Document:

ex10-18

 

Exhibit 10.18

	Execution Copy                              

CREDIT AGREEMENT

BY AND AMONG

HELIX HEARING CARE OF AMERICA CORP.

AND

EACH OF ITS DIRECT AND INDIRECT SUBSIDIARIES

AND

HEARx LTD.

Executed and Effective as of April 30, 2002

	

 

 

TABLE OF CONTENTS

	 	 	 
	CREDIT AGREEMENT	 	
1
 
	ARTICLE 1: THE CREDIT FACILITY	 	
1
	   1.1          Term Loan Facility	 	
1
	         1.1.1          Establishment of Credit Facility	 	
1
	         1.1.2          Facility Maturity	 	
1
	         1.1.3          Use of Proceeds	 	
1
	         1.1.4          Term Loan Notes	 	
2
	         1.1.5          Interest	 	
2
	                  1.1.5.1.          Interest Rate Determination	 	
2
	                  1.1.5.2.          Calculation of Interest	 	
3
	         1.1.6          Repayment and Prepayment	 	
3
	                  1.1.6.1.          Payments — Excess Cash Flow	 	
3
	                  1.1.6.2.          Payments at Maturity	 	
3
	                  1.1.6.3.          Prepayments	 	
3
	                  1.1.6.4.          Availability for Reborrowing	 	
4
	   1.2          Commitment	 	
4
	   1.3          Advances	 	
4
	         1.3.1          Requesting Advances	 	
4
	         1.3.2          Funding Advances	 	
4
	         1.3.3          Obligation to Advance	 	
4
	         1.3.4          Indemnification for Revocation or Failure to Satisfy Conditions	 	
4
	   1.4          Payments in General	 	
5
	         1.4.1          Manner and Place of Payments	 	
5
	         1.4.2          Special Payment Timing Issues	 	
5
	         1.4.3          Application of Payments	 	
5
	         1.4.4          Payment of Expenses, Indemnities and Protective Advances	 	
5
	         1.4.5          Payments upon Termination	 	
5
	         1.4.6          Late Payments	 	
5
	         1.4.7          Default Interest	 	
6
	         1.4.8          Usury Savings Provision	 	
6
	   1.5          Release of Security
 	 	
6
	ARTICLE 2: CONDITIONS PRECEDENT	 	
6
	   2.1          Closing Conditions	 	
6
	         2.1.1          Compliance	 	
6
	                  2.1.1.1.          Representations	 	
6
	                  2.1.1.2.          No Default	 	
6
	                  2.1.1.3.          No Material Change	 	
7
	         2.1.2          Documents	 	
7
	                  2.1.2.1.          Credit Agreement	 	
7
	                  2.1.2.2.          Promissory Notes	 	
7
	                  2.1.2.3.          Security Agreements and Collateral Assignments	 	
7
	                  2.1.2.4.          Intellectual Property Security Agreements	 	
7
	                  2.1.2.5.          Assignment of Life Insurance Policy	 	
7
	                  2.1.2.6.          Real Estate Documents	 	
7
	                  2.1.2.7.          Owners’ Pledge and Security Agreements	 	
8
	                  2.1.2.8.          Insurance	 	
8
	                  2.1.2.9.          Compliance Certificates	 	
8
	                  2.1.2.10.        Opinions of Counsel	 	
8
	                  2.1.2.11.        Payoff Instructions for Prior Indebtedness	 	
8
	                  2.1.2.12.        Authorization Documents — Borrowers	 	
8

i

 

	 	 	 
	                  2.1.2.13.        Officer’s Certificates	 	
8
	                  2.1.2.14.        Other Documents
 	 	
9
	ARTICLE 3: REPRESENTATIONS AND WARRANTIES	 	
9
	3.1          Organization and Good Standing	 	
9
	3.2          Power and Authority	 	
9
	3.3          Validity and Legal Effect	 	
9
	3.4          No Violation of Laws or Agreements	 	
9
	3.5          Title to Assets; Existing Encumbrances; Identification of Intellectual and Real Property	 	
10
	3.6          Capital Structure and Equity Ownership	 	
10
	3.7          Subsidiaries, Affiliates and Investments	 	
11
	3.8          Material Contracts	 	
11
	3.9          Licenses and Authorizations	 	
11
	3.10        Taxes and Assessments	 	
11
	3.11        Litigation and Legal Proceedings	 	
11
	3.12        Accuracy of Financial Information	 	
11
	3.13        Accuracy of Other Information	 	
12
	3.14        Compliance with Laws Generally	 	
12
	3.15        ERISA Compliance	 	
12
	3.16        Environmental Compliance	 	
13
	3.17        Fees and Commissions	 	
13
	3.18        Solvency
 	 	
13
	ARTICLE 4: AFFIRMATIVE COVENANTS	 	
13
	   4.1          Periodic Financial Statements and Compliance Certificates	 	
13
	         4.1.1          Monthly Financial Statements	 	
13
	         4.1.2          Quarterly Financial Statements	 	
14
	         4.1.3          Annual Financial Statements	 	
14
	   4.2          Other Financial Information and Specialized Reports	 	
14
	         4.2.1          Financial Forecasts; Operating Budget	 	
14
	         4.2.2          Additional Material Contracts	 	
14
	         4.2.3          Tax Returns	 	
14
	         4.2.4          Filings and Press Releases	 	
14
	   4.3          Fiscal Year	 	
14
	   4.4          Books and Records; Maintenance of Properties	 	
15
	   4.5          Existence and Good Standing	 	
15
	   4.6          Insurance	 	
15
	         4.6.1          General Insurance Provisions	 	
15
	         4.6.2          Key-Person Life Insurance	 	
15
	   4.7          Loan Purpose	 	
15
	   4.8          Taxes	 	
15
	   4.9          Management Changes	 	
16
	   4.10        Litigation and Administrative Proceedings	 	
16
	   4.11        Monitoring Compliance; Occurrence of Certain Events	 	
16
	   4.12        Compliance with Laws	 	
16
	   4.13        Further Actions	 	
16
	         4.13.1         Additional Collateral	 	
16
	         4.13.2         Further Assurances	 	
16
	         4.13.3         Estoppel Certificates	 	
17
	         4.13.4         Waivers and Consents	 	
17
	         4.13.5         Access and Audits	 	
17
	         4.13.6         Attendance at Board of Directors Meetings	 	
17
	   4.14          Costs and Expenses	 	
17
	   4.15          Maintenance of Domain Names	 	
18
	   4.16          Other Information
 	 	
18
	ARTICLE 5: NEGATIVE COVENANTS	 	
18
	   5.1            Capital Expenditures	 	
18

ii

 

	 	 	 
	   5.2       Additional Indebtedness	 	
18
	   5.3       Guaranties	 	
18
	   5.4       Loans	 	
19
	   5.5       Liens and Encumbrances; Negative Pledge	 	
19
	   5.6       Transfer of Assets	 	
20
	   5.7       Acquisitions and Investments	 	
20
	   5.8       New Ventures; Mergers	 	
21
	   5.9       Transactions with Affiliates	 	
21
	   5.10      Distributions or Dividends	 	
21
	   5.11      Issuance of Additional Equity	 	
21
	   5.12      Removal of Assets	 	
22
	   5.13      Modifications to Organic Documents	 	
22
	   5.14      Terms of and Modifications to Material Relationships
 	 	
22
	ARTICLE 6: RIGHT OF SET OFF	 	
22
	   6.1       Right of Set Off	 	
22
	   6.2       Additional Rights
 	 	
22
	ARTICLE 7: DEFAULT AND REMEDIES	 	
22
	   7.1       Events of Default	 	
22
	      7.1.1       Payment Obligations	 	
22
	      7.1.2       Representations and Warranties	 	
22
	      7.1.3       Termination of Merger Agreement	 	
23
	      7.1.4       Other Covenants in Loan Documents	 	
23
	      7.1.5       Default Under Other Agreements with Lender	 	
23
	      7.1.6       Default Under Material Agreements with Other Parties	 	
23
	      7.1.7       Intentionally Blank	 	
23
	      7.1.8       Change of Control	 	
23
	      7.1.9       Government Action	 	
23
	      7.1.10      Insolvency	 	
24
	      7.1.11      Additional Liabilities	 	
24
	      7.1.12      Material Adverse Change	 	
24
	   7.2       Remedies	 	
24
	      7.2.1       Acceleration, Termination and Pursuit of Collateral	 	
24
	      7.2.2       Other Remedies
 	 	
25
	ARTICLE 8: DEFINITIONS AND RULES OF CONSTRUCTION	 	
25
	   8.1       Definitions	 	
25
	      8.1.1       “Account”	 	
25
	      8.1.2       “Advance”	 	
25
	      8.1.3       “Advance Request”	 	
25
	      8.1.4       “Affiliate”	 	
25
	      8.1.5       “Agreement”	 	
25
	      8.1.6       “Authorized Officer”	 	
25
	      8.1.7       “Authorization”	 	
25
	      8.1.8       “Business Day”	 	
26
	      8.1.9       “Capital Expenditures”	 	
26
	      8.1.10     “Capital Leases”	 	
26
	      8.1.11     “Closing Date”	 	
26
	      8.1.12     “CCQ”	 	
26
	      8.1.13     “Code”	 	
26
	      8.1.14     “Collateral”	 	
26
	      8.1.15     “Collateral Security Documents”	 	
26
	      8.1.16     “Commitment”	 	
26
	      8.1.17     “Default”	 	
26
	      8.1.18     “Dollar” or “$”	 	
26
	      8.1.19     “EBITDA”	 	
26
	      8.1.20     “Environmental Control Statutes”	 	
27

iii

 

	 	 	 
	      8.1.21     “EPA”	 	
27
	      8.1.22     “Equivalent Amount”	 	
27
	      8.1.23     “ERISA”	 	
27
	      8.1.24     “ERISA Affiliate”	 	
27
	      8.1.25     “Event of Default”	 	
27
	      8.1.26     “Excess Cash Flow”	 	
27
	      8.1.27     “Final Term Loan Draw Date”	 	
28
	      8.1.28     “Fixed Charges”	 	
28
	      8.1.29     “Funded Debt”	 	
28
	      8.1.30     “GAAP”	 	
29
	      8.1.31     “Hazardous Materials”	 	
29
	      8.1.32     “Interest Expense”	 	
29
	      8.1.33     “Lender”	 	
29
	      8.1.34     “License”	 	
29
	      8.1.35     “Lien”	 	
29
	      8.1.36     “LLC”	 	
29
	      8.1.37     “Loan”	 	
29
	      8.1.38     “Loan Documents”	 	
30
	      8.1.39     “Local Authorities”	 	
30
	      8.1.40     “Material Adverse Change”	 	
30
	      8.1.41     “Material Adverse Effect”	 	
30
	      8.1.42     “Material Contract”	 	
30
	      8.1.43     “Merger Agreement”	 	
30
	      8.1.44     “Notes”	 	
30
	      8.1.45     “Obligations”	 	
30
	      8.1.46     “Obligor”	 	
30
	      8.1.47     “Official Body”	 	
30
	      8.1.48     “Operating Agreement”	 	
31
	      8.1.49     “Organic Document”	 	
31
	      8.1.50     “PBGC”	 	
31
	      8.1.51     “Permitted Guaranties”	 	
31
	      8.1.52     “Permitted Indebtedness”	 	
31
	      8.1.53     “Permitted Investments”	 	
31
	      8.1.54     “Permitted Liens”	 	
31
	      8.1.55     “Permitted Loans”	 	
31
	      8.1.56     “Permitted Transfers”	 	
31
	      8.1.57     “Person”	 	
31
	      8.1.58     “Plan”	 	
31
	      8.1.59     “Pledge and Security Agreements”	 	
31
	      8.1.60     “PPSA”	 	
31
	      8.1.61     “Prime Rate”	 	
31
	      8.1.62     “Revenue”	 	
31
	      8.1.63     “SEC”	 	
32
	      8.1.64     “Securities Acts”	 	
32
	      8.1.65     “Security Agreements”	 	
32
	      8.1.66     “Settlement Date”	 	
32
	      8.1.67     “Subsidiary”	 	
32
	      8.1.68     “Term Loan Commitment”	 	
32
	      8.1.69     “Term Loan Facility”	 	
32
	      8.1.70     “Term Loan Maturity Date”	 	
32
	      8.1.71     “Term Loan Note”	 	
32
	      8.1.72     “Total Charges”	 	
32
	      8.1.73     “UCC”	 	
32
	8.2       Rules of Interpretation and Construction	 	
33
	      8.2.1       Plural; Gender	 	
33
	      8.2.2       Section and Schedule References	 	
33
	      8.2.3       Titles and Headings	 	
33
	      8.2.4       “Including” and “Among Other” References	 	
33

iv

 

	 	 	 
	      8.2.5    “Shall”, “Will”, “Must”, “Can” and “May” References	 	
33
	      8.2.6    Time of Day References	 	
33
	      8.2.7    “Knowledge” of a Person	 	
33
	      8.2.8    Successors and Assigns	 	
34
	      8.2.9    Modifications to Documents	 	
34
	      8.2.10     References to Laws and Regulations	 	
34
	      8.2.11     Financial and Accounting Terms	 	
34
	      8.2.12     Conflicts Among Loan Documents	 	
34
	      8.2.13     Independence of Covenants and Defaults	 	
34
	      8.2.14     Interest Calculations and Payments	 	
34
	      8.2.15     Interest Act (Canada)	 	
35
	      8.2.16     Equivalent Amount
 	 	
35
	ARTICLE 9: MISCELLANEOUS	 	
35
	   9.1       Indemnification, Reliance and Assumption of Risk	 	
35
	   9.2       Assignments and Participations	 	
35
	   9.3       No Waiver; Delay	 	
36
	   9.4       Modification and Amendment	 	
36
	   9.5       Disclosure of Information to Third Parties	 	
36
	   9.6       Binding Effect and Governing Law	 	
37
	   9.7       Notices	 	
37
	   9.8       Relationship with Prior Agreements	 	
38
	   9.9       Severability	 	
38
	   9.10     Termination and Survival	 	
39
	   9.11     Reinstatement	 	
39
	   9.12     Counterparts	 	
39
	   9.13     Waiver of Suretyship Defenses	 	
39
	   9.14     Waiver of Liability	 	
39
	   9.15     Forum Selection; Consent to Jurisdiction	 	
40
	   9.16     Waiver of Jury Trial	 	
40
	   9.17     Judgment Currency	 	
40
	   9.18     French/English Acknowledgment	 	
41

v

 

SCHEDULES:

	 	 	 	 	 
	Schedule	 	
A
	 	List of Borrowers
	Schedule	 	
1.1.6
	 	Assets to be Transferred
	Schedule	 	
1.3.2
	 	Funding Instructions
	Schedule	 	
3.1
	 	Good Standing / Foreign Qualification Jurisdictions
	Schedule	 	
3.5A
	 	Intellectual Property
	Schedule	 	
3.5B
	 	Real Property Interests
	Schedule	 	
3.5C
	 	Operating Names / Trade Names
	Schedule	 	
3.6
	 	Capital Structure / Equity Ownership
	Schedule	 	
3.7
	 	Subsidiaries, Affiliates & Investments
	Schedule	 	
3.8
	 	Material Contracts
	Schedule	 	
3.10
	 	Taxes and Assessments
	Schedule	 	
3.11
	 	Material Litigation
	Schedule	 	
3.12
	 	Deviations from GAAP
	Schedule	 	
5.2
	 	Permitted Additional Indebtedness
	Schedule	 	
5.3
	 	Permitted Additional Guaranties
	Schedule	 	
5.4
	 	Permitted Additional Loans
	Schedule	 	
5.5
	 	Permitted Additional Liens
	Schedule	 	
5.7
	 	Permitted Additional Investments 

	EXHIBITS:

 

	Exhibit	 	
1.3.1
	 	Form of Advance Request

vi

 

CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (as defined in Article 8, along with all other
defined terms, this “Agreement”) is made and effective as of April 30, 2002, by
and among HELIX HEARING CARE OF AMERICA CORP.  (“Helix”) and each direct and
indirect Subsidiary of Helix (which either are listed on Schedule A with the
consent of Lender or are hereafter added as borrowing Subsidiaries pursuant to
the terms hereof) (as more fully defined in Article 8, Helix and each such
Subsidiary are referred to individually as a “Borrower” and collectively as the
“Borrowers”), and HEARx LTD. (as more fully defined in Article 8, “Lender”)

RECITALS

     WHEREAS, Borrowers desire and have requested from Lender a credit
facility consisting of a term loan pursuant to which $9.42 million can be
borrowed on a senior secured basis; and

     WHEREAS, Lender is willing to accommodate the request for credit upon and
subject to the terms, conditions and provisions of the Loan Documents;

     NOW, THEREFORE, for good and valuable consideration (receipt and
sufficiency of which are hereby acknowledged), and intending to be legally
bound hereby, Borrowers (jointly and severally) and Lender hereby agree as
follows:

ARTICLE 1: THE CREDIT FACILITY

     1.1      Term Loan Facility.

                1.1.1       Establishment of Credit Facility. Subject to the terms and
conditions of and in reliance upon the representations and warranties in the
Loan Documents, Lender will lend funds to Borrowers on a senior secured basis
through a total of up to six (6) Advances from time to time prior to June 30,
2002 (as may be extended from time to time in Lender’s sole and absolute
discretion, “Final Term Loan Draw Date”) in an aggregate principal amount
advanced not to exceed the Term Loan Commitment (as determined in accordance
with Section 1.2).

                1.1.2       Facility Maturity. The Term Loan Facility will mature on August 9,
2003 (as may be extended from time to time in Lender’s sole and absolute
discretion, “Term Loan Maturity Date”).

                1.1.3       Use of Proceeds. The funds advanced under this Term Loan Facility
shall be used exclusively as follows:

                               a.       Up to $5 million to repay and satisfy in full all indebtedness
(including principal, interest, fees, and expenses) under those certain
Convertible Secured Term Notes (four in number) each issued as of August 6,
1998, made by Helix in favor of payees named therein in the aggregate principal
amount of $5 million, and

 

 

                               b.       Up to $1.62 million to repay and satisfy in full all indebtedness
(including principal, interest, fees, and expenses) under that certain
Agreement dated May 23, 2000 between Helix and Starkey Laboratories, Inc., and

                               c.       Up to $650,000 to repay and satisfy in full all indebtedness (including
principal, interest, fees, and expenses) under that certain Convertible
Subordinated Debenture issued April 4, 1998, by Helix in favor of William
Demant Holding in the aggregate principal amount of $1.0 million, and

                               d.       To pay certain accounts receivable owed to Siemens Hearing Instruments,
Inc. in the aggregate amount of $1.15 million, and

                               e.       The balance of the Term Loan Commitment (if any) to pay in the
following order (i) $1.0 million for fees and expenses associated with
consummating and documenting the transactions contemplated by this Agreement
and the Merger Agreement, and (ii) then, the balance, if any, for such other
purposes as specifically authorized hereunder or in writing by Lender (in its
sole and absolute discretion).

