Document:

CREDIT AGREEMENT

 

Dated as of December 11, 2001

 

among

 

HEALTHTRONICS SURGICAL SERVICES,
INC.

as Borrower,

 

and

 

THE SUBSIDIARIES OF THE BORROWER

FROM TIME TO TIME PARTY HERETO,

as Guarantors,

 

THE LENDERS

FROM TIME TO TIME PARTY HERETO,

 

BANK OF AMERICA, N.A.,

as Agent

 

and

 

BANC OF AMERICA SECURITIES LLC,

as Sole Lead Arranger and Sole
Book Manager

 

 

TABLE OF CONTENTS

 

	
  SECTION 1  DEFINITIONS

  
	
   

  	
  1.1

  	
  Definitions.

  
	
   

  	
  1.2

  	
  Computation of Time
  Periods.

  
	
   

  	
  1.3

  	
  Accounting Terms.

  
	
  SECTION 2  CREDIT FACILITIES 

  
	
   

  	
  2.1

  	
  Revolving Loans.

  
	
   

  	
  2.2

  	
  Letter of Credit
  Subfacility.

  
	
   

  	
  2.3

  	
  Swingline Loan Subfacility.

  
	
   

  	
  2.4

  	
  Term
  Loan.

  
	
  SECTION 3  OTHER
  PROVISIONS RELATING TO CREDIT FACILITIES 

  
	
   

  	
  3.1

  	
  Default Rate.

  
	
   

  	
  3.2

  	
  Extension and Conversion.

  
	
   

  	
  3.3

  	
  Prepayments.

  
	
   

  	
  3.4

  	
  Termination
  and Reduction of Revolving Committed Amount.

  
	
   

  	
  3.5

  	
  Fees.

  
	
   

  	
  3.6

  	
  Capital Adequacy.

  
	
   

  	
  3.7

  	
  Limitation on Eurodollar
  Loans.

  
	
   

  	
  3.8

  	
  Illegality.

  
	
   

  	
  3.9

  	
  Requirements of Law.

  
	
   

  	
  3.10

  	
  Treatment of Affected
  Loans.

  
	
   

  	
  3.11

  	
  Taxes.

  
	
   

  	
  3.12

  	
  Compensation.

  
	
   

  	
  3.13

  	
  Pro Rata Treatment.

  
	
   

  	
  3.14

  	
  Sharing of Payments.

  
	
   

  	
  3.15

  	
  Payments,
  Computations, Etc.

  
	
   

  	
  3.16

  	
  Evidence of Debt.

  
	
   

  	
  3.17

  	
  Replacement of Affected
  Lenders.

  
	
  SECTION 4  GUARANTY

  
	
   

  	
  4.1

  	
  The Guaranty.

  
	
   

  	
  4.2

  	
  Obligations Unconditional.

  
	
   

  	
  4.3

  	
  Reinstatement.

  
	
   

  	
  4.4

  	
  Certain Additional Waivers.

  
	
   

  	
  4.5

  	
  Remedies.

  
	
   

  	
  4.6

  	
  Rights of Contribution.

  
	
   

  	
  4.7

  	
  Guarantee of
  Payment; Continuing Guarantee.

  
	
  SECTION 5  CONDITIONS

  
	
   

  	
  5.1

  	
  Closing Conditions.

  
	
   

  	
  5.2

  	
  Conditions to
  all Extensions of Credit.

  
	
  SECTION 6  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
  6.1

  	
  Financial Condition.

  
	
   

  	
  6.2

  	
  No Material Change.

  
	
   

  	
  6.3

  	
  Organization and Good
  Standing.

  
	
   

  	
  6.4

  	
  Power;
  Authorization; Enforceable Obligations.

  
	
   

  	
  6.5

  	
  No Conflicts.

  
	
   

  	
  6.6

  	
  No
  Default.

  

 

i

 

	
   

  	
  6.7

  	
  Ownership.

  
	
   

  	
  6.8

  	
  Indebtedness.

  
	
   

  	
  6.9

  	
  Litigation.

  
	
   

  	
  6.10

  	
  Taxes.

  
	
   

  	
  6.11

  	
  Compliance with Law.

  
	
   

  	
  6.12

  	
  ERISA.

  
	
   

  	
  6.13

  	
  Corporate Structure; Capital Stock,
  Etc.

  
	
   

  	
  6.14

  	
  Governmental Regulations, Etc.

  
	
   

  	
  6.15

  	
  Purpose of Loans
  and Letters of Credit.

  
	
   

  	
  6.16

  	
  Environmental Matters.

  
	
   

  	
  6.17

  	
  Intellectual Property.

  
	
   

  	
  6.18

  	
  Solvency.

  
	
   

  	
  6.19

  	
  Investments.

  
	
   

  	
  6.20

  	
  Business Locations.

  
	
   

  	
  6.21

  	
  Disclosure.

  
	
   

  	
  6.22

  	
  No Burdensome Restrictions.

  
	
   

  	
  6.23

  	
  Brokers’ Fees.

  
	
   

  	
  6.24

  	
  Labor Matters.

  
	
   

  	
  6.25

  	
  Nature of Business.

  
	
   

  	
  6.26

  	
  Representations
  and Warranties from Purchase Agreement.

  
	
  SECTION 7  AFFIRMATIVE COVENANTS

  
	
   

  	
  7.1

  	
  Information Covenants.

  
	
   

  	
  7.2

  	
  Preservation
  of Existence and Franchises.

  
	
   

  	
  7.3

  	
  Books and Records.

  
	
   

  	
  7.4

  	
  Compliance with Law.

  
	
   

  	
  7.5

  	
  Payment of
  Taxes and Other Claims.

  
	
   

  	
  7.6

  	
  Insurance.

  
	
   

  	
  7.7

  	
  Maintenance of Property.

  
	
   

  	
  7.8

  	
  Use of Proceeds.

  
	
   

  	
  7.9

  	
  Audits/Inspections.

  
	
   

  	
  7.10

  	
  Financial Covenants.

  
	
   

  	
  7.11

  	
  New Subsidiaries.

  
	
   

  	
  7.12

  	
  Pledged Assets.

  
	
   

  	
  7.13

  	
  Interest Rate Protection.

  
	
   

  	
  7.14

  	
  Upstreaming
  of Income from Consolidated Parties.

  
	
   

  	
  7.15

  	
  Further Assurances.

  	
   

  
	
  SECTION 8  NEGATIVE COVENANTS

  
	
   

  	
  8.1

  	
  Indebtedness.

  
	
   

  	
  8.2

  	
  Liens.

  
	
   

  	
  8.3

  	
  Nature of Business.

  
	
   

  	
  8.4

  	
  Consolidation,
  Merger, Dissolution, Etc.

  
	
   

  	
  8.5

  	
  Asset Dispositions.

  
	
   

  	
  8.6

  	
  Investments.

  
	
   

  	
  8.7

  	
  Restricted Payments.

  
	
   

  	
  8.8

  	
  Prepayment of Other
  Indebtedness, Etc.

  
	
   

  	
  8.9

  	
  Transactions with Insiders.

  

 

ii

 

	
   

  	
  8.10

  	
  Fiscal Year;
  Organizational Documents.

  
	
   

  	
  8.11

  	
  Limitation on
  Restricted Actions.

  
	
   

  	
  8.12

  	
  Ownership of Subsidiaries.

  
	
   

  	
  8.13

  	
  Sale Leasebacks.

  
	
   

  	
  8.14

  	
  Capital Expenditures.

  
	
   

  	
  8.15

  	
  No Further Negative
  Pledges.

  
	
   

  	
  8.16

  	
  Operating Lease
  Obligations.

  
	
  SECTION 9  EVENTS OF DEFAULT

  
	
   

  	
  9.1

  	
  Events of Default.

  
	
   

  	
  9.2

  	
  Acceleration; Remedies.

  
	
  SECTION 10  AGENCY PROVISIONS

  
	
   

  	
  10.1

  	
  Appointment and
  Authorization of Agent.

  
	
   

  	
  10.2

  	
  Delegation of Duties.

  
	
   

  	
  10.3

  	
  Liability of Agent.

  
	
   

  	
  10.4

  	
  Reliance by Agent.

  
	
   

  	
  10.5

  	
  Notice of Default.

  
	
   

  	
  10.6

  	
  Credit
  Decision; Disclosure of Information by Agent.

  
	
   

  	
  10.7

  	
  Indemnification of Agent.

  
	
   

  	
  10.8

  	
  Agent in its
  Individual Capacity.

  
	
   

  	
  10.9

  	
  Successor Agent.

  
	
  SECTION 11  MISCELLANEOUS 

  
	
   

  	
  11.1

  	
  Notices.

  
	
   

  	
  11.2

  	
  Right of Set-Off;
  Adjustments.

  
	
   

  	
  11.3

  	
  Successors and Assigns.

  
	
   

  	
  11.4

  	
  No Waiver; Remedies Cumulative.

  
	
   

  	
  11.5

  	
  Expenses; Indemnification.

  
	
   

  	
  11.6

  	
  Amendments, Waivers
  and Consents.

  
	
   

  	
  11.7

  	
  Counterparts.

  
	
   

  	
  11.8

  	
  Headings.

  
	
   

  	
  11.9

  	
  Survival.

  
	
   

  	
  11.10

  	
  Governing
  Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial.

  
	
   

  	
  11.11

  	
  Severability.

  
	
   

  	
  11.12

  	
  Entirety.

  
	
   

  	
  11.13

  	
  Binding Effect; Termination.

  
	
   

  	
  11.14

  	
  Confidentiality.

  
	
   

  	
  11.15

  	
  Source of Funds.

  
	
   

  	
  11.16

  	
  Regulation D.

  
	
   

  	
  11.17

  	
  Conflict.

  

 

iii

 

SCHEDULES

 

	
  Schedule 2.1(a)

  	
   

  	
  Lenders

  
	
  Schedule 6.1(a)

  	
   

  	
  Material Transactions

  
	
  Schedule 6.4

  	
   

  	
  Required Consents, Authorizations, Notices and
  Filings

  
	
  Schedule 6.13A

  	
   

  	
  Corporate Structure/Consolidated Parties

  
	
  Schedule 6.13B

  	
   

  	
  Subsidiaries

  
	
  Schedule 6.17

  	
   

  	
  Intellectual Property

  
	
  Schedule 6.20(a)

  	
   

  	
  Real Property Locations

  
	
  Schedule 6.20(b)

  	
   

  	
  Personal Property Collateral Locations

  
	
  Schedule 6.20(c)

  	
   

  	
  Chief Executive Offices/Principal Places of Business

  
	
  Schedule 7.6

  	
   

  	
  Insurance

  
	
  Schedule 8.1

  	
   

  	
  Indebtedness

  
	
  Schedule 8.2

  	
   

  	
  Liens

  
	
  Schedule 8.6

  	
   

  	
  Investments

  

 

EXHIBITS

 

	
  Exhibit 1.1A

  	
   

  	
  Form of Pledge Agreement

  
	
  Exhibit 1.1B

  	
   

  	
  Form of Security Agreement

  
	
  Exhibit 2.1(b)(i)

  	
   

  	
  Form of Notice of Borrowing

  
	
  Exhibit 2.1(e)

  	
   

  	
  Form of Revolving Note

  
	
  Exhibit 2.3(d)

  	
   

  	
  Form of Swingline Note

  
	
  Exhibit 2.4(f)

  	
   

  	
  Form of Term Note

  
	
  Exhibit 3.2

  	
   

  	
  Form of Notice of
  Extension/Conversion

  
	
  Exhibit 7.1(c)

  	
   

  	
  Form of Officer’s Compliance
  Certificate

  
	
  Exhibit 7.1(d)

  	
   

  	
  Form of Borrowing Base
  Certificate

  
	
  Exhibit 7.11

  	
   

  	
  Form of Joinder Agreement

  
	
  Exhibit 11.3

  	
   

  	
  Form of Assignment and
  Acceptance

  

 

iv

 

CREDIT AGREEMENT

 

THIS CREDIT
AGREEMENT, dated as of
December    , 2001 (as amended,
modified, restated or supplemented from time to time, the “Credit Agreement”),
is by and among HEALTHTRONICS SURGICAL SERVICES, INC., a Georgia corporation
(the “Borrower”), the Guarantors (as defined herein), the Lenders (as
defined herein) and BANK OF AMERICA, N.A., as Agent for the
Lenders (in such capacity, the “Agent”).

 

W I T N E S S E T H

 

WHEREAS, the Borrower has requested that the Lenders
provide credit facilities in an aggregate amount of $50,000,000 (the “Credit
Facilities”) for the purposes hereinafter set forth; and

 

WHEREAS, the Lenders have agreed to make the requested
Credit Facilities available to the Borrower on the terms and conditions
hereinafter set forth;

 

NOW, THEREFORE,
IN CONSIDERATION of the
premises and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1

 

DEFINITIONS

 

1.1          Definitions.

 

As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:

 

“Acquired Company” means
Litho Group, Inc., a Delaware corporation.

 

“Acquisition”, by any
Person, means the acquisition by such Person, in a single transaction or in a
series of related transactions, of all of the Capital Stock or all or
substantially all of the Property of another Person, whether or not involving a
merger or consolidation with such other Person and whether for cash, property,
services, assumption of Indebtedness, securities or otherwise.

 

“Adjusted Base Rate”
means the Base Rate plus the Applicable Percentage.

 

“Adjusted Eurodollar Rate”
means the Eurodollar Rate plus the Applicable Percentage.

 

“Adjusted Partnership
Syndication Income” means an amount equal to (A) 100% of the Net
Cash Proceeds from any Lithotripsy Disposition and (B) 100% of the After-Tax
Gain of any Orthotripsy Disposition.

 

 

“Affiliate” means, with
respect to any Person, any other Person (i) directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person or (ii) directly or indirectly owning or holding five percent
(5%) or more of the Capital Stock in such Person.  For purposes of this definition, “control” when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

 

“After-Tax Gain” means,
with respect of any Orthotripsy Disposition, an amount equal to (a) the
aggregate cash or Cash Equivalents proceeds received by any Consolidated Party
from such Orthotripsy Disposition minus (b) an amount equal to (x) the
aggregate amount of such Consolidated Party’s Investment in the related
Orthotripsy Affiliate multiplied  by (y) the percentage of Capital
Stock of such Orthotripsy Affiliate disposed of in such Orthotripsy Disposition
minus (c) taxes paid or payable as a result thereof.

 

“Agency Services Address”
means Bank of America, N.A., NC1-001-15-04, 101 North Tryon Street, Charlotte,
North Carolina  28255, Attn: Agency
Services, or such other address as may be identified by written notice from the
Agent to the Borrower.

 

“Agent” shall have the
meaning assigned to such term in the heading hereof, together with any
successors or assigns.

 

“Agent–Related Persons” means the Agent
(including any successor administrative agent), together with its Affiliates
(including, in the case of Bank of America in its capacity as the Agent, Banc
of AmericaSecurities LLC), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.

 

“Agent’s Fee Letter”
means that certain letter agreement, dated as of November 1, 2001,
between the Agent and the Borrower, as amended, modified, restated or
supplemented from time to time.

 

“Applicable Lending Office”
means, for each Lender, the office of such Lender (or of an Affiliate of such
Lender) as such Lender may from time to time specify to the Agent and the
Borrower by written notice as the office by which its Eurodollar Loans are made
and maintained.

 

2

 

“Applicable Percentage”
means, for purposes of calculating the applicable interest rate for any day for
any Loan, the applicable rate of the Unused Fee for any day for purposes of
Section 3.5(a) or the applicable rate of the Letter of Credit Fee for any
day for purposes of Section 3.5(b)(i), the appropriate applicable
percentage corresponding to the Leverage Ratio in effect as of the most recent
Calculation Date:

 

	
   

  	
   

  	
   

  	
   

  	
  Applicable
  Percentages

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  For
  Revolving Loans and Term

  Loans

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pricing
  Level

  	
   

  	
  Leverage
  Ratio

  	
   

  	
  Eurodollar
  Loans

  	
   

  	
  Base Rate
  Loans

  	
   

  	
  For Letter

  of Credit Fee

  	
   

  	
  For Unused
  Fee

  	
   

  
	
  I

  	
   

  	
  > 3.00 to 1.0

  	
   

  	
  3.25

  	
  %

  	
  2.00

  	
  %

  	
  3.25

  	
  %

  	
  0.50

  	
  %

  
	
  II

  	
   

  	
  < 3.00 to 1.0
  but > 2.50 to 1.0

  	
   

  	
  3.00

  	
  %

  	
  1.75

  	
  %

  	
  3.00

  	
  %

  	
  0.50

  	
  %

  
	
  III

  	
   

  	
  < 2.50 to 1.0
  but > 2.25 to 1.0

  	
   

  	
  2.75

  	
  %

  	
  1.50

  	
  %

  	
  2.75

  	
  %

  	
  0.50

  	
  %

  
	
  IV

  	
   

  	
  < 2.25 to 1.0
  but > 2.00 to 1.0

  	
   

  	
  2.50

  	
  %

  	
  1.25

  	
  %

  	
  2.50

  	
  %

  	
  0.50

  	
  %

  
	
  V

  	
   

  	
  < 2.00 to 1.0
  but > 1.75 to 1.0

  	
   

  	
  2.25

  	
  %

  	
  1.00

  	
  %

  	
  2.25

  	
  %

  	
  0.375

  	
  %

  
	
  VI

  	
   

  	
  < 1.75 to 1.0
  but > 1.50 to 1.0

  	
   

  	
  2.00

  	
  %

  	
  0.75

  	
  %

  	
  2.00

  	
  %

  	
  0.375

  	
  %

  
	
  VII

  	
   

  	
  < 1.50 to 1.0

  	
   

  	
  1.75

  	
  %

  	
  0.50

  	
  %

  	
  1.75

  	
  %

  	
  0.375

  	
  %

  

 

The Applicable Percentages shall be determined and adjusted quarterly
on the date (each a “Calculation Date”) five (5) Business Days after the
date by which the Credit Parties are required to provide the officer’s
certificate in accordance with the provisions of Section 7.1(c) for the
most recently ended fiscal quarter of the Consolidated Parties; provided,
however, that (i) the initial Applicable Percentages shall be based on
Pricing Level III (as shown above) and shall remain at Pricing Level III until
the later of March 31, 2002 and the Calculation Date for the fiscal quarter of
the Consolidated Parties ending on December 31, 2001, on and after which
time the Pricing Level shall be determined
by the Leverage Ratio as of the last day of the most recently ended fiscal
quarter of the Consolidated Parties preceding the applicable Calculation Date
and (ii) if the Credit Parties fail to provide the officer’s certificate
to the Agency Services Address as required by Section 7.1(c) for the last
day of the most recently ended fiscal quarter of the Consolidated Parties
preceding the applicable Calculation Date, the Applicable Percentage from such
Calculation Date shall be based on Pricing Level I until such time as an
appropriate officer’s certificate is provided, whereupon the Pricing Level
shall be determined by the Leverage Ratio as of the last day of the most
recently ended fiscal quarter of the Consolidated Parties 

 

3

 

preceding such Calculation
Date.  Each Applicable Percentage shall
be effective from one Calculation Date until the next Calculation Date.  Any adjustment in the Applicable Percentages
shall be applicable to all existing Loans and Letters of Credit as well as any
new Loans and Letters of Credit made or issued.

 

“Application Period” means, in respect of any Asset Disposition
(other than an Excluded Asset Disposition or the sale of Capital Stock of
Operating Affiliates in connection with the syndication thereof), the period of
180 days following the consummation of such Asset Disposition.

 

“Asset Disposition” means any disposition (including pursuant to
a Sale and Leaseback Transaction) of any or all of the Property (including
without limitation the disposition by any Consolidated Party of Capital Stock
of an Operating Affiliate) of any Consolidated Party whether by sale, lease,
licensing, transfer or otherwise, but other than pursuant to any casualty or
condemnation event; provided, however, that the term “Asset
Disposition” shall be deemed to exclude any Equity Issuance.

 

“Asset
Disposition Prepayment Event” means, with respect to any Asset Disposition other than an Excluded Asset Disposition (i)
the date five (5) Business Days following any Lithotripsy Disposition or
Orthotripsy Disposition and (ii) the failure of the Credit Parties to apply (or cause to be applied) the Net Cash
Proceeds of such Asset Disposition (other than an Asset Disposition described
in clause (i) above) to Eligible Reinvestments during the Application Period
for such Asset Disposition.

 

“Assignment and
Acceptance” means an Assignment and Acceptance substantially in the form of
Exhibit 11.3.

 

“Bank of America” means Bank of America, N.A. and its
successors.

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time to
time.

 

“Bankruptcy Event” means, with respect to any Person, the
occurrence of any of the following: (i) the entry of a decree or order for
relief by a court or governmental agency in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the appointment by a court or governmental agency of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
such Person or for any substantial part of its Property or the ordering of the
winding up or liquidation of its affairs by a court or governmental agency; or
(ii) the commencement against such Person of an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or of any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and such involuntary case or other
case, proceeding or other action shall remain undismissed for a period of sixty
(60) consecutive days, or the repossession or seizure by a creditor of such
Person of a substantial part of its Property; or (iii) such Person shall
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consent to the entry of an order for
relief in an involuntary 

 

4

 

case under any such law, or consent to the appointment of or the taking
possession by a receiver, liquidator, assignee, secured creditor, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the benefit
of creditors; or (iv) such Person shall be unable to, or shall admit in
writing its inability to, pay its debts generally as they become due.

 

“Base Rate” means, for any day, a fluctuating rate per
annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b)
the Prime Rate.

 

“Base Rate Loan” means any Loan bearing interest at a rate
determined by reference to the Base Rate.

 

“Borrower” means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.

 

“Borrowing Base”
means, as of any day, the sum of (a) 60% of Eligible Receivables plus
(b) 25% of Eligible Equipment plus (c) 75% of Eligible Inventory,
in each case as set forth in the most recent Borrowing Base Certificate
delivered to the Agent and the Lenders in accordance with the terms of
Section 7.1(d).

 

“Borrowing Base
Certificate” shall have the meaning
assigned to such term in Section 7.1(d).

 

“Business Day” means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina or New York,
New York are authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on which
dealings between banks are carried on in Dollar deposits in London, England.

 

“Businesses” means, at any time, a collective reference to the
businesses operated by the Consolidated Parties at such time.

 

“Calculation Date” shall have the meaning assigned to such term
in the definition of “Applicable Percentage” set forth in this
Section 1.1.

 

“Capital Lease” means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is required to be accounted for as a capital lease on
the balance sheet of that Person.

 

“Capital Stock”
means (i) in the case of a corporation, capital stock, (ii) in the
case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (iii) in the case of a partnership, partnership interests (whether
general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.

 

5

 

“Cash Equivalents” means, as at any date, (a) securities issued or directly and fully
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than twelve months
from the date of acquisition, (b) Dollar denominated time deposits and
certificates of deposit of (i) any Lender, (ii) any domestic
commercial bank of recognized standing having capital and surplus in excess of $500,000,000
or (iii) any bank whose short-term commercial paper rating from S&P is
at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the
equivalent thereof (any such bank being an “Approved Bank”), in each case with
maturities of not more than 270 days from the date of acquisition,
(c) commercial paper and variable or fixed rate notes issued by any
Approved Bank (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
Moody’s and maturing within six months of the date of acquisition,
(d) repurchase agreements entered into by any Person with a bank or trust
company (including any of the Lenders) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations issued by
or fully guaranteed by the United States in which such Person shall have a
perfected first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at least 100%
of the amount of the repurchase obligations and (e) Investments,
classified in accordance with GAAP as current assets, in money market
investment programs registered under the Investment Company Act of 1940, as
amended, which are administered by reputable financial institutions having
capital of at least $500,000,000 and the portfolios of which are limited to
Investments of the character described in the foregoing subdivisions (a)
through (d).

 

“Change of Control” means the occurrence of any of the following events:  (a) the sale, lease, transfer or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Borrower and its Subsidiaries taken as a whole to any “person” or “group”
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act); (b) the Borrower is liquidated or dissolved or
adopts a plan of liquidation or dissolution;
(c) any Person or two or more Persons acting in concert (other than
officers of the Borrower as of the Closing Date) shall have acquired beneficial
ownership, directly or indirectly, of, or shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over, 20% or
more of the Capital Stock of the Borrower; (d) Argil Wheelock shall cease to
own beneficially at least (i) 10% of the Capital Stock of the Borrower for any
date from the Closing Date to and including the first anniversary of the
Closing Date, (ii) 7.5% of the Capital Stock of the Borrower for any date
following the first anniversary of the Closing Date to and including the second
anniversary of the Closing Date and (iii) 5% of the Capital Stock of the
Borrower for any date following the second anniversary of the Closing Date to
and including the Maturity Date; (e) Argil Wheelock shall cease to be chief executive
officer of the Borrower or chairman of the Borrower’s Board of Directors; or, during any period of up to 24 consecutive months,
commencing after the Closing Date, individuals who at the beginning of such 24
month period were directors of the Borrower (together with any new director
whose election by the Borrower’s
Board of Directors or whose nomination for election by the Borrower’s shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or 

 

6

 

whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the directors of the Borrower then in office.  As used herein, “beneficial
ownership” shall have the meaning provided in Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act.

 

“Closing Date” means the date hereof.

 

“Code” means the Internal Revenue Code of 1986, as amended, and
any successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time.  References to sections of the Code shall be
construed also to refer to any successor sections.

 

“Collateral”
means a collective reference to all real and personal Property (other than
Excluded Property) with respect to which Liens
in favor of the Agent are purported to be granted pursuant to and in
accordance with the terms of the Collateral Documents.

 

“Collateral Documents” means a collective reference to the
Security Agreement, the Pledge Agreement, the mortgage instruments and such
other documents executed and delivered in connection with the attachment and
perfection of the Agent’s security interests and liens arising thereunder,
including without limitation, UCC financing statements and patent and trademark
filings.

 

“Commitment” means (i) with respect to each Lender, the
Revolving Commitment of such Lender and the Term Loan Commitment of such Lender,
(ii) with respect to the Issuing Lender, the LOC Commitment and (iii) with
respect to the Swingline Lender, the Swingline Commitment.

 

“Consolidated
Capital Expenditures” means, as of any
date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, all
capital expenditures, as determined in accordance with GAAP; provided, however, that  Consolidated
Capital Expenditures shall not include
(i) Eligible Reinvestments made with proceeds of any Involuntary
Disposition or (ii) Acquisitions.

 

“Consolidated Cash Taxes” means,  as
of any date for the four fiscal quarter period ending on such date with
respect to the Consolidated Parties on a consolidated basis, the
aggregate of all taxes, as
determined in accordance with GAAP, to the
extent the same are paid in cash during such period.

 

“Consolidated EBITDA” means,  as
of any date for the four fiscal quarter period ending on such date with
respect to the Consolidated Parties on a consolidated basis, the sum
of (i) Consolidated Net Income, plus (ii) an amount (other than the
percentage of such amount that is attributable to minority interests) which, in
the determination of Consolidated Net Income, has been deducted for (A) interest expense, (B) income taxes
and (C) depreciation and amortization expense, all as determined in
accordance with GAAP.

 

“Consolidated
Interest Expense” means, as of any date
for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis,

 

7

 

interest expense
(including the amortization of debt discount and premium, the interest
component under Capital Leases and the implied interest component under
Synthetic Leases), as determined in accordance with GAAP.

 

“Consolidated
Net Income” means, as of any date for
the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, net
income, as determined in accordance
with GAAP (including the deduction of the minority interest share thereof); provided,
however, Consolidated Net Income shall not include (a) extraordinary
gains or losses or (b) any gain on sale of investment interests.

 

“Consolidated Net Worth” means, as of any date with respect to the Consolidated Parties on a consolidated basis, shareholders’
equity or net worth, as determined in accordance with GAAP.

 

“Consolidated Parties” means a collective reference to the
Borrower, the Subsidiaries of the Borrower, each of the Persons identified on Schedule
6.13A,  any Person that the Borrower
consolidates or is required by GAAP to consolidate and any other Person engaged
in the business of providing non-invasive urologic and orthopaedic services in
which the Borrower directly or indirectly owns Capital Stock, and “Consolidated
Party” means any one of them.

 

“Consolidated Scheduled Funded Debt Payments” means, as of any
date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the sum of all
scheduled payments of principal on Funded Indebtedness, as determined in
accordance with GAAP.  For purposes of
this definition, “scheduled payments of principal” (i) shall be determined without giving effect to any reduction
of such scheduled payments resulting
from the application of any voluntary or mandatory prepayments made during the applicable period,
(ii) shall be deemed to include
the implied principal component of payments due on Capital Leases and Synthetic
Leases and (iii) shall not include any voluntary prepayments or mandatory
prepayments required pursuant to Section 3.3.

 

“Continue”, “Continuation” and “Continued” shall
refer to the continuation pursuant to Section 3.2 hereof of a Eurodollar
Loan from one Interest Period to the next Interest Period.

 

“Convert”, “Conversion” and “Converted” shall
refer to a conversion pursuant to Section 3.2 or Sections 3.7 through
3.12, inclusive, of a Base Rate Loan into a Eurodollar Loan.

 

“Credit
Documents” means a collective reference to this Credit Agreement, the
Notes, the LOC Documents, each Joinder Agreement, the Agent’s Fee Letter, the
Collateral Documents and all other related agreements and documents issued or
delivered hereunder or thereunder or pursuant hereto or thereto (in each case as the same may be amended, modified, restated,
supplemented, extended, renewed or replaced from time to time), and “Credit Document” means any one of them.

 

8

 

“Credit
Facilities” shall have the meaning
assigned to such term in the recitals hereto.

 

“Credit Parties” means a collective reference  to the
Borrower and the Guarantors, and “Credit Party” means any one of them.

 

“Credit Party Obligations” means, without duplication,
(i) all of the obligations of the Credit Parties to the Lenders (including
the Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes, the Collateral Documents or any of the other Credit
Documents (including, but not limited to, any interest accruing after the
occurrence of a Bankruptcy Event with respect to any Credit Party, regardless
of whether such interest is an allowed claim under the Bankruptcy Code) and
(ii) all liabilities and obligations, whenever arising, owing from the
Borrower to any Lender, or any Affiliate of a Lender, arising under any Hedging
Agreement.

 

“Debt Issuance” means the issuance by any Consolidated Party of
any Indebtedness of the type referred to in clause (a) or (b) of the definition
thereof set forth in this Section 1.1.

 

“Debt Issuance Prepayment Event” means the receipt by any
Consolidated Party of proceeds from any Debt Issuance other than an Excluded
Debt Issuance.

 

“Default” means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.

 

“Defaulting Lender” means, at any time, any Lender that, as
determined by the Agent, (a) has failed to make a Loan or purchase a
Participation Interest required pursuant to the terms of this Credit Agreement
within one Business Day of when due, (b) other than as set forth in (a)
above, has failed to pay to the Agent or any Lender an amount owed by such
Lender pursuant to the terms of this Credit Agreement within one Business Day
of when due, unless such amount is subject to a good faith dispute or
(c) has been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or with respect to which (or with respect to any of the
assets of which) a receiver, trustee or similar official has been appointed.

 

“Dollars” and “$” means dollars in lawful currency of the
United States.

 

“Domestic Subsidiary” means any direct or indirect Subsidiary of
the Borrower which is incorporated or organized under the laws of any State of
the United States or the District of Columbia.

 

“Eligible
Assignee” means (i) a Lender, (ii) an Affiliate of a Lender and
(iii) any other Person (other than a natural Person) approved by the Agent
and the Issuing Lender and, unless (a) such Person is taking delivery of
an assignment in connection with physical settlement of a credit derivatives
transaction or (b) an Event of Default has occurred and is continuing, the
Borrower (each such approval not to be unreasonably withheld or delayed); provided, however, that neither the Borrower nor an Affiliate of
the Borrower shall qualify as an Eligible Assignee.

 

9

 

“Eligible
Equipment” means, as of any date of determination and without duplication,
the aggregate net book value of all equipment (“Equipment”) owned by the
Consolidated Parties but excluding in any event (i) Equipment which is subject
to any other Lien that is not a Permitted Lien, (ii) Equipment which is not in
good condition or fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having regulatory authority
over such Equipment, (iii) Equipment which is not useable or salable at prices
approximating its  depreciated value in the ordinary course of the business,
(iv) Equipment located outside of the United States, (v) Equipment located at a
location not owned by the Borrower or any of its Subsidiaries with respect to
which the Agent shall not have received a landlord’s, warehousemen’s, bailee’s or appropriate waiver satisfactory to
the Agent and (vi) Equipment which is leased or on consignment.

