exv10w1



 





Exhibit 10.1




THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT




     This Third Amendment to Credit and Security Agreement (“Third Amendment”) is entered into as
of June 7, 2007, by and among Synergetics, Inc., a Missouri corporation (“Synergetics”), and
Synergetics USA, Inc., a Delaware corporation (“Synergetics USA”), (individually, a “Borrower” and
together, the “Borrowers”), and Regions Bank (“Lender”).



RECITALS




     A. Borrowers and Lender entered into a certain Credit and Security Agreement dated as of March
13, 2006, as heretofore amended by First Amendment (the “First Amendment”) dated as of September
26, 2006 and by Second Amendment (the “Second Amendment”) dated as of December 8, 2006 (as so
amended, the “Existing Credit Agreement”).



     B. Effective on or prior to the date of this Third Amendment, Lender has purchased the loan of
Wachovia Bank to Borrowers heretofore made under the Existing Credit Agreement and is currently the
sole Lender to Borrowers under the Existing Credit Agreement.



     C. Borrowers and Lenders desire to amend the Existing Credit Agreement as hereinafter
provided.



     D. The Existing Credit Agreement and this Third Amendment constitute the “Credit Agreement”
from and after the effectiveness of this Third Amendment.



     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Borrowers, Lenders and
Agent agree as follows:



     1. Defined Terms. Each term used herein without definition or a modification to
definition shall have the same meaning as set forth in the Existing Credit Agreement.



     2. Sole Lender. From and after the effectiveness of this Third Amendment, all
references in the Credit Agreement to “Wachovia” are hereby deleted and all references to “Agent”
or “Lender” or “Lenders” shall mean Regions Bank as the sole Lender under the Credit Agreement.



     3. Credit Agreement Amendments. The Existing Credit Agreement is hereby amended as
follows, effective upon fulfillment of conditions set forth in Section 4 of this Third Amendment:




     A. Section 1.2, entitled “Primary Definitions,” is hereby amended by modifying
the following definitions:




	 	(1)	 	“Borrowing Base” means, at any time and subject
to change from time to time in Lenders’ sole discretion, the lesser of:




 









 












	 	(a)	 	the Revolving Loan Commitment, or

	 
	 	(b)	 	the sum of






	 	(i)	 	up to 85% of Eligible Accounts, plus
	 
	 	(ii)	 	up to the lesser of (A) 50% of Eligible
Inventory or (B) $4,250,000.






	 	 	 	Lender reserves the right to adjust the percentages and maximums
stated above as a result the Field Audit in Lender’s reasonable
discretion.






	 	(2)	 	The definition of “Collateral” is hereby
amended by adding the following to the end of the definition thereof:






“Anything to the contrary in this Agreement notwithstanding,
from and after the effectiveness of the Third Amendment,
there shall be deleted from this definition and from the
Collateral all Accounts owed by an account debtor outside the
United States (“Foreign Accounts”) and all general intangible
rights of Borrower under foreign accounts insurance now and
hereafter obtained by Borrower to insure Foreign Accounts.”




	 	(3)	 	Item (6) under the definition of “Eligible
Accounts” is hereby amended to read as follows in its entirety:






“(6) Accounts owed by an account debtor located outside the
United States;”




	 	(4)	 	A new definition, “Field Audit”, is hereby
added to read as follows in its entirety:






“‘Field Audit’ means the one-time field audit (to be
conducted within ninety (90) days of the date of the Third
Amendment) of the facilities properties, books, records and
Collateral of Borrowers as provided in Section 6.2 hereof.”




	 	(5)	 	“Fixed Charge Coverage Ratio” means
consolidated EBITDA less unfinanced Capital Expenditures, cash taxes
paid or due, and distributions (including dividend distributions)
divided by Current Maturities of Long Term Debt and cash interest
expense paid or due plus all payments to Iridex (and Borrowers
represent and warrant that the required payments are $800,000 annually,
with first payment due April 15, 2008).




2









 












	 	(6)	 	“Foreign Accounts” is defined within the
definition of Collateral.
	 
	 	(7)	 	“Foreign Accounts and Insurance Security
Interest” is defined in Section 10.10 hereof.
	 
	 	(8)	 	“‘Notes’ and ‘Revolving Notes’ mean the Third
Amended and Restated Revolving Note attached to the Third Amendment as
Exhibit A, which replaces (without novation) the Second Amended and
Restated Revolving Notes referred to in the Second Amendment.”
	 
