**Exhibit 10.10**

 

**SECOND AMENDED AND RESTATED LOAN AGREEMENT**

 

**among**

 

**WC HOLDINGS, INC.**

**COMPMANAGEMENT, INC.**

**COMPMANAGEMENT HEALTH SYSTEMS, INC.**

**COMPMANAGEMENT INTEGRATED DISABILITY SERVICES,INC.**

**CMI MANAGEMENT COMPANY**

**COMPMANAGEMENT OF VIRGINIA, INC.**

**COMPMANAGEMENT DISABILITY SERVICES COMPANY**

**CMI BARRON RISK MANAGEMENT SERVICES, INC.**

**KRAMMCO INC.**

**INTEGRATED CLAIM STRATEGIES, INC.**

**OCTAGON RISK SERVICES, INC.**

**MANAGED CARE HOLDINGS CORPORATION**

**CARONIA CORPORATION**

 

**as Borrowers**

 

**and**

 

**JPMORGAN CHASE BANK, N.A.**

 

**as Lender**

 

**March 31, 2005**

 

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**TABLE OF CONTENTS**

 
| **ARTICLE 1.  AGREEMENT OF THE PARTIES**                         |   |
|----------------------------------------------------------------------------|--------|
|                                                                       | 1.1    | Restatement of  Obligations |   |
|                                                                       | 1.2    | Balances of Loans |   |
|                                                                       | 1.3    | Compliance  with Original Loan Documents |   |
|                                                                       | 1.4    | Continuation  of Original Loan Documents |   |
|                                                                       | 1.5    | Termination  of Original Assignment of Life Insurance Policies |   |
|                                                                       |   |
| **ARTICLE 2.  REVOLVING CREDIT LOANS**                           |   |
|                                                                       | 2.1    | Revolving Credit  Commitment |   |
|                                                                       | 2.2    | Conversion Options |   |
|                                                                       | 2.3    | Revolving Credit Note |   |
|                                                                       | 2.4    | Cancellation  and Reduction of Revolving Credit Commitment |   |
|                                                                       | 2.5    | Use of Funds |   |
|                                                                       | 2.6    | Additional  Provisions and Limitations Relating to Eurodollar Rate Loans |   |
|                                                                       | 2.7    | Letters of Credit |   |
|                                                                       |   |
| **ARTICLE 3.  TERM LOAN**                                        |   |
|                                                                       | 3.1    | Term Loan Amount |   |
|                                                                       | 3.2    | Term Note |   |
|                                                                       | 3.3    | Optional Prepayments |   |
|                                                                       | 3.4    | Additional  Provisions and Limitations Relating to Eurodollar Rate Portions |   |
|                                                                       | 3.5    | Mandatory Prepayments |   |
|                                                                       |   |
| **ARTICLE 4.  FEES, PAYMENTS, SETOFFS, SECURITY, DEFAULT  RATE** |   |
|                                                                       | 4.1    | Fees |   |
|                                                                       | 4.2    | Payments |   |
|                                                                       | 4.3    | Setoffs |   |
|                                                                       | 4.4    | Security |   |
|                                                                       | 4.5    | Default Rate |   |
|                                                                       |   |
| **ARTICLE 5.  CONDITIONS OF BORROWING**                          |   |
|                                                                       | 5.1    | Conditions  Precedent to the Term Loan and the Initial Revolving Credit Loan |   |
|                                                                       | 5.2    | Conditions  Precedent to Each of the Loans |   |
|                                                                       |   |
| **ARTICLE 6.  REPRESENTATIONS AND WARRANTIES**                   |   |
|                                                                       | 6.1    | Organization and  Authority |   |
|                                                                       | 6.2    | Qualification |   |
|                                                                       | 6.3    | Investments;  Guarantees; Liabilities |   |
|                                                                       | 6.4    | Tax Returns and Payments |   |
|                                                                       | 6.5    | Title to Properties;  Liens |   |
|                                                                       | 6.6    | Litigation |   |
|                                                                       | 6.7    | Compliance  with Law and Other Instruments |   |
|                                                                            |        |  |  |  |  |

 

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|                                            | 6.8    | Financial Statements                                        |   |
|-------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                            | 6.9    | Patents,  Trademarks and Copyrights                         |   |
|                                            | 6.10   | No Margin Activity                                          |   |
|                                            | 6.11   | ERISA                                                       |   |
|                                            | 6.12   | Adverse Contracts;  Defaults                                |   |
|                                            | 6.13   | Environmental Laws                                          |   |
|                                            | 6.14   | Disclosure                                                  |   |
|                                            | 6.15   | Insurance                                                   |   |
|                                            | 6.16   | Events of Default                                           |   |
|                                            | 6.17   | Solvency, Etc.                                              |   |
|                                            | 6.18   | Projections  and Pro Forma Financial Statements             |   |
|                                            | 6.19   | Caronia Purchase  Agreement                                 |   |
|                                            | 6.20   | Certain Assurances                                          |   |
|                                            |   |
| **ARTICLE 7.  AFFIRMATIVE COVENANTS** |   |
|                                            | 7.1    | Bank Deposits                                               |   |
|                                            | 7.2    | Unaudited  Financial Statements and Reports of  the Company |   |
|                                            | 7.3    | Audited  Financial Statements of the Company                |   |
|                                            | 7.4    | Inspection                                                  |   |
|                                            | 7.5    | Insurance                                                   |   |
|                                            | 7.6    | Payment of Taxes and  Claims                                |   |
|                                            | 7.7    | Compliance with Laws                                        |   |
|                                            | 7.8    | ERISA                                                       |   |
|                                            | 7.9    | Preservation of  Corporate Existence                        |   |
|                                            | 7.10   | Maintenance of  Tangible Assets                             |   |
|                                            | 7.11   | Notices of Certain  Events                                  |   |
|                                            | 7.12   | Records and Books of  Account                               |   |
|                                            | 7.13   | Performance of Contracts                                    |   |
|                                            | 7.14   | Notice of Material  Litigation                              |   |
|                                            | 7.15   | Use of Proceeds                                             |   |
|                                            | 7.16   | Ownership and  Control of Borrowers                         |   |
|                                            | 7.17   | Compliance  with the Caronia Purchase Agreement             |   |
|                                            | 7.18   | Compliance with the OBWC                                    |   |
|                                            | 7.19   | Seller Information                                          |   |
|                                            | 7.20   | Government Regulation                                       |   |
|                                            |   |
| **ARTICLE 8.  NEGATIVE COVENANTS**    |   |
|                                            | 8.1    | Indebtedness                                                |   |
|                                            | 8.2    | Liens and Other  Encumbrances                               |   |
|                                            | 8.3    | Guaranties  and Other Contingent Liabilities                |   |
|                                            | 8.4    | Fundamental Changes                                         |   |
|                                            | 8.5    | Creation of Subsidiaries                                    |   |
|                                            | 8.6    | Loans or Advances                                           |   |
|                                            | 8.7    | Investments                                                 |   |
|                                            | 8.8    | Sale and Leaseback                                          |   |
|                                            | 8.9    | Disposition of Assets                                       |   |
|                                            | 8.10   | Transactions with  Affiliates                               |   |

 

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|                                        | 8.11   | Sale of Accounts                                        |   |
|---------------------------------------------|--------|---------------------------------------------------------|--------|
|                                        | 8.12   | Capital Expenditures                                    |   |
|                                        | 8.13   | Minimum Fixed  Charge Coverage Ratio                    |   |
|                                        | 8.14   | Ratio of  Funded Indebtedness to EBITDA                 |   |
|                                        | 8.15   | Management Fees                                         |   |
|                                        | 8.16   | Dividends and Payments                                  |   |
|                                        | 8.17   | Issuance of Capital  Stock                              |   |
|                                        | 8.18   | Prohibition  of Change in Fiscal Year                   |   |
|                                        | 8.19   | Amendment to Other  Documents                           |   |
|                                        | 8.20   | Management                                              |   |
|                                        | 8.21   | Pledge Rights Not a “Change”                  |   |
|                                        | 8.22   | Government Regulations                                  |   |
|                                        |   |
| **ARTICLE 9.  EVENTS OF DEFAULT** |   |
|                                        | 9.1    | Event of Default                                        |   |
|                                        | 9.2    | Consequences of  Event of Default                       |   |
|                                        |   |
| **ARTICLE 10.  MISCELLANEOUS**    |   |
|                                        | 10.1   | Notices                                                 |   |
|                                        | 10.2   | Term  of Agreement; Termination; Successors and Assigns |   |
|                                        | 10.3   | No Implied Rights or  Waivers                           |   |
|                                        | 10.4   | Applicable Law                                          |   |
|                                        | 10.5   | Modifications,  Amendments or Waivers                   |   |
|                                        | 10.6   | Counterparts                                            |   |
|                                        | 10.7   | Headings                                                |   |
|                                        | 10.8   | Expenses                                                |   |
|                                        | 10.9   | Accounting Terms                                        |   |
|                                        | 10.10  | Severability                                            |   |
|                                        | 10.11  | Waiver of  Jury Trial; Consent to Venue                 |   |
|                                        | 10.12  | Entire Agreement                                        |   |
|                                        | 10.13  | Certificates, Etc.                                      |   |
|                                        | 10.14  | Waiver of Certain  Defenses                             |   |
|                                        | 10.15  | USA Patriot Act  Notification                           |   |
|                                        | 10.16  | Indemnification                                         |   |
|                                        |   |
| **ARTICLE 11.  DEFINITIONS**      |   |
|                                        |   |
| Signatures                                  |   |

 

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| **EXHIBITS:**  |               |                                                                      |
|----------------|--------------------|---------------------------------------------------------------------------|
|           |               |                                                                      |   |
|           | Exhibit A          | Second Amended and Restated Revolving Credit Note                         |   |
|           | Exhibit B          | Second Amended  and Restated Term Note                                    |   |
|           | Exhibit C          | Second Amended  and Restated Borrower Security Agreement                  |   |
|           | Exhibit D          | Second Amended  and Restated Intellectual Property Security Agreement     |   |
|           | Exhibit E          | Second Amended  and Restated Stock Pledge Agreement                       |   |
|           | Exhibit F          | Second Amended  and Restated Collateral Assignment of Leasehold Interests |   |
|           | Exhibit G          | Opinion of  Counsel to Borrowers                                          |   |
|           | Exhibit H          | Definitions                                                               |   |
|           | Exhibit I          | Pro Forma  Balance Sheets                                                 |   |
|           | Exhibit J          | Projections                                                               |   |
|           | Exhibit K          | Officer’s Solvency  Certificate                                      |   |
|           |               |                                                                      |   |
| **SCHEDULES:** |               |                                                                      |
|           |               |                                                                      |   |
|           | Schedule 6.1  | Affiliates,  Directors and Officers                                       |   |
|           | Schedule 6.5  | Leases                                                                    |   |
|           | Schedule 6.6  | Litigation and  Other Proceedings                                         |   |
|           | Schedule 6.9  | Patents,  Trademarks and Copyrights                                       |   |
|           | Schedule 8.10 | Transactions  with Affiliates                                             |   |

 

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# **SECONDAMENDED AND RESTATED LOAN AGREEMENT**

# ** **

THISSECOND AMENDED AND RESTATED LOAN AGREEMENT (this “Agreement”) is made andentered into in Columbus, Ohio effective as of March 31, 2005, by and amongWC HOLDINGS, INC., aDelaware corporation (formerly named Health Power, Inc.) (the “Company”),COMPMANAGEMENT, INC., an Ohio corporation (“CMI”), COMPMANAGEMENT HEALTHSYSTEMS, INC., an Ohio corporation (“CHSI”), COMPMANAGEMENT INTEGRATEDDISABILITY SERVICES, INC., an Ohio corporation (formerly named M&N RiskManagement, Inc.) (“CIDSI”), CMI MANAGEMENT COMPANY, an Ohio corporation(formerly named M&N Enterprises, Inc.) (“CMIMC”), COMPMANAGEMENT OFVIRGINIA, INC., a Virginia corporation (formerly named Trigon Administrators,Inc.) (“CVI”), COMPMANAGEMENT DISABILITY SERVICES COMPANY, a Virginiacorporation and a wholly owned subsidiary of CVI (formerly named TrigonDisability Services Company) (“CDSC”), CMI BARRON RISK MANAGEMENT SERVICES,INC., a Texas corporation (formerly named Barron Risk Management Services,Inc.) (“Barron Risk”), OCTAGON RISK SERVICES, INC., a Minnesota corporation (“Octagon”),KRAMMCO INC., an Ohio corporation (“KRAMMCO”), INTEGRATED CLAIM STRATEGIES,INC., a Florida corporation (“ICSI”), CARONIA CORPORATION, a Delawarecorporation (“Caronia”), and MANAGEDCARE HOLDINGS CORPORATION, a Delaware Corporation (“MCHC”), as borrowers(individually, a “Borrower” and collectively, the “Borrowers”), and JPMORGANCHASE BANK, N.A., a national banking association (successor by merger to BankOne, NA (Main Office Columbus)), as lender (the “Lender”).

 

**Recitals**

 

*The following recitals are representations with respect tocertain factual matters that form the basis of this Agreement and are an integralpart of this Agreement.*

 

A.                                   Pursuantto the terms and conditions of a certain Amended and Restated Loan Agreementdated as of October 3, 2003 by and among the Company, CMI, CHSI, CIDSI,CMIMC, CVI, CDSC, Barron Risk and Octagon (collectively, the “OriginalBorrowers”), WC Holdings, Inc., a Delaware corporation that merged with andinto the Company on or about December 2, 2003 (the “Guarantor”), and theLender (the “Original Loan Agreement”), the Lender agreed to make to theOriginal Borrowers (i) loans (collectively, the “Prior Revolving Credit Loans”)up to the maximum aggregate sum of$8,000,000 under a revolving line of credit, (ii) a term loan in the maximumsum of $31,479,166.64 (the “Prior Term Loan”) and (iii) an interim term loan inthe principal amount of $12,000,000 in order to finance a portion of thepurchase price paid by CMI for all of the outstanding shares of capital stockof Octagon (the “Octagon Interim Term Loan”);

 

B.                                     Toevidence the Prior Revolving Credit Loans, the Original Borrowers executed acertain Amended and Restated Revolving Credit Note dated October 3, 2003(the “Original Revolving Credit Note”), whereby the Original Borrowers promisedto pay to the order of the Lender, on or before September 30, 2005, thePrior Revolving Credit Loans, together with interest as set forth in theOriginal Loan Agreement;

 

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C.                                     Toevidence the Prior Term Loan, the Borrowers executed a certain Amended andRestated Term Note dated October 3, 2003 (the “Original Term Note”),whereby the Original Borrowers promised to pay to the order of the Lender, onor before September 3, 2008, the Prior Term Loan, together with interestas set forth in the Original Loan Agreement;

 

D.                                    Toevidence the Octagon Interim Term Loan, the Borrowers executed a certainInterim Term Note dated October 3, 2003 (the “Octagon Interim Term Note”and, collectively with the Original Revolving Credit Note and the Original TermNote, the “Original Notes”), whereby the Original Borrowers promised to pay tothe order of the Lender, on or before October 17, 2003, the OctagonInterim Term Loan, together with interest as set forth in the Original LoanAgreement.  The Original Borrowers haveheretofore paid in full the Octagon Interim Term Note;

 

E.                                      Tosecure the Original Loan Agreement and the Original Notes, the Lender and each OriginalBorrower entered into (i) a separate Borrower Security Agreement or Amended andRestated Borrower Security Agreement, as applicable, dated as of October 3,2003 (individually, an “Original Borrower Security Agreement” and collectively,the “Original Borrower Security Agreements”) and (ii) a separate SecurityAgreement Re: Patents, Trademarks and Copyrights or Amended and RestatedSecurity Agreement Re: Patents, Trademarks and Copyrights, as applicable, datedas of October 3, 2003 (individually, an “Original Intellectual PropertySecurity Agreement” and collectively, the “Original Intellectual PropertySecurity Agreements”);

 

F.                                      Tofurther secure the Original Loan Agreement and the Original Notes, the Lender,on the one hand, and the Company, the Guarantor or CMI, on the other hand,entered into nine certain Stock Pledge Agreements or Amended and Restated StockPledge Agreements, as applicable, dated as of October 3, 2003(individually, an “Original Stock Pledge Agreement” and collectively, the “OriginalStock Pledge Agreements”), pursuant to which the Guarantor, the Company andCMI, as applicable, pledged and assigned to the Lender all of the shares ofcapital stock of the Company, CMI, CVI, CMIMC, CHSI, CIDSI, CDSC, Barron Riskand Octagon;

