**EXHIBIT 10.37****BUSINESS LOAN AGREEMENT**                 **Principal** **Loan Date** **Maturity** **Loan No.** **Call / Coll** **Account** **Officer** **Initials****$1,000,000.00** **09-30-2005** **09-30-2006**  **519900828192**  **4A / 60**   ******* ** **References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any itemabove containing “***” has been omitted due to text length limitations.       **Borrower:** **SYNERGETICS, INC. (MISSOURI CORPORATION)** **Lender:** **Union Planters Bank NA**  **(TIN: 43-1585312)**   **Clayton Commercial Lending**  **3845 CORPORATE CENTRE DRIVE**   **8182 Maryland Avenue Suite 200**  **O’FALLON, MO 63368**   **St. Louis, MO 63105****THIS BUSINESS LOAN AGREEMENT dated September 30, 2005, is made and executed between SYNERGETICS,INC. (MISSOURI CORPORATION) (“Borrower”) and Union Planters Bank NA (“Lender”) on the followingterms and conditions. Borrower has received prior commercial loans from Lender or has applied toLender for a commercial loan or loans or other financial accommodations, including those which maybe described on any exhibit or schedule attached to this Agreement (“Loan”). Borrower understandsand agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying uponBorrower’s representations, warranties, and agreements as set forth in this Agreement; (B) thegranting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’ssole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms andconditions of this Agreement.****TERM.**This Agreement shall be effective as of September 30, 2005, and shall continue in full forceand effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full,including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, oruntil such time as the parties may agree in writing to terminate this Agreement.**CONDITIONS PRECEDENT TO EACH ADVANCE.**Lender’s obligation to make the initial Advance and eachsubsequent Advance under this Agreement shall be subject to the fulfillment to Lender’ssatisfaction of all of the conditions set forth in this Agreement and in the Related Documents.**Loan Documents.**Borrower shall provide to Lender the following documents for the Loan: (1)the Note; (2) Security Agreements granting to Lender security interests in the Collateral;(3) financing statements and all other documents perfecting Lender’s Security Interests; (4)evidence of insurance as required below; (5) guaranties; (6) together with all such RelatedDocuments as Lender may require for the Loan; all in form and substance satisfactory toLender and Lender’s counsel.**Borrower’s Authorization.**Borrower shall have provided in form and substance satisfactoryto Lender properly certified resolutions, duly authorizing the execution and delivery ofthis Agreement, the Note and the Related Documents. In addition, Borrower shall haveprovided such other resolutions, authorizations, documents and instruments as Lender or itscounsel, may require.**Payment of Fees and Expenses.**Borrower shall have paid to Lender all fees, charges, andother expenses which are then due and payable as specified in this Agreement or any RelatedDocument.**Representations and Warranties.**The representations and warranties set forth in thisAgreement, in the Related Documents, and in any document or certificate delivered to Lenderunder this Agreement are true and correct.**No Event of Default**. There shall not exist at the time of any Advance a condition whichwould constitute an Event of Default under this Agreement or under any Related Document.**REPRESENTATIONS AND WARRANTIES.**Borrower represents and warrants to Lender, as of the date of thisAgreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal,extension or modification of any Loan, and at all times any Indebtedness exists:**Organization.**Borrower is a corporation for profit which is, and at all times shall be,duly organized, validly existing, and in good standing under and by virtue of the laws ofthe State of Missouri Borrower has the full power and authority to own its properties and totransact the business in which it is presently engaged or presently proposes to engage.Borrower maintains an office at 3845 CORPORATE CENTER DRIVE,
 

 
O’FALLON, MO 63368. Unless Borrower has designated otherwise in writing, the principaloffice is the office at which Borrower keeps its books and records including its recordsconcerning the Collateral. Borrower will notify Lender prior to any change in the locationof Borrower’s state of organization or any change in Borrower’s name, Borrower shall do allthings necessary to preserve and to keep in full force and effect its existence, rights andprivileges, and shall comply with all regulations, rules, ordinances, statutes, orders anddecrees of any governmental or quasi-governmental authority or court applicable to Borrowerand Borrower’s business activities.**Assumed Business Names.**Borrower has filed or recorded all documents or filings required bylaw relating to all assumed business names used by Borrower. Excluding the name ofBorrower, the following is a complete list of all assumed business names under whichBorrower does business: **None.****Authorization.**Borrower’s execution, delivery, and performance of this Agreement and allthe Related Documents have been duly authorized by all necessary action by Borrower and donot conflict with, result in a violation of, or constitute a default under (1) any provisionof (a) Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreementor other instrument binding upon Borrower or (2) any law, governmental regulation, courtdecree, or order applicable to Borrower or to Borrower’s properties.**Financial Information.**Each of Borrower’s financial statements supplied to Lender truly andcompletely disclosed Borrower’s financial condition as of the date of the statement, andthere has been no material adverse change in Borrower’s financial condition subsequent tothe date of the most recent financial statement supplied to Lender. Borrower has nomaterial contingent obligations except as disclosed in such financial statements.