 

“Eligible
Inventory” means, as of any date of determination and without duplication,
the lower of the aggregate book value (based on a FIFO or a moving average cost
valuation, consistently applied) or fair market value of all raw materials and
finished goods inventory owned by the Credit Parties less appropriate reserves
determined in accordance with GAAP but excluding in any event
(i) inventory which is (a) not subject to a perfected, first priority
Lien in favor of the Agent to secure the Credit Party Obligations or
(b) subject to any other Lien that is not a Permitted Lien,
(ii) inventory which is not in good condition or fails to meet standards
for sale or use imposed by governmental agencies, departments or divisions
having regulatory authority over such goods, (iii) inventory which is not
useable or salable at prices approximating their cost in the ordinary course of
the business, (iv) inventory located outside of the United States,
(v) inventory located at a location not owned by the Borrower or any of
its Subsidiaries with respect to which the Agent shall not have received a
landlord’s, warehousemen’s, bailee’s
or appropriate waiver satisfactory to the Agent, (vi) inventory which is
leased or on consignment, (vii) inventory not at a location of the
Borrower or a Subsidiary of the Borrower which has been disclosed to the Agent
pursuant to this Credit Agreement and (viii) inventory which fails to meet
such other specifications and requirements as may from time to time be
established by the Agent in its reasonable discretion.

 

“Eligible
Receivables” means, as of any date of determination and without
duplication, the aggregate book value of all accounts receivable, receivables,
and obligations for payment created or arising from the sale of inventory or
the rendering of services in the ordinary course of business (collectively, the
“Receivables”), owned by or owing to the Consolidated Parties, net of
allowances and reserves for doubtful or uncollectible accounts and sales
adjustments consistent with such Person’s internal policies and in any event in
accordance with GAAP, but excluding in any event (i) any Receivable which
is subject to any other Lien that is not a Permitted Lien,
(ii) Receivables which are more than 90 days past due or 120 days past
invoice date,  (iii) Receivables
evidenced by notes, chattel paper or other instruments, unless such notes,
chattel paper or instruments have been delivered to and are in the possession
of the Agent, (iv) Receivables owing by an account debtor which is not
solvent or is subject to any bankruptcy or insolvency proceeding of any kind,
(v) Receivables owing by an account debtor located outside of the United
States (unless payment for the goods shipped is secured by an irrevocable
letter of credit in a form and from an institution acceptable to the Agent),
(vi) Receivables which are contingent or subject to offset, 

 

10

 

deduction,
counterclaim, dispute or other defense to payment, in each case to the extent
of such offset, deduction, counterclaim, dispute or other defense,
(vii) Receivables representing a sale to the government of the United States or any agency or instrumentality
thereof unless the Federal Assignment of Claims Act has been complied
with to the satisfaction of the Agent with respect to the granting of a
security interest in such Receivable, with or other similar applicable law and
(viii) Receivables which fail to meet such other specifications and
requirements as may from time to time be established by the Agent in its
reasonable discretion.

 

“Eligible Reinvestment” means (i) any acquisition
(whether or not constituting a capital expenditure, but not constituting an
Acquisition) of assets or any business (or any substantial part thereof) used
or useful in the same or a similar line of business as the Borrower and its
Subsidiaries were engaged in on the Closing Date (or any reasonable extensions
or expansions thereof) and (ii) any Permitted Acquisition.

 

“Environmental Laws” means any and all lawful and applicable
Federal, state, local and foreign statutes, laws (including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the
Toxic Substances Control Act, the Water Pollution Control Act, the Clean Air
Act and the Hazardous Materials Transportation Act), regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.

 

“Equity Issuance” means any issuance by any Consolidated Party
to any Person of (a) shares of its Capital Stock, (b) any shares of
its Capital Stock pursuant to the exercise of options or warrants, (c) any
shares of its Capital Stock pursuant to the conversion of any debt securities
to equity or (d) any options or warrants relating to its Capital
Stock.  The term “Equity Issuance” shall
not be deemed to include any Asset Disposition.

 

“Equity Issuance  Prepayment Event” means the receipt by
any Consolidated Party of proceeds from any Equity Issuance other than an
Excluded Equity Issuance.

 

“ERISA” means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by the
rules and regulations thereunder, all as the same may be in effect from time to
time.  References to sections of ERISA
shall be construed also to refer to any successor sections.

 

“ERISA Affiliate” means an entity which is under common control
with any Consolidated Party within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes any Consolidated Party and
which is treated as a single employer under Sections 414(b) or (c) of the
Code.

 

11

 

“ERISA Event” means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of operations
(within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal
by any Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such term is
defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple
Employer Plan; (iii) the distribution of a notice of intent to terminate
or the actual termination of a Plan pursuant to Section 4041(a)(2) or
4041A of ERISA; (iv) the institution of proceedings to terminate or the
actual termination of a Plan by the PBGC under Section 4042 of ERISA;
(v) any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (vi) the complete or partial withdrawal
of any Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (vii) the
conditions for imposition of a lien under Section 302(f) of ERISA exist
with respect to any Plan; or (viii) the adoption of an amendment to any
Plan requiring the provision of security to such Plan pursuant to
Section 307 of ERISA.

 

“Eurodollar Loan” means any Loan that bears interest at a rate
based upon the Eurodollar Rate.

 

“Eurodollar Rate” means for any Interest Period with respect to
any Eurodollar Loan, a rate per annum determined by the Agent to be equal to
the quotient obtained by dividing (a) the Interbank Offered Rate by
(b) 1 minus the Eurodollar Reserve Percentage.

 

“Eurodollar Reserve Percentage” means, for any day during any
Interest Period, the reserve percentage (expressed as a decimal, rounded upward
to the next 1/100th of 1%) in effect on such day, whether or not applicable to
any Lender, under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as
“Eurocurrency liabilities”).  The
Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted
automatically as of the effective date of any change in the Eurodollar Reserve
Percentage.

 

“Event of Default” shall have the meaning assigned to such term
in Section 9.1.

 

“Excess Cash Flow” means, with respect to any fiscal year period
of the Consolidated Parties on a consolidated basis, an amount equal to
(a) Net Cash Flow minus (b) Adjusted Partnership Syndication
Income, for such period.

 

“Excess Proceeds” shall have the meaning assigned to such term
in Section 7.6(b).

 

“Excluded Asset Disposition” means, with respect to any
Consolidated Party, any Asset Disposition consisting of (i) the sale,
lease, license, transfer or other disposition of inventory in the ordinary
course of such Consolidated Party’s business, (ii) the sale, lease,
license, transfer or other disposition of machinery and equipment no longer
used or useful in the conduct of such Consolidated Party’s business,
(iii) any sale, lease, license, transfer or other disposition of Property
by such Consolidated Party to any Credit Party; provided that the Credit
Parties shall cause to be executed and delivered such documents, instruments
and certificates as the Agent may request so as to cause the Credit Parties to
be in 

 

12

 

compliance with the terms of Section 7.12 after giving effect to
such transaction, (v) any Involuntary Disposition by such Consolidated
Party, (vi) any Asset Disposition by such Consolidated Party constituting
a Permitted Investment and (vii) if such Consolidated Party is not a
Credit Party, any sale, lease, license, transfer or other disposition of
Property by such Consolidated Party to any Consolidated Party that is not a
Credit Party.

 

“Excluded Debt Issuance” means any Debt Issuance permitted by
Section 8.1.

 

“Excluded Equity Issuance” means any Equity Issuance by any
Consolidated Party to any Credit Party.

 

“Excluded
Property” means, with respect to any Consolidated Party, including any
Person that becomes a Consolidated Party after the Closing Date as contemplated
by Section 7.11, (i) any leased real or personal Property of such
Consolidated Party which is located outside of the United States, (ii) any
owned real or personal Property of such Consolidated Party which is located
outside of the United States and which has a net book value of less than
$250,000, provided that the aggregate net book value of all real
Property of all of the Consolidated Parties excluded pursuant to this
clause (ii) shall not exceed $500,000, (iii) any owned real Property
of such Consolidated Party which has a net book value of less than $250,000, provided
that the aggregate net book value of all real Property of all of the
Consolidated Parties excluded pursuant to this clause (iii) shall not
exceed $500,000,  (iv) any leased real Property of such Credit Party
which, at the written request of the Borrower, the Agent has agreed in writing
in its sole discretion is not material, (v) any leased personal Property
of such Consolidated Party, and (vi) any Property of such Consolidated
Party which, subject to the terms of Section 8.11 and Section 8.15,
is subject to a Lien of the type described in Section 8.2(g) pursuant to
documents which prohibit such Consolidated Party from granting any other Liens
in such Property.

 

“Executive Officer” of any Person means any of the chief
executive officer, chief operating officer, president, vice president, chief
financial officer or treasurer of such Person.

 

“Federal Funds Rate” means, for any day, the rate per
annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
charged to Bank of America on such day on such transactions as determined by
the Agent.

 

“Fees” means all fees payable pursuant to Section 3.5.

 

“FIRREA”
means the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
as amended, and any successor statute thereto, as interpreted by the rules 

 

13

 

and regulations
thereunder, as amended, including, without limitation, 12 CFR part 34.41 to
34.47.

 

“Fixed Charge Coverage Ratio” means, as of the end of any fiscal
quarter of the Consolidated Parties for the four fiscal quarter period ending
on such date with respect to the Consolidated Parties on a consolidated basis, the ratio of
(a) the sum of (i) Consolidated EBITDA for such period minus
(ii) Consolidated Capital Expenditures for such period minus
(iii) Consolidated Cash Taxes for such period plus (iv) Partnership
Syndication Income  to (b) the sum of
(i) Consolidated Interest Expense (to the extent paid in cash) for such
period plus (ii) Consolidated Scheduled Funded Debt Payments for
such period plus (iii) Restricted Payments for such period.

 

“Foreign Subsidiary” means any direct or indirect Subsidiary of
the Borrower which is not a Domestic Subsidiary.

 

“Fully Satisfied”
means, with respect to the Credit Party Obligations
as of any date, that, as of such date, (a) all principal of and interest
accrued to such date which constitute Credit
Party Obligations shall have been irrevocably paid in full in cash,
(b) all fees, expenses and other amounts then due and payable which
constitute Credit Party Obligations
shall have been irrevocably paid in cash, (c) all outstanding Letters of
Credit shall have been (i) terminated, (ii) fully irrevocably cash
collateralized or (iii) secured by one or more letters of credit on terms
and conditions, and with one or more financial institutions, reasonably
satisfactory to the Issuing Lender and (d) the Commitments shall have been
expired or terminated in full.

 

“Funded Indebtedness” means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, or upon which interest payments are customarily made,
(c) all obligations of such Person under conditional sale or other title
retention agreements relating to Property purchased by such Person (other than
customary reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations of
such Person issued or assumed as the deferred purchase price of Property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such Person,
(e) the implied principal component of all obligations of such Person
under Capital Leases, (f) the maximum amount of all performance and
standby letters of credit issued or bankers’ acceptances facilities created for
the account of such Person and, without duplication, all drafts drawn
thereunder (to the extent unreimbursed), (g) the principal portion of all
obligations of such Person under Synthetic Leases, (h) the aggregate
amount of uncollected accounts receivable of such Person subject at such time
to a sale of receivables (or similar transaction) to the extent such
transaction is effected with recourse to such Person (whether or not such
transaction would be reflected on the balance sheet of such Person in
accordance with GAAP), (i) all Funded Indebtedness of others secured by
(or for which the holder of such Funded Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (j) all Guaranty
Obligations of such Person with respect to Funded Indebtedness of another Person

 

14

 

and (k) the Funded Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or a
joint venturer to the extent such Indebtedness is recourse to such Person.

 

“GAAP” means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3 (except, in respect of Synthetic Leases, as otherwise treated
herein).

 

“Governmental Authority” means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.

 

“Guarantors” means each of the Persons identified as a
“Guarantor” on the signature pages hereto and each Person which may hereafter
execute a Joinder Agreement pursuant to Section 7.11, together with their
successors and permitted assigns, and “Guarantor” means any one of them.

 

“Guaranty Obligations” means, with respect to any Person,
without duplication, any obligations of such Person (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any other
Person in any manner, whether direct or indirect, and including without limitation
any obligation, whether or not contingent, (i) to purchase any such
Indebtedness or any Property constituting security therefor, (ii) to
advance or provide funds or other support for the payment or purchase of any
such Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep well
agreements, maintenance agreements, comfort letters or similar agreements or
arrangements) for the benefit of any holder of Indebtedness of such other
Person, (iii) to lease or purchase Property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness, or
(iv) to otherwise assure or hold harmless the holder of such Indebtedness
against loss in respect thereof.  The
amount of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding principal
amount (or maximum principal amount, if larger) of the Indebtedness in respect
of which such Guaranty Obligation is made.

 

“Hedging Agreements” means any interest rate protection
agreement or foreign currency exchange agreement.

 

“Indebtedness” means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, or upon which interest payments are customarily made,
(c) all obligations of such Person under conditional sale or other title
retention agreements relating to Property purchased by such Person (other than
customary reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations of
such Person issued or assumed as the deferred purchase price of Property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such Person,
(e) all obligations of such Person under take-or-pay or similar
arrangements or under commodities agreements, (f) the implied principal
component of all obligations of such Person under 

 

15

 

Capital Leases, (g) all obligations of such Person under Hedging
Agreements, (h) the maximum amount of all performance and standby letters
of credit issued or bankers’ acceptances facilities created for the account of
such Person and, without duplication, all drafts drawn thereunder (to the
extent unreimbursed), (i) the principal portion of all obligations of such
Person under Synthetic Leases, (j) the aggregate amount of uncollected
accounts receivable of such Person subject at such time to a sale of
receivables (or similar transaction) to the extent such transaction is effected
with recourse to such Person (whether or not such transaction would be
reflected on the balance sheet of such Person in accordance with GAAP),
(k) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on, or payable out of the proceeds of production from, Property owned
or acquired by such Person, whether or not the obligations secured thereby have
been assumed, (l) all Guaranty Obligations of such Person with respect to
Indebtedness of another Person and (m) the Indebtedness of any partnership
or unincorporated joint venture in which such Person is a general partner or a
joint venturer to the extent such Indebtedness is recourse to such Person.

 

“Indemnified Party” shall have the meaning assigned to such term
in Section 11.5(b).

 

“Interbank Offered Rate” means for any Interest Period
with respect to any Eurodollar
Loan:  (a) the rate per annum equal to
the rate determined by the Agent to be the offered rate that appears on the
page of the Telerate screen (or any successor thereto) that displays an average
British Bankers Association LIBOR Rate for deposits in Dollars (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 A.M. (London time) two Business
Days prior to the first day of such Interest Period, or (b) if the rate
referenced in the preceding clause (a) does not appear on such page or service
or such page or service shall cease to be
available, the rate per annum equal to the rate determined by the Agent to be
the offered rate on such other page or other service that displays an average
British Bankers Association Interest Settlement Rate for deposits in Dollars
(for delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period, determined as of approximately 11:00 A.M. (London
time) two Business Days prior to the first day of such Interest Period, or (c)
if the rates referenced in the preceding clauses (a) and (b) are not
available, the rate per annum determined by the Agent as the rate of interest
(rounded upward to the next 1/100th of 1%) at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Eurodollar Loan being made, continued or converted by
Bank of America and with a term equivalent to such Interest Period would be
offered by Bank of America’s London Branch to major banks in the offshore
Dollar market at their request at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period.

 

“Interest Coverage Ratio” means,  as of the end of any fiscal quarter of the Consolidated Parties for the
four fiscal quarter period ending on such date with respect to the
Consolidated Parties on a consolidated
basis, the ratio of (a) Consolidated EBITDA for such period to
(b) Consolidated Interest Expense for such period.

 

16

 

“Interest Payment Date” means (a) as to Base Rate Loans,
the first Business Day following the last Business Day of each March, June,
September and December, the date of repayment of principal of such Loan and the
Maturity Date, and (b) as to Eurodollar Loans, the last day of each
applicable Interest Period, the date of repayment of principal of such Loan and
the Maturity Date, and in addition where the applicable Interest Period for a
Eurodollar Loan is greater than three months, then also the date three months
from the beginning of the Interest Period and each three months thereafter.

 

“Interest Period” means, as to Eurodollar Loans, a period of
one, two, three or six months’ duration, as the Borrower may elect, commencing,
in each case, on the date of the borrowing (including continuations and
conversions thereof); provided, however, (a) if any Interest
Period would end on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day (except that where the
next succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding Business Day), (b) no Interest Period shall extend
beyond the Maturity Date and (c) where an Interest Period begins on a day
for which there is no numerically corresponding day in the calendar month in
which the Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.

 

“Investment” in any Person means (a) any Acquisition of
such Person, (b) any other acquisition of Capital Stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests or other
securities of such other Person, (c) any deposit with, or advance, loan or
other extension of credit to, such Person (other than deposits made in
connection with the purchase of equipment inventory and supplies in the
ordinary course of business) or (d) any other capital contribution to or
investment in such Person, including, without limitation, any Guaranty
Obligations (including any support for a letter of credit issued on behalf of
such Person) incurred for the benefit of such Person and any Asset Disposition
to such Person for consideration less than the fair market value of the
Property disposed in such transaction, but excluding any Restricted Payment to
such Person.  Investments which
are capital contributions or purchases of Capital Stock which have a right to
participate in the profits of the issuer thereof shall be valued at the amount
(or, in the case of any Investment made with Property other than cash, the book
value of such Property) actually contributed or paid (including cash and non-cash consideration and any
assumption of Indebtedness) to purchase such Capital Stock as of the date of
such contribution or payment. 
Investments which are loans, advances, extensions of credit or Guaranty
Obligations shall be valued at the principal amount of such loan, advance or
extension of credit outstanding as of the date of determination or, as applicable,
the principal amount of the loan or advance outstanding as of the date of
determination actually guaranteed by such Guaranty Obligation.

 

“Involuntary Disposition” means any loss of, damage to or
destruction of, or any condemnation or other taking for public use of, any Property of any Consolidated Party.

 

“Involuntary
Disposition Prepayment Event” means, with respect to any Involuntary
Disposition, the failure of the Credit
Parties to apply (or cause to be
applied) an amount equal to the Excess Proceeds of such Involuntary
Disposition, if any, either (i) to
prepay the Loans (and cash collateralize the LOC Obligations) in accordance
with the terms of Section 3.3(b)(iii)(C) or (ii) to make Eligible
Reinvestments (including but not limited 

 

17

 

to the repair or
replacement of the Property affected by such Involuntary Disposition) within the period of 180 days following the date
of receipt of such Excess Proceeds, subject to the terms and conditions of Section 7.6(b).

 

“Issuing Lender” means Bank of America.

 

“Joinder Agreement” means a Joinder Agreement substantially in
the form of Exhibit 7.11 hereto, executed and delivered by a new
Guarantor in accordance with the provisions of Section 7.11.

 

“Key–Man Life
Insurance Policy” has the meaning set forth in Section 7.6(c).

 

“Lender” means any of the Persons identified as a “Lender” on
the signature pages hereto, and any Person which may become a Lender by way of
assignment in accordance with the terms hereof, together with their successors
and permitted assigns.

 

“Letter of Credit” means any letter of credit issued by the
Issuing Lender for the account of the Borrower in accordance with the terms of
Section 2.2.

 

“Letter of Credit
Fee” shall have the meaning assigned
to such term in Section 3.5(b)(i).

 

“Leverage Ratio” means, as of the end of any fiscal quarter of
the Consolidated Parties for the four fiscal quarter period ending on such date
with respect to the Consolidated Parties on
a consolidated basis, the ratio of (a) Funded Indebtedness of the
Consolidated Parties on a consolidated basis on the last day of such period to
(b) Consolidated EBITDA for such period.

 

“Lien” means any
mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest,
encumbrance, lien (statutory or otherwise), preference, priority or charge of
any kind (including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any financing or similar statement or
notice filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and any
lease in the nature thereof).

 

“Lithotripsy Affiliate” means any Affiliate of the Borrower that
(i) engages or is about to engage in the business of providing lithotripsy services or (ii) directly or indirectly owns the
Capital Stock of any Person described in clause (i) above.

 

“Lithotripsy Disposition” means any Asset Disposition of Capital Stock of any Lithotripsy Affiliate.

 

“Loan” or “Loans” means the Revolving Loans, the
Swingline Loans, the Term Loans (or a portion of any Revolving Loan or Term
Loan bearing interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate
and referred to as a Base Rate Loan or a Eurodollar Loan) and/or the Swingline
Loans (or any Swingline Loan bearing interest at the Adjusted Base Rate and
referred to as a Base Rate Loan), individually or collectively, as appropriate.

 

18

 

“LOC Commitment” means the commitment of the Issuing Lender to issue Letters of Credit
in an aggregate face amount at any time outstanding (together with the amounts
of any unreimbursed drawings thereon) of up to the LOC Committed Amount.

 

“LOC Committed Amount” shall have the meaning assigned to such term in
Section 2.2.

 

“LOC Documents” means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for
(i) the rights and obligations of the parties concerned or at risk or
(ii) any collateral security for such obligations.

 

“LOC Obligations” means, at any time, without duplication, the
sum of (i) the maximum amount which is, or at any time thereafter may
become, available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in such
Letters of Credit plus (ii) the aggregate amount of all drawings under
Letters of Credit honored by the Issuing Lender but not theretofore reimbursed
by the Borrower.

 

“Material Adverse Effect” means a material adverse effect on (i) the condition
(financial or otherwise), operations, business, assets, liabilities or
prospects of the Consolidated Parties taken as a whole, (ii) the ability
of any Credit Party to perform any material obligation under the Credit
Documents to which it is a party or (iii) the material rights and remedies
of the Agent and the Lenders under the Credit Documents.

 

“Materials of Environmental Concern” means any gasoline or petroleum (including crude oil
or any fraction thereof) or petroleum products or any hazardous or toxic
substances, materials or wastes, defined or regulated as such in or under any
Environmental Laws, including, without limitation, asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.

 

“Maturity Date” means December    , 2006.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor or assignee of the business of
such company in the business of rating securities.

 

“Multiemployer Plan” means a Plan which is a “multiemployer plan” as defined in Sections 3(37) or
4001(a)(3) of ERISA.

 

“Multiple Employer Plan” means a Plan (other than a
Multiemployer Plan) which any Consolidated Party or any ERISA Affiliate and at
least one employer other than the Consolidated Parties or any ERISA Affiliate
are contributing sponsors.

 

“Net Cash Flow” means,
with respect to any fiscal year period of the Consolidated Parties on a
consolidated basis, an amount equal to the net change in cash as reported on
the 

 

19

 

statement of cash flows of the Consolidated Parties required to
be delivered pursuant to Section 7.1(a).

 

“Net Cash Proceeds” means the aggregate cash or Cash Equivalents
proceeds received by any Consolidated Party in respect of any Asset
Disposition, Equity Issuance, Debt Issuance or Involuntary Disposition, net of
(a) direct costs incurred in connection therewith (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), (b) taxes paid or payable as a result thereof, (c) in
the case of any Asset Disposition, the amount necessary to retire any
Indebtedness secured by a Permitted Lien (ranking senior to any Lien of the
Agent) on the related Property and (d) in the case of any Lithotripsy
Disposition, ratable distributions payable
to majority/minority shareholders; it being understood that “Net Cash Proceeds”
shall include, without limitation, any cash or Cash Equivalents received upon
the sale or other disposition of any non-cash consideration received by any
such Consolidated Party in any Asset Disposition, Equity Issuance, Debt
Issuance or Involuntary Disposition.

 

“Note” or “Notes” means the Revolving Notes, the Swingline Note and/or the Term Notes,
individually or collectively, as appropriate.

 

“Notice of Borrowing” means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by
Section 2.1(b)(i), Section 2.3(b) or Section 2.4(b).

 

“Notice of Extension/Conversion” means the written notice of
extension or conversion in substantially the form of Exhibit 3.2,
as required by Section 3.2.

 

“Operating Affiliate” means any Lithotripsy Affiliate or any
Orthotripsy Affiliate.

 

“Operating Lease” means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any Property (whether real, personal or mixed) which is not a
Capital Lease other than any such lease in which that Person is the lessor.

 

“Orthotripsy Affiliate” means any Affiliate of the Borrower that
(i) engages or is about to engage in
the business of providing orthotripsy services or (ii) directly or indirectly
owns the Capital Stock of any Person described in clause (i) above.

 

“Orthotripsy Disposition” means any Asset Disposition of Capital
Stock of any Orthotripsy Affiliate.

 

“Other Taxes”
shall have the meaning assigned to such
term in Section 3.11(b).

 

“Participant” shall have the meaning assigned to such
term in Section 11.3(d).

 

“Participation Interest” means a purchase by a Lender of a
participation in Letters of Credit
or LOC Obligations as provided in Section 2.2, in Swingline Loans as
provided in Section 2.3  or in any Loans
as provided in Section 3.14.

 

20

 

“Partnership Syndication Income” means an amount equal to (A)
100% of the Net Cash Proceeds from any Lithotripsy Disposition and (B) 100% of
the gain on sale of any Orthotripsy Disposition.

 

“PBGC” means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any successor
thereof.

 

“Permitted Acquisition” means an Acquisition by the Borrower or
any Subsidiary of the Borrower permitted pursuant to the terms of
Section 8.6(j).

 

“Permitted Asset Disposition” means (i) any Asset
Disposition permitted by Section 8.5 and (ii) any Excluded Asset
Disposition.

 

“Permitted Investments” means, at any time, Investments by the
Consolidated Parties permitted to exist at such time pursuant to the terms of
Section 8.6.

 

“Permitted Liens” means, at any time, Liens in respect of Property
of the Consolidated Parties permitted to exist at such time pursuant to the
terms of Section 8.2.

 

“Person” means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.

 

“Plan” means any employee benefit plan (as defined in
Section 3(3) of ERISA) which is covered by ERISA and with respect to which
any Consolidated Party or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an “employer” within the meaning of Section 3(5) of ERISA.

 

“Pledge
Agreement” means the pledge agreement dated as of the Closing Date in the
form of Exhibit 1.1A to
be executed in favor of the Agent by each of the Credit Parties, as amended, modified, restated or supplemented
from time to time.

 

“Prime Rate” means, for any day, the per annum rate of interest in
effect for such day as publicly announced from time to time by Bank of America
as its “prime rate.”  Such rate is a
rate set by Bank of America based upon various factors including Bank of
America’s costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate.  Any change in such rate announced by Bank of America shall take
effect at the opening of business on the day specified in the public
announcement of such change.

 

“Principal Amortization Payment” means a principal payment on
the Term Loans as set forth in Section 2.4(d).

 

“Principal Amortization Payment Date” means the date a Principal
Amortization Payment is due.

 

21

 

“Principal
Office” means the principal office of Bank of America, presently located at
Charlotte, North Carolina.

 

“Pro Forma
Compliance Certificate” means a certificate of an Executive Officer of the
Borrower delivered to the Agent in connection with (i) any incurrence,
assumption or retirement of Indebtedness as referred to in Section 8.1(f),
(ii) any Asset Disposition as referred to in Section 8.5 or
(iii) any Acquisition as referred to in Section 8.6(j), as
applicable, and containing reasonably detailed calculations, upon giving effect
to the applicable transaction on a pro forma basis, of the Leverage Ratio, the
Interest Coverage Ratio and Consolidated Net Worth as of the most recent fiscal
quarter end preceding the date of the applicable transaction with respect to
which the Agent shall have received the Required Financial Information.

 

“Property” means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.

 

“Purchase Agreement” means the Stock Purchase Agreement dated as
of November 7, 2001 by and among Integrated Health Services, Inc., Litho Group,
Inc. and HealthTronics Surgical Services, Inc., as it may be amended on or
prior to the Closing Date.

 

“Purchase Price Adjustment” means any cash or Cash Equivalents received by or paid to or for the account of the
Borrower with respect to any purchase price adjustment under the Purchase
Agreement.

 

“Real Properties” means, at any time, a collective reference to
each of the facilities and real properties owned, leased or operated by the
Consolidated Parties at such time.

 

“Register” shall have the meaning assigned to such term in
Section 11.3(c).

 

“Regulation D, T, U, or X” means Regulation D, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as from time
to time in effect and any successor to all or a portion thereof.

 

“Reportable Event” means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.

 

“Required Financial
Information” means, with respect to the applicable Calculation Date,
(i) the financial statements of the
Consolidated Parties required to be delivered pursuant to
Section 7.1(a) or (b) for the fiscal period or quarter ending as of such
Calculation Date, and (ii) the certificate of an Executive Officer of the Borrower required by
Section 7.1(c) to be delivered with the financial statements described in
clause (i) above.

 

“Required Lenders” means, at any time, Lenders (other than
Defaulting Lenders) holding in the aggregate at least a majority of
(i) the unfunded Commitments (and Participation Interests therein) and the
outstanding Loans, LOC Obligations and
Participation Interests (including the Participation Interests of the Issuing
Lender in any Letters of Credit) or (ii) if the Commitments have been
terminated, the outstanding Loans, 

 

22

 

LOC Obligations and Participation Interests (including the
Participation Interests of the Issuing Lender in any Letters of Credit and the
Participation Interests of the Swingline Lender in any Swingline Loans).

 

“Requirement of Law” means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or to which any of its material property is
subject.

 

“Restricted Payment” means (i) any dividend or other
payment or distribution, direct or indirect, on account of any shares of any
class of Capital Stock of any Consolidated Party, now or hereafter outstanding
(including without limitation any payment in connection with any dissolution, merger,
consolidation or disposition involving any Consolidated Party), or to the
holders, in their capacity as such, of any shares of any class of Capital Stock
of any Consolidated Party, now or hereafter outstanding (other than dividends
or distributions payable in Capital Stock of the applicable Person to any
Credit Party), (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of Capital Stock of any Consolidated Party, now or
hereafter outstanding and (iii) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of any Consolidated Party, now or hereafter
outstanding.

 

“Revolving Commitment” means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender’s Revolving Commitment Percentage (if any) of
the Revolving Committed Amount, (i) to make Revolving Loans in accordance
with the provisions of Section 2.1(a) and (ii) to purchase
Participation Interests in Letters of Credit in accordance with the provisions
of Section 2.2(c).

 

“Revolving Commitment Percentage” means, for any Lender, the
percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a),
as such percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 11.3.

 

“Revolving Committed Amount” shall have the meaning assigned to
such term in Section 2.1(a).

 

“Revolving Loans” shall have the meaning assigned to such term
in Section 2.1(a).

 

“Revolving Note” shall have the meaning assigned to such term in
Section 2.1(e).

 

“S&P” means Standard & Poor’s Ratings Group, a division
of The McGraw Hill Companies, Inc., or any successor or assignee of the
business of such division in the business of rating securities.

 

“Sale and Leaseback Transaction” means any arrangement pursuant
to which any Consolidated Party, directly or indirectly, becomes liable as
lessee, guarantor or other surety 

 

23

 

with respect to any lease, whether an Operating Lease or a Capital
Lease, of any Property (a) which such Consolidated Party has sold or
transferred (or is to sell or transfer) to a Person which is not a Consolidated
Party or (b) which such Consolidated Party intends to use for
substantially the same purpose as any other Property which has been sold or
transferred (or is to be sold or transferred) by such Consolidated Party to
another Person which is not a Consolidated Party in connection with such lease.

 

“Securities Act” means the Securities Act of 1933, as amended, and all
regulations issued pursuant thereto.

 

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended,
and all regulations issued pursuant thereto.

 

“Security
Agreement” means the security agreement dated as of the Closing Date in the
form of Exhibit 1.1B to
be executed in favor of the Agent by each of the Credit Parties, as amended, modified, restated or supplemented
from time to time.

 

“Single Employer Plan” means any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.

 

“Solvent” or “Solvency” means, with respect to any Person
as of a particular date, that on such date (i) such Person is able to pay
its debts and other liabilities, contingent obligations and other commitments
as they mature in the ordinary course of business, (ii) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person’s ability to pay as such debts and liabilities mature in
their ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person’s Property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged or is to engage, (iv) the fair value of the
Property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person and
(v) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured.  In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.

 

“Subsidiary” means, as to any Person at any time, (a) any
corporation more than 50% of whose Capital Stock of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the directors
of such corporation (irrespective of whether or not at such time, any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at such time owned by such Person directly
or indirectly through Subsidiaries, and (b) any partnership, association,
joint venture or other entity of which such Person directly or indirectly
through Subsidiaries owns at such time more than 50% of the Capital Stock.

 

24

 

“Swingline Commitment” means the commitment of the Swingline
Lender in an aggregate principal amount at any time outstanding of up to the
Swingline Committed Amount, to make Swingline Loans in accordance with the
provisions of Section 2.3(a).

 

“Swingline Committed Amount” shall have the meaning assigned to
such term in Section 2.3(a).

 

“Swingline Lender” means Bank of America.