                1.1.4       Term Loan Notes. The indebtedness under the Term Loan Facility and
the corresponding (joint and several) obligation of Borrowers to repay Lender
with interest in accordance with the terms hereof will be evidenced by one or
more Term Loan Notes (as amended, restated, replaced, supplemented, extended or
renewed from time to time, each, a “Term Loan Note”; collectively, the “Term
Loan Notes”) payable to the order of Lender. The Term Loan Notes will be due
and payable in full on the Term Loan Maturity Date. The aggregate stated
principal amount of the Term Loan Notes will be the Term Loan Commitment
established as of the Closing Date pursuant to Section 1.2; provided, however,
that the maximum liability under such Term Loan Notes will be limited at all
times to the actual amount of indebtedness (including principal, interest,
fees, expenses and indemnities) then outstanding under the Term Loan Facility.
Lender is authorized to note or endorse the date and amount of each Advance and
each payment under the Term Loan Facility on a schedule annexed to and
constituting a part of the Term Loan Notes. Such notations or endorsements, if
made, will constitute prima facie evidence of the information noted or endorsed
on such schedule, but the absence of any such notation or endorsement will not
limit or otherwise affect the obligations or liabilities of Borrowers
thereunder and hereunder.

                1.1.5       Interest. Interest under the Term Loan Facility (and with respect
to any other amounts advanced to or on behalf of Borrowers or otherwise
outstanding under the Loan Documents) will be determined and imposed in
accordance with the following provisions (and, as applicable, Section 1.4 ):

                               1.1.5.1.       Interest Rate Determination. The outstanding principal balance
of the Term Loan Facility will bear interest (computed daily until paid in
immediately available funds, whether prior to or after the Term Loan Maturity
Date) at the applicable Prime Rate plus 1% per annum. Each change in the Prime
Rate shall be effective from and including the date such change is publicly
announced. Notwithstanding the foregoing, the applicable interest rate for the
outstanding balance under the Term Loan Facility from the Closing Date until
the first date on which the Prime Rate is changed will be 5.75% per annum
(i.e., the Prime Rate as of the Closing Date plus 1% per annum).

2

 

                               1.1.5.2.       Calculation of Interest. Interest under the Term Loan Facility
will be calculated, accrued, imposed and payable on the basis of a 360-day year
for the actual number of days elapsed. Interest will begin to accrue on any
amounts advanced to or on behalf of Borrowers under the Loan Documents on and
as of the date such funds are advanced. Unless prohibited by applicable law,
interest will be compounded (and added to the outstanding balance under the
Loan Documents) only if not paid when and as due and payable.

                1.1.6       Repayment and Prepayment. Each Borrower (jointly and severally)
hereby promises to pay Lender the aggregate indebtedness under the Term Loan
Facility (and other Loan Documents) in accordance with the following provisions
(and, as applicable, Section 1.4):

                               1.1.6.1.       Payments — Excess Cash Flow. An annual principal payment equal
to 20% of Excess Cash Flow is due and payable in its entirety on the date that
is 120 days after the end of Borrower’s fiscal year, commencing with March 30,
2003.

                               1.1.6.2.       Payments at Maturity. The outstanding indebtedness under the
Term Loan Facility (including all principal, interest, fees, expenses and
indemnities) is due and payable in its entirety on the Term Loan Maturity Date.

                               1.1.6.3.       Prepayments.

                                                  a.       Voluntary Prepayments. At any time, upon prior written notice to
Lender of at least two (2) Business Days, the outstanding principal balance
under the Term Loan Facility may be prepaid in whole or in part without premium
or penalty. Any voluntary partial prepayment must be in an amount of not less
than $100,000 and in an integral multiple thereof.

                                                  b.       Mandatory Prepayments — Excessive Balance. If the outstanding
indebtedness under the Term Loan Facility at any time exceeds the Term Loan
Commitment, then such excess amount outstanding must be re-paid to Lender in
its entirety immediately upon the earlier of (1) awareness by any Borrower of
the advance or incurrence thereof or (2) demand by Lender for payment thereof.

                                                  c.       Mandatory Prepayments — Equity Issuances and Asset Sales. If any
Borrower issues any equity securities (other than to another Borrower) or if
Borrowers collectively sell, lease, license, transfer or otherwise dispose of
any assets (other than inventory or other assets either sold in the ordinary
course of business with the proceeds thereof promptly reinvested in similar
assets at similar locations or sold to another Borrower and other than the
assets to be transferred as set forth on Schedule 1.1.6) exceeding an aggregate
fair market value of $50,000 in any 12 consecutive calendar months, then a
prepayment must be immediately made on the outstanding indebtedness under the
Term Loan Facility, unless Lender otherwise consents. The amount of any such
mandatory prepayment will be the higher of 25% of the cash proceeds or the cash
equivalent of the fair market value of any such equity issuance or asset
dispositions net of (1) reasonable commissions and expenses actually paid to
unrelated third parties in connection with such transactions and (2) taxes
actually due as a direct result of such transactions (as such taxes are
estimated and certified to Lender by an acceptable certified public accountant
or the chief financial officer).

3

 

                                                  d.       In General. Any prepayments under the Term Loan Facility must include
all accrued but unpaid interest under the Term Loan Facility allocable to the
amount prepaid through the date of such prepayment.

                               1.1.6.4.       Availability for Reborrowing. Principal amounts repaid or
prepaid under the Term Loan Facility prior to the Term Loan Maturity Date will
not be available for reborrowing hereunder.

     1.2       Commitment. Upon the execution of this Agreement and satisfaction of
the conditions precedent set forth in Section 2.1, the Term Loan Commitment
established hereunder will be $9.42 million (“Term Loan Commitment”).

     1.3       Advances.

                1.3.1       Requesting Advances. To request an Advance (other than the initial
Advances on the Closing Date), Borrowers must give Lender written notice (or
oral notice by telephone with immediate written confirmation to follow) at
least 3 Business Days (but not more than 10 Business Days) prior to the
requested Settlement Date for such Advance (such notice, an “Advance Request”).
Each Advance Request, together with certain certifications, must be
substantially in the form of Exhibit 1.3.1 or such other form as Lender from
time to time may reasonably request. Each Advance pursuant to an Advance
Request (unless Lender otherwise consents) must be in an amount of at least
$250,000 or in a multiple of $10,000 in excess thereof and may not be greater
than the un-borrowed balance of the Term Loan Commitment.

                1.3.2       Funding Advances. Subject to the satisfaction of and compliance
with the terms and conditions hereof (including, as applicable, the conditions
precedent specified in Article 2), Lender will wire transfer all or any portion
of an Advance in accordance with the written instructions of Borrowers. By
executing this Agreement, each Borrower (jointly and severally) hereby requests
Lender to make and fund the initial Advances in accordance with the funding
instructions attached as Schedule 1.3.2.

                1.3.3       Obligation to Advance. Lender will not be obligated to make any
Advance under the following circumstances: (a) if the principal amount of such
Advance plus the aggregate amount outstanding under the Term Loan Facility
would exceed the Term Loan Commitment, or (b) during the existence of a
Default or an Event of Default hereunder, or (c) if such Advance would cause a
Default or Event of Default hereunder, or (d) after the Final Term Loan Draw
Date.

                1.3.4       Indemnification for Revocation or Failure to Satisfy Conditions.
Each Borrower (jointly and severally) will indemnify Lender against all losses
and costs incurred by Lender as a result of any revocation of any requested
Advance or any failure to fulfill the applicable conditions precedent to such
Advance on or before the requested Settlement Date specified in an Advance
Request. Such indemnification will include (among other things) all losses and
costs incurred by reason of the liquidation or reemployment of funds required
by Lender to fund the Advance when such Advance, as a result of such failure,
is not made on the requested Settlement Date.

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     1.4       Payments in General.

                1.4.1       Manner and Place of Payments. All payments of principal, interest,
fees, expenses, indemnities and other amounts due under the Loan Documents must
be received by Lender by wire transfer in immediately available funds in U.S.
dollars (and without any deduction, offset, netting, counterclaim or
reservation of rights) on or before Two O’clock (2:00) p.m. Eastern Time (“ET”)
on the due date therefor at the principal office of Lender set forth in Notice
Section hereof or at such other place as Lender may designate from time to
time.

                1.4.2       Special Payment Timing Issues. Whenever any payment to be made
under any Loan Document is due on a day that is not a Business Day, then such
payment may be made on the next succeeding Business Day, and such extension of
time will be included in the computation of interest under such Loan Document.
Any funds received by Lender after 2:00 p.m. ET on any day will be deemed to be
received on the next succeeding Business Day.

                1.4.3       Application of Payments. All payments and other funds received by
Lender under the Loan Documents will be applied in the following order: (a)
first to the payment of any fees and charges due under the Loan Documents, and
(b) then to any obligations for the payment of expenses, costs and indemnities
due under the Loan Documents, and (c) then to the payment of interest due and
owing under the Loan Documents, and (d) then to the principal indebtedness due
under the Term Loan Facility, and (e) then to any other interest accrued under
the Loan Documents, and (f) then to any other indebtedness of any Borrower or
other Obligor to Lender.

                1.4.4       Payment of Expenses, Indemnities and Protective Advances. If any
funds are advanced or costs are incurred by Lender to or on behalf of Borrowers
or otherwise as permitted under the Loan Documents (including as protective
advances), other than Advances pursuant to Section 1.3, then such advances or
costs must be re-paid to Lender in their entirety immediately upon the earlier
of (a) awareness by Borrowers of the advance or incurrence thereof or (b)
demand by Lender for payment thereof.

                1.4.5       Payments upon Termination. Notwithstanding any other provision
hereof, the entire outstanding indebtedness under the Term Loan Facility
(including all principal, interest, fees, expenses and indemnities) is due and
payable in its entirety upon any termination of the Term Loan Facility, the
Commitment therefor, or this Agreement.

                1.4.6       Late Payments. If any payment (of principal, interest, fees,
expenses, indemnities or other amounts) due under any Loan Document is not
received by Lender in immediately available funds on or before the 7th calendar
day after the due date therefor, then each Borrower (jointly and severally)
hereby agrees (to the maximum extent not prohibited by applicable law) to pay
to Lender (upon Lender’s request) a late payment charge equal to 1% of the
amount of such late payment. Additional and separate late payment charges (to
the maximum extent not prohibited by applicable law) may be subsequently
imposed hereunder by Lender from time to time (a) if any late payment or late
payment charge is not received by Lender in immediately available funds on or
before the 30th calendar day after any demand therefor, and (b) if any other
payment due under any Loan Document is not received by Lender in immediately
available funds on or before the 7th calendar day after the due date therefor.
The late payment charges due under this Section are in addition to any other
interest, fees, charges, expenses or indemnities due under the Loan Documents.

5

 

                1.4.7       Default Interest. During the existence of an Event of Default
hereunder, each Borrower (jointly and severally) hereby agrees (to the maximum
extent not prohibited by applicable law) to pay to Lender (upon Lender’s
request, but commencing on the date of occurrence of such Default or Event of
Default) interest on any indebtedness outstanding hereunder at the rate of
Three Percent (3%) per annum in excess of the rate then otherwise applicable to
such indebtedness. Notwithstanding the foregoing, if the relevant Event of
Default is under Section 7.1.10, then such rate increase (to the maximum extent
not prohibited by applicable law) will occur automatically without any request
by Lender.

                1.4.8       Usury Savings Provision. Notwithstanding any provision of any Loan
Document, Borrowers (individually and collectively) are not and will not be
required to pay interest at a rate or any fee or charge in an amount prohibited
by applicable law. If interest or any fee or charge payable on any date would
be in a prohibited amount, then such interest, fee or charge will be
automatically reduced to the maximum amount that is not prohibited. To the
extent that any prohibited amount is actually received by Lender, then such
amount will be automatically deemed to constitute a repayment of principal
indebtedness hereunder.

     1.5       Release of Security. Upon termination of the Loan Documents in
accordance with Section 9.10, then Lender (at the written request and expense
of Borrowers) (i) will release the Obligors and the property serving as
Collateral under the Loan Documents (without representation, warranty,
recourse, liability or indemnification of any kind by or to Lender), and (ii)
will execute and deliver such UCC termination statements, mortgage releases,
deed of trust releases, discharges and other documentation and instruments (all
in form and substance reasonably acceptable to Lender) as may be reasonably
requested and provided to Lender to effect such releases, reconveyances and
terminations, and (iii) will terminate and cancel all Commitments and all
facilities under the Loan Documents.

ARTICLE 2: CONDITIONS PRECEDENT

     2.1       Closing Conditions. The obligation of Lender to execute and perform
the Loan Documents, and to establish the Term Loan Facility and to fund the
Advances are subject to the following conditions precedent (unless and except
to the extent expressly waived by Lender in its sole and absolute discretion):

                2.1.1       Compliance.

                               2.1.1.1.       Representations. Each, and all, representations and warranties
contained in this Agreement (including those in Article 3) and in each other
Loan Document, certificate or other writing delivered to Lender pursuant hereto
or thereto on or prior to the Closing Date must be true, correct and complete
in all material respects on and as of the Closing Date, except for such
deviations disclosed in writing and acceptable to Lender.

                               2.1.1.2.       No Default. There must not be any Default or Event of Default
hereunder or any default under any other Loan Document on the Closing Date, and
there must not be any such Default or Event of Default occurring as a result of
executing or advancing funds under the Loan Documents, except for such defaults
disclosed in writing and acceptable to Lender.

6

 

                               2.1.1.3.       No Material Change. There must not have been (in Lender’s
reasonable opinion) any Material Adverse Change between November 30, 2001
(i.e., the “as of” date for the most recent audited financial statements
delivered to Lender) and the Closing Date.

                2.1.2                Documents. Lender must have received the following documents,
agreements and certificates (together with all exhibits and schedules thereto),
each duly executed, in form, substance and amount satisfactory to Lender and,
when applicable, recorded or filed in the appropriate public office:

                               2.1.2.1.       Credit Agreement. This Agreement.

                               2.1.2.2.       Promissory Notes. The Term Loan Notes as described in Section
1.1.4.

                               2.1.2.3.       Security Agreements and Collateral Assignments. A master
security agreement and collateral assignment and deed of hypothec executed by
each Borrower in favor of Lender granting Lender a security interest in and
collaterally assigning to Lender all of such grantor’s tangible and intangible
personal property assets (including fixtures), whether now owned or hereafter
acquired, and the proceeds and products thereof, as collateral security for the
indebtedness and obligations hereunder, together with all necessary financing
statements and termination statements (each as filed), waivers and consents,
and evidence of any other recordations required by applicable law or by Lender
to perfect such security interests in a manner that will be subject only to
Permitted Liens.

                               2.1.2.4.       Intellectual Property Security Agreements. One or more separate
intellectual property security agreements by each Borrower in favor of Lender
encumbering all of such grantor’s copyrights, patents, trade names, trademarks,
service names, service marks and other intellectual property (including any and
all applications and licenses therefor), all as now owned or hereafter
acquired, and the proceeds and goodwill thereof, together with all appropriate
financing statements and termination statements (each as filed), waivers and
consents, and any other documents or recordations required by applicable law or
by Lender to perfect such interests.

                               2.1.2.5.       Assignment of Life Insurance Policy. One or more separate
assignments to Lender of the key-person life insurance policy (or policies)
insuring the life of Steve Forget for at least $500,000 and naming Helix as the
only other beneficiary thereof, which assignment (a) must be in form and
substance acceptable to Lender, and (b) must be executed or consented to by
each beneficiary, each insured and the relevant insurance company, and (c) must
indicate that the life insurance policy is fully paid for a period of at least
12 months beyond the Closing Date.

                               2.1.2.6.       Real Estate Documents. One or more deeds of trust, mortgages
and/or fixture filings by each Borrower in favor of Lender encumbering all of
such grantor’s real property and leasehold interests (including fixtures) as
collateral security for the indebtedness and obligations hereunder, together
with all necessary financing statements and termination statements, deeds of
release, estoppel certificates, waivers and consents, Lender title insurance,
surveys, environmental reports, appraisals, flood status certifications, and
any other documents or recordations required by applicable law or by Lender to
perfect such liens in a manner that will be subject only to Permitted Liens.

7

 

                               2.1.2.7.       Owners’ Pledge and Security Agreements. One or more equity
pledge and security agreements executed by Steve Forget in favor of Lender
pledging (among other things) all of his outstanding equity interests and
rights with respect to Cousineau, Doucet, Parent, Forget Audioprothésistes
s.e.n.c. or any successor or assign thereof (including any warrants, options or
convertible rights therefor) as collateral security for the indebtedness and
obligations hereunder, together with the certificates therefor (if any), powers
executed in blank, and all necessary financing statements, evidence of
registration and other documents required by applicable law or by Lender to
perfect such liens in a manner that will be subject only to Permitted Liens.

                               2.1.2.8.       Insurance. Current proof of insurance with an indication of loss
payee and additional insured endorsements in favor of Lender with respect to
all of the coverages required under Section 4.6. Such proof of insurance must
be indicated pursuant to one or more certificates on (a) an ACORD 27 form
(3/93) for property-related insurance coverages and (b) a modified version of
an ACORD 25-S form (3/93), in each instance permitting Lender reliance and
requiring cancellation notification.

                               2.1.2.9.       Compliance Certificates. A certificate from an Authorized
Officer of each Borrower dated as of the Closing Date and certifying as to
compliance with the matters described under Section 2.1.1.

                               2.1.2.10.       Opinions of Counsel. One or more written opinions from legal
counsel to Borrowers addressed to Lender and its counsel and dated as of the
Closing Date opining as to such matters as Lender may request.

                               2.1.2.11.       Payoff Instructions for Prior Indebtedness. Payoff and release
letters from each Person receiving any proceeds of any Advance.

                               2.1.2.12.       Authorization Documents — Borrowers. A certificate of an
Authorized Officer of each Borrower delivering true, accurate and complete
versions of (a) its Articles of Incorporation, Articles of Organization or
Certificate of Partnership (as applicable) and all amendments thereto, and (b)
its Bylaws, Operating Agreements or Partnership Agreements (as applicable) and
all amendments thereto, and (c) the resolutions authorizing its execution,
delivery and full performance of the Loan Documents and all other documents,
certificates and actions required hereunder or in connection herewith, and (d)
an incumbency certificate setting forth its officers (together with the
corresponding signatures), and (e) a long-form good standing and qualification
certificate (issued within 15 calendar days before the Closing Date) with
respect to each jurisdiction listed on Schedule 3.1.