 

G.                                     Tofurther secure the Original Loan Agreement and the Original Notes, the Lenderand CMI entered into two certain Amended and Restated Assignments of LifeInsurance Policies dated as of October 3, 2003 (collectively, the “OriginalAssignment of Life Insurance Policies”), pursuant to which CMI assigned to theLender certain life insurance policies;

 

H.                                    Tofurther secure the Original Loan Agreement and the Original Notes, the Lenderand CMI entered into a certain Amended and Restated Collateral Assignment ofLeasehold Interest dated as of October 3, 2003, pursuant to which CMIassigned to the Lender all of its right, title and interest in, to and underthe lease of CMI’s corporate headquarters facility located in Dublin, Ohio (the“Original Assignment of Leasehold Interest”);

 

I.                                         Inconsideration of the Lender entering into the Original Loan Agreement, theGuarantor agreed, by a certain Amended and Restated Unconditional GuarantyAgreement dated as of October 3, 2003 (the “Original Guaranty”), tounconditionally guaranty the repayment of the Prior Revolving Credit Loans, thePrior Term Loan and the Octagon Interim Term Loan;

 

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J.                                        Tosecure the Original Loan Agreement and the Original Notes and the Guarantor’sobligations under the Original Guaranty, the Lender and the Guarantor enteredinto a certain Amended and Restated Guarantor Security Agreement dated as of October 3,2003 (the “Original Guarantor Security Agreement”);

 

K.                                    Pursuantto a certain Certificate of Merger of WC Holdings, Inc. into Health Power, Inc.dated as of November 21, 2003 filed with the Delaware Secretary of Stateon December 2, 2003, the Guarantor merged with and into the Company andthe Company’s name was changed to “WC Holdings, Inc.”;

 

L.                                      Pursuantto a certain First Amendment to Amended and Restated Loan Agreement dated as ofJuly 22, 2004 among the Original Borrowers and the Lender (the “FirstAmendment to Original Loan Agreement”), the Original Borrowers and the Lenderamended the Original Loan Agreement to, among other things, (i) decrease theApplicable Margin for Eurodollar Rate portions of the Prior Term Loan; (ii)amend Section 8.4 of the Original Loan Agreement to require the Company toprovide audited annual consolidated financial statements, (iii) amend Section 9.13of the Original Loan Agreement to increase the dollar amount of the capitalexpenditures permitted to made during Fiscal Year 2004 and (iv) make certainother modifications to the provisions of the Original Loan Agreement;

 

M.                                 Pursuantto a certain Second Amendment to Amended and Restated Loan Agreement dated asof March 1, 2005 among the Original Borrowers and Lender (the “Second Amendmentto Original Loan Agreement”), the Original Borrower and the Lender amended theOriginal Loan Agreement to, among other things, (i) provide for a one-timewaiver by the Lender of certain covenant violations by the Original Borrowers,(ii) require that certain subsidiaries of the Company become co-borrowers underthe Original Loan Agreement and (iii) make certain other modifications to theprovisions of the Original Loan Agreement;

 

N.                                    TheLender is still the holder and beneficiary of the Original Loan Agreement, OriginalRevolving Credit Note, Original Term Note, Original Borrower SecurityAgreements, Original Intellectual Property Security Agreements, Original StockPledge Agreements, Original Assignments of Life Insurance Policies and OriginalAssignment of Leasehold Interest (such documents, as amended by the FirstAmendment to Original Loan Agreement and the Second Amendment to the OriginalLoan Agreement, together with all other documents related thereto, arehereinafter collectively referred to as the “Original Loan Documents”);

 

O.                                    Octagonand Continental Casualty Company, an Illinois corporation (“Seller”), enteredinto a certain Stock Purchase Agreement dated as of March 17, 2005 (the “CaroniaPurchase Agreement”), pursuant to which Octagon agreed to purchase from Sellerall of the outstanding shares of capital stock of Caronia (the “Caronia Shares”)and MCHC (the “MCHC Shares” and, together with the Caronia Shares, the “AcquiredShares”) for an aggregate cash purchase price of $16,000,000, subject to thepost-closing adjustments set forth in Section 2.4 of the Caronia PurchaseAgreement (the “Caronia Purchase Price”);

 

P.                                      Theparties hereto desire to amend and restate the Original Loan Documents in orderto, among other things:  (i) evidence theLender’s consent to Octagon’s acquisition of the Acquired

 

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Shares and theconsummation of the other transactions contemplated by the Caronia PurchaseAgreement (the “Caronia Acquisition”); (ii) cause Caronia, MCHC, KRAMMCO andICSI to become additional co-borrowers under the Original Loan Documents, asamended and restated hereby (collectively, the “Additional Borrowers”); (iii) increasethe principal amount of the Prior Term Loan to $40,500,000; (iv) extend therespective maturity dates of the Original Revolving Credit Note and theOriginal Term Note; (v) provide for certain additional security for the Loans(defined below); (vi) modify various provisions of the Original Loan Documents;and (vii) make certain other changes thereto in order to reflect the agreementof the parties set forth in this Agreement; and

 

Q.                                    Inorder to evidence the agreement of the parties and to reflect the terms andconditions of this Agreement, the parties shall execute and deliver thisAgreement and the agreements, documents and instruments contemplated hereby.

 

**Agreement**

 

NOWTHEREFORE, the Borrowers and the Lender hereby agree as hereinafter set forth.

 

**ARTICLE 1.  AGREEMENT OF THE PARTIES**

 

**1.1****                               Restatementof Obligations****.**  The parties hereto acknowledge and agree thatthis Agreement (i) amends and restates the existing obligations of the OriginalBorrowers under the Original Loan Agreement, as amended, (ii) is acontinuation of the borrowings evidenced by the Original Loan Agreement, asamended, (iii) is not intended to be a novation of the Original RevolvingCredit Note or the Original Term Note or the obligations evidenced thereby, and(iv) is in substitution of and supersedes the Original Loan Agreement, asamended.  The Borrowers, jointly andseverally, covenant that they will perform and observe all covenants,agreements, stipulations and conditions on their part to be performed under theOriginal Loan Documents, as amended, restated and modified hereby, and theExhibits hereto.

 

**1.2****                               Balancesof Loans****.**

 

(a)                                  Theparties hereby acknowledge and agree that the outstanding principal balance ofthe Original Revolving Credit Note as of March 31, 2005 (prior to themaking of any additional Loans to finance the Caronia Acquisition) was $0 andthat all accrued interest on the outstanding principal balance thereof has beenpaid through March 1, 2005.

 

(b)                                 Theparties hereby acknowledge and agree that the outstanding principal balance ofthe Original Term Note as of March 31, 2005 (prior to the making of anyadditional Loans to finance the Caronia Acquisition) was $23,451,512.22 andthat all accrued interest on the outstanding principal balance thereof has beenpaid through March 1, 2005.

 

**1.3****                               Compliancewith Original Loan Documents****.**  The Borrowers that are parties to theOriginal Loan Documents hereby, jointly and severally, represent and warrantthat they are in

 

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fullcompliance with all terms, conditions, covenants, agreements, stipulations,representations and warranties under the Original Loan Documents, and theyhereby, jointly and severally, reaffirm the same as of the date hereof.

 

**1.4****                               Continuationof Original Loan Documents****.**  Except as specifically modified herein and inthe Exhibits hereto, the Original Loan Documents, as amended, restated andmodified hereby, shall remain in full force and effect in all respectsaccording to their terms, covenants and conditions as security for the unpaidbalance of the indebtedness and interest thereon evidenced by this Agreementand the Notes, as if the unpaid balance of the principal, with the interestaccrued thereon, had originally been payable as provided for herein.  Except as specifically set forth herein andin the Exhibits hereto, nothing in this Agreement shall affect or impair anyrights and powers that the Lender may have thereunder.

 

**1.5****                               Terminationof Original Assignment of Life Insurance Policies****. **Effective as of the date hereof, the OriginalAssignment of Life Insurance Policies shall be and hereby is terminated andrendered of no further force and effect.

 

# **ARTICLE 2. REVOLVING CREDIT LOANS**

# ** **

**2.1****                               RevolvingCredit Commitment****.**  The Lender hereby agrees, on the terms andconditions of this Agreement, to lend to the Borrowers the maximum sum of EightMillion Dollars ($8,000,000) (the “Revolving Credit Commitment”).  The Revolving Credit Commitment shall beavailable to the Borrowers, subject to the limitations herein, in whole or partand from time to time until March 31, 2007, and any amounts borrowed maybe repaid in whole or in part and reborrowed until such date.  Each borrowing under the Revolving CreditCommitment shall be made in accordance with the provisions of this Section 2.1,and shall be subject to the conditions of Article 5 hereof, and shall bein the initial principal amount of $100,000 or any integral multiple of$100,000 (a “Revolving Credit Loan”).

 

EachRevolving Credit Loan to be made in accordance with the provisions of this Section 2.1shall, at the election of the Borrowers, be made either in the form of (i) aVariable Rate Loan (individually, a “Variable Rate Loan” and collectively, the “VariableRate Loans”) or (ii) a Eurodollar Rate Loan (individually, a “EurodollarRate Loan” and collectively, the “Eurodollar Rate Loans”); provided, however,that the Borrowers shall not be permitted to have outstanding at any time morethan a total of eight (8) Eurodollar Rate Loans and Eurodollar Rate Portions ofthe Term Loan, except as otherwise permitted by the Lender in its solediscretion.  Notwithstanding theforegoing, each Eurodollar Rate Loan shall be in the initial principal amountof $1,000,000 or any integral multiple of $100,000.  The aggregate unpaid principal amount of theVariable Rate Loans and the Eurodollar Rate Loans at any one time outstandingshall not exceed the Revolving Credit Commitment.

 

EachRevolving Credit Loan shall be made pursuant to the request of the Borrowers tothe Lender which request for a Revolving Credit Loan shall specify (i) thetotal amount of the Revolving Credit Loan; (ii) the borrowing date (the “BorrowingDate”), which shall be a Business Day in the case of a Variable Rate Loan and aEurodollar Banking Day in the case of a Eurodollar Rate Loan; and (iii) whetherthe Revolving Credit Loan is to be a Variable Rate Loan or a

 

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Eurodollar Rate Loan (andin the case of a Eurodollar Rate Loan, the length of the Interest Period).  Requests for Variable Rate Loans may be madeon the applicable Borrowing Date. Requests for Eurodollar Rate Loans shall be made at least three (3)Eurodollar Banking Days prior to the applicable Borrowing Date.

 

In thecase of a request for a Eurodollar Rate Loan, the Lender shall not later than11:00 a.m., Columbus, Ohio time two (2) Eurodollar Banking Days prior tothe Borrowing Date, give notice to the Borrowers of the Adjusted EurodollarRate (including information as to the calculation thereof) applicable for theperiod requested by the Borrowers.  TheBorrowers shall not later than 11:00 a.m., Columbus, Ohio time one (1)Eurodollar Banking Day prior to the Borrowing Date, give notice by telephoneconfirmed in writing to the Lender whether they wish (i) to complete suchborrowing in the form of a Eurodollar Rate Loan; (ii) to complete suchborrowing as a Variable Rate Loan; or (iii) to cancel their request for aRevolving Credit Loan.  Failure by theBorrowers to timely deliver such notice shall constitute cancellation of suchrequest.

 

Notwithstandingany other provision of this Agreement to the contrary, the parties understandand agree that if and to the extent the Borrowers participate in Lender’s cashmanagement program, Revolving Credit Loans shall be automatically disbursed andrepaid on a daily basis based on the cash deposits and disbursements in the Borrowers’accounts with the Lender.

 

**2.2****                               ConversionOptions****.**  The Borrowers may elect from time to time toconvert $1,000,000 or any amount in excess thereof in any integral multiple of$100,000 of the Variable Rate Loans then outstanding to Eurodollar Rate Loansby giving the Lender irrevocable telephone notice of such election as providedin this Section 2.2.  EachEurodollar Rate Loan shall automatically convert to a Variable Rate Loan uponits maturity unless the Borrowers elect to continue such Loan as a EurodollarRate Loan by giving the Lender irrevocable telephone notice of such election asprovided in this Section 2.2.  Anysuch notice pursuant to this Section 2.2 shall be received by the Lenderat least three (3) Eurodollar Banking Days prior to the proposed conversiondate, which shall be a Eurodollar Banking Day, and shall specify (i) theconversion date and (ii) the length of the Interest Period.  If no Event of Default then exists, suchconversion shall be made on the requested conversion date.

 

**2.3****                               RevolvingCredit Note****.**  The Revolving Credit Commitment shall beevidenced by a master amended and restated promissory note (the “RevolvingCredit Note”) of the Borrowers executed by duly authorized officers thereof,which shall be in the form of Exhibit A attached hereto.  Each Revolving Credit Loan made by the Lenderand each payment made on account of principal on the Revolving Credit Noteshall be recorded by the Lender; provided, however, that the failure of theLender to make such notation shall not limit or otherwise affect theobligations of the Borrowers under the Revolving Credit Note or thisAgreement.  The Revolving Credit Noteshall amend and restate, and be in substitution for, the Original RevolvingCredit Note and shall include the following terms:

 

**(a)****                                  Term.**  The Revolving Credit Note shall be dated asof the date of this Agreement and shall be due and payable in full on or beforeMarch 31, 2007.

 

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**(b)****                                  InterestRate on Variable Rate Loans.** From its date, each Variable Rate Loan shall bear interest (computed onthe basis of the actual number of days elapsed over a Business Year) on theunpaid principal balance at a fluctuating rate per annum equal to the PrimeRate plus the Applicable Margin (as determined in accordance with Section 2.3(d)(iv),below).  Any change in the interest ratedue to a change in the Prime Rate shall be effective immediately upon and afterthe date of each such change in the Prime Rate.

 

Interest on the Variable Rate Loans shall be payablemonthly on the first day of each calendar month (each an “Interest Payment Date”),commencing on the first day of the month following the initial disbursement ofthe initial Revolving Credit Loan.

 

**(c)****                                  InterestRate on Eurodollar Rate Loans.** From its date, each Eurodollar Rate Loan shall bear interest during theperiod from the date thereof until and including the maturity date thereof at arate per annum equal to the Adjusted Eurodollar Rate plus the Applicable Margin(as determined in accordance with Section 2.3(d)(i), below).  The Borrowers shall be obligated to pay withrespect to each Eurodollar Rate Loan such additional amounts as shall bedetermined pursuant to Section 2.6 hereof.

 

Interest on each Eurodollar Rate Loan shall be payable(i) with respect to Eurodollar Rate Loans having an Interest Period of 30, 60or 90 days, on the expiration of such Interest Period, and (ii) withrespect to Eurodollar Rate Loans having a maturity of 180 or 360 days, on thefirst day of each March, June, September and December that suchEurodollar Rate Loan is outstanding and upon expiration of such InterestPeriod.  Interest on all Eurodollar RateLoans shall be calculated on the basis of the actual number of days elapsedover a Business Year.

 

**(d)****                                  ApplicableMargin.**  For purposes of Sections2.3 and 3.2 hereof, the “Applicable Margin” shall be determined as follows:

 

(i)                                     TheApplicable Margin for Eurodollar Rate Loans shall be two percent (2.00%);

 

(ii)                                  TheApplicable Margin for Eurodollar Rate Portions of the Term Loan shall be twoand one-half percent (2.50%);

 

(iii)                               The Applicable Marginfor purposes of the Variable Term Rate applicable to the Variable Rate Portionof the Term Loan shall be zero percent (0.0%); and

 

(iv)                              TheApplicable Margin for Variable Rate Loans shall be negative one-half percent (-.50%).

 

**(e)****                                  OptionalRepayments.**  OutstandingRevolving Credit Loans may be repaid in whole or in part at any time, withoutpremium or penalty, in principal amounts not less than the minimum RevolvingCredit Loan for any borrowing under Section 2.1, or any larger amountpermitted thereunder, by tender of payment and delivery of written, telegraphicor oral notice of payment to the Lender not later than 1:30 p.m., Columbus,Ohio

 

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time,on the Business Day on which such repayment is to be made.  Payments received after 1:30 p.m. shall bedeemed tendered on the following Business Day. Interest accrued to the date of payment shall be due and payable on thenext following Interest Payment Date unless the Revolving Credit Note is paidin full, in which event, accrued interest shall become due and payable on thepayment date.

