Ex-4.1 Credit & security Agreement



 






CREDIT AND SECURITY AGREEMENT




     This Credit and Security Agreement (the “Agreement”) dated as of this 11th day of
August, 2005, is by and between SUN HYDRAULICS CORPORATION, a Florida corporation, (the “Borrower”)
and FIFTH THIRD BANK, a Michigan banking corporation (the “Bank”).



     The Borrower and the Bank agree as follows:



ARTICLE I




DEFINITIONS AND ACCOUNTING TERMS




     SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the
following meanings (terms defined in the singular to have the same meaning when used in the plural
and vice versa):



     “Account” or “Accounts” means a right to payment of a monetary obligation, whether or not
earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned,
or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of
insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v)
for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or
other contract, (vii) arising out of the use of a credit or charge card or information contained on
or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or
sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the
game by a State or governmental unit of a State. The term includes health-care-insurance
receivables.



     “Advance” or “Advances” means advances made to Borrower by the Bank under the Revolving Line
of Credit Facility.



     “Affiliate” means, as applied to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with that Person. For purposes of this
definition, “control” as applied to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract, or otherwise.



     “Agreement” means this Credit Agreement, as amended, supplemented, or modified from time to
time.



     “Applicable Margin” means the percentage added to the LIBOR Rate at which interest shall
accrue on the Loan and, when the Base Rate applies to the Loan, the percentage added to the Base
Rate, determined as follows:




	 	(1)	 	Commencing on the Closing Date and continuing to the first
anniversary of the Closing Date:




 









 











	 	 	 	 	 	 	 	 	 
	LIBOR	 	Base Rate	 	Facility
	Margin	 	Margin	 	Fee
	1.50%

	 	 	0.00	%	 	 	0.000	%







	 	(2)	 	Commencing on the first anniversary of the Closing Date and continuing
through the Maturity Date, the Applicable Margin shall be adjusted in accordance
with the following Performance Pricing Matrix:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	Leverage Ratio	 	LIBOR	 	Base Rate	 	Facility
	Funded Debt/EBITDA	 	Margin	 	Margin	 	Fee
	<2.25:1.0

	 	 	1.50	%	 	 	0.00	%	 	 	0.000	%
	>=2.25:1.0

	 	 	2.00	%	 	 	0.00	%	 	 	0.150	%





The Applicable Margin shall be based on changes in the Funded Debt to EBITDA Ratio as set
forth above calculated quarterly based upon a rolling four quarter calculation of EBITDA, and shall
be determined based on the computations set forth in the Compliance Certificate furnished to the
Bank pursuant to Section 6.08 and shall be effective commencing on the date following the
date such Certificate is received (or if earlier, the date such Certificate was required to be
delivered), and in each case, until the date following the date on which a new Certificate is
delivered or is required to be delivered, whichever shall first occur, provided however, that if
the Borrower shall fail to deliver any such Certificate within the time period required by
Section 6.08, or if the Bank in the exercise of reasonable business judgment determines
that the calculations contained in such Certificate are inaccurate or incomplete and such
inaccuracy or incompleteness is not cured by Borrower to the Bank’s reasonable satisfaction within
15 days after receipt by Borrower of a written notice of such inaccuracy or incompleteness from the
Bank, then the Applicable Margin shall be at the highest level until an appropriate, accurate and
complete Certificate is delivered to the Bank showing that a different level is applicable.




     “Applicable Rate” means the interest rate selected by Borrower to apply to Advances under the
Revolving Line of Credit Facility and which may be either the Base Rate plus the Applicable Margin
or the LIBOR Rate plus the Applicable Margin.



     “Assets” means, at any time, all assets that should, in accordance with GAAP consistently
applied, be classified as assets on a balance sheet of the Borrower.



     “Bank Affiliate” means any entity directly or indirectly controlling, controlled by, or under
common control with the Bank. For purposes of this definition, “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of that entity, whether through the ownership of voting securities, by contract, or
otherwise.



     “Base Rate” means the lending rate as announced by the Bank from time to time, as its base
rate which may change as often as daily, provided however, that at no time shall the rate of
interest exceed the



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highest rate allowed by law. In the event that Bank does not, for any reason,
announce a Base Rate or discontinues the use of the term “Base Rate” as a benchmark for interest
rate on its loans, the Base Rate shall be the rate quoted as the “prime rate” as reported in the
“Money Rates” section of the Wall Street Journal (or the arithmetic average of the rates so quoted,
if more than one rate is
quoted) or, in the event of discontinuance of such publication or such section thereof, the Base
Rate shall mean the monthly average prime rate as reported and published in the Federal Reserve
Bulletin published monthly by the Board of Governors of the Federal Reserve System under the
table styled “Prime Rate Charged by Banks on Short Term Business Loans”. In the event of the
discontinuance of both such publications or such section or table thereof, the Base Rate shall mean
the prime rate as from time to time announced or published by Citibank, N.A. at its principal
office in New York, New York.




     The terms “Base Rate” and “Prime Rate” are intended by the parties to be benchmarks only and
are not to be construed as indicating that such rates are the best or lowest rates offered by the
Lender to any of its customers regardless of their creditworthiness.



     “Base Rate Advance” means an advance under the Revolving Line of Credit Facility bearing
interest at the Base Rate plus the Applicable Margin.



     “Borrower’s Books” means all of the Borrower’s books and records including, without
limitation, ledgers; records indicating, summarizing or evidencing Borrower’s properties or assets
(including the Collateral) or liabilities; all information relating to Borrower’s business
operations or financial condition; and all computer programs, disc or tape files, printouts, runs,
or other computer prepared information.



     “Business Day” means any day other than a Saturday, Sunday, or other day on which commercial
banks in Tampa, Florida are authorized or required to close under applicable law.



     “Capital Lease” means all leases which have been or should be capitalized on the books of the
lessee in accordance with GAAP.



     “Chattel Paper” means a record or records that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and software used in the
goods, a security interest in specific goods and license of software used in the goods, a lease of
specific goods, or a lease of specific goods and license of software used in the goods. For the
purposes hereof, “monetary obligation” means a monetary obligation secured by the goods or owed
under a lease of the goods and includes a monetary obligation with respect to software used in the
goods. If a transaction is evidenced by records that include an instrument or series of
instruments, the group of records taken together constitutes chattel paper.



     “Closing Date” means the date of this Credit Agreement upon which the Loan Documents have been
executed by the Borrower and delivered to the Bank.



     “Collateral” means the Real Property Collateral and all of the Borrower’s domestic assets



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including, without limitation, Items of Payment, Accounts, Chattel Paper, Commercial Tort Claims,
Commodity Accounts, Commodity Contracts, Deposit Accounts, Equipment, General Intangibles, Goods,
Health Care Insurance Receivables, Instruments, Inventory, Investment Property, Letter of Credit
Rights, Payment Intangibles and all other tangible and intangible Assets of Borrower including,
without limitation, Borrower’s Books relating to Collateral, and the proceeds of Collateral whether
cash or non-cash including, without limitation, insurance proceeds.




     “Commercial Tort Claims” means a claim or claims arising in tort with respect to which:




	 	(A)	 	the claimant is an organization; or
	 
	 	(B)	 	the claimant is an individual and the claim:






	 	(i)	 	arose in the course of the claimant’s business or profession; and
	 
	 	(ii)	 	does not include damages arising out of personal injury to or the
death of an individual.





     “Commitment” means the Bank’s obligation to make Advances to the Borrower under the Revolving
Line of Credit Facility pursuant to Article II of this Agreement in the amount referred to therein.



     “Commodity Account” means an account maintained by a commodity intermediary in which a
commodity contract is carried for a commodity customer.



     “Commodity Contract” means a commodity futures contract, an option on a commodity futures
contract, a commodity option, or another contract if the contract or option is:




	 	(A)	 	traded on or subject to the rules of a board of trade that has been designated
as a contract market for such a contract pursuant to federal commodities laws; or
	 
	 	(B)	 	traded on a foreign commodity board of trade, exchange, or market, and is
carried on the books of a commodity intermediary for a commodity customer.





     “Debt” means (1) indebtedness or liability for borrowed money or for the deferred purchase
price of property or services (including trade obligations); (2) obligations as lessee under
Capital Leases; (3) current liabilities in respect of unfunded vested benefits under any Plan; (4)
obligations under letters of credit issued for the account of any Person; (5) all obligations
arising under a Note; (6) all guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss;
and (7) obligations secured by any Lien on property owned by the Borrower, whether or not the
obligations have been assumed.



     “Default” means any of the events specified in Section 9.01, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other condition, has been
satisfied.



     “Default Rate” means a rate of interest equal to the Base Rate plus five percent per annum.



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     “Deposit Accounts” means, singly or collectively as the context may require, a demand, time,
savings, passbook, or similar account maintained with a bank.



     “EBIT” means net income before provision for interest and income taxes.



     “EBITDA” means net income before provision for interest, income taxes, depreciation, and
amortization.



     “Eligible Accounts” means Borrower’s domestic Accounts in which the Bank has a first priority,
perfected security interest, that are owing to Borrower by solvent account debtors less Accounts
(i) outstanding for more than 90 days or (ii) in default, contested, subject to an asserted setoff,
defense, counterclaim or claim of any person, other than the Borrower or the Bank, or (iii) billed
but for which goods have not been shipped, or (iv) owed by any Affiliate. Any Account of the
Borrower in which the Bank does not have a first priority, perfected security interest shall not be
an Eligible Account.



     “Eligible Inventory” means all Borrower’s domestic Inventory.