                               2.1.2.13.       Officer’s Certificates. One or more certificates of an
Authorized Officer of each Borrower delivering true, accurate and complete
copies of the following documents (together with all amendments, exhibits and
schedules thereto):

                                                     a.       Lien Searches — Searches (conducted within 15 calendar days before
the Closing Date) satisfactory to Lender with respect to consensual liens, tax
liens, judgments and bankruptcy, listing respectively (1) all effective UCC and
PPSA financing statements and CCQ hypothec filings that name any Borrower
(including any predecessor thereto and any operating or tradenames thereof) as
“debtor” that are filed in each Borrower’s jurisdiction of incorporation, the
provinces of Alberta, Ontario and Quebec, or any other U.S. or Canadian
jurisdiction in which such debtor currently operates or has had assets at any
time within the

8

 

immediately preceding 12 calendar months (together with copies of such
financing statements), and (2) all tax liens against any Obligor (or the assets
thereof), and (3) all outstanding judgments against any Obligor (or the assets
thereof), and (4) whether any Obligor has filed bankruptcy within the preceding
5 years.

                                                    b.       Financial Statements — A set of (1) the quarterly financial statements
of Helix for fiscal quarter ending February 28, 2002 and (2) the audited
financial statements of Helix (with consolidating schedules thereto) for fiscal
year ending November 30, 2001.

                                                    c.       Equityholder Agreements — Each shareholder agreement, member
agreement, partner agreement, voting agreement, buy-sell agreement, option,
warrant, put, call, right of first refusal, and any other agreement or
instrument with conversion rights into equity of any Borrower either (1)
between any Borrower and any holder or prospective holder of any equity
interest of any Borrower (including interests convertible into such equity) or
(2) otherwise between any two or more such holders of equity interests.

                                                    d.       Other Agreement — Such other agreements and documents as Lender may
reasonably request, including a complete set of the agreements regarding
dissolution of 3319725 Canada Inc. and the reorganization of Cousineau, Doucet,
Parent, Forget Audioprothésistes s.e.n.c.

                               2.1.2.14.       Other Documents. Lender must have received all additional
agreements, documents and certificates as Lender or its counsel may reasonably
request.

ARTICLE 3: REPRESENTATIONS AND WARRANTIES

     Each Borrower, as of the Closing Date and the Settlement Date for each
Advance hereunder, hereby (jointly and severally) represents and warrants as
follows:

     3.1       Organization and Good Standing. Each Borrower (a) is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and (b) has all requisite power and authority (corporate,
partnership, LLC and otherwise) to own its properties and to conduct its
business as now conducted and as currently proposed to be conducted, and (c) is
duly qualified to conduct business as a foreign organization and is currently
in good standing in each state and jurisdiction in which it conducts business,
except where failure to be duly qualified and in good standing could not have a
Material Adverse Effect. Each state and jurisdiction in which any Borrower is
organized or is (or should be) qualified to conduct business under applicable
law is listed on Schedule 3.1.

     3.2       Power and Authority. Each Borrower has all requisite power and
authority under applicable law and under its Organic Documents, Authorizations
and Licenses to execute, deliver and perform the obligations under the Loan
Documents to which it is a party.

     3.3       Validity and Legal Effect. This Agreement constitutes, and the other
Loan Documents to which (any) Borrower is a party constitute (or will
constitute when executed and delivered), the legal, valid and binding
obligations of each Borrower in accordance with the terms thereof.

     3.4       No Violation of Laws or Agreements. The execution, delivery and
performance of the Loan Documents (a) will not violate or contravene any
material provision of any material law, rule,

9

 

 regulation, administrative order or judicial decree (federal, state,
provincial, or local), and (b) will not violate or contravene any provision of
the Organic Documents of any Borrower, and (c) will not result in any material
breach or violation of (or constitute a material default under) any material
agreement or instrument by which any Borrower or any of its property may be
bound, and (d) will not result in or require the creation of any Lien (other
than pursuant to the Loan Documents) upon or with respect to any properties of
any Borrower, whether such properties are now owned or hereafter acquired.

     3.5       Title to Assets; Existing Encumbrances; Identification of Intellectual
and Real Property.

                3.5.1       Each Borrower has good and marketable title to all of its owned real
and personal property assets and the right to possess and use all of its leased
or licensed real and personal property assets. All such property interests are
free and clear of any Liens, except for Permitted Liens (as defined in Section
5.5). Each such property and asset owned, leased or licensed by any Borrower
is titled, leased or licensed in the current legal name of such Borrower.

                3.5.2       Schedule 3.5A lists each trademark, service mark, copyright, patent,
database, customized application software and systems integration software,
trade secret and other intellectual property owned, licensed, leased,
controlled or applied for by any Borrower, whether or not such intellectual
property is recorded with the Copyright Office or the U.S. or Canadian Patent
and Trademark Office, together with relevant identifying information with
respect to such intellectual property describing (among other things) the date
of creation, the method of protection against adverse claims and the
registration number.

                3.5.3       Schedule 3.5B lists each real property interest owned, leased or
otherwise used by any Borrower, together with relevant identifying information
describing (among other things) the location and mailing address for each such
real property and a legal description for each such real property, an
indication of whether such interest is owned or leased (and, if leased, the
lessor and record owner thereof). Each such property and asset is in good
order and repair (ordinary wear and tear excepted) and is fully covered by the
insurance required under Section 4.7.

                3.5.4       Schedule 3.5C identifies each legal, operating and trade name that
any Borrower has used (or permitted the filing of a UCC or PPSA financing
statement or CCQ hypothec filing under) at any time during the twelve (12)
consecutive calendar years immediately preceding the Closing Date. Borrowers
have properly registered with Network Solutions, Inc. (or an appropriate
successor thereto) Internet domain names and URL’s that correspond with each
legal, operating and trade name of any Borrower.

     3.6       Capital Structure and Equity Ownership. Schedule 3.6 accurately and
completely discloses (a) the number of shares and classes of equity ownership
rights and interests of each Borrower authorized and/or outstanding (whether
existing as common or preferred stock, general or limited partnership
interests, or LLC membership interests, or warrants, options or other
instruments convertible into such equity), and (b) the ownership thereof.
Except as shown on Schedule 3.6, no Borrower owns any other equity ownership
rights or interests of any organization (whether existing as common or
preferred stock, general or limited partnership interests, or LLC membership
interests, or warrants, options or other instruments convertible into such
equity). All such shares and interests (with respect to each Borrower) are
validly existing, fully paid and non assessable.

10

 

     3.7       Subsidiaries, Affiliates and Investments. Schedule 3.7 accurately and
completely discloses (a) each Subsidiary and Affiliate of each Borrower (other
than its officers and directors) and (b) each investment in or loan to any
other Person by any Borrower in excess of $5,000.

     3.8       Material Contracts. Schedule 3.8 (a) accurately and completely
discloses each Material Contract (as defined below) of each Borrower, and (b)
also indicates the following information with respect to each such contract:
(1) the contract parties thereunder, and (2) the contract term and any options
or renewals thereto, and (3) the monthly payment required thereunder, and (4)
any restrictions on assignments, and (5) any restrictions on disclosure of the
terms thereof, and (6) the existence of any breaches or defaults thereunder.
Except as shown on Schedule 3.8, no Borrower has committed any unwaived breach
or default under any Material Contract (whether or not listed on Schedule 3.8),
and after due inquiry and investigation, no Borrower has any knowledge or
reason to believe that any other party to any such Material Contract (whether
or not listed on Schedule 3.8) has or might have committed any unwaived breach
or default thereof. For purposes of this Section 3.8, a “Material Contract” of
[a] Borrower includes the following types of agreements to which a Borrower is
a party: (1) any contract either with annual compensation, consideration or
payments in excess of $100,000 or with aggregate compensation, consideration or
payments in excess of $100,000, and (2) any other agreement or contract the
loss or breach of which could reasonably be expected to have or cause a
Material Adverse Effect.

     3.9       Licenses and Authorizations. Each Borrower possesses all Licenses and
other Authorizations necessary or required in the conduct of its businesses
and/or the operation of its properties. Each material Authorization is valid,
binding and enforceable on, against and by such Borrower. Each material
Authorization is subsisting without any defaults thereunder or enforceable
adverse limitations thereon, and no Authorization is subject to any proceedings
or claims opposing the issuance, continuance, renewal, development or use
thereof or contesting the validity or seeking the revocation thereof.

     3.10       Taxes and Assessments. Except as disclosed on Schedule 3.10, each
Borrower has timely filed all required tax returns and reports (federal, state
and local) or has properly and timely filed for extensions of the time for the
filing thereof. No Borrower has knowledge of any deficiency, penalty or
additional assessment due or appropriate in connection with any such taxes.
All taxes (federal, state, provincial, municipal and local) imposed upon any
Borrower or any of its properties, operations or income have been paid and
discharged prior to the date when any interest or penalty would accrue for the
nonpayment thereof, except for those taxes being contested in good faith by
appropriate proceedings diligently prosecuted and with adequate reserves
reflected on the financial statements in accordance with GAAP (all as also
disclosed on Schedule 3.10).

     3.11       Litigation and Legal Proceedings. Except as disclosed on Schedule
3.11, there is no litigation, claim, investigation, administrative proceeding,
labor controversy or similar action that is pending or (to the best of each
Borrower’s knowledge and information after due inquiry) threatened against any
Borrower or its properties that, if adversely resolved, could reasonably be
expected to have or cause a Material Adverse Effect.

     3.12       Accuracy of Financial Information. All financial statements
previously furnished to Lender concerning the financial condition and
operations of any one or more Borrowers (a) have been prepared in accordance
with GAAP consistently applied (except as disclosed on Schedule 3.12), and (b)
fairly present the financial condition of the organization covered thereby as
of the dates and for the periods covered thereby (but, with respect to interim
periodic financial statements, subject to

11

 

 normal and customary year end audit adjustments), and (c) disclose all
material liabilities (contingent and otherwise) of each Borrower. In addition,
all written information previously furnished to Lender concerning the financial
condition and operations of any Borrower are true, accurate and complete in all
material respects.

     3.13       Accuracy of Other Information. All written information contained in
any application, schedule, report, certificate, or any other document furnished
to Lender by any Borrower or any other Person (on behalf of any Borrower) in
connection with the Loan Documents is in all material respects true, accurate
and complete, and no such Person (including Borrowers) has omitted to state
therein (or failed to include in any such document) any material fact or any
fact necessary to make such information not misleading. All written
projections furnished to Lender by any Borrower or any other Person on behalf
of any Borrower have been prepared with a reasonable basis and in good faith,
making use of such information as was available at the date such projection was
made.

     3.14       Compliance with Laws Generally. Each Borrower is in compliance in all
material respects with all material laws, rules, regulations, administrative
orders and judicial decrees (federal, state, local and otherwise) applicable to
it, its operations and its properties.

     3.15       ERISA Compliance.

                3.15.1       Each Borrower is in compliance in all material respects with all
applicable provisions of ERISA.

                3.15.2       Neither any Borrower nor any ERISA Affiliate thereof maintains or
contributes to (or has maintained or contributed to) any multi-employer plan
(as defined in Section 4001 of ERISA) under which any Borrower or any ERISA
Affiliate thereof could reasonably be expected to have any withdrawal
liability.

                3.15.3       Neither any Borrower nor any ERISA Affiliate thereof sponsors or
maintains any defined benefit pension plan under which there is an accumulated
funding deficiency within the meaning of Section 412 of the Code, or other law
of a foreign jurisdiction, if applicable, whether or not waived.

                3.15.4       The liability for accrued benefits under each defined benefit
pension plan that will be sponsored or maintained by any Borrower or any ERISA
Affiliate thereof (determined on the basis of the actuarial assumptions
utilized by the PBGC) or other law of a foreign jurisdiction, if applicable,
does not exceed the aggregate fair market value of the assets under each such
defined benefit pension plan.

                3.15.5       The aggregate liability of each Borrower and each ERISA Affiliate
thereof arising out of or relating to a failure of any employee benefit plan
within the meaning of Section 3(2) of ERISA or other law of a foreign
jurisdiction, if applicable, to comply with provisions of ERISA or the Code
will not have a Material Adverse Effect.

                3.15.6       There does not exist any unfunded liability (determined on the
basis of actuarial assumptions utilized by the actuary for the plan in
preparing the most recent annual report) of any Borrower or any ERISA Affiliate
thereof under any plan, program or arrangement providing post retirement, life
or health benefits.

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                3.15.7       No Reportable Event and no Prohibited Transaction (as defined in
ERISA) has occurred or is occurring with respect to any plan with which any
Borrower is associated.

     3.16       Environmental Compliance.

                3.16.1       Each Borrower has received all permits and filed all notifications
necessary under and is otherwise in compliance in all material respects with
the Environmental Control Statutes.

                3.16.2       No Borrower has given any written or oral notice to the EPA or any
state, provincial, or local agency with regard to any actual or imminently
threatened removal, storage, transportation, spill, release or discharge of
hazardous or toxic wastes, substances or petroleum products either (a) on
properties owned or leased by such Borrower or (b) otherwise in connection with
the conduct of its business and operations.

                3.16.3       No Borrower has received notice that it is potentially responsible
for costs of clean up of any actual or imminently threatened spill, release or
discharge of hazardous or toxic wastes or substances or petroleum products
pursuant to any Environmental Control Statute.

     3.17       Fees and Commissions. No Borrower owes any fees or commissions of
any kind in connection with this Agreement or the transactions contemplated
hereby, and no Borrower knows of any claim (or any basis for any claim) for any
fees or commissions in connection with this Agreement or the transactions
contemplated hereby.

     3.18       Solvency. No Borrower is “insolvent,” as such term is defined in
Section 101(32) of the Bankruptcy Code (11 U.S.C. § 101(32)) or any other
applicable law of any jurisdiction, including without limitation, the
Bankruptcy & Insolvency Act (Canada). No Borrower, by virtue of its
obligations and actions in connection with the Loan Documents, has engaged or
is engaging in any transaction that constitutes a fraudulent transfer or
fraudulent conveyance under applicable federal, provincial, or state law
(including without limitation under Section 548 of the Bankruptcy Code or under
the Uniform Fraudulent Transfer Act or the Uniform Fraudulent Conveyance Act).

ARTICLE 4: AFFIRMATIVE COVENANTS

     Each Borrower (jointly and severally) hereby covenants and agrees that, so
long as any indebtedness remains outstanding hereunder, each Borrower will
comply with the following affirmative covenants:

     4.1       Periodic Financial Statements and Compliance Certificates.

                4.1.1       Monthly Financial Statements. Within 45 calendar days after the end
of each calendar month (including the last calendar month of each year),
Borrowers must prepare and deliver to Lender a complete set of unaudited
internal monthly financial statements consisting of a balance sheet and an
income statement (profit and loss statement). Together with the monthly
financial statements, Lender must also receive a certificate executed by the
chief financial officer or such other senior executive officer of Helix as is
acceptable to Lender (a) stating that the financial statements fairly present
the financial condition of each Borrower as of the date thereof and for the
periods covered thereby, and (b) certifying that as of the date of such
certificate there is not any existing Default or Event of Default.

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                4.1.2       Quarterly Financial Statements. Within 60 calendar days after the
end of each fiscal quarter (including the fourth fiscal quarter of each year),
Borrowers must prepare and deliver to Lender unaudited quarterly financial
statements, in form and substance reasonably acceptable to Lender. Such
financial statements must include a balance sheet and an income statement (with
appropriate notes and schedules). Such financial statements must be prepared
in accordance with GAAP consistently applied (except as approved by Lender in
its sole and absolute discretion). Together with the quarterly financial
statements, Lender must also receive a certificate executed by the chief
financial officer or such other senior executive officer of Helix as is
acceptable to Lender (a) stating that the financial statements fairly present
the financial condition of each Borrower as of the date thereof and for the
periods covered thereby, and (b) certifying that as of the date of such
certificate there is not any existing Default or Event of Default.

                4.1.3       Annual Financial Statements. Within 120 calendar days after the
close of each fiscal year, Borrowers must prepare and deliver to Lender a
complete set of audited annual consolidated financial statements (with
accompanying notes and consolidating schedules). Such financial statements (a)
must include the types of financial statements and information required on a
quarterly basis under this Section 4.1 as well as a cash flow statement and a
reconciliation of consolidated net worth and capital accounts, and (b) must be
prepared in accordance with GAAP consistently applied, and (c) must be
certified without qualification by Deloitte & Touche, LLP or another
independent certified public accounting firm satisfactory to Lender. Together
with the annual financial statements, Lender must also receive all related
management letters prepared by such accountants and a certificate signed by
such accountants, (a) stating that the financial statements fairly present the
consolidated financial condition of each Borrower as of the date thereof and
for the periods covered thereby, and (b) calculating, as of the end of such
fiscal year, the then-current amounts for the Excess Cash Flow, and (c)
certifying that as of the date of such certificate, to the best of such
accountant’s knowledge (after due inquiry), there is not any existing Default
or Event of Default.

     4.2       Other Financial Information and Specialized Reports.

                4.2.1       Financial Forecasts; Operating Budget. Within 10 Business Days
after receiving, preparing, materially revising or otherwise assembling any
periodic budgets or financial forecasts, Borrowers must deliver a complete copy
thereof to Lender.

                4.2.2       Additional Material Contracts. Each Borrower (a) will notify Lender
in writing within 90 calendar days after executing or becoming bound by any
contract or agreement that should have been listed on Schedule 3.5B or Schedule
3.8 if it had existed as of the Closing Date, and (b) will concurrently update
Schedule 3.5B or Schedule 3.8 (as appropriate).

                4.2.3       Tax Returns. Within 10 Business Days after the date that any
Borrower makes any filing with Revenue Canada or the Internal Revenue Service
relating to its liability for income taxes, such Borrower must deliver a
complete copy thereof to Lender.

                4.2.4       Filings and Press Releases. Within 10 Business Days after the date
that any Borrower or any organization that owns or controls at least 50% of any
class of equity interests of any Borrower makes any filing with any stock
exchange or securities commission or regulatory authority or issues any press
release, Borrowers must deliver a complete copy thereof to Lender.

     4.3       Fiscal Year. Helix will maintain a fiscal year that has a November 30
year end.

14

 

     4.4       Books and Records; Maintenance of Properties. Each Borrower will keep
and maintain satisfactory and adequate books and records of account in
accordance with GAAP. Each Borrower will also keep, maintain and preserve all
of its property and assets in good order and repair (ordinary wear and tear
excepted).

     4.5       Existence and Good Standing. Each Borrower will preserve and maintain
(a) its existence as a corporation under the laws of its jurisdiction of
organization, and (b) its good standing in all jurisdictions where it conducts
business, and (c) the validity of all its Authorizations and Licenses required
or otherwise appropriate in the conduct of its businesses.