 

**2.4****                               Cancellationand Reduction of Revolving Credit Commitment****.** The Borrowers shall be entitled to permanently reduce or cancel theRevolving Credit Commitment from time to time upon ten (10) days’ prior writtennotice to the Lender.  In the event ofcancellation of the Revolving Credit Commitment, the principal amount of theRevolving Credit Note shall be paid in full, together with all accrued interestthereon, any unpaid Commitment Fee accrued to the date of cancellation, and allother amounts owing to the Lender by the Borrowers hereunder with respect toany Revolving Credit Loans.  In the eventof the permanent reduction of the Revolving Credit Commitment to a level whichis less than the then outstanding principal amount of the Revolving CreditNote, the Revolving Credit Note shall be prepaid at the time of such reductionin an amount equal to the then excess of the Revolving Credit Note over theRevolving Credit Commitment as so reduced. Accrued interest on the principal amount of the Revolving Credit Noterepaid shall be included in the interest due and payable on the next InterestPayment Date.

 

**2.5****                               Useof Funds****.**  Revolving Credit Loans shall be used for theworking capital requirements of the Borrowers and may be used to pay a portionof the Caronia Purchase Price (including, without limitation, any post-closingadjustment payments that may be required under Section 2.4 of the CaroniaPurchase Agreement) and the Related Transaction Expenses.

 

**2.6****                               AdditionalProvisions and Limitations Relating to Eurodollar Rate Loans****.** The additional provisions and limitations set forth below shall applywith respect to Eurodollar Rate Loans:

 

(a)                                  Inthe event the Lender shall incur any loss, cost or reasonable expense(including, without limitation, any loss, cost or reasonable expense incurredby reason of the liquidation or reemployment of deposits or other fundsacquired or contracted to be acquired by the Lender to fund or maintain or therelending or reinvesting of such deposits or other funds or amounts paid orprepaid to the Lender) as a result (i) of any payment or prepayment of aEurodollar Rate Loan on a date other than the last day of the then applicableInterest Period for such Eurodollar Rate Loan for any reason or (ii) anyfailure by the Borrowers to borrow funds as a Eurodollar Rate Loan after theyhave given a notice of election with respect thereto for any reason, whetherbefore or after default, and whether or not such payment is required by anyprovisions of this Agreement; then, within three (3) days after receipt of thewritten demand of the Lender, the Borrowers shall pay to the Lender such amountas will reimburse the Lender for such loss, cost or expense.  If the Lender requests such a reimbursement,it shall provide to the Borrowers at the time of demand a certificate settingforth the computation of the loss, cost or expense giving rise to the requestfor reimbursement in reasonable detail and such certificate shall be conclusiveif reasonably determined, absent manifest error.

 

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(b)                                 Ifthe Lender shall, in good faith, determine that it is unable to reasonablyascertain the Eurodollar Rate or to acquire Eurodollar deposits on reasonableterms in an amount sufficient to meet a request for a Eurodollar Rate Loan, theLender shall promptly notify the Borrowers. In such event, the Borrowers may request a Variable Rate Loan of likeamount without regard to the notice requirement of Section 2.1 or maycancel such request.

 

(c)                                  Theobligation of the Lender to make Eurodollar Rate Loans hereunder shall besuspended in the event that any change in any law or regulation or in anyinterpretation thereof by any governmental authority charged with itsadministration shall, in the sole opinion of the Lender, make it unlawful forthe Lender to comply with its obligation to make or maintain any EurodollarRate Loan hereunder for the duration of such illegality.  The Lender shall promptly notify theBorrowers of such suspension, and, if and when, in the sole opinion of theLender, such illegality ceases to exist, such suspension shall cease and theLender shall promptly notify the Borrowers of the termination of suchsuspension.

 

(d)                                 Ifthe Lender has Eurodollar Rate Loans outstanding and there shall occur anychange in applicable law, regulation or interpretation (including any request,guideline or policy not having the force of law by any authority charged withthe administration or interpretation thereof) (i) which change directly affectstransactions in Eurodollars, (ii) which involves new or additional taxes,reserves or deposit requirements in regard to the Eurodollar Rate Loans orchanges in the basis of taxation of payments on such Loans, or (iii) which, ifthe Eurodollar Rate Loans made hereunder by the Lender were to have been matchedwith Eurodollar deposits corresponding in amounts to such Eurodollar Rate Loansand having maturity dates which are the same as such Eurodollar Rate Loansregardless of whether or not such Eurodollar Rate Loans are in fact so matched,increases the cost to the Lender of making or maintaining the Eurodollar RateLoans hereunder or reduces the amount of any payments (whether of principal,interest or otherwise) receivable by the Lender as to any Eurodollar Rate Loansor requires the Lender to make any payment on or calculated by reference to thegross amount of any sum received by it as to such Eurodollar Rate Loans, thenwhere the amount of any such additional cost, reduction or payment is deemedmaterial by the Lender:

 

(i)                                     theLender shall promptly notify the Borrowers of the occurrence of such event;

 

(ii)                                  theLender shall promptly deliver to the Borrowers a certificate stating the changewhich has occurred, together with the date thereof and the amount of and themanner of calculating the increased cost on any outstanding Eurodollar RateLoan; and

 

(iii)                               upon receipt of suchcertificate from the Lender, the Borrowers shall pay to the Lender on demandthe amount or amounts of such additional cost with respect to such outstandingEurodollar Rate Loan as additional compensation hereunder.

 

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(e)                                  Thecertificate of the Lender delivered to the Borrowers as to the additionalamount payable pursuant to Section 2.6(d) shall (in the absence ofmanifest error in the transmission or calculation) be conclusive evidence ofthe amount thereof.  The protection ofthis Section 2.6(e) shall be available to the Lender regardless of anypossible contention of invalidity or inapplicability of the law, regulation orcondition which has been imposed. However, if the Borrowers have made a payment of any additional amountspursuant to Section 2.6(d) and any subsequent event occurs which reducesthe amount of the increased cost incurred by the Lender, then the Lender shallpromptly refund to the Borrowers an amount equal to such reduction in theamount of increased cost.

 

(f)                                    Inaddition to the other amounts payable hereunder, the Borrowers shall pay to theLender such additional amounts as shall compensate the Lender for increasedcosts which the Lender, in its sole discretion, reasonably determines in goodfaith to be allocable to Eurodollar Rate Loans. Additional amounts payable under this Section 2.6(f) shall be paidby the Borrowers to the Lender on the maturity of the respective EurodollarRate Loans, subject to receipt by the Borrowers from the Lender of acertificate showing the amount and certifying as to the correctness thereof.

 

**2.7****                               Lettersof Credit****.**  The Lender has issued, and in the Lender’ssole discretion may hereafter issue from time to time, certain letters ofcredit (the “Letters of Credit”) for the account of one or more of theBorrowers.  It is the intention of theBorrowers and the Lender that the Letters of Credit become and shall be a partof the Revolving Credit Commitment. Therefore, upon any draws under the Letters of Credit, the amount of anysuch draw shall be treated as a Revolving Credit Loan hereunder and shall besubject to all of the terms of this Agreement, the Revolving Credit Note andthe other Loan Documents.

 

**ARTICLE 3.  TERM LOAN**

 

**3.1****                               TermLoan Amount****.**  The Lender hereby agrees on the terms andconditions of this Agreement to lend to the Borrowers the maximum sum of FortyMillion Five Hundred Thousand Dollars and 00/100 Cents ($40,500,000) (the “TermLoan”).

 

**3.2****                               TermNote****.**  The Term Loan shall be evidenced by anamended and restated promissory note of the Borrowers executed by dulyauthorized officers thereof (the “Term Note”), which Term Note shall be in theform of Exhibit B attached hereto with blanks appropriatelycompleted.  The Term Note shall amend andrestate, and be in substitution for, the Original Term Note and shall includethe following terms:

 

**(a)****                                  Term.**  The Term Note shall be dated as of the dateof its execution and delivery by the Borrowers and shall be due and payable infull on or before March 31, 2010.

 

**(b)****                                  VariableRate Portions.**  The unpaidprincipal balance of the Term Note, other than the Eurodollar Rate Portionsthereof, shall bear interest (computed on the basis of the actual number ofdays elapsed over a Business Year) at a fluctuating rate per annum equal to thePrime Rate plus the Applicable Margin (as determined in accordance with

 

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Section 2.3(d)(iii),above) (the “Variable Term Rate”).  Theportion of the indebtedness evidenced by the Term Note that bears interest atthe Variable Term Rate is referred to herein as the “Variable Rate Portion.”  Any change in the interest rate due to achange in the Prime Rate shall be effective immediately from and after the dateof each such change in the Prime Rate.

 

**(c)****                                  EurodollarRate Portions.**  The Borrowers mayelect from time to time to have portions of the principal indebtednessevidenced by the Term Note (each a “Eurodollar Rate Portion”) bear interest ata rate per annum equal to the Adjusted Eurodollar Rate plus the ApplicableMargin (as determined in accordance with Section 2.3(d)(ii), above) (the “AdjustedEurodollar Term Rate”) by providing a request therefor to the Lender not lessthan three (3) Eurodollar Banking Days prior to the applicable Effective Datefor each such Eurodollar Rate Portion, which request shall specify:(i) the total amount of the Eurodollar Rate Portion; (ii) the effectivedate of the applicable Adjusted Eurodollar Term Rate (the “Effective Date”),which shall be a Eurodollar Banking Day, and (iii) the length of the applicableInterest Period.  The Lender shall notlater than 11:00 a.m., Columbus, Ohio time, two (2) Eurodollar Banking Daysprior to the Effective Date for such Eurodollar Rate Portion, give notice tothe Borrowers of the applicable Adjusted Eurodollar Term Rate (includinginformation as to the calculation thereof) applicable for the period requestedby the Borrowers.  The Borrowers shallnot later than 11:00 a.m., Columbus, Ohio time, one (1) Eurodollar Banking Dayprior to the Effective Date of each Eurodollar Rate Portion give notice bytelephone to the Lender as to whether or not they wish to elect to have suchEurodollar Rate Portion bear interest at the applicable Adjusted EurodollarTerm Rate commencing as of the applicable Effective Date.  In the event the Borrowers elect not to havesuch Eurodollar Rate Portion bear interest at the applicable AdjustedEurodollar Term Rate or fail to timely deliver such notice of election, suchEurodollar Rate Portion shall continue to bear interest at the Variable TermRate until the Borrowers elect otherwise in accordance with provisions of thisparagraph.  Upon the expiration of theInterest Period applicable to each Eurodollar Rate Portion, such EurodollarRate Portion shall, unless the Borrowers have otherwise elected in accordancewith the provisions of this paragraph, bear interest at the Variable TermRate.  Each Eurodollar Rate Portion shallbe in the initial amount of $1,000,000 or any integral multiple of$100,000.  Each election to have aEurodollar Rate Portion bear interest at the Adjusted Eurodollar Term Rateshall be recorded by the Lender; provided, however, that the failure of the Lenderto make such recordation shall not limit or otherwise affect the obligations ofthe Borrowers under the Term Note.  EachEurodollar Rate Portion shall bear interest during the Interest Period selectedtherefor at a rate per annum equal to the Adjusted Eurodollar Rate plus theApplicable Margin.  The Borrowers shallbe obligated to pay with respect to each Eurodollar Rate Portion suchadditional amounts as shall be determined pursuant to Section 3.4 hereof.

 

**(d)****                                  InterestPayment Dates.**

 

**(i)****                                    VariableRate Portion**.  Interest on theVariable Rate Portion shall be payable monthly on each Interest Payment Date,commencing on the first Interest Payment Date following the date of issuance ofthe Term Note.

 

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**(ii)****                                EurodollarRate Portions.**  Interest on eachEurodollar Rate Portion shall be payable (i) with respect to Eurodollar RatePortions having an Interest Period of 30, 60 or 90 days, on the expiration ofsuch Interest Period, and (ii) with respect to Eurodollar Rate Portions havingan Interest Period of 180 or 360 days, on the first day of each March, June, September andDecember during such Interest Period and upon expiration of such InterestPeriod.  Interest on all Eurodollar RatePortions shall be calculated on the basis of the actual number of days elapsedover a Business Year.

 

**(e)****                                  PrincipalPayments.**  Principal payments onthe Term Note shall be due and payable as follows:  (i) fifty-nine (59) equal consecutive monthlyinstallments in the amount of $675,000 each shall be due and payable commencingon May 1, 2005 and continuing on each Interest Payment Date thereafter toand including March 1, 2010; and (ii) one final payment in the amountof the unpaid principal balance of the Term Note and accrued, unpaid interestthereon shall be due and payable on March 31, 2010.

 

**3.3****                               OptionalPrepayments****.**  The outstanding principal balance of the TermNote may be prepaid in whole or in part at any time, without premium orpenalty, in principal amounts not less than the minimum Eurodollar Rate Portionfor any borrowing under Section 3.2(c) (provided that prepayments of theVariable Term Rate Portion may be made in the amount of $100,000 or more), orany larger amount permitted thereunder, by tender of payment and delivery ofwritten, telegraphic or oral notice of payment to the Lender not later than1:30 p.m., Columbus, Ohio time, on the Business Day on which such prepayment isto be made.  Payments received after 1:30p.m. shall be deemed tendered on the following Business Day.  Any prepayments shall be applied againstscheduled principal payments in the inverse order of their due date.  Interest accrued to the date of payment shallbe due and payable on the next following Interest Payment Date unless the TermNote is paid in full, in which event, accrued interest shall become due andpayable on the payment date.

 

**3.4****                               AdditionalProvisions and Limitations Relating to Eurodollar Rate Portions****.** The additional provisions and limitations set forth below shall apply toEurodollar Rate Portions:

 

(a)                                  Ifthe Lender shall, in good faith, determine that it is unable to reasonablyascertain the Adjusted Eurodollar Term Rate for a particular Eurodollar RatePortion or to acquire Eurodollar deposits on reasonable terms in an amountsufficient to meet a request for a portion of the total indebtedness evidencedby the Term Note to bear interest at the Adjusted Eurodollar Term Rate, theLender shall promptly notify the Borrowers. In such event, such Eurodollar Rate Portion shall bear interest at theVariable Term Rate.

 

(b)                                 Theprovisions of Sections 2.6(a) and 2.6(c) through (f), inclusive, shall beapplicable to each Eurodollar Rate Portion to the same extent as if suchprovisions were restated in full in this Section 3.4(b) with the terms “EurodollarRate Loan(s)” and “Variable Rate Loan” replaced each time they appear thereinwith the terms “Eurodollar Rate Portion(s)” and “Variable Rate Portion”,respectively.

 

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**3.5****                               MandatoryPrepayments****.**

 

(a)                                  IfSeller pays Octagon any amount in excess of $500,000 pursuant to itsindemnification obligations under Article X of the Caronia PurchaseAgreement and such payment relates to an indemnification claim based upon Seller’sfailure to deliver good title to the Acquired Shares or any other assetspurchased from Seller by Octagon pursuant to the provisions of the CaroniaPurchase Agreement, free and clear of all claims and encumbrances, or Caronia’sfailure to own and have good title to any asset, free and clear of all claimsand encumbrances, then Octagon shall pay such amount to the Lender as aprepayment of the Term Loan within one (1) Business Day after Octagon’s receiptof the same.

 

(b)                                 Inaddition to the regularly scheduled monthly payments of interest and principalrequired to be made by the Borrowers to the Lender under Section 3.2hereof, the Borrowers shall make mandatory annual prepayments of the principalamount of the Term Note in an aggregate amount not less than one hundredpercent (100%) of Excess Cash Flow for each Fiscal Year of the Companyoccurring during the term of the Term Note, commencing with the Fiscal Yearending December 31, 2005, until the earlier of the following: (i) thescheduled maturity date of the Term Note; (ii) the repayment in full of theTerm Loan; or (iii) the last day of the first full Fiscal Year of the Companyoccurring after the date hereof for which the ratio of the Company’s FundedIndebtedness (including, without limitation, borrowings pursuant to thisAgreement) to EBITDA for such Fiscal Year is less than 1.00 to 1.00.  Such mandatory prepayments of principal tothe Lender shall be calculated based on the audited consolidated financialstatements of the Company for each applicable Fiscal Year of the Company.  The Borrowers shall pay the Lender themandatory prepayment of principal payable hereunder with respect to each FiscalYear of the Company on or before April 30 of the following Fiscal Year;provided, however, that any principal prepayments made between May 1 of theapplicable Fiscal Year and April 30 of the following Fiscal Year shall becredited toward the mandatory principal prepayment amount with respect to suchapplicable Fiscal Year that is payable on or before April 30 of suchfollowing Fiscal Year.