**Legal Effect.**This Agreement constitutes, and any instrument or agreement Borrower isrequired to give under this Agreement when delivered will constitute legal, valid, andbinding obligations of Borrower enforceable against Borrower in accordance with theirrespective terms.**Properties.**Except as contemplated by this Agreement or as previously disclosed inBorrowers financial statements or in writing to Lender and as accepted by Lender, and exceptfor property tax liens for taxes not presently due and payable, Borrower owns and has goodtitle to all of Borrower’s properties free and clear of all Security Interests, and has notexecuted any security documents or financing statements relating to such properties. All ofBorrower’s properties are titled in Borrower’s legal name, and Borrower has not used orfiled a financing statement under any other name for at least the last five (5) years.**Hazardous Substances.**Except as disclosed to and acknowledged by Lender in writing,Borrower represents and warrants that: (1) During the period of Borrower’s ownership of theCollateral, there has been no use, generation, manufacture, storage, treatment, disposal,release or threatened release of any Hazardous Substance by any person on, under, about orfrom any of the Collateral. (2) Borrower has no knowledge of, or reason to believe thatthere has been (a) any breach or violation of any Environmental Laws; (b) any use,generation, manufacture, storage, treatment, disposal, release or threatened release of anyHazardous Substance on, under, about or from the Collateral by any prior owners or occupantsof any of the Collateral; or (c) any actual or threatened litigation or claims of any kindby any person relating to such manors. (3) Neither Borrower nor any tenant, contractor,agent or other authorized user of any of the Collateral shall use, generate, manufacture,store, treat, dispose of or release any Hazardous Substance on, under, about or from any ofthe Collateral; and any such activity shall be conducted in compliance with all applicablefederal, state, and local laws, regulations, and ordinances, including without limitationall Environmental Laws. Borrower authorizes Lender and its agents to enter upon theCollateral to make such inspections and tests as Lender may deem appropriate to determinecompliance of the Collateral with this section of the Agreement. Any inspections or testsmade by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall notbe construed to create any responsibility or liability on the part of Lender to Borrower orto any other person. The representations and warranties contained herein are based onBorrower’s due diligence in investigating the Collateral for hazardous waste and HazardousSubstances. Borrower hereby (1) releases and waives any future claims against Lender forindemnity or contribution in the event Borrower becomes liable for cleanup or other costsunder any such laws, and (2) agrees to indemnify and hold harmless Lender against any andall claims, losses, liabilities, damages, penalties, and expenses which Lender may directlyor indirectly sustain or suffer resulting from a breach of this section of the Agreement oras a consequence of any use, generation, manufacture, storage, disposal, release orthreatened release of a hazardous waste or substance on the Collateral. The provisions ofthis section of the Agreement, including the obligation to indemnify, shall survive thepayment of the Indebtedness and the       2  
 

 
termination, expiration or satisfaction of this Agreement and shall not be affected byLender’s acquisition of any interest in any of the Collateral, whether by foreclosure orotherwise.**Litigation and Claims.**No litigation, claim, investigation, administrative proceeding orsimilar action (including those for unpaid taxes) against Borrower is pending or threatened,and no other event has occurred which may materially adversely affect Borrower’s financialcondition or properties, other than litigation, claims, or other events, if any, that havebeen disclosed to and acknowledged by Lender in writing.**Taxes.**To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports thatare or were required to be filed, have been filed, and all taxes, assessments and othergovernmental charges have been paid in full, except those presently being or to be contestedby Borrower in good faith in the ordinary course of business and for which adequate reserveshave been provided.**Lien Priority.**Unless otherwise previously disclosed to Lender in writing, Borrower has notentered into or granted any Security Agreements, or permitted the filing or attachment ofany Security Interests on or affecting any of the Collateral directly or indirectly securingrepayment of Borrower’s Loan and Note, that would be prior or that may in any way besuperior to Lender’s Security Interests and rights in and to such Collateral.**Binding Effect.**This Agreement, the Note, all Security Agreements (if any), and all RelatedDocuments are binding upon the signers thereof, as well as upon their successors,representatives and assigns, and are legally enforceable in accordance with their respectiveterms.**AFFIRMATIVE COVENANTS.**Borrower covenants and agrees with Lender that, so long as this Agreementremains in effect, Borrower will:**Notices of Claims and Litigation.**Promptly inform Lender in writing of (1) all materialadverse changes in Borrower’s financial condition, and (2) all existing and all threatenedlitigation, claims, investigations, administrative proceedings or similar actions affectingBorrower or any Guarantor which could materially affect the financial condition of Borroweror the financial condition of any Guarantor.**Financial Records.**Maintain its books and records in accordance with GAAP, applied on aconsistent basis, and permit Lender to examine and audit Borrower’s books and records at allreasonable times.