     “Equipment” means goods other than inventory, farm products or consumer goods and includes,
without limitation, machinery of all types, heavy equipment, non-titled vehicles, computers,
printers and office equipment.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the regulations and published interpretations thereof.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) which together
with the Borrower would be treated as a single employer under Section 4001 of ERISA.



     “Eurocurrency Reserve Percentage” means, with respect to each Interest Period, a percentage
(expressed as a decimal) equal to the percentage in effect two Business Days prior to the first day
of such Interest Period, as prescribed by the Board of Governors of the Federal Reserve System (or
any successor), for determining reserve requirements applicable to any “Eurocurrency liabilities”
pursuant to Regulation D or any other applicable regulation of the Board of Governors which
prescribes reserve requirements applicable to “Eurocurrency liabilities” as presently defined in
Regulation D.



     “Event of Default” means any of the events specified in Section 9.01, provided that
any requirement for the giving of notice, the lapse of time, or both, or any other condition, has
been satisfied.



     “Funded Debt” means the sum of all debt for borrowed money (including, without limitation,
capital lease obligations, subordinated debt, and unreimbursed drawings under letters of credit) or
evidenced by a note, bond, debenture or similar instrument of that person, and shall, in addition,
include contingent reimbursement obligations for outstanding letters of credit (to the extent not
resulting in double-counting).



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     “GAAP” means generally accepted accounting principles in the United States consistently
applied.



     “General Intangibles” means any personal property, including things in action, other than
Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Goods, Instruments,
Investment Property, Letter-of-Credit Rights, Letters of Credit, Money and oil, gas, or other
minerals before extraction. The term includes, without limitation, payment intangibles and
software, books, correspondence, credit files, records, computer programs, computer tapes, cards
and other papers and documents in the possession or control of Borrower, claims (including without
limitation all claims for income tax and other refunds), choses in action , contract rights,
judgments, patents, patent licenses, trademarks, trademark licenses, licensing agreements, rights
in intellectual property, goodwill (including all goodwill of the Borrower’ business symbolized by
and associated with any and all trademarks, trademark licenses, copyrights and/or service marks),
royalty payments, contractual rights, rights as lessee under any lease of real or personal
property, literary rights, copyrights, service names, service marks, logos, trade secrets, all
amounts received as an award in or settlement of a suit in damages, deposit accounts interest in
joint ventures or general or limited partnerships, rights in applications for any of the foregoing,
and all proceeds (cash and non-cash) of the foregoing.



     “Goods” means all things that are movable when a security interest attaches. The term
includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or
contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown,
even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term
also includes a computer program embedded in goods and any supporting information provided in
connection with a transaction relating to the program if (i) the program is associated with the
goods in such a manner that it customarily is considered part of the goods or (ii) by becoming the
owner of the goods, a person acquires a right to use the program in connection with the goods. The
term does not include a computer program embedded in goods that consist solely of the medium in
which the program is embedded.



     “Health Care Insurance Receivable” means an interest in or claim under a policy of insurance
which is a right to payment of a monetary obligation for health care goods or services provided.



     “Hedge Agreement” means any ISDA Master Agreement, Confirmation and Schedules between a
Borrower and Bank or any Bank Affiliate executed at closing or at any time prior to or after
closing or any other agreement between Borrower and Bank or any Bank Affiliate heretofore or
hereafter entered into, which provides for an interest rate, currency, equity, credit or commodity
swap, cap, floor or collar, spot or foreign exchange transaction, cross-currency rate swap,
currency option, any combination thereof, or option with respect to, any of the foregoing or any
similar transactions, for the purpose of hedging Borrower’s exposures to fluctuations in interest
rates, exchange rates, currency, stock, portfolio or loan valuations or commodity prices (including
any such or similar agreement or transaction entered into by Bank or any Bank Affiliate thereof in
connection with any other agreement or transaction between Borrower and Bank or any Bank
Affiliate thereof).



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     “Instrument” means a negotiable instrument or any other writing that evidences a right to the
payment of a monetary obligation, is not itself a security agreement or lease, and is of a type
that in ordinary course of business is transferred by delivery with any necessary indorsement or
assignment.



     “Interbank Rate” means, with respect to each Interest Period, the rate per annum at which
dollar deposits in immediately available funds are offered to the Bank two Business Days prior to
the beginning of such Interest Period by major banks in the London interbank eurodollar market as
at or about 11:00 a.m. London time, for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to the amount of the Loan to which
such Interest Period relates.



     “Interbank Rate (Reserve Adjusted)” means, for any Interest Period, a rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula:



	 	 	 	 	 	 	 
	Interbank Rate

	 	=
	 	Interbank Rate	 	 
	 	 	 	 	 	 	 
	(Reserve Adjusted)

	 	 	 	          1 – Eurocurrency Reserve Percentage	 	 






     “Interest Period” means (i) for Base Rate Advances, one (1) day; (ii) for LIBOR Advances, the
period beginning on (and including) the date on which the Advance is made and ending on (but
excluding) the first day of each month thereafter and each one month period thereafter.



     “Inventory” means goods, other than farm products, which:




	 	(A)	 	are leased by a person as lessor;
	 
	 	(B)	 	are held by a person for sale or lease or to be furnished under a contract of
services;
	 
	 	(C)	 	are furnished by a person under a contract of service; or
	 
	 	(D)	 	consist of raw materials, work in process, or materials used or consumed in a
business.





     “Investment Property” means a security, whether certificated or uncertificated, security
entitlement, securities account, Commodity Contract, or Commodity Account.



     “Item of Payment” or “Items of Payment” means, singly or collectively as the context may
require, each check, draft, cash, money, instrument, item, and other remittance in payment or on
account of payment with respect to any Collateral, and other proceeds or products of Collateral.



     “Letter of Credit Right” means a right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is at the time entitled to demand payment or
performance. The term does not include the right of a beneficiary to demand payment or performance
under a letter of credit.



     “Leverage Ratio” shall mean the sum of all Funded Debt divided by EBITDA.



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     “LIBOR Advance” means an Advance under the Revolving Line of Credit Facility bearing interest
at the LIBOR Rate.



     “LIBOR Rate” means an adjustable rate of interest per annum equal to the Interbank Rate
(Reserve Adjusted) for Interest Periods of one month, plus the Applicable Margin, fixed for one
month periods and adjusted on the first day of each calendar month.



     “Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority,
or other security agreement or preferential arrangement, charge, or encumbrance of any kind or
nature whatsoever (including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction to evidence any of the foregoing).



     “Loan” means the Advances made under the Revolving Line of Credit Facility.



     “Loan Documents” means this Agreement, the Note, the Mortgage, any financing statements
relating to the Collateral and all other documents executed by the parties in connection with the
transactions contemplated thereby.



     “Master List” is defined in Section 3.01(4).



     “Maximum Amount” means the maximum principal amount of Advances outstanding from time to time
under the Revolving Line of Credit Facility which shall not exceed THIRTY FIVE MILLION DOLLARS
($35,000,000.00).



     “Mortgage” means the Renewed, Amended and Restated Mortgage and Security Agreement of even
date with this Agreement pursuant to which the Real Property Collateral is pledged and mortgaged to
secure a portion of the Loan.



     “Multiemployer Plan” means a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of
ERISA or Section 414 of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, in which employees of Borrower or an ERISA Affiliate participate or to
which Borrower or any ERISA Affiliate contribute or are required to contribute.



     “Note” means the Revolving Note and any renewals or replacements thereof.



     “Operating Account Advance” means an advance under the Revolving Line of Credit Facility
bearing interest at the Base Rate.



     “Other Agreements” means all agreements, instruments and documents, including, without



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limitation, the Note, any Hedge Agreement and any other notes, guarantees, mortgages, deeds of
trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices,
security agreements, leases, financing statements, borrowing base certificates, subordination
agreements, trust account agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of Borrower with respect to, or in connection with, this
Agreement, the transactions contemplated by this Agreement or the transactions contemplated by any
other loan document or Hedge Agreement between the Borrower and the Bank or any Bank Affiliate,
together with any and all amendments, modifications, extensions, substitutions and renewals
thereof.




     “Payment Intangible” means a general intangible under which the account debtor’s principal
obligation is a monetary obligation.



     “Person” means an individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority, or other entity of
whatever nature.



     “Plan” means any plan established, maintained, or to which contributions have been made by the
Borrower or any ERISA Affiliate.



     “Real Property Collateral” means the real property described in Exhibit “A” attached
to this Agreement.



     “Responsible Officer” means, as applicable, the chief executive officer of Borrower or the
president of Borrower, or, with respect to financial matters, the chief financial officer and
controller of Borrower.



     “Revolving Line of Credit Facility” means the line of credit facility to be made available by
the Bank to the Borrower pursuant to Section 2.01 of this Agreement.



     “Revolving Line of Credit Facility Maturity Date” means July 1, 2011.



     “Revolving Note” means the promissory note of the Borrower of even date with this Agreement
evidencing Borrower’s obligation to repay Advances under the Revolving Line of Credit Facility.



     “Subsidiary” means, as to any Person, a corporation of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly, or indirectly through one or
more intermediaries, or both, by such Person.



     “Tangible Net Worth” means total assets minus Total Liabilities. For purposes of this
computation, the aggregate amount owing from any officers, stockholders or other Affiliates and the
aggregate amount of any intangible assets including, without limitation, goodwill, franchises,



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licenses, patents, trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets.




     “Total Liabilities” means all liabilities including, without limitation, capitalized leases
and all reserves for deferred taxes and other deferred sums appearing on the liabilities side of a
balance sheet in accordance with GAAP applied on a consistent basis.



