scheduled mandatory
principal payment of $3.25 million due in November 2002 to American Home
Products Corporation under the Existing Secured Debt held by American Home
Products Corporation, (b) the aggregate amount of any optional prepayments of
Indebtedness of such Person and its Subsidiaries made during such period, (c)
the amount of taxes actually paid in cash by such Person or any Subsidiary
during such period, (d) Cash Interest Expense for such period, (e) Capital
Expenditures actually made by such Person and its Subsidiaries during such
period and (f) rental expenses actually incurred by such Person and its
Subsidiaries during such period, in each case determined on a consolidated basis
in accordance with GAAP.

4

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

 
“Interest Rate Agreement” means, with respect to any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
 
“Net Income” means, with respect to any Person, for any period, the net income
(loss) available to common stockholders of such Person determined in accordance
with GAAP.
 
“Net Worth” means, with respect to any Person, at any time, the consolidated
stockholders’ equity of such Person at such time, determined in accordance with
GAAP, except that there shall be deducted any amount of treasury stock reflected
as an asset at such time.
 
“Preferred Stock” means the Senior Convertible Redeemable Preferred Stock,
Series A of Borrower.
 

5

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

 

APPENDIX A

 

DEFINITIONS

 

“Accounts” shall mean all “accounts” (as defined in the UCC) of Borrower (or, if
referring to another Person, of such other Person), including without
limitation,    , accounts receivables, monies due or to become due and
obligations in any form (whether arising in connection with contracts, contract
rights, Instruments, General Intangibles or Chattel Paper), in each case whether
arising out of goods sold or services rendered, now or hereafter in existence,
and all documents of title or other documents representing any of the foregoing,
and all collateral security and guaranties of any kind, now or hereafter in
existence, given by any Person with respect to any of the foregoing.

 

“Account Debtor” shall mean any Person who is obligated under an Account.

 

“Advance” shall mean a borrowing under the Revolving Facility. Any amounts paid
by Lender on behalf of Borrower or any Guarantor under any Loan Document shall
be an Advance for purposes of the Agreement.

 

“Affiliate” shall mean, as to any Person, any other Person (a) that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person, (b) who is a director or officer of such
Person, or (c) which, directly or indirectly through one or more intermediaries,
is the beneficial or record owner (as defined in Rule 13d-3 of the Exchange Act,
as the same is in effect on the date hereof) of ten percent (10%) or more of any
class of the outstanding voting stock, securities or other equity or ownership
interests of such Person. For purposes of this definition, the term “control”
(and the correlative terms, “controlled by” and “under common control with”)
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies, whether through ownership of
securities or other interests, by contract or otherwise.

 

“Applicable Rate” shall mean the interest rates applicable from time to time to
Advances under the Agreement.

 

“As We Change” shall mean As We Change, LLC, a Delaware limited liability
company.

 

“Books and Records” shall mean Borrower’s books and records specifically
relating to Accounts, including, but not limited to, ledgers, records
indicating, summarizing, or evidencing Borrower’s Accounts and all computer
programs, disc or tape files, printouts, runs, and other computer prepared
information with respect to the foregoing and any software necessary to operate
the same.

 

“Borrowing Base” shall mean, as of any date of determination, the net
collectible U.S. Dollar value of Eligible Receivables, as determined with
reference to the most recent Borrowing Certificate and otherwise in accordance
with the Agreement; provided, however, that if as of such date the most recent
Borrowing Certificate is of a date more than four (4) Business Days before or
after such date, the Borrowing Base shall be determined by Lender in its
Permitted Discretion.

 

“Borrowing Certificate” shall mean a Borrowing Certificate substantially in the
form of Exhibit A.

 

1

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

 
“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which the Federal Reserve or banks in Maryland are closed.
 
“Capital Expenditures” shall mean, for any test period, the sum (without
duplication) of all expenditures (whether paid in cash or accrued as
liabilities) during the test period that are or should be treated as capital
expenditures under GAAP.
 
“Capital Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset by that Person as lessee that is, should be or should
have been recorded as a “capital lease” in accordance with GAAP.
 
“Capitalized Lease Obligations” shall mean all obligations of any Person under
Capital Leases, in each case, taken at the amount thereof accounted for as a
liability in accordance with GAAP.
 