**Financial Statements.**Furnish Lender with the following:**Annual Statements.**As soon as available, but in no event later than 180 days afterthe end of each fiscal year, Borrower’s balance sheet and income statement for theyear ended, audited by a certified public accountant satisfactory to Lender.**Interim Statements.**As soon as available, but in no event later than sixty (60)days after the end of each fiscal quarter, Borrower’s balance sheet and profit andloss statement for the period ended, prepared by Borrower.All financial reports required to be provided under this Agreement shall be prepared inaccordance with GAAP, applied on a consistent basis, and certified by Borrower as being trueand correct.**Additional Information.**Furnish such additional information and statements, as Lender mayrequest from time to time.**Insurance.**Maintain fire and other risk insurance, public liability insurance, and suchother insurance as Lender may require with respect to Borrower’s properties and operations,in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower,upon request of Lender, will deliver to Lender from time to time the policies orcertificates of insurance in form satisfactory to Lender, including stipulations thatcoverages will not be cancelled or diminished without at least thirty (30) days priorwritten notice to Lender. Each insurance policy also shall include an endorsement providingthat coverage in favor of Lender will not be impaired in any way by any act, omission ordefault of Borrower or any other person. In connection with all policies covering assets inwhich Lender holds or is offered a security interest for the Loans, Borrower will provideLender with such lender’s loss payable or other endorsements as Lender may require.       3  
 

 
**Insurance Reports.**Furnish to Lender, upon request of Lender, reports on each existinginsurance policy showing such information as Lender may reasonably request, includingwithout limitation the following: (1) the name of the insurer; (2) the risks insured; (3)the amount of the policy; (4) the properties insured; (5) the then current property valueson the basis of which insurance has been obtained, and the manner of determining thosevalues; and (6) the expiration date of the policy. In addition, upon request of Lender(however not more often than annually), Borrower will have an independent appraisersatisfactory to Lender determine, as applicable, the actual cash value or replacement costof any Collateral. The cost of such appraisal shall be paid by Borrower.**Guaranties.**Prior to disbursement of any Loan proceeds, furnish executed guaranties of theLoans in favor of Lender, executed by the guarantor named below, on Lender’s forms, and inthe amount and under the conditions set forth in those guaranties.   **Name of Guarantor** **Amount****SYNERGETICSUSA, INC. (DELAWAREPUBLIC CORPORATION)** **Unlimited****Other Agreements.**Comply with all terms and conditions of all other agreements, whether nowor hereafter existing, between Borrower and any other party and notify Lender immediately inwriting of any default in connection with any other such agreements.**Loan Proceeds.**Use all Loan proceeds solely for Borrower’s business operations, unlessspecifically consented to the contrary by Lender in writing.**Taxes, Charges and Liens.**Pay and discharge when due all of its indebtedness andobligations, including without limitation all assessments, taxes, governmental charges,levies and liens, of every kind and nature, imposed upon Borrower or its properties, income,or profits, prior to the date on which penalties would attach, and all lawful claims that,if unpaid, might become a lien or charge upon any of Borrower’s properties, income, orprofits.**Performance.**Perform and comply, in a timely manner, with all terms, conditions, andprovisions set forth in this Agreement, in the Related Documents, and in all otherinstruments and agreements between Borrower and Lender. Borrower shall notify Lenderimmediately in writing of any default in connection with any agreement.**Operations.**Maintain executive and management personnel with substantially the samequalifications and experience as the present executive and management personnel; providewritten notice to Lender of any change in executive and management personnel; conduct itsbusiness affairs in a reasonable and prudent manner.**Environmental Studies.**Promptly conduct and complete, at Borrower’s expense, all suchinvestigations, studies, samplings and testings as may be requested by Lender or anygovernmental authority relative to any substance, or any waste or by-product of anysubstance defined as toxic or a hazardous substance under applicable federal, state, orlocal law, rule, regulation, order or directive, at or affecting any property or anyfacility owned, leased or used by Borrower.**Compliance with Governmental Requirements.**Comply with all laws, ordinances, andregulations, now or hereafter in effect, of all governmental authorities applicable to theconduct of Borrower’s properties, businesses and operations, and to the use or occupancy ofthe Collateral, including without limitation, the Americans With Disabilities Act. Borrowermay contest in good faith any such law, ordinance, or regulation and withhold complianceduring any proceeding, including appropriate appeals, so long as Borrower has notifiedLender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’sinterests in the Collateral are not jeopardized. Lender may require Borrower to postadequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’sinterest.**Inspection.**Permit employees or agents of Lender at any reasonable time to inspect any andall Collateral for the Loan or Loans and Borrower’s other properties and to examine or auditBorrower’s books, accounts, and records and to make copies and memoranda of Borrower’sbooks, accounts, and records. If Borrower now or at any time hereafter maintains anyrecords (including without limitation computer generated records       4  
 

 
and computer software programs for the generation of such records) in the possession of athird party, Borrower, upon request of Lender, shall notify such party to permit Lender freeaccess to such records at all reasonable times and to provide Lender with copies of anyrecords it may request, all at Borrower’s expense.