     SECTION 1.02. Accounting Terms and Uniform Commercial Code. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all financial data
submitted pursuant to this Agreement shall be prepared in accordance with such principles. When
used herein, the term “financial statements” shall include the notes and schedules thereto. Terms
relating to Collateral, if not expressly defined herein, shall have the meanings ascribed thereto
in the Uniform Commercial Code as enacted in the State of Florida including, without limitation,
Florida Statutes Chapter 679 relating to secured transactions, as amended from time to time.



     SECTION 1.03. Construction. Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular, references to the singular include the plural, the
term “including” is not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or”. The words “hereof”, “herein”, “hereby’,
“hereunder”, and similar terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Section, subsection, clause, schedule and exhibit
references are to this Agreement unless otherwise specified. Any reference in this Agreement or in
the Loan Documents to this Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements, substitutions and
supplements thereto and thereof, as applicable. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference. Each references to “Borrower” or
“Borrowers” shall be deemed to relate to each Borrower individually and to all Borrowers
collectively it being the intent of the parties that the obligations, representations, warranties
and pledges of each Borrower hereunder shall be joint and several.



ARTICLE II




THE LOAN




     SECTION 2.01.



     (a) The Revolving Line of Credit Facility. The Bank agrees, on the terms hereinafter set
forth, to make Advances to Borrower from time to time until the Revolving Line of Credit Facility
Maturity Date in an aggregate principal amount outstanding at any time not to exceed the Maximum
Amount. Within the aforesaid limits, and subject to the provisions of this Agreement, the Borrower
may borrow, make payments, and reborrow under the Revolving Line of Credit Facility until the
Revolving Line of Credit Facility Maturity Date, after which the Bank’s obligation to make advances
to Borrower under the Revolving Line of Credit Facility shall terminate. Anything to the contrary
in this Agreement notwithstanding, the Bank shall not be obligated to make Advances under the
Revolving Line of Credit



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Facility after the occurrence and during the pendency of an Event of
Default or any occurrence which, with the passage of time or the giving of notice and without cure
as may be provided in the applicable Loan Document, would constitute and Event of Default.




     (b) The Revolving Note. The Borrower’s obligation to repay Advances under the Revolving Line
of Credit Facility shall be evidenced by a Revolving Note of Borrower of even date with this
Agreement.



     (c) Revolving Line of Credit Facility Advances Interest Rate. The principal amount of the
Advances outstanding from time to time under the Revolving Note shall bear interest at the
Applicable Rate based upon selections made by Borrower in accordance with Section 2.01(e).
Interest shall be calculated based on a 360 day year for the actual number of days elapsed during
any Interest Period.



     (d) Requests for Revolving Line of Credit Facility Advances.





	 	(1)	 	All requests for Advances after the initial Advance made pursuant to
Section 2.02 shall be submitted to the Bank on a Business Day and all Advances
shall be made on Business Days.
	 
	 	(2)	 	Requests for Advances shall be made in writing signed by the Borrower (which
may be by facsimile) and shall specify the principal amount requested, which Advances
shall be in a minimum principal amount of $200,000.00, excluding however Operating
Account Advances.
	 
	 	(3)	 	The Bank shall, if all of the conditions precedent set forth in this
Article II and in Article III of this Agreement have been met, make
the Advances requested by Borrower pursuant to this Agreement on the same Business Day
after receipt of a written request for such Advance received by the Bank prior to 11:00
a.m. Eastern Time, and on the next Business Day after receipt of a written request for
such Advance received by the Bank at or after 11:00 a.m. Eastern Time. Each written
request for an Advance shall be effected by crediting the amount thereof to a deposit
account designated by Borrower maintained with the Bank or with a Bank Affiliate.





     (e) Selection and Conversion of Interest Rate.




	 	(1)	 	An Operating Account Advance shall bear interest at the Base Rate, and Borrower
shall have no right of conversion of such interest.
	 
	 	(2)	 	Except for an Operating Account Advance, and subject to the provisions hereof,
the
Borrower shall have the right to (i) select the initial Applicable Rate to apply to an
Advance commencing on the date of the Advance, and (ii) to continue any Advance as a
LIBOR Advance or as a Base Rate Advance, or (iii) to convert any Advance from either a
LIBOR Advance or a Base Rate Advance to the other. In each case conversion shall be
effected by submitting to the Bank written notice (effective upon receipt) (a) in the
case of conversion from a Base Rate Advance to a LIBOR Advance, on or before 11:00 a.m.
Eastern Time at least two (2) Business Days




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	 	 	 	prior to the effective date of conversion,
and (b) in the case of conversion from a LIBOR Advance to a Base Rate Advance, on or
before 11:00 a.m. Eastern Time on the last day of a current Interest Period. Such
conversion shall take effect at the end of the current Interest Period. If no such
notice of election is received by the Bank from the Borrower within the time prescribed
prior to the end of a current Interest Period, then the Advance shall be continued as
the same type of Advance with the same Interest Period. Notwithstanding anything herein
to the contrary, no Interest Period may end later than the Revolving Line of Credit
Maturity Date.
	 
	 	(3)	 	Except for an Operating Account Advance, and subject to the provisions hereof,
the Borrower shall have the right to convert any Advance from either a LIBOR Advance or
a Base Rate Advance to a fixed rate of interest (such fixed rate of interest to be
determined at the time of such conversion in Bank’s discretion based upon such factors,
including but not limited to, Bank’s then current underwriting standards) (the “Fixed
Rate”). In such case conversion shall be effected by submitting to the Bank (i)
written notice of conversion to a Fixed Rate on or before 11:00 a.m. Eastern time at
least fifteen (15) days prior to the last day of a current Interest Period, and (ii)
payment of any applicable fees and costs. Such conversions shall (a) be in minimum
increments of $1,000,000.00; and (b) take effect at the end of the current Interest
Period. If no such notice of election is received by the Bank from the Borrower within
the time prescribed prior to the end of a current Interest Period, then the Advance
shall be continued as the same type of Advance with the same Interest Period.
Notwithstanding anything herein to the contrary, no Interest Period may end later than
the Revolving Line of Credit Maturity Date.
	 
	 	(4)	 	After the occurrence and during the continuance of an Event of Default, the
interest rate may not be continued at the LIBOR Rate or the Base Rate plus the
Applicable Margin, but shall be deemed automatically to have been converted to the
Default Rate.





     (f) Payments Under the Revolving Note. Interest shall be paid to the Bank on the amount of
the Advances outstanding from time to time and shall be payable monthly commencing with a payment
due on the first (1st) day of the month following the Closing Date and on the first
(1st) day of each month thereafter (each such date being an “Interest Payment Date”)
provided, however, that all outstanding principal plus accrued interest on each Advance shall be
due and payable on the Revolving Line of Credit Facility Maturity Date. All payments received by
the Bank shall be applied first to payment of any costs and expenses to which the Bank may be
entitled under any Loan Document, then to payment of accrued interest and then to payment of
principal.



     (g) Right of Prepayment of Advances. Borrower shall have the right any time and from
time to time to prepay the Advances outstanding under the Revolving Line of Credit Facility, in
whole or in part, without premium or penalty, except as provided herein, provided, however, that
Borrower shall pay accrued interest to the date of such prepayment. Prepayments shall be made to
Bank in immediately available funds, and any such prepayment shall not affect or vary the
obligation of Borrower to pay any installment when due. Notwithstanding the foregoing, prepayment
of Advances that have been converted



12









 




to the Fixed Rate shall require, in addition to payment of
outstanding principal, accrued interest, and other sums due hereunder, payment of any loss or
expense incurred by Bank as specified in Section 2.08.




     (h) Use of Proceeds of Revolving Line of Credit Facility Advances. The proceeds of the
Advances made under the Revolving Line of Credit Facility shall be used to refinance existing
indebtedness, to fund future corporate acquisitions of Borrower, and to fund Borrower’s working
capital needs.



     (i) Collateral Security for the Revolving Line of Credit Facility Advances. The Advances
made under the Revolving Line of Credit Facility shall be secured by Borrower granting to the Bank
a first mortgage on the Real Property Collateral, and a duly perfected first priority security
interest in the Collateral other than the Real Property Collateral.



     (j) Facility Fee. Borrower shall pay to the Bank annually, on the anniversary of the Closing
Date, a facility fee calculated and due as shown in the pricing matrix used for determination of
Applicable Margin. The facility fee shall be the percentage shown in said pricing matrix times the
unused principal amount of the Revolving Note.



     SECTION 2.02. Closing Disbursements. The Bank shall disburse the Revolving Line of Credit
Facility at Closing first, to pay all closing costs and disbursements shown on a closing statement
relating to the Loan executed by the Bank and the Borrower at Closing, then to refinance the
existing indebtedness of Borrower. The remainder of the Revolving Line of Credit Facility shall be
available for disbursement for Borrower after Closing. Borrower’s execution of such closing
statement shall be conclusive evidence of Borrower’s approval of the disbursements shown on the
closing statement and of Borrower’s authorization for the Bank to pay such disbursements with the
Revolving Line of Credit Facility.



     SECTION 2.03. Mandatory Prepayment of Advances. Notwithstanding any other provision of this
Agreement, the aggregate outstanding principal balance of the Revolving Line of Credit Facility
Advances shall not at any time exceed the Maximum Amount. If the aggregate outstanding principal
balance of such Advances at any time exceeds the Maximum Amount as otherwise determined by the
Bank, then the Borrower shall immediately pay to the Bank an amount equal to such excess. Borrower
shall not be entitled to borrow or reborrow under the Revolving Line of Credit Facility so long as
the aggregate outstanding principal balance of Advances exceeds the Maximum Amount nor if the
result of any requested Advance would cause the aggregate outstanding principal balance of all
Advances to exceed the Maximum Amount.