 

“Swingline Loan” shall have the meaning assigned to such term in
Section 2.3(a).

 

“Swingline Note” shall have the meaning assigned to such term in
Section 2.3(d).

 

“Synthetic Lease” means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product where such transaction is considered borrowed money indebtedness for
tax purposes but is classified as an Operating Lease under GAAP.

 

“Taxes” shall have the meaning assigned to such term in
Section 3.11(a).

 

“Term Loan” shall have the meaning assigned to such term in
Section 2.4(a).

 

“Term Loan Commitment” means, with respect to each Lender, the
commitment of such Lender to make its portion of the Term Loan in a principal
amount equal to such Lender’s Term Loan Percentage (if any) of the Term Loan
Committed Amount.

 

“Term Loan Committed Amount” shall have the meaning assigned to
such term in Section 2.4(a).

 

“Term Loan Percentage” means, for any Lender, the percentage
identified as its Term Loan Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 11.3.

 

“Term Note” shall have the meaning assigned to such term in
Section 2.4(f).

 

“Transaction”
means the Acquisition of the stock of the Acquired Company from Integrated
Health Services, Inc. pursuant to the Purchase Agreement.

 

“Unused Fee” shall have the meaning assigned to such term in
Section 3.5(a).

 

“Unused Fee Calculation Period” shall have the meaning assigned
to such term in Section 3.5(a).

 

“Unused Revolving Committed Amount” means, for any period, the
amount by which (a) the then applicable Revolving Committed Amount exceeds
(b) the daily average sum for such period of (i) the outstanding
aggregate principal amount of all Revolving Loans (but not including any
Swingline Loans) plus (ii) the outstanding aggregate principal amount of
all LOC Obligations.

 

25

 

“Vehicle” means and includes, with respect to any Person, all
motor vehicles, tractors, trailers, rolling stock, mobile cranes and motorized
forklifts of every kind and description used in such Person’s business
operations or used or owned by such Person or in which such Person has an
interest, and all parts, accessories and special tools and all increases and
accession thereto and substitutions and replacements therefor.

 

“Voting Stock” means, with respect to any Person, Capital Stock
issued by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.

 

“Wholly Owned Subsidiary” means any Person 100% of whose Voting
Stock is at the time owned by the Borrower directly or indirectly through other
Persons 100% of whose Voting Stock is at the time owned, directly or
indirectly, by the Borrower.

 

1.2          Computation
of Time Periods.

 

For purposes of computation of periods of time hereunder, the word
“from” means “from and including” and the words “to” and “until” each mean “to
but excluding.”

 

1.3          Accounting
Terms.

 

Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis; provided, however, that calculations of the implied
principal component of all obligations under any Synthetic Lease or the implied
interest component of any rent paid under any Synthetic Lease shall be made by
the Borrower in accordance with accepted financial practice and consistent with
the terms of such Synthetic Lease.  All
calculations made for the purposes of determining compliance with this Credit
Agreement shall (except as otherwise expressly provided herein) be made by
application of GAAP applied on a basis consistent with the most recent annual
or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to
Section 7.1, consistent with the financial statements as at September 30,
2001), but, in any event, after elimination for minority interests; provided,
however, if (a) the Credit Parties shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or
(b) the Agent or the Required Lenders shall so object in writing within 60
days after delivery of such financial statements, then such calculations shall
be made on a basis consistent with the most recent financial statements delivered
by the Credit Parties to the Lenders as to which no such objection shall have
been made.

 

Notwithstanding
the above, the parties hereto acknowledge and agree that, for purposes of all
calculations made under the financial covenants set forth in Section 7.10 (including
without limitation for purposes of determining “pro forma basis” and the
definition of “Applicable Percentage” set forth in Section 1.1),
(i) after consummation of any Asset Disposition
(A) income statement items (whether positive or negative) and capital
expenditures attributable to the Property disposed of shall be excluded to the
extent relating to any period 

 

26

 

occurring prior to the
date of such transaction and (B) Indebtedness which is retired shall be
excluded and deemed to have been retired as of the first day of the applicable
period and (ii) after consummation of any Acquisition (A) income
statement items (whether positive or negative) and capital expenditures
attributable to the Person or Property acquired shall, to the extent not
otherwise included in such income statement items for the Consolidated Parties
in accordance with GAAP or in accordance with any defined terms set forth in
Section 1.1, be included to the extent relating to any period applicable
in such calculations, (B) to the extent not retired in connection with
such Acquisition, Indebtedness of the Person or Property acquired shall be
deemed to have been incurred as of the first day of the applicable period and
(C) pro forma adjustments may be included to the extent that such
adjustments would give effect to items that are (x) directly attributable
to such transaction, (y) expected to have a continuing impact on the Consolidated Parties and (z) factually supportable.

 

SECTION
2

 

CREDIT
FACILITIES

 

2.1          Revolving
Loans.

 

(a)           Revolving
Commitment.  Subject to the terms
and conditions hereof and in reliance upon the representations and warranties
set forth herein, each Lender severally agrees to make available to the
Borrower such Lender’s Revolving Commitment Percentage of revolving credit
loans requested by the Borrower in Dollars (“Revolving Loans”) from time
to time from the Closing Date until the Maturity Date, or such earlier date as
the Revolving Commitments shall have been terminated as provided herein; provided,
however, that the sum of the aggregate outstanding principal amount of
Revolving Loans shall not exceed the lesser of (i) FIFTEEN MILLION DOLLARS ($15,000,000)
(as such aggregate maximum amount may be reduced from time to time as provided
in Section 3.4, the “Revolving Committed Amount”) and (ii) the
Borrowing Base; provided, further, (A) with regard to each
Lender individually, such Lender’s outstanding Revolving Loans shall not exceed
such Lender’s Revolving Commitment Percentage of the Revolving Committed
Amount, and (B) the sum of the aggregate outstanding principal amount of
Revolving Loans plus LOC Obligations plus Swingline Loans shall not exceed the
lesser of (1) the Revolving Committed Amount and (2) the Borrowing
Base.  Revolving Loans may consist of
Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower
may request; provided, however, that no more than five (5)
Eurodollar Loans which are Revolving Loans shall be outstanding hereunder at
any time (it being understood that, for purposes hereof, Eurodollar Loans with
different Interest Periods shall be considered as separate Eurodollar Loans,
even if they begin on the same date, although borrowings, extensions and
conversions may, in accordance with the provisions hereof, be combined at the
end of existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period).  Revolving
Loans hereunder may be repaid and reborrowed in accordance with the provisions
hereof.

 

27

 

(b)           Revolving Loan
Borrowings.

 

(i)            Notice of
Borrowing.  The Borrower shall
request a Revolving Loan borrowing by written notice (or telephonic notice
promptly confirmed in writing) to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day prior to the date of the
requested borrowing in the case of Base Rate Loans, and on the third Business
Day prior to the date of the requested borrowing in the case of Eurodollar
Loans.  Each such request for borrowing
shall be irrevocable and shall specify (A) that a Revolving Loan is
requested, (B) the date of the requested borrowing (which shall be a
Business Day), (C) the aggregate principal amount to be borrowed, and
(D) whether the borrowing shall be comprised of Base Rate Loans,
Eurodollar Loans or a combination thereof, and if Eurodollar Loans are
requested, the Interest Period(s) therefor. 
If the Borrower shall fail to specify in any such Notice of Borrowing
(I) an applicable Interest Period in the case of a Eurodollar Loan, then
such notice shall be deemed to be a request for an Interest Period of one month
or (II) the type of Revolving Loan requested, then such notice shall be
deemed to be a request for a Base Rate Loan hereunder.  The Agent shall give notice to each affected
Lender promptly upon receipt of each Notice of Borrowing pursuant to this
Section 2.1(b)(i), the contents thereof and each such Lender’s share of
any borrowing to be made pursuant thereto.

 

(ii)           Minimum Amounts.  Except for Revolving Loans made for the
purpose of reimbursing the Issuing Lender in respect of a drawing under a
Letter of Credit pursuant to Section 2.2(e), each Eurodollar Loan or Base
Rate Loan that is a Revolving Loan shall be in a minimum aggregate principal
amount of $1,000,000 and integral multiples of $500,000 in excess thereof (or
the remaining amount of the Revolving Committed Amount, if less).

 

(iii)          Advances.  Each Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing available to the Agent
for the account of the Borrower as specified in Section 3.15(a), or in
such other manner as the Agent may specify in writing, by 1:00 P.M. (Charlotte,
North Carolina time) on the date specified in the applicable Notice of
Borrowing in Dollars and in funds immediately available to the Agent.  Such borrowing will then be made available
to the Borrower by the Agent by crediting the account of the Borrower on the
books of such office with the aggregate of the amounts made available to the
Agent by the Lenders and in like funds as received by the Agent.

 

(c)           Repayment.  The Borrower hereby promises to pay the
principal amount of all outstanding Revolving Loans in full on the Maturity
Date, unless accelerated sooner pursuant to Section 9.2.

 

(d)           Interest.  Subject to the provisions of
Section 3.1,

 

(i)            Base Rate Loans.  During such periods as Revolving Loans shall
be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall
bear interest at a per annum rate equal to the Adjusted Base Rate.

 

28

 

(ii)           Eurodollar Loans.  During such periods as Revolving Loans shall
be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans
shall bear interest at a per annum rate equal to the Adjusted Eurodollar Rate.

 

The Borrower hereby promises to pay interest on Revolving Loans in
arrears on each applicable Interest Payment Date (or at such other times as may
be specified herein).

 

(e)           Revolving Notes.  The Borrower hereby agrees that, upon the
request of any Lender, the Borrower will execute and deliver to such Lender a
promissory note evidencing the Revolving Loans made by such Lender in an
original principal amount equal to such Lender’s Revolving Commitment Percentage
of the Revolving Committed Amount and in substantially the form of Exhibit 2.1(e),
with appropriate insertions as to date and principal amount (each such
promissory note a “Revolving Note”).

 

2.2          Letter
of Credit Subfacility.

 

(a)           Issuance.  Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein, the
Issuing Lender agrees to issue, and each Lender severally agrees to participate
in the issuance by the Issuing Lender of, standby and trade Letters of Credit
in Dollars from time to time from the Closing Date until the date thirty (30)
days prior to the Maturity Date as the Borrower may request, in a form
acceptable to the Issuing Lender; provided, however, that
(i) the LOC Obligations outstanding shall not at any time exceed TWO MILLION
DOLLARS ($2,000,000) (the “LOC Committed Amount”) and (ii) the
sum of the aggregate outstanding principal amount of Revolving Loans plus LOC
Obligations plus Swingline Loans shall not at any time exceed the lesser of
(A) the Revolving Committed Amount and (B) the Borrowing Base.  No Letter of Credit shall (x) have an
original expiry date more than one year from the date of issuance (provided
that any such Letter of Credit may contain customary “evergreen” provisions
pursuant to which the expiry date is automatically extended by a specific time
period unless the Issuing Lender gives notice to the beneficiary of such Letter
of Credit at least a specified time period prior to the expiry date then in
effect) or (y) as originally issued or as extended, have an expiry date
extending beyond the date thirty (30) days prior to the Maturity Date.  Each Letter of Credit shall comply with the
related LOC Documents.  The issuance and
expiry dates of each Letter of Credit shall be a Business Day.

 

(b)           Notice and
Reports.  The request for the
issuance of a Letter of Credit shall be submitted by the Borrower to the
Issuing Lender at least three (3) Business Days prior to the requested date of
issuance.  The Issuing Lender will, at
least quarterly and more frequently upon request, disseminate to the Agent who
will forward to each of the Lenders a detailed report specifying the Letters of
Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the beneficiary, the face amount and the
expiry date, as well as any payment or expirations which may have occurred.

 

(c)           Participation.  Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a Participation
Interest from the Issuing Lender in such Letter of Credit and the obligations
arising thereunder and any collateral relating thereto, in each case in an
amount equal to its pro rata share of the obligations under such 

 

29

 

Letter of Credit (based on the respective Revolving Commitment
Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume and be obligated to pay to the Issuing Lender and discharge
when due, its pro rata share of the obligations arising under such Letter of
Credit.  Without limiting the scope and
nature of each Lender’s Participation Interest in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required hereunder or
under any such Letter of Credit, each such Lender shall pay to the Agent for
the account of the Issuing Lender its pro rata share of such unreimbursed
drawing in same day funds on the day of notification by the Issuing Lender of
an unreimbursed drawing pursuant to the provisions of subsection (d)
below.  The obligation of each Lender to
so reimburse the Issuing Lender shall be absolute and unconditional and shall
not be affected by the occurrence of a Default, an Event of Default or any
other occurrence or event.  Any such
reimbursement shall not relieve or otherwise impair the obligation of the
Borrower to reimburse the Issuing Lender under any Letter of Credit, together
with interest as hereinafter provided.

 

(d)           Reimbursement.  In the event of any drawing under any Letter
of Credit, the Issuing Lender will promptly notify the Borrower and the
Agent.  Unless the Borrower shall
immediately notify the Issuing Lender that the Borrower intends to otherwise
reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to
have requested that the Lenders make a Revolving Loan in the amount of the
drawing as provided in subsection (e) below on the related Letter of Credit,
the proceeds of which will be used to satisfy the related reimbursement
obligations.  The Borrower promises to
reimburse the Issuing Lender on the day of drawing under any Letter of Credit
(either with the proceeds of a Revolving Loan obtained hereunder or otherwise)
in same day funds.  If the Borrower
shall fail to reimburse the Issuing Lender as provided hereinabove, the
Borrower promises to pay the Issuing Lender interest on the unreimbursed amount
of such drawing on demand at a per annum rate equal to the Adjusted Base Rate
plus 2%.  The Borrower’s reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of setoff, counterclaim or defense to
payment the Borrower may claim or have against the Issuing Lender, the Agent,
the Lenders, the beneficiary of the Letter of Credit drawn upon or any other
Person, including without limitation any defense based on any failure of the
Borrower or any other Credit Party to receive consideration or the legality,
validity, regularity or unenforceability of the Letter of Credit.  The Issuing Lender will promptly notify the
Agent who will promptly notify the other Lenders of the amount of any
unreimbursed drawing and each Lender shall promptly pay to the Agent for the
account of the Issuing Lender in Dollars and in immediately available funds,
the amount of such Lender’s pro rata share of such unreimbursed drawing.  Such payment shall be made on the day such
notice is received by such Lender from the Issuing Lender if such notice is
received at or before 2:00 P.M. (Charlotte, North Carolina time), and otherwise
such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina
time) on the Business Day next succeeding the day such notice is received.  If such Lender does not pay such amount to
the Agent for the account of the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Agent for the account of the Issuing Lender
interest on the unpaid amount during the period from the date of such drawing
until such Lender pays such amount to the Agent for the account of the Issuing
Lender in full at a rate per annum equal to, if paid within two (2) Business
Days of the date that such Lender is required to make payments of such amount
pursuant to the preceding sentence, the Federal Funds Rate and thereafter at a
rate equal to the Base Rate.  Each
Lender’s obligation to make 

 

30

 

such payment to the Issuing Lender, and the right of the Issuing Lender
to receive the same, shall be absolute and unconditional, shall not be affected
by any circumstance whatsoever and without regard to the termination of this
Credit Agreement or the Commitments hereunder, the existence of a Default or
Event of Default or the acceleration of the obligations of the Borrower
hereunder and shall be made without any offset, abatement, withholding or
reduction whatsoever.  Simultaneously
with the making of each such payment by a Lender to the Issuing Lender, such
Lender shall, automatically and without any further action on the part of the
Issuing Lender or such Lender, acquire a Participation Interest in an amount
equal to such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed drawn portion
of the LOC Obligation and in the interest thereon and in the related LOC
Documents, and shall have a claim against the Borrower with respect thereto.

 

(e)           Repayment with
Revolving Loans.  On any day on which
the Borrower shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of Credit, the
Agent shall give notice to the Lenders that a Revolving Loan has been requested
or deemed requested by the Borrower to be made in connection with a drawing
under a Letter of Credit, in which case a Revolving Loan advance comprised of
Base Rate Loans (or Eurodollar Loans to the extent the Borrower has complied
with the procedures of Section 2.1(b)(i) with respect thereto) shall be
immediately made to the Borrower by all Lenders (notwithstanding any
termination of the Commitments pursuant to Section 9.2) pro rata based on
the respective Revolving Commitment Percentages of the Lenders (determined
before giving effect to any termination of the Commitments pursuant to
Section 9.2) and the proceeds thereof shall be paid directly to the
Issuing Lender for application to the respective LOC Obligations.  Each such Lender hereby irrevocably agrees
to make its pro rata share of each such Revolving Loan immediately upon any
such request or deemed request in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (i) the amount of such
borrowing may not comply with the minimum amount for advances of Revolving
Loans otherwise required hereunder, (ii) whether any conditions specified
in Section 5.2 are then satisfied, (iii) whether a Default or an
Event of Default then exists, (iv) failure for any such request or deemed request
for Revolving Loan to be made by the time otherwise required hereunder,
(v) whether the date of such borrowing is a date on which Revolving Loans
are otherwise permitted to be made hereunder or (vi) any termination of
the Commitments relating thereto immediately prior to or contemporaneously with
such borrowing.  In the event that any
Revolving Loan cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or any other
Credit Party), then each such Lender hereby agrees that it shall forthwith
purchase (as of the date such borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date and
prior to such purchase) from the Issuing Lender such Participation Interests in
the outstanding LOC Obligations as shall be necessary to cause each such Lender
to share in such LOC Obligations ratably (based upon the respective Revolving
Commitment Percentages of the Lenders (determined before giving effect to any
termination of the Commitments pursuant to Section 9.2)), provided
that at the time any purchase of Participation Interests pursuant to this
sentence is actually made, the purchasing Lender shall be required to pay to
the Agent for the account of the Issuing Lender, to the extent not paid to the
Issuing Lender by the Borrower in accordance with the terms of 

 

31

 

subsection (d) above, interest on the principal amount of
Participation Interests purchased for each day from and including the day upon
which such borrowing would otherwise have occurred to but excluding the date of
payment for such Participation Interests, at the rate equal to, if paid within
two (2) Business Days of the date of the Revolving Loan advance, the Federal
Funds Rate, and thereafter at a rate equal to the Base Rate.

 

(f)            Designation of
Consolidated Parties as Account Parties. 
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of Credit
issued hereunder may contain a statement to the effect that such Letter of
Credit is issued for the account of any Subsidiary of the Borrower, provided
that notwithstanding such statement, the Borrower shall be the actual account
party for all purposes of this Credit Agreement for such Letter of Credit and
such statement shall not affect the Borrower’s reimbursement obligations
hereunder with respect to such Letter of Credit.

 

(g)           Renewal,
Extension.  The renewal or extension
of any Letter of Credit shall, for purposes hereof, be treated in all respects
the same as the issuance of a new Letter of Credit hereunder.

 

(h)           Uniform Customs
and Practices.  The Issuing Lender
may have the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits (the “UCP”) or the International Standby Practices 1998
(the “ISP98”), in either case as published as of the date of issue by the
International Chamber of Commerce, in which case the UCP or the ISP98, as
applicable, may be incorporated therein and deemed in all respects to be a part
thereof.

 

(i)            Indemnification;
Nature of Issuing Lender’s Duties.

 

(i)            In addition to its
other obligations under this Section 2.2, the Borrower hereby agrees to
pay, and protect, indemnify and save each Lender harmless from and against, any
and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys’ fees) that such Lender may incur or
be subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or (B) the failure of such Lender to honor a drawing
under a Letter of Credit as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto government or
Governmental Authority (all such acts or omissions, herein called “Government
Acts”).

 

(ii)           As between the
Borrower and the Lenders (including the Issuing Lender), the Borrower shall
assume all risks of the acts, omissions or misuse of any Letter of Credit by
the beneficiary thereof.  No Lender
(including the Issuing Lender) shall be responsible:  (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, that may prove to be invalid or 

 

32

 

ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher;
(D) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under a Letter of Credit or of the proceeds
thereof; and (E) for any consequences arising from causes beyond the
control of such Lender, including, without limitation, any Government Acts.  None of the above shall affect, impair, or
prevent the vesting of the Issuing Lender’s rights or powers hereunder.

 

(iii)          In furtherance and
extension and not in limitation of the specific provisions hereinabove set
forth, any action taken or omitted by any Lender (including the Issuing
Lender), under or in connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put such Lender
under any resulting liability to the Borrower or any other Credit Party.  It is the intention of the parties that this
Credit Agreement shall be construed and applied to protect and indemnify each
Lender (including the Issuing Lender) against any and all risks involved in the
issuance of the Letters of Credit, all of which risks are hereby assumed by the
Borrower (on behalf of itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts.  No Lender (including the Issuing Lender) shall, in any way, be
liable for any failure by such Lender or anyone else to pay any drawing under
any Letter of Credit as a result of any Government Acts or any other cause
beyond the control of such Lender.

 

(iv)          Nothing in this
subsection (i) is intended to limit the reimbursement obligations of the
Borrower contained in subsection (d) above.  The obligations of the Borrower under this subsection (i)
shall survive the termination of this Credit Agreement.  No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or impair the rights
of the Lenders (including the Issuing Lender) to enforce any right, power or
benefit under this Credit Agreement.

 

(v)           Notwithstanding
anything to the contrary contained in this subsection (i), the Borrower
shall have no obligation to indemnify any Lender (including the Issuing Lender)
in respect of any liability incurred by such Lender (A) arising solely out
of the gross negligence or willful misconduct of such Lender, as determined by
a court of competent jurisdiction, or (B) caused by such Lender’s failure
to pay under any Letter of Credit after presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit, as
determined by a court of competent jurisdiction, unless such payment is
prohibited by any law, regulation, court order or decree.

 

(j)            Responsibility
of Issuing Lender.  It is expressly
understood and agreed that the obligations of the Issuing Lender hereunder to
the Lenders are only those expressly set forth in this Credit Agreement and that
the Issuing Lender shall be entitled to assume that the conditions precedent
set forth in Section 5.2 have been satisfied unless it shall have acquired
actual knowledge that any such condition precedent has not been satisfied; provided,
however, that nothing set forth in this Section 2.2 shall be deemed
to prejudice the right of any Lender to recover from the Issuing Lender any
amounts made available by such Lender to the Issuing Lender pursuant to this
Section 2.2 in the event that it is determined by 

 

33

 

a court of competent jurisdiction that the payment with respect to a
Letter of Credit constituted gross negligence or willful misconduct on the part
of the Issuing Lender.

 

(k)           Conflict with LOC
Documents.  In the event of any
conflict between this Credit Agreement and any letter of credit application,
this Credit Agreement shall control.

 

2.3          Swingline
Loan Subfacility.

 

(a)           Swingline
Commitment. Subject to the terms and conditions hereof and in reliance upon
the representations and warranties set forth herein, the Swingline Lender, in
its individual capacity, agrees to make certain revolving credit loans
requested by the Borrower in Dollars to the Borrower (each a “Swingline Loan”
and, collectively, the “Swingline Loans”) from time to time from the
Closing Date until the Maturity Date for the purposes hereinafter set forth; provided,
however, (i) the aggregate principal amount of Swingline Loans
outstanding at any time shall not exceed TWO MILLION DOLLARS  ($2,000,000) (the “Swingline
Committed Amount”), and (ii) the sum of the aggregate outstanding
principal amount of Revolving Loans plus LOC Obligations plus
Swingline Loans shall not exceed the lesser of (A) the Revolving Committed
Amount and (B) the Borrowing Base. 
Swingline Loans hereunder shall be made as Base Rate Loans in accordance
with the provisions of this Section 2.3 and may be repaid and reborrowed in
accordance with the provisions hereof.

 

(b)           Swingline Loan
Advances.

 

(i)            Notices;
Disbursement.  Whenever the Borrower
desires a Swingline Loan advance hereunder it shall give written notice (or
telephonic notice promptly confirmed in writing) to the Swingline Lender not
later than 1:00 P.M. (Charlotte, North Carolina time) on the Business Day of
the requested Swingline Loan advance. 
Each such notice shall be irrevocable and shall specify (A) that a
Swingline Loan advance is requested, (B) the date of the requested
Swingline Loan advance (which shall be a Business Day) and (C) the
principal amount of the Swingline Loan advance requested.  Each Swingline Loan shall be made as a Base
Rate Loan and shall have such maturity date as the Swingline Lender and the
Borrower shall agree upon receipt by the Swingline Lender of any such notice
from the Borrower.  The Swingline Lender
shall initiate the transfer of funds representing the Swingline Loan advance to
the Borrower by 3:00 P.M. (Charlotte, North Carolina time) on the Business Day
of the requested borrowing.

 

(ii)           Minimum Amounts.  Each Swingline Loan advance shall be in a
minimum principal amount of $100,000 and integral multiples of $25,000 (or the remaining amount of the Swingline
Committed Amount, if less).

 

(iii)          Repayment of
Swingline Loans.  The Borrower
hereby promises to pay the outstanding principal amount of each Swingline Loan
on the earlier of (A) the maturity date agreed to by the Swingline Lender
and the Borrower with respect to such Loan (which maturity date shall not be a
date more than seven (7) Business Days from the date of advance thereof) or
(B) the Maturity Date.  The
Swingline Lender may, at any time, in its sole discretion, by written notice to
the 

 

34

 

Borrower and the Lenders, demand repayment of its Swingline Loans by
way of a Revolving Loan advance, in which case the Borrower shall be deemed to
have requested a Revolving Loan advance comprised solely of Base Rate Loans in
the amount of such Swingline Loans; provided, however, that any
such demand shall be deemed to have been given one Business Day prior to the
Maturity Date and on the date of the occurrence of any Event of Default
described in Section 9.1 and upon acceleration of the indebtedness hereunder
and the exercise of remedies in accordance with the provisions of Section
9.2.  Each Lender hereby irrevocably
agrees to make its pro rata share of each such Revolving Loan in the amount, in
the manner and on the date specified in the preceding sentence notwithstanding
(I) the amount of such borrowing may not comply with the minimum amount
for advances of Revolving Loans otherwise required hereunder, (II) whether
any conditions specified in Section 5.2 are then satisfied, (III) whether
a Default or an Event of Default then exists, (IV) failure of any such
request or deemed request for Revolving Loan to be made by the time otherwise
required hereunder, (V) whether the date of such borrowing is a date on
which Revolving Loans are otherwise permitted to be made hereunder or
(VI) any termination of the Commitments relating thereto immediately prior
to or contemporaneously with such borrowing. 
In the event that any Revolving Loan cannot for any reason be made on
the date otherwise required above (including, without limitation, as a result
of the commencement of a proceeding under the Bankruptcy Code with respect to
the Borrower or any other Credit Party), then each Lender hereby agrees that it
shall forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on or after
such date and prior to such purchase) from the Swingline Lender such
Participation Interests in the outstanding Swingline Loans as shall be
necessary to cause each such Lender to share in such Swingline Loans ratably
based upon its Commitment Percentage of the Revolving Committed Amount
(determined before giving effect to any termination of the Commitments pursuant
to Section 3.4), provided that (A) all interest payable on the
Swingline Loans shall be for the account of the Swingline Lender until the date
as of which the respective Participation Interest is purchased and (B) at
the time any purchase of Participation Interests pursuant to this sentence is
actually made, the purchasing Lender shall be required to pay to the Swingline
Lender, to the extent not paid to the Swingline Lender by the Borrower in
accordance with the terms of subsection (c)(ii) below, interest on the
principal amount of Participation Interests purchased for each day from and
including the day upon which such borrowing would otherwise have occurred to
but excluding the date of payment for such Participation Interests, at the rate
equal to the Federal Funds Rate.

 

(c)           Interest on
Swingline Loans.

 

(i)            Rate of Interest.  Subject to the provisions of Section 3.1,
each Swingline Loan shall bear interest at a per annum rate equal to the
Adjusted Base Rate.

 

(ii)           Payment of
Interest.  The Borrower hereby
promises to pay interest on Swingline Loans in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).

 

35

 

(d)           Swingline Note.  The Borrower hereby agrees that, upon the request to the Agent by the
Swingline Lender, the Borrower will execute and deliver to the Swingline Lender
a promissory note evidencing the Swingline Loans of the Swingline Lender,
substantially in the form of Exhibit 2.3(d), with appropriate
insertions as to date and principal amount (a “Swingline Note”).

 

2.4          Term Loan.

 

(a)           Term Commitment.  Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein, each
Lender severally agrees to make available to the Borrower on the Closing Date
such Lender’s Term Loan Percentage of a term loan in Dollars (the “Term Loan”)
in the aggregate principal amount of THIRTY-FIVE MILLION DOLLARS  ($35,000,000)
(the “Term Loan Committed Amount”).  The
Term Loan may consist of Base Rate Loans or Eurodollar Loans, or a combination
thereof, as the Borrower may request; provided, however, that no
more than five (5) Eurodollar Loans which are Term Loans shall be outstanding
hereunder at any time (it being understood that, for purposes hereof,
Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they begin on the same date, although
borrowings, extensions and conversions may, in accordance with the provisions
hereof, be combined at the end of existing Interest Periods to constitute a new
Eurodollar Loan with a single Interest Period).  Amounts repaid on the Term Loan may not be reborrowed.

 

(b)           Borrowing
Procedures.  The Borrower shall
submit an appropriate Notice of Borrowing to the Agent not later than 11:00
A.M. (Charlotte, North Carolina time) on the Closing Date, with respect to the
portion of the Term Loan initially consisting of a Base Rate Loan, or on the
third Business Day prior to the Closing Date, with respect to the portion of
the Term Loan initially consisting of one or more Eurodollar Loans.  Such Notice of Borrowing shall be irrevocable
and shall specify (i) that the funding of a Term Loan is requested and
(ii) whether the funding of the Term Loan shall be comprised of Base Rate
Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are
requested, the Interest Period(s) therefor. 
If the Borrower shall fail to deliver such Notice of Borrowing to the
Agent by 11:00 A.M. (Charlotte, North Carolina time) on the third Business Day
prior to the Closing Date, then the full amount of the Term Loan shall be
disbursed on the Closing Date as a Base Rate Loan.  Each Lender shall make its Term Loan Percentage of the Term Loan
available to the Agent for the account of the Borrower at the office of the
Agent specified in Schedule 2.1(a), or at such other office as the
Agent may designate in writing, by 1:00 P.M. (Charlotte, North Carolina time)
on the Closing Date in Dollars and in funds immediately available to the Agent.

 

(c)           Minimum Amounts.  Each Eurodollar Loan or Base Rate Loan that
is part of the Term Loan shall be in an aggregate principal amount that is not
less than $5,000,000 and integral multiples of $1,000,000 (or the then
remaining principal balance of the Term Loan, if less).

 

(d)           Repayment of Term
Loan.  The Borrower hereby promises
to pay the outstanding principal amount of the Term Loan in eighteen (18)
consecutive quarterly 

 

36

 

installments as follows (as such installments may hereafter be adjusted
as a result of prepayments made pursuant to Section 3.3), unless accelerated
sooner pursuant to Section 9.2:

 

	
  Principal

  Amortization

  Payment Dates

  	
   

  	
  Term

  Loan Principal

  Amortization

  Payment

  	
   

  
	
  September 30, 2002

  and December 31, 2002

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2003,

  June 30, 2003,

  September 30, 2003

  and December 31, 2003

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2004,

  June 30, 2004,

  September 30, 2004

  and December 31, 2004

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2005,

  June 30, 2005,

  September 30, 2005

  and December 31, 2005

  	
   

  	
  $

  	
  2,812,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2006,

  June 30, 2006,

  September 30, 2006

  and the Maturity Date

  	
   

  	
  $

  	
  2,812,500

  	
   

  

 

(e)           Interest.  Subject to the provisions of
Section 3.1, the Term Loan shall bear interest at a per annum rate equal
to:

 

(i)            Base Rate Loans.  During such periods as the Term Loan shall
be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall
bear interest at a per annum rate equal to the Adjusted Base Rate.

 

(ii)           Eurodollar Loans.  During such periods as the Term Loan shall
be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans
shall bear interest at a per annum rate equal to the Adjusted Eurodollar Rate.

 

The Borrower hereby promises to pay interest on the Term Loan in
arrears on each applicable Interest Payment Date (or at such other times as may
be specified herein).

 

(f)            Term Notes.  The Borrower hereby agrees that upon the
request of any Lender, the Borrower will execute and deliver to such Lender a promissory
note evidencing the Term Loans made by such Lender in an original principal
amount equal to such 

 

37

 

Lender’s Term Loan
Percentage of the Term Loan and substantially in the form of Exhibit 2.4(f),
with appropriate insertions as to date and principal amount (each such
promissory note “Term Note”).