**Compliance Certificates.**Unless waived in writing by Lender, provide Lender at leastannually, with a certificate executed by Borrower’s chief financial officer, or otherofficer or person acceptable to Lender, certifying that the representations and warrantiesset forth in this Agreement are true and correct as of the date of the certificate andfurther certifying that, as of the date of the certificate, no Event of Default exists underthis Agreement.**Environmental Compliance and Reports.**Borrower shall comply in all respects with any andall Environmental Laws; not cause or permit to exist, as a result of an intentional orunintentional action or omission on Borrower’s part or on the part of any third party, onproperty owned and/or occupied by Borrower, any environmental activity where damage mayresult to the environment, unless such environmental activity is pursuant to and incompliance with the conditions of a permit issued by the appropriate federal, state or localgovernmental authorities; shall furnish to Lender promptly and in any event within thirty(30) days after receipt thereof a copy of any notice, summons, lien, citation, directive,letter or other communication from any governmental agency or instrumentality concerning anyintentional or unintentional action or omission on Borrower’s part in connection with anyenvironmental activity whether or not there is damage to the environment and/or othernatural resources.**Additional Assurances.**Make, execute and deliver to Lender such promissory notes,mortgages, deeds of trust, security agreements, assignments, financing statements,instruments, documents and other agreements as Lender or its attorneys may reasonablyrequest to evidence and secure the Loans and to perfect all Security Interests.**LENDER’S EXPENDITURES.**If any action or proceeding is commenced that would materially affectLender’s interest in the Collateral or if Borrower fails to comply with any provision of thisAgreement or any Related Documents, including but not limited to Borrower’s failure to discharge orpay when due any amounts Borrower is required to discharge or pay under this Agreement or anyRelated Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any actionthat Lender deems appropriate, including but not limited to discharging or paying all taxes, liens,security interests, encumbrances and other claims, at any time levied or placed on any Collateraland paying all costs for insuring, maintaining and preserving any Collateral. All suchexpenditures incurred or paid by Lender for such purposes will then bear interest at the ratecharged under the Note from the date incurred or paid by Lender to the date of repayment byBorrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will(A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and bepayable with any installment payments to become due during either (1) the term of any applicableinsurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon paymentwhich will be due and payable at the Note’s maturity.**NEGATIVE COVENANTS.**Borrower covenants and agrees with Lender that while this Agreement is ineffect, Borrower shall not, without the prior written consent of Lender:**Indebtedness and Liens.**(1) Except for trade debt incurred in the normal course of businessand indebtedness to Lender contemplated by this Agreement, create, incur or assumeindebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage,assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets(except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’saccounts, except to Lender.**Continuity of Operations.**(1) Engage in any business activities substantially differentthan those in which Borrower is presently engaged, (2) cease operations, liquidate, merge,transfer, acquire or consolidate with any other entity, change its name, dissolve ortransfer or sell Collateral out of the ordinary course of business, or (3) pay any dividendson Borrower’s stock (other than dividends payable in its stock), provided, however thatnotwithstanding the foregoing, but only so long as no Event of Default has occurred and iscontinuing or would result from the payment of dividends, if Borrower is a “Subchapter SCorporation” (as defined in the Internal Revenue Code of 1986, as amended), Borrower may paycash dividends on its stock to its shareholders from time to time in amounts necessary toenable the shareholders to pay income taxes and make estimated income tax payments tosatisfy their liabilities under federal and state law which arise solely from their statusas Shareholders of a Subchapter S Corporation because of their ownership of shares       5  
 

 
of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter oramend Borrower’s capital structure.**Loans, Acquisitions and Guaranties.**(1) Loan, invest in or advance money or assets to anyother person, enterprise or entity, (2) purchase, create or acquire any interest in anyother enterprise or entity, or (3) incur any obligation as surety or guarantor other than inthe ordinary course of business.**Agreements.**Borrower will not enter into any agreement containing any provisions whichwould be violated or breached by the performance of Borrower’s obligations under thisAgreement or in connection herewith.**CESSATION OF ADVANCES.