     SECTION 2.04. Non Usury. Notwithstanding any other provision of this Agreement, the Note or
of any instrument securing the Note or any other instrument executed in connection with the Loan
evidenced thereby, it is expressly agreed that amounts payable under the Note or under the other
aforesaid instruments for the payment of interest or any other payment in the nature of or which
would be considered as interest or other charge for the use or loan of money shall not exceed the
highest rate allowed by law, from time to time, and in the event the provisions of this Agreement,
the Note or of such



13









 




other instruments referred to above in this paragraph with respect to the
payment of interest or other charge for the use or loan of money shall result in payments of
interest exceeding such limitation, then the excess over such limitation shall not be payable and
the amount otherwise agreed to have been paid shall be reduced by the excess so that such
limitation will not be exceeded, and if any payment actually made shall result in such limitation
being exceeded, the amount of the excess shall constitute and be treated as a repayment of
principal and shall operate to reduce such principal by the amount of such excess, or if any such
payment is in excess of the principal indebtedness, such excess shall be refunded.




     SECTION 2.05. LIBOR Rate Lending Unlawful. If as a result of a regulatory change the Bank
shall reasonably determine that it is unlawful for the Bank to make, continue or maintain any Loan
accruing interest at a LIBOR Rate, the obligation of the Bank to make, continue or maintain any
such Loan at a LIBOR Rate shall, upon such determination (and telephonic notice thereof, to be
subsequently confirmed in writing, to the Borrower which notice shall, in the absence of manifest
error, create a rebuttable presumption as to the effect of such regulatory change as specified
above), forthwith be suspended until the earliest date the Bank can determine and notify the
Borrower that the circumstances causing such suspension no longer exist, and the LIBOR Rate
applicable to all Loans shall automatically convert to the Base Rate on the last day(s) of the then
current respective Interest Period(s) with respect thereto or sooner, if required by such
regulatory change, provided that the Bank shall take any reasonable actions available to it
(including designation of its lending offices) consistent with legal and regulatory restrictions
that will avoid the need for such suspension and will not, in the reasonable judgment of the Bank,
be otherwise materially disadvantageous to the Bank.



     SECTION 2.06. Deposits Unavailable. If the Bank shall have reasonably determined that
quotations of interest rates for the relevant deposits referred to in the definition of “Interbank
Rate” are not being provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for LIBOR Rate determinations as provided herein or that, by reason
of circumstances affecting the London interbank eurodollar market, adequate means do not exist for
ascertaining the LIBOR Rate for any Loan to which such rate is the Applicable Rate, then, upon
telephonic notice from the Bank to the Borrower to be subsequently confirmed in writing (such
notice, in the absence of manifest error, to create a rebuttable presumption as to the effect
specified above), the obligations of the Bank to make or continue any Loan at a LIBOR Rate shall
forthwith be suspended until the earliest date that the Bank can reasonably determine and notify
the Borrower that the circumstances causing such suspension no longer exist, provided that the Bank
shall take any reasonable actions available to it to obtain the necessary quotations of interest
rates in the London interbank eurodollar market (or another eurodollar market acceptable to the
Bank and to the Borrower).



     SECTION 2.07. Treatment of Affected Loans. If the obligation of the Bank to make,
continue or maintain any Loan at a LIBOR Rate shall be suspended pursuant to Section 2.05 or
2.06 above, the Applicable Rate shall be automatically converted to the Base Rate on the last
day(s) of the then current Interest Period(s) for such Loan (or, in the case of a suspension
pursuant to Section 2.05, sooner, if required by the regulatory change that gave rise to
such suspension) and, unless and until the Bank gives notice as provided below that the
circumstances specified in Section 2.05 or 2.06 (as the case may be) that gave rise to such
suspension no longer exist all Loans that would otherwise be made or continued at a



14









 




LIBOR Rate by
the Bank shall be made or continued instead at the Base Rate.




     If the Bank gives notice to the Borrower that the circumstances specified in Section 2.05
or 2.06 that gave rise to such suspension no longer exist (which the Bank agrees to do promptly
upon such circumstances ceasing to exist) Advances converted to accrue interest at the Base Rate
shall be re-converted, on the first day(s) of the next succeeding Interest Period(s) for such
outstanding Advances, to the LIBOR Rate based upon an Interest Period elected by the Borrower
pursuant to written notice received by the Bank at least three (3) Business Days prior to the end
of the current Interest Period and, if none is so elected by Borrower, for an Interest Period of
thirty (30) days.



     SECTION 2.08. LIBOR Related Losses and Expenses. In the event that the Bank shall incur any
loss or expense (including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Bank to make, continue or maintain any
portion of the principal amount of any Loan at a LIBOR Rate) as a result of any repayment or
prepayment of the principal amount of any Loan on a date other than the scheduled last day of the
Interest Period applicable thereto then, upon written notice from the Bank to the Borrower the
Borrower shall, within five days of its receipt thereof, pay directly to the Bank such amount as
will (in the reasonable determination of the Bank) reimburse the Bank for such loss or expense.
Such written notice shall, in the absence of manifest error, create a rebuttable presumption of the
amount of such losses or expenses.



     SECTION 2.09. Payments and Computations. All payments on account of the indebtedness
evidenced by the Note shall be made in lawful money no later than 1:00 p.m. Eastern Time on the
date due in immediately available United States funds. All payments shall be first applied to
payment of costs and expenses to which the Bank may be entitled under the Loan Documents, then to
accrued interest and the remainder to principal. All computations of interest shall be made on the
basis of a year of 360 days charged for the actual number of days elapsed. Payments are to be
made to the Bank in Tampa, Florida, or at any one other place in the continental United States as
the Bank may, from time to time, in writing designate. Any payment made after 1:00 p.m. Eastern
Time shall be deemed received on the next Business Day and must include interest up to but not
including such next Business Day. If any payment becomes due on a Saturday, Sunday, or any day on
which banks in Tampa, Florida are legally closed to business, such payment shall be made on the
next succeeding Business Day, and, in the case of a principal payment, interest on such principal
payment shall be payable for such extension of time and shall be included with such payment.



     SECTION 2.10. Default Rate. Upon and after the occurrence of an Event of Default hereunder,
all principal amounts due under the Note shall bear interest, payable on demand, at the
Default Rate.



     SECTION 2.11. Costs. If any miscellaneous items of cost or expense, or any other
expenditures are incurred by Bank in connection with the Revolving Line of Credit Facility, or in
order to protect, preserve or further secure the Bank’s interests with respect thereto, or, if any
action or proceedings shall be commenced by any person other than the Bank to which action or
proceedings the Bank is made a party or in which it shall become necessary to defend the interests
of the Bank or the provisions of this Agreement, all sums paid or incurred by the Bank for such
expenses, including reasonable attorney’s fees,



15









 




shall be paid by the Borrower, together with
interest thereon at the Default Rate from the date of demand by the Bank for payment. The sums
paid or incurred by the Bank in accordance with the terms of this paragraph shall be paid by the
Borrower to the Bank within ten (10) days of demand and the failure or omission of the Borrower to
do so shall entitle the Bank to add such sums to the principal indebtedness of the Note, or, at its
option, to declare the Note to be in default, thereupon maturing all of the unpaid indebtedness
including the sums advanced hereunder.




     SECTION 2.12. Creditors’ Inquiries. Borrower hereby grants to the proper officials of Bank
the right to make response to any inquiries of creditors and/or suppliers of the Borrower
concerning the status of the Loan. Bank agrees to furnish such information from time to time to
the best of its knowledge, provided, however, that the only duty of Bank in the furnishing of such
information shall be not to affirmatively deceive, as construed by decisions of the courts of the
State of Florida, which is equivalent to fraud and willful misrepresentation.



     SECTION 2.13. Additional Remedies of Bank. In addition to other remedies available to the
Bank in an Event of Default under this Agreement, should Borrower default, violate, breach or fail
to comply with and perform in any material respect any one or more of the express covenants,
conditions, and provisions of this Agreement, which default, violation, breach or failure remains
uncured ten (10) days after written notice thereof to the Borrower, or default under the Note then
the Bank shall have the absolute right, at its option and election, to (1) cancel this Agreement by
written notice to the Borrower; (2) institute appropriate proceedings to specifically enforce
performance hereof; (3) withhold further Advances hereunder; (4) take immediate possession of the
Collateral; (5) appoint a receiver, as a matter of strict right without regard to the solvency of
Borrower, for the purpose of preserving the Collateral, preventing waste, and to protect all rights
accruing to Bank by virtue of this Agreement. All expenses incurred in connection with the
appointment of said receiver, or in protecting or preserving the Collateral shall be chargeable
against the Borrower and shall be enforced as a lien against the Collateral. Nothing herein shall
be construed to require notice or opportunity to cure in the event that Borrower defaults in any
obligation to pay money under the Note. The said remedies and rights of Bank shall be cumulative
and not exclusive, the Bank to be privileged and have the absolute right to resort to any one or
more, or all of the said remedies, neither to the limited exclusion of the other, or any other
remedy available to the Bank at law or equity, in the event of any such default or breach of said
agreement or provisions by the Borrower. The Bank shall have the absolute right to apply any
balance of the Loan funds as a payment toward the Note, and no other party shall have any interest
in any Loan funds so applied and shall not have any right to garnish, require or compel payment
thereof toward discharge or satisfaction of any claim or lien which they or any of them have or may
have.