 

SECTION
3

 

OTHER PROVISIONS RELATING TO CREDIT FACILITIES

 

3.1          Default Rate.

 

Upon the occurrence, and during the continuance, of an Event of
Default, (i) the principal of and, to the extent permitted by law,
interest on the Loans and any other amounts owing hereunder or under the other
Credit Documents shall bear interest, payable on demand, at a per annum rate 2%
greater than the rate which would otherwise be applicable (or if no rate is
applicable, whether in respect of interest, fees or other amounts, then the Adjusted
Base Rate plus 2%) and (ii) the Letter of Credit Fee shall accrue at a per
annum rate 2% greater than the rate which would otherwise be applicable.

 

3.2          Extension
and Conversion.

 

The Borrower shall have the option, on any Business Day, to extend existing
Loans into a subsequent permissible Interest Period or to convert Loans into
Loans of another interest rate type; provided, however, that
(i) except as provided in Section 3.8, Eurodollar Loans may be
converted into Base Rate Loans or extended as Eurodollar Loans for new Interest
Periods only on the last day of the Interest Period applicable thereto,
(ii) Loans extended as, or converted into, Eurodollar Loans shall be
subject to the terms of the definition of “Interest Period” set forth in Section 1.1
and shall be in such minimum amounts as provided in, with respect to Revolving
Loans, Section 2.1(b)(ii), or, with respect to the Term Loan,
Section 2.4(c), (iii) no more than five (5) Eurodollar Loans which
are Revolving Loans and five (5) Eurodollar Loans which are Term Loans shall be
outstanding hereunder at any time (it being understood that, for purposes
hereof, Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they begin on the same date, although
borrowings, extensions and conversions may, in accordance with the provisions
hereof, be combined at the end of existing Interest Periods to constitute a new
Eurodollar Loan with a single Interest Period), (iv) any request for
extension or conversion of a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month and (v) Swingline Loans may not be extended or converted pursuant to this
Section 3.2.  Each such extension or
conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephonic notice promptly confirmed in writing) to
the office of the Agent specified in Schedule 2.1(a), or at such
other office as the Agent may designate in writing, prior to 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day of, in the case of the
conversion of a Eurodollar Loan into a Base Rate Loan, and on the third
Business Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the
proposed extension or conversion, specifying the date of the proposed extension
or conversion, the Loans to be so extended or converted, the types of Loans
into which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. 
In the event the Borrower fails to request extension or conversion of
any Eurodollar Loan in accordance with this Section 3.2, or any such
conversion or extension is not permitted or 

 

38

 

required
by this Section 3.2, then such Eurodollar Loan shall be automatically
converted into a Base Rate Loan at the end of the Interest Period applicable
thereto.  The Agent shall give each Lender
notice as promptly as practicable of any such proposed extension or conversion
affecting any Loan.

 

3.3          Prepayments.

 

(a)           Voluntary
Prepayments.  The Borrower shall
have the right to prepay Loans in whole or in part from time to time; provided,
however, that (i) each partial prepayment of Loans (other than
Swingline Loans) shall be in a minimum principal amount of $500,000 and
integral multiples of $100,000 in excess thereof (or the then remaining
principal balance of the Revolving Loans or the Term Loan, as applicable, if
less) and (ii) any prepayment of the Term Loan shall be applied to
remaining Principal Amortization Payments in
inverse order of maturities thereof. 
Subject to the foregoing terms,
amounts prepaid under this Section 3.3(a) shall be applied as the Borrower
may elect; provided that if the Borrower shall fail to specify with
respect to any voluntary prepayment, such voluntary prepayment shall be applied
first to  Revolving Loans and then to
the Term Loan (ratably to the remaining Principal Amortization Payments
thereof), in each case first to Base Rate
Loans and then to Eurodollar Loans in direct order of Interest Period
maturities.  All prepayments under this
Section 3.3(a) shall be subject to Section 3.12, but otherwise
without premium or penalty, and shall
be accompanied by interest on the principal amount prepaid through the
date of prepayment.

 

(b)           Mandatory
Prepayments.

 

(i)            (A)          Revolving Committed Amount.  If at any time, the sum of the aggregate
outstanding principal amount of Revolving Loans plus LOC Obligations plus
Swingline Loans shall exceed the lesser of (A) the Revolving Committed
Amount and (B) the Borrowing Base, the Borrower immediately shall prepay
the Revolving Loans and (after all Revolving Loans have been repaid) cash collateralize
the LOC Obligations, in an amount sufficient to eliminate such excess.

 

(B)           LOC Committed
Amount.  If at any time, the sum of
the aggregate principal amount of LOC Obligations shall exceed the LOC
Committed Amount, the Borrower immediately shall cash collateralize the LOC
Obligations in an amount sufficient to eliminate such excess.

 

(ii)           Excess Cash Flow.  Within 90 days after the end of each fiscal
year (commencing with the fiscal year ending December 31, 2002), the
Borrower shall prepay the Loans in an amount equal to the sum of (A) 75% (if
the Leverage Ratio as of the end of such fiscal year is equal to or greater
than 1.50 to 1.0) or 50% (if the Leverage Ratio as of the end of such fiscal
year is less than 1.50 to 1.0) of Excess Cash Flow for such prior fiscal year minus
(B) the amount of any voluntary prepayments made during such fiscal year of the
Term Loan or (to the extent accompanied by a reduction in the Revolving
Committed Amount) the Revolving Loans (such prepayment to be applied as set
forth in clause (vii) below).

 

39

 

(iii)                               (A)          Lithotripsy
Dispositions and Orthotripsy Dispositions. 
Immediately upon the occurrence of any Asset Disposition Prepayment
Event, (1) with respect to any Lithotripsy Disposition, the Borrower shall
prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds
of such Lithotripsy Disposition and (2) with respect to any Orthotripsy
Disposition, the Borrower shall prepay the Loans in an aggregate amount equal
to 100% of the After-Tax Gain of such Orthotripsy Disposition  (such prepayments to be applied as set forth
in clause (vii) below).

 

(B)           Other Asset
Dispositions.   Immediately upon the
occurrence of any Asset Disposition Prepayment Event, with respect to all Asset
Dispositions (other than any Lithotripsy Disposition or Orthotripsy
Disposition), the Borrower shall prepay the Loans in an aggregate amount equal
to 100% of the Net Cash Proceeds of the related Asset Disposition not applied
(or caused to be applied) by the Credit Parties during the related Application
Period to make Eligible Reinvestments
as contemplated by the terms of Section 8.5 (such prepayments to be
applied as set forth in clause (vii) below).

 

(C)           Involuntary
Dispositions.  Immediately upon the
occurrence of an Involuntary Disposition Prepayment Event, the Borrower shall
prepay the Loans in an aggregate amount equal to 100% of the Excess Proceeds
(such prepayment to be applied as set forth in clause (vii) below).

 

(D)          Key-Man Life
Insurance.   Immediately upon the
receipt by the Borrower of any payment under the Key-Man Life Insurance Policy
(subject to the provisions of Section 7.6(c)), the Borrower shall prepay the
Loans in an aggregate amount equal to 100% of such payment (such prepayment to
be applied as set forth in clause (vii) below).

 

(iv)          Debt Issuances.    Immediately upon the occurrence of a Debt
Issuance Prepayment Event, the Borrower shall prepay the Loans in an aggregate
amount equal to 100% of the Net Cash Proceeds of the related Debt Issuance
(such prepayment to be applied as set forth in clause (vii) below).

 

(v)           Equity Issuances.  Immediately upon the occurrence of an Equity
Issuance Prepayment Event, the Borrower shall prepay the Loans in an aggregate
amount equal to 100% of the Net Cash Proceeds of the related Equity Issuance
(such prepayment to be applied as set forth in clause (vii) below).

 

(vi)          Purchase Price
Adjustment. Immediately upon the receipt by the Borrower of any Purchase
Price Adjustment pursuant to the Purchase Agreement, the Borrower shall prepay
the Loans in an aggregate amount equal to 100% of such payment (such prepayment
to be applied as set forth in clause (vii) below).

 

(vii)         Application of
Mandatory Prepayments.  All amounts
required to be paid pursuant to this Section 3.3(b) shall be applied as
follows: (A) with respect to all amounts prepaid pursuant to
Section 3.3(b)(i)(A) and Section 3.3(b)(vi), to 

 

40

 

Revolving Loans and (after all Revolving Loans have been repaid) to a
cash collateral account in respect of LOC Obligations, (B) with respect to
all amounts prepaid pursuant to Section 3.3(b)(i)(B), to a cash collateral
account in respect of LOC Obligations and (C) with respect to all amounts
prepaid pursuant to Section 3.3(b)(ii), (iii), (iv) or (v) , first, to the
Term Loan (to remaining Principal Amortization Payments in inverse order of maturities thereof) and second, to the Revolving Loans and (after all Revolving Loans have
been repaid) to a cash collateral account in respect of LOC Obligations (with a
corresponding reduction in the Revolving Committed Amount in an amount equal to
all amounts applied pursuant to this clause (C)).  Within the parameters of the applications
set forth above, prepayments shall be applied first to Base Rate Loans and then
to Eurodollar Loans in direct order of Interest Period maturities.  All prepayments under this
Section 3.3(b) shall be subject to Section 3.12, but otherwise
without premium or penalty, and shall
be accompanied by interest on the principal amount prepaid through the
date of prepayment.

 

3.4          Termination and Reduction of
Revolving Committed Amount.

 

(a)           Voluntary Reductions.  The Borrower may from time to time permanently reduce or
terminate the Revolving Committed Amount in whole or in part (in minimum
aggregate amounts of $1,000,000 or in integral multiples of $500,000 in excess
thereof (or, if less, the full remaining amount of the then applicable
Revolving Committed Amount)) upon five (5) Business Days’ prior written notice
to the Agent; provided, however, no such termination or reduction
shall be made which would cause the sum of the aggregate outstanding principal
amount of Revolving Loans plus LOC Obligations plus Swingline
Loans to exceed the lesser of (A) the Revolving Committed Amount and
(B) the Borrowing Base, unless, concurrently with such termination or
reduction, the Revolving Loans are repaid to the extent necessary to eliminate
such excess.  The Agent shall promptly
notify each affected Lender of receipt by the Agent of any notice from the
Borrower pursuant to this Section 3.4(a).

 

(b)           Term Loan Commitments.  The Term Loan Commitment of each Lender, if any, shall
automatically terminate at such time as such Lender shall have made available
to the Borrower such Lender’s share of the Term Loan.

 

(c)           Mandatory Reductions.  The Revolving Committed Amount automatically shall be permanently
reduced from time to time in accordance with the terms of
Section 3.3(b)(vii).

 

(d)           Maturity Date. 
Unless terminated sooner pursuant to Section 3.4(a) or
Section 9.2, the Revolving Commitments of the Lenders and the LOC
Commitment of the Issuing Lender shall automatically terminate on the Maturity
Date.

 

(e)           General. 
The Borrower shall pay to the Agent for the account of the Lenders in
accordance with the terms of Section 3.5(a), on the date of each
termination or reduction of the Revolving Committed Amount, the Unused Fee
accrued through the date of such termination or reduction on the amount of the
Revolving Committed Amount so terminated or reduced.

 

41

 

3.5          Fees.

 

(a)           Unused Fee. 
In consideration of the Revolving Commitments of the Lenders hereunder,
the Borrower promises to pay to the Agent for the account of each Lender a fee
(the “Unused Fee”) on the Unused Revolving Committed Amount computed at a per
annum rate for each day during the applicable Unused Fee Calculation Period
(hereinafter defined) at a rate equal to the Applicable Percentage in effect
from time to time.  The Unused Fee shall
commence to accrue on the Closing Date and shall be due and payable in arrears
on the first Business Day following the last Business Day of each March, June,
September and December (and on any date that the Revolving Committed Amount is
reduced and on the Maturity Date) for the immediately preceding quarter (or
portion thereof) (each such quarter or portion thereof for which the Unused Fee
is payable hereunder being herein referred to as an “Unused Fee Calculation
Period”), beginning with the first of such dates to occur after the Closing
Date.

 

(b)           Letter of Credit Fees.

 

(i)            In consideration of the issuance of
standby and commercial Letters of Credit hereunder, the Borrower promises to
pay to the Agent for the account of each Lender a fee (the “Letter of Credit
Fee”) on such Lender’s Revolving Commitment Percentage of the average daily
maximum amount available to be drawn under each such Letter of Credit computed
at a per annum rate for each day from the date of issuance to the date of
expiration equal to the Applicable Percentage. 
The Letter of Credit Fee will be payable quarterly in arrears on the
first Business Day following the last Business Day of each March, June, September
and December for the immediately preceding quarter (or a portion thereof).

 

(ii)           Issuing Lender Fees.  In addition to the Letter of Credit Fee
payable pursuant to clause (i) above, the Borrower promises to pay to the
Agent for the account of the Issuing Lender without sharing by the other Lenders
(i) a letter of credit fronting fee of 0.125% on the average daily maximum
amount available to be drawn under each Letter of Credit computed at a per
annum rate for each day from the date of issuance to the date of expiration
(which fronting fee shall be payable quarterly in arrears on the first Business
Day following the last Business Day of each March, June, September and December
for the immediately preceding quarter (or a portion thereof)) and (ii) the
customary charges from time to time of the Issuing Lender with respect to the
issuance, amendment, transfer, administration, cancellation and conversion of,
and drawings under, such Letters of Credit.

 

(c)           Agent’s Fees. 
The Borrower promises to pay to the Agent, for its own account, for the
account of the Issuing Lender and for the account of Banc of America Securities
LLC, as applicable, the fees referred to in the Agent’s Fee Letter.

 

3.6          Capital
Adequacy.

 

If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or 

 

42

 

comparable
agency charged with the interpretation or administration thereof in the
interpretation or administration of, any applicable law, rule or regulation
regarding capital adequacy, or compliance by such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender’s capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Lender could have achieved but for such adoption, effectiveness,
change or compliance (taking into consideration such Lender’s policies with
respect to capital adequacy), then, upon notice from such Lender to the
Borrower, the Borrower shall be obligated to pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.  Each determination by any such Lender of
amounts owing under this Section shall, absent manifest error, be
conclusive and binding on the parties hereto.

 

3.7          Limitation
on Eurodollar Loans.

 

If on or prior to the first day of any Interest Period for any
Eurodollar Loan:

 

(a)          the Agent determines
(which determination shall be conclusive) that by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period; or

 

(b)          the Required Lenders
determine (which determination shall be conclusive) and notify the Agent that
the Eurodollar Rate will not adequately and fairly reflect the cost to the
Lenders of funding Eurodollar Loans for such Interest Period;

 

then the Agent shall give the Borrower prompt notice thereof, and so
long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans, Continue Eurodollar Loans, or
to Convert Base Rate Loans into Eurodollar Loans and the Borrower shall, on the
last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Eurodollar Loans or Convert such
Eurodollar Loans into Base Rate Loans in accordance with the terms of this
Credit Agreement.

 

3.8          Illegality.

 

Notwithstanding any other provision of this Credit Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender’s obligation to make or
Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund Eurodollar Loans (in which case the provisions of Section 3.10 shall
be applicable).

 

3.9          Requirements
of Law.

 

If,
after the date hereof, the adoption of any applicable law, rule, or regulation,
or any change in any applicable law, rule, or regulation, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank, or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with
any request or directive (whether or not having the force of law) of any such
Governmental Authority, central bank, or comparable agency:

 

43

 

(i)            shall subject such Lender (or its
Applicable Lending Office) to any tax, duty, or other charge with respect to
any Eurodollar Loans, its Notes, or its obligation to make Eurodollar Loans, or
change the basis of taxation of any amounts payable to such Lender (or its
Applicable Lending Office) under this Credit Agreement or its Notes in respect
of any Eurodollar Loans (other than taxes imposed on the overall net income of
such Lender by the jurisdiction in which such Lender has its principal office
or such Applicable Lending Office);

 

(ii)           shall impose, modify, or deem
applicable any reserve, special deposit, assessment, or similar requirement
(other than the Eurodollar Reserve Percentage utilized in the determination of
the Adjusted Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of, such Lender
(or its Applicable Lending Office), including the Commitment of such Lender
hereunder; or

 

(iii)          shall impose on such Lender (or its
Applicable Lending Office) or the London interbank market any other condition
affecting this Credit Agreement or its Notes or any of such extensions of
credit or liabilities or commitments;

 

and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Eurodollar Loans or to reduce any sum received
or receivable by such Lender (or its Applicable Lending Office) under this
Credit Agreement or its Notes with respect to any Eurodollar Loans, then the
Borrower shall pay to such Lender on demand such amount or amounts as will
compensate such Lender for such increased cost or reduction.  If any Lender requests compensation by the
Borrower under this Section 3.9, the Borrower may, by notice to such
Lender (with a copy to the Agent), suspend the obligation of such Lender to
make or Continue Eurodollar Loans, or to Convert Base Rate Loans into
Eurodollar Loans, until the event or condition giving rise to such request
ceases to be in effect (in which case the provisions of Section 3.10 shall
be applicable); provided that such suspension shall not affect the right
of such Lender to receive the compensation so requested.  Each Lender shall promptly notify the
Borrower and the Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Lender to compensation pursuant to
this Section 3.9 and will designate a different Applicable Lending Office
if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it.  Any Lender
claiming compensation under this Section 3.9 shall furnish to the Borrower
and the Agent a statement setting forth the additional amount or amounts to be
paid to it hereunder which shall be conclusive in the absence of manifest
error.  In determining such amount, such
Lender may use any reasonable averaging and attribution methods.

 

3.10        Treatment
of Affected Loans.

 

If
the obligation of any Lender to make any Eurodollar Loan or to Continue, or to
Convert Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to
Section 3.7, 3.8 or 3.9 hereof, such Lender’s Eurodollar Loans shall be
automatically Converted into Base Rate Loans on the last day(s) of the then
current Interest Period(s) for such Eurodollar Loans (or, in the case of a
Conversion, on such earlier date as such Lender may specify to the Borrower
with a copy to the Agent) and, unless and until such Lender gives notice as
provided below that the circumstances specified in Section 3.7, 3.8 or 3.9
hereof that gave rise to such Conversion no longer exist:

 

44

 

(a)           to the extent that such Lender’s
Eurodollar Loans have been so Converted, all payments and prepayments of
principal that would otherwise be applied to such Lender’s Eurodollar Loans
shall be applied instead to its Base Rate Loans; and

 

(b)           all Loans that would otherwise be
made or Continued by such Lender as Eurodollar Loans shall be made or Continued
instead as Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate Loans.

 

If
such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 3.7, 3.8 or 3.9 hereof that gave rise
to the Conversion of such Lender’s Eurodollar Loans pursuant to this
Section 3.10 no longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Eurodollar Loans made by
other Lenders are outstanding, such Lender’s Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Loans, to the extent necessary so
that, after giving effect thereto, all Loans held by the Lenders holding
Eurodollar Loans and by such Lender are held pro rata (as to principal amounts,
interest rate basis, and Interest Periods) in accordance with their respective
Commitments.

 

3.11        Taxes.

 

(a)           Any and all payments
by any Credit Party to or for the account of any Lender or the Agent hereunder
or under any other Credit Document shall be made free and clear of and without
deduction for any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Lender (or its Applicable Lending Office) or the Agent (as the
case may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as “Taxes”).  If any Credit Party shall be required by law
to deduct any Taxes from or in respect of any sum payable under this Credit
Agreement or any other Credit Document to any Lender or the Agent, (i) the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.11) such Lender or the Agent receives an amount equal to
the sum it would have received had no such deductions been made, (ii) such
Credit Party shall make such deductions, (iii) such Credit Party shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law, and (iv) such Credit Party shall furnish
to the Agent, at its address referred to in Section 11.1, the original or
a certified copy of a receipt evidencing payment thereof.

 

(b)           In addition, the
Borrower agrees to pay any and all present or future stamp or documentary taxes
and any other excise or property taxes or charges or similar levies which arise
from any payment made under this Credit Agreement or any other Credit Document
or from the execution or delivery of, or otherwise with respect to, this Credit
Agreement or any other Credit Document (hereinafter referred to as “Other
Taxes”).

 

45

 

(c)           The Borrower agrees
to indemnify each Lender and the Agent for the full amount of Taxes and Other
Taxes (including, without limitation, any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 3.11)
paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest, and expenses) arising therefrom or with respect
thereto.

 

(d)           Each Lender that is not a United
States person under Section 7701(a)(30) of the Code, on or prior to the
date of its execution and delivery of this Credit Agreement in the case of each
Lender listed on the signature pages hereof and on or prior to the date on which
it becomes a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Borrower or the Agent (but only so
long as such Lender remains lawfully able to do so), shall provide the Borrower
and the Agent with (i) Internal Revenue Service Form W-8 BEN or W-8 ECI,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income
tax treaty to which the United States is a party which reduces to zero the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Credit Agreement is effectively connected with the
conduct of a trade or business in the United States, (ii) Internal Revenue
Service Form W-8 or W-9, as appropriate, or any successor form prescribed by
the Internal Revenue Service, and/or (iii) any other form or certificate
required by any taxing authority (including any certificate required by
Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that
such Lender is entitled to an exemption from tax on payments pursuant to this
Credit Agreement or any of the other Credit Documents.

 

(e)           For any period with respect to which
a Lender has failed to provide the Borrower and the Agent with the appropriate
form pursuant to Section 3.11(d) (unless such failure is due to a change
in treaty, law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be entitled to
indemnification under Section 3.11(a) or 3.11(b) with respect to Taxes
imposed by the United States; provided, however, that should a Lender,
which is otherwise exempt from withholding tax, become subject to Taxes because
of its failure to deliver a form required hereunder, the Borrower shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.

 

(f)            If any Credit Party is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 3.11, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its Applicable
Lending Office so as to eliminate or reduce any such additional payment which
may thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.

 

(g)           Without prejudice to the survival of
any other agreement of the Credit Parties hereunder, the agreements and
obligations of the Credit Parties contained in this Section 3.11 shall survive the repayment of the Loans, LOC
Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder.

 

 

46

 

3.12        Compensation.

 

Upon
demand of any Lender (with a copy to the Agent) from time to time, the Borrower
shall promptly compensate such Lender for and hold such Lender harmless from
any loss, cost or expense incurred by it as a result of:

 

(a)           any
Continuation, Conversion, payment or prepayment of any Eurodollar Loan on a day other than the last day of the Interest Period for such Loan (whether
voluntary, mandatory, automatic, or for any other reason, including, without
limitation, (i) in connection with any assignment by Bank of America
pursuant to Section 11.3(b) as part of the primary syndication of the Loans
during the 90-day period immediately following the Closing Date (it being
understood and agreed by the Agent, however, that the Agent shall use
commercially reasonable efforts to minimize the incurrence of costs by
the Borrower pursuant to this clause (i))
and (ii) the acceleration of the Loans pursuant to Section 9.2);

 

(b)           any failure by the Borrower (for a
reason other than the failure of such Lender to make a Loan) to prepay, borrow,
Continue or Convert any Eurodollar Loan on
the date or in the amount notified by the Borrower; or

 

(c)           any
assignment of a Eurodollar Loan on a day other than the last day of the
Interest Period therefor as a result of a request by the Borrower pursuant to
Section 3.17;

 

including any loss
of anticipated profits and any loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained.  The
Borrower shall also pay any customary administrative fees charged by such
Lender in connection with the foregoing.

 

For purposes of
calculating amounts payable by the Borrower to the Lenders under this
Section 3.12, each Lender shall
be deemed to have funded each Eurodollar Loan made by it at the Interbank
Offered Rate for such Loan by a matching deposit or other borrowing in the
applicable offshore Dollar interbank market for a comparable amount and for a
comparable period, whether or not such Eurodollar Loan was in fact so funded.  The
covenants of the Borrower set forth in this Section 3.12 shall survive the
repayment of the Loans, LOC Obligations and other obligations under the Credit
Documents and the termination of the Commitments hereunder.

 

3.13        Pro Rata
Treatment.

 

Except to the extent otherwise provided herein:

 

(a)           Loans.  Each Loan, each payment or (subject to the
terms of Section 3.3) prepayment of principal of any Loan or reimbursement
obligations arising from drawings under Letters of Credit, each payment of
interest on the Loans or reimbursement obligations arising from drawings under
Letters of Credit, each payment of Unused Fees, each payment of the Letter of
Credit Fee, each reduction of the Revolving Committed Amount and each
conversion or extension of any Loan, shall be allocated pro rata among the
Lenders in accordance with the respective principal amounts of their
outstanding Loans of the applicable type and Participation Interests in Loans
of the applicable type and Letters of Credit.

 

47

 

(b)           Advances.  No Lender shall be responsible for the
failure or delay by any other Lender in its obligation to make its ratable
share of a borrowing hereunder; provided, however, that the
failure of any Lender to fulfill its obligations hereunder shall not relieve
any other Lender of its obligations hereunder. 
Unless the Agent shall have been notified by any Lender prior to the
date of any requested borrowing that such Lender does not intend to make
available to the Agent its ratable share of such borrowing to be made on such
date, the Agent may assume that such Lender has made such amount available to
the Agent on the date of such borrowing, and the Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to do so)
make available to the Borrower a corresponding amount.  If such corresponding amount is not in fact
made available to the Agent, the Agent shall be able to recover such
corresponding amount from such Lender. 
If such Lender does not pay such corresponding amount forthwith upon the
Agent’s demand therefor, the Agent will promptly notify the Borrower, and the
Borrower shall immediately pay such corresponding amount to the Agent.  The Agent shall also be entitled to recover
from the Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent at a per annum rate equal to
(i) from the Borrower at the applicable rate for the applicable borrowing
pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal
Funds Rate.

 

3.14        Sharing of
Payments.

 

The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the
exercise of a right of setoff, banker’s lien or counterclaim, or pursuant to a
secured claim under Section 506 of Title 11 of the United States Code or
other security or interest arising from, or in lieu of, such secured claim,
received by such Lender under any applicable bankruptcy, insolvency or other
similar law or otherwise, or by any other means, in excess of its pro rata
share of such payment as provided for in this Credit Agreement, such Lender
shall promptly purchase from the other Lenders a participation interest in such
Loans, LOC Obligations and other obligations in such amounts, and make such
other adjustments from time to time, as shall be equitable to the end that all
Lenders share such payment in accordance with their respective ratable shares
as provided for in this Credit Agreement. 
The Lenders further agree among themselves that if payment to a Lender
obtained by such Lender through the exercise of a right of setoff, banker’s
lien, counterclaim or other event as aforesaid shall be rescinded or must
otherwise be restored, each Lender which shall have shared the benefit of such
payment shall, by repurchase of a participation interest theretofore sold,
return its share of that benefit (together with its share of any accrued
interest payable with respect thereto) to each Lender whose payment shall have
been rescinded or otherwise restored. 
The Borrower agrees that any Lender so purchasing such a participation
interest may, to the fullest extent permitted by law, exercise all rights of
payment, including setoff, banker’s lien or counterclaim, with respect to such
participation interest as fully as if such Lender were a holder of such Loan,
LOC Obligations or other obligation in the amount of such participation
interest.  Except as otherwise expressly
provided in this Credit Agreement, if any Lender shall fail to remit to the
Agent or any other Lender an amount payable by such Lender to the Agent or such
other Lender pursuant to this Credit Agreement on the date when such amount is
due, such payments shall be made together with interest thereon for each date
from 

 

48

 

the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate.  If under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section 3.14 applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders under this Section 3.14
to share in the benefits of any recovery on such secured claim.

 

3.15        Payments,
Computations, Etc.

 

(a)           Generally.  Except as otherwise specifically provided
herein, all payments hereunder shall be made to the Agent in Dollars in immediately
available funds, without condition or deduction for any counterclaim, defense,
recoupment or setoff of any kind, at the Agent’s office specified in Schedule 2.1(a)
not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when
due.  Payments received after such time
shall be deemed to have been received on the next succeeding Business Day.  The Agent may (but shall not be obligated
to) debit the amount of any such payment which is not made by such time to any
ordinary deposit account of the Borrower or any other Credit Party maintained with the Agent (with notice to the
Borrower or such other Credit Party).  The Borrower shall, at the time it makes any
payment under this Credit Agreement, specify to the Agent the Loans, LOC
Obligations, Fees, interest or other amounts payable by the Borrower hereunder
to which such payment is to be applied (and in the event that it fails so to
specify, or if such application would be inconsistent with the terms hereof,
the Agent shall distribute such payment to the Lenders in such manner as the
Agent may determine to be appropriate in respect of obligations owing by the
Borrower hereunder, subject to the terms of Section 3.13(a)).  The Agent will distribute such payments to
such Lenders, if any such payment is received prior to 2:00 P.M. (Charlotte,
North Carolina time) on a Business Day in like funds as received prior to the
end of such Business Day and otherwise the Agent will distribute such payment
to such Lenders on the next succeeding Business Day.  Whenever any payment hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for the period
of such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day.  Except as expressly provided
otherwise herein, all computations of interest and fees shall be made on the
basis of actual number of days elapsed over a year of 360 days, except with
respect to computation of interest on Base Rate Loans which shall be calculated
based on a year of 365 or 366 days, as appropriate.  Interest shall accrue from and include the date of borrowing, but
exclude the date of payment.

 

(b)           Allocation of
Payments After Acceleration. 
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after acceleration of the Credit Party Obligations pursuant to
Section 9.2, all amounts collected or received by the Agent or any Lender
on account of the Credit Party Obligations or any other amounts outstanding
under any of the Credit Documents or in respect of the Collateral shall be paid
over or delivered as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys’ fees) of the Agent
in connection 

 

49

 

with enforcing the rights of the Lenders under the Credit Documents
and any protective advances made by the Agent with respect to the Collateral
under or pursuant to the terms of the Collateral Documents;

 

SECOND, to payment of any fees owed to the Agent;

 

THIRD, to the payment of all of the Credit Party Obligations consisting
of accrued fees and interest (including, without limitation, accrued fees and
interest arising under any Hedging Agreement between the Borrower and any
Lender, or any Affiliate of a Lender);

 

FOURTH, to the payment of the outstanding principal amount of the
Credit Party Obligations (including,
without limitation, the outstanding principal amount arising under any Hedging
Agreement  between the Borrower and
any Lender, or any Affiliate of a Lender and the payment or cash
collateralization of the outstanding LOC Obligations);

 

FIFTH, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys’ fees) of each of
the Lenders in connection with enforcing its rights under the Credit Documents
or otherwise with respect to the Credit Party Obligations owing to such Lender;

 

SIXTH, to all other Credit Party Obligations and other obligations
which shall have become due and payable under the Credit Documents or otherwise
and not repaid pursuant to clauses “FIRST” through “FIFTH” above; and

 

SEVENTH, to the payment of the surplus, if any, to whomever may be
lawfully entitled to receive such surplus.

 

In carrying out
the foregoing, (i) amounts received shall be applied in the numerical
order provided until exhausted prior to application to the next succeeding
category; (ii) each of the Lenders shall receive an amount equal to its
pro rata share (based on the proportion that the then outstanding Loans and LOC
Obligations held by such Lender bears to the aggregate then outstanding Loans
and LOC Obligations) of amounts available to be applied pursuant to
clauses “THIRD”, “FOURTH”,
“FIFTH” and “SIXTH” above; and (iii) to the extent that any amounts
available for distribution pursuant to clause “FIFTH” above are attributable to the issued but undrawn amount
of outstanding Letters of Credit, such amounts shall be held by the Agent in a
cash collateral account and applied (A) first, to reimburse the Issuing
Lender from time to time for any drawings under such Letters of Credit and
(B) then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner provided in this Section 3.15(b).

 

3.16        Evidence of
Debt.

 

(a)           Each Lender shall
maintain an account or accounts evidencing each Loan made by such Lender to the
Borrower from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time under this Credit
Agreement.  

 

50

 

Each
Lender will make reasonable efforts to maintain the accuracy of its account or
accounts and to promptly update its account or accounts from time to time, as
necessary.

 

(b)           The Agent shall
maintain the Register pursuant to Section 11.3(c), and a subaccount for
each Lender, in which Register and subaccounts (taken together) shall be
recorded (i) the amount, type and Interest Period of each such Loan
hereunder, (ii) the amount of any principal or interest due and payable or
to become due and payable to each Lender hereunder and (iii) the amount of
any sum received by the Agent hereunder from or for the account of any Credit
Party and each Lender’s share thereof. 
The Agent will make reasonable efforts to maintain the accuracy of the
subaccounts referred to in the preceding sentence and to promptly update such
subaccounts from time to time, as necessary.

 

(c)           The entries made in
the accounts, Register and subaccounts maintained pursuant to clause (b)
of this Section 3.16 (and, if consistent with the entries of the Agent,
clause (a)) shall be prima facie evidence of the existence and amounts of
the obligations of the Credit Parties therein
recorded; provided, however, that the failure of any Lender or
the Agent to maintain any such account, such Register or such subaccount, as
applicable, or any error therein, shall not in any manner affect the obligation
of the Credit Parties to repay the
Credit Party Obligations owing to such Lender.