     4.6       Insurance.

                4.6.1       General Insurance Provisions. Each Borrower will keep all of its
property and assets fully covered by insurance with reputable and financially
sound insurance companies (reasonably acceptable to Lender). Each Borrower
must also maintain such protection against such hazards and liability
(including casualty, liability, fire, flood, business interruption, earthquake,
workmen’s compensation, and other material risks to its property and business),
in such amounts and with such deductibles as is customary in the relevant
industry and appropriate under the relevant circumstances (and, in each
instance, as is reasonably acceptable to Lender). If any Borrower fails or
refuses to obtain or maintain any such insurance coverage, then Lender (at its
election) may (but is not obligated to) obtain and maintain such insurance
coverage on behalf of such Borrower, and the premiums and other costs thereof
(a) will be included in the indebtedness hereunder secured by the Collateral
and (b) will be due and payable by such Borrower to Lender immediately upon
demand. Each such policy for liability insurance must name Lender as loss
payee, and each such other policy for insurance must name Lender as loss payee
and as additional insured. Each such policy must also require the insurer to
furnish Lender with written notice at least 25 calendar days prior to any
termination, cancellation or lapse of coverage and must provide Lender with the
right (but not the obligation) to cure any non-payment of premium. Upon
Lender’s request, each Borrower (from time to time) will furnish Lender with
proof of such insurance (in form and substance acceptable to Lender) and a copy
of the related policy. Notwithstanding the foregoing, with respect to property
insurance coverage, Borrowers from time to time will be entitled to receive and
keep all proceeds and payments of less than $50,000 if and to the extent that
(i) no Event of Default exists at the time of receiving such proceeds or
payment and (ii) such proceeds or payment is promptly reinvested by Borrowers
to repair or replace the affected property.

                4.6.2       Key-Person Life Insurance. Borrowers must also maintain key-person
life insurance coverage (acceptable to Lender) that (a) insures the life of
Steve Forget for at least $500,000, and (b) names Helix as the only other
beneficiary thereof (together with Lender), and (c) is assigned to Lender as
additional collateral security for the indebtedness hereunder. At Closing and
on an annual basis thereafter for so long as such insurance is required to be
maintained hereunder, Borrowers must provide Lender (prior to the expiration of
any such coverage) with written evidence that such coverage is continued and
fully paid for a period of at least an additional year.

     4.7       Loan Purpose. Borrowers will use the proceeds of each Advance
hereunder exclusively as set forth in Section 1.1.3.

     4.8       Taxes. Each Borrower will pay and discharge all taxes, assessments or
other governmental charges or levies imposed on it or any of its property or
assets prior to the date upon which any penalty for non payment or late payment
is incurred, unless (a) the same are then being

15

 

 contested in good faith by appropriate proceedings diligently prosecuted,
and (b) adequate reserves therefor acceptable to Lender have been established,
and (c) Lender has been notified thereof in writing, and (d) the consequences
of such non-payment (in Lender’s reasonable judgment) will not have a Material
Adverse Effect.

     4.9       Management Changes. Borrowers will notify Lender in writing within
thirty (30) calendar days prior to any change (including any dismissal or
change in title or status) in the senior management personnel of any Borrower.

     4.10       Litigation and Administrative Proceedings. Each Borrower will notify
Lender in writing immediately upon the institution or commencement of any
litigation, legal or administrative proceeding, or labor controversy (a) with a
purported amount in controversy in excess of $100,000, or (b) that could
otherwise reasonably be expected to have or cause a Material Adverse Effect.

     4.11       Monitoring Compliance; Occurrence of Certain Events. Each Borrower
at all times will maintain (and comply with) commercially reasonable procedures
and systems designed to monitor compliance and to detect instances of
non-compliance with the Loan Documents. Each Borrower will notify Lender in
writing immediately upon (a) the occurrence of any Default or Event of Default
hereunder, or (b) the occurrence of any default under any other Loan Document,
or (c) the happening of any event or the assertion or threat of any claim that
could reasonably be expected to have or cause a Material Adverse Effect.

     4.12       Compliance with Laws. Each Borrower will comply in all material
respects (a) with all laws, rules, regulations and orders (U.S., Canadian,
federal, state, provincial, local and otherwise) applicable to its business,
and (b) with the provisions and requirements of all Authorizations. Each
Borrower will notify Lender immediately in detail of any actual or alleged
material failure to comply with or violation of any such laws, rules,
regulations or orders, or under the terms of any of such Authorizations, or of
the occurrence or existence of any facts or circumstances that with the passage
of time, the giving of notice or otherwise could create such a failure to
comply or violation or could reasonably be expected to occasion the termination
of any of such Authorization.

     4.13       Further Actions.

                4.13.1       Additional Collateral. Each Borrower will execute, deliver and
record (or, as appropriate, cause the execution, delivery and recordation) at
any time upon Lender’s request and in form and substance reasonably
satisfactory to Lender, any of the following instruments in favor of Lender as
additional Collateral hereunder: (a) mortgages, deeds of trust and/or
assignments on or of any real or personal property owned, leased or licensed by
it, and (b) certificates of title encumbrances against any of its titled
vehicles, and (c) any other like assignments or agreements specifically
covering any of its properties or assets (including assignments of any patents,
trademarks, copyrights, databases, trade secrets and other forms of
intellectual property and deposit account control agreements), and (d) any
financing or continuation statements requested by Lender.

                4.13.2       Further Assurances. From time to time, each Borrower will execute
and deliver (or will cause to be executed and delivered) such supplements,
amendments, modifications to and/or replacements of the Loan Documents and such
further instruments as may be reasonably required to effectuate the intention
of the parties to (or to otherwise facilitate the performance of) the Loan
Documents.

16

 

                4.13.3       Estoppel Certificates. Upon Lender’s request, each Borrower will
execute, acknowledge and deliver (or, as appropriate, cause the execution,
acknowledgment and delivery) to such Persons as Lender may request a statement
in writing certifying as follows (to the best of its knowledge, after diligent
inquiry): (a) that the Loan Documents (as amended, if applicable) are
unmodified and in full force and effect, and (b) that the payments under the
Loan Documents required to be paid by Borrowers have been paid, and (c) the
then unpaid principal balance of Facilities hereunder, and (d) whether or not
any Event of Default is then occurring under any of the Loan Documents and, if
so, specifying each such Event of Default of which the signer may have
knowledge, and (e) whether or not any Borrower is then entitled to assert any
claims, defenses or causes of action that would impose any liability upon
Lender or that would otherwise challenge the enforceability any Loan Document
or any provision thereof (including, the existence of any so-called “Lender
Liability” claims or defenses). Unless such Borrower otherwise consents (which
consent will not be unreasonably withheld, delayed or conditioned), Lender must
give such Borrower at least 10 Business Days to complete and deliver any such
certificate. Each Borrower understands and agrees that any such certificate
delivered pursuant to this Section may be relied upon by Lender and, if
different, by the recipient thereof.

                4.13.4       Waivers and Consents. At any time upon Lender’s request, each
Borrower will use its best efforts to obtain and deliver (in form and substance
reasonably satisfactory to Lender) a waiver or consent to the assignment to
Lender of any contract, lease, Authorization or other agreement to which it is
a party.

                4.13.5       Access and Audits. Lender (from time to time at its discretion)
may conduct audits of the Collateral and of the performance and operations of
any Borrower. Each Borrower (upon Lender’s request from time to time) will use
its best efforts to provide Lender (and its representatives and agents) with
reasonable access during normal business hours to such Borrower’s management
personnel, books and records, property and operations (including its financial
records), whether such property, books and records are in the possession of
such Borrower or are in the possession of a third party (including the
possession of such Borrower’s Affiliates, accountants and legal counsel). In
connection with any such audit, Lender may also make notes and copies of (and
extracts from) relevant records.

                4.13.6       Attendance at Board of Directors Meetings. Lender (from time to
time at its discretion) may attend any or all meetings of the board of
directors of any Borrower (including the meetings of any committees or
sub-committees thereof) as an observer only. Borrowers will provide Lender
with written notice thereof at least 3 Business Days prior to each such
meeting. Notwithstanding the foregoing, at the request of Borrowers,
representatives of Lender will temporarily leave a meeting of the board of
directors if such action is necessary to preserve the Borrowers’
attorney-client privilege with respect to such meetings or the information
disseminated therein.

     4.14       Costs and Expenses. Borrowers will pay or reimburse Lender for all
reasonable fees and costs (including all reasonable attorneys’ fees and
disbursements) that Lender may pay or incur in connection with (a) the initial
and continuing perfection or protection of Lender’s interest in any of the
Collateral, and (b) the collection or enforcement of any of the Loan Documents.
Borrowers will pay any and all recordation taxes or other fees due upon the
filing of the financing statements or documents of similar effect required to
be filed under the Loan Documents, and will provide Lender with a copy of any
receipt or other evidence reflecting such payments. All obligations provided
for

17

 

 in this Section shall survive the termination of this Agreement and/or the
repayment of indebtedness hereunder.

     4.15       Maintenance of Domain Names. Borrowers will properly register,
preserve and maintain with Network Solutions, Inc. (or an appropriate successor
thereto) Internet domain names and URL’s that correspond with each legal,
operating and trade name of any Borrower.

     4.16       Other Information. Each Borrower will provide Lender with any other
documents and information (financial or otherwise) reasonably requested by
Lender or its counsel from time to time.

ARTICLE 5: NEGATIVE COVENANTS

     Each Borrower (jointly and severally) hereby covenants and agrees that, so
long as any indebtedness remains outstanding hereunder, each Borrower will
comply with the following negative covenants (unless Lender otherwise consents
in writing, which consent will not be unreasonably withheld while no Event of
Default is occurring):

     5.1       Capital Expenditures. Borrowers (on a consolidated basis) will not
incur Capital Expenditures in any fiscal year in excess of $100,000.

Notwithstanding the foregoing, no Borrower may make any such Capital
Expenditure to acquire all or any substantial portion of the assets or equity
of another business enterprise.

     5.2       Additional Indebtedness. No Borrower will borrow any monies or
create, incur, assume or permit to exist any additional indebtedness,
obligations or liabilities (including monetary obligations evidenced by a
promissory note and monetary obligations under non-compete and consulting
arrangements) except as follows (collectively, the “Permitted Indebtedness”):

                 a.       Borrowings from Lender hereunder; and

                 b.       Trade indebtedness, if and to the extent (i) such indebtedness is
incurred in the normal and ordinary course of business for value received and
(ii) such indebtedness (to the extent it exceeds $10,000 to any single vendor)
is paid on a current basis or is less than 90 calendar days past due; and

                 c.       Indebtedness and obligations incurred under Capital Leases, consistent
with the restrictions in Section 5.1 and Section 5.5, provided, however, that
(1) the aggregate amount of such Capital Lease indebtedness outstanding at any
time may not exceed $150,000, and (2) such fixed or capital assets being leased
may not constitute any asset the loss of which could reasonably be expected to
have or cause a Material Adverse Effect; and

                 d.       Indebtedness in favor of another Borrower if and to the extent
permitted under Section 5.4(c); and

                 e.       Such indebtedness listed on Schedule 5.2 with the prior written consent
of Lender (which consent will not be unreasonably withheld by Lender while no
Event of Default is occurring).

     5.3       Guaranties. No Borrower will guarantee, assume or otherwise be or
agree to become liable in any way, either directly or indirectly, for any
additional indebtedness or liability of any other

18

 

 Person, except as follows (collectively, the “Permitted Guaranties”): (a)
in favor of Lender, or (b) to endorse checks, drafts and negotiable instruments
for collection in the ordinary course of business, or (c) as listed on Schedule
5.3 with the consent of Lender, or (d) to the extent that Lender otherwise
consents in writing.

     5.4       Loans. No Borrower will make any loans or advances to any other
Person, except as follows (collectively, the “Permitted Loans”): (a) loans to
employees that do not exceed $5,000 to any individual employee and do not at
any time in the aggregate outstanding exceed $25,000 among all such loans to
all such employees, and (b) as listed on Schedule 5.4 with the consent of
Lender, and (c) demand loans to other Borrowers that are appropriately
reflected on each Borrower’s financial records and evidenced by a written
promissory note assigned to Lender as additional Collateral.

     5.5       Liens and Encumbrances; Negative Pledge. No Borrower will create,
permit or suffer the creation or existence of any Liens on any of its property
or assets (real or personal, tangible or intangible), except as follows
(collectively, the “Permitted Liens”):

                 a.       Liens in favor of Lender as security for the Obligations under the Loan
Documents; and

                 b.       Liens for taxes, assessments or other governmental charges (federal,
state or local) that are not yet delinquent or that are then being currently
contested in good faith by appropriate proceedings diligently prosecuted,
provided, however, that (1) the existence of such Liens and challenge of such
charges must have been fully disclosed to Lender, and (2) adequate reserves
therefor in accordance with GAAP must have been established, and (3) such Liens
(in Lender’s reasonable opinion) could not reasonably be expected to have or
cause a Material Adverse Effect; and

                 c.       Deposits in the ordinary course of business to secure obligations under
workmen’s compensation, unemployment insurance or social security laws or
similar legislation; and

                 d.       Deposits to secure performance or payment bonds, bids, tenders,
contracts, leases, franchises or public and statutory obligations required in
the ordinary course of business; and

                 e.       Deposits to secure surety, appeal or custom bonds required in the
ordinary course of business; and

                 f.       Liens of carriers, warehousemen, mechanics, materialmen and landlords
incurred in the ordinary course of business for sums not past due or for sums
being currently contested in good faith by appropriate proceedings diligently
prosecuted, provided, however, that (1) the existence of such Liens and
challenge of such sums allegedly due must have been fully disclosed to Lender,
and (2) adequate reserves therefor in accordance with GAAP must have been
established, and (3) such Liens (in Lender’s reasonable opinion) could not
reasonably be expected to have or cause a Material Adverse Effect; and

                 g.       Easements, rights-of-way, restrictions and other similar encumbrances
on real property of a Borrower that, independently and in the aggregate, do not
(1) materially interfere with the occupation, use or enjoyment by such Borrower
of the property or assets encumbered thereby in the normal course of business
or (2) materially impair the value of the property subject thereto; and

19

 

                 h.       Liens listed on Schedule 5.5 with the consent of Lender (which consent
will not be unreasonably withheld by Lender while no Event of Default is
occurring).

No Borrower will similarly covenant to or in favor of any other Person that it
will not create, permit or suffer the creation or existence of any Liens on any
of its property or assets. In addition, no Borrower will purchase or otherwise
acquire any additional assets (including any leasehold interest therefor)
unless Lender’s interest in such property either (a) is already covered and
perfected pursuant to an existing and effective UCC-1 or PPSA financing
statement, CCQ hypothec filing, fixture filing, mortgage and/or leasehold
mortgage (as appropriate) in favor of Lender or (b) otherwise becomes properly
perfected within 5 calendar days after any such acquisition by such Borrower’s
filing (at its expense) all necessary UCC-1 or PPSA financing statements, CCQ
hypothec filing, fixture filings, mortgages and/or leasehold mortgages (as
appropriate, and in form and substance reasonably acceptable to Lender).
Moreover, no Borrower will establish or maintain any “securities account” with
any “securities intermediary” (as such terms are defined in Article 8 of the
UCC) except as permitted under Section 5.7.

     5.6       Transfer of Assets. No Borrower will sell, lease, license, transfer
or otherwise dispose of all or substantially all of its assets. In addition,
no Borrower will sell, lease, license, transfer or otherwise dispose of any of
its assets other than as follows (collectively, the “Permitted Transfers”):
(a) pursuant to a transaction with an unrelated third party in the normal and
ordinary course of business for value received and otherwise in accordance with
the terms hereof or (b) with respect to obsolete or replaced equipment no
longer useful in the operation of any Borrower’s business, pursuant to a
reasonable and customary transaction with an unrelated third party and
otherwise in accordance with the terms hereof, (c) pursuant to a reasonable and
customary transaction with another Borrower that is appropriately reflected on
each Borrower’s financial records, and (d) as set forth on Schedule 1.1.6.

     5.7       Acquisitions and Investments. No Borrower will purchase or otherwise
acquire (including by way of share exchange) any part or amount of the equity
ownership or assets of, or make any investments in, any other corporation,
partnership, limited liability company or other venture or enterprise.
Notwithstanding the foregoing, Borrowers may acquire or invest in the following
(collectively, the “Permitted Investments”):

                 a.       Government and agency securities backed by the full faith and credit of
the U.S. or Canadian federal government; and

                 b.       Commercial paper of a U.S. or Canadian domestic issuer rated A-1+ or
A-1 by Standard & Poor’s Ratings Group or P-1 by Moody’s Investor Services,
Inc. and maturing not more than 90 calendar days from the date of acquisition
thereof; and

                 c.       Certificates of deposit (maturing within 12 calendar months after the
date of issuance), time deposits, other deposits and bankers’ acceptances
issued by or established with U.S. or Canadian federally insured commercial
banks rated as “well capitalized” by their primary federal regulators, and
having unimpaired capital and unimpaired surplus (collectively) of at least
$250 million, and whose commercial paper (or commercial paper that is supported
by such bank’s letter of credit or commitment to lend) is rated as A-1+ or A-1
by Standard & Poor’s Ratings Group or P-1 by Moody’s Investor Services, Inc.;
and

20

 

                 d.       Assets acquired pursuant to transactions permitted under Section 5.1 or
Section 5.2; and

                 e.       Inventory, office equipment (not constituting Capital Expenditures),
and operating supplies acquired in the ordinary course of business; and

                 f.       Investments listed on Schedule 5.7 with the consent of Lender (which
consent will not be unreasonably withheld by Lender while no Event of Default
is occurring).

Notwithstanding the foregoing, unless and to the extent such investments are
certificated and separately collaterally assigned to Lender, then the amounts
of investments permitted under Clauses “a”, “b” and “c” of this Section may not
at any time exceed $1,000,000. In addition, no Borrower will establish or
maintain any “securities account” with any “securities intermediary” (as such
terms are defined in Article 8 of the UCC), unless a control agreement
acceptable in form and substance to Lender is first executed by such
“securities intermediary” securing Lender’s first priority interest and rights
in and to all “financial assets” and “security entitlements” associated with
such “securities account”.

     5.8       New Ventures; Mergers. No Borrower will (a) enter into any new
business activities or ventures not directly related to its current business,
or (b) except as contemplated by the Merger Agreement, merge or consolidate
with or into any other corporation, partnership, limited liability company or
other organization, or (c) create or acquire (or cause or permit the creation
or acquisition of) any Subsidiary or Affiliate (except the hiring of officers
and directors).

     5.9       Transactions with Affiliates. No Borrower will enter into any
transaction or agreement with any Subsidiary, Affiliate or other related Person
except as follows: (a) reasonable and customary compensation arrangements in
the ordinary course of business with its officers and directors, and (b)
guaranties (if any) to the extent permitted by Section 5.3, and (c) employee
loans (if any) to the extent permitted under Section 5.4, and (d) reasonable
and customary asset transfers among Borrowers (if any) to the extent permitted
under Section 5.6, and (e) transactions in the ordinary course of business
between Borrowers.