     SECTION 2.14. Further Assurances. Borrower agrees upon demand to do any act or execute any
additional documents (including, without limitation, security agreements and/or financing
statements on any personalty included or to be included as Collateral) as may be required by Bank
to secure the Note.



     SECTION 2.15. Time is of the Essence. It is specifically agreed that time is of the essence
of this Agreement, and that no waiver of any obligation or requirement hereunder shall at any time
thereafter be held to be a waiver of the terms hereunder.



16









 





     SECTION 2.16. Taxes. All payments of the principal of and interest on the Note shall be made
without deduction for any present and future taxes, levies, imposts, deductions, charges or
withholdings (other than any of the foregoing levied on or measured by the net income of the Bank
pursuant to the tax laws of the jurisdictions in which it is incorporated or where such Bank’s
lending installations are located or managed and controlled) which amount shall be paid by
Borrower. Borrower will pay the amounts necessary so that the gross amount of the principal and
interest paid is not less than that which would have been required by the Note if such taxes and
other items were not payable. All stamp and documentary taxes shall be paid by Borrower. If,
notwithstanding the previous three sentences, the Bank pays any such taxes, Borrower will reimburse
the Bank for the amount paid, including interest and penalties for late payment, if any.



ARTICLE III




CONDITIONS PRECEDENT




     SECTION 3.01. Conditions Precedent to Making Advances. In addition to the conditions
precedent set forth in Article II of this Agreement, the obligation of the Bank to make Advances to
Borrower as provided in Article II of this Agreement is subject to the further condition precedent
that the Bank shall have received at Closing or on or before the day of closing each Advance, as
applicable, each of the following in form and substance satisfactory to the Bank and its counsel:



     (1) Note. The Revolving Note duly executed by Borrower;



     (2) Evidence of all authorizing action by the Borrower. Copies of all corporate action taken
by the Borrower, certified as of the date of this Agreement, including resolutions of Borrower’s
Board of Directors, authorizing the execution, delivery, and performance of the Loan Documents to
which Borrower is a party;



     (3) Incumbency and signature certificate of the Borrower. A certificate (dated as of the date
of this Agreement) of Borrower certifying the names, incumbency and true signatures of Borrower’s
officers authorized to sign the Loan Documents to which Borrower is a party and the other documents
to be delivered by the Borrower under this Agreement, and having attached thereto certified copies
of Borrower’s Articles of Incorporation and By-Laws, and all amendments thereto;



     (4) Items Relating to Collateral. The Bank shall have received from Borrower prior to Closing
(i) a list of all domestic machinery and Equipment currently owned by Borrower providing serial
numbers or other identification numbers to the extent available and the net book value of each item
of machinery and Equipment (the “Master List”); (ii) a current UCC lien search in a form and from a
source satisfactory to the Bank relating to the Borrower and showing that no other liens or
security interests of equal or greater priority than the lien or security interest of the Bank
exist with respect to the non-real property Collateral except such as will be paid, satisfied and
discharged with the proceeds of the Loan and, in such event, that each such lienor or secured party
has prepared and delivered for filing with the



17









 




appropriate governmental agency upon payment an
appropriate satisfaction of lien; (iii) a Security Agreement (which may be incorporated in this
Agreement), in form and substance acceptable to the Bank, granting the Bank a security interest in
the Collateral; (iv) UCC-1 financing statements, in form and substance acceptable to the Bank
which, upon filing with the appropriate governmental office, will duly perfect a first priority
security interest in the non-real property Collateral in favor of the Bank as secured party; and
(v) Landlord’s lien waivers as to all non-real property Collateral located in premises leased by
Borrower, in form and substance acceptable to the Bank which will duly waive any priority such
Landlord may have in the non-real property Collateral in favor of the security interest of the
Bank. Notwithstanding the foregoing, as to the leased premises located at 1155 and 1165 Commerce
Boulevard, Sarasota, Florida, Borrower shall use its commercially reasonable best efforts to either
(A) obtain a landlord’s lien waiver, or (b) in the event Borrower purchases such leased premises,
grant a mortgage naming the Bank as mortgagee, within three (3) months from the date of this
Agreement.




     (5) Items Relating to Real Property Collateral. The Bank shall have received, at or prior to
the Closing Date, (a) a mortgage from Borrower securing a portion of the Revolving Note, in form
and substance acceptable to the Bank, duly executed in recordable form by Borrower naming the Bank
as mortgagee, encumbering the Real Property Collateral; (b) a loan title insurance commitment
relating to the Real Property Collateral, naming the Bank as the insured mortgagee, and showing (i)
good and marketable fee simple title or a leasehold interest acceptable to the Bank being vested in
Borrower, and (ii) that the Bank’s mortgage will be a first priority lien encumbering the mortgaged
property without qualification or exception other than permitted encumbrances accepted by the Bank
in writing; and (c) an environmental indemnification agreement, in form and substance acceptable to
the Bank, relating to the Real Property Collateral, whereupon Borrower agrees to indemnify the Bank
against such environmental hazards and other matters as the Bank may require;



     (6) Insurance. The Bank shall have received evidence satisfactory to it that all Collateral
subject to theft or casualty loss, if any, is insured against fire, flood, theft and casualty loss
to its full insurable value in substance and with coverage amounts reasonably satisfactory to the
Bank; and that the Bank is named as loss payee and an additional insured as its interest may appear
in all such insurance policies and certificates;



     (7) Opinion of Counsel for Borrower. An opinion of counsel for the Borrower as to such
matters and in form and substance acceptable to the Bank;



     (8) Other Documents. The Bank shall have received such other approvals, opinions, or
documents as the Bank may reasonably request;



     (9) No Defaults. The Bank shall have received a certificate signed by the Borrower dated the
date of such Advance, stating that no Default or Event of Default has occurred and is continuing,
or would result from the passage of time or the giving of notice;



     (10) Payment of Fees. Borrower shall have paid to or for the benefit of the Bank all fees
properly payable by the Borrower to the Bank; and



18









 





     (11) General. All agreements, instruments and proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to Bank, and Bank shall
have received on the date of this Agreement copies of all documents which it may have requested in
connection with this transaction.



     SECTION 3.02. Conditions Precedent for the Bank’s Benefit. The foregoing conditions
precedent exist solely for the Bank’s benefit, and the Bank in its sole discretion shall determine
whether they have been satisfied. The Bank shall have the right, in its sole and absolute
discretion, to waive any conditions precedent without notice to or the approval of any other entity
or person including, without limitation, any guarantor, provided, however, that such waiver shall
not be enforceable against the Bank without its consent unless the waiver is in writing signed by
the Bank.



ARTICLE IV




SECURITY AGREEMENT




     As security for the payment of the Loan and for the performance of all of Borrower’s
Obligations under the Loan Documents, the Borrower hereby assigns, grants and conveys to the Bank
and agrees that the Bank shall have a perfected, continuing security interest in all of the
Collateral. The Borrower further agrees that the Bank shall have in respect of the Collateral all
of the rights and remedies of a secured party under the applicable provisions of the Uniform
Commercial Code and under other applicable laws and Loan Documents, as well as those provided in
this Agreement. The Borrower covenants and agrees to execute and deliver such financing statements
and other instruments and filings as are necessary in the opinion of the Bank to perfect such
security interest. Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, the Borrower may not dispose of the Collateral, or any part thereof, other than
in the ordinary course of business or otherwise as may be permitted by this Agreement. Borrower
shall, if requested by the Bank, execute a separate Security Agreement in favor of the Bank
relating to the Collateral which shall be construed in conjunction with and as supplemental to this
section.



ARTICLE V




REPRESENTATION AND WARRANTIES




     The Borrower represents and warrants to the Bank that:



     SECTION 5.01. Organization, Good Standing, and Due Qualification. Borrower is a corporation
duly organized, validly existing, and having an active status under the laws of Borrower’s state or
country of organization; has the power and authority to own its assets and to transact the business
in which it is now engaged or proposed to be engaged; and is duly qualified as a foreign business
entity and in good standing under the laws of each other jurisdiction in which such qualification
is required, if any, except where the failure to so qualify would not have a material adverse
effect on Borrower’s business or financial condition.



19









 





     SECTION 5.02. Power and Authority. The execution, delivery, and performance by the Borrower
of the Loan Documents to which Borrower is a party has been duly authorized by all necessary action
of the Borrower’s board of directors and does not and will not (1) require any consent or approval
of the shareholders of the Borrower or of any other entity; (2) contravene any of Borrower’s
articles of incorporation or by-laws; (3) violate any provision of any law, rule, regulation
(including, without limitation, Regulation U of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination, or award presently in effect
having applicability to Borrower; (4) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease, or instrument to which
Borrower is a party or by which it or its properties may be bound or affected; (5) result in or
require the creation or imposition of any Lien upon or with respect to any of the properties now
owned or hereafter acquired by Borrower except as granted to the Bank; or (6) cause Borrower to be
in default under any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award or any such indenture, agreement, lease, or instrument.



     SECTION 5.03. Legally Enforceable Agreement. This Agreement, and each of the other Loan
Documents to which the Borrower is party, and all of Borrower’s undertakings thereunder, when such
Loan Documents have been duly executed and delivered under this Agreement will be, legal, valid,
and binding obligations of the Borrower enforceable against Borrower in accordance with their
respective terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors’ rights generally, and
principles of equity. Each Borrower represents and warrants that it is not insolvent or
contemplating filing a voluntary petition for bankruptcy nor are any of them aware of any
possibility or threat of being subject to any petition for involuntary bankruptcy.