 

3.17        Replacement
of Affected Lenders.

 

If (i) any
Lender having a Revolving Commitment becomes a Defaulting Lender or otherwise
defaults in its Revolving Commitment, (ii) any Credit Party is required to
make any payments to any Lender under Section 3.6, Section 3.9 or
Section 3.11 in excess of the proportionate amount (based on the
respective Commitments and/or Loans of the Lenders) of corresponding payments
required to be made to the other Lenders or (iii) any Lender is unable or
unwilling to make, maintain, and fund Eurodollar Loans as contemplated by
Section 3.8, the Borrower shall have the right, if no Event of Default
then exists, to replace such Lender (the “Replaced Lender”) with one or more
other Eligible Assignee or Eligible Assignees, none of whom shall constitute a
Defaulting Lender at the time of such replacement (collectively, the
“Replacement Lender”), provided that (a) at the time of any
replacement pursuant to this Section 3.17, the Replaced Lender and
Replacement Lender shall enter into an Assignment and Acceptance pursuant to
which the Replacement Lender shall acquire all or a portion, as the case may
be, of the Commitments and outstanding Loans of, and participation in Letters
of Credit by, the Replaced Lender and (b) all obligations of the Borrower
owing to the Replaced Lender relating to the Loans so replaced (including,
without limitation, such increased costs and excluding those specifically
described in clause (a) above in respect of which the assignment purchase
price has been, or is concurrently being paid) shall be paid in full to such
Replaced Lender concurrently with such replacement.  Upon the execution of the appropriate Assignment and Acceptance,
the payment of amounts referred to in clauses (a) and (b) above and, if so
requested by the Replacement Lender, delivery to the Replacement Lender of the
appropriate Note or Notes executed by the Borrower, the Replacement Lender
shall become a Lender hereunder and the Replaced Lender shall cease to
constitute a Lender hereunder with respect to such replaced Loans, except with
respect to indemnification provisions under this Credit Agreement, which shall
survive as to such Replaced Lender. 
Notwithstanding anything to the contrary contained above, (1) the
Lender that acts as the Issuing Lender may not be replaced hereunder at any
time that it has Letters of Credit outstanding hereunder unless arrangements 

 

51

 

satisfactory to the
Issuing Lender (including the furnishing of a back-up standby letter of credit
in form and substance, and issued by an issuer satisfactory to such Issuing
Lender or the depositing of cash collateral into a cash collateral account
maintained with the Agent in amounts and pursuant to arrangements satisfactory
to such Issuing Lender) have been made with respect to such outstanding Letters
of Credit and (2) the Lender that acts as the Agent may not be replaced
hereunder except in accordance with the terms of Section 10.9.  The Replaced Lender shall be required to
deliver for cancellation its applicable Notes to be canceled on the date of
replacement, or if any such Note is lost or unavailable, such other assurances
or indemnification therefor as the Borrower may reasonably request.

 

SECTION
4

 

GUARANTY

 

4.1          The Guaranty.

 

Each of the Guarantors hereby jointly and severally guarantees to each
Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and
the Agent as hereinafter provided, as primary obligor and not as surety, the
prompt payment of the Credit Party Obligations in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) strictly in accordance with the terms
thereof.  The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantors will, jointly
and severally, promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Credit Party Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of
such extension or renewal.

 

Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations
of each Guarantor under this Credit
Agreement and the other Credit Documents shall be limited to an
aggregate amount equal to the largest amount that would not render such
obligations subject to avoidance under Section 548 of the Bankruptcy Code
or any comparable provisions of any applicable state law.

 

4.2          Obligations
Unconditional.

 

The obligations of the Guarantors under Section 4.1 are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or
Hedging Agreements, or any other agreement or instrument referred to therein,
or any substitution, release, impairment or exchange of any other guarantee of
or security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances.  Each
Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity,
reimbursement or contribution against the Borrower or any other Guarantor for
amounts 

 

52

 

paid
under this Section 4 until such time as the Credit Party Obligations have
been Fully Satisfied.  Without limiting
the generality of the foregoing, it is agreed that, to the fullest extent
permitted by law, the occurrence of any one or more of the following shall not
alter or impair the liability of any Guarantor hereunder which shall remain
absolute and unconditional as described above:

 

(a)           at any time or from
time to time, without notice to any Guarantor, the time for any performance of
or compliance with any of the Credit Party Obligations shall be extended, or
such performance or compliance shall be waived;

 

(b)           any of the acts
mentioned in any of the provisions of any of the Credit Documents, any Hedging
Agreement between any Consolidated Party and any Lender, or any Affiliate of a
Lender, or any other agreement or instrument referred to in the Credit
Documents or such Hedging Agreements shall be done or omitted;

 

(c)           the maturity of any
of the Credit Party Obligations shall be accelerated, or any of the Credit
Party Obligations shall be modified, supplemented or amended in any respect, or
any right under any of the Credit Documents, any Hedging Agreement between any
Consolidated Party and any Lender, or any Affiliate of a Lender, or any other
agreement or instrument referred to in the Credit Documents or such Hedging
Agreements shall be waived or any other guarantee of any of the Credit Party Obligations
or any security therefor shall be released, impaired or exchanged in whole or
in part or otherwise dealt with;

 

(d)           any Lien granted to,
or in favor of, the Agent or any Lender or Lenders as security for any of the
Credit Party Obligations shall fail to attach or be perfected; or

 

(e)           any of the Credit
Party Obligations shall be determined to be void or voidable (including,
without limitation, for the benefit of any creditor of any Guarantor) or shall
be subordinated to the claims of any Person (including, without limitation, any
creditor of any Guarantor).

 

With respect to its obligations hereunder, each Guarantor hereby
expressly waives diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Agent or any Lender exhaust
any right, power or remedy or proceed against any Person under any of the
Credit Documents, any Hedging Agreement between any Consolidated Party and any
Lender, or any Affiliate of a Lender, or any other agreement or instrument referred
to in the Credit Documents or such Hedging Agreements, or against any other
Person under any other guarantee of, or security for, any of the Credit Party
Obligations.

 

4.3          Reinstatement.

 

The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment
by or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit
Party Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment 

 

53

 

constituted
a preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.

 

4.4          Certain
Additional Waivers.

 

Without limiting the generality of the provisions of this
Section 4, each Guarantor hereby specifically waives the benefits of N.C.
Gen. Stat. §§ 26-7 through 26-9, inclusive, to the extent applicable.  Each Guarantor further agrees that such
Guarantor shall have no right of recourse to security for the Credit Party
Obligations, except through the exercise of rights of subrogation pursuant to
Section 4.2 and through the exercise of rights of contribution pursuant to
Section 4.6.

 

4.5          Remedies.

 

The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due
and payable as provided in Section 9.2 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Credit Party
Obligations being deemed to have become automatically due and payable), the
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of
Section 4.1.  The Guarantors
acknowledge and agree that their obligations hereunder are secured in
accordance with the terms of the Collateral Documents and that the Lenders may
exercise their remedies thereunder in accordance with the terms thereof.

 

4.6          Rights
of Contribution.

 

The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such
other Guarantor’s Contribution Share (as defined below) of such Excess
Payment.  The payment obligations of any
Guarantor under this Section 4.6 shall be subordinate and subject in right
of payment to the Credit Party Obligations until such time as the Credit Party
Obligations have been Fully Satisfied, and none of the Guarantors shall
exercise any right or remedy under this Section 4.6 against any other
Guarantor until such Credit Party Obligations have been Fully Satisfied.  For purposes of this Section 4.6,
(a) “Excess Payment” shall mean the amount paid by any Guarantor in excess
of its Pro Rata Share of any Guaranteed Obligations; (b) “Pro Rata Share”
shall mean, for any Guarantor in respect of any payment of Credit Party Obligations,
the ratio (expressed as a percentage) as of the date of such payment of
Guaranteed Obligations of (i) the amount by which the aggregate present
fair salable value of all of its assets and properties exceeds the amount of
all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (ii) the amount by which the
aggregate present fair salable value of all assets and other properties of all
of the Credit Parties exceeds the
amount of all of the debts and liabilities (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of the Credit
Parties hereunder) of the Credit
Parties; provided, however,
that, for purposes of calculating the Pro Rata Shares of the Guarantors in
respect of any payment of Credit Party Obligations, any Guarantor that became a
Guarantor subsequent to the date of any such 

 

54

 

payment
shall be deemed to have been a Guarantor on the date of such payment and the
financial information for such Guarantor as of the date such Guarantor became a
Guarantor shall be utilized for such Guarantor in connection with such payment;
and (c) “Contribution Share” shall mean, for any Guarantor in respect of
any Excess Payment made by any other Guarantor, the ratio (expressed as a
percentage) as of the date of such Excess Payment of (i) the amount by
which the aggregate present fair salable value of all of its assets and
properties exceeds the amount of all debts and liabilities of such Guarantor
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of such Guarantor hereunder) to (ii) the
amount by which the aggregate present fair salable value of all assets and
other properties of the Credit Parties other
than the maker of such Excess Payment exceeds the amount of all of the debts
and liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Credit Parties) of the Credit Parties other than the maker of such Excess Payment; provided,
however, that, for purposes of calculating the Contribution Shares of
the Guarantors in respect of any Excess Payment, any Guarantor that became a
Guarantor subsequent to the date of any such Excess Payment shall be deemed to
have been a Guarantor on the date of such Excess Payment and the financial
information for such Guarantor as of the date such Guarantor became a Guarantor
shall be utilized for such Guarantor in connection with such Excess
Payment.  This Section 4.6 shall
not be deemed to affect any right of subrogation, indemnity, reimbursement or
contribution that any Guarantor may have under applicable law against the
Borrower in respect of any payment of Guaranteed Obligations.  Notwithstanding the foregoing, all rights of
contribution against any Guarantor shall terminate from and after such time, if
ever, that such Guarantor shall be relieved of its obligations pursuant to
Section 8.5.

 

4.7          Guarantee of Payment; Continuing
Guarantee.

 

The guarantee in this Section 4 is a guaranty of payment and not
of collection, is a continuing guarantee, and shall apply to all Credit Party
Obligations whenever arising.

 

SECTION
5

 

CONDITIONS

 

5.1          Closing
Conditions.

 

The obligation of the Lenders to enter into this Credit Agreement and
to make the initial Loans or the Issuing Lender to issue the initial Letter of
Credit, whichever shall occur first, shall be subject to satisfaction of the
following conditions:

 

(a)           Executed Credit
Documents.  Receipt by the Agent of
duly executed copies of:  (i) this
Credit Agreement, (ii) the Collateral Documents and (iii) all other
Credit Documents.

 

(b)           Organizational
Documents.  Receipt by the Agent of
the following:

 

(i)            Charter
Documents.  Copies of the articles
or certificates of incorporation or other charter documents of each Credit
Party certified to be true and complete as of a recent date by the appropriate
Governmental Authority of the state 

 

55

 

or other jurisdiction of its incorporation and certified by a secretary
or assistant secretary of such Credit Party to be true and correct as of the
Closing Date.

 

(ii)           Bylaws; Etc.  A copy of the bylaws or other governing
document of each Credit Party certified by a secretary or assistant secretary
of such Credit Party to be true and correct as of the Closing Date.

 

(iii)          Resolutions.  Copies of resolutions of the Board of
Directors of each Credit Party approving and adopting the Credit Documents to
which it is a party, the transactions contemplated therein and authorizing
execution and delivery thereof, certified by a secretary or assistant secretary
of such Credit Party to be true and correct and in force and effect as of the
Closing Date.

 

(iv)          Good Standing.  Copies of (A) certificates of good
standing, existence or its equivalent with respect to each Credit Party
certified as of a recent date by the appropriate Governmental Authorities of
the state or other jurisdiction of organization and each other jurisdiction in
which the failure to so qualify and be in good standing could have a Material
Adverse Effect and (B) to the extent available, a certificate indicating
payment of all corporate or comparable franchise taxes certified as of a recent
date by the appropriate governmental taxing authorities.

 

(v)           Incumbency.  An incumbency certificate of each Credit
Party certified by a secretary or assistant secretary to be true and correct as
of the Closing Date.

 

(c)           Opinions of
Counsel.  The Agent shall have
received, dated as of the Closing Date, and in form and substance
reasonably satisfactory to the Agent, a
legal opinion of Miller & Martin LLP, general counsel for the Credit
Parties.

 

(d)           Personal Property
Collateral.  The Agent shall have
received:

 

(i)            searches of Uniform Commercial Code
filings in the jurisdiction of the chief executive office of each Credit Party
and each jurisdiction where any Collateral is located or where a filing would
need to be made in order to perfect the Agent’s security interest in the
Collateral, copies of the financing statements on file in such jurisdictions
and evidence that no Liens exist other than Permitted Liens;

 

(ii)           duly executed UCC financing statements
for each appropriate jurisdiction as is necessary, in the Agent’s sole
discretion, to perfect the Agent’s security interest in the Collateral;

 

(iii)          searches of ownership of, and Liens
on, intellectual property of each Credit Party in the appropriate governmental
offices;

 

(iv)          all
certificates evidencing any certificated Capital Stock pledged to the
Agent pursuant to the Pledge Agreement, together with duly executed in blank,
undated stock powers attached thereto (unless, with respect to the pledged
Capital Stock of any Foreign Subsidiary, such stock powers are deemed 

 

56

 

unnecessary by the
Agent in its reasonable discretion under the law of the jurisdiction of
incorporation of such Person);

 

(v)           duly executed notices of grant of
security interest in the form required by the Security Agreement as are
necessary, in the Agent’s sole discretion, to perfect the Agent’s security
interest in the Collateral;

 

(vi)          all instruments and chattel paper in
the possession of any of the Credit Parties, together with allonges or
assignments as may be necessary or appropriate to perfect the Agent’s security
interest in the Collateral;

 

(vii)         duly
executed consents as are necessary, in the Agent’s sole discretion, to perfect
the Agent’s security interest in the Collateral; and

 

(viii)        in the case of any personal property
Collateral located at a premises leased by a Credit Party, such estoppel
letters, consents and waivers from the landlords on such real property as may
be required by the Agent.

 

(e)           Opening Borrowing
Base Report.  Receipt by the Agent
of a Borrowing Base Certificate as of the Closing Date after giving effect to the Transaction,
substantially in the form of Exhibit 7.1(d)
and certified by an Executive Officer of
the Borrower to be true and correct as of the Closing Date.

 

(f)            Availability.  After giving effect to the Transaction
(including the initial Revolving Loans made and Letters of Credit issued
hereunder on the Closing Date), the outstanding Revolving Loans plus LOC
Obligations plus $5,000,000 (minimum availability) shall not exceed the
lesser of (i) the Borrowing Base and (ii) the Revolving Committed
Amount;

 

(g)           Evidence of
Insurance.  Receipt by the Agent of
copies of insurance policies or certificates of insurance of the Consolidated
Parties evidencing liability and of the Credit Parties evidencing casualty
insurance meeting the requirements set forth in the Credit Documents,
including, but not limited to, naming the Agent as additional insured (in the
case of liability insurance) or loss payee (in the case of hazard insurance) on
behalf of the Lenders.

 

(h)           Consent.  Receipt by the Agent of evidence that all
governmental, shareholder and material third party consents (including
Hart-Scott-Rodino clearance) and approvals necessary or desirable in connection
with the Transaction (including, without limitation, to the extent required
under the respective partnership agreements, the consent of each Consolidated
Party (or general partner or partners, as the case may be) in which a Credit
Party is pledging the Capital Stock owned by such Credit Party in such
Consolidated Party) and expiration of all
applicable waiting periods without any action being taken by any authority that
could restrain, prevent or impose any material adverse conditions on the
Transaction or that could seek or threaten any of the foregoing, and no law or
regulation shall be applicable which in the judgment of the Agent could have
such effect.

 

57

 

(i)            Consummation of
Transaction.  The Transaction shall
have been consummated in accordance with the terms of the Purchase Agreement and in material
compliance with applicable law and regulatory approvals, all material
conditions precedent to the obligations of the buyer under the Purchase Agreement shall have been
satisfied.  The Purchase Agreement shall
provide for an aggregate purchase price not in excess of $46,000,000 (which
purchase price shall be based upon the working capital position of the Acquired
Company as of July 31, 2001 and shall include all fees and expenses to be
incurred in connection with the Transaction and the repayment in full of any
and all Indebtedness of the Acquired Company except for Indebtedness permitted under Section 8.1).  The Purchase
Agreement shall not have been altered, amended or otherwise changed or
supplemented in any material respect or any material condition therein waived,
without the prior written consent of the Agent.  The Agent shall have received a copy,
certified by an Executive Officer of the Borrower as true and complete, of the
Acquisition Agreement as originally executed and delivered, together with all
exhibits.

 

(j)            Officer’s
Certificates.  The Agent shall have
received a certificate or certificates executed by an Executive Officer of the
Borrower as of the Closing Date, in form and substance satisfactory to the
Agent, stating that (A) each Consolidated Party is in compliance with all
existing financial obligations, (B) all governmental, shareholder and
third party consents and approvals, if any, with respect to the Credit
Documents and the transactions contemplated thereby have been obtained,
(C) no action, suit, investigation or proceeding is pending or threatened
in any court or before any arbitrator or governmental instrumentality that
purports to affect any Consolidated Party or any transaction contemplated by
the Credit Documents, if such action, suit, investigation or proceeding could
have a Material Adverse Effect, (D) the transactions contemplated by the
Purchase Agreement have been consummated in accordance with the terms thereof
and (E) immediately after giving effect to the Transaction, (1) no
Default or Event of Default exists, (2) all representations and warranties
contained herein and in the other Credit Documents are true and correct in all
material respects and (3) on the basis of income statement items
and capital expenditures for the 12-month
period ending on the last day of the most recently ended calendar month prior
to the Closing Date and balance sheet items as of the Closing Date after giving
effect to the Transaction, the Credit Parties would be in pro forma compliance
with each of the financial covenants set forth in Section 7.10 as of the
first date provided for the measurement of each of such financial covenants in
accordance with the terms thereof.

 

(k)           Solvency.  The Agent shall have received a certificate
executed by an Executive Officer of the Borrower as of the Closing Date, in
form and substance satisfactory to the Agent, regarding the Solvency of the
Credit Parties on a consolidated basis.

 

(l)            Corporate
Structure.  The corporate
capital and ownership structure, shareholders agreements and management of the
Borrower and its Subsidiaries (after giving effect to the Transaction) shall be
satisfactory to the Administrative Agent.

 

(m)          Fees and Expenses.  Payment by the Credit Parties to the Lenders
and the Agent of all fees and expenses relating to the Credit Facilities which
are due and payable on the Closing Date, including, without limitation, payment
to the Agent of the fees set forth in the Agent’s Fee Letter.

 

58

 

(n)           Vehicle Titles.  To the extent available to the Credit
Parties on the Closing Date with respect to any Vehicles owned by the Credit
Parties for which a certificate of title may be issued, evidence that a
certificate of title has been issued by the appropriate governmental authority
in the name of such Credit Party with the Agent’s security interest noted thereon.

 

(o)           Other.  Receipt by the Lenders of such other
documents, instruments, agreements or information as reasonably requested by
any Lender, including, but not limited to, information regarding litigation,
tax, accounting, labor, insurance, pension liabilities (actual or contingent),
real estate leases, environmental matters, material contracts, debt agreements,
property ownership, contingent liabilities and management of the Consolidated
Parties.

 

5.2          Conditions to all Extensions of
Credit.

 

The obligations of each Lender to make, convert or extend any Loan and
of the Issuing Lender to issue or extend any Letter of Credit (including the
initial Loans and the initial Letter of Credit) are subject to satisfaction of
the following conditions in addition to satisfaction on the Closing Date of the
conditions set forth in Section 5.1:

 

(a)           The Borrower shall
have delivered (i) in the case of any Revolving Loan or any portion of the
Term Loan, an appropriate Notice of Borrowing or Notice of Extension/Conversion
or (ii) in the case of any Letter of Credit, the Issuing Lender shall have
received an appropriate request for issuance in accordance with the provisions
of Section 2.2(b);

 

(b)           The representations
and warranties set forth in Section 6 shall, subject to the limitations
set forth therein, be true and correct in all material respects as of such date
(except for those which expressly relate to an earlier date);

 

(c)           There shall not have
been commenced against any Consolidated Party an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and such involuntary case or other
case, proceeding or other action shall remain undismissed;

 

(d)           No Default or Event
of Default shall exist and be continuing either prior to or after giving effect
thereto; and

 

(e)           Immediately after
giving effect to the making of such Loan, in the case of a request for a
Revolving Loan or a Swingline Loan (and the application of the proceeds
thereof) or to the issuance of such Letter of Credit, as the case may be,
(i) the sum of the aggregate outstanding principal amount of Revolving
Loans plus LOC Obligations plus Swingline Loans shall not exceed
the lesser of (A) the Revolving Committed Amount and (B) the
Borrowing Base, (ii) the LOC Obligations shall not exceed the LOC
Committed 

 

59

 

Amount
and (iii) the aggregate outstanding principal amount of Swingline Loans shall
not exceed the Swingline Committed Amount.

 

The
delivery of each Notice of Borrowing and each request for a Letter of Credit
pursuant to Section 2.2(b) shall constitute a representation and warranty
by the Credit Parties of the
correctness of the matters specified in subsections (b), (c), (d) and (e)
above.

 

SECTION
6

 

REPRESENTATIONS AND WARRANTIES

 

The Credit Parties hereby represent to the Agent and each Lender that:

 

6.1          Financial
Condition.

 

(a)           The audited
consolidated balance sheets and income statements of the Consolidated Parties
for the fiscal years 1998, 1999 and 2000 (including the notes thereto)
(i) have been audited by Ernst & Young LLP, (ii) have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby and (iii) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of such
date and for such periods.  The
unaudited interim balance sheets of the Consolidated Parties as at the end of,
the related unaudited interim statements of earnings and of cash flows for and
the related working capital detail, each fiscal month and quarterly period
ended after September 30, 2001 and prior to the Closing Date (i) have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby and (ii) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of such
date and for such periods.  Other than
as set forth on Schedule 6.1(a), during the period from September 30,
2001 to and including the Closing Date, there has been no sale, transfer or
other disposition by any Consolidated Party of any material part of the
business or property of the Consolidated Parties, taken as a whole, and no
purchase or other acquisition by any of them of any business or property
(including any Capital Stock of any other Person) material in relation to the
consolidated financial condition of the Consolidated Parties, taken as a whole,
in each case, which is not reflected in the foregoing financial statements or
in the notes thereto and has not otherwise been disclosed in writing to the
Lenders on or prior to the Closing Date. 
As of the Closing Date, the Borrower and its Subsidiaries have no
material liabilities (contingent or otherwise) that are not reflected in the
foregoing financial statements or in the notes thereto.

 

(b)           The pro forma consolidated balance sheet
of the Consolidated Parties as of the Closing Date giving effect to the
Transaction in accordance with the terms of the Purchase Agreement and
reflecting estimated purchase accounting adjustments (i)  has been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and (ii) is
based upon reasonable assumptions made known to the Lenders and upon
information not known to be incorrect or misleading in any material respect.

 

60

 

(c)           The pro forma
balance sheets and related statements of earnings and cash flows for and the
related working capital detail of the Consolidated Parties, for fiscal years
2002, 2003, 2004, 2005 and 2006 (i) have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby and (ii) are
based upon reasonable assumptions made known to the Lenders and upon
information not known to be incorrect or misleading in any material respect.

 

(d)           The financial
statements delivered pursuant to Section 7.1(a) and (b) have been prepared
in accordance with GAAP (except as may otherwise be permitted under
Section 7.1(a) and (b)) and present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of such
date and for such periods.

 

6.2          No
Material Change.

 

Since September 30, 2001, there has been no development or event
relating to or affecting a Consolidated Party which has had or could have a
Material Adverse Effect.

 

6.3          Organization
and Good Standing.

 

Each of the Consolidated Parties (a) is duly organized, validly
existing and is in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the corporate or other necessary
power and authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which
it is currently engaged and (c) is duly qualified as a foreign entity and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so qualified
and in good standing would not have a Material Adverse Effect.

 

6.4          Power; Authorization; Enforceable
Obligations.

 

Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate or other
necessary action to authorize the borrowings and other extensions of credit on
the terms and conditions of this Credit Agreement and to authorize the
execution, delivery and performance of the Credit Documents to which it is a
party.  No consent or authorization of,
filing with, notice to or other similar act by or in respect of, any Governmental
Authority or any other Person is required to be obtained or made by or on
behalf of any Credit Party in connection with the borrowings or other
extensions of credit hereunder, or with the execution, delivery, performance,
validity or enforceability of the Credit Documents to which such Credit Party
is a party or with the consummation of the Transaction, except for
(i) consents, authorizations, notices and filings described in Schedule 6.4,
all of which have been obtained or made or have the status described in such Schedule 6.4
and (ii) filings to perfect the Liens created by the Collateral
Documents.  This Credit Agreement has been, and each other Credit Document to which
any Credit Party is a party will be, duly executed and delivered on behalf of the
Credit Parties.  This Credit Agreement
constitutes, and each other Credit Document to which any Credit Party is a
party when executed and 

 

61

 

delivered
will constitute, a legal, valid and binding obligation of such Credit Party
enforceable against such party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

6.5          No Conflicts.

 

Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by any Consolidated Party will
(a) violate or conflict with any provision of its articles or certificate
of incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any
Requirement of Law or any other law, regulation (including, without limitation,
Regulation U or Regulation X), order, writ, judgment, injunction, decree or
permit applicable to it, (c) violate, contravene or conflict with
contractual provisions of, or cause an event of default under, any material
indenture, loan agreement, mortgage, deed of trust, contract or other agreement
or instrument to which it is a party or by which it may be bound or
(d) result in or require the creation of any Lien (other than those
contemplated in or created in connection with the Credit Documents) upon or
with respect to its properties.

 

6.6          No Default.

 

No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture, mortgage, security agreement or other
agreement or obligation to which it is a party or by which any of its
properties is bound which default could have a Material Adverse Effect.  No Default or Event of Default has occurred
or exists except as previously disclosed in writing to the Lenders.

 

6.7          Ownership.

 

Each Consolidated Party is the owner of, and has good and marketable
title to, all of its respective assets and none of such assets is subject to
any Lien other than Permitted Liens.

 

6.8          Indebtedness.

 

Except as otherwise permitted under Section 8.1, the Consolidated
Parties have no Indebtedness.

 

6.9          Litigation.

 

There does not exist (i) any order, decree, judgment, ruling or
injunction which restrains the consummation of the acquisition of the Acquired
Company in the manner contemplated by the Purchase Agreement or (ii) any
pending or threatened action, suit or legal, equitable, arbitration or
administrative proceeding against any Consolidated Party which might have a
Material Adverse Effect.

 

62

 

6.10        Taxes.

 

Each Consolidated Party has filed, or caused to be filed, all tax
returns (Federal, state, local and foreign) required to be filed and paid
(a) all amounts of taxes shown thereon to be due (including interest and
penalties) and (b) all other taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes (i) which
are not yet delinquent or (ii) that are being contested in good faith and
by proper proceedings, and against which adequate reserves are being maintained
in accordance with GAAP.  No Credit
Party is aware as of the Closing Date of any proposed tax assessments against
it or any other Consolidated Party.

 

6.11        Compliance
with Law.

 

Each Consolidated Party is in compliance with all Requirements of Law
and all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply could not have a Material Adverse Effect.  No Requirement of Law could cause a Material
Adverse Effect.

 

6.12        ERISA.

 

(a)           During the five-year
period prior to the date on which this representation is made or deemed made:
(i) no ERISA Event has occurred, and, to the best knowledge of the
Executive Officers of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no “accumulated funding deficiency,”
as such term is defined in Section 302 of ERISA and Section 412 of
the Code, whether or not waived, has occurred with respect to any Plan; (iii) each
Plan has been maintained, operated, and funded in compliance with its own terms
and in material compliance with the provisions of ERISA, the Code, and any
other applicable Federal or state laws; and (iv) no Lien in favor of the
PBGC or a Plan has arisen or is reasonably likely to arise on account of any
Plan.

 

(b)           The actuarial
present value of all “benefit liabilities” (as defined in
Section 4001(a)(16) of ERISA), whether or not vested, under each Single
Employer Plan, as of the last annual valuation date prior to the date on which
this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing
the actuarial assumptions used in such Plan’s most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.

 

(c)           Neither any
Consolidated Party nor any ERISA Affiliate has incurred, or, to the best
knowledge of the Executive Officers of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan.  Neither
any Consolidated Party nor any ERISA Affiliate would become subject to any
withdrawal liability under ERISA if any Consolidated Party or any ERISA
Affiliate were to withdraw completely from all Multiemployer Plans and Multiple
Employer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made.  Neither any Consolidated Party nor any ERISA Affiliate has
received any notification that any Multiemployer Plan is in reorganization 

 

63

 

(within the meaning of Section 4241 of ERISA), is insolvent
(within the meaning of Section 4245 of ERISA), or has been terminated
(within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the
best knowledge of the Executive Officers of the Credit Parties, reasonably
expected to be in reorganization, insolvent, or terminated.

 

(d)           No prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the
Code) or breach of fiduciary responsibility has occurred with respect to a Plan
which has subjected or may subject any Consolidated Party or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of
ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any Person against any such liability.

 

(e)           Neither any
Consolidated Party nor any ERISA Affiliates has any material liability with
respect to “expected post-retirement benefit obligations” within the meaning of
the Financial Accounting Standards Board Statement 106.  Each Plan which is a welfare plan (as
defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA
and Section 4980B of the Code apply has been administered in compliance in
all material respects with such sections.

 

(f)            Neither the
execution and delivery of this Credit Agreement nor the consummation of the
financing transactions contemplated thereunder will involve any transaction
which is subject to the prohibitions of Sections 404, 406 or 407 of ERISA
or in connection with which a tax could be imposed pursuant to
Section 4975 of the Code.  The
representation by the Credit Parties in the preceding sentence is made in
reliance upon and subject to the accuracy of the Lenders’ representation in
Section 11.15 with respect to their source of funds and is subject, in the
event that the source of the funds used by the Lenders in connection with this
transaction is an insurance company’s general asset account, to the application
of Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995),
compliance with the regulations issued under Section 401(c)(1)(A) of
ERISA, or the issuance of any other prohibited transaction exemption or similar
relief, to the effect that assets in an insurance company’s general asset
account do not constitute assets of an “employee benefit plan” within the
meaning of Section 3(3) of ERISA or a “plan” within the meaning of
Section 4975(e)(1) of the Code.

 

6.13        Corporate
Structure; Capital Stock, Etc.

 

The ownership structure (setting forth the percentage owned directly or
indirectly by the Borrower) of the Consolidated Parties as of the Closing Date
after giving effect to the Transaction is as described in Schedule 6.13A.  Set forth on Schedule 6.13B is a
complete and accurate list as of the Closing Date with respect to the Borrower
and each of its direct and indirect Subsidiaries of (i) jurisdiction of
incorporation, (ii) number of shares of each class of Capital Stock
outstanding, (iii) number and percentage of outstanding shares of each
class owned (directly or indirectly) by the Consolidated Parties and
(iv) number and effect, if exercised, of all outstanding options,
warrants, rights of conversion or purchase and all other similar rights with
respect thereto as of the Closing Date. 
The outstanding Capital Stock of all such Persons is validly issued,
fully paid and non-assessable and is owned by the Consolidated Parties,
directly or indirectly, in the manner set forth on Schedule 6.13B,
free and clear of all Liens (other than those arising under or contemplated in 

 

64

 

connection with the Credit Documents). 
Other than as set forth in Schedule 6.13B, neither the
Borrower nor any of its Subsidiaries has outstanding any securities convertible
into or exchangeable for its Capital Stock nor does any such Person have
outstanding any rights to subscribe for or to purchase or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its Capital Stock.

 

6.14        Governmental
Regulations, Etc.

 

(a)           None of the
transactions contemplated by this Credit Agreement (including, without
limitation, the direct or indirect use of the proceeds of the Loans) will
violate or result in a violation of the Securities Act, the Securities Exchange
Act or any of Regulations U and X.

 

(b)           None of the
Consolidated Parties is (i) an “investment company”, or a company
“controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended, (ii) a “holding company” as defined in,
or otherwise subject to regulation under, the Public Utility Holding Company
Act of 1935, as amended or (iii) subject to regulation under any other
Federal or state statute or regulation which limits its ability to incur
Indebtedness.