 

(c)                                  Anypayments under this Section 3.5 received after 1:30 p.m. shall be deemedtendered on the following Business Day. Any prepayments shall be applied against scheduled principal payments inthe inverse order of their due date. Interest accrued to the date of payment shall be due and payable on thenext following Interest Payment Date unless the Term Note is paid in full, inwhich event accrued interest shall become due and payable on the payment date.

 

# **ARTICLE 4. FEES, PAYMENTS, SETOFFS, SECURITY, DEFAULT RATE**

# ** **

**4.1****                               Fees****.**  Onthe date hereof, the Borrowers shall pay to the Lender an additional facility feein the amount of $141,250 (the “Facility Fee”). The Borrowers shall also pay to the Lender an unused commitment fee (the“Commitment Fee”) based on the daily average amount of the Revolving CreditCommitment not drawn down in Revolving Credit Loans (the “Unused Commitment”)for the period beginning with the date hereof and ending December 31, 2005or on

 

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thesooner cancellation in full of the Revolving Credit Commitment.  The Commitment Fee shall be payable quarterlyin arrears (i) within ten (10) days after the last day of March, June, September andDecember of each year commencing with the quarter ending on June 30,2005, and (ii) within ten (10) days after the date on which the RevolvingCredit Commitment is fully terminated. The amount of the Commitment Fee shall be equal to one-half of onepercent (0.50%) per annum of the Unused Commitment (computed on the basis ofthe actual number of days elapsed over a Business Year).

 

**4.2****                               Payments****.** All payments and prepayments by the Borrowers to be made in respect ofthe Commitment Fee or of principal or interest on the Revolving Credit Note andthe Term Note (collectively, the “Notes”) shall become due at 1:30 p.m.,Columbus, Ohio time on the day when due, and shall be made to the Lender infederal funds or other immediately available lawful money of the United Statesof America.  Whenever any payment to bemade hereunder shall be due other than on a Business Day, such payment shall bemade on the next succeeding Business Day and such extension of time shall insuch case be included in the computation of interest or fees hereunder.

 

**4.3****                               Setoffs****.**  Uponthe occurrence and continuance of any Event of Default, the Lender shall havethe right to set off against all obligations of each Borrower to the Lenderunder this Agreement and the Notes, whether matured or unmatured, all amountsowing to such Borrower by the Lender, whether or not then due and payable, andall funds or property of such Borrower on deposit with or otherwise held or inthe custody of the Lender for the beneficial account of such Borrower.  Such funds shall be charged against accrued intereston and/or principal of the Notes as the Lender may determine in its discretion.

 

**4.4****                               Security****.**

 

**(a)****                                  BorrowerSecurity Agreements and****Intellectual Property Security Agreements.** As security for the payment of the Notes and for the performance of, andcompliance with all of the terms, covenants, conditions, stipulations andagreements contained in this Agreement, the Notes and the other Loan Documents,the Borrowers, by separate Second Amended and Restated Borrower SecurityAgreements each in the form attached hereto as Exhibit C andincorporated herein by this reference (individually, a “Borrower SecurityAgreement” and collectively, the “Borrower Security Agreements”), by separate SecondAmended and Restated Security Agreements Re: Patents, Trademarks and Copyrights, each in the form attached hereto as ExhibitD and incorporated herein by this reference (individually, an “IntellectualProperty Security Agreement” and collectively, the “Intellectual PropertySecurity Agreements”), and by other instruments contemplated thereby, shall, asprovided in the Borrower Security Agreements and the Intellectual PropertySecurity Agreements, assign and grant to the Lender a first perfected securityinterest in all the collateral described in the Borrower Security Agreementsand the Intellectual Property Security Agreements.  Notwithstanding the foregoing, the BorrowerSecurity Agreement and Intellectual Property Security Agreement executed by theAdditional Borrowers shall be modified as appropriate to reflect that suchagreements do not amend or restate any prior agreements.

 

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**(b)****                                  StockPledge Agreements.**  As securityfor the payment of the Notes and for the performance of, and compliance withall of the terms, covenants, conditions, stipulations and agreements containedin this Agreement, the Notes and the other Loan Documents, the relevantBorrowers, by separate Second Amended and Restated Stock Pledge Agreements eachin the form attached hereto as Exhibit E and incorporated herein by thisreference (individually, a “Stock Pledge Agreement” and collectively, the “StockPledge Agreements”) and by other instruments contemplated thereby, shall, asprovided in the Stock Pledge Agreements, grant to the Lender a securityinterest in all of the shares of capital stock of each of the Company’sSubsidiaries owned by the respective Borrower (including, without limitation,CMI, CHSI, CIDSI, CMIMC, CVI, CDSC, Barron Risk, Octagon, Caronia, MCHC,KRAMMCO and ICSI) and pledge and assign to the Lender all of the stockcertificates evidencing such shares. Notwithstanding the foregoing, the Stock Pledge Agreement relating tothe shares of capital stock of the Additional Borrowers shall be modified asappropriate to reflect that it does not amend or restate any prior agreement.

 

**(c)****                                  CollateralAssignment of Leasehold Interest.** As security for the payment of the Notes and for the performance of, andcompliance with all of the terms, covenants, conditions, stipulations andagreements contained in this Agreement, the Notes and the other Loan Documents,CMI, by a second Amended and Restated Collateral Assignment of LeaseholdInterest in the form attached hereto as Exhibit F and incorporatedherein by this reference (the “Assignment of Leasehold Interest”) and by otherinstruments contemplated thereby, shall, as provided in the Assignment ofLeasehold Interest assign and grant to the Lender all of CMI’s right, title andinterest in, to and under the Dublin Lease.

 

**4.5****                               DefaultRate****.**  Overdue principal and, to the extentpermitted by law, overdue interest in respect of any Loan shall bear interestat a rate equal to the sum of the rate otherwise applicable to such Loanpursuant to Section 2.3 or Section 3.2 hereof plus 3% per annum (the “DefaultRate”).  The application of thisparagraph shall not constitute a waiver of any Event of Default or an agreementby the Lender to permit any later payments whatsoever.

 

# **ARTICLE 5. CONDITIONS OF BORROWING**

# ** **

Theobligation of the Lender to make the Loans to the Borrowers provided forhereunder shall be subject to the following conditions:

 

**5.1****                               ConditionsPrecedent to the Term Loan and the Initial Revolving Credit Loan****.**

 

(a)                                  Priorto the disbursement of the undisbursed portion of the Term Loan, and the initialRevolving Credit Loan hereunder, the Borrowers shall furnish to the Lender thefollowing, each dated the date required under Section 2.3(a) or 3.2(a), asapplicable, or such earlier or later date as may be acceptable to the Lender,and in form and substance satisfactory to the Lender and counsel for theLender:

 

(i)                                     Theduly executed Revolving Credit Note in the form of the attached Exhibit A;

 

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(ii)                                  Theduly executed Term Note in the form of the attached Exhibit B;

 

(iii)                               The duly executedBorrower Security Agreements each in the form of the attached Exhibit C,the duly executed Intellectual Property Security Agreements each in the form ofattached Exhibit D;

 

(iv)                              Theduly executed Stock Pledge Agreements each in the form of the attached Exhibit E,together with the original stock certificates pledged thereby and stock powerswith respect thereto executed in blank;

 

(v)                                 Theduly executed Assignment of Leasehold Interest in the form of the attached Exhibit F,together with a duly executed estoppel certificate from the landlord under theDublin Lease in form and substance acceptable to the Lender and its counsel(the “Landlord Estoppel Certificate”); provided, however, that the Borrowersshall be permitted to deliver the Landlord Estoppel Certificate at any timeprior to June 30, 2005;

 

(vi)                              [Notused];

 

(vii)                           Evidence that the CaroniaAcquisition has been consummated in accordance with the provisions of the CaroniaPurchase Agreement, subject to payment of the initial purchase price for the AcquiredShares upon disbursement of the undisbursed portion of the Term Loan and theinitial Revolving Credit Loan hereunder (if any);

 

(viii)                        Copies of the followingdocuments certified by the president or a vice president of the Company asbeing true, correct and complete:

 

(A)                              TheCaronia Purchase Agreement (including all schedules and exhibits thereto andall related agreements); and

 

(B)                                Suchother agreements, documents and instruments executed and delivered pursuant toor in connection with the Caronia Acquisition, the Caronia Purchase Agreementor the transactions contemplated thereby as the Lender may reasonably request;

 

(ix)                                Certifiedcopies of the resolutions of the board of directors of each Borrower authorizingthe execution, delivery and performance of its respective obligations underthis Agreement, the other Loan Documents and certified copies of theresolutions of the board of directors of Octagon authorizing the execution,delivery and performance of its obligations under the Caronia PurchaseAgreement;

 

(x)                                   Certificatesof the Secretary or an Assistant Secretary of each Borrower, which shallcertify the names of the officers of each such corporation authorized to signthis Agreement and the Notes, the other Loan Documents or any other documentsor certificates to be delivered pursuant to this Agreement by such Borrower, asapplicable, or any of its respective officers, together with the truesignatures of such officers.  The Lendermay conclusively rely upon each such certificate until it shall receive afurther certificate of the

 

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Secretaryor an Assistant Secretary of the applicable corporation canceling or amendingthe prior certificate and submitting the signatures of the officers named insuch further certificate;

 

(xi)                                Evidencethat the Borrowers have in effect insurance and endorsements of the character andamount described in Section 7.7 hereof;

 

(xii)                             One or more opinions ofcounsel to the Borrowers addressed to the Lender opining as to the matters setforth in Exhibit G hereto and as to such other matters as theLender may request and containing only such qualifications as are acceptable tothe Lender and its counsel;

 

(xiii)                          Evidence that no materialadverse change shall have occurred with respect to the credit or financialcondition of the Borrowers taken as a whole;

 

(xiv)                         (A) Pro forma projectedbalance sheets of each Borrower after giving effect to the Caronia Acquisitionand each of the transactions contemplated by this Agreement, the CaroniaPurchase Agreement, and each of the other Loan Documents, copies of which proforma balance sheets are attached hereto as Exhibit I(collectively, the “Pro Forma Balance Sheet”); and (B) projections of theincome and cash flows of the Borrowers for the succeeding five (5) Fiscal Yearsending on December 31, 2009, copies of which projections are attachedhereto as Exhibit J;

 

(xv)                            Asolvency certificate from the chief financial officer of the Company, on behalfof the Borrowers, in form and substance as set forth in Exhibit Kattached hereto, which shall be addressed to the Lender, dated as of the datehereof;

 

(xvi)                         Copies of each legal opiniondelivered in connection with the Caronia Acquisition, accompanied by a relianceletter of counsel rendering such opinion to the effect that the Lender may relyon such opinion (or containing such reliance language within the termsthereof); and

 

(xvii)                      Such other opinions,certificates, affidavits, documents and filings as the Lender may deemreasonably necessary or appropriate.

 

(b)                                 TheLender’s obligation hereunder to make the Term Loan and the initial RevolvingCredit Loan shall be subject to the fulfillment, to the Lender’s satisfactionprior to the disbursement of such Loans, of the following additionalconditions:

 

(i)                                     TheCaronia Acquisition shall have been consummated in accordance with theprovisions of the Caronia Purchase Agreement, subject to payment of the initialpurchase price for the Acquired Shares upon disbursement of the undisbursedportion of the Term Loan and the initial Revolving Credit Loan hereunder (ifany); and

 

(ii)                                  Allof the conditions to the Caronia Acquisition set forth in the Caronia PurchaseAgreement (other than payment of the Caronia Purchase Price) shall have been

 

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satisfiedand fulfilled (and not waived by any party thereto) and the Caronia Acquisitionshall have been consummated in accordance with the provisions of the CaroniaPurchase Agreement, subject to payment of the Caronia Purchase Price upondisbursement of the undisbursed portion of the Term Loan and the initialRevolving Credit Loan hereunder.

 

**5.2****                               ConditionsPrecedent to Each of the Loans****.**  At the time of each Revolving Credit Loanafter the initial Revolving Credit Loan hereunder and at the time of making theTerm Loan hereunder, each of the Borrowers shall be in compliance with all ofthe provisions and covenants contained in this Agreement and the other Loan Documentswith which it is to comply; there shall exist no Event of Default; no eventshall exist or shall have occurred which with the lapse of time or notice orboth would constitute an Event of Default; and all of the representations andwarranties of the Borrowers under the Loan Documents shall be true and correctin all material respects (except for those representations and warranties thatare expressly made as of an earlier date in which case such representations andwarranties shall have been true and correct, in all material respects, as ofsuch earlier date).

 

# **ARTICLE 6. REPRESENTATIONS AND WARRANTIES**

# ** **

TheBorrowers, jointly and severally, hereby represent and warrant to the Lender,which representations and warranties shall survive the execution and deliveryof this Agreement and the Notes, as follows.

 

**6.1****                               Organizationand Authority****.**  Each of the Borrowers is a corporation dulyorganized, validly existing and in good standing under the laws of the state ofits incorporation, and has all requisite power and authority to execute,deliver and perform this Agreement and all of the documents executed inconnection with the Loans and to own and operate its properties and to carry onits business as now conducted.  Octagonhas all requisite power and authority to execute, deliver and perform the CaroniaPurchase Agreement.  The execution,delivery and performance of this Agreement, the Notes and the other LoanDocuments have been duly authorized by the Borrowers by all necessary corporateactions; the execution, delivery and performance of the Caronia PurchaseAgreement have been duly authorized by Octagon by all necessary corporateactions; there is no prohibition, either in law, in its certificate ofincorporation, articles of incorporation, bylaws, regulations or otherorganizational documents, or in any order, writ, injunction or decree of anycourt or arbitrator presently in effect having applicability to any Borrower orSCC that in any way prohibits or would be violated by the execution andperformance of this Agreement, the Notes, the other Loan Documents or the CaroniaPurchase Agreement in any respect; and this Agreement, the Notes, the otherLoan Documents and the Caronia Purchase Agreement are and will be valid,binding and enforceable obligations of the Borrowers, as applicable, except asenforcement thereof may be limited by bankruptcy, insolvency or similar lawsaffecting the enforcement of creditors’ rights generally and except to theextent enforcement thereof may be limited by the application of generalprinciples of equity.  SCC ownsbeneficially and of record at least eighty percent (80%) of the issued andoutstanding shares of capital stock of the Company.  The Company owns beneficially and of recordall of the issued and outstanding shares of capital stock of CMI.  CMI owns beneficially and of record all ofthe issued and outstanding shares of capital stock of CHSI, CIDSI, CMIMC, CVI,Barron Risk, Octagon KRAMMCO and ICSI. CVI owns beneficially and of record all of the issued and outstanding sharesof capital stock of CDSC.  As of the datehereof, as a result

 

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of thecompletion of the Caronia Acquisition, Octagon owns or will own beneficiallyand of record all of the issued and outstanding shares of capital stock of Caroniaand MCHC.  Schedule 6.1attached hereto contains a complete and correct list of all of the Company’sSubsidiaries and of the Company’s and its Subsidiaries’ directors and officers,in each case after giving effect to the consummation of the CaroniaAcquisition.

 

**6.2****                               Qualification****.** Each of the Borrowers is duly qualified or licensed and in good standingas a foreign corporation duly authorized to do business in each jurisdiction inwhich the character of the properties owned or leased or the nature of theactivities conducted makes such qualification or licensing necessary and inwhich the failure to be so qualified would have a Material Adverse Effect.

 

**6.3****                               Investments;Guarantees; Liabilities****.**  Except as permitted in Sections 8.1, 8.3, 8.7and 8.10 hereof, the Borrowers have made no material investments (other thaninvestment in themselves) in, material advances to or guarantees of theobligations of any Person other than guarantees for the benefit of theLender.  As of the date hereof, exceptfor Indebtedness hereunder and the Tax Allocation Agreement and Indebtednessdisclosed in Schedule 8.10 attached hereto, the Borrowers do nothave any material Liabilities, direct or contingent, except for(i) Liabilities reflected in the Balance Sheet and/or the Caronia BalanceSheet, (ii) Liabilities incurred in the ordinary course of business since January 31,2005, (iii) Liabilities incurred pursuant to the Caronia Purchase Agreement orin connection therewith, and (iv) Liabilities which under GAAP are notrequired to be reflected or reserved against in the Borrowers’ financialstatements (including the notes thereto), but none of which could reasonably beexpected to have, individually or in the aggregate, a Material Adverse Effect.