     SECTION 5.04. Financial Statements. All financial statements of the Borrower which have been
furnished to the Bank are complete and correct and fairly present in all material respects the
financial condition of the Borrower and the results of the operations of the Borrower for the
periods covered by such statements, all in accordance with GAAP consistently applied and there has
been no material adverse change in the condition (financial or otherwise), business, or operations
of the Borrower. There are no liabilities of the Borrower fixed or contingent which are material
but are not reflected in the financial statements, other than liabilities arising in the ordinary
course of business. No information, exhibit, or report furnished by the Borrower to the Bank in
connection with the negotiation of this Agreement contained any material misstatement of fact or
omitted to state a
material fact or any fact necessary to make the statement contained therein not materially
misleading.



     SECTION 5.05. Labor Disputes and Acts of God. Neither the business nor the properties of any
Borrower are now affected by any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy, or other casualty,
nor does any Borrower have any reason to believe that they will be affected in the future, by any
strike, lockout or other labor dispute or embargo (whether or not any of the foregoing are covered
by insurance) materially and adversely affecting such business or properties or the operation of
any Borrower.



20









 





     SECTION 5.06. Other Agreements. Borrower is not a party to any indenture, loan, or credit
agreement, or, to any Borrower’s knowledge, to any lease or other agreement or instrument, or
subject to any charter or corporate restriction which could have a material adverse effect on the
business, properties, assets, operations, or conditions, financial or otherwise, of Borrower, or
the ability of Borrower to carry out its obligations under the Loan Documents to which it is a
party. Borrower is not in default in any respect in the performance, observance, or fulfillment of
any of the obligations, covenants, or conditions contained in any agreement or instrument material
to its business to which it is a party.



     SECTION 5.07. Litigation. There is no pending or, to Borrower’s knowledge, threatened action
or proceedings against or affecting Borrower before any court, governmental agency or arbitrator
which may, in any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties, or business of any Borrower or the ability of any Borrower to
perform its obligations under the Loan Documents to which it is a party.



     SECTION 5.08. No Defaults on Outstanding Judgments or Orders. Borrower has satisfied all
judgments against it and Borrower is not in default with respect to any judgment, writ, injunction,
decree, rule, or regulation of any court, arbitrator, or federal, state, municipal, or other
governmental authority, commission, board, bureau, agency or instrumentality, domestic or foreign.



     SECTION 5.09. Ownership and Liens. Borrower has title to, or valid leasehold interests in,
all of its properties and assets, real and personal, including the properties and assets pledged as
Collateral to the Bank (other than any properties or assets disposed of in the ordinary course of
business), and none of the properties and assets owned by the Borrower is subject to any Lien,
except such as may be permitted by this Agreement.



     SECTION 5.10. ERISA. Neither Borrower nor any ERISA Affiliate (if any) is party to or a
participant in any Multiemployer Plan that is subject to ERISA.



     SECTION 5.11. Operation of Business. To the best of Borrower’s knowledge, Borrower possesses
all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct their business substantially as now conducted and as presently proposed to be
conducted, and Borrower is not in violation of any valid rights of others with respect to any of
the
foregoing.



     SECTION 5.12. Taxes. Borrower has filed all tax returns (federal, state and local) required
to be filed and has paid all taxes, assessments, and governmental charges and levies thereon which
are due, including interest and penalties.



ARTICLE VI




AFFIRMATIVE COVENANTS




     So long as the Note shall remain unpaid or the Bank shall have any Commitment under this



21









 




Agreement, the Borrower will:




     SECTION 6.01. Maintenance of Existence. Preserve and maintain its existence and good
standing in the jurisdiction of its organization, and qualify and remain qualified as a foreign
business entity in each jurisdiction in which such qualification is required, except where the
failure to so qualify would not have a material adverse effect on Borrower’s business or financial
condition.



     SECTION 6.02. Maintenance of Records. Keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Borrower.



     SECTION 6.03. Maintenance of Properties. Maintain, keep, and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its business in good working
order and condition, ordinary wear and tear excepted.



     SECTION 6.04. Conduct of Business. Continue to engage in business of the same general type
as conducted by it on the date of this Agreement.



     SECTION 6.05. Maintenance of Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such risks as are
usually carried by companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof, and shall include,
without limitation, (i) fire, theft and casualty insurance insuring property pledged to secure the
Loan in an amount of not less than full replacement value and (ii) public liability insurance
including, without limitation automobile and appropriate liability coverage relating to the
Collateral in the amount of not less that $1,000,000.00 per occurrence and $2,000,000.00 annual
aggregate, and (iii) business interruption insurance. All personal property and Improvements
pledged as Collateral for the Loan shall be insured against fire, theft and casualty loss to the
full insurable value thereof.



     Borrower shall immediately notify the Bank upon the occurrence of any material business
interruption or of any material casualty, damage or loss to Collateral or seizure of any Collateral
for any reason including, without limitation, action of any foreign government.



     SECTION 6.06. Compliance with Laws. Comply in all material respects with all applicable
laws, rules, regulations, and orders, such compliance to include, without limitation, paying before
the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon
its property unless same are being contested by Borrower in good faith in a manner that precludes
the issuance of any tax deed or foreclosure of any lien or claim for unpaid taxes against the
Collateral.



     SECTION 6.07. Right of Inspection. Upon reasonable prior notice, at any reasonable time and
from time to time, permit the Bank or any agent or representative thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the properties of, the
Borrower, and to discuss the affairs, finances, and accounts of the Borrower with any of its
officers and directors and the



22









 




Borrower’s independent accountants.




     SECTION 6.08. Reporting Requirements. Furnish to the Bank:




(1) (A) Quarterly Financial Statements. As soon as available and in any event within
forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal
year of the Borrower, internally prepared financial statements including, without
limitation, statements of income of the Borrower and balance sheets for the period
commencing at the end of the previous fiscal quarter, if any, and ending with the end of
such quarter, and a statement of change in cash flow of the Borrower for the portion of the
fiscal year ended with the last day of such quarter, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in the
previous fiscal year, if any, and all prepared on a consolidated and consolidating basis in
accordance with GAAP consistently applied and certified by the controller, treasurer or
chief financial officer of the Borrower (subject to year-end adjustments).




(B) Annual Audited Financial Statements. As soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of the Borrower, audited
financial statements prepared by an independent certified public accountant reasonably
acceptable to the Bank including, without limitation, a balance sheet of the Borrower as of
the end of such fiscal year and a statement of income and retained earnings of the Borrower
for such fiscal year, and a statement of change in cash flow, all in reasonable detail and
stating in comparative form the respective figures for the corresponding date and period in
the prior fiscal year, if any, and all prepared on a consolidated and consolidating basis in
accordance with GAAP consistently applied and certified by the controller, treasurer or
chief financial officer of the Borrower.



     (2) Management Letters. Promptly upon receipt thereof, copies of any reports submitted to the
Borrower by independent certified public accountants in connection with examination of the
financial statements of the Borrower or any Subsidiary made by such accountants;



     (3) Compliance Certificate. As soon as available and in any event within thirty (30) days
after the end of each of the first three fiscal quarters of Borrower, and concurrently with
delivery to the
Bank of the Borrower’s annual, financial statements, a certificate signed by both the president and
the chief financial officer of Borrower, certified as to accuracy and completeness, showing (i)
compliance with the financial covenants set forth in Article VIII of this Agreement with
all supporting calculations and data, and (ii) for the purpose of determining the Applicable
Margin, a calculation of the Funded Debt to EBITDA Ratio, and (iii) certifying that no Default or
Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto;



     (4) Notice of Litigation. Promptly after the commencement thereof, notice of all actions,
suits, and proceedings before any court or governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign, affecting the Borrower or any Subsidiary, which,
if determined adversely to the Borrower or such Subsidiary, would have a material adverse effect on
the financial



23









 




condition, properties, or operations of the Borrower and its Subsidiaries taken as a
whole;




     (5) Notice of Defaults and Events of Default. Immediately after the occurrence of each
Default or Event of Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with respect thereto;



     (6) Proxy Statements, Etc. Promptly after the sending or filing thereof, copies of all proxy
statements, financial statements, and reports which the Borrower or any corporation of which such
Borrower is a Subsidiary sends to its stockholders, and copies of all regular, periodic, and
special reports, and all registration statements which the Borrower or any parent corporation files
with the Securities and Exchange Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange;



     (7) Notice of Acquisition, Bulk Sale, Merger or Change in Control. Prior to any (i) proposed
acquisition of control of or purchase of all or any substantial part of the assets of any
corporation or business entity by the Borrower; (ii) sale of all or any substantial part of the
assets of the Borrower; or (iii) any merger by the Borrower with any other entity whether or not a
Borrower is to survive the merger; the Bank shall be provided with not less than thirty (30) days
advance written notice.



     (8) Notice of Business Interruption, etc. Borrower shall immediately notify the Bank upon the
occurrence of any business interruption, any casualty or damage or loss of property which could
have a material adverse effect on the business of the Borrower for any reason, including, but not
limited to any action of any foreign government.



     (9) Notice of Change of Borrower’s Name or Change in Location of Collateral. Borrower shall,
prior to the effective date of any change in Borrower’s name and prior to any change in location of
any Collateral (except for Inventory and work in progress moving among Borrower’s and Borrower’s
Subsidiaries’ business locations in the ordinary course of Borrower’s business), notify the Bank in
writing of the impending occurrence of any such event and the effective date thereof.



     (10) General Information. Such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any subsidiary as the Bank may from time to time
reasonably request.