 

6.15        Purpose of Loans and Letters of Credit.

 

The proceeds of the Loans hereunder shall be used solely by the
Borrower to effect the Transaction, to pay fees and expenses related to the
Transaction and to provide for working capital and general corporate purposes
of the Borrower and its Subsidiaries. 
The Letters of Credit shall be used only for or in connection with
appeal bonds, reimbursement obligations arising in connection with surety and
reclamation bonds, reinsurance, domestic or international trade transactions
and obligations not otherwise aforementioned relating to transactions entered
into by the applicable account party in the ordinary course of business.

 

6.16        Environmental
Matters.

 

(a)           Each of the Real
Properties and all operations at the Real Properties are in compliance with all
applicable Environmental Laws, there is no violation of any Environmental Law
with respect to the Real Properties or the Businesses, and there are no
conditions relating to the Real Properties or the Businesses that could give
rise to liability under any applicable Environmental Laws.

 

(b)           None of the Real
Properties contains, or has previously contained, any Materials of
Environmental Concern at, on or under the Real Properties in amounts or
concentrations that constitute or constituted a violation of, or could give
rise to liability under, Environmental Laws.

 

(c)           No Consolidated
Party has received any written or verbal notice of, or inquiry from any
Governmental Authority regarding, any violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the Real
Properties or the Businesses, nor 

 

65

 

does
any Executive Officer of any Credit Party have knowledge or reason to believe
that any such notice will be received or is being threatened.

 

(d)           Materials of
Environmental Concern have not been transported or disposed of from the Real
Properties, or generated, treated, stored or disposed of at, on or under any of
the Real Properties or any other location, in each case by or on behalf of any
Consolidated Party in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Law.

 

(e)           No judicial
proceeding or governmental or administrative action is pending or, to the best
knowledge of the Executive Officers of the Credit Parties, threatened, under
any Environmental Law to which any Consolidated Party is or will be named as a
party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the Consolidated
Parties, the Real Properties or the Businesses.

 

(f)            There has been no
release, or threat of release, of Materials of Environmental Concern at or from
the Real Properties, or arising from or related to the operations (including,
without limitation, disposal) of any Consolidated Party in connection with the
Real Properties or otherwise in connection with the Businesses, in violation of
or in amounts or in a manner that could give rise to liability under
Environmental Laws.

 

6.17        Intellectual
Property.

 

Each Consolidated Party owns, or has the legal right to use, all
trademarks, service marks, trade names, trade dress, patents, copyrights,
technology, know-how and processes (the “Intellectual Property”) necessary for
each of them to conduct its business as currently conducted except for those
the failure to own or have such legal right to use could not have a Material
Adverse Effect.  Set forth on Schedule 6.17
is a list of all Intellectual Property registered or pending registration with
the United States Copyright Office or the United States Patent and Trademark
Office and owned by each Consolidated Party or that any Consolidated Party has
the right to use.  Except as provided on
Schedule 6.17, no claim has been asserted and is pending by any
Person challenging or questioning the use of the Intellectual Property or the
validity or effectiveness of the Intellectual Property, nor does any Credit
Party know of any such claim, and, to the knowledge of the Executive Officers
of the Credit Parties, the use of the Intellectual Property by any Consolidated
Party or the granting of a right or a license in respect of the Intellectual
Property from any Consolidated Party does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.  As of the Closing Date, none of the
Intellectual Property of the Consolidated Parties is subject to any licensing
agreement or similar arrangement except as set forth on Schedule 6.17.

 

6.18        Solvency.

 

The Credit Parties are Solvent on a consolidated basis.

 

66

 

6.19        Investments.

 

All Investments of each Consolidated Party are Permitted Investments.

 

6.20        Business
Locations.

 

Set forth on Schedule 6.20(a) is a list of all Real
Properties located in the United States of
America as of the Closing Date.  Set
forth on Schedule 6.20(b) is a list of all locations where any
tangible personal property of a Credit Party is located as of the Closing
Date.  Set forth on Schedule 6.20(c)
is the chief executive office, jurisdiction of incorporation or formation and
principal place of business of each Credit Party as of the Closing Date.

 

6.21        Disclosure.

 

Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Consolidated Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained therein or herein not misleading.

 

6.22        No
Burdensome Restrictions.

 

No Consolidated Party is a party to any agreement or instrument or
subject to any other obligation or any charter or corporate restriction or any
provision of any applicable law, rule or regulation which, individually or in
the aggregate, could have a Material Adverse Effect.

 

6.23        Brokers’ Fees.

 

No Consolidated Party has any obligation to any Person in respect of
any finder’s, broker’s, investment banking or other similar fee in connection
with any of the transactions contemplated under the Credit Documents.

 

6.24        Labor Matters.

 

There are no collective bargaining agreements or Multiemployer Plans
covering the employees of a Consolidated Party as of the Closing Date and none
of the Consolidated Parties has suffered any strikes, walkouts, work stoppages
or other material labor difficulty within the last five years.

 

6.25        Nature of
Business.

 

As of the Closing Date, the Consolidated Parties are engaged in the
business of providing non-invasive urologic and orthopaedic services.

 

6.26        Representations and Warranties
from Purchase Agreement.

 

As of the Closing Date, each of the representations and warranties made
in the Purchase Agreement by each of the parties thereto is true and correct in
all material respects.

 

67

 

SECTION
7

 

AFFIRMATIVE
COVENANTS

 

Each Credit Party hereby covenants and agrees that until such time as
this Credit Agreement has been terminated in accordance with the terms of
Section 11.13:

 

7.1          Information
Covenants.

 

The Credit Parties will
furnish, or cause to be furnished, to the Agent and each of the Lenders:

 

(a)           Annual Financial
Statements.  As soon as available,
and in any event within 100 days after the close of each fiscal year of the
Consolidated Parties, a consolidated balance sheet and income statement of the
Consolidated Parties as of the end of such fiscal year, together with related
consolidated statements of retained earnings and cash flows for such fiscal
year, in each case setting forth in comparative form consolidated figures for
the preceding fiscal year, all such financial information described above to be
in reasonable form and detail and audited by independent certified public
accountants of recognized national standing reasonably acceptable to the Agent
and whose opinion shall be to the effect that such financial statements have
been prepared in accordance with GAAP (except for changes with which such
accountants concur) and shall not be limited as to the scope of the audit or
qualified as to the status of the Consolidated Parties as a going concern or
any other material qualifications or exceptions.

 

(b)           Quarterly
Financial Statements.  As soon as
available, and in any event within 55 days after the close of each of the first
three fiscal quarters of each fiscal year of the Consolidated Parties, a
consolidated balance sheet and income statement of the Consolidated Parties as
of the end of such fiscal quarter, together with related consolidated
statements of retained earnings and cash flows for such fiscal quarter, in each
case setting forth in comparative form consolidated figures for the
corresponding period of the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and reasonably
acceptable to the Agent, and accompanied by a certificate of an Executive
Officer of the Borrower to the effect that such quarterly financial statements
fairly present in all material respects the financial condition of the
Consolidated Parties and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments.

 

(c)           Officer’s Certificate.  At the time of delivery of the financial
statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate
of an Executive Officer of the Borrower substantially in the form of Exhibit 7.1(c),
(i) demonstrating compliance with the financial covenants contained in
Section 7.10 by calculation thereof as of the end of each such fiscal
period and (ii) stating that no Default or Event of Default exists, or if
any Default or Event of Default does exist, specifying the nature and extent
thereof and what action the Credit Parties propose to take with respect
thereto.

 

68

 

(d)           Borrowing Base Certificates.  Within 30 days after the end of each
calendar month, a certificate as of the end of the immediately preceding month,
substantially in the form of Exhibit 7.1(d)
and certified by an Executive Officer of the Borrower to be true and correct as
of the date thereof (a “Borrowing Base Certificate”).

 

(e)           Annual Business
Plan and Budgets.  Not later than 30
days following the end of each fiscal year of the Borrower, beginning with the
fiscal year ending December 31, 2002, an annual business plan and budget of the
Consolidated Parties containing, among other things, pro forma financial
statements for the next fiscal year.

 

(f)            Compliance With
Certain Provisions of the Credit Agreement.  Within 100 days after the end of each fiscal year of the Credit
Parties, a certificate containing
information regarding (i) the calculation of Excess Cash Flow and
(ii) the amount of all Asset Dispositions (other than any Asset
Disposition constituting a transaction of the type described in clauses (i)
through (iv) or clause (vi) of the
definition of “Excluded Asset Disposition” set forth in Section 1.1), Debt
Issuances, Equity Issuances and Acquisitions that occurred during the prior
fiscal year.

 

(g)           Accountant’s
Certificate.  Within the period for
delivery of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that they
have reviewed this Credit Agreement as it relates to accounting and other
financial matters and stating further whether, in the course of their audit,
they have become aware of any Default or Event of Default and, if any such Default
or Event of Default exists, specifying the nature and extent thereof, provided
that such accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be disclosed
in the course of their audit examination.

 

(h)           Auditor’s Reports.  Promptly upon receipt thereof, a copy of any
other report or “management letter” submitted by independent accountants to any
Consolidated Party in connection with any annual, interim or special audit of
the books of such Person.

 

(i)            Reports.  Promptly upon transmission or receipt
thereof, (i) copies of any filings and registrations with, and reports to
or from, the Securities and Exchange Commission, or any successor agency, and
copies of all financial statements, proxy statements, notices and reports as
any Consolidated Party shall send to its shareholders or to a holder of any
Indebtedness owed by any Consolidated Party in its capacity as such a holder
and (ii) upon the request of the Agent, all reports and written
information to and from the United States Environmental Protection Agency, or
any state or local agency responsible for environmental matters, the United
States Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters, or any successor agencies or
authorities concerning environmental, health or safety matters.

 

(j)            Notices.  Upon any Executive Officer of a Credit Party
obtaining knowledge thereof, the Credit Parties will give written notice to the Agent immediately of (i) the
occurrence of an event or condition consisting of a Default or Event of
Default, specifying the nature and existence thereof and what action the Credit
Parties propose to take with respect thereto, and (ii) the occurrence of
any of the following with respect to any 

 

69

 

Consolidated
Party (A) the pendency or commencement of any litigation, arbitral or
governmental proceeding against such Person which if adversely determined is
likely to have a Material Adverse Effect or (B) the institution of any
proceedings against such Person with respect to, or the receipt of notice by
such Person of potential liability or responsibility for violation, or alleged
violation of any Federal, state or local law, rule or regulation, including but
not limited to, Environmental Laws, the violation of which could have a
Material Adverse Effect.

 

(k)           ERISA.  Upon any Executive Officer of a Credit Party
obtaining knowledge thereof, the Credit Parties will give written notice to the Agent promptly (and in any event within
five (5) Business Days) of: (i) any event or condition, including, but not
limited to, any Reportable Event, that constitutes, or might reasonably lead
to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the
receipt of notice as prescribed in ERISA or otherwise of any withdrawal
liability assessed against the Credit Parties or any ERISA Affiliates, or of a determination that any Multiemployer
Plan is in reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due date
(including extensions) thereof of all amounts which any Consolidated Party or
any ERISA Affiliate is required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto; or (iv) any change in the funding
status of any Plan that could have a Material Adverse Effect, together with a
description of any such event or condition or a copy of any such notice and a
statement by an Executive Officer of
the Borrower briefly setting forth the details regarding such event, condition,
or notice, and the action, if any, which has been or is being taken or is
proposed to be taken by the Credit Parties with respect thereto.  Promptly upon request, the Credit Parties
shall furnish the Agent and the Lenders with such additional information
concerning any Plan as may be reasonably requested, including, but not limited
to, copies of each annual report/return (Form 5500 series), as well as all
schedules and attachments thereto required to be filed with the Department of
Labor and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each “plan year” (within the meaning of Section 3(39) of
ERISA).

 

(l)            Environmental.  Upon the reasonable written request of the
Agent following the occurrence of any event or the discovery of any condition
which the Agent or the Required Lenders reasonably believe has caused (or could
be reasonably expected to cause) the representations and warranties set forth
in Section 6.16 to be untrue in any material respect, the Credit Parties
will furnish or cause to be furnished to the Agent, at the Credit
Parties’ expense, a report of an
environmental assessment of reasonable scope, form and depth, (including, where
appropriate, invasive soil or groundwater sampling) by a consultant reasonably
acceptable to the Agent as to the nature and extent of the presence of any Materials
of Environmental Concern on any Real Properties (as defined in
Section 6.16) and as to the compliance by any Consolidated Party with
Environmental Laws at such Real Properties. 
If the Credit Parties fail to deliver such an environmental report within
seventy-five (75) days after receipt of such written request then the Agent may
arrange for same, and the Consolidated Parties hereby grant to the Agent and
their representatives access to the Real Properties to reasonably undertake
such an assessment (including, where appropriate, invasive soil or groundwater
sampling).  The reasonable cost of any
assessment arranged for by the Agent pursuant to this provision will be payable
by the Credit Parties on demand and
added to the obligations secured by the Collateral Documents.

 

70

 

(m)          Additional Patents
and Trademarks.  At the time of
delivery of the financial statements and reports provided for in
Section 7.1(a), a report signed by an Executive Officer of the Borrower setting forth (i) a list of
registration numbers for all patents, trademarks, service marks, trade names
and copyrights awarded to any Credit Party since the last day of the
immediately preceding fiscal year and (ii) a list of all patent applications,
trademark applications, service mark applications, trade name applications and
copyright applications submitted by any Credit Party since the last day of the
immediately preceding fiscal year and the status of each such application, all
in such form as shall be reasonably satisfactory to the Agent.

 

(n)           Annual Insurance
Certificates. At the time of delivery of the financial statements and
reports provided for in Section 7.1(a), copies of insurance policies or
certificates of insurance of the Consolidated Parties evidencing liability and
casualty insurance meeting the requirements set forth in the Credit Documents,
including, but not limited to, naming the Agent as additional insured (in the
case of liability insurance) or loss payee (in the case of hazard insurance) on
behalf of the Lenders.

 

(o)           Other Information.  With reasonable promptness upon any such
request, such other information regarding the business, properties or financial
condition of any Consolidated Party as the Agent or the Required Lenders may
reasonably request.

 

7.2          Preservation of Existence and
Franchises.

 

Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary not prohibited by Section 8.4 or Section 8.5, each Credit Party will, and
will cause each of the Consolidated Parties to, do all things necessary to
preserve and keep in full force and effect its existence, rights, franchises
and authority.

 

7.3          Books and
Records.

 

Each Credit Party will, and will cause each of the Consolidated Parties
to, keep complete and accurate books and records of its transactions in
accordance with good accounting practices on the basis of GAAP (including the
establishment and maintenance of appropriate reserves).

 

7.4          Compliance
with Law.

 

Each Credit Party will, and will cause each of the Consolidated Parties
to, comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could have a Material Adverse Effect.

 

7.5          Payment of Taxes and Other Claims.

 

Each Credit Party will, and will cause each of the Consolidated Parties
to, pay and discharge (a) all taxes, assessments and governmental charges
or levies imposed upon it, or upon its income or profits, or upon any of its
properties, before they shall become delinquent and (b) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid, might
give rise to a Lien upon 

 

71

 

any
of its properties; provided, however, that no Consolidated Party
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith by appropriate proceedings and as to which
adequate reserves therefor have been established in accordance with GAAP,
unless the failure to make any such payment could have a Material Adverse
Effect.

 

7.6          Insurance.

 

(a)           Each Credit Party
will, and will cause each of the Consolidated Parties to, at all times maintain
in full force and effect insurance (including worker’s compensation insurance,
liability insurance, casualty insurance and business interruption insurance) in
such amounts, covering such risks and liabilities and with such deductibles or
self-insurance retentions as are in accordance with normal industry practice.  The Agent shall be named as loss payee or
mortgagee, as its interest may appear, and/or additional insured with respect
to any such insurance providing coverage in respect of any Collateral, and each
provider of any such insurance shall agree, by endorsement upon the policy or
policies issued by it or by independent instruments furnished to the Agent,
that it will give the Agent thirty (30) days prior written notice before any
such policy or policies shall be altered or canceled.  The present insurance
coverage of the Consolidated Parties is outlined as to carrier, policy number,
expiration date, type and amount on Schedule 7.6.

 

(b)           In the event that
the Credit Parties receive Net Cash Proceeds in excess of $250,000 in aggregate
amount during any fiscal year of the Consolidated Parties (“Excess Proceeds”)
on account of Involuntary Dispositions, the Credit Parties shall, within the period of 180 days following
the date of receipt of such Excess Proceeds, apply (or cause to be applied) an
amount equal to such Excess Proceeds to (i) make Eligible
Reinvestments (including but not limited to the repair or replacement of the
related Property) or (ii) prepay the
Loans (and cash collateralize LOC Obligations) in accordance with the terms of
Section 3.3(b)(iii)(C); provided, however, that such Person
shall not undertake replacement or restoration of such Property unless, after
giving pro forma effect to any Funded Indebtedness to be incurred in connection
with such replacement or restoration, the Credit Parties would be in compliance
with the financial covenants set forth in Section 7.10(a)-(c) as of
the most recent fiscal quarter end
preceding the date of determination with respect to which the Agent has
received the Required Financial Information
(assuming, for purposes hereof, that such Funded Indebtedness was
incurred as of the first day of the four fiscal-quarter period ending as of
such fiscal quarter end).  All insurance
proceeds shall be subject to the security interest of the Agent (for the
ratable benefit of the Lenders) under the Collateral Documents.  Pending final application of any Excess
Proceeds, the Credit Parties may apply such Excess Proceeds to temporarily
reduce the Revolving Loans or to make Permitted Investments.

 

(c)           The Borrower
will, at its sole cost and expense, enter into and thereafter maintain in full
force and effect a term life insurance policy (the “Key-Man Life Insurance
Policy”) in form and substance and issued by a life insurance company,
acceptable to the Agent in its sole good faith discretion, with respect to
Argil Wheelock in an amount not less than: 
(i) $7,500,000; or (ii) $5,000,000 (if
the aggregate amount of mandatory prepayments consisting of Lithotripsy
Dispositions made by the Borrower pursuant to Section 3.3(b)(iii)(A)
exceeds $5,000,000 or so long as the Leverage Ratio as of the end of the most
recently ended fiscal quarter is greater than 1.25 to 1.00 but less than or 

 

72

 

equal
to 2.00 to 1.0); or (iii) $3,000,000 (if
the aggregate amount of mandatory prepayments consisting of Lithotripsy
Dispositions made by the Borrower pursuant to Section 3.3(b)(iii)(A)
exceeds $10,000,000 or so long as the Leverage Ratio as of the end of the most
recently ended fiscal quarter is less than or equal to 1.25 to 1.0).  Any proceeds payable to the Borrower
under the Key-Man Life Insurance Policy shall be paid to the Agent for
application in accordance with Section 3.3(b); provided, however,
up to $1,000,000 of such proceeds may be used by the Borrower to recruit a
replacement for Argil Wheelock and such amount actually expended by the Company
shall not be subject to prepayment under Section 3.3(b) hereof.

 

7.7          Maintenance
of Property.

 

Each Credit Party will, and will cause each of the Consolidated Parties
to, maintain and preserve its properties and equipment material to the conduct
of its business in good repair, working order and condition, normal wear and
tear and Involuntary Dispositions excepted, and will make, or cause to be made,
in such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as
may be needed or proper, to the extent and in the manner customary for
companies in similar businesses.

 

7.8          Use of
Proceeds.

 

The Borrower will use the proceeds of the Loans and will use the
Letters of Credit solely for the purposes set forth in Section 6.15.

 

7.9          Audits/Inspections.

 

Upon reasonable notice and during normal business hours, each Credit
Party will, and will cause each of the Consolidated Parties to, permit
representatives appointed by the Agent, including, without limitation,
independent accountants, agents, attorneys, and appraisers to visit and inspect
its property, including its books and records, its accounts receivable and
inventory, its facilities and its other business assets, and to make
photocopies or photographs thereof and to write down and record any information
such representative obtains and shall permit the Agent or its representatives
to investigate and verify the accuracy of information provided to the Lenders
and to discuss all such matters with the officers, employees and representatives
of such Person.  The Credit
Parties agree that the Agent, and its representatives, may conduct an annual
audit of the Collateral, at the expense of the Credit Parties.

 

7.10        Financial
Covenants.

 

(a)           Leverage Ratio.  The Leverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties set forth below, shall be less
than or equal to:

 

	
  Fiscal Year

  	
   

  	
  March 31

  	
   

  	
  June 30

  	
   

  	
  September
  30

  	
   

  	
  December
  31

  	
   

  
	
  2002

  	
   

  	
  3.25 to 1.00

  	
   

  	
  3.25 to 1.00

  	
   

  	
  3.00 to 1.00

  	
   

  	
  3.00 to 1.00

  	
   

  
	
  2003

  	
   

  	
  2.75 to 1.00

  	
   

  	
  2.75 to 1.00

  	
   

  	
  2.50 to 1.00

  	
   

  	
  2.25 to 1.00

  	
   

  
	
  2004

  	
   

  	
  1.75 to 1.00

  	
   

  	
  1.75 to 1.00

  	
   

  	
  1.75 to 1.00

  	
   

  	
  1.75 to 1.00

  	
   

  
	
  Thereafter

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.50 to 1.00

  	
   

  

 

73

 

Notwithstanding anything to the contrary contained herein, for purposes
of calculating the Leverage Ratio for the first three fiscal quarters of fiscal
year 2002, Consolidated EBITDA for the four fiscal quarter period ending
March 31, 2002 shall be calculated as Consolidated EBITDA for the fiscal quarter ending
March 31, 2002 multiplied by 4; Consolidated EBITDA for the four fiscal quarter period ending
June 30, 2002 shall be calculated as Consolidated
EBITDA for the two fiscal quarters ending June 30, 2002 multiplied
by 2; and Consolidated EBITDA
for the fiscal quarter ending September 30, 2002 shall be calculated
as Consolidated EBITDA for the three
fiscal quarters ending preceding September  30, 2002 multiplied by
1.33.

 

(b)           Consolidated Net
Worth.  At all times the
Consolidated Net Worth of the Borrower shall be greater than or equal to the
sum of $15,500,000, increased on a cumulative basis as of the end of each
fiscal quarter of the Consolidated Parties, commencing with the fiscal quarter
ending March 31, 2002 by an amount equal to 50% of Consolidated Net Income
(to the extent positive) for the fiscal quarter then ended plus 100% of
the Net Cash Proceeds of all Equity Issuances (other than Excluded Equity
Issuances) occurring subsequent to the Closing Date.

 

(c)           Interest Coverage
Ratio.  The Interest Coverage Ratio,
as of the last day of each fiscal quarter of the Consolidated Parties set forth
below, shall be greater than or equal to:

 

	
  Fiscal
  Year

  	
   

  	
  March 31

  	
   

  	
  June 30

  	
   

  	
  September
  30

  	
   

  	
  December
  31

  	
   

  
	
  2002

  	
   

  	
  4.00 to 1.00

  	
   

  	
  4.00 to 1.00

  	
   

  	
  4.00 to 1.00

  	
   

  	
  4.00 to 1.00

  	
   

  
	
  2003

  	
   

  	
  4.00 to 1.00

  	
   

  	
  4.00 to 1.00

  	
   

  	
  4.00 to 1.00

  	
   

  	
  4.00 to 1.00

  	
   

  
	
  Thereafter

  	
   

  	
  5.00 to 1.00

  	
   

  	
  5.00 to 1.00

  	
   

  	
  5.00 to 1.00

  	
   

  	
  5.00 to 1.00

  	
   

  

 

Notwithstanding anything to the contrary contained herein, (i) the
Interest Coverage Ratio (and the components thereof) for the fiscal quarter ending March 31, 2002
shall be calculated based on the one fiscal quarter period then ending, (ii) the Interest Coverage Ratio (and the components
thereof) for the fiscal quarter ending June 30, 2002 shall be calculated
based on the two fiscal quarter period then ending and (iii) the Interest Coverage Ratio (and the components
thereof) for the fiscal quarter ending September 30, 2002 shall be
calculated based on the three fiscal quarter period then ending.

 

(d)           Fixed Charge
Coverage Ratio.  The Fixed Charge
Coverage Ratio, as of the last day of each fiscal quarter of the Consolidated
Parties set forth below, shall be greater than or equal to:

 

	
  Fiscal
  Year

  	
   

  	
  March 31

  	
   

  	
  June 30

  	
   

  	
  September
  30

  	
   

  	
  December
  31

  	
   

  
	
  2002

  	
   

  	
  1.40 to 1.00

  	
   

  	
  1.40 to 1.00

  	
   

  	
  1.40 to 1.00

  	
   

  	
  1.40 to 1.00

  	
   

  
	
  2003

  	
   

  	
  1.40 to 1.00

  	
   

  	
  1.40 to 1.00

  	
   

  	
  1.45 to 1.00

  	
   

  	
  1.45 to 1.00

  	
   

  
	
  2004

  	
   

  	
  1.45 to 1.00

  	
   

  	
  1.45 to 1.00

  	
   

  	
  1.45 to 1.00

  	
   

  	
  1.45 to 1.00

  	
   

  
	
  Thereafter

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.50 to 1.00

  	
   

  

 

74

 

Notwithstanding
anything to the contrary contained herein, (i) the Fixed Charge Coverage Ratio
(and the components thereof) for the fiscal quarter ending
March 31, 2002 shall be calculated based on the one fiscal quarter
period then ending, (ii) the Fixed Charge
Coverage Ratio (and the components thereof) for the fiscal quarter
ending June 30, 2002 shall be calculated based on the two fiscal quarter
period then ending and (iii) the Fixed
Charge Coverage Ratio (and the components thereof) for the fiscal
quarter ending September 30, 2002 shall be calculated based on the three
fiscal quarter period then ending.

 

7.11        New
Subsidiaries.

 

As soon as
practicable and in any event within 30 days after any Person  becomes a direct or indirect
Subsidiary of any Credit Party, the Credit Parties shall (i) provide the
Agent with written notice thereof, (ii) if such Person is a Domestic
Subsidiary, cause such Person to execute a Joinder Agreement in substantially
the same form as Exhibit 7.11,
(iii) deliver such other documentation as the Agent may reasonably request
in connection with the foregoing, including, without limitation, items of the
types required to be delivered pursuant to Section 5.1(b), (c), (d) and
(e) with respect to a Person of such type, all in form, content and scope
reasonably satisfactory to the Agent and (iv) otherwise comply with
Section 7.12 in respect of such Person. 
Notwithstanding the foregoing, no Domestic Subsidiary (other than a
Wholly Owned Subsidiary) which was in existence on the Closing Date shall be
required to execute a Joinder Agreement pursuant to this Section 7.11 until
such time, if any, as such Subsidiary becomes a Wholly Owned Subsidiary.

 

7.12        Pledged Assets.

 

Each Credit Party
will  (i) cause all of its owned
and leased real and personal Property other than Excluded Property to be
subject at all times to first priority, perfected and, in the case of real
Property (whether leased or owned), title insured Liens in favor of the Agent
to secure the Credit Party Obligations pursuant to the terms and conditions of
the Collateral Documents or, with respect to any such Property acquired
subsequent to the Closing Date, such other additional security documents as the
Agent shall reasonably request, subject in any case to Permitted Liens and
(ii) deliver such other documentation as the Agent may reasonably request
in connection with the foregoing, including, without limitation, appropriate
UCC-1 financing statements, real estate title insurance policies, surveys,
environmental reports, landlord’s waivers, certified resolutions and other
organizational and authorizing documents of such Person, favorable opinions of
counsel to such Person (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to
above and the perfection of the Agent’s Liens thereunder) and other items of
the types required to be delivered pursuant to Section 5.1(d) and (e), all
in form, content and scope reasonably satisfactory to the Agent.  Without limiting the generality of the
above, the Credit Parties will cause
(A) 100% (or, if less, the full
amount owned by such Credit Party) of the issued and outstanding shares of
Capital Stock owned by such Credit Party of each Domestic Subsidiary (other
than a non-Wholly Owned Subsidiary which was in existence on the Closing Date
until such time, if any, as such Subsidiary 

 

75

 

becomes a Wholly Owned
Subsidiary), (B) 100% (or, if less,
the full amount directly owned by such Credit Party) of the issued and outstanding Capital Stock of each Consolidated
Party and (C) 65% (or such greater
percentage that, due to a change in an applicable Requirement of Law
after the date hereof, (1) could not reasonably be expected to cause the
undistributed earnings of such Foreign Subsidiary as determined for United
States federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary’s United States parent and (2) could not reasonably be
expected to cause any material adverse tax
consequences) of the issued and outstanding Capital Stock entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Capital
Stock not entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)) in each Foreign Subsidiary directly owned by the
Borrower or any Domestic Subsidiary to be subject at all times to a first
priority, perfected Lien in favor of the Agent pursuant to the terms and
conditions of the Collateral Documents or such other security documents as the
Agent shall reasonably request.

 

If, subsequent to the Closing Date, a Credit Party shall acquire
any Vehicle for which a certificate of title may be issued, such Credit Party
shall promptly deliver to the Agent, in form and substance satisfactory to the
Agent, evidence that (i) a certificate of title for such Vehicle has been
issued by the appropriate governmental authority in the name of such Credit
Party with the Agent’s security interest noted thereon or (ii) the
documentation necessary to have a certificate of title issued by the
appropriate governmental authority in the name of such Credit Party with the
Agent’s security interest noted thereon has been delivered to such appropriate
governmental authority.

 

7.13        Interest
Rate Protection.

 

Until the third anniversary date of the Closing Date, the Credit
Parties shall cause the Borrower to maintain protection against fluctuations in
interest rates pursuant to one or more Hedging Agreements reasonably
satisfactory to the Agent and providing coverage in a notional amount equal to
at least 50% of the outstanding Term Loans.

 

7.14        Upstreaming of Income from
Consolidated Parties.

 

The Credit Parties
will cause each Consolidated Party that is
not a Credit Party to distribute to the Credit Parties from time to time (but
in any event at least quarterly) the Credit Parties’ ratable share of the cash
flow available from operations (net of cash expenses) of such Consolidated Party.

 

SECTION 8

 

NEGATIVE COVENANTS

 

Each Credit Party hereby covenants and agrees that until such time as
this Credit Agreement has been terminated in accordance with the terms of
Section 11.13:

 

8.1          Indebtedness.

 

The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:

 

76

 

(a)           Indebtedness arising
under this Credit Agreement and the other Credit Documents;

 

(b)           Indebtedness of the
Consolidated Parties set forth in Schedule 8.1 (and renewals,
refinancings and extensions thereof on terms and conditions no less favorable
to such Person than such existing Indebtedness);

 

(c)           purchase money
Indebtedness (including obligations in respect of Capital Leases or Synthetic
Leases) hereafter incurred by the Consolidated Parties to finance the purchase
of fixed assets provided that (i) the total of all such
Indebtedness shall not exceed an aggregate principal amount of $5,000,000 at
any one time outstanding; (ii) such Indebtedness when incurred shall not
exceed the purchase price of the asset(s) financed; and (iii) no such
Indebtedness shall be refinanced for a principal amount in excess of the
principal balance outstanding thereon at the time of such refinancing;

 

(d)           obligations of the
Borrower in respect of Hedging Agreements entered into in order to manage
existing or anticipated interest rate or exchange rate risks and not for
speculative purposes;

 

(e)           intercompany
Indebtedness and Guaranty Obligations permitted under Section 8.6; and

 

(f)            other unsecured
Indebtedness hereafter incurred by the Consolidated Parties;  provided that the aggregate principal amount of such Indebtedness shall not
exceed $1,000,000 at any time.