	 	(9)	 	“‘Revolving Loan Commitment’ means $8,500,000,
unless in either case said amount is reduced pursuant to Section
2.10(b) hereof, in which event it means the aggregate amount to which
said amount is reduced.”
	 
	 	(10)	 	“Termination Date” means December 1, 2008.”






     B. Section 2.16, entitled “Fees,” is hereby amended by adding the following subsection
(c):




	 	“(c) 	 	 Borrowers agree to pay Lender its costs
incurred in connection with the Field Audit.”






     C. Subsections (c) and (d) to Section 6.1, entitled “Reporting Requirements,” are
hereby amended to read as follows in their entirety:




	 	“(c)	 	 Within 30 days after the end of each month,
agings of the Borrowers’ accounts receivable and their accounts payable
report as at the end of such month.
	 
	 	(d)	 	As soon as available, and in any event within
30 days after the end of each month (or more frequently if requested by
Lender), a Borrowing Base certificate in a form acceptable to the
Lender (currently, the form attached to the Third Amendment as
Exhibit C, showing the computation of the Borrowing Base as of
the close of business on the last day of the immediately preceding
fiscal month (except that Inventory calculations may be updated not
less than every 60 days), prepared by the Borrowers and certified by
the Borrowers’ chief financial officer.”






     D. Section 6.11, entitled “Maximum Leverage Ratio,” is hereby amended to read as
follows in its entirety:




“Section 6.11 Maximum Leverage Ratio. The Borrowers will not, as
of the end of the fiscal quarter ending April 30, 2007, allow their Leverage



3









 







Ratio to be greater than 3.90 to 1.00, and will not, as of the end of each
subsequent fiscal quarter allow their Leverage Ratio to be greater than 3.75
to 1.00”




     E. Section 10.10, entitled “Release of Collateral,” is hereby amended by adding the
following sentence:




“Lender, upon the effectiveness of the Third Amendment and the execution and
delivery by Borrower of the Foreign Accounts Credit Agreement (as defined in
Section F to this Third Amendment), hereby releases the security interest
granted to Lender in all of its Foreign Accounts and in all general
intangible rights of Borrowers under any and all insurance insuring the
collection of Foreign Accounts (the “Foreign Accounts and Insurance Security
Interest”). Effective at such time as payment in full is made of all
obligations of Borrower under, and termination of, the Foreign Accounts
Credit Agreement and all payments and requirements have been made and
accomplished as required under the Foreign Accounts Insurance, including
without limitation, the assignment to the Insurer of all Accounts as to
which a claim shall have been made under the Foreign Accounts Insurance,
Borrower agrees to grant a security interest in the Foreign Accounts to
Lender (or if at such time there are one or more co-lenders under this
Credit Agreement, to Regions Bank as Agent for the benefit of all such
Lenders), and any proceeds thereafter received from the insurer of the
Foreign Accounts will be applied to reduce the principal amount of Advances
outstanding, and item (6) under the definition of “Eligible Accounts” as in
effect prior to this Third Amendment will be reinstated as set forth in the
Existing Credit Agreement.




     F. Lender and Borrowers acknowledge that: (i) Borrowers and Lender are entering into a
certain Foreign Accounts Credit and Security Agreement (“Foreign Accounts Credit
Agreement”); (ii) when executed and delivered, the Indebtedness to be incurred thereunder
will constitute Indebtedness permitted to be incurred under Section 7.2 of the Existing
Credit Agreement, entitled “Indebtedness”; and (iii) the Foreign Accounts and Insurance
Security Interest to be granted to Regions to secure such Indebtedness will constitute a
“Permitted Encumbrance” under the definition thereof and Section 7.1 of the Existing Credit
Agreement, entitled “Liens”.




     G. Lender and Borrowers acknowledge that the following Indebtedness of Borrowers to
Lender constitutes Indebtedness permitted under Section 7.2 of the Existing Credit Agreement
and that the liens securing such Indebtedness are Permitted Encumbrances under the
definition thereof and Section 7.1 of the Existing Credit Agreement:




	 	(i)	 	equipment loan in current principal amount of $594,474;




4









 






	 	(ii)	 	equipment loan in current principal amount of $784,709;
	 
	 	(iii)	 	$1,000,000 equipment purchase line of credit;
	 
	 	(iv)	 	two industrial revenue bond real estate
financings of $2,087,292 and $2,099,959, respectively, in favor of
Synergetics Development Company (wholly owned subsidiary of
Synergetics); and
	 
	 	(v)	 	real estate mortgage loan to Synergetics
Development Company in current principal amount of $153,750.