     SECTION 6.09. Hedge Agreements. Borrower hereby grants to the Bank a right of first refusal
to enter into any Hedge Agreements with Borrower. Borrower shall make first inquiry of the Bank
regarding the availability of any such Hedge Agreements and the terms of such offered by the Bank.
In the event that Borrower thereafter negotiates a Hedge Agreement with a third party on terms more
favorable than those offered by the Bank, the Borrower shall thereupon provide the Bank with the
written terms of such third party Hedge Agreement and the Bank shall have a right of first refusal
to enter into a Hedge Agreement on the same terms. Violation by the Borrower of the Bank’s right
of first refusal hereunder shall constitute an Event of Default under this Agreement.



24









 





     SECTION 6.10. Unconditional Obligations. The payment and performance by the Borrower of its
obligations under the Loan Documents shall be absolute and unconditional, irrespective of any
defense or any rights of set-off, recoupment or counterclaim Borrower might otherwise have against
the Bank and the Borrower shall pay absolutely net all of its payment obligations under the Loan
Documents free of any deductions and without abatement, diminution or set-off; and until payment in
full of all such obligations, the Borrower: (a) will not suspend or discontinue any payments
provided for in the Note; (b) will perform and observe all of its other agreements contained in the
Loan Documents; and (c) will not terminate or attempt to terminate this Agreement for any cause.



ARTICLE VII




NEGATIVE COVENANTS




     So long as the Note shall remain unpaid or the Bank shall have any Commitment under this
Agreement, the Borrower will not, without the prior written consent of the Bank:



     SECTION 7.01. Liens. Create, incur, assume, or suffer to exist, or permit any Subsidiary to
create, incur, assume, or suffer to exist, any Lien upon or with respect to any of the Collateral
now owned or hereafter acquired except for Liens of the Bank, and except for purchase money Liens
not exceeding $1,000,000.00.



     SECTION 7.02. Mergers, Bulk Sale or Acquisition of Assets, Etc. Merge or consolidate with,
or sell, assign, lease, or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to
any Person, or acquire all or substantially all of the assets or the business of any Person
(whether in one transaction or in a series of transactions totaling $500,000 or more in the
aggregate), or permit any domestic Subsidiary to do so, except that (l) any Subsidiary may merge
into or transfer assets to the Borrower and (2) any Subsidiary may merge into or consolidate with
or transfer assets to any other Subsidiary. Bank’s consent under this Section 7.02 shall not be
unreasonably withheld.



     SECTION 7.03. Sale and Leaseback. Sell, transfer, or otherwise dispose of, or permit any
subsidiary to sell, transfer, or otherwise dispose of, any real or personal property to any Person
and thereafter directly or indirectly lease back the same or similar property, for less than fair
market value.



     SECTION 7.04. Sale of Assets. Except for (i) the sale of goods and services in the ordinary
course of Borrower’s business, and (ii) the sale or other disposition of assets that have reached
the end of their useful life for purposes of Borrower’s business and which are to be replaced by
assets of like kind or function, sell, lease, assign, transfer, or otherwise dispose of any of its
now owned or hereafter acquired assets with an individual value of $100,000 or more or in an
aggregate value of more than $350,000 annually for other than a price equal to 90% or more of the
original purchase value to be paid to Borrower in currently available funds at or prior to the
transfer.



     SECTION 7.05. Investments. Make, or permit any domestic Subsidiary to make, any loan or



25









 




advance to any Person, or purchase or otherwise acquire, or permit any domestic Subsidiary to
purchase or otherwise acquire, any capital stock or investment in an aggregate value of more than
$500,000 in any twelve (12) month period other than in the ordinary course of business, or other
securities of, make any capital contribution to, or otherwise invest in or acquire any interest in
any Person, except: (l) direct obligations of the United States or any agency thereof with
maturities of one year or less from the date of acquisition; (2) commercial paper of a domestic
issuer rated at least “A-l” by Standard & Poor’s Corporation or “P-l” by Moody’s Investors Service,
Inc.; (3) certificates of deposit with maturities of one year or less from the date of acquisition
issued by any commercial bank having capital and surplus in excess of Twenty Million Dollars
($20,000,000.00); (4) stock, obligations, or securities received in settlement of debts (created in
the ordinary course of business) owing to the Borrower or any Subsidiary; (5) loans to or to
purchase securities of the Borrower or a Subsidiary; and (6) to accept promissory notes from
employees as payment for the purchase price of stock purchased pursuant to an employee stock option
plan.




     SECTION 7.06. Transactions With Affiliates. Except as may otherwise be permitted by
Section 7.05, make any loans to any Affiliate nor enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering of any service,
with any Affiliate including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the
reasonable requirements of the Borrower’s business and upon fair and reasonable terms no less
favorable to the Borrower than would obtain in a comparable arm’s-length transaction with a Person
not an Affiliate.



     SECTION 7.07. Stock of Subsidiary, Etc. Sell or otherwise dispose of any shares of capital
stock of any Subsidiary or permit any Subsidiary to issue any additional shares of its capital
stock other than to Borrower or another Subsidiary.



     SECTION 7.08. Guaranties and Contingent Liabilities. Enter into any guaranty agreement
whereby Borrower guaranties payment or performance of any indebtedness or obligations of any Person
other than a Subsidiary; nor assume any contingent liability of any kind or character whatsoever
other than that of a Subsidiary.



     SECTION 7.09 Debt. Enter into any capitalized leases or incur any indebtedness, whether
direct or contingent, other than trade payables, equipment leases and normal accrued expenses which
arise under normal operation of Borrower’s business.



     SECTION 7.10. Transfer and Change of Location of Collateral. Transfer or permit the transfer
to another location not currently owned or leased by Borrower, of any of the Collateral or the
books and records related to any of the Collateral. Borrower shall provide, at any time and from
time to time, written lists of the location of Collateral within thirty (30) days after Bank’s
request.



     SECTION 7.11. Change of Borrower’s Name. Change Borrower’s name without giving twenty (20)
Business Days prior written notice to the Bank.



26









 





     SECTION 7.12 Foreign Asset Purchases. Use any of the Revolving Line of Credit Facility in
excess of $5,000,000.00 to purchase foreign Assets or direct any Advances under the Revolving Line
of Credit Facility in excess of $5,000,000.00 to Borrower’s foreign Subsidiaries.



ARTICLE VIII




FINANCIAL COVENANTS




     SECTION 8.01. Maximum Total Liabilities to Tangible Net Worth. The Borrower shall maintain on
a consolidated basis determined quarterly during the term of this Agreement a ratio of Debt to
Tangible Net Worth of not more than 1.5 to 1.0.



     SECTION 8.02. Minimum EBIT to Interest Expenses. The Borrower shall maintain on a
consolidated basis determined quarterly during the term of this Agreement a minimum EBIT to
Interest Expense Ratio of 1.1 to 1.0.



     SECTION 8.03. Maximum Leverage Ratio. The Borrower shall maintain on a consolidated basis
during the term of this Agreement a maximum ratio of Funded Debt to EBIDTA of less than 2.5 to 1.0.
Compliance with this covenant shall be determined quarterly on a rolling four quarters basis.



     SECTION 8.04. Banking Deposit Relationship. Borrower shall, during the term of this
Agreement, maintain its primary domestic depository accounts with the Bank.



ARTICLE IX




EVENTS OF DEFAULT




     SECTION 9.01. Events of Default. The occurrence of any of the following events shall
constitute an Event of Default:



     (l) The Borrower should fail to pay the principal of or interest on the Note, or any fee, as
and when due and payable;



     (2) Any representation or warranty made or deemed made by the Borrower in this Agreement or
which is contained in any guaranty, certificate, document, opinion, or financial or other statement
furnished at any time under or in connection with any Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;



     (3) Borrower shall fail to perform or observe in any material respect any term, covenant, or
agreement or shall default under any material provision contained in any Loan Document including,
without limitation, the financial reporting requirements in Article VI and the financial
covenants in Article VIII of this Agreement which are expressly deemed to be material;



27









 





     (4) Borrower or any Subsidiary shall (a) fail to pay any indebtedness for borrowed money in
excess of $50,000.00 (other than the Note), or any interest or premium thereon, when due or within
any applicable grace period (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise), or (b) fail to perform or observe any material term, covenant, or condition
on its part to be performed or observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect of such failure of payment
or to perform or observe is to accelerate, or to permit the acceleration after the giving of notice
or passage of time, or both, of the maturity of such indebtedness; or any such indebtedness shall
be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof;



     (5) Borrower or any Subsidiary (a) shall generally not, or shall be unable to, or shall admit
in writing its inability to pay its debts as such debts become due; or (b) shall make an assignment
for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its assets; or (c) shall commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of debt, dissolution,
or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall
have any such petition or application filed or any such proceeding commenced against it in which an
order for relief is entered or adjudication or appointment is made and which remains undismissed
for a period of sixty (60) days or more; or (e) by any act or omission shall indicate its consent
to, approval of, or acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment of a custodian, receiver, or trustee for all or any substantial part of
its properties; or (f) shall suffer any such custodianship, receivership, or trusteeship to
continue undischarged for a period of sixty (60) days or more;



     (6) One or more judgments, decrees, or orders for the payment of money in excess of Fifty
Thousand Dollars ($50,000.00) in the aggregate shall be rendered against Borrower or any Guarantor
and such judgments, decrees, or orders shall continue unsatisfied and in effect for a period of
thirty (30) consecutive days without being vacated, discharged, satisfied, or stayed or bonded
pending appeal;



     (7) Borrower or any Subsidiary shall in any material respect fail to comply with any statute,
rule, regulation, ordinance, order, or other law or judicial decree regarding such Borrower, its
premises or assets;



     (8) Borrower defaults under any Other Agreements and such default continues beyond any
applicable cure period provided therein;



     (9) Any foreclosure, execution or attachment shall be instituted or levied against the
Collateral, or any part thereof, and such foreclosure, execution or attachment shall not be
dismissed, set aside, discharged or stayed within thirty (30) days after the same shall have been
levied; or



     (10) If Borrower’s existence shall be liquidated, dissolved or terminated, or Borrower shall
suspend or terminate a substantial portion of its business operations.