     5.10       Distributions or Dividends. No Borrower will declare or make
(directly or indirectly) any payment or distribution with respect to, or incur
any liability for the purchase, acquisition, redemption or retirement of, any
of its equity interests (including warrants therefor) or as a dividend, return
of capital or other payment or distribution of any kind to any holder of any
such equity interest.

     5.11       Issuance of Additional Equity. No Borrower will permit the issuance,
reissuance, conversion or exercise of any equity interests (common stock,
preferred stock, partnership interests, member interests or otherwise) or any
options, warrants, convertible securities or other rights to purchase such
beneficial or equity interest. Notwithstanding the foregoing, a Borrower may
issue additional equity interests as a result of the conversion of the options
and warrants outstanding on the Closing Date and described on Schedule 3.6,
provided that: (a) such Borrower has provided written notice thereof to Lender
at least 15 Business Days prior to such issuance (which notice must at least
describe the type and amount of equity interests being purchased, the
consideration to be received by such Borrower in exchange for such issuance,
and the identity of the purchaser), and (b) no Default or Event of Default then
exists under the Loan Documents or would otherwise result from the issuance of
such equity interest (including a Event of Default under the change in control
restrictions set forth in Section 7.1.8).

21

 

     5.12       Removal of Assets. No Borrower will remove or permit the removal of
any asset or group of assets (with a collective fair market value exceeding
$10,000) to a jurisdiction or a county in which no financing statement on Form
UCC-1 has been filed naming Lender as “secured party” with respect to such
assets.

     5.13       Modifications to Organic Documents. No Borrower will (a) amend or
otherwise modify any of its Organic Documents, or (b) change its official name,
its operating names or the names under which it executes contracts and conducts
business.

     5.14       Terms of and Modifications to Material Relationships. Each Borrower
will use its best efforts not to permit any other party to cancel, terminate,
amend, modify or otherwise alter any Material Contract listed (or contract that
should be listed) on Schedule 3.8. In addition, each Borrower will use its
best efforts to ensure that no Material Contract entered into by any Borrower
after the Closing Date (including the renewal or extension of any Material
Contract existing as of the Closing Date) will restrict any Borrower’s ability
to collaterally assign or encumber such Material Contract in favor of Lender.

ARTICLE 6: RIGHT OF SET OFF

     6.1       Right of Set Off. Lender is hereby authorized at any time and from
time to time during the existence of an Event of Default hereunder (unless
expressly prohibited by applicable law) to set off and apply any and all
deposits (general or special, time or demand, provisional or final) and other
indebtedness at any time held or owing by Lender (or any of its Affiliates) to
or for the credit or the account of any Borrower against any and all of the
indebtedness and monetary obligations of any Borrower now or hereafter existing
under the Loan Documents or any other evidence of indebtedness originated,
acquired or otherwise held by Lender, irrespective of whether Lender shall have
made any demand under the Loan Documents or other indebtedness and although
such obligations may be unmatured. Lender agrees to notify Borrowers within a
commercially reasonable time after any such set off and application made by
Lender; provided, however, that the failure to give such notice shall not in
any way affect the validity of such set off and application.

     6.2       Additional Rights. The rights of Lender under this Article 6 are in
addition to the other rights and remedies (including other rights of set off)
that Lender may have by contract, at law, or otherwise.

ARTICLE 7: DEFAULT AND REMEDIES

     7.1       Events of Default. Each of the following events separately
constitutes an independent Event of Default hereunder:

                7.1.1       Payment Obligations. If any payment of principal, interest, fees,
expenses, indemnities or other sums payable to Lender under any Loan Document
(including under any Note) is not received by Lender in immediately available
funds on the date such payment is due and payable and such failure to receive
payment in immediately available funds continues for a period of five (5)
Business Days after the due date therefor.

                7.1.2       Representations and Warranties. If any representation, warranty or
other statement made in any Loan Document, or in any written report, schedule,
exhibit, certificate, agreement, or other document given by or on behalf of any
Borrower or any other Obligor (or

22

 

otherwise furnished in connection herewith) when made was misleading or
incorrect in any material respect.

                7.1.3       Termination of Merger Agreement. If the Merger Agreement is
terminated without completion of the Plan of Arrangement contemplated
thereunder.

                7.1.4       Other Covenants in Loan Documents. If any Borrower or any other
Obligor defaults in the full and timely performance when due of any other
covenant or agreement contained in any Loan Document (or in any other document
or agreement now or hereafter executed or delivered in connection herewith),
and such default remains uncured for a period of twenty (20) Business Days
after the earlier of the date that Lender notifies any Borrower thereof or the
date that any Borrower otherwise acquires knowledge or should have acquired
knowledge thereof.

                7.1.5       Default Under Other Agreements with Lender. If any event of default
(as described or defined therein, which term shall include any notice and cure
periods provided therein) occurs or exists under the provisions of any other
credit agreement, security agreement, mortgage, deed of trust, indenture,
debenture, cash management or account agreement, contract, lease or other
agreement between any Borrower, any Affiliate of any Borrower or any other
Obligor and Lender (or any Affiliate of Lender), unless such default is waived
by Lender or cured to Lender’s satisfaction.

                7.1.6       Default Under Material Agreements with Other Parties. If any
Borrower fails or refuses to make any one or more required payments (whether
principal, interest or otherwise) aggregating in excess of $100,000 with
respect to any Funded Debt (or with respect to any guaranty or reimbursement
obligation of any such indebtedness) prior to the expiration of any applicable
grace period with respect to such payment, or if any such indebtedness for
borrowed money in excess of $100,000 is accelerated prior to its express
maturity as a result of any default thereunder, or if any event of default (as
described or defined therein, which term shall include any notice and cure
periods provided therein) occurs or exists under the provisions of any Material
Contract (including those listed on Schedule 3.8 or that should be listed on
Schedule 3.8 under the terms hereof).

                7.1.7       Intentionally Blank.

                7.1.8       Change of Control. Except as contemplated by the Merger Agreement,

                               a.       If there occurs any direct or indirect change in the ownership (i.e.
any change exceeding 25% of the voting or beneficial interest for such
structure as of the Closing Date) or in the control of any Borrower.

                               b.       If Steve Forget ceases to be chief executive officer of Helix, unless
(1) such event is by reason of his or her death or disability and (2)
replacement management arrangements satisfactory to Lender (in its sole and
absolute discretion) are made within 60 calendar days after such death or
within 120 calendar days after the commencement of such period of disability.

                7.1.9       Government Action.

                               a.       If custody or control of any substantial part of the property of any
Borrower is assumed by any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency.

23

 

                                 b.       If any governmental regulatory authority or judicial body makes any
other final non-appealable determination that (in Lender’s reasonable judgment)
could reasonably be expected to have or cause a Material Adverse Effect.

                7.1.10       Insolvency. If any Borrower or any holder of equity interests of
any Borrower (whether as common stock, preferred stock, partnership interest,
membership interest or otherwise) or any other Obligor that pledges Collateral
under the Loan Documents or that is directly or indirectly liable (in whole or
in part) to Lender for indebtedness hereunder (a) becomes insolvent, bankrupt
or generally fails to pay its, his or her debts as such debts become due; or
(b) is adjudicated insolvent or bankrupt in any proceeding; or (c) admits in
writing an inability to pay its, his or her debts; or (d) comes under the
authority of a custodian, receiver, administrator, monitor, or trustee (or one
is appointed for substantially all of its, his or her property); or (e) makes
an assignment for the benefit of creditors; or (f) has commenced against it,
him or her any proceedings under any law related to bankruptcy, insolvency,
liquidation, dissolution or the reorganization, readjustment or release of
debtors that is either not contested or if contested is not dismissed or stayed
within thirty (30) calendar days after the commencement thereof; or (g)
commences or institutes any proceedings under any law related to bankruptcy,
insolvency, liquidation, dissolution or the reorganization, readjustment or
release of debtors; or (h) calls a meeting of creditors with a view to
arranging a composition or adjustment of debt; or (i) by any act or failure to
act that indicates consent to, approval of or acquiescence in any of the
foregoing.

                7.1.11       Additional Liabilities. If any judgment, writ, warrant, attachment
or execution or similar process that calls for payment or presents liability in
excess of $100,000 is rendered, issued or levied against any Borrower or any of
its properties or assets and such liability is not paid, waived, stayed,
vacated, discharged, settled, satisfied or fully bonded within thirty (30)
calendar days after it is rendered, issued or levied.

                7.1.12       Material Adverse Change. If Lender determines in good faith that a
Material Adverse Change has occurred with respect to any Borrower from the
condition set forth in the financial statements furnished to Lender for the
fiscal year ended immediately prior to the Closing Date, or from the condition
of any Borrower most recently disclosed to Lender in any other manner.

     7.2       Remedies.

                7.2.1       Acceleration, Termination and Pursuit of Collateral. At any time
during the existence of any Event of Default, at the election of Lender but
with notice thereof to any Borrower (unless an Event of Default described in
Section 7.1.10 has occurred, in which case acceleration will occur
automatically with respect to the entire indebtedness and without any notice),
then Lender (a) may terminate any or all Commitments and/or facilities, and/or
(b) may accelerate the Term Loan Maturity Date, and/or (c) may declare all or
any portion of the indebtedness of any or all Borrowers to Lender (hereunder or
otherwise, and including all principal, interest, fees, expenses and
indemnities hereunder) to be immediately due and payable. At any time during
the existence of any Event of Default, Lender will also have the immediate
right to enforce and realize upon any collateral or security granted under any
Loan Document in any manner or order that Lender deems expedient without regard
to any equitable principles of marshalling or otherwise. Notwithstanding the
foregoing (unless an Event of Default described in Section 7.1.10 has occurred,
in which case acceleration will occur automatically with respect to the entire
indebtedness and without any notice), in the case of an Event of Default under
Section 7.1.3, Lender agrees not to exercise is rights under clauses (b) or (c)
above or to enforce or realize upon any collateral or security granted under
any

24

 

Loan Document until (i) if such Event of Default is caused by the
termination of the Merger Agreement for any reason other than the reasons set
forth in Sections 4.1(e) or (f) thereof, 180 days after such Event of Default;
and (ii) if such Event of Default is caused by the termination of the Merger
Agreement for the reasons set forth in Sections 4.1(e) or (f) thereof, 365 days
after such Event of Default; provided, however, that nothing in this Section
7.2.1 shall extend the Term Loan Maturity Date.

                7.2.2       Other Remedies. In addition to the rights and remedies expressly
granted in the Loan Documents, Lender also will have all other legal and
equitable rights and remedies granted by or available under all applicable law
(including the “self help” and other rights of a secured party under the UCC,
PPSA or CCQ, as applicable), and all rights and remedies will be cumulative.

ARTICLE 8: DEFINITIONS AND RULES OF CONSTRUCTION

     8.1       Definitions. When used in this Agreement, the following terms shall
have the respective meanings set forth below:

                8.1.1       “Account” means, at any relevant time, the designated account of
Borrowers at Lender for purposes of effecting transactions hereunder.

                8.1.2       “Advance” means any advance of funds under any Facility.

                8.1.3       “Advance Request” has the meaning set forth in Section 1.3.1.

                8.1.4       “Affiliate” of any Person means any other Person that directly or
indirectly controls, is controlled by or is under direct or indirect common
control with such Person. A Person shall be deemed to “control” another Person
if such first Person directly or indirectly possesses the power to direct (or
to cause the direction of or to materially influence) the management and
policies of the second Person, whether through the ownership of voting
securities, by contract or otherwise. Without limiting the generality of the
foregoing, each of the following Persons will be deemed to be an Affiliate of a
Person: (a) each Person who owns or controls 5% or more of any class or series
of any equity interest of such Person, and (b) each member, manager, partner,
director and/or senior executive officer of such Person or any Affiliate
thereof, and (c) any family member or other relative of such Person or any
Affiliate thereof, and (d) any trust of which any Person or Affiliate thereof
is either a trustee or beneficiary. Notwithstanding the foregoing, Lender
shall not be deemed to be an Affiliate of any Obligor.

                8.1.5       “Agreement” means this Credit Agreement and all the exhibits and
schedules hereto, all as may be amended and otherwise modified from time to
time hereafter.

                8.1.6       “Authorized Officer” means any officer, employee or representative
of such organization who is expressly designated as such or is otherwise
authorized to borrow funds hereunder or, as appropriate, to sign loan documents
and/or deliver certificates on behalf of such organization pursuant to the
provisions of such organization’s most recent resolution on file with Lender.

                8.1.7       “Authorization“means any License or other governmental permit,
certificate and/or approval issued by any Official Body.

25

 

                8.1.8       “Business Day” means any day that is not a Saturday, a Sunday or a
day on which banks under the laws of the State of New York are authorized or
required to be closed.

                8.1.9       “Capital Expenditures” means expenditures (a) for any fixed assets
or improvements, replacements, substitutions or additions thereto that have a
useful life of more than one (1) year, including direct or indirect acquisition
of such assets or (b) for any Capital Leases.

                8.1.10       “Capital Leases” means capital leases and subleases as defined in
the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 13 dated November 1976 (as amended and updated from time to
time).

                8.1.11       “Closing Date” means the date on which all conditions precedent to
the effectiveness of this Agreement under Section 2.1 have been satisfied or
waived by Lender.

                8.1.12       “CCQ” means the Civil Code (Quebec), and all regulations
thereunder, as amended from time to time, and any successor legislation.

                8.1.13       “Code” means the Internal Revenue Code of 1986, as amended.

                8.1.14       “Collateral” means the collateral security committed to Lender
under the Collateral Security Documents executed by any Borrower or any other
Obligor in favor of Lender pursuant to this Agreement from time to time and/or
pursuant to all similar or related documents and agreements from time to time,
all as amended from time to time.

                8.1.15       “Collateral Security Documents” means, individually and
collectively, (a) the Security Agreements and the financing statements filed
pursuant thereto, and (b) the Pledge and Security Agreements, and (c) any
additional documents guaranteeing indebtedness, assuring performance of
obligations, subordinating indebtedness, or granting security or Collateral to
Lender hereunder, all as amended from time to time.

                8.1.16       “Commitment” means any commitment for credit pursuant to a facility
established hereunder.

                8.1.17       “Default” means any event or circumstance that with the giving of
notice or the passage of time would constitute an Event of Default.

                8.1.18       “Dollar” or “$” means U.S. dollars.

                8.1.19       “EBITDA” means, at the time of any determination, the sum of the
following items (without duplication) for Borrowers during the relevant four
consecutive fiscal quarter period:

                                 a.       Net income from continuing operations (on a consolidated basis) during
such period — i.e., excluding extraordinary gains and income items and the
cumulative effect of accounting changes and income associated with transactions
with Affiliates or for which payment is received in a form other than cash or
cash equivalents — determined in accordance with GAAP, and

                                 b.       Plus Interest Expense during such period, but subtract interest income
accrued during such period, and

26

 

                                 c.       Plus federal and state income taxes paid or required to be paid / paid
and accrued in accordance with GAAP / all provisions for federal, state and
other taxes based upon income of Borrowers during such period, and

                                 d.       Plus depreciation permitted under GAAP during such period, and

                                 e.       Plus amortization expense permitted under GAAP during such period.

                                 f.       For purposes of this calculation, interest shall include interest
accrued under Capital Leases, determined in accordance with GAAP.

                8.1.20       “Environmental Control Statutes” means all federal, provincial,
state and local laws, rules, ordinances and regulations (as implemented and as
interpreted) governing the control, removal, storage, transportation, spill,
release or discharge of hazardous or toxic wastes, substances and petroleum
products, including, without limitation, as provided in the provisions of (a)
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of 1986,
and (b) the Solid Waste Disposal Act, and (c) the Clean Water Act, and (d) the
Clean Air Act, and (e) the Hazardous Materials Transportation Act, and (f) the
Resource Conservation and Recovery Act of 1976, and (g) the Federal Water
Pollution Control Act Amendments of 1972, and (h) the rules, regulations and
ordinances of the EPA, and any provincial or state departments of health
services, regional water quality control boards, state water resources control
boards, provincial and/or cities in which any of such Borrower’s assets are
located.

                8.1.21       “EPA” means the United States Environmental Protection Agency or
any other entity that succeeds to its responsibilities and powers.

                8.1.22       “Equivalent Amount” means, on any date, the amount of U.S. dollars
into which an amount of Cdn. dollars may be converted or the amount of Cdn.
dollars into which an amount of U.S. dollars may be converted, in either case,
at Lender’s spot buying rate in Toronto as at approximately 12:00 noon (Local
Time) on such date.

                8.1.23       “ERISA” means the Employee Retirement Income Security Act of 1974
and any corresponding applicable law of federal, state, provincial or foreign
jurisdiction, or any corresponding or succeeding provisions or such other
applicable law, in each case, as amended, and as implemented and interpreted.

                8.1.24       “ERISA Affiliate” means any company, whether or not incorporated,
which is considered a single employer with Borrower under Titles I, II and IV
of ERISA.

                8.1.25       “Event of Default” means each of the events described in Section
7.1.

                8.1.26       “Excess Cash Flow” means, at the time of any determination, the sum
of the following items (without duplication) for Borrowers during the relevant
period:

                                 a.       EBITDA for such period, and

                                 b.       Minus Total Charges for such Period.

27

 

                8.1.27       “Final Term Loan Draw Date” has the meaning set forth in Section
1.1.1, as may be extended from time to time in Lender’s sole and absolute
discretion.

                8.1.28       “Fixed Charges” means, at the time of any determination, the sum of
the following items (without duplication) for Borrowers during the relevant
four consecutive fiscal quarter periods:

                                 a.       The amount of principal required to be paid under this Agreement during
such period, and

                                 b.       Plus the amount of principal paid or required to be paid and mandatory
commitment reductions on other Funded Debt (i.e., Funded Debt other than under
this Agreement) during such period, and

                                 c.       Plus Interest Expense during such period, and

                                 d.       Plus (to the extent not already included under one of the other
categories of Fixed Charges) the amount of payments made or required to be made
with respect to non-complete and consulting agreements during such period, and

                                 e.       Plus the amount of Capital Expenditures during such period.

For purposed of this calculation, interest includes interest accrued under
Capital Leases, and principal includes principal obligations under Capital
Leases.