 

8.2          Liens.

 

The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property, whether now owned or hereafter acquired, except for:

 

(a)           Liens in favor of
the Agent to secure the Credit Party Obligations;

 

(b)           Liens (other than
Liens created or imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes being contested in good faith
by appropriate proceedings for which adequate reserves determined in accordance
with GAAP have been established;

 

(c)           statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, materialmen and
suppliers and other Liens imposed by law or pursuant to customary reservations
or retentions of title arising in the ordinary course of business, provided
that such Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the same or
are being contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established;

 

77

 

(d)           Liens (other than
Liens created or imposed under ERISA) incurred or deposits made by any Consolidated
Party in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);

 

(e)           Liens in connection
with any judgment which is not the basis for the existence of an Event of
Default pursuant to Section 9.1(h);

 

(f)            easements,
rights-of-way, restrictions (including zoning restrictions), minor defects or
irregularities in title and other similar charges or encumbrances not, in any
material respect, impairing the use of the encumbered Property for its intended
purposes;

 

(g)           Liens on Property of
any Person securing purchase money Indebtedness (including Capital Leases and
Synthetic Leases) of such Person permitted under Section 8.1(c), provided
that any such Lien attaches to such Property concurrently with or within 90
days after the acquisition thereof;

 

(h)           leases or subleases
granted to others not interfering in any material respect with the business of
any Consolidated Party;

 

(i)            any interest of
title of a lessor under, and Liens arising from UCC financing statements (or
equivalent filings, registrations or agreements in foreign jurisdictions)
relating to, leases permitted by this Credit Agreement;

 

(j)            Liens deemed to
exist in connection with Investments in repurchase agreements permitted under
Section 8.6;

 

(k)           normal and customary
rights of setoff upon deposits of cash in favor of banks or other depository
institutions;

 

(l)            Liens of a
collection bank arising under Section 4-210 of the Uniform Commercial Code
on items in the course of collection;

 

(m)          Liens of sellers
of goods to the Borrower and any of its Subsidiaries arising under Article 2 of
the Uniform Commercial Code or
similar provisions of applicable law in the ordinary course of business,
covering only the goods sold and securing only the unpaid purchase price for
such goods and related expenses; and

 

(n)           Liens existing as of
the Closing Date and set forth on Schedule 8.2 (and renewals,
replacements, refinancings and extensions thereof to the extent permitted under
Section 8.1), provided that no such Lien shall at any time be
extended to or cover any Property other than the Property subject thereto on
the Closing Date.

 

78

 

8.3          Nature
of Business.

 

The Credit Parties will not permit any Consolidated Party to
substantively alter the character or conduct of the business conducted by such
Person as of the Closing Date.

 

8.4          Consolidation, Merger, Dissolution,
Etc.

 

Except in connection with a Permitted Asset Disposition, the Credit
Parties will not permit any Consolidated Party to enter into any transaction of
merger or consolidation or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution); provided that, notwithstanding the foregoing
provisions of this Section 8.4 but subject to the terms of
Sections 7.11 and 7.12, (a) the Borrower may merge or consolidate
with any of its Subsidiaries provided that the Borrower shall be the continuing
or surviving corporation, (b) any Credit Party other than the Borrower may
merge or consolidate with any other Credit Party other than the Borrower,
(c) any Consolidated Party which is not a Credit Party may be merged or
consolidated with or into any Credit Party provided that such Credit Party
shall be the continuing or surviving Person, (d) any Consolidated Party
which is not a Credit Party may be merged or consolidated with or into any
other Consolidated Party which is not a Credit Party, (e) any Subsidiary
of the Borrower may merge with any Person that is not a Credit Party in
connection with an Asset Disposition permitted under Section 8.5,
(f) any Consolidated Party may merge with any Person other than a
Consolidated Party in connection with a Permitted Acquisition provided that, if
such transaction involves the Borrower, the Borrower shall be the continuing or
surviving corporation and (g) any Wholly Owned Subsidiary may dissolve,
liquidate or wind up its affairs at any time provided that such dissolution,
liquidation or winding up, as applicable, could not have a Material Adverse
Effect.

 

8.5          Asset
Dispositions.

 

The Credit Parties will not permit any Consolidated Party to make any
Asset Disposition other than:

 

(a)           an Excluded Asset
Disposition;

 

(b)           the sale of Capital
Stock of Operating Affiliates in connection with the syndication thereof so
long as (i) at least 100% of the consideration paid in connection
therewith shall be cash or Cash Equivalents, (ii) the consideration received in
connection therewith shall not be less than the fair market value of the
Capital Stock disposed in such transaction and (iii) the Credit Parties shall immediately apply (or cause to be applied)
an amount equal to the Net Cash Proceeds (or the After-Tax Gain, as applicable)
of such Asset Disposition to prepay the Loans (and cash collateralize LOC
Obligations) in accordance with the terms of Section 3.3(b)(iii)(A), and

 

(c)           other Asset
Dispositions so long as (i) at least 75% of the consideration paid in
connection therewith shall be cash or Cash Equivalents and shall be in an
amount not less than the fair market value of the Property disposed of,
(ii) if such transaction is a Sale and Leaseback Transaction, such
transaction is not prohibited by the terms of Section 8.13,
(iii) such transaction does not involve the sale or other disposition of a
minority  equity
interest in any Consolidated Party, (iv) such transaction does not involve
a sale or other disposition of receivables other than receivables owned by or
attributable to other Property 

 

79

 

concurrently being disposed of in a transaction otherwise permitted
under this Section 8.5, (v) the aggregate net book value of all of
the assets sold or otherwise disposed of by the Consolidated Parties in all
such transactions pursuant to this clause (c) after the Closing Date shall not
exceed $1,000,000, (vi) no later than five (5) Business Days prior to such
Asset Disposition, the Borrower shall have delivered to the Agent
(A) a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a pro forma basis to such transaction,
the Credit Parties would be in compliance with the financial covenants set
forth in Section 7.10(a)-(c) and (B) a certificate of an
Executive Officer of the Borrower
specifying the anticipated date of such Asset Disposition, briefly describing the
assets to be sold or otherwise disposed of and setting forth the net book value
of such assets, the aggregate consideration and the Net Cash Proceeds to be
received for such assets in connection with such Asset Disposition and
(vii) the Credit Parties shall,
within the Application Period, apply (or cause to be applied) an amount equal
to the Net Cash Proceeds of such Asset Disposition to (A) make Eligible
Reinvestments or (B) prepay the Loans
(and cash collateralize LOC Obligations) in accordance with the terms of
Section 3.3(b)(iii)(B).  Pending
final application of the Net Cash Proceeds of any Asset Disposition, the
Consolidated Parties may apply such Net Cash Proceeds to temporarily reduce the
Revolving Loans or to make Investments in Cash Equivalents.

 

Upon a sale of assets or the sale of Capital Stock of a Consolidated
Party permitted by this Section 8.5, the Agent shall (to the extent
applicable) deliver to the Credit Parties, upon the Credit Parties’ request
and at the Credit Parties’ expense,
such documentation as is reasonably necessary to evidence the release of the
Agent’s security interest, if any, in such assets or Capital Stock, including,
without limitation, amendments or terminations of UCC financing statements, if
any, the return of stock certificates, if any, and (if as a result of any such
sale of Capital Stock of a Consolidated Party, (A) such Consolidated Party is
no longer a direct or indirect Subsidiary of the Borrower or  (B)
the Borrower shall own less than 66% of the Capital Stock of such Consolidated
Party, with the consent of the Agent, in its sole discretion) the release of
such Person from all of its obligations, if any, under the Credit Documents.

 

8.6          Investments.

 

The Credit Parties will not permit any Consolidated Party to make any
Investments, except for:

 

(a)           Investments
consisting of cash and Cash Equivalents;

 

(b)           Investments
consisting of accounts receivable created, acquired or made by any Consolidated
Party in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms;

 

(c)           Investments
consisting of Capital Stock, obligations, securities or other property received
by any Consolidated Party in settlement of accounts receivable (created in the
ordinary course of business) from bankrupt obligors;

 

(d)           Investments existing
as of the Closing Date and set forth in Schedule 8.6;

 

80

 

(e)           Investments
consisting of advances or loans to directors, officers, employees, agents,
customers or suppliers in an aggregate principal amount (including Investments
of such type set forth in Schedule 8.6) not to exceed $100,000 at
any time outstanding;

 

(f)            Investments in any
Person which is a Credit Party prior to giving effect to such Investment;

 

[(g)          Reserved;]

 

(h)           Investments in
Operating Affiliates which are not Credit Parties in an aggregate principal
amount at any time outstanding (excluding Investments of such type set forth in
Schedule 8.6) not to exceed an amount equal to $2,000,000 (it being understood that Investments outstanding
pursuant to this clause (h) are deemed repaid to the extent that mandatory prepayments are received in accordance with the terms of Section
3.3(b)(iii)(A) after the date such Investments were made);

 

(i)            any Eligible Reinvestment of the
proceeds of any Involuntary Disposition as contemplated by Section 7.6(b)
or of any Asset Disposition as contemplated by Section 8.5; or

 

(j)            Investments
consisting of an Acquisition by any Credit Party, provided that
(i) the Property acquired (or the Property of the Person acquired) in such
Acquisition is used or useful in the same or a similar line of business
as the Consolidated Parties were engaged in on the Closing Date (or any
reasonable extensions or expansions thereof),
(ii) the Agent shall have received all items in respect of the Capital
Stock or Property acquired in such Acquisition to the extent required to be
delivered by the terms of Section 7.11 and/or Section 7.12,
(iii) in the case of an Acquisition of the Capital Stock of another
Person, the board of directors (or other comparable governing body) of such
other Person shall have duly approved such Acquisition, (iv) the
Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate
demonstrating that, upon giving effect to
such Acquisition on a pro forma basis, the Credit Parties would be in
compliance with the financial covenants set forth in Section 7.10(a)-(c),
(v) the representations and warranties made by the Credit Parties in any
Credit Document shall be true and correct in all material respects at and as if
made as of the date of such Acquisition (after giving effect thereto) except to
the extent such representations and warranties expressly relate to an earlier
date, (vi) after giving effect to such Acquisition, there shall be at
least $5,000,000 of availability existing under the Revolving Committed Amount
and the Borrowing Base and (vii) the aggregate consideration
(including cash and non-cash consideration,
any assumption of Indebtedness and any earn–out payments) paid by the
Credit Parties for all such Acquisitions
shall not exceed (A) $3,000,000 during any fiscal year and (B) $7,500,000 for
all such Acquisitions occurring after the Closing Date.

 

8.7          Restricted
Payments.

 

The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (a) to make dividends or other distributions
payable to any Credit Party (directly or indirectly through Subsidiaries) and
ratably to other majority/minority shareholders and (b) as permitted by
Section 8.8.

 

81

 

8.8          Prepayment
of Other Indebtedness, Etc.

 

The Credit Parties will not permit any Consolidated Party to if any
Default or Event of Default has occurred and is continuing or would be directly
or indirectly caused as a result thereof, (i) amend or modify any of the
terms of any Indebtedness of such Consolidated Party if such amendment or
modification would add or change any terms in a manner adverse to such
Consolidated Party, or shorten the final maturity or average life to maturity
or require any payment to be made sooner than originally scheduled or increase
the interest rate applicable thereto, or (ii) make (or give any notice
with respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including without limitation, by way of
depositing money or securities with the trustee with respect thereto before due
for the purpose of paying when due), refund, refinance or exchange of any other
Indebtedness of such Consolidated Party.

 

8.9          Transactions
with Insiders.

 

Except for management agreements entered into by any Credit Party and
any Operating Affiliate, the Credit Parties will not permit any Consolidated
Party to enter into or permit to exist any transaction or series of
transactions with any officer, director or Affiliate of such Person other than
(a) intercompany transactions expressly permitted by Section 8.1, Section 8.4,
Section 8.5 or Section 8.6, (b) normal compensation and
reimbursement of expenses of officers and directors and (c) except as
otherwise specifically limited in this Credit Agreement, other transactions
which are entered into in the ordinary course of such Person’s business on
terms and conditions substantially as favorable to such Person as would be
obtainable by it in a comparable arms-length transaction with a Person other
than an officer, director or Affiliate.

 

8.10        Fiscal Year; Organizational Documents.

 

The Credit Parties will not permit any Consolidated Party to (a) amend,
modify or change its articles of incorporation (or corporate charter or other
similar organizational document) or bylaws (or other similar document) in a
manner adverse to the rights of the Lenders under the Credit Documents or (b)
change its fiscal year.

 

8.11        Limitation
on Restricted Actions.

 

The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any such Person to
(a) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with
respect to any other interest or participation in, or measured by, its profits,
(b) pay any Indebtedness or other obligation owed to any Credit Party,
(c) make loans or advances to any Credit
Party, (d) sell, lease or transfer any of its Property to any Credit Party or (e) except in respect
of any Consolidated Party which is not a Credit Party, (i) pledge its Property (other than Excluded Property) pursuant to the Credit
Documents or any renewals, refinancings, exchanges, refundings or extension
thereof or (ii) act as a Credit Party
pursuant to the Credit Documents or any renewals, refinancings,
exchanges, refundings or extension thereof, except (in respect of any of the
matters referred to in clauses (a)-(e)(i) above) for such encumbrances or
restrictions existing under or by reason of (i) this Credit Agreement and
the other Credit Documents, (iii) applicable law, (iv) any document or instrument governing 

 

82

 

Indebtedness
incurred pursuant to Section 8.1(c),  provided that any such
restriction contained therein relates only to the asset or assets constructed
or acquired in connection therewith, (v) any Permitted Lien or any
document or instrument governing any Permitted Lien, provided that any
such restriction contained therein relates only to the asset or assets subject
to such Permitted Lien or (vi) customary restrictions and conditions
contained in any agreement relating to the sale of any Property permitted under
Section 8.5 pending the consummation of such sale.

 

8.12        Ownership
of Subsidiaries.

 

Notwithstanding any other provisions of this Credit Agreement to the
contrary, the Credit Parties will not permit any Consolidated Party to (i) permit
any Person (other than the Borrower or any Wholly Owned Subsidiary) to own any
Capital Stock of any Subsidiary of the Borrower (other than an Operating
Affiliate), except (A) to qualify directors where required by applicable
law or to satisfy other requirements of
applicable law with respect to the ownership of Capital Stock of Foreign
Subsidiaries or (B) as a result
of or in connection with a dissolution, merger, consolidation or disposition of
a Subsidiary not prohibited by
Section 8.4 or Section 8.5, (ii) permit any Subsidiary of
the Borrower to issue or have outstanding any shares of preferred Capital Stock
or (iii) permit, create, incur, assume or suffer to exist any Lien on any
Capital Stock of any Subsidiary of the Borrower, except for Permitted Liens.

 

8.13        Sale
Leasebacks.

 

The Credit Parties will not permit any Consolidated Party to enter into
any Sale and Leaseback Transaction.

 

8.14        Capital
Expenditures.

 

The Credit Parties will not permit Consolidated Capital Expenditures
for any fiscal year to exceed $12,500,000, plus up to $2,500,000 of the
unused amount available for Consolidated Capital Expenditures under this
Section 8.14 for the immediately preceding fiscal year (excluding any carry
forward available from any prior fiscal
year); provided, however, that with respect to any fiscal
year, Consolidated Capital Expenditures made during such fiscal year shall be
deemed to be made first with respect to the applicable limitation for such
fiscal year and then with respect to any carry-forward from the immediately preceding fiscal year.

 

8.15        No
Further Negative Pledges.

 

The Credit Parties will not permit any Consolidated Party to enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the existence of any Lien upon any of its Property in favor of the
Agent (for the benefit of the Lenders) for the purpose of securing the Credit
Party Obligations, whether now owned or hereafter acquired, or requiring the
grant of any security for any obligation if such Property is given as security
for the Credit Party Obligations, except (a) in connection with any
document or instrument governing
Indebtedness incurred pursuant to Section 8.1(c),  provided
that any such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith, (b) in connection with any Permitted Lien or any document
or instrument governing any Permitted Lien, provided that any such
restriction contained therein relates only to the asset or assets subject to
such Permitted Lien 

 

83

 

and (c) pursuant to
customary restrictions and conditions contained in any agreement relating to
the sale of any Property permitted under Section 8.5, pending the
consummation of such sale.

 

8.16        Operating
Lease Obligations.

 

The Credit Parties will not
permit any Consolidated Party to enter into, assume or permit to exist any
obligations for the payment of rental under Operating Leases which in the
aggregate for all such Persons would exceed the amount set forth below
opposite such period:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  Fiscal Year 2002

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  Fiscal Year 2003

  	
   

  	
  $

  	
  3,500,000

  	
   

  
	
  Fiscal Year 2004

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
  Fiscal Year 2005

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
  Fiscal Year 2006

  	
   

  	
  $

  	
  5,000,000

  	
   

  

 

SECTION
9

 

EVENTS
OF DEFAULT

 

9.1          Events of
Default.

 

An Event of Default shall exist upon the occurrence and during the
continuance of any of the following specified events (each an “Event of
Default”):

 

(a)           Payment.  Any Credit Party shall

 

(i)            default in the
payment when due of any principal of any of the Loans or of any reimbursement
obligations arising from drawings under Letters of Credit, or

 

(ii)           default, and such
default shall continue for three (3) or more Business Days, in the payment when
due of any interest on the Loans or on any reimbursement obligations arising
from drawings under Letters of Credit, or of any Fees or other amounts owing
hereunder, under any of the other Credit Documents or in connection herewith or
therewith; or

 

(b)           Representations.  Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the other
Credit Documents, or in any statement or certificate delivered or required to
be delivered pursuant hereto or thereto shall prove untrue in any material
respect on the date as of which it was deemed to have been made; or

 

(c)           Covenants.  Any Credit Party shall

 

(i)            default in the due performance
or observance of any term, covenant or agreement contained in
Sections 7.2, 7.8, 7.10, 7.11 or 7.12 or Section 8;

 

84

 

(ii)           default in the due
performance or observance of any term, covenant or agreement contained in
Sections 7.1(a), (b), (c) or (d) and such default shall continue
unremedied for a period of at least 5 days after the earlier of an Executive
Officer of a Credit Party becoming aware of such default or notice thereof by
the Agent; or

 

(iii)          default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this
Section 9.1) contained in this Credit Agreement or any other Credit
Document and such default shall continue unremedied for a period of at least 30
days after the earlier of an Executive Officer of a Credit Party becoming aware
of such default or notice thereof by the Agent; or

 

(d)           Other Credit
Documents.  Except as a result of or
in connection with a dissolution, merger or disposition of a Subsidiary not
prohibited by Section 8.4 or
Section 8.5, any Credit Document shall fail to be in full force and effect
or to give the Agent and/or the Lenders the Liens, rights, powers and
privileges purported to be created thereby, or any Credit Party shall so state
in writing; or

 

(e)           Guaranties.  Except as the result of or in connection
with a dissolution, merger or disposition of a Subsidiary not prohibited
by Section 8.4 or Section 8.5,
the guaranty given by any Guarantor hereunder (including any Person after the
Closing Date in accordance with Section 7.11) or any provision thereof
shall cease to be in full force and effect, or any Guarantor (including any
Person after the Closing Date in accordance with Section 7.11) hereunder
or any Person acting by or on behalf of such Guarantor shall deny or disaffirm
such Guarantor’s obligations under such guaranty, or any Guarantor shall
default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to any guaranty; or

 

(f)            Bankruptcy, etc.  Any Bankruptcy Event shall occur with
respect to any Consolidated Party; or

 

(g)           Defaults under
Other Agreements.

 

(i)            Any Consolidated
Party shall default in the performance or observance (beyond the applicable
grace period with respect thereto, if any) or any material obligation or
condition of any contract or lease material to the Consolidated Parties taken
as a whole if such default could reasonably be expected to have a Material
Adverse Effect; or

 

(ii)           With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit Agreement)
in excess of $1,000,000 in the aggregate for the Consolidated Parties taken as
a whole, (A) either (1) default in any payment shall occur and
continue (beyond the applicable grace period with respect thereto, if any) with
respect to any such Indebtedness, or (2) a default in the observance or
performance relating to such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event or
condition 

 

85

 

shall occur or exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such Indebtedness
(or trustee or agent on behalf of such holders) to cause (determined without
regard to whether any notice or lapse of time is required), any such
Indebtedness to become due prior to its stated maturity; or (B) any such Indebtedness
shall be declared due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof;
or

 

(h)           Judgments.  A judgment or order by any court for the
payment of money which causes the aggregate amount of all judgments and orders
by any court in any fiscal year (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage and has the
ability to perform) to exceed (i) $1,000,000 with respect to the Borrower or
any Consolidated Party or (ii) $2,500,000 in the aggregate with respect to the
Consolidated Parties, and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days from the
entry thereof; or

 

(i)            ERISA.  Any of the following events or conditions,
if such event or condition could involve possible taxes, penalties, and other
liabilities in an aggregate amount in excess of $1,000,000:  (i) any “accumulated funding
deficiency,” as such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, shall exist with respect
to any Plan, or any lien shall arise on the assets of any Consolidated Party or
any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA Event
shall occur with respect to a Single Employer Plan, which is, in the reasonable
opinion of the Agent, likely to result in the termination of such Plan for
purposes of Title IV of ERISA; (iii) an ERISA Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in (A) the termination
of such Plan for purposes of Title IV of ERISA, or (B) any Consolidated
Party or any ERISA Affiliate incurring any liability in connection with a
withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of
such Plan; or (iv) any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility shall occur which may subject any Consolidated Party
or any ERISA Affiliate to any liability under Sections 406, 409, 502(i),
or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which any Consolidated Party or any ERISA
Affiliate has agreed or is required to indemnify any person against any such
liability; or

 

(j)            Ownership.  There shall occur a Change of Control.

 

9.2          Acceleration;
Remedies.

 

Upon the occurrence and during the continuance of an Event of Default,
the Agent may or, upon the request and direction of the Required Lenders,
shall, by written notice to the Credit Parties take any of the following
actions:

 

(a)           Termination of
Commitments.  Declare the
Commitments terminated whereupon the Commitments shall be immediately
terminated.

 

86

 

(b)           Acceleration.  Declare the unpaid Credit Party Obligations
to be due, whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Credit Parties.

 

(c)           Cash Collateral.  Direct the Borrower to pay (and the Borrower hereby promises
to pay, upon receipt of such notice) to the
Agent additional cash, to be held by the Agent, for the benefit of the Lenders,
in a cash collateral account as additional security for the LOC Obligations in
respect of subsequent drawings under all then outstanding Letters of Credit in
an amount equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.

 

(d)           Enforcement of
Rights.  Enforce any and all rights
and interests created and existing under the Credit Documents including, without
limitation, all rights and remedies existing under the Collateral Documents,
all rights and remedies against a Guarantor and all rights of set-off.

 

Notwithstanding the foregoing, if an Event of Default specified in
Section 9.1(f) shall occur with respect to the Borrower, then, without the
giving of any notice or other action by the Agent or the Lenders, (i) the
Commitments automatically shall terminate, (ii) all of the outstanding
Credit Party Obligations automatically shall immediately become due and payable
and (iii) the Borrower automatically
shall be obligated (and hereby promises) to pay to the Agent additional cash,
to be held by the Agent, for the benefit of the Lenders, in a cash collateral
account as additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount equal to the
maximum aggregate amount which may be drawn under all Letters of Credits then
outstanding.

 

SECTION
10

 

AGENCY
PROVISIONS

 

10.1        Appointment and Authorization of
Agent.

 

(a)           Each Lender hereby irrevocably
(subject to Section 10.9) appoints, designates and authorizes the Agent to
take such action on its behalf under the provisions of this Credit Agreement
and each other Credit Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Credit Agreement
or any other Credit Document, together with such powers as are reasonably
incidental thereto.  Notwithstanding any
provision to the contrary contained elsewhere herein or in any other Credit
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender or participant, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Credit Agreement or any other Credit Document or
otherwise exist against the Agent. 
Without limiting the generality of the foregoing sentence, the use of
the term “Agent” herein and in the other Credit Documents with reference to the
Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law.  Instead, such term is used merely as a
matter of market 

 

87

 

custom, and is
intended to create or reflect only an administrative relationship between
independent contracting parties.

 

(b)           The Issuing Lender shall act on
behalf of the Lenders with respect to any Letters of Credit issued by it and
the documents associated therewith until such time (and except for so long) as
the Agent may agree at the request of the Required Lenders to act for the
Issuing Lender with respect thereto; provided, however, that the Issuing Lender
shall have all of the benefits and immunities (i) provided to the Agent in
this Section 10 with respect to any acts taken or omissions suffered by
the Issuing Lender in connection with Letters of Credit issued by it or
proposed to be issued by it and the application and agreements for letters of
credit pertaining to the Letters of Credit as fully as if the term “Agent” as
used in this Section 10 included the Issuing Lender with respect to such
acts or omissions, and (ii) as additionally provided herein with respect
to the Issuing Lender.

 

10.2        Delegation
of Duties.

 

The Agent may execute any
of its duties under this Credit Agreement or any other Credit Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel and other consultants or experts concerning all matters pertaining
to such duties.  The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects in the absence of gross negligence or willful misconduct.

 

10.3        Liability of
Agent.

 

No Agent–Related
Person shall (a) be liable for any action taken or omitted to be taken by
any of them under or in connection with this Credit Agreement or any other
Credit Document or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct in connection with its duties expressly
set forth herein), or (b) be responsible in any manner to any Lender or
participant for any recital, statement, representation or warranty made by any
Credit Party or any officer thereof, contained herein or in any other Credit
Document, or in any certificate, report, statement or other document referred
to or provided for in, or received by the Agent under or in connection with,
this Credit Agreement or any other Credit Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Credit
Agreement or any other Credit Document, or for any failure of any Credit Party
or any other party to any Credit Document to perform its obligations hereunder
or thereunder.  No Agent–Related
Person shall be under any obligation to any Lender or participant to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Credit Agreement or any other Credit
Document, or to inspect the properties, books or records of any Credit Party or
any Affiliate thereof.

 

10.4        Reliance by
Agent.

 

(a)           The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, communication,
signature, resolution, representation, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to any Credit Party),
independent accountants and other 

 

88

 

experts selected
by the Agent.  The Agent shall be fully
justified in failing or refusing to take any action under any Credit Document
unless it shall first receive such advice or concurrence of the Required
Lenders as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.  The Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Credit Agreement or any other Credit Document in accordance with a request
or consent of the Required Lenders or all the Lenders, if required hereunder,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and participants.  Where this Credit Agreement expressly permits or prohibits an
action unless the Required Lenders otherwise determine, the Agent shall, and in
all other instances, the Agent may, but shall not be required to, initiate any
solicitation for the consent or a vote of the Lenders.

 

(b)           For purposes of determining
compliance with the conditions specified in Section 5.1, each Lender that
has signed this Credit Agreement shall be deemed to have consented to, approved
or accepted or to be satisfied with, each document or other matter either sent
by the Agent to such Lender for consent, approval, acceptance or satisfaction,
or required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender.

 

10.5        Notice of
Default.

 

The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Lenders,
unless the Agent shall have received written notice from a Lender or the
Borrower referring to this Credit Agreement, describing such Default or Event
of Default and stating that such notice is a “notice of default”.  The Agent will notify the Lenders of its
receipt of any such notice.  The Agent
shall take such action with respect to such Default or Event of Default as may
be directed by the Required Lenders in accordance with Section 9.2; provided, however, that unless and until the Agent has received
any such direction, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of the
Lenders.

 

10.6        Credit Decision; Disclosure of
Information by Agent.

 

Each Lender acknowledges
that no Agent–Related Person has made any representation or warranty to
it, and that no act by the Agent hereinafter taken, including any consent to
and acceptance of any assignment or review of the affairs of any Credit Party
or any Affiliate thereof, shall be deemed to constitute any representation or
warranty by any Agent–Related Person to any Lender as to any matter,
including whether Agent–Related Persons have disclosed material
information in their possession.  Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent–Related Person and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, prospects, operations, property, financial and other condition
and creditworthiness of the Credit Parties and their respective Subsidiaries,
and all applicable Requirements of Law relating to the transactions
contemplated hereby, and made its own decision to enter into this 

 

89

 

Credit Agreement and to extend credit to the Borrower hereunder.  Each Lender also represents that it will,
independently and without reliance upon any Agent–Related Person and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Credit Agreement and the other Credit
Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower and the other Credit
Parties.  Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent herein, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of any of the Credit Parties or any of their respective
Affiliates which may come into the possession of any Agent–Related
Person.

 

10.7        Indemnification
of Agent.

 

Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand each Agent–Related Person (to the extent not reimbursed by or
on behalf of any Credit Party and without limiting the obligation of any Credit
Party to do so), pro rata, and hold harmless each Agent–Related Person
from and against any and all claims, damages, losses, liabilities, costs, and
expenses (including, without limitation, reasonable attorneys’ fees) that may
be incurred by or asserted or awarded against any Agent–Related Person,
in each case arising out of or in connection with or by reason of (including,
without limitation, in connection with any investigation, litigation, or
proceeding or preparation of defense in connection therewith) the Credit
Documents, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Loans, except to the extent such claim,
damage, loss, liability, cost, or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such Agent–Related
Person’s gross negligence or willful misconduct; provided, however,
that no action taken in accordance with the directions of the Required Lenders
shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section.  Without
limitation of the foregoing, each Lender shall reimburse the Agent upon demand
for its ratable share of any costs or out-of-pocket expenses (including
reasonable attorneys fees and the allocated costs of internal counsel) incurred
by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Credit Agreement, any other Credit
Document, or any document contemplated by or referred to herein, to the extent
that the Agent is not reimbursed for such expenses by or on behalf of the
Borrower.  The undertaking in this
Section shall survive termination of the Commitments, the payment of all
Credit Party Obligations hereunder and the resignation or replacement of the
Agent.

 

10.8        Agent
in its Individual Capacity.

 

Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
each of the Credit Parties and their respective Affiliates as though Bank of
America were not the Agent or the Issuing Lender hereunder and without notice
to or consent of the Lenders.  The
Lenders acknowledge that, pursuant to such activities, Bank of America or its
Affiliates may receive information 

 

90

 

regarding any Credit Party or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of such Credit Party or such Affiliate) and acknowledge that the Agent
shall be under no obligation to provide such information to them.  With respect to its Loans, Bank of America
shall have the same rights and powers under this Credit Agreement as any other
Lender and may exercise such rights and powers as though it were not the Agent
or the Issuing Lender, and the terms “Lender” and “Lenders” include Bank of
America in its individual capacity.

 

10.9        Successor
Agent.

 

The Agent may resign as
Agent upon 30 days’ notice to the Lenders. 
If the Agent resigns under this Credit Agreement, the Required Lenders
shall appoint from among the Lenders a successor administrative agent for the
Lenders which successor administrative agent shall be consented to by the
Borrower at all times other than during the existence of an Event of Default
(which consent of the Borrower shall not be unreasonably withheld or
delayed).  If no successor
administrative agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Borrower, a successor administrative agent from among the
Lenders.  Upon the acceptance of its
appointment as successor administrative agent hereunder, such successor
administrative agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term “Agent” shall mean such successor administrative
agent and the retiring Agent’s appointment, powers and duties as Agent shall be
terminated.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 10 and
Sections 11.4 and 11.9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Credit
Agreement.  If no successor
administrative agent has accepted appointment as Agent by the date which is 30
days following a retiring Agent’s notice of resignation, the retiring Agent’s
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.

 

SECTION
11

 

MISCELLANEOUS

 

11.1        Notices.

 

Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device)
to the number set out below, (c) the Business Day following the day on
which the same has been delivered prepaid (or pursuant to an invoice arrangement) to a reputable national overnight air courier service, or (d) the
third Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, in each case to the respective parties at the
address, in the case of the Credit Parties and the Agent, set forth below, and, in the case of the Lenders, set
forth on Schedule 2.1(a), or at such other address as such party
may specify by written notice to the other parties hereto:

 

91

 

if
to any Credit Party:

 

HealthTronics Surgical Services, Inc

1841 West Oak Parkway, Suite A

Marietta, Georgia  30062-9923

Attn:  Argil Wheelock

Telephone:  (770) 419-0691

Telecopy:    (770) 419-9490

 

with a copy to:

 

Miller & Martin LLP

1275 Peachtree Street

Atlanta, Georgia  30309

Attn:  Frank M. Williams, Esq.

Telephone:  (423)-785-8206

Telecopy:    (423) 785-8480

 

if to the Administrative Agent (for notices regarding
borrowings, payments, conversions, fees, interest, and other administrative
matters):

 

Bank of America, N. A.

101 North Tryon Street

Location Code: NC1-001-15-04

Charlotte, NC  28255

Attention:  Neil Hendrix

Telephone: (704) 386-4220

Telecopy:   (704) 409-0017

 

if to the Administrative Agent for all other notices (including
with respect to Defaults and Events of Default, amendments, waivers and
modifications of the Credit Documents, assignments):

 

Bank of America, N.A.

Agency Management

1455 Market Street, CA5-701-05-19

San Francisco, CA 94103

Attention:  Kathleen Carry

Telephone:  (415) 436-4001

Telecopy:  (415) 503-5001

 

with a copy to:

 

Bank of America, N. A.

Location Code:  NC1-007-1711

100 North Tryon, 17th Floor

Charlotte, North Carolina 28202

Attention: Phil Durand

Telephone: (704) 386-4955

Telecopy:  (704) 288-6002

 

92

 

 

11.2        Right
of Set-Off; Adjustments.

 

Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, 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 such
Lender (or any of its Affiliates) to or for the credit or the account of any
Credit Party against any and all of the obligations of such Person now or
hereafter existing under this Credit Agreement, under the Notes, under any
other Credit Document or otherwise, irrespective of whether such Lender shall
have made any demand hereunder or thereunder and although such obligations may
be unmatured.  Each Lender agrees
promptly to notify any affected Credit Party after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.  The rights of each Lender under this
Section 11.2 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that such Lender may have.