28









 





     SECTION 9.02. Action if Bankruptcy. If any Event of Default described in Section
9.01 (5) shall occur, the Commitment (if not theretofore terminated) shall automatically
terminate and the outstanding principal amount of the outstanding Loan and Advances and all other
obligations of the Borrower under the Loan Documents shall automatically be and become immediately
due and payable, without notice or demand or presentment and the Bank shall, subject to limitations
imposed by laws relating to bankruptcy, moratorium and equitable limitations on enforcement of
creditors’ rights generally, pursue any and all rights of the Bank under the Loan Documents
including, without limitation, foreclosure as to any and all pledged Collateral.



     SECTION 9.03. Action if Other Event of Default. Upon the occurrence of any of the
events described in Section 9.01 (2), (3), (4) or (6) through (10), the Borrower shall have
thirty (30) days after receipt of written notice from the Bank (which may be given by facsimile)
within which to effect a cure. If any Event of Default (other than any Event of Default described
in Section 9.01 (5) shall occur for any reason, whether voluntary or involuntary, and be
continuing after any applicable cure period, then, and in any such event, the Bank may: (l) declare
its obligations under this Agreement to be terminated, whereupon the same shall forthwith
terminate; (2) declare the Note, all interest thereon, and all other amounts payable under this
Agreement and the Loan Documents to be forthwith due and payable, whereupon the Note, all such
interest, and all such amounts shall become and be forthwith due and payable, without presentment,
demand, protest, or further notice of any kind, all of which are hereby expressly waived by the
Borrower; and (3) pursue any and all rights of the Bank under the Loan Documents including, without
limitation, foreclosure as to any and all pledged Collateral.



     SECTION 9.04. Specific Rights With Regard to Collateral. In addition to all other rights and
remedies provided hereunder or as shall exist at law or in equity from time to time upon occurrence
of an Event of Default, the Bank may (but shall be under no obligation to), without notice to the
Borrower, and the Borrower hereby irrevocable appoints the Bank as its attorney-in-fact, with power
of substitution, in the name of the Bank or in the name of the Borrower or otherwise, for the use
and benefit of the Bank, but at the cost and expense of the Borrower and without notice to
Borrower, upon the occurrence of an Event of Default:




	 	(i)	 	request any lessee under any Lease to make payments directly to the Bank to the
extent such payments are not already being made directly to the Bank, with the Bank
taking control of the cash and non-cash proceeds thereof;
	 
	 	(ii)	 	compromise, extend or renew any of the Collateral or deal with the same as Bank
may deem advisable subject to government tax liens in respective states and
municipalities;
	 
	 	(iii)	 	make exchanges, substitutions or surrenders of all or any part of the
Collateral;
	 
	 	(iv)	 	copy, transcribe or remove from any place of business of Borrower any of
Borrower’s Books, records, ledger sheets, correspondence, invoices and documents in any
way relating to or evidencing any of the Collateral or without cost or expense to the
Bank make such use of any of Borrower’s places of business as may be reasonably
necessary to




29









 






	 	 	 	administer, control, and collect the Collateral;
	 
	 	(v)	 	repair, alter or supply goods if necessary to fulfill in whole or in part the
purchase order of any Account debtor;
	 
	 	(vi)	 	demand, collect, receipt for and give renewals, extensions, discharges and
releases of any of the Collateral;
	 
	 	(vii)	 	institute and prosecute legal and equitable proceedings to enforce collection
of, or realize upon any of the Collateral;
	 
	 	(viii)	 	settle, renew, extend, compromise, compound, exchange or adjust claims in respect of
any of the Collateral or any legal proceedings brought in respect thereof;
	 
	 	(ix)	 	endorse or sign the name of the Borrower upon any items of payment,
certificates of title, instruments, securities, stock powers, documents, documents of
title, or other writing relating to or part of the Collateral including, without
limitation, on any Proof of Claim in Bankruptcy against an Account debtor;
	 
	 	(x)	 	take any other action necessary or beneficial to realize upon or dispose of the
Collateral.





ARTICLE X




MISCELLANEOUS




     SECTION 10.01. Amendments, Etc. No amendment, modification, termination, or waiver of any
provision of any Loan Document to which the Borrower is a party, nor consent to any departure by
the Borrower from any Loan Document to which it is a party, shall in any event be effective unless
the same shall be in writing and signed by the Bank, and then such waiver or consent shall be
effective
only in the specific instance and for the specific purpose for which given.



     SECTION 10.02. Notices, Etc. All notices and other communications provided for under this
Agreement and under the other Loan Documents to which the Borrower is party shall be in writing
(including facsimile) and mailed or delivered, if to the Borrower, at 1500 West University Parkway,
Sarasota, FL 34243, Attention: Chief Financial Officer, Fax No. (941) 362- 1268; and if to the
Bank, at its address at 4401 W. Kennedy Blvd., Suite 300, Tampa, FL 33609, Attention: John A.
Marian, with copy to DLA Piper Rudnick Gray Cary US LLP, 101 E. Kennedy Blvd., Suite 2000, Tampa,
FL 33602, Attention: Michael A. Bedke, Esq.; or, as to each party, at such other address as shall
be designated by such party in a written notice to the other party complying as to delivery with
the terms of this Section 10.02. All such notices and communications shall, when mailed or
delivered, be effective when deposited in the mails or delivered to the courier service,
respectively, addressed as aforesaid, except that notices to the Bank pursuant to the provisions of
Article II shall not be effective until received by the Bank. Notices sent by facsimile shall be
deemed to be effective upon machine confirmation of receipt.



30









 





     SECTION 10.03. No Waiver; Remedies. No failure on the part of the Bank to exercise, and no
delay in exercising, any right, power, or remedy under any Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any rights under any Loan Documents preclude
any other or further exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by law.



     SECTION 10.04. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Bank and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights under any Loan Document to which the Borrower
is party without the prior written consent of the Bank.



     SECTION 10.05. Costs, Expenses, and Taxes. The Borrower agrees to pay on demand all costs
and expenses in connection with the preparation, execution, delivery, filing, recording, and
administration of any of the Loan Documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Bank, with respect thereto and with respect to advising
the Bank as to its rights and responsibilities under any of the Loan Documents, and all costs and
expenses, if any, in connection with the enforcement of any of the Loan Documents. In addition,
the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of any of the Loan
Documents and the other documents to be delivered under any such Loan Documents, and agree to save
the Bank harmless from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.



     SECTION 10.06. Right of Setoff. Upon the occurrence and during the continuance of any Event
of Default the Bank is hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the account of the Borrower
against
any and all of the obligations of the Borrower now or hereafter existing under this Agreement or
the Note or any other Loan Document, irrespective of whether or not the Bank shall have made any
demand under this Agreement or the Note or such other Loan Document and although such obligations
may be unmatured. The Bank agrees promptly to notify the Borrower after any such setoff and
application, provided that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of the Bank under this Section 10.06 are in addition to
other rights and remedies (including, without limitation, other rights of setoff) which the Bank
may have.



     SECTION 10.07. Governing Law and Venue. This Agreement and the Note and all Loan Documents
shall be governed by, and construed in accordance with, the laws of the State of Florida. Any suit
brought under or relating to this Agreement, the Note or any Loan Document shall be brought
exclusively in a court of competent jurisdiction in Hillsborough County, Florida. The foreign
Borrowers expressly agree to and hereby do (i) submit to personal jurisdiction and venue in the
United States District Court in and for the Middle District of Florida, and (ii) hereby appoint Sun
Hydraulics Corporation as their respective agent in the United States of America for the purpose of
receipt of service of process on



31









 




the foreign Borrowers, in each case of (i) and (ii) for any action
arising under or in any way relating to the Loan Documents notwithstanding any provision to the
contrary contained in any Loan Document. The prevailing party in any action brought under or
relating to this Agreement, the Note or any Loan Document shall be entitled to recover its
reasonable attorneys’ fees, paralegal’s fees and costs of suit, including fees and costs on appeal
and in bankruptcy proceedings.




     SECTION 10.08. Severability of Provisions. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining provisions of
such Loan Document or affecting the validity or enforceability of such provision in any other
jurisdiction.



     SECTION 10.09. Headings. Article and Section headings in the Loan Documents are included in
such Loan Documents for the convenience of reference only and shall not constitute a part of the
applicable Loan Documents for any other purpose.



     SECTION 10.10. Waiver of Jury Trial. As an important inducement to the Bank to enter this
Agreement, Borrower and Bank each waive the right to trial by jury in any action arising under or
in any way related to this Agreement.



     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above written.



	 	 	 	 	 	 	 	 	 	 	 
	FIFTH THIRD BANK	 	 	 	SUN HYDRAULICS CORPORATION,
	 	 	 	 	 	 	a Florida corporation
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ John A. Marian	 	 	 	By:	 	/s/ Tricia Fulton
	 	 	 	 	 	 	 	 	 
	 

	 	Name: John A. Marian
	 	 	 	 	 	Name:
	 	Tricia Fulton
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Title: Vice President
	 	 	 	 	 	Title:
	 	Corp. Finance
	 

	 	 	 	 	 	 	 	 	 	 






32