 

**6.4****                               TaxReturns and Payments****.**  Each of the Borrowers has filed all taxreturns required by law to be filed and has paid all taxes, assessments andother governmental charges of any material nature, either in amount or effect,levied upon any of its properties, assets, income or franchises, other thanthose not yet delinquent or those being contested in accordance with Section 7.6hereof.  The charges, accruals andreserves on the books of the Borrowers in respect to income taxes for allrespective fiscal periods are adequate in the opinion of the Borrowers, and theBorrowers know of no unpaid assessment for additional income taxes for anyfiscal period or of any reasonable basis therefor.

 

**6.5****                               Titleto Properties; Liens****.**  Each of the Borrowers has good and marketabletitle to all of its property and assets, in each case including, but notlimited to, the property and assets reflected as being owned by it on theBalance Sheet and/or the Caronia Balance Sheet except such as have beendisposed of in the ordinary course of business since January 31, 2005 andall such property and assets are free and clear of mortgages, pledges, liens,charges or other encumbrances except such as are not prohibited by Section 8.2hereof.  Each of the Borrowers enjoyspeaceful and undisturbed possession under the Leases and all other leases underwhich it is lessee that are material to the conduct of its business and all ofthe Leases and such other leases are valid, subsisting and in full force andeffect in accordance with their terms. None of the Leases and such other leases contains any provisionrestricting incurrence of Indebtedness by any Borrower or any provision whichhas a Material Adverse Effect or in the future could reasonably be expected tohave a Material Adverse Effect.

 

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**6.6****                               Litigation****.** There is no court action, other proceeding or investigation pending orthreatened which questions the validity of this Agreement, the Notes, any ofthe other Loan Documents or any action taken or to be taken pursuant theretoor, except as set forth in Schedule 6.6 attached hereto which couldreasonably be expected to result, either separately or in the aggregate, in anymaterially adverse change in the business, operations, affairs or condition ofthe Borrowers, taken as a whole.

 

**6.7****                               Compliancewith Law and Other Instruments****.**  None of the Borrowers is in violation of, andthe execution, delivery and performance of this Agreement, the Notes, the OtherLoan Documents and the Caronia Purchase Agreement does not and will not resultin a violation of nor a conflict with or default under, any agreement,instrument, judgment, decree, order, statute or governmental rule or regulationapplicable to any Borrower or by which any of them is bound, which now or inthe future could reasonably be expected to have a Material Adverse Effect.

 

**6.8****                               FinancialStatements****.**

 

(a)                                  TheCompany has furnished to the Lender financial statements of the Companyincluding (i) audited consolidated balance sheets, audited consolidatedstatements of income, audited consolidated statements of changes instockholders’ equity and audited consolidated statements of cash flows as atand for the Fiscal Year ended December 31, 2003, (ii) unauditedinterim financial statements for the Fiscal Year ending December 31, 2004,including, without limitation, an unaudited balance sheet of the Company as of December 31,2005, and (iii) unaudited interim financial statements for the periodending January 31, 2005, including, without limitation, an unauditedconsolidated interim balance sheet of the Company as of January 31, 2005(the “Balance Sheet”).  Such financialstatements are complete and correct in all material respects, have beenprepared in accordance with GAAP and fairly present the consolidated financialcondition of the Company as at such dates and the results of operations of theCompany for the period ended on such dates. Since the date of such statements, no materially adverse change hasoccurred in the business, operations, affairs or condition (financial orotherwise) of the Original Borrowers, taken as a whole.

 

ThePro Forma Balance Sheet delivered to the Lender sets forth the assets andliabilities of the Borrowers on a pro forma consolidated and consolidatingbasis after taking into account the consummation of the transactionscontemplated in this Agreement, the other Loan Documents and the TransactionDocuments as of the Closing Date.  ThePro Forma Balance Sheet has been prepared in accordance with GAAP and fairlypresents in all material respects the assets and liabilities of the Borrowersand their respective Subsidiaries, reflecting the consummation of thetransactions contemplated in this Agreement, the other Loan Documents and theTransaction Documents and based on the assumptions set forth therein as of theClosing Date.

 

(b)                                 TheCompany has furnished, or caused to be furnished, to the Lender financialstatements of Caronia and MCHC including (i) unaudited balance sheets,unaudited statements of income, unaudited statements of changes in stockholders’equity and unaudited statements of cash flows as at and for the Fiscal Yearsended December 31, 2003 and 2004, and (ii) unaudited interimfinancial statements for the period ending January 31, 2005, including,without limitation, an

 

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unaudited interim balancesheet of Caronia and MCHC as of January 31, 2005 (the “Caronia BalanceSheet”).  Such financial statements arecomplete and correct in all material respects, have been prepared in accordancewith GAAP and fairly present the financial condition of Caronia and MCHC as atsuch dates and the results of operations of Caronia and MCHC for the periodended on such dates (subject to the effects of certain intercompany expenseallocations and other intercompany transactions).  Since the date of such statements, nomaterially adverse change has occurred in the business, operations, affairs orcondition (financial or otherwise) of Caronia and MCHC, taken as a whole.

 

**6.9****                               Patents,Trademarks and Copyrights****.**  Schedule 6.9 hereto lists, as ofthe date of this Agreement, all patents, patent applications, trademark andservice mark registrations and applications therefor and copyrightregistrations and applications therefor owned or licensed by any Borrower, andall license agreements for the same entered into by any Borrower.  Each of the Borrowers possesses and has madeall filings with the United States Patent and Trademark Office and appropriatestate agencies to evidence in such Borrower full and complete title to all thepatents, trademarks, service marks, trade names, copyrights and licenses andrights in respect of the foregoing which are essential to the conduct of itsbusiness, without any known conflict with the rights of others.

 

**6.10****                        NoMargin Activity****.**  None of the Borrowers is engaged in thebusiness of extending or obtaining credit for the purpose of purchasing orcarrying margin stock (within the meaning of Regulation U of the Board ofGovernors of the Federal Reserve System, as is now and may from time to timehereafter be in effect) and no part of the proceeds of any Loan shall be usedto purchase or carry any such margin stock or to extend credit to others forthe purpose of purchasing or carrying any such margin stock or to reduce orretire any indebtedness incurred for any such purpose.  No part of the proceeds of the Loanshereunder will be used for any purpose which violates, or which is inconsistentwith, the provisions of Regulations G, T, U or X of the Board of Governors ofthe Federal Reserve System.

 

**6.11****                        ERISA****.** Each Plan maintained by a Borrower and by each ERISA Affiliate complieswith all material applicable requirements of ERISA and of the Code and with allmaterial applicable rulings and regulations issued under the provisions ofERISA and the Code setting forth those requirements.  Neither any Borrower nor any ERISA Affiliatehas engaged in any prohibited transaction (as defined in Section 406 ofERISA or Section 4975 of the Code) (i) which has not been corrected withinthe correction period applicable to it under Section 502(i) of ERISA or Section 4963(e)of the Code or (ii) for which an exemption has not been obtained under Section 408of ERISA or Section 4975 of the Code. As of the date hereof, neither any Borrower nor any ERISA Affiliate is aparticipant in (i) any Multiemployer Plan, (ii) any other Plan which is subjectto Title IV of ERISA, or (iii) any money purchase pension plan.

 

**6.12****                        AdverseContracts; Defaults****.**  None of the Borrower is a party to anyagreement or instrument or subject to any charter or other corporaterestriction which could reasonably be expected to have a Material AdverseEffect.  No Borrower is in default in anymaterial respect in the performance, observance or fulfillment of any of theobligations, covenants or conditions contained in any agreement or instrumentto which it is a party which default could reasonably be expected to have aMaterial Adverse Effect.

 

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**6.13****                        EnvironmentalLaws****.**  No release, emission, or discharge into theenvironment of hazardous substances, as defined under the ComprehensiveEnvironmental Response, Compensation and Liability Act, as amended, orhazardous waste as defined under the Solid Waste Disposal Act, as amended, orair pollutants as defined under the Clean Air Act, or toxic pollutants asdefined under the Clear Air Act, or the Toxic Substances Control Act, hasoccurred or is presently occurring in excess of federally permitted releases orreportable quantities, or other concentrations, standards or limitations under,and which would constitute a material violation of, the foregoing laws or underany other federal, state or local laws or regulations, in connection with anyaspect of the business of the Borrowers. No Borrower has any knowledge of any past or existing violations, in anymaterial respect, by any of them of any environmental laws, ordinances orregulations issued by any federal, state or local governmental authority.

 

**6.14****                        Disclosure****.** None of the information (financial or otherwise) furnished by or onbehalf of the Borrowers to the Lender in connection with the negotiation ofthis Agreement contains any untrue statement of a material fact or omits tostate a material fact necessary to make the statements contained herein ortherein not misleading in the light of the circumstances under which suchstatements were made.  All financialprojections (if any) delivered to the Lender in connection herewith have beenprepared on the basis of the assumptions stated therein.  Such projections represent the Borrowers’good faith estimate of the Borrowers’ future financial performance and, whilethere can be no assurance that the performance set forth in such projectionswill approximate actual performance, such projections are believed by theBorrowers to be fair in light of current business conditions.

 

**6.15****                        Insurance****.** All of the properties and operations of the Borrowers of a characterusually insured by Persons of established reputation engaged in the same orsimilar businesses similarly situated are adequately insured, by financiallysound and reputable insurance companies, against loss or damage of the kindsand in amounts customarily insured against by such Persons and each of theBorrowers carries, with such insurers in customary amounts, such otherinsurance, including public and product liability, as is usually carried byPersons of established reputation engaged in the same or similar businessessimilarly situated.  The insurancerequired by the provisions of Section 7.7 hereof and by the other LoanDocuments is in force and all premiums due and payable in respect thereof havebeen paid.

 

**6.16****                        Eventsof Default****.**  There does not exist any Event of Default orDefault hereunder.

 

**6.17****                        Solvency,Etc****.**  Eachof the Borrowers and their respective Subsidiaries is solvent on a goingconcern basis as of the date of this Agreement and shall not become insolventas a result of the consummation of the transactions contemplated by the CaroniaPurchase Agreement, this Agreement or the other Transaction Documents.  Each of the Borrowers and their respectiveSubsidiaries is, and after giving effect to the transactions contemplated bythe Caronia Purchase Agreement, this Agreement and the other TransactionDocuments shall be, able to pay their debts as they become due, and theproperty of each Borrower and their respective Subsidiaries now has, and aftergiving effect to the transactions contemplated by the Caronia PurchaseAgreement, this Agreement and the other Transaction Documents shall have, afair salable value (on a going concern basis) greater than the amounts requiredto pay its debts (including a reasonable estimate of the

 

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amount of all contingentliabilities).  Each of the Borrowers andtheir respective Subsidiaries has adequate capital to carry on its business,and after giving effect to the transactions contemplated by the CaroniaPurchase Agreement, this Agreement and the other Transaction Documents, each ofthe Borrowers and their respective Subsidiaries shall have adequate capital toconduct their business.  No transfer ofproperty is being made and no obligation is being incurred in connection withthe transactions contemplated by this Agreement with the intent to hinder,delay or defraud either present or future creditors of the Borrowers or any oftheir respective Subsidiaries.

 

**6.18****                        Projectionsand Pro Forma Financial Statements****.**

 

(a)                                  Attachedhereto as Exhibit J are true and complete copies of the latestprojections of the consolidated income and cash flows the Borrowers for thefive (5) Fiscal Years ending through December 31, 2009.  Such projections are based on underlyingassumptions of the Borrowers which, to the knowledge of the Borrowers, providea reasonable basis for the projections contained therein.  Such projections have been prepared on thebasis of the assumptions set forth therein, which assumptions are, to theknowledge of the Borrowers, fair and reasonable in light of the historicalfinancial performance of the Borrowers and of current and reasonablyforeseeable business conditions, as of the date hereof, and reflect thereasonable estimate of the Borrowers, as of the date hereof, of the results ofoperations and other information projected therein.

 

(b)                                 Thepro forma projected consolidated balance sheets of the Borrowers as of January 31,2005, attached hereto as Exhibit I, are complete and correct in allmaterial respects and present fairly in all material respects the respectiveconsolidated financial conditions of the Borrowers as of such date as if thetransactions contemplated by the Caronia Purchase Agreement, this Agreement,the other Loan Documents and the Transaction Documents had occurred immediatelyprior to such date, and such balance sheets contain all pro forma adjustmentsnecessary in order to fairly reflect such assumption.

 

**6.19****                        CaroniaPurchase Agreement****.**

 

(a)                                  Thetransactions contemplated by the Caronia Purchase Agreement have beenconsummated substantially in accordance with the respective terms andconditions thereof, except for waivers of conditions consented to by Octagon inwriting (copies of which have heretofore been delivered to the Lender).  The Caronia Purchase Agreement has not been alteredor amended or any condition thereof waived in a manner adverse to any Borrowerwithout its prior written consent (copies of which have heretofore beendelivered to the Lender).

 

(b)                                 Tothe knowledge of the Borrowers, each of the representations and warranties madeby Seller in the Caronia Purchase Agreement on the dates referenced therein istrue and correct in all material respects.

 

**6.20****                        CertainAssurances****.**  CHSIis certified by the State of Ohio Bureau of Workers’ Compensation (the “OBWC”)and similar agencies in other states where the Borrowers conduct business, andsuch certifications are in full force and effect.  The OBWC Contracts are in full force

 

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and effect and neitherthe Company nor any of the other Borrowers have received any indications,whether written or oral, of alleged breaches of, or OBWC’s intent to terminate,or not to renew, either such contract. CHSI has not been notified that it is “at capacity” under either OBWCContract by the OBWC, nor has CHSI received indications that the OBWC isintending, in any way, to limit, in any material manner, CHSI’s ability toaccept new enrollments under either OBWC Contract.  The Borrowers are not aware of any changes orpotential changes to the system of workers’ compensation or unemploymentinsurance or the Ohio Health Partnership Plan or the Qualified Health Plan(each as defined in the HPI Merger Agreement) that would have a MaterialAdverse Effect.  The foregoing representationsand warranties under this Section 6.21 are given as of the datehereof.  The consummation of thetransactions contemplated by the HPI Merger Agreement did not constitute a “changein the MCO organizational structure or business operations”, as set forth inthe OBWC Contracts.

 

# **ARTICLE 7. AFFIRMATIVE COVENANTS**

# ** **

Untilpayment in full of the Notes and performance of all other obligations of theBorrowers hereunder:

 

**7.1****                               BankDeposits****.**  Each of the Borrowers covenants that theLender shall be the principal bank of account and primary depository for eachof the Borrowers.

 

**7.2****                               UnauditedFinancial Statements and Reports of the Company****.**

 

(a)                                  Notlater than thirty (30) days following the end of each calendar month after thedate hereof, the Company shall furnish to the Lender the following items inform and substance satisfactory to the Lender:

 

(i)                                     Anunaudited consolidated and unaudited consolidating income statement (includingunaudited consolidating income statements for CMI and CHSI) for the month andFiscal Year to date and (subject to normal year-end adjustments) copies of thestatements for the same periods of the previous year;

 

(ii)                                  Anunaudited consolidated and unaudited consolidating balance sheet as of the endof such month and a copy of such statement as of the end of such month in theprevious year; and

 

(iii)                               A certificate from thechief financial officer or treasurer of the Company (A) stating, on behalfof the Company, that:  (I) the financialstatements are complete and correct in all material respects and fairlyrepresent the financial position of the Company as of their respective datesand the consolidated results of the Company’s operations for the periods thenended (subject to normal year-end adjustments); (II) each Borrower has compliedwith and is then in compliance, in all material respects, with all terms andcovenants of this Agreement (or, if there is any non-compliance, giving thedetails thereof); and (III) there exists no Default or Event of Default(or, if a Default or Event of Default exists, giving the details thereof); and(B) setting forth in a detailed computation in a form reasonably satisfactoryto the Lender the financial status of the Company (as the end of, or,

 

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in thecase of incurrence tests, during such accounting period) in respect of therestrictions contained in Sections 8.12 through 8.14, inclusive; provided,however, that the financial covenants set forth in Sections 8.13 and 8.14hereof only need to be calculated in such certificate quarterly and thefinancial covenant in Section 8.12 hereof only needs to be calculated insuch certificate annually.