“Change of Control” shall mean, with respect to Borrower or any Guarantor, the
occurrence of any of the following: (i) a merger, consolidation, reorganization,
recapitalization or share or interest exchange, sale or transfer or any other
transaction or series of transactions in which its stockholders, managers,
partners or interest holders immediately prior to such transaction or series of
transactions receive, in exchange for the stock or interests owned by them,
cash, property or securities of the resulting or surviving entity or any
Affiliate thereof, and, as a result thereof, Persons who, individually or in the
aggregate, were holders of 50% or more of its voting stock or voting membership
interests immediately prior to such transaction or series of transactions hold
less than 50% of the voting stock or voting membership interests of the
resulting or surviving entity or such Affiliate thereof, calculated on a fully
diluted basis, (ii) a direct or indirect sale, transfer or other conveyance or
disposition, in any single transaction or series of transactions, of all or
substantially all of its assets, or (iii) the initial public offering of its
common stock after the date hereof.
 
“Charter and Good Standing Documents” shall mean, for Borrower (i) a copy of the
certificate of incorporation or formation (or other charter document) certified
as of a date satisfactory to Lender before the Closing Date by the applicable
Governmental Authority of the jurisdiction of incorporation or organization of
such Borrower, (ii) a copy of the bylaws or similar organizational documents of
certified as of a date satisfactory to Lender before the Closing Date by the
corporate secretary or assistant secretary of such Borrower, (iii) an original
certificate of good standing as of a date acceptable to Lender issued by the
applicable Governmental Authority of the jurisdiction of incorporation or
organization of such Borrower and of every other jurisdiction in which such
Borrower has an office or is otherwise required to be in good standing, and (iv)
copies of the resolutions of the Board of Directors or managers (or other
applicable governing body) and, if required, stockholders, members or other
equity owners authorizing the execution, delivery and performance of the Loan
Documents to which such Borrower is a party, certified by an authorized officer
of such Person as of the Closing Date.
 
“CIBC Secured Notes” shall mean those certain Senior Secured Notes due September
30, 2005 issued under the Note and Warrant Purchase Agreement dated June 25,
2002.
 
“Closing” shall mean the satisfaction, or written waiver by Lender, of all of
the conditions precedent set forth in the Agreement required to be satisfied
prior to the consummation of the transactions contemplated hereby.
 
“Closing Date” shall mean the date the Closing occurs.
 
“Collateral” shall have the meaning ascribed to such term in Section 2.9.

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“Debtor Relief Law” shall mean, collectively, the Bankruptcy Code of the United
States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally, as amended from time to time.
 
“Default” shall mean any event, fact, circumstance or condition that, with the
giving of applicable notice or passage of time or both, would constitute or be
or result in an Event of Default.
 
“Distribution” shall mean any fee, payment, bonus or other remuneration of any
kind, and any repayment of or debt service on loans or other indebtedness.
 
“Eligible Receivables” shall mean each Account arising in the ordinary course of
Borrower’s business from the sale of goods or rendering of services which
Lender, in its Permitted Discretion, deems an Eligible Receivable unless:
 
(a)  it is not subject to a valid perfected first priority security interest in
favor of Lender, and subject to no other Lien;
 
(b)  it is not evidenced by an invoice, statement or other documentary evidence
satisfactory to Lender; provided, that Lender in its sole discretion may from
time to time include Accounts that are not evidenced by an invoice, statement or
other documentary evidence satisfactory to Lender as Eligible Receivables and
determine the advance rate, liquidity factors and reserves applicable to
Advances made on any such Accounts;
 
(c)  it or any portion thereof (in which case only such portion shall not be an
Eligible Receivable) is payable by a beneficiary, recipient or subscriber
individually and not directly by a commercial pharmaceutical distributor
acceptable to Lender (it being understood by the parties that QK Healthcare,
Inc., Cardinal Health, Inc. and McKesson Drug Operations are acceptable to
Lender);
 
(d)  it arises out of services rendered or a sale made to, or out of any other
transaction between Borrower or any of its Subsidiaries and, one or more
Affiliates of Borrower or any of its Subsidiaries;
 