     4. Representations and Warranties. The Borrowers jointly and severally hereby
represent and warrant to the Lender as follows:




     (a) This Third Amendment and the Revolving Note have been duly and validly executed by
authorized officers of the Borrowers and constitute the legal, valid and binding obligation
of the Borrowers, enforceable against the Borrowers in accordance with their terms. The
Existing Credit Agreement, as amended by this Third Amendment, remains in full force and
effect and remains the valid and binding obligation of the Borrowers, enforceable against
the Borrowers in accordance with its terms. The Borrowers hereby ratify and confirm the
Existing Credit Agreement, as amended by this Third Amendment.




     (b) No Default or Event of Default has occurred or now exists under the Existing Credit
Agreement and no Default or Event of Default will occur as a result of the effectiveness of
this Third Amendment.




     (c) The representations and warranties of the Borrower contained in the Existing Credit
Agreement, as modified by the Disclosure Schedule Amendment attached hereto as Exhibit
B (the “Disclosure Schedule Amendment”), are true and correct in all material respects
on and as of the date of this Third Amendment.



     5. Conditions to Effectiveness of Third Amendment. The effectiveness of this Third
Amendment and the agreements set forth herein are subject to fulfillment, as determined in the sole
judgment of Agent, of the following conditions:




     (a) Borrowers shall have executed and delivered to Lender this Third Amendment, the
Revolving Note and the Disclosure Schedule Amendment and Lender shall have determined that
the Disclosure Schedule Amendment is acceptable to Lender in its good faith determination;




     (b) Each Borrower shall have delivered to Lender a Certificate of the Secretary or an
Assistant Secretary of such Borrower certifying that appropriate corporate actions
authorizing the execution and delivery of this Third Amendment and the Revolving Note have
been taken and covering such other matters as Agent may reasonably request;



5









 






     (c) Lender shall have determined that no Default or Event of Default exists;




     (d) Lender shall have scheduled the Field Audit, to be conducted within 90 days of
the date of this Third Amendment; and




     (e) Borrowers shall have delivered such other documents and shall have taken such
other actions as Lender in its reasonable discretion may require.



     6. Release. In consideration of the agreement of Lender to modify the terms of the
Existing Credit Agreement as set forth in this Third Amendment, Borrowers hereby release, discharge
and acquit forever Lender and any of its officers, directors, servants, agents, employees and
attorneys, past and present, from any and all claims, demands and causes of action, of whatever
nature, whether in contract or tort, accrued or to accrue, contingent or vested, known or unknown,
arising out of or relating to the loans evidenced by the Existing Credit Agreement, as hereby
amended, or Lender’s administration of the same or any other actions taken pursuant to the Existing
Credit Agreement or under any other documents or instruments evidencing loans made by Lender to
Borrowers or the administration of same; provided, however, that the foregoing release and the
following indemnity relate only to actions or inactions of Lender through the date hereof.



     7. Payment of Costs/Expenses. Without limiting the generality of provisions in the
Existing Credit Agreement (as amended by this Third Amendment) relating to payment of Lender’s
costs and expenses, the Borrower will pay all reasonable out-of-pocket expenses, costs and charges
of Lender’s attorneys incurred in connection with the preparation and implementation of this Third
Amendment.



     8. Other Documents/Provisions to Remain in Force. Except as expressly amended hereby,
the Existing Credit Agreement and all documents and instruments executed in connection therewith or
contemplated thereby and all indebtedness incurred pursuant thereto shall remain in full force and
effect and are in all respects hereby ratified and affirmed.



     9. Successors and Assigns. Subject to any restriction on assignment set forth in the
Existing Credit Agreement, this Third Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.



     10. Counterparts. This Third Amendment may be executed in any number of counterparts,
each of which shall constitute one and the same Amendment.



     11. Incorporation by Reference. The Existing Credit Agreement and all exhibits
thereto, and the exhibits to this Third Amendment are incorporated herein by this reference, except
to the extent replaced by Exhibits attached to this Third Amendment.