 

(b)                                 Eachof the Borrowers shall promptly upon their becoming available, furnish to theLender one copy of (i) each financial statement, report, notice or proxystatement sent by any Borrower to its stockholders (in their capacity asstockholders) generally, and (ii) each report, each registration statementand each prospectus and all amendments thereto filed by any Borrower with theSecurities and Exchange Commission and of all press releases and otherstatements made available generally by any Borrower to the public concerningdevelopments that are material.

 

(c)                                  Not later than one hundred twenty (120) daysfollowing the end of each Fiscal Year of the Company, commencing with theFiscal Year ended December 31, 2004, the Company shall furnish to theLender a detailed schedule, in form and substance satisfactory to the Lender,calculating the Tax Agreement Payments for such Fiscal Year.  Such schedule shall be prepared by theCompany; provided, however, that upon the Lender’s request from time to time,the Company, at its sole cost and expense, shall cause the independentaccounting firm auditing the Company’s consolidated financial statements, oranother national accounting firm reasonably acceptable to Lender, to reviewsuch schedule and to determine the final Tax Agreement Payments for eachFiscal Year.  Upon the Lender’s requestfrom time to time, the Borrowers shall promptly provide the Lender with suchfurther information and documents as the Lender shall reasonably request forpurposes of reviewing the schedule(s) prepared by the Company’s accounting firmand determining the Tax Agreement Payments for any Fiscal Year.

 

(d)                                 Inaddition, within thirty (30) days following the end of each calendar month andforty-five (45) days following the end of each quarter of each Fiscal Year, theCompany shall furnish to the Lender a certificate from the chief financialofficer or treasurer of the Company setting forth, on behalf of the Company, adetailed computation, in a form satisfactory to the Lender, of the Company’sEBITA for the previous month or quarter, as applicable.

 

**7.3****                               AuditedFinancial Statements of the Company****.**

 

(a)                                  Notlater than one hundred twenty (120) days following the end of each Fiscal Yearof the Company, commencing with the Fiscal Year ended December 31, 2004,the Company shall furnish to the Lender, in form and substance satisfactory tothe Lender, complete unaudited consolidating and audited consolidated financialstatements for the Company for such Fiscal Year, accompanied by unauditedsupporting schedules with respect to each of CMI and CHSI, certified, in thecase of the audited consolidated financial statements, by Ernst & Young LLPor another independent certified public accountant acceptable to the Lender,accompanied by a certificate from such accountant, stating that in examiningthe Company’s books and records for such period, such accountant has obtainedno knowledge of breaches of Sections 8.12, 8.13 or 8.14.

 

(b)                                 Eachof the financial statements delivered under this Section 7.3 shall beaccompanied by a certificate of the chief financial officer or treasurer of theCompany stating, on behalf of the Borrowers, that except as disclosed in thecertificate such officer has no knowledge of

 

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a Default or an Event ofDefault hereunder and setting forth in a detailed computation in formsatisfactory to the Lender of (i) the financial status of the Company (at theend of, or, in the case of incurrence tests, during such accounting period) inrespect of the restrictions contained in Sections 8.12, 8.13 and 8.14 and (ii)the amount of the mandatory principal prepayment (if any) payable by theBorrowers under Section 3.5(b) hereof with respect to the prior FiscalYear of the Company.

 

**7.4****                               Inspection****.**  Upon request of the Lender and uponreasonable prior notice (provided, however, that no such notice shall berequired if an Event of Default shall have occurred and be continuing), each ofthe Borrowers shall make available for inspection by representatives of theLender any of its books and records and shall furnish to the Lender informationregarding its business affairs and financial condition within a reasonable timeafter receipt of written request therefor.

 

**7.5****                               Insurance****.**

 

(a)                                  Eachof the Borrowers shall insure and maintain hazard and other insurance upon allof its assets and business properties and liability insurance with responsibleand reputable insurers of such character and in such amounts as are usuallymaintained by companies engaged in like business.  All insurance policies shall be written forthe benefit of the Borrowers and the Lender as their interests may appear andshall contain a provision requiring the insurance company to provide the Lendernot less than thirty (30) days’ written notice prior to cancellation of anysuch policy.  All insurance policies orcertificates evidencing the same shall be furnished to the Lender.

 

(b)                                 Withoutlimiting the foregoing provisions of this Section 7.5, the Borrowers shallmaintain the following insurance coverages:

 

(i)                                     theBorrowers shall maintain all risk property insurance against direct physicalloss or damage on an all risks basis, including windstorm and hurricane andcomprehensive boiler and machinery coverage, subject to a maximum deductible of$50,000.  The property shall be insuredfor the full replacement cost and such policy shall contain an agreed amountendorsement waiving any coinsurance penalty;

 

(ii)                                  atall times on and after the date hereof, as an extension of the coveragerequired under Section 8.7(b)(i), the Borrowers shall maintain businessinterruption insurance with a minimum period of indemnity of six (6) months,subject to a maximum five-day waiting period or $50,000 deductible and shallcontain an agreed amount endorsement waiving any coinsurance penalty;

 

(iii)                               the Borrowers shallmaintain commercial general liability insurance written on an occurrence basiswith a limit of not less than $1,000,000 for each occurrence and $3,000,000 inthe aggregate.  Such coverage shallinclude, but not be limited to, premises/operations, blanket contractualliability, independent contracts, broad form products and completed operations,personal injury, fire, legal liability and employee benefits liability;

 

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(iv)                              theBorrowers shall maintain errors and omissions insurance with a limit of notless than $5,000,000 in the aggregate;

 

(v)                                 theBorrowers shall maintain workers’ compensation insurance in accordance withstatutory provisions covering accidental injury, illness or death of anemployee of any Borrower while at work or in the scope of his or her employmentwith the Borrowers and employer’s liability insurance in an amount not lessthan $500,000; and

 

(vi)                              theBorrowers shall maintain automobile liability insurance covering owned,non-owned, leased, hired or borrowed vehicles against bodily injury or propertydamage.  Such coverage shall have a limitof not less than $1,000,000.

 

**7.6****                               Paymentof Taxes and Claims****.**  Each of the Borrowers shall pay all taxes,assessments and other governmental charges imposed upon its properties orassets or in respect of its franchises, business, income or profits before anypenalty or interest accrues thereon, and all claims (including, withoutlimitation, claims for labor, services, materials and supplies) for sums whichhave become due and payable and which by law have or might become a lien orcharge upon any of its properties or assets, provided that (unless any materialitem of property would be lost, forfeited or materially damaged as a resultthereof) no such charge or claim need be paid if the amount, applicability orvalidity thereof is currently being contested in good faith and if such reserveor other appropriate provision, if any, as shall be required by GAAP shall havebeen made therefor.

 

**7.7****                               Compliancewith Laws****.**  Each of the Borrowers shall comply in allsubstantial respects with all applicable statutes, laws, ordinances andgovernmental rules, regulations and orders (including, without limitation,those promulgated by or relating to the OBWC system or the workers’compensation system in other states in which any Borrower does business) towhich it is subject or which are applicable to its business, properties andassets if noncompliance therewith would materially adversely affect suchbusiness, including, but not limited to, all applicable federal, state,regional, county or local laws, statutes, rules, regulations or ordinancesconcerning public health, safety or the environment; provided that (unless suchcontest or noncompliance would materially adversely affect such business) suchBorrower need not so comply if any such statute, law, ordinance, orgovernmental rule, regulation or order is currently being contested in goodfaith.

 

**7.8****                               ERISA****.** Each of the Borrowers shall furnish to Lender:  (a) promptly and in any event withinthirty (30) days after such Borrower knows or has reason to know of theoccurrence of a Reportable Event with respect to a Plan with regard to whichnotice must be provided to the PBGC, a copy of such materials required to befiled with the PBGC with respect to such Reportable Event and in each such casea statement of the chief financial officer of such Borrower, setting forthdetails as to such Reportable Event and the action which such Borrower proposesto take with respect thereto; (b) promptly and in any event within thirty(30) days after such Borrower knows or has reason to know of any conditionexisting with respect to a Plan which presents a material risk of terminationof the Plan, imposition of an excise tax, requirement to provide security tothe Plan or incurrence of other liability by such Borrower or any ERISAAffiliate a statement of the chief

 

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financial officer of suchBorrower or such ERISA Affiliate describing such condition; (c) at leastthirty (30) days prior to the filing by any plan administrator of a Plan of anotice of intent to terminate such Plan, a copy of such notice;(d) promptly and in no event more than 10 days after the filing thereofwith the Secretary of the Treasury, a copy of any application by such Borrower oran ERISA Affiliate for a waiver of the minimum funding standard under section 412of the Code; (e) upon request, and in no event more than thirty (30) daysafter the request therefore, copies of each annual report which is filed onForm 5500 together with certified financial statements for the Plan (if any) asof the end of such year and actuarial statements on Schedule B to suchform 5500; (f) promptly and in any event within thirty (30) days after itknows or has reason to know of any event or condition which might reasonably beexpected to constitute grounds under section 4042 of ERISA for thetermination of, or the appointment of a trustee to administer, any Plan, astatement of the chief financial officer of such Borrower describing such eventor condition; (g) promptly and in no event more than thirty (30) daysafter receipt thereof by such Borrower or any ERISA Affiliate, a copy of eachnotice received by such Borrower or an ERISA Affiliate concerning theimposition of any withdrawal liability under section 4202 of ERISA; and(h) promptly after receipt thereof a copy of any notice such Borrower orany ERISA Affiliate may receive from the PBGC or the Internal Revenue Servicewith respect to any Plan or Multiemployer Plan; provided, however, that this subsection (h)shall not apply to notices of general application promulgated by the PBGC orthe Internal Revenue Service.

 

**7.9****                               Preservationof Corporate Existence****.**  Each of the Borrowers shall preserve andmaintain and cause each of its subsidiaries to preserve and maintain itscorporate existence (except pursuant to a merger permitted by Section 8.4below), rights, franchises and privileges in the jurisdiction of itsincorporation or in any other jurisdiction it shall select, and qualify andremain qualified as a foreign corporation in each jurisdiction in which suchqualification is necessary in view of its business and operations or theownership of its properties.

 

**7.10****                        Maintenanceof Tangible Assets****.**  Each of the Borrowers shall maintain itstangible assets in good condition and repair and shall not permit any action oromission which might materially impair the value thereof, normal wear and tearexcepted.

 

**7.11****                        Noticesof Certain Events****.**  Each of the Borrowers shall promptly after itbecomes aware thereof give notice to the Lender of:

 

(a)                                  AnyDefault or Event of Default;

 

(b)                                 Anydefault or event of default under any contractual obligation of such Borrowerthat would have a Material Adverse Effect; and

 

(c)                                  Anymaterially adverse change in the business, operations, affairs or condition(financial or otherwise) of such Borrower.

 

Each notice pursuant tothis Section 7.11 shall be accompanied by a statement of the chiefexecutive officer or chief financial officer of the respective Borrower settingforth details of the occurrence referred to therein and stating what action therespective Borrower proposes to take with respect thereto.

 

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**7.12****                        Recordsand Books of Account****.**  Each of the Borrowers shall keep adequaterecords and books of account in which complete entries will be made inaccordance with GAAP, reflecting all financial transactions required by GAAP tobe so reflected.

 

**7.13****                        Performanceof Contracts****.**  Each of the Borrowers shall perform and comply,in all material respects, with, in accordance with their terms, all provisionsof each and every contract, agreement or instrument now or hereafter bindingupon it, except to the extent that it shall contest the provisions thereof ingood faith and by proper proceedings or the failure to perform could notreasonably be expected to have a Material Adverse Effect.

 

**7.14****                        Noticeof Material Litigation****.**  Each of the Borrowers shall promptly notifythe Lender in writing of any litigation, arbitration proceeding oradministrative investigation, inquiry or other proceeding to which it mayhereafter become a party which could reasonably be expected to have a MaterialAdverse Effect and which may involve any risk of any judgment or liability notfully covered by insurance or which may otherwise result in any materiallyadverse change in the business, operations, affairs or condition (financial orotherwise) of such Borrower or which may impair, in any material respect, theability of such Borrower to perform its obligations under this Agreement, theNotes or the other Loan Documents.

 

**7.15****                        Use ofProceeds****.**  The Borrowers shall use the proceeds of theRevolving Credit Loans as provided in Section 2.5 hereof, and the Companyshall use the proceeds of the Term Loan solely for purposes of repayingRevolving Credit Loans and/or the Prior Term Loan and/or paying the CaroniaPurchase Price in accordance with the terms of the Caronia PurchaseAgreement.  Such uses shall be consistentwith all applicable laws.

 

**7.16****                        Ownershipand Control of Borrowers****.**

 

(a)                                  TheCompany shall, at all times after the date hereof, have, direct or indirect,beneficial and legal ownership of, and the right and power to control thevoting and transfer of, and the exercise of all other rights attributable to,all of the voting equity securities (and securities convertible into, orgranting rights to acquire, voting equity securities) of each of the otherBorrowers.

 

(b)                                 Withoutthe prior written consent of the Lender, no Borrower shall cause or permit anyshares of capital stock of the Company to be transferred, sold or assigned toany Person other than the Lender; provided, however, that any member of thesenior management or key employee of the Company that is an existingstockholder of the Company may transfer, without the Lender’s consent, his orher shares of the Company’s stock to members of his or her immediate family orto trusts for their benefit or by will or operation of law and the Lender shallnot unreasonably withhold its consent to any other transfer of such shares byany such senior management or other key employee.

 

**7.17****                        Compliancewith the Caronia Purchase Agreement****.**  The Company shallenforce its material rights and remedies as set forth in the Caronia PurchaseAgreement, the agreements contemplated thereby and the other TransactionDocuments.  If requested by the Lender,each of the

 

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Borrowers and theirrespective Subsidiaries shall obtain and promptly furnish to the Lenderevidence of all governmental approvals as may be required to enable the Companyand its Subsidiaries to comply with the Company’s obligations under the CaroniaPurchase Agreement and the agreements, documents and instruments relatedthereto and to continue in business as conducted on the date hereof withoutmaterials interruption or interference.

 

**7.18****                        Compliancewith the OBWC****.**  Each of the Borrowers shall comply with allmaterial obligations, standards and requirements of all contracts with the OBWCor any applicable governmental agency performing a similar function in anyother jurisdiction in which any Borrower operates.

 

**7.19****                        SellerInformation****.**  At the request of the Lender, the Borrowersshall promptly deliver to the Lender copies of any statements, reports, certificatesand any other information delivered by any Borrower or their respectiveAffiliates to Seller or the equityholders of any Borrower.  In addition, the Borrowers shall keep theLender informed on a timely basis as to all developments and communicationswith Seller regarding the determination of the adjustments to the CaroniaPurchase Price in accordance with Section 2.4 of the Caronia PurchaseAgreement.  The Borrowers shall promptlyprovide the Lender with copies of all written correspondence between Seller andany Borrower or Affiliate thereof relating to the same, together with copies ofthe Preliminary Financial Statements, Final Pro Forma Balance Sheet, FinalIncome Statement and Accounting Firm’s Dispute Working Papers (if any) (as suchterms are defined in the Caronia Purchase Agreement).

 

**7.20****                        GovernmentRegulation****.**  No Borrower shall (a) be or becomesubject at any time to any law, regulation or list of any government agency(including, without limitation, the U.S. Office of Foreign Asset Control list)that prohibits or limits the Lender from making any advance or extension ofcredit to any Borrower or from otherwise conducting business with any Borrower,or (b) fail to provide documentary and other evidence of such Borrower’sidentity as may be requested by the Lender at any time to enable the Lender toverify such Borrower’s identity or to comply with any applicable law orregulation, including, without limitation, Section 326 of the USA PatriotAct of 2001, 31 U.S.C. Section 5318.