(e)  it remains unpaid for longer than the earlier of 90 calendar days after the
invoice date;
 
(f)  with respect to all Accounts owed by any particular Account Debtor and/or
its Affiliates, if more than fifty percent (50%) of the aggregate balance of all
such Accounts owing from such Account Debtor and/or its Affiliates remain unpaid
for longer 90 calendar days after the invoice date;
 
(g)  with respect to all Accounts owed by any particular Account Debtor and/or
its Affiliates, 25% or more of all such Accounts are not deemed Eligible
Receivables for any reason hereunder;
 
(h)  with respect to all Accounts owed by any particular Account Debtor and/or
its Affiliates, if such Accounts exceed 20% of the net collectible dollar value
of all Eligible Receivables at any one time (other than the Accounts owed by
McKesson Drug Operations, which shall not exceed 40%, QK Healthcare, Inc. which
shall not exceed 30%, and Cardinal Health, which shall not exceed 25% of the net
collectible dollar value of all Eligible Receivables);

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(i)   any covenant, agreement, representation or warranty contained in any Loan
Document with respect to such Account has been breached and remains uncured;
 
(j)   the Account Debtor for such Account has commenced a voluntary case under
any Debtor Relief Law or has made an assignment for the benefit of creditors, or
a decree or order for relief has been entered by a court having jurisdiction in
respect of such Account Debtor in an involuntary case under any Debtor Relief
Law, or any other petition or application for relief under any Debtor Relief Law
has been filed against such Account Debtor, or such Account Debtor has failed,
suspended business, ceased to be solvent, called a meeting of its creditors, or
has consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or affairs,
or Borrower, in the ordinary course of business, should have known of any of the
foregoing;
 
(k)   it arises from the sale of property or services rendered to one or more
Account Debtors outside the continental United States or that have their
principal place of business or chief executive offices outside the continental
United States;
 
(l)   it represents the sale of goods or rendering of services to an Account
Debtor on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is evidenced by Chattel
Paper or an Instrument of any kind or has been reduced to judgment (it being
understood that Accounts with customary right of return in accordance with
pharmaceutical industry practice will not be disqualified as Eligible
Receivables);
 
(m)   the applicable Account Debtor for such Account is any Governmental
Authority, unless rights to payment of such Account have been assigned to Lender
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section
3727, et seq. and 41 U.S.C. Section 15, et seq.), or otherwise all with
applicable statutes or regulations respecting the assignment of Government
Accounts have been complied with;
 
(n)   it is subject to any known offset, credit (including any resource or other
income credit or offset) deduction, defense, discount, chargeback, freight
claim, allowance, adjustment, dispute or counterclaim, or is contingent in any
respect or for any reason, but only to such extent;
 
(o)   there is any agreement with an Account Debtor for any deduction from such
Account, except for discounts or allowances made in the ordinary course of
business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the face value of each invoice related thereto, such that
only the discounted amount of such Account after giving effect to such discounts
and allowances shall be considered an Eligible Receivable;
 
(p)   any return, rejection or repossession of goods or services related to it
has occurred, but only to such extent;
 
(q)   it is not payable to Borrower;
 
(r)   Borrower has agreed to accept or has accepted any non-cash payment for
such Account;
 
(s)   with respect to any Account arising from the sale of goods, the goods have
not been shipped to the Account Debtor or its designee;
 
(t)   with respect to any Account arising from the performance of services, the
services have not been actually performed or the services were undertaken in
violation of any law; or

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(u)  such Account fails to meet such other specifications and requirements which
may from time to time be established by Lender or is not otherwise satisfactory
to Lender, as determined in Lender’s Permitted Discretion upon five (5) Business
Days’ notice to Borrower; provided, however, that any failure of Lender to
provide such notice or communication shall not negate the effectiveness or
application of any such specifications, requirements or determinations, result
in any liability of Lender or otherwise release or excuse Borrower from its
Obligations.
 