                8.1.29       “Funded Debt” means, at the time of any determination, the
aggregate principal amount of indebtedness of all Borrowers (on a consolidated
basis) for the following (without duplication):

                                 a.       Borrowed money (including the indebtedness under the Loan Documents,
but not including trade indebtedness permitted under Section 5.2.b); and

                                 b.       Capital Leases; and

                                 c.       Deferred purchase price or installment purchases of real property,
personal property, and/or services (including any deferred purchase price
and/or non-compete obligations in connection with acquisitions); and

                                 d.       Reimbursement obligations under letters of credit (whether standby or
documentary); and

                                 e.       Obligations under interest rate protection or swap arrangements,
repurchase arrangements and other derivative transactions; and

                                 f.       Any indebtedness or contractual payment obligation that is not paid
within 60 calendar days of the due date therefor; and

                                 g.       Any indebtedness evidenced by a promissory note; and

28

 

                                 h.       Any obligation secured by a Lien on any asset of any Borrower; and

                                 i.       Guaranties of indebtedness and obligations that would constitute Funded
Debt hereunder if the primary obligor thereof were a Borrower; and

                                 j.       Indebtedness otherwise required to be included as part of “Funded Debt”
under Section 5.2.

                8.1.30       “GAAP” means generally accepted accounting principles applied on a
consistent basis set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and similar Canadian entities, as
applicable, and/or in such other statements by such other entity as Lender may
reasonably approve, which are applicable in the circumstances as of the date in
question, and the requirement that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current period
are comparable in all material respects to those applied in preceding periods.

                8.1.31       “Hazardous Materials” includes (a) any “hazardous waste” as defined
by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et
seq.), as amended from time to time, and regulations promulgated thereunder; or
(b) any “hazardous substance” as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder; or (c) any
other substance the use or presence of which on, in, under or above any real
property ever owned, controlled or used by Borrower is similarly regulated or
prohibited by any federal, state, provincial, or local law, rule, ordinance,
regulation or decree of any court or governmental authority as a hazardous
material.

                8.1.32       “Interest Expense” means, at the time of any determination, the
amount of interest and other finance charges of Borrowers (on a consolidated
basis) required to be charged as an expense under GAAP during the relevant four
consecutive fiscal quarter period. For purposes of this calculation, interest
includes interest accrued under Capital Leases.

                8.1.33       “Lender” means HEARx Ltd., or any successor thereof, or any
assignee, participant, pledgee or other transferee of Lender hereunder.

                8.1.34       “License” means any authorization, construction or other permit,
consent, franchise, ordinance, registration, certificate, license, call sign,
frequency designation, agreement or other right filed with, granted by, issued
by or entered into with any Official Body.

                8.1.35       “Lien” means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), reversionary or reclamation interest, charge against or interest in
property to secure payment of a debt or performance of an obligation or other
priority or preferential arrangement of any kind or nature whatsoever.

                8.1.36       “LLC” means a limited liability company.

                8.1.37       “Loan” means any loan or Advance of funds under any Facility as
well as any other credit extended by Lender to any Borrower under this
Agreement.

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                8.1.38       “Loan Documents” means this Agreement, any Notes, the Collateral
Security Documents and any other documents, agreements and certificates entered
into or delivered in connection herewith or therewith or pursuant hereto or
thereto, all as may be amended, modified and supplemented from time to time.

                8.1.39       “Local Authorities” means, individually and collectively, the
state, provincial, and local governmental authorities that govern the
activities of any Borrower.

                8.1.40       “Material Adverse Change” means any change that has or causes or
could reasonably be expected to have or cause a Material Adverse Effect.

                8.1.41       “Material Adverse Effect” means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), a material adverse
change to, or, as the case may be, a materially adverse effect on:

                                 a.       The business, assets, revenues, financial condition, operations,
Collateral or prospects of any Borrower or other Obligor; or

                                 b.       The ability of any Borrower to perform any of its payment obligations
when due or to perform any other material obligations under any Loan Document;
or

                                 c.       Any right, remedy or benefit of Lender under any Loan Document, except
for any such right, remedy or benefit that may be prohibited by applicable law.

                8.1.42       “Material Contract” has the meaning set forth in Section 3.8.

                8.1.43       “Merger Agreement” means the Amended and Restated Merger Agreement
dated as of November 6, 2001, by and between Helix and Lender (as may be
amended, modified, supplemented, restated, extended, renewed or replaced from
time to time).

                8.1.44       “Notes” means, individually and collectively, each promissory note
delivered to Lender pursuant to any Loan Document and evidencing any
indebtedness to Lender under the Loan Documents (each as may be amended,
modified, supplemented, restated, extended, renewed or replaced from time to
time).

                8.1.45       “Obligations” means all of the indebtedness and obligations
(monetary or otherwise) of any Borrower and any other Obligor arising under or
in connection with any Loan Document as well as all indebtedness and
obligations (monetary or otherwise) of any Affiliate of any Borrower or other
Obligor arising under or in connection with any agreement between any such
Affiliate and Lender or any Affiliate of Lender.

                8.1.46       “Obligor” means each Borrower or any other Person (other than
Lender) obligated under any Loan Document.

                8.1.47       “Official Body” means any federal, state, local, provincial, or
other government (or any political subdivision, agency, authority, bureau,
commission, department or instrumentality thereof) and any court, tribunal,
grand jury or arbitrator, in each instance whether foreign or domestic.

30

 

                8.1.48       “Operating Agreement” means any consulting agreement, management
agreement, employment agreement, cost allocation agreement, or other similar
agreement relating to the operations of any Borrower.

                8.1.49       “Organic Document” means, relative to any entity, its certificate
and articles of incorporation or organization, its by-laws or operating
agreements, and all equityholder agreements, voting agreements and similar
arrangements applicable to any of its authorized shares of capital stock, its
partnership interests or its member interests, and any other arrangements
relating to the control or management of any such entity (whether existing as a
corporation, a partnership, an LLC or otherwise).

                8.1.50       “PBGC” means the Pension Benefits Guaranty Corporation or any other
entity that succeeds to its responsibilities and powers under ERISA.

                8.1.51       “Permitted Guaranties” has the meaning set forth in Section 5.3.

                8.1.52       “Permitted Indebtedness” has the meaning set forth in Section 5.2.

                8.1.53       “Permitted Investments” has the meaning set forth in Section 5.7.

                8.1.54       “Permitted Liens” has the meaning set forth in Section 5.5.

                8.1.55       “Permitted Loans” has the meaning set forth in Section 5.4.

                8.1.56       “Permitted Transfers” has the meaning set forth in Section 5.6.

                8.1.57       “Person” means any natural person, corporation, LLC, partnership,
firm, association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.

                8.1.58       “Plan” means any employee pension benefit or welfare benefit plan
as defined in Sections 3(1), (2) or (3) of ERISA or as defined in the
applicable laws of any other jurisdiction covering employees of any Borrower or
any ERISA Affiliate of any Borrower.

                8.1.59       “Pledge and Security Agreements” means, individually and
collectively, each pledge and security agreement relating to a pledge of an
equity interest in an enterprise (all as may be amended, modified and
supplemented from time to time) required to be executed and delivered in favor
of Lender pursuant to the Loan Documents.

                8.1.60       “PPSA” means the Personal Property Security Act (Ontario) and all
regulations thereunder, as amended from time to time, and any successor
legislation.

                8.1.61       “Prime Rate” means the rate of interest per annum publicly
announced from time to time by Citibank, N.A. as its prime rate in effect at
its principal office in New York City.

                8.1.62       “Revenue” means revenue of Borrowers (on a consolidated basis) as
determined in accordance with GAAP.

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                8.1.63       “SEC” means the Securities and Exchange Commission or any other
entity that succeeds to its responsibilities and powers.

                8.1.64       “Securities Acts” means, collectively, the Securities Act of 1933
and the Securities Exchange Act of 1934, each as amended, and as implemented by
the SEC and interpreted by the SEC or any court of competent jurisdiction.

                8.1.65       “Security Agreements” means, collectively, each security agreement
(as may be amended, modified and supplemented from time to time) required to be
executed and delivered in favor of Lender pursuant to Article 2, and any other
security agreement required or delivered in connection with the Loan Documents,
including any intellectual property assignments or security agreements required
to be delivered pursuant to Article 2.

                8.1.66       “Settlement Date” means, with respect to any Advance hereunder, the
date on which funds are advanced by Lender.

                8.1.67       “Subsidiary” of any Person or entity means any Person as to which
such other Person or entity (a) directly or indirectly owns, controls or holds
25% or more of the outstanding beneficial interest or (b) is otherwise required
in accordance with GAAP to be considered as part of a consolidated
organization.

                8.1.68       “Term Loan Commitment” means the Commitment established pursuant to
Section 1.2.

                8.1.69       “Term Loan Facility” means the term loan Facility as described in
Article 1.

                8.1.70       “Term Loan Maturity Date” has the meaning set forth in Section
1.1.2, as may be extended from time to time in Lender’s sole and absolute
discretion.

                8.1.71       “Term Loan Note” means any Note payable to the order of Lender
prepared in accordance with Section 1.1.4, as may be amended, modified,
restated, replaced, supplemented, extended or renewed from time to time
hereafter.

                8.1.72       “Total Charges” means, at the time of any determination, the sum of
the following items (without duplication) for Borrowers during the relevant
four consecutive fiscal quarter period:

                                a.       The amount of Fixed Charges during such period, and

                                b.       Plus the amount of all provision for federal, state and other taxes
based upon income of Borrowers during such period (but only to the extent not
already included under one of the other categories of Total Charges).

For purposes of this calculation, interest includes interest accrued under
Capital Leases, and principal includes principal obligations under Capital
Leases.

                8.1.73       “UCC” means the Uniform Commercial Code in effect in the applicable
jurisdiction.

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     8.2       Rules of Interpretation and Construction.

                8.2.1       Plural; Gender. Unless otherwise expressly stated or the context
clearly indicates a different intention, then (as may be appropriate in the
particular context) (a) a singular number or noun used in any Loan Document
includes the plural, and a plural number or noun includes the singular, and (b)
the use of the masculine, feminine or neuter gender pronouns in any Loan
Document includes each and all genders.

                8.2.2       Section and Schedule References. Unless otherwise expressly stated
or the context clearly indicates a different intention, then all references to
sections, paragraphs, clauses, schedules and exhibits in any Loan Document are
to be interpreted as references to sections, paragraphs, clauses, schedules and
exhibits of such Loan Document (rather than of some other Loan Document). In
addition, the words “herein”, “hereof”, “hereunder”, “hereto” and other words
of similar import in any Loan Document refer to such Loan Document as a whole,
and not to any particular section, paragraph or clause in such Loan Document.

                8.2.3       Titles and Headings. Unless otherwise expressly stated or the
context clearly indicates a different intention, then the various titles and
headings in the Loan Documents are inserted for convenience only and do not
affect the meaning or interpretation of such Loan Document or any provision
thereof.

                8.2.4       “Including” and “Among Other” References. Unless otherwise
expressly stated or the context clearly indicates a different intention, then
all references in the Loan Documents to phrases containing or list preceded by
the words “include”, “includes”, “including”, “among other”, “among other
things” or other words or phrases of similar import are to be interpreted to
mean such “without limitation” (whether or not such additional phrase is
actually added). In other words, such words and phrases connote an
illustrative example or list rather than an exclusive example or list.

                8.2.5       “Shall”, “Will”, “Must”, “Can” and “May” References. Unless
otherwise expressly stated or the context clearly indicates a different
intention, then all references in the Loan Documents to the words “shall”,
“will” and “must” (including, when modified by “not”) are to be interpreted to
indicate mandatory actions or restrictions (as applicable), and all references
in the Loan Documents to the words “may” and “can” (unless modified by “not”)
are to be interpreted to indicate permissive actions.

                8.2.6       Time of Day References. Unless otherwise expressly stated or the
context clearly indicates a different intention, then all time of day
references in and restrictions imposed under the Loan Documents are to be
calculated using Eastern Time.

                8.2.7       “Knowledge” of a Person. Unless otherwise expressly stated or the
context clearly indicates a different intention, then (a) all references to the
“knowledge,” “awareness” or “belief” of any Person that is not a natural person
are to be interpreted to mean the knowledge, awareness or belief of senior and
executive management of such Person (and including the knowledge or awareness
of managers of limited liability companies and general partners of
partnerships), and (b) all representations qualified by the “knowledge,”
“awareness” or “belief” of a Person are to be interpreted to mean (unless a
different standard is specified) that such Person has conducted a commercially
reasonable inquiry and investigation prior to making such representation.

33

 

                8.2.8       Successors and Assigns. Unless otherwise expressly stated or the
context clearly indicates a different intention, then all references to any
Person (including any Official Body) in any Loan Document are to be interpreted
as including (as applicable) such Person’s successors, assigns, estate, heirs,
executors, administrators and personal representatives. Notwithstanding the
foregoing, no Borrower or other Obligor may assign or delegate any Loan
Document (or any right or obligation thereunder) except to the extent expressly
permitted hereunder or under such other Loan Document.

                8.2.9       Modifications to Documents. Unless otherwise expressly stated or
the context clearly indicates a different intention, then all references to any
Loan Document or other agreement or instrument in any Loan Document are to be
interpreted as including all extensions, renewals, amendments, supplements,
substitutions, replacements and waivers thereto and thereof from time to time.

                8.2.10       References to Laws and Regulations. Unless otherwise expressly
stated or the context clearly indicates a different intention, then all
references to any law, regulation, rule, order or policy in any Loan Document
are to be interpreted references to such law, regulation, rule or policy (a) as
implemented and interpreted from time to time by Official Bodies with
appropriate jurisdiction therefor, and (b) as amended, modified, supplemented,
replaced and repealed from time to time.

                8.2.11       Financial and Accounting Terms. Unless otherwise expressly stated
or the context clearly indicates a different intention, financial and
accounting terms used in the foregoing definitions or elsewhere in the Loan
Documents shall be defined and determined in accordance with GAAP.

                8.2.12       Conflicts Among Loan Documents. Unless otherwise expressly stated
or the context clearly indicates a different intention, then any irreconcilable
conflict between the terms and conditions of this Agreement and the terms and
conditions of any other Loan Document (other than a Note or any warrant issued
to Lender) are to be resolved by having the terms and conditions of this
Agreement govern.

                8.2.13       Independence of Covenants and Defaults. All covenants and defaults
contained in the Loan Documents shall be given independent effect. If a
particular action or condition is not permitted by any covenant in the Loan
Documents, then the fact that such action or condition would be permitted by an
exception to (or would otherwise be within the limitations of) another covenant
in the Loan Documents shall not avoid the occurrence or existence of a Event of
Default if such action is taken or if such condition exists.

                8.2.14       Interest Calculations and Payments. Unless otherwise stated,
wherever in this Agreement reference is made to a rate of interest “per annum”
or a similar expression is used, such interest will be calculated on the basis
of three hundred and sixty-five (365) days and the actual number of days
elapsed in the period, and using the nominal rate method of calculation, and
will not be calculated using the effective rate method of calculation or on any
other basis that gives effect to the principle of deemed reinvestment of
interest. All payments of interest to be made hereunder will be paid both
before and after maturity and before and after default and/or judgment, if any,
until payment thereof, and interest will accrue on overdue interest, if any.

34

 

                8.2.15       Interest Act (Canada). For the purposes of this Agreement,
whenever interest to be paid hereunder is to be calculated on the basis of a
year of three hundred and sixty (360) days or any other period of time that is
less than a calendar year, the yearly rate of interest to which the rate
determined pursuant to such calculation is equivalent is the rate so determined
multiplied by the actual number of days in the calendar year in which the same
is to be ascertained and divided by three hundred and sixty (360).

                8.2.16       Equivalent Amount. For the purpose of determining compliance with
covenant and default limitations set forth in the Agreement, amounts expressed
in Canadian Dollars shall be measured by aggregating the applicable items
denominated in U.S. Dollars with the Equivalent Amounts of such items in
Canadian Dollars.

ARTICLE 9: MISCELLANEOUS

     9.1       Indemnification, Reliance and Assumption of Risk. Without limiting
any other indemnification in any Loan Document, each Borrower (jointly and
severally) hereby agrees to defend Lender (and its directors, officers,
employees, agents, counsels and Affiliates) from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages, interests,
judgments, or costs (including fees and disbursements of counsel) incurred by
any of them arising out of or in any way connected with any Loan Document,
except for losses resulting directly and exclusively from Lender’s own gross
negligence, willful misconduct or fraud. In addition, each Borrower will
reimburse and (jointly and severally) indemnify Lender for all costs and losses
resulting from the following: (1) any failure or refusal by any Borrower or by
any Affiliate of any Borrower to provide any requested assistance or
cooperation in connection with any attempt by Lender to liquidate any
Collateral in the event of any Event of Default and/or any attempt by Lender to
otherwise exercise its rights hereunder, and (2) any misrepresentation, gross
negligence, fraud or willful misconduct by any Borrower (or any of its
employees or officers), or any other person or entity pledging Collateral
hereunder. Moreover, with respect to any Advance Request or other
communication between any Borrower and Lender hereunder and all other matters
and transactions in connection therewith, each Borrower hereby irrevocably
authorizes Lender to accept, rely upon, act upon and comply with any verbal or
written instructions, requests, confirmations and orders of any Authorized
Officer of any Borrower. Each Borrower acknowledges that the transmissions of
any such instruction, request, confirmation, order or other communication
involves the possibility of errors, omissions, mistakes and discrepancies, and
each Borrower agrees to adopt such internal measures and operational procedures
to protect its interest. By reason thereof, each Borrower hereby assumes all
risk of loss and responsibility for — and hereby releases and discharges
Lender from any and all risk of loss and responsibility for, and agrees to
indemnify, reimburse on demand and hold Lender harmless from — any and all
claims, actions, damages, losses, liability and costs by reason of or in any
way related to (a) Lender’s accepting, relying and acting upon, complying with
or observing any such instructions, requests, confirmations or orders from or
on behalf of any such Authorized Officer, and (b) any such errors, omissions,
mistakes and discrepancies by (or otherwise resulting from or attributable to
the actions or inactions of) any Authorized Officer or any Borrower; provided,
however, no Borrower assumes hereby the risk of any foreseeable actual loss
resulting from Lender’s own gross negligence, fraud or willful misconduct.
Each Borrower’s obligations provided for in this Section will survive any
termination of this Agreement, and the repayment of the outstanding balances
hereunder.

     9.2       Assignments and Participations. No Loan Document may be assigned (in
whole or in part) by any Borrower without the prior written consent of Lender.
Notwithstanding any other

35

 

 provision of any Loan Document, without receiving any consent of any
Borrower, Lender at any time and from time to time may syndicate, participate
or otherwise transfer, pledge or assign all (or any part of) its rights and
obligations under any of the Loan Documents (or any indebtedness evidenced
thereby) to any Person. Lender will make reasonable efforts to notify
Borrowers of any such absolute transfer or assignment within twenty (20)
Business Days thereafter; however, a failure to so notify will in no way impair
any rights of Lender or any transferee or assignee. Upon execution and
delivery of an appropriate instrument between any such participant, transferee
or assignee and Lender, then (at Lender’s request) such participant, transferee
or assignee will become a Lender party to this Agreement and will have all the
rights and obligations of a Lender as set forth in such instrument. At
Lender’s request, each Borrower will execute (or re-execute) and deliver (or
otherwise obtain) any documents necessary to reflect or implement any such
participation, transfer or assignment (including replacement promissory notes
and any requested letters authorizing such participant, transferee or assignee
to rely on existing certificates and opinions) and will otherwise fully
cooperate in any such syndication process. Notwithstanding the foregoing,
unless an Event of Default has occurred and is continuing and subject to any
grace periods specified in Section 7.2, without the prior written consent of
Helix, Lender may not transfer or assign all (or any part of) its rights and
obligations under any of the Loan Documents to any person that directly or
indirectly competes with the principal business of the Borrowers.