**If Lender has made any commitment to make any Loan to Borrower, whetherunder this Agreement or under any other agreement, Lender shall have no obligation to make LoanAdvances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under theterms of this Agreement or any of the Related Documents or any other agreement that Borrower or anyGuarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomesinsolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C)there occurs a material adverse change in Borrower’s financial condition, in the financialcondition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) anyGuarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guarantyof the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, eventhough no Event of Default shall have occurred.**RIGHT OF SETOFF.**To the extent permitted by applicable law, Lender reserves a right of setoff inall Borrower’s accounts with Lender (whether checking, savings, or some other account). Thisincludes all accounts Borrower holds jointly with someone else and all accounts Borrower may openin the future. However, this does not include any IRA or Keogh accounts, or any trust accounts forwhich setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted byapplicable law, to charge or setoff all sums owing on the Indebtedness against any and all suchaccounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender toprotect Lender’s charge and setoff rights provided in this paragraph.**DEFAULT.**Each of the following shall constitute an Event of Default under this Agreement:**Payment Default.**Borrower fails to make any payment when due under the Loan.**Other Defaults.**Borrower fails to comply with or to perform any other term, obligation,covenant or condition contained in this Agreement or in any of the Related Documents or tocomply with or to perform any term, obligation, covenant or condition contained in any otheragreement between Lender and Borrower.**False Statements.**Any warranty, representation or statement made or furnished to Lender byBorrower or on Borrower’s behalf under this Agreement or the Related Documents is false ormisleading in any material respect, either now or at the time made or furnished or becomesfalse or misleading at any time thereafter.**Insolvency.**The dissolution or termination of Borrower’s existence as a going business, theinsolvency of Borrower, the appointment of a receiver for any part of Borrower’s property,any assignment for the benefit of creditors, any type of creditor workout, or thecommencement of any proceeding under any bankruptcy or insolvency laws by or againstBorrower.**Defective Collateralization.**This Agreement or any of the Related Documents ceases to be infull force and effect (including failure of any collateral document to create a valid andperfected security interest or lien) at any time and for any reason.**Creditor or Forfeiture Proceedings.**Commencement of foreclosure or forfeiture proceedings,whether by judicial proceeding, self-help, repossession or any other method, by any creditorof Borrower or by any governmental agency against any collateral securing the Loan. Thisincludes a garnishment of any of Borrower’s accounts, including deposit accounts, withLender. However, this Event of Default shall not apply if there is a good faith dispute byBorrower as to the validity or reasonableness of the claim which is the basis of thecreditor or forfeiture proceeding and if Borrower gives Lender written notice of thecreditor or forfeiture proceeding and deposits with Lender monies or a surety bond for thecreditor or forfeiture proceeding, in an amount determined by Lender, in its solediscretion, as being an adequate reserve or bond for the dispute.       6  
 

 
**Events Affecting Guarantor.**Any of the preceding events occurs with respect to anyGuarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, orrevokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.In the event of a death, Lender, at its option, may, but shall not be required to, permitthe Guarantor’s estate to assume unconditionally the obligations arising under the guarantyin a manner satisfactory to Lender, and, in doing so, cure any Event of Default.**Change in Ownership.**Any change in ownership of twenty-five percent (25%) or more of thecommon stock of Borrower.**Adverse Change.**A material adverse change occurs in Borrower’s financial condition, orLender believes the prospect of payment or performance of the Loan is impaired.**Insecurity.**Lender in good faith believes itself insecure.**Right to Cure.**If any default, other than a default on Indebtedness, is curable and ifBorrower or Grantor, as the case may be, has not been given a notice of a similar defaultwithin the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the casemay be, after receiving written notice from Lender demanding cure of such default: (1) curethe default within fifteen (15) days; or (2) if the cure requires more than fifteen (15)days, immediately initiate steps which Lender deems in Lender’s sole discretion to besufficient to cure the default and thereafter continue and complete all reasonable andnecessary steps sufficient to produce compliance as soon as reasonably practical.**EFFECT OF AN EVENT OF DEFAULT.**If any Event of Default shall occur, except where otherwiseprovided in this Agreement or the Related Documents, all commitments and obligations of Lenderunder this Agreement or the Related Documents or any other agreement immediately will terminate(including any obligation to make further Loan Advances or disbursements), and, at Lender’s option,all Indebtedness immediately will become due and payable, all without notice of any kind toBorrower, except that in the case of an Event of Default of the type described in the “Insolvency”subsection above, such acceleration shall be automatic and not optional. In addition, Lender shallhave all the rights and remedies provided in the Related Documents or available at law, in equity,or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remediesshall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursueany remedy shall not exclude pursuit of any other remedy, and an election to make expenditures orto take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’sright to declare a default and to exercise its rights and remedies.