“Environmental Laws” shall mean, collectively and each individually, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendment and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air
Act, the Clean Water Act, any other “Superfund” or “Superlien” law and all other
federal, state and local and foreign environmental, land use, zoning, health,
chemical use, safety and sanitation laws, statutes, ordinances and codes
relating to the protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances, in each case, as amended, and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of Governmental Authorities with respect thereto.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
 
“Event of Default” shall mean the occurrence of any event set forth in Article
VIII.
 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
 
“Fair Valuation” shall mean the determination of the value of the consolidated
assets of a Person on the basis of the amount which may be realized by a willing
seller within a reasonable time through collection or sale of such assets at
market value on a going concern basis to an interested buyer who is willing to
purchase under ordinary selling conditions in an arm’s length transaction.
 
“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time as applied by nationally recognized
accounting firms.
 
“Government Account” shall be defined to mean all Accounts arising out of or
with respect to any Government Contract.
 
“Government Contract” shall be defined to mean all contracts with the United
States Government or with any agency thereof, and all amendments thereto.
 
“Governmental Authority” shall mean any federal, state, municipal, national,
local or other governmental department, court, commission, board, bureau, agency
or instrumentality or political subdivision thereof, or any entity or officer
exercising executive, legislative or judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case, whether
of the United States or a state, territory or possession thereof, a foreign
sovereign entity or country or jurisdiction or the District of Columbia.
 
“Guarantor” shall mean, collectively and each individually, all guarantors of
the Obligations or any part thereof, including, without limitation, As We
Change.
 
“Guaranty” shall mean, collectively and each individually, all guarantees
executed by any Guarantors.

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“Hazardous Substances” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials
as defined in or subject to any applicable Environmental Law.
 
“Indebtedness” of any Person shall mean, without duplication, (a) all items
which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
as of the date as of which Indebtedness is to be determined, including any lease
which, in accordance with GAAP would constitute Indebtedness, (b) all
indebtedness secured by any mortgage, pledge, security, Lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Person is subject, whether or not the indebtedness secured thereby shall
have been assumed, (c) all indebtedness of others which such Person has directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly liable.
Notwithstanding any other provision of the foregoing definition, any trade
payable arising from the purchase of goods or materials or for services obtained
in the ordinary course of business shall not be deemed to be Indebtedness of
Borrower or any of its Subsidiaries for purposes of this definition.
 
“Insurer” shall mean a Person that insures another Person against any costs
incurred in the receipt by such other Person of services, or that has an
agreement with Borrower to compensate it for providing services to such Person.
 
“Landlord Waiver and Consent” shall mean a waiver/consent in form and substance
satisfactory to Lender from the owner/lessor of any premises not owned by
Borrower at which any of the Collateral is now or hereafter located for the
purpose of providing Lender access to such Collateral, in each case as such may
be modified, amended or supplemented from time to time.
 
“Lien” shall mean any mortgage, pledge, security interest, encumbrance,
restriction, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof), or any other arrangement pursuant to which title
to the property is retained by or vested in some other Person for security
purposes.
 
“Loan” or “Loans” shall mean, individually and collectively, all Advances under
the Revolving Facility.
 
“Loan Documents” shall mean, collectively and each individually, the Agreement,
the Notes, the Security Documents, the Guaranty, the Lockbox Agreements, the
Uniform Commercial Code Financing Statements, the Landlord Waiver and Consents,
the Borrowing Certificates, and all other agreements, documents, instruments and
certificates heretofore or hereafter executed or delivered to Lender in
connection with any of the foregoing or the Loans, as the same may be amended,
modified or supplemented from time to time.
 
“Lockbox Accounts” shall mean the accounts maintained by Borrower at the Lockbox
Banks into which all collections or payments on its Accounts and other
Collateral are paid.
 
“Material Adverse Effect” or “Material Adverse Change” shall mean any event,
condition or circumstance or set of events, conditions or circumstances or any
change(s) which (i) has, had or would reasonably be expected to have any
material adverse effect upon or change in the validity or

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enforceability of any Loan Document, (ii) has been or would reasonably be
expected to be material and adverse to the value of any of the Collateral or to
the business, operations, properties, assets, liabilities or condition of
Borrower, either individually or taken as a whole, or (iii) has materially
impaired or would reasonably be expected to materially impair the ability of
Borrower to perform the Obligations or to consummate the transactions under the
Loan Documents executed by such Person.
 