     9.3       No Waiver; Delay. To be effective, any waiver by Lender must be
expressed in a writing executed by Lender. Once an Event of Default occurs
under the Loan Documents, then such Event of Default will continue to exist
until it either is cured (to the extent specifically permitted) in accordance
with the Loan Documents or is otherwise expressly waived by Lender (in its sole
and absolute discretion) in writing. If Lender waives any power, right or
remedy arising hereunder or under any applicable law, then such waiver will not
be deemed to be a waiver (a) upon the later occurrence or recurrence of any
events giving rise to the earlier waiver or (b) as to any other Obligor. No
failure or delay by Lender to insist upon the strict performance of any term,
condition, covenant or agreement of any of the Loan Documents, or to exercise
any right, power or remedy hereunder, will constitute a waiver of compliance
with any such term, condition, covenant or agreement, or preclude Lender from
exercising any such right, power, or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement
or any other Loan Document, Lender will not be deemed to waive the right either
to require prompt payment when due of all other amounts payable under this
Agreement or any other Loan Document or to declare an Event of Default for
failure to effect such prompt payment of any such other amount. The remedies
provided herein are cumulative and not exclusive of each other, the remedies
provided by law, and the remedies provided by the other Loan Documents.

     9.4       Modification and Amendment. Except as otherwise expressly provided in
this Agreement, no modification or amendment hereof will be effective unless
made in a writing signed by appropriate officers of the parties hereto.

     9.5       Disclosure of Information to Third Parties. Lender will employ
reasonable procedures to treat as confidential all written, non-public
information delivered to Lender pursuant to this Agreement concerning the
performance, operations, assets, structure and business plans of Borrowers that
is conspicuously designated by Borrowers as confidential information. While
other or different confidentiality procedures may be employed by Lender, the
actual procedures employed by Lender for this purpose will be conclusively
deemed to be reasonable if they are at least as protective of such information
as the procedures generally employed by Lender to safeguard the confidentiality
of

36

 

Lender’s own information that Lender generally considers to be
confidential. Notwithstanding the foregoing, Lender may disclose any
information concerning any Borrower in Lender’s possession from time to time
(a) to permitted participants, transferees, assignees, pledgees and investors
(including prospective participants, transferees, assignees, pledgees and
investors), but subject to a reasonable confidentiality agreement regarding any
non-public confidential information thereby disclosed, and (b) in response to
credit inquiries consistent with general banking practices, and (c) to any
federal or state regulator of Lender, and (d) to Lender’s Affiliates,
employees, legal counsel, appraisers, accountants, agents and investors, and
(e) to any Person pursuant to compulsory judicial process, and (f) to any
judicial or arbitration forum in connection with enforcing the Loan Documents
or defending any action based upon the Loan Documents or the relationship
between Lender and any Borrower, and (g) to any other Person with respect to
the public or non-confidential portions of any such information. Moreover,
Lender (without any compensation, remuneration or notice to Borrowers) may also
include operational, performance and structural information and data relating
to Borrowers in compilations, reports and data bases assembled by Lender (or
its Affiliates) and used to conduct, support, assist in and validate portfolio,
industry and credit research and analysis for itself and/or other Persons;
provided, however, that Lender may not thereby disclose to other Persons any
information relating to Borrowers in a manner that is attributable to Borrowers
unless (1) such disclosure is permitted under the standards outlined above in
this Section or (2) Borrowers otherwise separately consent thereto (which
consent may not be unreasonably withheld).

     9.6       Binding Effect and Governing Law. This Agreement and the other Loan
Documents have been delivered by Borrowers and the other Obligors and have been
received by Lender in the State of New York. This Agreement and all documents
executed hereunder are binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement and all
documents executed hereunder are governed as to their validity, interpretation,
construction and effect by the laws of the State of New York.

     9.7       Notices. Any notice, request, consent, waiver or other communication
required or permitted under or in connection with the Loan Documents will be
deemed satisfactorily given if it is in writing and is delivered either
personally to the addressee thereof, or by prepaid registered or certified U.S.
mail or Canada Post, as applicable (return receipt requested), or by a
nationally recognized commercial courier service with next-day delivery charges
prepaid, or by telegraph, or by facsimile (voice confirmed), or by any other
reasonable means of personal delivery to the party entitled thereto at its
respective address set forth below:

	 	 	 
	If to any Borrower	 	
Helix Hearing Care of America, Inc.
	or its Affiliates:	 	
7100 Jean-Talon East
	 	 	
Suite 610
	 	 	
Montreal, QC H1M 353
	 	 	
Attention: Steve Forget
	 	 	
Facsimile: (514) 353-0029
 

	 	 	
With a copy to the following listed counsel or such other
counsel as may be designated by Borrowers from time to time
(and which notice shall not constitute notice to Borrowers and
failure to give such notice shall not affect the effectiveness
of notice to Borrowers):

37

 

	 	 	 
	 	 	
Fraser Milner Casgrain LLP
	 	 	
1 Place Ville-Marie, 39th Floor
	 	 	
Montreal, QC H3B 4M7
	 	 	
Attention: Vitale Santoro, Esquire
	 	 	
Facsimile: (514) 866-2241
 

	If to Lender:	 	
HEARx Ltd.
	 	 	
1250 Northpoint Parkway
	 	 	
West Palm Beach, FL 33407
	 	 	
Attention: Steve Hansbrough
	 	 	
Facsimile: (561) 688-8893
 

	 	 	
With a copy to the following listed counsel or such other
counsel as may be designated by Lender from time to time (and
which notice shall not constitute notice to Lender and failure
to give such notice shall not affect the effectiveness of
notice to Lender):
 

	 	 	
Bryan Cave LLP
	 	 	
13th Street, N.W., Suite 700
	 	 	
Washington, D.C. 20005
	 	 	
Attention: LaDawn Naegle, Esquire
	 	 	
Facsimile: (202) 508-6200

Any party to a Loan Document may change its address or facsimile number for
notice purposes by giving notice thereof to the other parties to such Loan
Document in accordance with this Section, provided that such change shall not
be effective until 2 calendar days after notice of such change. All such
notices and other communications will be deemed given and effective (a) if by
mail, then upon actual receipt or 5 calendar days after mailing as provided
above (whichever is earlier), or (b) if by facsimile, then upon successful
transmittal to such party’s designated number, or (c) if by telegraph, then
upon actual receipt or 2 Business Days after delivery to the telegraph company
(whichever is earlier), or (d) if by nationally recognized commercial courier
service, then upon actual receipt or 2 Business Days after delivery to the
courier service (whichever is earlier), or (e) if otherwise delivered, then
upon actual receipt. For any and all purposes related to giving and receiving
notices and communications between any Borrower and Lender under any Loan
Document, each Borrower hereby irrevocably appoints Steve Forget (and each
other Authorized Officer) as its agent to whom Lender may give and from whom
Lender may receive all such notices and communications, and Lender is entitled
to rely upon (and treat as being properly authorized by Borrowers) any oral or
written notices or communications purportedly received from (or that Lender
believes in good faith to be received from) such Authorized Officer.

     9.8       Relationship with Prior Agreements. This Agreement completely and
fully supersedes all oral agreements and all other and prior written agreements
by and among Borrowers and Lender concerning the terms and conditions of this
credit arrangement.

     9.9       Severability. If fulfillment of any provision of or any transaction
related to any Loan Document at the time performance is due involves
transcending the limit of validity prescribed by applicable law, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity. If any clause or provision of this Agreement operates or would
prospectively operate to invalidate this Agreement or any other Loan Document
in whole or in part, then such clause or

38

 

 provision only shall be void (as though not contained herein or therein),
and the remainder of this Agreement or such other Loan Document shall remain
operative and in full force and effect; provided, however, if any such clause
or provision pertains to the repayment of any indebtedness hereunder, then the
occurrence of any such invalidity shall constitute an immediate Event of
Default hereunder.

     9.10       Termination and Survival. All representations, warranties, covenants
and other agreements of any Obligor contained in any Loan Document or any other
documentation required thereunder will survive the execution and delivery of
the Loan Documents and the funding of the Advances hereunder and will continue
in full force and effect until terminated in accordance with this Agreement.
Upon (a) indefeasible receipt by Lender of the entire indebtedness and all
other amounts then due or owing to Lender under the Loan Documents (without any
condition, deduction, offset, netting, counterclaim or reservation of rights),
and (b) receipt by Lender of an instruction from Borrowers to terminate and
cancel the Loan Documents, all Commitments and all Facilities thereunder
(together with an acknowledgment that Lender will have no further obligations
or liabilities under or in connection with any Loan Document), then Lender (at
the written request and expense of Borrowers) will terminate and cancel all
Loan Documents (other than the waivers, reinstatement rights, and reimbursement
and indemnification protections in favor of Lender under the Loan Documents,
which provisions shall survive any such termination of the Loan Documents).

     9.11       Reinstatement. To the maximum extent not prohibited by applicable
law, this Agreement and the other Loan Documents (and the indebtedness
hereunder and Collateral therefor) will be reinstated and the indebtedness
correspondingly increased (as though such payment(s) had not been made) if at
any time any amount received by Lender in respect of any Loan Document is
rescinded or must otherwise be restored, refunded or returned by Lender to
Borrower or any other Person (a) upon or as a result of the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Borrower or any
other Person, or (b) upon or as a result of the appointment of any receiver,
intervenor, conservator, trustee or similar official for any Borrower or any
other Person or for any substantial part of the assets of any Borrower or any
other Person, or (c) for any other reason.

     9.12       Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all the signatures on such counterparts
appeared on one document. Each such counterpart will be deemed to be an
original but all counterparts together will constitute one and the same
instrument.

     9.13       Waiver of Suretyship Defenses. Each Borrower hereby waives any and
all defenses and rights of discharge based upon suretyship or impairment of
collateral (including lack of attachment or perfection with respect thereto)
that it may now have or may hereafter acquire with respect to Lender or any of
its obligations hereunder, under any Loan Document or under any other agreement
that it may have or may hereafter enter into with Lender.

     9.14       Waiver of Liability. Each Borrower (a) agrees that Lender (and its
directors, officers, employees and agents) shall have no liability to any
Borrower (whether sounding in tort, contract or otherwise) for losses or costs
suffered or incurred by any Borrower in connection with or in any way related
to the transactions contemplated or the relationship established by any Loan
Document, or any act, omission or event occurring in connection herewith or
therewith, except for foreseeable actual losses resulting from Lender’s own
gross negligence, willful misconduct or fraud and (b) waives, releases and
agrees not to sue upon any claim against Lender (or its directors, officers,
employees or agents) whether sounding in tort,

39

 

 contract or otherwise, except for claims for foreseeable actual losses
resulting from Lender’s own gross negligence, willful misconduct or fraud.
Moreover, whether or not such damages are related to a claim that is subject to
the waiver effected above and whether or not such waiver is effective, Lender
(and its directors, officers, employees and agents) shall have no liability
with respect to (and each Borrower hereby waives, releases and agrees not to
sue upon any claim for) any special, indirect, consequential, punitive or
non-foreseeable damages suffered by any Borrower in connection with or in any
way related to the transactions contemplated or the relationship established by
any Loan Document, or any act, omission or event occurring in connection
herewith or therewith.

     9.15       Forum Selection; Consent to Jurisdiction. Any litigation in
connection with or in any way related to any Loan Document, or any course of
conduct, course of dealing, statements (whether verbal or written), actions or
inactions of Lender or any Borrower will be brought and maintained exclusively
in the courts of the State of New York or in the United States District Court
for the Southern District of New York; provided, however, that any suit seeking
enforcement against any Borrower, any Collateral or any other property may also
be brought (at Lender’s option) in the courts of any other jurisdiction where
such Collateral or other property may be found or where Lender may otherwise
obtain personal jurisdiction over such Borrower. Each Borrower hereby
expressly and irrevocably submits to the jurisdiction of the courts of the
State of New York and of the United States District Court for the Southern
District of New York for the purpose of any such litigation as set forth above
and irrevocably agrees to be bound by any final and non-appealable judgment
rendered thereby in connection with such litigation. Each Borrower further
irrevocably consents to the service of process by registered or certified mail,
postage prepaid, or by personal service within or outside the State of New
York. Each Borrower hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that any Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, then
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement.

     9.16       Waiver of Jury Trial. Lender and each Borrower each hereby
knowingly, voluntarily and intentionally waives any rights it may have to a
trial by jury in respect of any litigation (whether as claim, counter-claim,
affirmative defense or otherwise) in connection with or in any way related to
any of the Loan Documents, or any course of conduct, course of dealing,
statements (whether verbal or written), actions or inactions of Lender or any
Borrower. Each Borrower acknowledges and agrees (a) that it has received full
and sufficient consideration for this provision (and each other provision of
each other Loan Document to which it is a party), and (b) that it has been
advised by legal counsel in connection herewith, and (c) that this provision is
a material inducement for Lender entering into the Loan Documents and funding
Advances thereunder.

     9.17       Judgment Currency. If for the purpose of obtaining judgment in any
court it is necessary to convert an amount due hereunder in the currency in
which it is due (the “Original Currency”) into another currency (the “Second
Currency”), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, the Lender could purchase in the Toronto

40

 

 foreign exchange market, the Original Currency with the Second Currency on
the date two (2) Business Days preceding that on which judgment is given. Each
Obligor agrees that its obligation in respect of any Original Currency due from
it hereunder shall, notwithstanding any judgment or payment in such other
currency, be discharged only to the extent that, on the Business Day following
the date the Lender receives payment of any sum so adjudged to be due hereunder
in the Second Currency, the Lender may, in accordance with normal banking
procedures, purchase, in the Toronto foreign exchange market, the Original
Currency with the amount of the Second Currency so paid; and if the amount of
the Original Currency so purchased or could have been so purchased is less than
the amount originally due in the Original Currency, each Obligor agrees as a
separate obligation and notwithstanding any such payment or judgment to
indemnify the Lender against such loss. The term “rate of exchange” in this
Section 9.17 means the spot rate at which the Lender, in accordance with normal
practices, is able on the relevant date to purchase the Original Currency with
the Second Currency and includes any premium and costs of exchange payable in
connection with such purchase.

     9.18       French/English Acknowledgment. It is the express wish of the parties
hereto that this Agreement and any related documents be drawn up and executed
in English. Il est la volonté expresse des parties que cette convention et
tous les documents s’y rattachant soient redigés et signés en anglais.

Balance of page intentionally left blank.

41

 

     IN WITNESS WHEREOF, the undersigned, by their duly authorized officers,
have executed this Credit Facility Agreement, as an instrument under seal
(whether or not any such seals are physically attached hereto), as of the day
and year first above written.

 

	 	 	 
	ATTEST:	 	
HELIX HEARING CARE OF AMERICA CORP (Borrower)
 

	By: /s/ FRANCOIS TELLIER
 
	 	
By: /s/ STEVE FORGET
 

	Name: Francois Tellier
 
	 	
Name: Steve Forget
	Title: General Counsel
 
	 	
Title: President & Chief Executive Officer
 

	CORPORATE SEAL:	 	
Address: 7100, Jean-Talon East, Suite 610
	 	 	
Montreal, Quebec H1M 3S3
	 	 	
Facsimile: (514) 353-0029
 

	 	 	
HELIX HEARING CARE OF AMERICA (U.S.A.) CORP. (Borrower)
 

	 	 	
By: /s/ STEVE FORGET
 

	 	 	
Name: Steve Forget
 

	 	 	
Title: President & Chief Executive Officer
 

	 	 	
Address: 7100, Jean-Talon East, Suite 610
	 	 	
Montreal, Quebec H1M 3S3
	 	 	
Facsimile: (514) 353-0029
 

	 	 	
Les services de gestion Hearing Care of
	 	 	
America SGHCA Inc. (Borrower)
 

	 	 	
By: /s/ STEVE FORGET
 

	 	 	
Name: Steve Forget
 

	 	 	
Title: President & Chief Executive Officer
 

	 	 	
Address: 7100, Jean-Talon East, Suite 610
	 	 	
Montreal, Quebec H1M 3S3
	 	 	
Facsimile: (514) 353-0029
 

 

 

	 	Les services d’ approvsionement Hearing Care

of America SAHCA Inc. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Les services de location Hearing Care of

America SLHCA Inc. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	3371727 Canada Inc. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	Helix Hearing Care of America (Ohio) Corp.

(Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Helix Hearing Care of America (New York)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Helix Hearing Care of America (Missouri)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	Helix Hearing Care of America (Wisconsin)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Helix Hearing Care of America (Minnesota)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Helix Hearing Care of America (Indiana)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	Helix Hearing Care of America (Pennsylvania)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Helix Hearing Care of America (Arizona)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Helix Hearing Care of America (Washington)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	Helix Hearing Care of America (Michigan)

Corp. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	American Hearing Centers, Inc. (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

	 	Auxiliary Health Benefits Corporation, d/b/a

National Ear Care Plan (Borrower)

	 	By: /s/ STEVE FORGET

	 	Name: Steve Forget

	 	Title: President & Chief Executive Officer

	 	Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 	 	
Thomas W. Fell Co., Inc. (Borrower)
 

	 	 	
        By: /s/ STEVE FORGET
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610
	 	 	
Montreal, Quebec H1M 3S3
	 	 	
Facsimile: (514) 353-0029
	 
	ATTEST:	 	
HEARx LTD. (Lender)
	 
	By: /s/ BRYAN L. BURGETT	 	
        By: /s/ STEPHEN J. HANSBROUGH
	 
	Name: Bryan L. Burgett	 	
Name: Stephen J. Hansbrough
	 
	Title: Vice President & General Counsel	 	
Title: President and Chief Operating Officer
	 
	 	 	
Address: 1250 Northpoint Parkway
	 	 	
West Palm Beach, FL 33407
	 	 	
Facsimile: (561) 688-8893ex10-19

 

EXHIBIT 10.19

EXECUTION COPY

MASTER SECURITY AGREEMENT,

COLLATERAL ASSIGNMENT AND EQUITY PLEDGE

         THIS MASTER SECURITY AGREEMENT, COLLATERAL ASSIGNMENT AND EQUITY PLEDGE
(as defined in Article 6 hereof, along with all other defined terms, this
“Security Agreement”) is made and effective as of May      , 2002, by EACH
“GRANTOR” THAT IS FROM TIME TO TIME LISTED ON SCHEDULE 1 HERETO OR OTHERWISE
ADDED AS A SIGNATORY HERETO (each, as more fully defined below, a “Grantor”;
collectively, the “Grantors”), in favor of HEARx LTD. (including any successor,
participant, assignee, pledgee or transferee thereof, “Lender”).