**DEBT SERVICE.**DEBT SERVICE COVERAGE RATIO TO BE MEASURED ANNUALLY. DEBT SERVICE COVERAGE RATIO> 1.20. DEFINED AS: EARNINGS BEFORE INTEREST, DEPRECIATION AND AMORTIZATION DIVIDED BYINTEREST EXPENSE PLUS CURRENT MATURITIES OF LONG-TERM DEBT FOR BORROWER AND GUARANTOR ON ACONSOLIDATED BASIS.**MISCELLANEOUS PROVISIONS.**The following miscellaneous provisions are a part of this Agreement:**Amendments.**This Agreement, together with any Related Documents, constitutes the entireunderstanding and agreement of the parties as to the matters set forth in this Agreement.No alteration of or amendment to this Agreement shall be effective unless given in writingand signed by the party or parties sought to be charged or bound by the alteration oramendment.**Arbitration. Borrower and Lender agree that all disputes, claims and controversies betweenthem whether individual, joint, or class in nature, arising from this Agreement orotherwise, including without limitation contract and tort disputes, shall be arbitratedpursuant to the Rules of the American Arbitration Association in effect at the time theclaim is filed, upon request of either party. No act to take or dispose of any Collateralshall constitute a waiver of this arbitration agreement or be prohibited by this arbitrationagreement. This includes, without limitation, obtaining Injunctive relief or a temporaryrestraining order; Invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating topersonal property, including taking or disposing of such property with or without judicialprocess pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, orcontroversies concerning the lawfulness or reasonableness of any act, or exercise of anyright, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided howeverthat no arbitrator shall have the right or the power to enjoin or restrain any act of anyparty. Judgment upon any award rendered by any arbitrator may be entered in any courthaving jurisdiction. Nothing in this Agreement shall preclude**       7  
 

 
**any party from seeking equitable relief from a court of competent jurisdiction. The statuteof limitations, estoppel, waiver, laches, and similar doctrines which would otherwise beapplicable In an action brought by a party shall be applicable in any arbitrationproceeding, and the commencement of an arbitration proceeding shall be deemed thecommencement of an action for these purposes. The Federal Arbitration Act shall apply tothe construction, interpretation, and enforcement of this arbitration provision.****Attorneys’ Fees; Expenses.**Borrower agrees to pay upon demand all of Lender’s costs andexpenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred inconnection with the enforcement of this Agreement. Lender may hire or pay someone else tohelp enforce this Agreement, and Borrower shall pay the costs and expenses of suchenforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whetheror not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcyproceedings (including efforts to modify or vacate any automatic stay or injunction), andappeals. Borrower also shall pay all court costs and such additional fees as may bedirected by the court.**Caption Headings.**Caption headings in this Agreement are for convenience purposes only andare not to be used to interpret or define the provisions of this Agreement.**Consent to Loan Participation.**Borrower agrees and consents to Lender’s sale or transfer,whether now or later, of one or more participation interests in the Loan to one or morepurchasers, whether related or unrelated to Lender, Lender may provide. without anylimitation whatsoever, to any one or more purchasers, or potential purchasers, anyinformation or knowledge Lender may have about Borrower or about any other matter relatingto the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respectto such matters. Borrower additionally waives any and all notices of sale of participationinterests, as well as all notices of any repurchase of such participation interests.Borrower also agrees that the purchasers of any such participation interests will beconsidered as the absolute owners of such interests in the Loan and will have all the rightsgranted under the participation agreement or agreements governing the sale of suchparticipation interests. Borrower further waives all rights of offset or counterclaim thatit may have now or later against Lender or against any purchaser of such a participationinterest and unconditionally agrees that either Lender or such purchaser may enforceBorrower’s obligation under the Loan irrespective of the failure or insolvency of any holderof any interest in the Loan, Borrower further agrees that the purchaser of any suchparticipation interests may enforce its interests irrespective of any personal claims ordefenses that Borrower may have against Lender.**Governing Law.**This Agreement will be governed by federal law applicable to Lender and, tothe extent not preempted by federal law, the laws of the State of Missouri without regard toits conflicts of law provisions. This Agreement has been accepted by Lender in the State ofMissouri.**Choice of Venue.**If there is a lawsuit, Borrower agrees upon Lender’s request to submit tothe jurisdiction of the courts of St. Louis County, State of Missouri.**No Waiver by Lender.**Lender shall not be deemed to have waived any rights under thisAgreement unless such waiver is given in writing and signed by Lender. No delay or omissionon the part of Lender in exercising any right shall operate as a waiver of such right or anyother right. A waiver by Lender of a provision of this Agreement shall not prejudice orconstitute a waiver of Lender’s right otherwise to demand strict compliance with thatprovision or any other provision of this Agreement. No prior waiver by Lender, nor anycourse of dealing between Lender and Borrower, or between Lender and any Grantor, shallconstitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’sobligations as to any future transactions. Whenever the consent of Lender is required underthis Agreement, the granting of such consent by Lender in any instance shall not constitutecontinuing consent to subsequent instances where such consent is required and in all casessuch consent may be granted or withheld in the sole discretion of Lender.