 

11.3        Successors
and Assigns.

 

(a)           The provisions of this Credit
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that none
of the Credit Parties may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by any Credit Party without such consent shall
be null and void).  Nothing in this
Credit Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the
Indemnified Parties) any legal or equitable right, remedy or claim under or by
reason of this Credit Agreement.

 

(b)           Any Lender may assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Credit Agreement (including all or a portion of its Commitment and the Loans
(including for purposes of this subsection (b), its Participation Interests) at
the time owing to it); provided that (i) except in the case of an
assignment of the entire remaining amount of the assigning Lender’s Commitment
and the Loans at the time owing to it or in the case of an assignment to a
Lender or an Affiliate of a Lender, the aggregate amount of the Commitment
(which for this purpose includes Loans outstanding thereunder) or principal
outstanding balance of the Term Loan of the assigning Lender subject to each
such assignment, determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Agent, shall not be less than
$2,500,000 and in integral multiples of $500,000, unless each of the Agent and,
so long as no Event of Default has occurred and is continuing, the Borrower
otherwise consents (each such consent not to be unreasonably withheld or
delayed), (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under this
Credit Agreement with respect to the Loans or the Commitments assigned, except
that this clause (ii) shall not 

 

93

 

apply to rights in
respect of outstanding Swingline Loans, and (iii) the parties to each assignment
shall execute and deliver to the Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500.  Subject to acceptance and recording thereof by the Agent pursuant
to subsection (c), from and after the effective date specified in each
Assignment and Acceptance, the Eligible Assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Credit
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Credit Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under
this Credit Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 3.11, 3.12 and
11.5).  Upon request, the Borrower (at
its expense) shall execute and deliver new or replacement Notes to the
assigning Lender and the assignee Lender. 
Any assignment or transfer by a Lender of rights or obligations under
this Credit Agreement that does not comply with this subsection shall be
treated for purposes of this Credit Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with subsection (d)
of this Section.

 

(c)           The Agent, acting solely for this
purpose as an agent of the Borrower, shall maintain at is address referred to
in Section 11.1 a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
and the Commitments of, and principal amount of the Loans and LOC Obligations
owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the
Register shall be conclusive, and the Credit Parties, the Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Credit Agreement,
notwithstanding notice to the contrary. 
The Register shall be available for inspection by the Credit Parties and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice.

 

(d)           Any Lender may, without the consent
of, or notice to, the Credit Parties or the Agent, sell participations to one
or more banks or other entities (a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Credit Agreement (including all
or a portion of its Commitments and/or the Loans (including such Lender’s
Participation Interests) owing to it); provided that (i) such
Lender’s obligations under this Credit Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Credit
Parties, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Credit Agreement. 
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Credit Agreement and to approve any amendment, modification or
waiver of any provision of this Credit Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, waiver or other
modification that would (i) postpone any date upon which any payment of
money is scheduled to be paid to such Participant, (ii) reduce the
principal, interest, fees or other amounts payable to such Participant,  (iii) except
as the 

 

94

 

result of or in
connection with a dissolution, merger or disposition of a Consolidated Party
not prohibited by Section 8.4 or 8.5, release all or substantially all of
the Guarantors from their obligations under the Credit Documents or
(iv) except as the result of or in connection with an Asset Disposition
not prohibited by Section 8.5, release all or substantially all of the
Collateral.  Subject to subsection (e)
of this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 3.6, 3.9, 3.11 and 3.12  to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to
subsection (b) of this Section.  To the
extent permitted by law, each Participant also shall be entitled to the benefits
of Section 11.2  as though it were a Lender, provided such
Participant agrees to be subject to Section 3.14 as though it were a
Lender.

 

(e)           A Participant shall not be entitled
to receive any greater payment under Section 3.6, 3.7 or 3.11  than
the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower’s prior written consent.  A Participant that is not a United States
person under Section 7701(a)(30) of the Code shall not be entitled to the
benefits of Section 3.11 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 3.11(d) as though it were
a Lender.

 

(f)            Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Credit Agreement (including under its Notes, if any) to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall
release a Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.

 

(g)           If the consent of the Borrower to an
assignment or to an Eligible Assignee is required hereunder (including a
consent to an assignment which does not meet the minimum assignment threshold
specified in clause (i) of the proviso to the first sentence of Section 11.3(b)),
the Borrower shall be deemed to have given its consent five (5) Business Days
after the date notice thereof has been delivered by the assigning Lender
(through the Agent) unless such consent is expressly refused by the Borrower
prior to such fifth Business Day.

 

(h)           Notwithstanding anything to the
contrary contained herein, if at any time Bank of America assigns all of its
Commitment and Loans pursuant to subsection (b) above, Bank of America may,
(i) upon 30 days’ notice to the Borrower and the Lenders, resign as
Issuing Lender and/or (ii) upon five (5) Business Days’ notice to the
Borrower, terminate its Swingline Commitment. 
In the event of any such resignation as Issuing Lender or termination of
its Swingline Commitment, the Borrower shall be entitled to appoint from among
the Lenders a successor Issuing Lender or Swingline Lender hereunder; provided, however, that no failure by the Borrower to appoint any
such successor shall affect the resignation of Bank of America as Issuing
Lender or the termination of its Swingline Commitment, as the case may be.  Bank of America shall retain all the rights
and obligations of the Issuing Lender hereunder with respect to all Letters of
Credit outstanding as of the effective date of its resignation as Issuing
Lender 

 

95

 

and all LOC
Obligations with respect thereto (including the right to require the Lenders to
make Revolving Loans or fund their Participation Interests pursuant to
Section 2.2).  If Bank of America
terminates its Swingline Commitment, it shall retain all the rights of the
Swingline Lender provided for hereunder with respect to Swingline Loans made by
it and outstanding as of the effective date of such termination, including the
right to require the Lenders to make Revolving Loans or fund their
Participation Interests in outstanding Swing Line Loans pursuant to
Section 2.3(b)(iii).

 

11.4        No
Waiver; Remedies Cumulative.

 

No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Agent or any Lender and any of
the Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder.  The rights and remedies provided herein are
cumulative and not exclusive of any rights or remedies which the Agent or any
Lender would otherwise have.  No notice
to or demand on any Credit Party in any case shall entitle the Credit
Parties to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights
of the Agent or the Lenders to any other or further action in any circumstances
without notice or demand.

 

11.5        Expenses;
Indemnification.

 

(a)           The Credit Parties jointly and
severally agree to pay on demand all costs and expenses of the Agent in
connection with the syndication, preparation, execution, delivery,
administration, modification, and amendment of this Credit Agreement, the other
Credit Documents, and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and expenses of counsel for the Agent
(including the cost of internal counsel) with respect thereto and with respect
to advising the Agent as to its rights and responsibilities under the Credit
Documents.  The Credit Parties further
jointly and severally agree to pay on demand all costs and expenses of the
Agent and the Lenders, if any (including, without limitation, reasonable
attorneys’ fees and expenses and the cost of internal counsel), in connection
with any work–out or restructuring relating to the Credit Facilities or
any enforcement (whether through negotiations, legal proceedings, or otherwise)
of any of the Credit Documents.

 

(b)           The Credit Parties jointly and
severally agree to indemnify and hold harmless each Agent–Related Person
and each Lender and each of their Affiliates and their respective officers,
directors, employees, agents, and advisors (each, an “Indemnified Party”) from
and against any and all claims, damages, losses, liabilities, costs, and
expenses (including, without limitation, reasonable attorneys’ fees) that may
be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation, or proceeding or
preparation of defense in connection therewith) the Credit Documents, any of
the transactions contemplated herein or the actual or proposed use of the
proceeds of the Loans, except to the extent such claim, damage, loss,
liability, cost, or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party’s
gross 

 

96

 

negligence or
willful misconduct.  In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 11.5 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by any of the Credit
Parties, their respective directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated.  The Credit Parties agree
not to assert any claim against any Agent–Related Party, any Lender, any
of their Affiliates, or any of their respective directors, officers, employees,
attorneys, agents, and advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Credit Documents, any of the transactions contemplated herein
or the actual or proposed use of the proceeds of the Loans.

 

(c)           Without prejudice to the survival of
any other agreement of the Credit Parties hereunder, the agreements and
obligations of the Credit Parties contained in this Section 11.5 shall survive the repayment of the Credit Party
Obligations and the termination of the Commitments hereunder.

 

11.6        Amendments,
Waivers and Consents.

 

Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is
in writing entered into by, or approved in writing by, each of the Credit
Parties party thereto and the Required Lenders, provided, further,
that:

 

(a)           without the consent
of each Lender affected thereby, neither this Credit Agreement nor any other
Credit Document may be amended, changed, waived, discharged or terminated so as
to:

 

(i)            extend any
Commitment or the final maturity of any Loan or of any reimbursement
obligation, or any portion thereof, arising from drawings under Letters of
Credit, or extend or waive any Principal Amortization Payment of any Loan, or
any portion thereof,

 

(ii)           reduce the rate or
extend the time of payment of interest on any Loan or of any reimbursement
obligation, or any portion thereof, arising from drawings under Letters of
Credit (other than as a result of waiving the applicability of any post-default
increase in interest rates) or of any Fees,

 

(iii)          reduce or waive the
principal amount of any Loan or of any reimbursement obligation, or any portion
thereof, arising from drawings under Letters of Credit,

 

(iv)          increase the
Revolving Commitment or Term Loan Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver of any
condition precedent set forth in Section 5.2 or of any Default or Event of
Default or mandatory reduction in the Commitments shall not constitute a change
in the terms of any Commitment of any Lender),

 

97

 

(v)           except as the result
of or in connection with an Asset Disposition not prohibited by Section 8.5, release all or substantially
all of the Collateral,

 

(vi)          except as the result
of or in connection with a dissolution, merger or disposition of a Consolidated
Party not prohibited by
Section 8.4 or Section 8.5, release the Borrower or substantially all
of the other Credit Parties from its or their obligations under the Credit
Documents,

 

(vii)         amend, modify or
waive any provision of this Section 11.6,

 

(viii)        reduce any
percentage specified in the definition of Required Lenders, or

 

(ix)           consent to the
assignment or transfer by the Borrower or all or substantially all of the other
Credit Parties of any of its or their rights and obligations under (or in
respect of) the Credit Documents except as permitted thereby;

 

(b)           without the consent
of the Agent, no provision of Section 10 may be amended, changed, waived,
discharged or terminated;

 

(c)           without the consent
of the Issuing Lender, no provision of Section 2.2 or
Section 3.5(b)(iii) may be amended, changed, waived, discharged or
terminated in a manner that is adverse to the Issuing Lender; and

 

(d)           without the consent
of the Swingline Lender, no provision of Section 2.3 may be amended.

 

Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender is
entitled to vote as such Lender sees fit on any bankruptcy reorganization plan
that affects the Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders shall determine
whether or not to allow a Credit Party to use cash collateral in the context of
a bankruptcy or insolvency proceeding and such determination shall be
binding on all of the Lenders.

 

11.7        Counterparts.

 

This Credit Agreement may be executed in any number of counterparts,
each of which when so executed shall be an original, but all of which shall
constitute one and the same instrument. 
It shall not be necessary in making proof of this Credit Agreement to
produce or account for more than one such counterpart for each of the parties
hereto.  Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.

 

98

 

11.8        Headings.

 

The headings of the sections hereof are provided for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Credit Agreement.

 

11.9        Survival.

 

All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive until this Credit Agreement shall be terminated in
accordance with the terms of Section 11.13(b).

 

11.10      Governing Law; Submission to
Jurisdiction; Venue; Waiver of Jury Trial.

 

(a)           THIS CREDIT
AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, THE OTHER CREDIT
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NORTH CAROLINA. 
Any legal action or proceeding with respect to this Credit
Agreement or any other Credit Document may be brought in the courts of the
State of North Carolina (including Mecklenburg County, North Carolina) or of
the United States for the Western District of North Carolina and, by execution
and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the nonexclusive jurisdiction of
such courts.  Each of the Credit Parties
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the address
set out for notices pursuant to Section 11.1, such service to become
effective three (3) days after such mailing. 
Nothing herein shall affect the right of the Agent or any Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Credit Party in any other
jurisdiction.

 

(b)           Each of the Credit
Parties hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Credit Agreement or any other Credit
Document brought in the courts referred to in subsection (a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

 

(c)           EACH
PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN
DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM 

 

99

 

WITH RESPECT TO ANY
CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS CREDIT AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

11.11      Severability.

 

If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

 

11.12      Entirety.

 

This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.

 

11.13      Binding
Effect; Termination.

 

(a)           This Credit
Agreement shall become effective at such time on or after the Closing Date when
it shall have been executed by each Credit Party and the Agent, and the Agent
shall have received copies hereof (telefaxed or otherwise) which, when taken
together, bear the signatures of each Lender, and thereafter this Credit Agreement
shall be binding upon and inure to the benefit of each Credit Party, the Agent
and each Lender and their respective successors and assigns.

 

(b)           The term of this
Credit Agreement shall be until the Credit Party Obligations are Fully
Satisfied.

 

11.14      Confidentiality.

 

Each of the Agent
and the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its
Affiliates and to its (and its Affiliates’) directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process; (d) to any other party to this
Credit Agreement; (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Credit Agreement
or the 

 

100

 

enforcement of rights
hereunder; (f) subject to an agreement containing provisions substantially
the same as those of this Section 11.14, to (i) any Eligible Assignee
of or Participant in, or any prospective Eligible Assignee of or Participant
in, any of its rights or obligations under this Credit Agreement or
(ii) any direct or indirect contractual counterparty or prospective
counterparty (or such contractual counterparty’s or prospective counterparty’s
professional advisor) to any credit derivative transaction relating to Credit
Party Obligations; (g) with the consent of the Borrower; (h) to the
extent such Information (i) becomes publicly available other than as a
result of a breach of this Section 11.14 or (ii) becomes available to
the Agent or any Lender on a nonconfidential basis from a source other than the
Consolidated Parties; or (i) to the National Association of Insurance
Commissioners or any other similar organization or any nationally recognized
rating agency that requires access to information about a Lender’s or its
Affiliates’ investment portfolio in connection with ratings issued with respect
to such Lender or its Affiliates.  For
the purposes of this Section, “Information” means all information received from
the Credit Parties relating to the Consolidated Parties or their business,
other than any such information that is available to the Agent or any Lender on
a nonconfidential basis prior to disclosure by the Consolidated Parties; provided
that, in the case of information received from the Consolidated Parties after
the date hereof, such information is clearly identified in writing at the time
of delivery as confidential.  Any Person
required to maintain the confidentiality of Information as provided in this
Section 11.14 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

11.15      Source of Funds.

 

Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to
the source of funds to be used by such Lender in connection with the financing
hereunder:

 

(a)           no part of such
funds constitutes assets allocated to any separate account maintained by such
Lender in which any employee benefit plan (or its related trust) has any
interest;

 

(b)           to the extent that
any part of such funds constitutes assets allocated to any separate account
maintained by such Lender, such Lender has disclosed to the Borrower the name
of each employee benefit plan whose assets in such account exceed 10% of the
total assets of such account as of the date of such purchase (and, for purposes
of this clause (b), all employee benefit plans maintained by the same
employer or employee organization are deemed to be a single plan);

 

(c)           to the extent that
any part of such funds constitutes assets of an insurance company’s general
account, such insurance company has complied with all of the requirements of
the regulations issued under Section 401(c)(1)(A) of ERISA; or

 

(d)           such funds
constitute assets of one or more specific benefit plans which such Lender has
identified in writing to the Borrower.

 

101

 

As used in this Section 11.15, the terms “employee benefit plan”
and “separate account” shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

 

11.16      Regulation D.

 

Each of the Lenders hereby represents and warrants to the Borrower that
it is a commercial lender, other financial institution or other “accredited”
investor (as defined in SEC Regulation D) which makes or acquires or loans on
the ordinary course of business and that it will make or acquire Loans for its
own account in the ordinary course of business.

 

11.17      Conflict.

 

To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.

 

[Signature Page to Follow]

 

102

 

IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Credit Agreement to be duly executed and delivered as of
the date first above written.

 

	
  BORROWER:

  	
  HEALTHTRONICS SURGICAL SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  

 

	
  GUARANTORS:

  	
  HT ORTHOTRIPSY MANAGEMENT COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  

 

	
   

  	
  OSSATRON
  MEDICAL SERVICES OF THE PACIFIC, LP

  
	
   

  	
  OSSATRON
  SERVICES OF THE BAY AREA, LP

  
	
   

  	
  OSSATRON
  SERVICES OF CHESAPEAKE BAY, LP

  
	
   

  	
  OSSATRON
  SERVICES OF CINCINNATI, LP

  
	
   

  	
  OSSATRON
  SERVICES OF NORTHEAST FLORIDA, LP

  
	
   

  	
  OSSATRON
  SERVICES OF HAWAII, LP

  
	
   

  	
  OSSATRON
  SERVICES OF LAS VEGAS LP

  
	
   

  	
  OSSATRON
  SERVICES OF MILWAUKEE, LP

  
	
   

  	
  OSSATRON
  SERVICES OF NORTHEAST OHIO, LP

  
	
   

  	
  OSSATRON
  SERVICES OF NORTHEAST

  
	
   

  	
  OKLAHOMA,
  LP

  
	
   

  	
  OSSATRON
  SERVICES OF SOUTH COAST, LP

  
	
   

  	
  OSSATRON
  SERVICES OF SOUTHEAST I, LP

  
	
   

  	
  OSSATRON
  SERVICES OF TRI—STATES I, LP

  
	
   

  	
  OSSATRON
  SERVICES OF UTAH, LP

  
	
   

  	
  ORTHOTRIPSY
  SERVICES OF SOUTHERN IDAHO, LP

  
	
   

  	
  ORTHOTRIPSY
  SERVICES OF MEMPHIS, LP

  
	
   

  	
  ORTHOTRIPSY
  SERVICES OF OHIO, LP

  
	
   

  	
  ORTHOTRIPSY
  SERVICES OF ROCHESTER, LP

  

 

	
   

  	
  By: 

  	
  HT Orthotripsy Management Company, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  

 

 

	
   

  	
  HT
  LITHOTRIPSY MANAGEMENT COMPANY, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
							

 

	
   

  	
  HERITAGE MEDICAL SERVICES OF TEXAS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
							

 

	
   

  	
  HLE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  HSC OF GULF COAST, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  LITHO MANAGEMENT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  LITHO
  GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  WEST
  COAST CAMBRIDGE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

 

	
   

  	
  MIDWEST
  CAMBRIDGE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  INTEGRATED
  HEALTH CARE MANAGEMENT CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  CAMBRIDGE
  TREEMONT APARTMENTS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  CAMBRIDGE
  HEALTH SERVICES OF TEXAS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  N.Y.L.S.A.
  #4, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  

 

 

	
   

  	
  INTEGRATED
  HEARING SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  

 

	
   

  	
  T2
  LITHOTRIPTER INVESTMENT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  SERVICETRENDS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  AMCARE HEALTH SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  AMCARE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  INTEGRATED
  LITHOTRIPSY OF OHIO, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  
					

 

	
   

  	
  INTEGRATED
  LITHOTRIPSY OF GEORGIA, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Argil J. Wheelock

  	
   

  
	
   

  	
  Name:

  	
  Argil
  J. Wheelock, MD

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer   

  	
   

  
					

 

 

	
  LENDERS:

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  individually
  in its capacity as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kathleen M. Carry

  	
   

  
	
   

  	
  Name:

  	
  Kathleen M. Carry

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  individually
  in its capacity as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip Durand

  	
   

  
	
   

  	
  Name:

  	
  Philip Durand

  	
   

  
	
   

  	
  Title:

  	
  Principal

  	
   

  

 

	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  individually
  in its capacity as a Swingline Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip Durand

  	
   

  
	
   

  	
  Name:

  	
  Philip Durand

  	
   

  
	
   

  	
  Title:

  	
  Principal

  	
   

  

 

	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  individually
  in its capacity as Issuing Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip Durand

  	
   

  
	
   

  	
  Name:

  	
  Philip Durand

  	
   

  
	
   

  	
  Title:

  	
  Principal<Page>

                                  EXHIBIT 10.7

                      FIFTH AMENDMENT TO SECOND AMENDED AND
                      RESTATED LOAN AND SECURITY AGREEMENT

     THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ("AMENDMENT"), dated effective as of March __, 2002 (the "AMENDMENT
EFFECTIVE DATE"), is executed and entered into by and among the financial
institutions listed on the signature pages hereof (such financial institutions
are referred to herein individually as a "LENDER" and collectively as the
"LENDERS"), Bank of America, National Association (in its capacity as agent for
the Lenders, the "AGENT"), and Pentacon, Inc. (the "PARENT") and each of the
other undersigned subsidiaries of the Parent party to the Agreement.

                                    RECITALS:

     A.   The Borrowers, the Lenders, and the Agent are parties to the certain
Second Amended and Restated Loan and Security Agreement, dated as of September
30, 1999, as amended by the First Amendment to Second Amended and Restated Loan
and Security Agreement dated effective as of November 15, 1999, the Second
Amendment to Second Amended and Restated Loan and Security Agreement dated
effective as of December 31, 1999, the Third Amendment to Second Amended and
Restated Loan and Security Agreement dated effective as of September 30, 1999
and the Fourth Amendment to Second Amended and Restated Loan and Security
Agreement dated effective as of October 30, 2001 (collectively, the
"AGREEMENT").

     B.   The Loan Parties, the Lenders and the Agent have agreed to amend the
Agreement as provided below.

     NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     Section 1.1 DEFINITIONS. Unless otherwise defined in this Amendment, terms
defined by the Agreement, where used in this Amendment, shall have the same
meanings in this Amendment as are prescribed by the Agreement.

                                    ARTICLE 2
                                   AMENDMENTS

     Section2.1 AMENDMENT TO DEFINITIONS IN SECTION 1.1 OF THE AGREEMENT.
Effective as of the Amendment Effective Date, the definitions of "Commitment
Termination Date," "Maximum Revolver Amount" and "Stated Termination Date" in
SECTION 1.1 of the Agreement are hereby amended and restated to read in its
entirety as follows:

<Page>

     "MAXIMUM REVOLVER AMOUNT" means $65,000,000.

     "COMMITMENT TERMINATION DATE" means April 26, 2002.

     "STATED TERMINATION DATE" means April 30, 2002.

     Section 2.2 AMENDMENT IN RESPECT OF DEFINITION OF "COMMITMENT".
Effective as of the Amendment Effective Date, the "Commitment" of each Lender
hereby is amended to be the amount specified under the heading "Commitment"
adjacent to its signature page to this Amendment.

     Section 2.3 AMENDMENT TO SECTION 9.26. Effective as of the Amendment
Effective Date, SECTION 9.26 of the Agreement hereby is amended to (i) delete
the word "or" after CLAUSE (c) thereof and (ii) add the following prior to the
period that follows CLAUSE (d) thereof:

          or (e) make any payment or prepayment of Debt evidenced by the
          Subordinated Notes.

                                    ARTICLE 3
                              ADDITIONAL AGREEMENTS

     Section 3.1 WEEKLY CASH FLOW PROJECTIONS. Pursuant to, and without
limiting, SECTION 7.2(l) of the Agreement, the Loan Parties shall deliver to the
Agent, on or before Wednesday of each calendar week (or if such day is not a
Business Day, on the next Business Day) beginning on or after the Amendment
Effective Date and continuing thereafter, a current forecasted statement of cash
flow for the Parent and its consolidated Subsidiaries for the thirteen (13)
calendar week period beginning on the first day of such calendar week.

     Section 3.2 RELEASE. In consideration of this Amendment, each of the Loan
Parties on its own behalf and on behalf of their respective Subsidiaries,
predecessors, successors and assigns (collectively, the "RELEASING PARTIES"),
hereby irrevocably and forever releases, remises, discharges and holds harmless
the Agent and each Lender and all of their respective officers, directors,
employees, agents, attorneys and representatives, and all of their respective
predecessors, successors, and assigns, from any and all claims, causes of
action, demands, and liabilities of any kind whatsoever, if any, whether direct
or indirect, fixed or contingent, liquidated or nonliquidated, disputed or
undisputed, asserted or non-asserted, known or unknown, which any of the
Releasing Parties has relating in any way to any event, circumstance,
occurrence, act, action, or failure to act in connection with or otherwise
concerning this Agreement, the other Loan Documents or the transactions
contemplated therein from the beginning of time through the Amendment Effective
Date.

<Page>

                                    ARTICLE 4
                                  MISCELLANEOUS

     Section 4.1 CONDITIONS PRECEDENT. The effectiveness of this Amendment is
subject to the satisfaction of each of the following conditions precedent:

          (a)  The Agent shall have received all of the following, each dated
     the date of this Amendment (unless otherwise indicated), in form and
     substance satisfactory to the Agent:

               (i)  AMENDMENT DOCUMENTS. This Amendment and any other agreement,
          certificate, document, or instrument required by the Agent to be
          executed or delivered by any Borrower, the Agent, or the Lenders in
          connection with this Amendment, in each case duly executed (the
          "AMENDMENT DOCUMENTS");

               (ii) FEES AND EXPENSES. Evidence that the costs and
          expenses (including, without limitation, reasonable attorneys' fees
          and expenses) incurred by the Agent incident to this Amendment or
          otherwise required to be paid in accordance with SECTION 15.7 of the
          Agreement, to the extent incurred and submitted to the Borrowers,
          shall have been paid in full;

               (iii) ADDITIONAL INFORMATION. The Agent shall have received such
          additional documents, instruments, and information as the Agent may
          reasonably request to effect the transactions contemplated hereby; and

               (iv) CONSENTS. All consents required by SECTION 13.2 of the
          Agreement shall have been obtained.

          (b)  The representations and warranties contained herein, in the
     Agreement, and in all other Loan Documents, as amended hereby, shall be
     true and correct as of the date hereof as if made on the date hereof
     (except those, if any, which by their terms specifically relate only to a
     different date).

          (c)  All corporate proceedings taken in connection with the
     transactions contemplated by this Amendment and all other agreements,
     documents, and instruments executed and/or delivered pursuant hereto, and
     all legal matters incident thereto, shall be satisfactory to the Agent.

          (d)  No Default or Event of Default shall have occurred and be
     continuing.

     Section 4.2 REPRESENTATIONS AND WARRANTIES. The Borrowers hereby represent
and warrant to, and agree with, the Agent, for the benefit of the Lenders, that,
as of the date of and after giving effect to this Amendment, (a) the execution,
delivery, and performance of this Amendment and any and all other Amendment
Documents executed and/or delivered in connection herewith have been authorized
by all requisite corporate action on the part of each of the Borrowers (as
applicable) and will not violate any of such Borrower's certificate of
incorporation or bylaws, (b) all representations

<Page>

and warranties set forth in the Agreement and in any other Loan Document are
true and correct as if made again on and as of such date (except those, if any,
which by their terms specifically relate only to a different date) in the
Agreement), (d) no Default or Event of Default has occurred and is continuing,
(e) the Agreement (as amended by this Amendment), and all other Loan Documents
are and remain legal, valid, binding, and enforceable obligations in accordance
with the terms thereof, and (f) the certifications delivered to the Agent under
CLAUSE (i), CLAUSE (ii), CLAUSE (iii), and CLAUSE (iv) of SECTION 10.1(a) of the
Agreement remain true, correct, and complete as of the Amendment Effective Date.

     Section 4.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Amendment or any other Loan Document shall survive
the execution and delivery of this Amendment and the other Loan Documents, and
no investigation by the Agent or any Lender, or any closing, shall affect the
representations and warranties or the right of the Agent and the Lenders to rely
upon them.

     Section 4.4 REFERENCE TO AGREEMENT. Each of the Loan Documents, including
the Agreement, the Amendment Documents, and any and all other agreements,
documents, or instruments now or hereafter executed and/or delivered pursuant to
the terms hereof or pursuant to the terms of the Agreement as amended hereby,
are hereby amended so that any reference in such Loan Documents to the
Agreement, whether direct or indirect, shall mean a reference to the Agreement
as amended hereby.

     Section 4.5 SEVERABILITY. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

     Section 4.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Agent, the Lenders, the Borrowers, and their
respective successors and assigns, except no Borrower may assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Agent and the Lenders.

     Section 4.7 GENERAL. This Amendment, when signed by each signatory as
required by the Agreement (a) shall be deemed effective prospectively as of the
Amendment Effective Date, (b) contains the entire agreement among the parties
and may not be amended or modified except in writing signed by all parties as
required by the Agreement, (c) shall be governed and construed according to the
laws of the State of Texas, and (d) may be executed in any number of
counterparts, each of which shall be valid as an original and all of which shall
be one and the same agreement. A telecopy or other electronic transmission of
any executed counterpart shall be deemed valid as an original.

     THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
     AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
     SUBSEQUENT ORAL

<Page>

     AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE
     PARTIES.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers in several counterparts effective
as of the date specified in the introductory paragraph hereof.

                                     LOAN PARTIES:
                                     ------------

                                     PENTACON, INC.

                                     By: /s/ JAY D. MCFADYEN
                                         ---------------------------------------
                                     Name:  Sr Vice President & General Counsel
                                          --------------------------------------
                                     Title: Jay D. McFadyen
                                           -------------------------------------

                                     PENTACON  AEROSPACE  GROUP,  INC., a Nevada
                                     corporation and successor by merger to
                                     Texas  International  Aviation,  Inc., West
                                     Coast Aero Products Holding Corp., Pollard
                                     Acquisition Corp., ASI Aerospace Group,
                                     Inc. and Alatec Products, Inc.
                                     ALATEC  CABLE HARNESS &
                                     ASSEMBLY DIVISION, INC.
                                     ALATEC FASTENER AND COMPONENT GROUP, INC.
                                     ALATEC RACE, INC.
                                     TRACE ALATEC SUPPLY COMPANY, INC.

                                     By: /s/ JAY D. MCFADYEN
                                         ---------------------------------------
                                     Name:   Jay D. McFadyen
                                          --------------------------------------
                                     Title: Sr. Vice President & General Counsel
                                           -------------------------------------

                                     PENTACON  INDUSTRIAL  GROUP, INC, a Nevada
                                     corporation and successor by merger to AXS
                                     Solutions, Inc., Maumee Industries, Inc.
                                     and Sales Systems Limited

<Page>

                                     By: /s/ JAY D. MCFADYEN
                                        ----------------------------------------
                                     Name:   Jay D. McFadyen
                                          --------------------------------------
                                     Title: Sr Vice President & General Counsel
                                           -------------------------------------

                                     PENTACON USA, L.P., a Texas limited
                                     partnership  and successor by merger to
                                     Pace Products, Inc. and Capitol Bolt &
                                     Supply, Inc.

                                     By:     JIT Holdings, Inc., a Texas
                                             corporation
                                             Its: General Partner

                                             By: /s/ JAY D. MCFADYEN
                                                --------------------------------
                                             Name:   Jay D. McFadyen
                                                  ------------------------------
                                             Title:  President
                                                   -----------------------------

<Page>

                                     THE AGENT:
                                     ----------

                                     BANK OF AMERICA, NATIONAL ASSOCIATION

                                     By: /s/ RICHARD BURKE
                                        ----------------------------------------
                                     Name:   Richard Burke
                                          --------------------------------------
                                     Title:  Sr V.P.
                                           -------------------------------------

<Page>

                                     THE LENDERS
                                     -----------

Commitment: $26,000,000              BANK OF AMERICA, NATIONAL ASSOCIATION
Pro Rata Share: 40.0%

                                     By: /s/ RICHARD BURKE
                                        ----------------------------------------
                                     Name:   Richard Burke
                                         ---------------------------------------
                                     Title:  Sr V.P.
                                           -------------------------------------

Commitment:  $13,000,000             FLEET CAPITAL CORPORATION
Pro Rata Share:  20.0%

                                     By: /s/ H MICHAEL WILLS
                                        ----------------------------------------
                                     Name:   H. Michael Wills
                                         ---------------------------------------
                                     Title:  Senior Vice President
                                           -------------------------------------

Commitment:  $13,000,000             PNC BANK, NATIONAL ASSOCIATION
Pro Rata Share:  20.0%

                                     By: /s/ LAWRENCE WEINSTEIN
                                         ---------------------------------------
                                     Name:   Lawrence Weinstein
                                          --------------------------------------
                                     Title:  Vice President
                                           -------------------------------------

Commitment:  $13,000,000             UNION BANK OF CALIFORNIA, N.A.
Pro Rata Share:  20.0%

                                     By: /s/ GREG F. ENNIS
                                         ---------------------------------------
                                     Name:   Greg F. Ennis
                                          --------------------------------------
                                     Title:  Vice President
                                           -------------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]