 

# **ARTICLE 8.  NEGATIVE COVENANTS**

# ** **

Untilpayment in full of the Notes and the performance of all other obligations ofthe Borrowers hereunder, without the prior written consent of the Lender:

 

**8.1****                               Indebtedness****.** Each of the Borrowers shall not, nor shall any of them permit any oftheir respective Subsidiaries to, create, incur, assume or suffer to exist anyIndebtedness, except for: (i) Indebtedness to the Lender; (ii) the Indebtedness incurredand owed under that certain Asset Purchase Agreement dated May 12, 1999between CHSI and Community Health Insurance Company (the “Anthem Indebtedness”);(iii) Capitalized Lease Obligations and purchase money Indebtedness reflectedon the Balance Sheet and/or the Caronia Balance Sheet or in historicalfinancial statements heretofore provided to the Lender; (iv) other CapitalizedLease Obligations and purchase money Indebtedness incurred in any Fiscal Yearcommencing after the date hereof up to an aggregate amount of $350,000 perFiscal Year; (v) inter-company Indebtedness between or

 

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among one or more of theBorrowers; (vi) Indebtedness under the Tax Allocation Agreement;(vii) Indebtedness under the Deferred Compensation Plan and accruedincentive compensation expenses; and (viii) trade liabilities and accruedexpenses incurred in the ordinary course of business.  Except as otherwise provided, allIndebtedness permitted to be created, incurred, assumed or suffered by theBorrowers pursuant to this Section shall be considered (but withoutduplication) Indebtedness of the Borrowers.

 

**8.2****                               Liensand Other Encumbrances****.**  No Borrower shall create, incur, assume orsuffer to exist any security interest, mortgage, pledge, lien or otherencumbrance of any nature whatsoever on any of its property or assets whethernow owned or hereafter acquired, except: (i) liens securing the payment oftaxes and other governmental charges, either not yet due or the validity ofwhich is being contested in good faith by appropriate proceedings (so long asno material item of property would be lost, forfeited or materially damaged asa result thereof), and as to which it shall, as appropriate under GAAP, haveset aside on its books and records adequate reserves; (ii) deposits underworkers’ compensation, unemployment insurance, social security and othersimilar laws or to secure the performance of bonds, tenders or contracts (otherthan for the repayment of purchase price indebtedness or borrowed money) or tosecure statutory obligations or surety or appeal bonds, or to secure indemnity,performance or other similar bonds, all in the ordinary course of business;(iii) liens and security interests in favor of the Lender;(iv) zoning restrictions, easements, licenses, covenants and otherrestrictions affecting the use of real property, so long as its use of, or thevalue of, its property subject thereto is not impaired, in any materialrespect, thereby; and (v) liens securing purchase money Indebtedness and CapitalizedLeases referred to in clauses (iii) or (iv) under Section 8.1, aboveprovided that such liens are limited to the specific property purchased orleased and the proceeds thereof.  All ofthe foregoing liens are hereinafter referred to as “Permitted Liens.”

 

**8.3****                               Guarantiesand Other Contingent Liabilities****.**  No Borrower shallbecome an indemnitor, guarantor or surety or otherwise become liable for any ofthe obligations or liabilities of any Person, other than the guaranty by aBorrower of the liabilities and obligations of other Borrowers.

 

**8.4****                               FundamentalChanges****.**  No Borrower shall (i) enter into anytransaction of merger or consolidation or amalgamation, (ii) liquidate,wind-up or dissolve itself (or suffer any liquidation or dissolution),(iii) convey, sell, lease, transfer or otherwise dispose of, in onetransaction or a series of transactions, all or any substantial part of itsbusiness or assets, whether now owned or hereafter acquired, (iv) acquireby purchase or otherwise all or substantially all of the business or assets of,or stock or other evidence of beneficial ownership of, any Person (other thanas part of the Caronia Acquisition), or (v) make any material change inthe nature of its business or in the methods by which it conducts business;provided, however, that any Borrower may, without the consent of the Lender,enter into solely with one or more other Borrowers any transaction of the typesdescribed in clauses (i), (iii) or (iv), above, provided that all of theBorrowers that are a party to any such transaction have a positive net worth asdetermined in accordance with GAAP.

 

**8.5****                               Creationof Subsidiaries****.**  No Borrower shall create or acquire anySubsidiaries without the prior written consent of the Lender, which consentshall not be unreasonably withheld, delayed or conditioned, provided that anysuch Subsidiaries become co-borrowers under the Loan

 

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Documentsand the Lender is granted first priority, perfected security interests in allof the ownership interests in, and assets of, such Subsidiaries.

 

**8.6****                               Loansor Advances****.**  No Borrower shall make loans or advances toany Person (including any Subsidiary of a Borrower) other than anotherBorrower, except in the ordinary course of their respective businesses.

 

**8.7****                               Investments****.**  NoBorrower shall acquire or purchase the securities of any Person other thananother Borrower; provided, however, that the Borrowers may purchase:  (i) U.S. government securities directlyor pursuant to repurchase agreements with (A) Affiliates of the Lender or(B) other domestic banks having capital and surplus of at least$100,000,000; (ii) certificates of deposit of (A) Affiliates of theLender or (B) other domestic banks having a capital and surplus of atleast $100,000,000; and (iii) commercial paper rated A-1 or P-1 or anequivalent by Moody’s Investors Services, Inc. or Standard & Poor’sCorporation, both of New York, New York, or their successors if all of suchinvestments have a maturity of one year or less.

 

**8.8****                               Saleand Leaseback****.**  No Borrower shall enter into any agreementwith any lender or investor providing for the leasing of (i) real orpersonal property which has been or is to be sold or transferred by anyBorrower to such lender or investor or (ii) other real or personalproperty intended to be used for substantially the same purpose as the propertysold or transferred by any Borrower.

 

**8.9****                               Dispositionof Assets****.**  No Borrower shall dispose of any of itsassets in any transaction or series or transactions other than those disposedof in the ordinary course of business and except in connection with thereplacement of assets sold by like assets.

 

**8.10****                        Transactionswith Affiliates****.**  Except for the execution, delivery andperformance by the applicable parties of the Tax Allocation Agreement and eachof the agreements listed on Schedule 8.10 attached hereto, noBorrower shall:  (i) enter into anytransaction, including without limitation, the purchase, sale or exchange ofproperty or the rendering of any services, with any Affiliate or any officer ordirector thereof, enter into, assume or suffer to exist any employment orconsulting contract with any such Affiliate, except any transaction or contractwhich is in the ordinary course of its business and which is upon fair andreasonable terms no less favorable to it than it would obtain in a comparablearms-length transaction; (ii) make any advance or loan to any Affiliate orany director or officer thereof or to any trust of which any of the foregoingis a beneficiary, or to any Person on the guaranty of any of the foregoing; or(iii) pay any fees or expenses to, or reimburse or assume any obligationfor the reimbursement of any expenses incurred by, any Affiliate or any officeror director thereof except as may be permitted in accordance with the precedingclauses of this Section or the other Sections of this Agreement and exceptfor the reimbursement of reasonable expenses incurred in connection with theprovision of services by an officer, director or employee of any Borrower tosuch entity, including expenses for travel, entertainment and similar items, inaccordance with the reimbursement policies of such Borrower.

 

**8.11****                        Sale ofAccounts****.**  No Borrower shall sell, assign or exchangeany of its Accounts or notes receivable with or without recourse.

 

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**8.12****                        CapitalExpenditures****.**  TheCompany shall not make Capital Expenditures, on a consolidated basis, in anamount in excess of the amount listed in column (b) of this Section duringthe period listed opposite such amount in column (a) of this Section:

 

 
| **(a)  Period**                                           | ** ** | **(b)  Amount** | ** ** |
|-----------------------------------------------------------|------------|-----------------|------------|
| ** **                                                | ** ** | ** **      | ** ** |
| From January 1, 2004 through December 31,  2004 |       | $               | 3,500,000  |   |
| From January 1, 2005 through December 31,  2005 |       | $               | 4,500,000  |   |
| In Each Fiscal Year Thereafter                            |       | $               | 2,500,000  |   |

 

**8.13****                        MinimumFixed Charge Coverage Ratio****.**  TheCompany shall not permit its Fixed Charge Coverage Ratio based upon the mostrecent four fiscal quarters on a rolling basis to be less than 1.20 to 1.00 at December 31,2004 or at the end of any fiscal quarter ending thereafter; provided, however,that for purposes of calculating the Company’s Fixed Charge Coverage Ratio,Capital Expenditures shall be limited to $2,500,000 during any four fiscal quarterperiod.  In addition, the Company shallnot permit its Fixed Charge Coverage Ratio based on the quarter ending March 31,2005, the two quarters ending June 30, 2005 and the three quarters ending September 30,2005 to be less than 1.20 to 1.00 at March 31, 2005, June 30, 2005and September 30, 2005, respectively; provided, however, that for purposesof calculating the Company’s Fixed Charge Coverage Ratio, Capital Expendituresshall be fixed at $625,000 per quarter for each of the four fiscal quartersending in calendar year 2005.

 

**8.14****                        Ratioof Funded Indebtedness to EBITDA****.**  TheCompany shall not permit the ratio of its Funded Indebtedness (including,without limitation, borrowings pursuant to this Agreement) to EBITDA based uponthe most recent four fiscal quarters on a rolling basis to be greater than 2.00to 1.00 at December 31, 2005 or at the end of any subsequent fiscalquarter thereafter.

 

**8.15****                        ManagementFees****.**  Exceptas otherwise permitted in this Section 8.15, no Borrower shall pay anymanagement fees to SCC or their respective Affiliates (other than anotherBorrower); provided, however, that so long as no Event of Default has occurredand is continuing (or would occur as a result of such payment), the Borrowersmay pay management fees to SCC or their respective Affiliates, solely andstrictly in accordance with the provisions of the Management Advisory ServicesAgreement, in an aggregate amount not to exceed with respect to any Fiscal Yearfive percent (5.0%) of the Company’s total consolidated EBITA for such FiscalYear.  The Borrowers may accrue (butshall not be permitted to pay, until all Indebtedness hereunder is paid in fulland any commitment to lend or issue letters of credit hereunder is terminated)the Deferred Compensation Payments.  TheBorrowers may make the Tax Agreement Payments at the times provided for in theTax Allocation Agreement; provided, however, that no Tax Agreement Paymentsshall be made after the occurrence and during the continuance of an Event ofDefault, except for Tax Agreement Payments representing income taxes which SCCis actually required to pay and which are directly attributable solely to theconsolidated operations of the Company.

 

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**8.16****                        Dividendsand Payments****.**  Neither the Company nor CMI shall declare orpay on, or make any distribution to the holders of any shares of capital stockof the Company or CMI of any class, or purchase, redeem or otherwise acquirefor consideration any shares of capital stock of the Company or CMI of anyclass; provided, however, that nothing contained in this Section 8.18shall be construed to prevent any payments expressly permitted under Section 8.17hereof.

 

**8.17****                        Issuanceof Capital Stock****. **None of the Borrowers shall issueany additional shares of capital stock of any class (or any options, warrants,convertible securities or rights with respect thereto) after the date hereof,except for the issuance of shares of capital stock or other securities of theCompany pursuant to the Option Plan (as identified on Schedule 8.10and related agreements entered into in accordance therewith).

 

**8.18****                        Prohibitionof Change in Fiscal Year****.**  Neither any Borrower nor any Subsidiarythereof shall change its Fiscal Year-end for accounting purposes from December 31of any year.

 

**8.19****                        Amendmentto Other Documents****.**  The Borrowers shall not cause or permit,directly or indirectly, any amendment, waiver, consent or modification of theTax Allocation Agreement, Management Advisory Services Agreement, CaroniaPurchase Agreement or any other agreement, document or instrument contemplatedby, or executed in connection with, the Caronia Purchase Agreement(collectively, the “Transaction Documents”).

 

**8.20****                        Management****.** The Company shall not terminate the employment of Jonathan R.Wagner, Richard T. Kurth or Stephen Brown, without the prior writtenconsent of the Lender, such consent not to be unreasonably withheld.  In the event of the termination by theCompany of the employment of any such individuals or their respectivesuccessors, the Company shall retain, within 150 days after such termination,replacement officers reasonably acceptable to the Lender.

 

**8.21****                        PledgeRights Not a “Change”****.**  None of the Borrowers or shall take or permitany of their Subsidiaries to take any action, or participate in or consent toany transaction(s) (i) which would require the advance approval of theOBWC under the OBWC Contracts, other than actions of CHSI taken, or not taken,in the ordinary course of performance of the OBWC Contracts which, from time totime, may require the approval of OBWC, or (ii) which would cause theLender’s realization of any of their respected rights under the Stock PledgeAgreements to constitute a “Change” under the OBWC Contracts (except for anypossible “Change” resulting from the exercise of remedies with respect to thecapital stock of CHSI).

 

**8.22****                        GovernmentRegulations****.**  No Borrower shall (a) be or become subject atany time to any law, regulation or list of any government agency (including,without limitation, the U.S. Office of Foreign Asset Control list) thatprohibits or limits the Lender from making any advance or extension of creditto any Borrower or from otherwise conducting business with any Borrower, or(b) fail to provide documentary and other evidence of such Borrower’sidentity as may be requested by the Lender at any time to enable the Lender toverify such Borrower’s identity or to comply with any applicable law orregulation, including, without limitation, Section 326 of the USA PatriotAct of 2001, 31 U.S.C. Section 5318.

 

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# **ARTICLE 9.  EVENTS OF DEFAULT**

# ** **

**9.1****                               Eventof Default****.**  “Event of Default” shall mean the occurrenceof one or more of the following described events:

 

(a)                                  TheBorrowers shall default in the payment of any principal of the Notes when thesame shall become due, either by the terms thereof or otherwise as hereinprovided;

 

(b)                                 TheBorrowers shall default in payment of the Facility Fee or any Commitment Fee orany interest on the Notes or of any other payment due the Lender under thisAgreement when the same shall become due, either by the terms thereof orotherwise as herein provided and such default continues for a period of five(5) days;

 

(c)                                  AnyBorrower shall default (after the expiration of any applicable grace period) inthe payment of any amount due to Lender pursuant to the terms of any promissorynote or other instrument other than the Notes;

 

(d)                                 AnyBorrower shall default (after the expiration of any applicable grace period) inthe performance or observance of any covenant, condition or agreement containedin the Borrower Security Agreements, the Intellectual Property SecurityAgreements, the Copyright Collateral Agreements, the Stock Pledge Agreements,the Assignment of Leasehold Interests or any other security agreement entered intoby any Borrower for the benefit of the Lender;

 

(e)                                  AnyBorrower shall default in the payment of any Indebtedness in excess of $250,000beyond any period of grace provided with respect thereto, or any Borrower shalldefault in the performance of any agreement under which such Indebtednesspayment obligation is created if the effect of such default is to cause orpermit the holder or holders of such obligation (or a representative of suchholder or holders) to cause, such payment obligation to become due prior to itsdate of maturity;

 

(f)                                    Anyrepresentation or warranty made by any Borrower herein, in any other LoanDocument or in any report, certificate or writing furnished in connection withor pursuant to this Agreement shall be false or incorrect in any materialrespect on the date as of which made;

 

(g)                                 AnyBorrower shall default in the performance or observation of any covenant,condition or agreement in Sections 7.1, 7.11, 7.14, 7.15 or 7.16 or in Article 8hereof;

 

(h)                                 AnyBorrower shall default in the performance or observation of any covenant,condition or agreement made or required to be observed or performed by it underthis Agreement (other than those referred to in Sections 9.1(a), 9.1(b) or 9.1(g)of this Agreement) and such default shall continue without cure for thirty (30)days after written notice thereof shall have been given to the Borrowers by theLender, or, in the case of Sections 7.2 and 7.3, such default shall continuewithout cure for ten (10) days (without any required notice thereof);

 

(i)                                     AnyBorrower shall make an assignment for the benefit of creditors;

 

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(j)                                     AnyBorrower shall petition or apply to any tribunal for the appointment of atrustee or receiver of it, or of any substantial part of its assets, orcommence any proceeding relating to it under any bankruptcy, reorganization,arrangement, insolvency, readjustment of debt, dissolution or liquidation lawof any jurisdiction whether now or hereafter in effect;

 

(k)                                  Anybankruptcy, insolvency, receivership or similar petition or application isfiled, or any proceedings are commenced against any Borrower and any Borrowerby any act indicates its approval thereof, consent thereto, or acquiescencetherein, or any order is entered appointing a trustee or receiver, oradjudicating any Borrower bankrupt or insolvent, or approving the petition inany such proceedings and such order remains unstayed or undischarged for morethan sixty (60) days; provided, however, that the Lender shall be under noobligation to make Loans hereunder during the period that such order isunstayed or undischarged;

 

(l)                                     Anyorder is entered in any proceedings against any Borrower decreeing thedissolution of any Borrower and such order remains unstayed or undischarged formore than sixty (60) days; provided, however, that the Lender shall be under noobligation to make Loans hereunder during the period that such order isunstayed or undischarged;

 