“Minimum Termination Fee” shall mean (for the time period indicated) the amount
equal to (i) 3.0% of the Facility Cap, if the date of notice of such termination
by Borrower is after the Closing Date but before the first anniversary of the
Closing Date; (ii) 2.0% of the Facility Cap, if the date of notice of such
termination by Borrower is after first anniversary of the Closing Date but
before the second anniversary of the Closing Date; and (ii) 1.0% of the Facility
Cap, if the date of notice of such termination by Borrower is on or after the
second anniversary of the Closing Date.
 
“Note” shall mean, collectively and each individually, the promissory note(s)
payable to the order of Lender executed by Borrower evidencing the Revolving
Facility, as the same may be modified, amended or supplemented from time to
time.
 
“Obligations” shall mean all shall mean all present and future obligations,
Indebtedness and liabilities of Borrower and/or Guarantors to Lender at any time
and from time to time of every kind, nature and description, direct or indirect,
secured or unsecured, joint and several, absolute or contingent, due or to
become due, matured or unmatured, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, under any of the Loan Documents or
otherwise relating to Notes and/or Loans, including, without limitation, all
applicable fees, charges and expenses and/or all amounts paid or advanced by
Lender on behalf of or for the benefit of Borrower and/or any Guarantor for any
reason at any time, including in each case obligations of performance as well as
obligations of payment and interest that accrue after the commencement of any
proceeding under any Debtor Relief Law by or against any such Person.
 
“Payment Office” shall mean initially the address set forth beneath Lender’s
name on the signature page of the Agreement, and thereafter, such other office
of Lender, if any, which it may designate by notice to Borrower to be the
Payment Office.
 
“Permit” shall mean collectively all licenses, leases, powers, permits,
franchises, certificates, authorizations, approvals, certificates of need,
provider numbers and other rights.
 
“Permitted Discretion” shall mean a determination or judgment made by Lender in
good faith in the exercise of reasonable (from the perspective of a secured
lender) business judgment.
 
“Permitted Refinancing Indebtedness” means any Indebtedness of Borrower issued
in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other Indebtedness of Borrower; provided that:
 
(a)  the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness extended, refinanced, renewed,
replaced, defeased or refunded (plus all accrued interest on the Indebtedness
and the amount of all expenses and premiums incurred in connection therewith;
and
 
(b)  if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the Note held by Lender, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of

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payment to, the Note on terms at least as favorable to Lender as those contained
in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
 
“Person” shall mean an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature.
 
“Prime Rate” shall mean a fluctuating interest rate per annum equal at all times
to the rate of interest announced publicly from time to time by Citibank, N.A.
as its base rate; provided, that such rate is not necessarily the best rate
offered to its customers, and, should Lender be unable to determine such rate,
such other indication of the prevailing prime rate of interest as may reasonably
be chosen by Lender; provided, that each change in the fluctuating interest rate
shall take effect simultaneously with the corresponding change in the Prime
Rate.
 
“Revolving Facility Maturity Date” shall have the meaning assigned to such term
in Section 2.2(b).
 
“SEC Reports” means Borrower’s Annual Report on Form 10-K for the Fiscal Year
ended December 31, 2001 and WFHC’s Quarterly Report on Form 10-Q for the
quarterly periods ended March 31, 2002, June 30, 2002 and September 30, 2002,
including all exhibits thereto and those incorporated by reference.
 
“Security Documents” shall mean the Notes, this Agreement, Lockbox Agreements,
Uniform Commercial Code Financing Statements and all other documents or
instruments necessary to create or perfect the Liens in the Collateral, as such
may be modified, amended or supplemented from time to time.
 
“Subsidiary” shall mean, (i) as to Borrower, any Person in which more than 50%
of all equity, membership, partnership or other ownership interests is owned
directly or indirectly by Borrower or one or more of its Subsidiaries, and (ii)
as to any other Person, any Person in which more than 50% of all equity,
membership, partnership or other ownership interests is owned directly or
indirectly by such Person or by one or more of such Person’s Subsidiaries.
 
“Term” shall mean the period commencing on the date set forth on the first page
hereof and ending on August 31, 2005.
 
“UCC” shall mean the Uniform Commercial Code as in effect in the State of
Maryland from time to time.

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