**Notices.**Any notice required to be given under this Agreement shall be given in writing,and shall be effective when actually delivered, when actually received by telefacsimile(unless otherwise required by law), when deposited with a nationally recognized overnightcourier, or, if mailed, when deposited in the United States mail, as first class, certifiedor registered mail postage prepaid, directed to the addresses shown near the beginning ofthis Agreement. Any party may change its address for notices under this Agreement by givingformal written notice to the other parties, specifying that the purpose of the notice is tochange the party’s address. For notice purposes, Borrower agrees to keep Lender informed atall times of Borrower’s       8  
 

 
current address. Unless otherwise provided or required by law, if there is more than oneBorrower, any notice given by Lender to any Borrower is deemed to be notice given to allBorrowers.**Severability.**If a court of competent jurisdiction finds any provision of this Agreement tobe illegal, invalid, or unenforceable as to any circumstance, that finding shall not makethe offending provision illegal, invalid, or unenforceable as to any other circumstance. Iffeasible, the offending provision shall be considered modified so that it becomes legal,valid and enforceable. If the offending provision cannot be so modified, it shall beconsidered deleted from this Agreement. Unless otherwise required by law, the illegality,invalidity, or unenforceability of any provision of this Agreement shall not affect thelegality, validity or enforceability of any other provision of this Agreement.**Subsidiaries and Affiliates of Borrower.**To the extent the context of any provisions ofthis Agreement makes it appropriate, including without limitation any representation,warranty or covenant, the word “Borrower” as used in this Agreement shall include all ofBorrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under nocircumstances shall this Agreement be construed to require Lender to make any Loan or otherfinancial accommodation to any of Borrower’s subsidiaries or affiliates.**Successors and Assigns.**All covenants and agreements by or on behalf of Borrower containedin this Agreement or any Related Documents shall bind Borrower’s successors and assigns andshall inure to the benefit of Lender and its successors and assigns. Borrower shall not,however, have the right to assign Borrower’s rights under this Agreement or any interesttherein, without the prior written consent of Lender.**Survival of Representations and Warranties.**Borrower understands and agrees that inextending Loan Advances, Lender is relying on all representations, warranties, and covenantsmade by Borrower in this Agreement or in any certificate or other instrument delivered byBorrower to Lender under this Agreement or the Related Documents. Borrower further agreesthat regardless of any investigation made by Lender, all such representations, warrantiesand covenants will survive the extension of Loan Advances and delivery to Lender of theRelated Documents, shall be continuing in nature, shall be deemed made and redated byBorrower at the time each Loan Advance is made, and shall remain in full force and effectuntil such time as Borrower’s Indebtedness shall be paid in full, or until this Agreementshall be terminated in the manner provided above, whichever is the last to occur.**Time is of the Essence.**Time is of the essence in the performance of this Agreement.**DEFINITIONS.**The following capitalized words and terms shall have the following meanings when usedin this Agreement. Unless specifically stated to the contrary, all references to dollar amountsshall mean amounts in lawful money of the United States of America. Words and terms used in thesingular shall include the plural, and the plural shall include the singular, as the context mayrequire. Words and terms not otherwise defined in this Agreement shall have the meaningsattributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwisedefined in this Agreement shall have the meanings assigned to them in accordance with generallyaccepted accounting principles as in effect on the date of this Agreement:**Advance.**The word “Advance” means a disbursement of Loan funds made, or to be made, toBorrower or on Borrower’s behalf on a line of credit or multiple advance basis under theterms and conditions of this Agreement.**Agreement.**The word “Agreement” means this Business Loan Agreement, as this Business LoanAgreement may be amended or modified from time to time, together with all exhibits andschedules attached to this Business Loan Agreement from time to time.**Borrower.**The word “Borrower” means SYNERGETICS, INC. (MISSOURI CORPORATION) and includesall co-signers and co-makers signing the Note.**Collateral.**The word “Collateral” means all property and assets granted as collateralsecurity for a Loan, whether real or personal property, whether granted directly orindirectly, whether granted now or in the future, and whether granted in the form of asecurity interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, croppledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien,equipment trust, conditional sale, trust receipt, lien, charge, lien or title retentioncontract, lease or consignment intended as a security device, or any other security or lieninterest whatsoever, whether created by law, contract, or otherwise.       9  
 

 