     12. No Oral Loan Agreements. Pursuant to Mo. Rev. Stat. § 432.045 and § 432.047, the
parties agree to the quoted language below (all references to “you” are references to Borrower and
all references to “us” are references to Agent and Lenders):




ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR 
     FROM ENFORCING REPAYMENT OF A



6









 







DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS
OF THE LEGAL THEORY UPON WHICH IT IS BASED, THAT IS IN ANY WAY RELATED TO THE CREDIT
AGREEMENT. TO PROTECT YOU (BORROWER) AND US (AGENT AND LENDERS) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS
ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE
AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.



[Remaining portion of page is intentionally blank. Signature page follows]



7









 





     IN WITNESS WHEREOF, Lenders, Agent and Borrowers have caused this Third Amendment to be
executed effective as of the date first written above.



	 	 	 	 	 
	 	BORROWERS:



SYNERGETICS, INC.

 	 
	 	By:  	/s/ Pamela G. Boone
 	 
	 	 	Name:  	Pamela G. Boone 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	and



SYNERGETICS, USA, INC.

 	 
	 	By:  	/s/ Pamela G. Boone
 	 
	 	 	Name:  	Pamela G. Boone 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	LENDER:



REGIONS BANK

 	 
	 	By:  	/s/ Anne D. Silvestri
 	 
	 	 	Name:  	Anne D. Silvestri 	 
	 	 	Title:  	Senior Vice President 	 
	 




8









 





TABLES OF EXHIBITS TO THIRD AMENDMENT




Exhibit A - Third Amended and Restated Revolving Note Payable to Regions Bank




Exhibit B - Disclosure Schedule Amendment




Exhibit C - Amended and Restated Borrowing Base Certificate




9









 




Exhibit A to Third

Amendment to Credit and

Security Agreement




AMENDED AND RESTATED

REVOLVING NOTE




$8,500,000.00




St. Louis, Missouri

June 7, 2007




     FOR VALUE RECEIVED, the undersigned, SYNERGETICS, INC., a Missouri corporation, and
SYNERGETICS USA, INC., a Delaware corporation (individually, a “Borrower” and together, the
“Borrowers”), hereby jointly and severally promise to pay on the Termination Date to the order of
Regions Bank (the “Lender”), at its main office in St. Louis, Missouri, or at any other place
designated at any time by the holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Eight Million Five Hundred Thousand and
00/100 ($8,500,000.00) or, if less, the aggregate unpaid principal amount of all
Advances and Swing Line Loans made by the Lender to the Borrowers under the Credit Agreement
(defined below), together with interest on the principal amount hereunder remaining unpaid from
time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from
the date hereof until this Note is fully paid at the rate from time to time in effect under the
Credit and Security Agreement dated as of March 13, 2006, as heretofore amended by First Amendment
dated as of September 26, 2006, by Second Amendment dated as of December 8, 2006 and by Third
Amendment of even date herewith (as so amended, the “Credit Agreement”) by and among the Lender and
the Borrowers. The principal hereof and interest accruing thereon shall be due and payable as
provided in the Credit Agreement. This Note may be prepaid only in accordance with the Credit
Agreement.



     This Note is issued pursuant, and is subject, to the Credit Agreement, which provides, among
other things, for acceleration hereof. This Note is the Revolving Note referred to in the Credit
Agreement. This Note evidences not only all Advances of Lender under the Revolving Credit Facility
but also all Swing Line Loans made by Lender pursuant to Section 2.1A of the Credit Agreement.



     This Note, among other things, is secured pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one or more other security
agreements, mortgages, deeds of trust, assignments or other instruments or agreements.



     The Borrowers hereby agree to pay all costs of collection, including attorneys’ fees and legal
expenses in the event this Note is not paid when due, whether or not legal proceedings are
commenced.



     Presentment or other demand for payment, notice of dishonor and protest are expressly waived.



10









 





     This Note shall be governed by the internal substantive laws of the State of Missouri, without
regard for its conflicts-of-law principles.



     This Note is a replacement for, but not a novation or refinancing of: (A) the Revolving Note
dated as of September 26, 2006, as amended by Amended and Restated Revolving Note dated as of
December 8, 2006, by Borrowers payable to the order of Lender; and (B) the Revolving Note dated as
of September 26, 2006, as amended by Amended and Restated Revolving Note dated as of December 8,
2006, by Borrowers payable to the order of Wachovia Bank National Association, which Note has been
purchased by Lender. This Note does not evidence or effect a release, or relinquishment of the
priority, of the security interests in any Collateral (as defined in the Credit Agreement).



     ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS
OF THE LEGAL THEORY UPON WHICH IT IS BASED, THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO
PROTECT YOU (BORROWERS) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE
REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING (THIS NOTE, THE CREDIT AGREEMENT AND THE
LOAN DOCUMENTS REFERRED TO THEREIN), WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENTS OF THE
AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.



11









 





	 	 	 	 	 
	 	BORROWERS:



SYNERGETICS, INC.

 	 
	 	BY:  	 	 
	 	 	NAME:       Pamela G. Boone 	 
	 	 	TITLE:      Chief Financial Officer 	 
	 
	 	and



SYNERGETICS USA, INC.

 	 
	 	BY:  	 	 
	 	 	NAME:        Pamela G. Boone 	 
	 	 	TITLE:       Chief Financial Officer 	 



12









 






	 	 	 	 	 


Exhibit B to Third

Amendment to Credit and

Security Agreement




DISCLOSURE SCHEDULE




13









 







Exhibit C to Third

Amendment to Credit and

Security Agreement




AMENDED AND RESTATED

BORROWING BASE CERTIFICATE




Date of Computation:                     





     The undersigned (“Borrowers”) are the Borrowers under a Credit and Security Agreement dated
March 13, 2006, as heretofore amended and as may be further amended from time to time, between the
undersigned and Regions Bank (“Lender”).



     Borrowers hereby reaffirm all warranties made in the Credit and Security Agreement and other
agreements in connection therewith and certifies and warrants that Borrowers hold, subject to the
security interest of the Lender granted pursuant to the Credit and Security Agreement and all other
documents creating a security interest which secures the Loan described therein, the following
Collateral:



	 	 	 	 	 
	1.) Borrowers’ Total Accounts Receivable
	 	 	                    	 
	 
	 	 	 	 
	2.) Less: Ineligible Accounts Receivable:
	 	 	 	 
	 
	 	 	 	 
	a.) Receivables over 90 days old
	 	 	                    	 
	 
	 	 	 	 
	b.) Contra Accounts
	 	 	                    	 
	 
	 	 	 	 
	c.) Affiliate/ Sub
	 	 	                    	 
	 
	 	 	 	 
	d.) Employee
	 	 	                    	 
	 
	 	 	 	 
	e.) Government
	 	 	                    	 
	 
	 	 	 	 
	f.) Foreign
	 	 	                    	 
	 
	 	 	 	 
	g.) Other
	 	 	                    	 
	 
	 	 	 	 
	h.) Accounts of Synergetics IP, Inc.
	 	 	                    	 
	 
	 	 	 	 
	3.) Eligible Accounts Receivable
	 	 	                    	 
	 
	 	 	 	 
	4.) Loan Value of Eligible Accounts Receivable
(85% of Line 3)
	 	 	                    	 
	 
	 	 	 	 
	5.) Borrowers Total Inventory
	 	 	                    	 






14









 






	 	 	 	 	 
	6.) Less: Ineligible Inventory
	 	 	 	 
	 
	 	 	 	 
	a.) Work in Process
	 	 	                    	 
	 
	 	 	 	 
	b.) Slow Moving
	 	 	                    	 
	 
	 	 	 	 
	c.) Obsolete
	 	 	                    	 
	 
	 	 	 	 
	7.) Eligible Inventory
	 	 	                    	 
	 
	 	 	 	 
	8.) Loan Value of Inventory
(50% of Line 7, but not more than $4,250,000)
	 	 	                    	 
	 
	 	 	 	 
	9.) Loan Value of Eligible Accounts Receivable and
Eligible Inventory (Line 4 plus Line 8), but in no event
more than $8,500,000
	 	 	                    	 
	 
	 	 	 	 
	10.) Outstanding Principal Balance and Amount of
Letters of Credit
	 	 	                    	 
	 
	 	 	 	 
	11.) Excess (Deficit) Availability (line 9 minus Line 10
	 	 	                    	 






Deficit Must be Repaid within 5 Days of the Date of this Certificate



Borrowers further certify and warrant that no Default under the Credit and Security Agreement is
existing at the date of this Certificate and, to the best of the knowledge and belief of the
Officer of the Borrowers executing this Certificate, there has not been (except as may be otherwise
indicated below) any change since the computation date specified above which would materially
reduce the amounts shown above if such amounts were computed as of the date of this Certificate.




	 	 	 	 	 
	Borrowers:   	 SYNERGETICS, INC

 	 
	Dated:                      	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	and

SYNERGETICS USA, INC.

 	 
	Dated:                      	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




15