(m)                               Afinal judgment or judgments for the payment of money in excess of an aggregateof $250,000 shall be rendered against any Borrower and such judgment orjudgments shall remain undischarged for a period of sixty (60) consecutive daysduring which the execution shall not be effectively stayed;

 

(n)                                 (i)Any Reportable Event or a Prohibited Transaction shall occur with respect toany Plan; (ii) a notice of intent to terminate a Plan under section 4041of ERISA shall be filed; (iii) a notice shall be received by the planadministrator of a Plan that the PBGC has instituted proceedings to terminate aPlan or appoint a trustee to administer a Plan; (iv) any other event orcondition shall exist which might, in the opinion of the Lender, constitutegrounds under section 4042 of ERISA for the termination of, or theappointment of a trustee to administer, any Plan; or (v) any Borrower or anyERISA Affiliate shall withdraw from a Multiemployer Plan; provided, however,that none of the foregoing shall constitute an Event of Default except undercircumstances that the Lender determines could reasonably be expected to have aMaterial Adverse Effect;

 

(o)                                 (i)CHSI is notified by the OBWC that it is “at capacity,” declared ineligible tosolicit or accept selection by or assignment of an employer by the OBWC, or theOBWC in any material manner limits the Company’s ability to accept newenrollments, and any of the same is reasonably likely to result in any Event ofDefault under Sections 9.1(a) or (b) or any breach of Sections 8.12, 8.13 or 8.14;(ii) the State of Ohio announces its intention to dissolve or disband thestate-sponsored system of workers’ compensation insurance or the Ohio HealthPartnership Program (and the Lender determines in the exercise of itscommercially reasonable discretion that the same is reasonably likely to impairthe Borrowers’ ability to perform their material obligations under thisAgreement, the Notes or the other Loan Documents); (iii) (A) the OBWCterminates or does not renew the OBWC Contracts, or (B) the OBWC informs CHSIof its intent to terminate or not renew the OBWC Contracts, except if theBorrowers provide the Lender written notice that (I) CHSI is actively anddiligently pursuing renewals of the OBWC Contracts, (II) CHSI is reasonablyconfident that its efforts will be successful, and (III) such active pursuit ofrenewal does

 

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not exceed (withoutrenewal) ninety (90) days time from the date of such written notice to theLender; or (iv) the OBWC terminates, does not renew or informs CHSI of its intentto terminate or not renew CHSI’s OBWC certification as a vendor; or

 

(p)                                 Theoccurrence or existence of any default, event of default or other similarcondition or event (however described) with respect to any Rate ManagementTransaction.

 

**9.2****                               Consequencesof Event of Default****.**

 

(a)                                  Ifany Event of Default specified under Section 9.1, other than subsections(i) through (l) thereof, shall occur and be continuing the Lender shall beunder no further obligation to make Loans hereunder and the Lender may, bywritten notice to the Borrowers, declare the unpaid balance of all CommitmentFees and the principal and interest accrued on the Notes and all otherobligations of the Borrowers hereunder and under the other Loan Documents to beforthwith due and payable, and the same shall thereupon become immediately dueand payable, without any other or further presentment, demand, protest, noticeof default, notice of intent to accelerate or other notice of any kind, all ofwhich are hereby expressly waived.

 

(b)                                 Ifan Event of Default specified under subsections (i) through (l), inclusive, of Section 9.1shall occur, the Lender shall be under no further obligation to make Loanshereunder and the unpaid balance of all Commitment Fees and the principal andinterest accrued on the Notes and all other obligations of the Borrowershereunder shall be immediately due and payable automatically withoutpresentment, demand, protest, notice of default, notice of intent toaccelerate, notice of acceleration or other notice of any kind, all of whichare hereby expressly waived.

 

# **ARTICLE 10.  MISCELLANEOUS**

# ** **

**10.1****                        Notices****.** All notices, requests and demands to or upon the parties hereto to beeffective shall be in writing or by telecopy or telex and, unless otherwiseexpressly provided herein, shall be deemed to have been duly given or made whendelivered by hand, or when sent by certified or registered mail, postageprepaid, or, in the case of telecopy notice, when received, or in the case oftelegraphic notice, when delivered to the telegraph company, or in the case oftelex notice, when sent, answerback received, addressed as follows in the caseof the Borrowers and the Lender or to such address or other address as may behereafter notified by the parties hereto:

 

 
| Any Borrower: | c/o Security  Capital Corporation  One Pickwick Plaza  Suite 310  Greenwich, Connecticut 06830  Attention: Brian D. Fitzgerald, Chairman  Facsimile: (203) 625-0423 |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                |
|          | with copies to:                                                                                                                                                     |
|          |                                                                                                                                                                |
|          | WC Holdings,  Inc.  c/o CompManagement, Inc.                                                                                                                        |

 

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|        | 6377 Emerald  ParkwayDublin, Ohio 43016  Attention: William R. Schlueter  Facsimile: (203) 625-0770                                                                        |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                       |
|        | and                                                                                                                                                                        |
|        |                                                                                                                                                                       |
|        | Diserio Martin O’Connor  &    Castiglioni LLP  One Atlantic Street  Stamford, CT 06901  Attention: Brian O’Connor, Esq.  Facsimile: (203) 358-0800 |
|        |                                                                                                                                                                       |
| The Lender: | JPMorgan Chase  Bank, N.A.  100 East Broad Street  Columbus, Ohio 43271-0171                                                                                               |
|        | Attention:                                                                                                                                                                 | Mark S. Slayman,  First Vice President |
|        | Facsimile: (614)  248-5518                                                                                                                                                 |
|        |                                                                                                                                                                       |
|        | with a copy to:                                                                                                                                                            |
|        |                                                                                                                                                                       |
|        | Bailey Cavalieri  LLC  One Columbus  10 West Broad Street  Columbus, Ohio 43215-3422  Attention: Anthony J. Sugar, Esq.  Facsimile: (614) 221-0479                         |

 

Notwithstandingany other provision hereof to the contrary, each Borrower has appointed theCompany as its representative to receive and give all notices to or from suchBorrower and the Lender shall have acted in accordance with this Agreement inaccepting notices from and giving notice to the Company as being notices fromor to such Borrower.

 

**10.2****                        Term ofAgreement; Termination; Successors and Assigns****.** This Agreement and all covenants, agreements, representations andwarranties made herein and in the reports, certificates and other writingsdelivered pursuant hereto shall survive the execution and delivery of thisAgreement, the making by the Lender of each Loan and the execution and deliveryto the Lender of the Notes and shall continue in full force and effect untilterminated.  The representations ofBorrowers herein are made as of the date of this Agreement.  This Agreement shall terminate at such timeas the Revolving Credit Commitment is terminated in full and the Lender hasreceived payment in full of all amounts owing to the Lender hereunder and underthe Notes.  Whenever in this Agreementany of the parties hereto is referred to, such reference shall be deemed toinclude the successors and assigns of such parties; and all terms andprovisions of this Agreement shall be binding upon and shall inure to thebenefit of the parties hereto and their respective successors and assigns,whether so expressed or not; provided, however, that (i) no Borrower mayassign or transfer

 

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itsrights or duties under this Agreement to any Person without the prior writtenconsent of the Lender and (ii) the Lender may not assign, or participate,this Agreement or the Notes to a direct competitor of the Borrowers.

 

**10.3****                        NoImplied Rights or Waivers****.**  No notice to or demand on any Borrower in anycase shall entitle such Borrower to any other or further notice or demand inthe same, similar and other circumstances. Neither any failure nor any delay on the part of the Lender inexercising any right, power or privilege hereunder or under the Notes shalloperate as a waiver thereof, nor shall a single or partial exercise thereofpreclude any other or further exercise of the same or the exercise of any otherright, power or privilege.

 

**10.4****                        ApplicableLaw****.**  This Agreement, the Notes and the other LoanDocuments shall be deemed to be contracts made under and shall be construed inaccordance with and governed by the laws of the State.

 

**10.5****                        Modifications,Amendments or Waivers****.**

 

(a)                                  TheLender and the Borrowers may from time to time enter into written agreementsamending or changing any provision of this Agreement or the rights of theLender or the Borrowers hereunder or give waivers or consents to a departurefrom the due performance of the obligations of the Borrowers hereunder or underthe Notes.

 

(b)                                 Inthe case of any such waiver or consent relating to any provision hereof, theparties shall be restored to their former positions and rights thereunder, andany Default or Event of Default so waived or consented to shall be deemed to becured and not continuing; but no such waiver or consent shall extend to anysubsequent or other Default or Event of Default or impair any right consequentthereon.

 

**10.6****                        Counterparts****.** This Agreement may be signed in any number of counterparts with the sameeffect as if the signatures thereto were upon the same instrument.

 

**10.7****                        Headings****.** The headings of the articles and sections of this Agreement are insertedfor convenience only and shall not be deemed to constitute a part hereof.

 

**10.8****                        Expenses****.** The Borrowers shall pay or cause to be paid and save the Lender harmlessagainst liability for the payment of all reasonable out-of-pocket expenses,including counsel fees and disbursements incurred or paid by the Lender inconnection with the negotiation, development, preparation and execution of thisAgreement, the Notes, the other Loan Documents and the relatedtransactions.  The Borrowers shall pay orcause to be paid and save the Lender harmless against liability for the paymentof all reasonable out-of-pocket expenses, including counsel fees anddisbursements incurred or paid by the Lender in connection with (i) anyrequested amendments, waivers or consents pursuant to the provisions hereof andthereof; and (ii) the enforcement of this Agreement, the Notes and theother Loan Documents including such expenses as may be incurred by the Lenderin collection of the Notes and all obligations of the Borrowers hereunder.

 

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**10.9****                        AccountingTerms****.**  All accounting terms not specifically definedherein shall be construed in accordance with GAAP.

 

**10.10****                 Severability****.** Any provision of this Agreement which is prohibited or unenforceable inany jurisdiction shall, as to such jurisdiction, be ineffective to the extentof such prohibition or unenforceability without invalidating the remainingprovisions hereof or effecting the validity or enforceability of suchprovisions in any other jurisdiction.

 

**10.11****                 Waiver of JuryTrial; Consent to Venue****.**  The Lender and the Borrowers, after havinghad the opportunity to consult with counsel, knowingly, voluntarily, irrevocably,unconditionally and intentionally waive any right to a trial by jury in anylitigation based upon or arising out of this Agreement or any relatedinstrument or agreement, or any of the transactions contemplated by thisAgreement, or any course of conduct, dealing, statements (whether oral orwritten) or actions of any Borrower or the Lender.  The Borrowers shall not seek to consolidate,by counterclaim or otherwise, any action in which a jury trial has been waived withany other action in which a jury trial cannot be or has not been waived.  In the event of a dispute under thisAgreement, the Borrowers hereby, jointly and severally, agree that jurisdictionand venue lies in a court of competent jurisdiction in Franklin County,Ohio.  These provisions shall not bedeemed to have been modified in any respect or relinquished by the Lenderexcept by a written instrument executed by it. This provision is a material inducement to the Lender to enter into thetransactions described in this Agreement.

 

**10.12****                 EntireAgreement****.**  This Agreement and the Exhibits heretoreflect the entire understanding of the parties with respect to the subjectmatter hereof and supersede all prior agreements or understandings with respectthereto in their entirety.

 

**10.13****                 Certificates,Etc****.**  All certificates, reports and other writingssubmitted by any Borrower to the Lender hereunder shall constitute therepresentations and warranties of each Borrower to the Lender as to the truthand accuracy of all facts, calculations and other information set forththerein, as though fully set forth and repeated in this Agreement.

 

**10.14****                 Waiver ofCertain Defenses****.**  Each of the Borrowers hereby waives alldefenses based on suretyship and impairment of collateral.

 

**10.15****                 USA PatriotAct Notification****.**  The following notification is provided to theBorrowers pursuant to Section 326 of the USA Patriot Act of 2001, 31U.S.C. Section 5318:

 

IMPORTANTINFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.  To help the government fight the funding ofterrorism and money laundering activities, Federal law requires all financialinstitutions to obtain, verify and record information that identifies eachperson or entity that opens an account, including any deposit account, treasurymanagement account, loan, other extension of credit or other financial servicesproduct.  What this means for eachBorrower:  When such Borrower opens anaccount, if such Borrower is an individual, the Lender will ask for a Borrower’sname, taxpayer identification number, residential address, date of birth andother information that will allow the

 

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Lenderto identify such Borrower, and if such Borrower is not an individual, theLender will ask for such Borrower’s name, taxpayer identification number,business address and other information that will allow the Lender to identifysuch Borrower.  The Lender may also ask,if a Borrower is an individual, to see such Borrower’s driver’s license orother identifying documents, and if a Borrower is not an individual, to seesuch Borrower’s legal organizational documents or other identifying documents.

 

**10.16****                 Indemnification****.** The Borrowers, jointly and severally, agree to defend, protect,indemnify and hold harmless the Lender, each of its affiliates, and each oftheir respective officers, directors, employees, agents and co-agents(collectively, the “Indemnitees”) from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, claims,costs, expenses and disbursements of any kind or nature whatsoever  (including, without limitation, thereasonable fees and disbursements of counsel for such Indemnitees in connectionwith any investigative, administrative or judicial proceeding, whether or notsuch Indemnitees shall be designated a party thereto), imposed on, incurred by,or asserted against such Indemnitees in any manner relating to or arising outof this Agreement, the Notes or the other Loan Documents, the use or intendeduse of the proceeds of the Loans, the Caronia Acquisition or the termination ofthe employment of any Management Investors or other employees or officers ofany Borrower (collectively, the “Indemnified Matters”); provided, that theBorrowers shall have no obligation to an Indemnitee hereunder with respect toIndemnified Matters caused by or resulting from the gross negligence or willfulmisconduct of that Indemnitee.  To theextent that the undertaking to indemnify, pay and hold harmless set forth inthe preceding sentence may be unenforceable because it is violative of any lawor public policy, each of the Borrowers shall contribute the maximum portionwhich it is permitted to pay and satisfy under applicable law, to the paymentand satisfaction of all Indemnified Matters incurred by the Indemnitees.

 

# **ARTICLE 11. DEFINITIONS**

# ** **

Theterms set forth and defined in Exhibit H hereto shall, for the purposesof this Agreement, have the meanings assigned to such terms as set forth in ExhibitH.

 

**[SIGNATURE PAGES TO FOLLOW]**

 

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IN WITNESSWHEREOF, the Borrowers and the Lender have caused this Second Amended andRestated Loan Agreement to be duly executed by their duly authorized officers,all as of the day and year first above written.

 

 
| **LENDER:**                                                                                                               |
|---------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                      |
| JPMORGAN CHASE BANK, N.A.,  a national banking association (successor  by merger to Bank One, NA) (Main Office  Columbus) |
|                                                                                                                      |
|                                                                                                                      |
| By:                                                                                                                       |   | /s/ Mark S.  Slyaman |   |
|                                                                                                                      |   Mark  S. Slayman, First Vice President |
|                                                                                                                      |
|                                                                                                                      |
| **BORROWERS:**                                                                                                            |
|                                                                                                                      |
| WC HOLDINGS, INC., a Delaware corporation                                                                                 |
| COMPMANAGEMENT, INC., an Ohio corporation                                                                                 |
| COMPMANAGEMENT INTEGRATED DISABILITY SERVICES, INC., an Ohio  corporation                                                 |
| CMI MANAGEMENT COMPANY, an Ohio corporation                                                                               |
| COMPMANAGEMENT OF VIRGINIA, INC., a Virginia corporation                                                                  |
| COMPMANAGEMENT DISABILITY SERVICES COMPANY, a Virginia corporation                                                        |
| CMI BARRON RISK MANAGEMENT SERVICES, INC., a Texas corporation                                                            |
| COMPMANAGEMENT HEALTH SYSTEMS, INC., an Ohio corporation                                                                  |
| OCTAGON RISK  SERVICES, INC., a Minnesota corporation                                                                     |
| INTEGRATED CLAIM STRATEGIES, INC., a Florida Corporation                                                                  |
| KRAMMCO INC., an  Ohio Corporation                                                                                        |
| CARONIA  CORPORATION, a Delaware corporation                                                                              |
| MANAGED CARE  HOLDINGS CORPORATION, a Delaware corporation                                                                |
|                                                                                                                      |
|                                                                                                                      |
| By:                                                                                                                       |   | /s/ Kevin Lowry |   |
|                                                                                                                      | Kevin Lowry,  Vice President |

 

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