**Environmental Laws.**The words “Environmental Laws” mean any and all state, federal andlocal statutes, regulations and ordinances relating to the protection of human health or theenvironment, including without limitation the Comprehensive Environmental Response,Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1601, et seq., theResource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicablestate or federal laws, rules, or regulations adopted pursuant thereto.**Event of Default.**The words “Event of Default” mean any of the events of default set forthin this Agreement in the default section of this Agreement.**GAAP.**The word “GAAP” means generally accepted accounting principles.**Grantor.**The word “Grantor” means each and all of the persons or entities granting aSecurity Interest in any Collateral for the Loan, including without limitation all Borrowersgranting such a Security Interest.**Guarantor.**The word “Guarantor” means any guarantor, surety, or accommodation party of anyor all of the Loan.**Guaranty.**The word “Guaranty” means the guaranty from Guarantor to Lender, includingwithout limitation a guaranty of all or part of the Note.**Hazardous Substances.**The words “Hazardous Substances” mean materials that, because oftheir quantity, concentration or physical, chemical or infectious characteristics, may causeor pose a present or potential hazard to human health or the environment when improperlyused, treated, stored, disposed of, generated, manufactured, transported or otherwisehandled, The words “Hazardous Substances” are used in their very broadest sense and includewithout limitation any and all hazardous or toxic substances, materials or waste as definedby or listed under the Environmental Laws. The term “Hazardous Substances” also includes,without limitation, petroleum and petroleum by-products or any fraction thereof andasbestos.**Indebtedness.**The word “Indebtedness” means the indebtedness evidenced by the Note orRelated Documents, including all principal and interest together with all other indebtednessand costs and expenses for which Borrower is responsible under this Agreement or under anyof the Related Documents.**Lender.**The word “Lender” means Union Planters Bank NA, its successors and assigns.**Loan.**The word “Loan” means any and all loans and financial accommodations from Lender toBorrower whether now or hereafter existing, and however evidenced, including withoutlimitation those loans and financial accommodations described herein or described on anyexhibit or schedule attached to this Agreement from time to time.**Note.**The word “Note” means the Note executed by SYNERGETICS, INC. (MISSOURI CORPORATION)in the principal amount of $1,000,000.00 dated September 30, 2005, together with allrenewals of, extensions of, modifications of, refinancings of, consolidations of, andsubstitutions for the note or credit agreement.**Permitted Liens.**The words “Permitted Liens” mean (1) liens and security interests securingIndebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similarcharges either not yet due or being contested in good faith; (3) liens of materialmen,mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course ofbusiness and securing obligations which are not yet delinquent; (4) purchase money liens orpurchase money security interests upon or in any property acquired or held by Borrower inthe ordinary course of business to secure indebtedness outstanding on the date of thisAgreement or permitted to be incurred under the paragraph of this Agreement titled“Indebtedness and Liens”; (5) liens and security interests which, as of the date of thisAgreement, have been disclosed to and approved by the Lender in writing; and (6) those liensand security interests which in the aggregate constitute an immaterial and insignificantmonetary amount with respect to the net value of Borrower’s assets.**Related Documents.**The words “Related Documents” mean all promissory notes, creditagreements, loan agreements, environmental agreements, guaranties, security agreements,mortgages, deeds of trust,       10  
 

 
security deeds, collateral mortgages, and all other instruments, agreements and documents,whether now or hereafter existing, executed in connection with the Loan.**Security Agreement.**The words “Security Agreement” mean and include without limitation anyagreements, promises, covenants, arrangements, understandings or other agreements, whethercreated by law, contract, or otherwise, evidencing, governing, representing, or creating aSecurity Interest.**Security Interest.**The words “Security Interest” mean, without limitation, any and alltypes of collateral security, present and future, whether in the form of a lien, charge,encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge,chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipmenttrust, conditional sale, trust receipt, lien or title retention contract, lease orconsignment intended as a security device, or any other security or lien interest whatsoeverwhether created by law, contract, or otherwise.**ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENTOF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THELEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECTYOU (BORROWER(S)) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT. ANY AGREEMENTS WE REACHCOVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING. WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENTOF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.****WAIVE JURY. All parties to this Agreement hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by any party against any other party.****BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWERAGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED SEPTEMBER 30, 2005.**     **BORROWER:**       **SYNERGETICS, INC. (MISSOURI CORPORATION)**       **By:**      **/s/ Gregg D. Scheller**         **GREGG D. SCHELLER, President of SYNERGETICS,INC. (MISSOURI CORPORATION)**       **LENDER:**       **UNION PLANTERS BANK NA**       **By:**      **/s/ Anne D. Silvestri**         **Authorized Signer**        11