RECITALS

         WHEREAS, pursuant to that certain Credit Agreement by and among Borrowers
and Lender dated as of April 30, 2002 (as may be amended from time to time,
“Credit Agreement”), each Grantor is required to have executed and delivered
this Security Agreement encumbering all of each Grantor’s tangible and
intangible personal property assets in favor of Lender; and

         WHEREAS, each Grantor has determined that it is in its best interest to
execute this Security Agreement inasmuch as each Grantor will derive
substantial direct and indirect benefits from the funding of the Advances by
Lender pursuant to the Credit Agreement;

         NOW, THEREFORE, for good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged) and intending to be legally bound
hereby, each Grantor and Lender hereby agree as follows:

ARTICLE 1: SECURITY INTEREST, COLLATERAL ASSIGNMENT AND PLEDGE

         1.1. Grant of Security. Each Grantor (as of the effective date of
becoming a signatory hereto) hereby collaterally assigns and pledges to Lender,
and hereby grants to Lender a present, absolute, unconditional and continuing
security interest in, all of the following property, assets and equity
interests, whether or not such property and assets are covered by Article 9 of
the applicable UCC or Personal Property Security Act (Ontario) (the “PPSA”)
(collectively, and including all Pledged Collateral, “Collateral”):

                  a. Fixtures and Improvements — All of such Grantor’s fixtures and
improvements to real property in all of its forms, including the following:
all buildings, structures, furnishings, and all heating, electrical, lighting,
power and air conditioning equipment, and all antennas, transmitters, receivers
and related equipment, and all other equipment that under applicable law
constitutes a fixture, and all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
(any and all of the foregoing being the “Fixtures”); and

-1-

 

                  b. Equipment (and Computer Hardware) — All of such Grantor’s equipment in
all of its forms, including the following: all machinery, tools, motor
vehicles, furniture and furnishings, and all antennas, transmitters, receivers
and related equipment, all communications, telecommunications, switches and
related equipment, and all computer and other electronic data processing
hardware, integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers, tape
drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and other
related computer hardware, and all documentation manuals and materials with
respect to such hardware, and all rights with respect to all of the foregoing,
including any and all licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement rights,
renewal rights and indemnifications, and any model conversions of any of the
foregoing, and all parts thereof and all accessions, additions, parts
(including replacement parts), attachments, improvements, substitutions and
replacements thereto and therefor (any and all of the foregoing being the
“Equipment”); and

                  c. Inventory — All of such Grantor’s inventory in all of its forms,
including the following: (1) all raw materials and work in process therefor,
finished goods thereof, and materials used or consumed in the preparation,
manufacture, creation or production thereof, and (2) all goods in which any
Grantor has an interest in mass or a joint or other interest or right of any
kind (including goods in which any Grantor has an interest or right as
consignee), and (3) all goods which are returned to or repossessed by any
Grantor, and in each instance all accessions thereto, products thereof and
documents therefor (any and all of the foregoing being the “Inventory”); and

                  d. Receivables, Accounts, Contracts, Money, Instruments, Chattel Paper and
Related Documents — All of such Grantor’s Accounts (as defined in the UCC),
receivables, cash collateral accounts (general or special, time or demand,
provisional or final), lock box accounts, other deposit accounts, security
deposits, advance payments, contracts, contract rights, leases, licenses,
insurance policies, chattel paper, documents, instruments (whether or not
negotiable), money, general intangibles and other obligations of any kind, and
whether or not arising out of or in connection with the sale or lease of goods
or the rendering of services (any and all of the foregoing being the “Contract
Rights”), and all rights of any Grantor in and to all agreements, security
agreements, guaranties, leases and other contracts securing or otherwise
relating to any such Contract Rights (any and all such security agreements,
guaranties, leases and other contracts being the “Related Contracts”); and

                  e. Intellectual Property — Without limiting any of the foregoing, all of
such Grantor’s intellectual and information related property, rights and
assets, including the following (collectively, “Intellectual Property
Collateral”):

                           1. Computer Software and Data — (a) All software programs and data bases
(including source code, object code and all related applications and data
files) owned, licensed or leased by any Grantor, and (b) all firmware
associated therewith or with any of the Equipment, and (c) all documentation
and materials (including all flow charts, logic diagrams, algorithms, manuals,
guides, instructions, indices, abstracts and specifications) with respect to
such software and firmware, and (d) all rights with respect to all of the
foregoing, including any and all copyrights,

-2-

 

trademarks, licenses, options,
warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications, and any substitutions, replacements, additions or model
conversions of any of the foregoing (collectively, “Computer Software
Collateral”), and

                           2. Copyrights — All copyrights of such Grantor in each work or authorship
and derivative works thereof, whether published or unpublished and whether or
not the same also constitutes a trade secret, whether statutory or common law,
registered or unregistered, throughout the world, including all of such
Grantor’s right, title and interest in and to all copyrights registered in the
United States Copyright Office or anywhere else in the world, and all
applications for registration thereof, whether pending or in preparation, and
all copyright licenses, and further including the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, and all goodwill associated therewith, all
extensions, continuations and renewals of any thereof, and all proceeds of the
foregoing, including licenses, fees, royalties, income, payments, claims,
damages and proceeds of suit (collectively, “Copyright Collateral”), and

                           3. Patents — All patents and like protections, including all
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, and all applications for registration
thereof, whether pending or in preparation, all patent licenses, the right to
sue for past, present and future infringements of any thereof, all rights
corresponding thereto throughout the world, and all goodwill associated
therewith, all extensions, continuations and renewals of any thereof, and all
proceeds of the foregoing, including licenses, fees, royalties, income,
payments, claims, damages and proceeds of suit (collectively, “Patent
Collateral”), and

                           4. Trademarks — (a) All trademarks, service marks, trade names, corporate
names, company names, business names, operating names, domain names, fictitious
business names, trade styles, certification marks, collective marks, call
signs, logos, other source of business identifiers, prints, labels and goods on
which any of the foregoing appear or have appeared, designs (including product
designs) and general intangibles of a like nature (any and all of the foregoing
being the “Trademarks”), anywhere in the world, whether registered or not and
whether currently in use or not, all registrations and recordings thereof and
all applications to register the same, whether pending or in preparation for
filing, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the United
States of America or any State thereof or any foreign country, and (b) all
Trademark licenses, and (c) all reissues, extensions or renewals of any of the
foregoing, and (d) all of the goodwill of the business connected with the use
of, and symbolized by, the items described in the foregoing, and (e) all
proceeds, fees, royalties, income or payments of, and rights associated with,
the foregoing, including any claim by any Grantor against third parties for
past, present or future infringement or dilution of any Trademark, Trademark
registration or Trademark license, or for any injury to the goodwill associated
with the use of any such Trademark or for breach or enforcement of any
Trademark license (collectively, “Trademark Collateral”), and

                           5. Trade Secrets — All common law and statutory trade secrets and all
other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in any Grantor’s
business (any and all of the foregoing being the

-3-

 

“Trade Secrets”), whether or
not such Trade Secret has been reduced to a writing or other tangible form,
including all documents and things embodying, incorporating or referring in any
way to such
Trade Secrets, all Trade Secret licenses, and including the right to sue
for and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license (collectively, “Trade Secret Collateral”); and

                  f. Publication, Customer and Production-Related Property — Without
limiting any of the foregoing, all of such Grantor’s right, title, interest and
benefits in, to and under (a) all books, writings, journals, articles and
publications, and (b) all patient, customer, prospect, inquiry, marketing,
advertising, publicity, and promotional files, lists, records, documents,
contracts and agreements, including all files, lists and records of active,
former, prospective, trial and conditional patients and customers, and all
files, lists and records of current, former and prospective advertisers, and
all internally generated, purchased and rented mailing lists (but only to the
extent of any Grantor’s rights therein), and all promotional letters,
catalogues, flyers, reply cards, sales materials, promotional materials, sample
mailing pieces, artwork, drawings, advertising materials, and any similar
materials, and (c) all publication rights, programming rights, editorial
rights, promotional rights, advertising rights, licensing rights, distribution
and redistribution rights, and printing and reprinting rights (and any and all
agreements, contracts, documents and materials in any way governing or relating
to any of the foregoing rights), and (d) all editorial, publishing,
programming, manufacturing, prepublication and post-publication, royalty,
sales, pricing, cost and promotional files, lists, records and documents, and
(e) all indices, abstracts, compilations, summaries, glossaries and archives of
or for any of the foregoing items, and (f) all other information and property
relating to, used or useful in connection with, evidencing, embodying,
incorporating or referring to, any of the foregoing property identified in this
clause or elsewhere in this Section 1.1 and regardless of whether such property
is embodied in a tangible or intangible medium; and

                  g. Licenses and Authorizations — Without limiting any of the foregoing,
all of such Grantor’s right, title, interest and benefits in, to and under all
present and future Licenses, Authorizations and other rights for the
construction, development, operation and ownership of its business and
properties including (but only to the extent that and only during such time as
it is not unlawful to grant and enforce a security interest therein), and all
proceeds of such Licenses, Authorizations and other rights, and all rights of
such Grantor in and to all agreements, security agreements, guaranties, leases
and other contracts securing or otherwise relating to any such Licenses,
Authorizations and other rights; and

                  h. Other General Intangibles — Without limiting any of the foregoing, all
of such Grantor’s right, title, interest and benefits in, to and under all
other General Intangibles (as defined in the UCC), wherever arising, including
the following: (a) all corporate, partnership, limited liability company and
joint venture investments and other interests in and to any other entity
(including all ownership rights and interests in such Grantor’s subsidiaries,
whether or not such rights and interests are certificated), and the proceeds
and general intangibles related thereto (including all dividends,
distributions, capital accounts and proceeds thereof), and (b) all leasehold
interests (whether as lessee or as lessor) and all related rights thereunder
and proceeds thereof, and (c) all tax refunds and other refunds or rights to
receive payment from U.S. federal, state, or local governments or from foreign
governments, whether or not arising out of or in connection with the sale or
lease of goods or the

-4-

 

rendering of services, and (d) all settlements, judgments
and other awards (whether or not resulting from judicial or arbitration
proceedings) and all commercial tort claims specified on the attached Schedule
in (“Commercial Tort Claims”) and contract claims and causes of action; and all
rights of such Grantor in and to all security agreements, guaranties, leases and
other contracts securing or otherwise relating to any such general intangibles;
and

                  i. Securities and Investment Property — Without limiting any of the
foregoing, all of such Grantor’s right, title, interest and benefits in, to and
under all stocks, options, warrants, bonds, and other securities, security
entitlements, securities accounts, financial assets and other investment
property (including all such securities representing ownership in such
Grantor’s subsidiaries), and the proceeds and general intangibles related
thereto (including all dividends and distributions); and

                  j. Other General Property — All of such Grantor’s other property and
rights of every kind and description and interests therein; and

                  k. Products and Proceeds — All products, offspring, rents, issues,
profits, returns, refunds, income and proceeds of and from any and all of the
foregoing Collateral, including the following: all proceeds of the Licenses
and Authorizations, all proceeds that constitute property of the types
described in this Section 1.1, all proceeds deposited from time to time in any
lock boxes of any Grantor, and, to the extent not otherwise included, all
payments, unearned premiums and cash or surrender value under insurance
policies (whether or not Lender or any Lender is a loss payee or additional
insured thereof), and any indemnity, warranty or guaranty payable by reason of
loss or damage to or otherwise with respect to any of the foregoing Collateral;

in each instance (whether or not expressly specified above), wherever
located, and whether now existing, owned, leased or licensed or hereafter
acquired , leased, licensed, arising, developed, generated, adopted or
created for or by any Grantor, and howsoever any Grantor’s interest
therein may arise or appear (whether by ownership, security interest,
claim or otherwise).

         1.2. Security for Secured Obligations. This Security Agreement secures
the payment and performance in full of (a) all obligations (monetary or
otherwise) of each Borrower and each other Obligor now or hereafter existing
under the Credit Agreement or any other Loan Document as well as under any
other agreement with Lender to extend credit to any Obligor or to any Affiliate
of any such Obligor (whether for principal, interest, costs, fees, expenses,
protective advances or otherwise), and (b) all obligations (monetary or
otherwise) of any Grantor now or hereafter existing under this Security
Agreement or any other Loan Document (all such obligations under Clauses “(a)”
and “(b)” being referred to collectively as the “Secured Obligations”).

         1.3. Continuing Security Interest; Assignment; Termination. This Security
Agreement creates a continuing security interest in and collateral assignment
and pledge of the Collateral and will remain in full force and effect until
terminated as described below in this Section. This Security Agreement is
binding upon each Grantor and its successors, transferees and assignees, and
(together with the rights and remedies of Lender hereunder) inures to the
benefit of Lender and its successors, transferees, participants and assignees.
Without limiting the generality of the foregoing, except to

-5-

 

the extent
restricted under the Credit Agreement, Lender may assign, syndicate,
participate or otherwise transfer (in whole or in part, and without any
Grantor’s consent) any Loan Document and any indebtedness thereunder to any
other Person, and such other Person or entity will thereupon become vested with
all the rights and benefits in respect thereof granted to Lender under any such
Loan Document (including this Security Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer. The
security interest, collateral assignment and pledge granted herein will
terminate (and all rights to the Collateral will revert to Grantors) upon
satisfaction of the following conditions: (a) payment and performance in full
of all Secured Obligations (unconditionally and indefeasibly) and (b) the
termination of the Credit Agreement (and the Facilities thereunder). Upon any
such termination, Lender (at Grantors’ request and sole expense) (a) will
execute and deliver to a Grantor (without any representation, warranty or
recourse of any kind whatsoever) such documents as such Grantor may reasonably
request and provide to Lender to evidence such termination, and (b) will
deliver to a Grantor or to another Person that Lender reasonably believes may
be entitled thereto (without any representation, warranty or recourse of any
kind whatsoever) all stock certificates and instruments representing or
evidencing Collateral being physically held by Lender hereunder.

         1.4. Security Interest Absolute. All rights of Lender and the security
interests, collateral assignments and pledges granted, assigned and pledged to
Lender hereunder, and all obligations of each Grantor hereunder, are absolute
and unconditional, irrespective of the occurrence of any one or more of the
following:

	 	 	 
	a.	 	
Any lack of validity or enforceability of any Loan
Document; or
	
	
	
	

	
	
	
	

	
	
	
	

	b.	 	
The failure of Lender or any holder of any Note:

	 	 	 
	1.	 	
To assert any claim or demand or to
enforce any right or remedy under the provisions of any
Loan Document or otherwise, or
	
	
	
	

	
	
	
	

	
	
	
	

	2.	 	
To exercise any right or remedy against
any other Obligor of, or any collateral securing, any
obligations of any Borrower owing to any Lender; or

	 	 	 
	c.	 	
Any change in the time, manner or place of payment
of, or in any other term of, any Secured Obligation; or
	
	
	
	

	
	
	
	

	
	
	
	

	d.	 	
Any other extension, increase, refinancing,
restructuring, compromise or renewal of any Secured Obligation;
or
	
	
	
	

	
	
	
	

	
	
	
	

	e.	 	
Any reduction, limitation, impairment or
termination of any Secured Obligation for any reason, including
any waiver, release, surrender, alteration or compromise; or
	
	
	
	

	
	
	
	

	
	
	
	

	f.	 	
Any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, the terms of
any Loan Document; or

-6-

 

	 	 	 
	
	
	
	

	
	
	
	

	
	
	
	

	g.	 	
Any addition, exchange, release, surrender or
nonperfection of any collateral (including the Collateral), or
any amendment to or waiver or release of or addition to or
consent to departure from any guaranty, for any Secured
Obligation; or
	
	
	
	

	
	
	
	

	
	
	
	

	h.	 	
Any other circumstances which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, any Grantor or its obligations hereunder,
including, without limitation, any and all suretyship defenses.

Each Grantor hereby waives any right to or any claim of any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of any
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligation.

         1.5. Equity Pledge.

                  a. Grant of Security Interest. Pursuant to Section 1.1, without limiting
the generality thereof, each Grantor pledges, hypothecates, assigns, charges,
mortgages, delivers, and transfers to Lender and grants to Lender a present,
absolute, unconditional and continuing security interest in all of the
following property (collectively, “Pledged Equity Collateral”):

	 	 	 
	1.	 	All Pledged Equity currently owned by such Grantor; and	 
	
	
	
	

	2.	 	All Pledged Equity issued from time to
time hereafter to such Grantor; and	 
	
	
	
	

	3.	 	All other Pledged Equity Property
(including, all options and warrants for Pledged Equity)
owned by such Grantor, whether now or hereafter delivered
to Lender in connection with this Security Agreement; and	 
	
	
	
	

	4.	 	All Dividends, Distributions, capital
accounts, and other payments and rights with respect to
any Pledged Equity Property received or receivable by
such Grantor; and	 
	
	
	
	

	5.	 	All proceeds of any of the foregoing;
and	 

in each case, whether now existing or owned or hereafter acquired by such
Grantor and howsoever such Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

                  b. Delivery of Pledged Equity Property. To the extent that any of the
Collateral is evidenced by a certificate or instrument, then all such
certificates or instruments (a) must be delivered to and held by or on behalf
of Lender pursuant hereto, and (b) must be in suitable form for transfer by
delivery, and (c) must be accompanied by all necessary powers, appointments and
instruments of transfer or assignment, duly executed in blank. To the extent
that any of the

-7-

 

Collateral is not evidenced by a certificate or instrument,
then such Grantor shall cause the issuer of such uncertifcated security to
either (a) register the Lender a registered owner thereof on the books and
records of the issuer or (b) execute a control agreement pursuant to which such
issuer agrees to comply with the Lender’s instructions with respect to such
uncertificated security without further consent by such Grantor.

                  c. Dividends and Distributions on Pledged Shares. Except as otherwise
provided in the Credit Agreement, all Dividends, Distributions, non-Dividend
cash payments, and proceeds thereof paid or payable to any Grantor must be paid
directly to Lender (properly endorsed if required hereby or requested by
Lender) as additional Collateral hereunder to be held by Lender separate,
segregated and apart from its other property, unless and until Lender has
terminated this Security Agreement as provided in Section 1.3. All Dividends,
Distributions, cash payments, and proceeds that at any time and from time to
time may be delivered to any Grantor but which such Grantor is then obligated
to deliver to Lender, as additional collateral hereunder, until delivery to
Lender, must be held by such Grantor (a) in trust for Lender and (b) separate,
segregated and apart from its other property.

         1.6. Collateral Assignment of Contracts.

                  a. Grant of Security Interest. Pursuant to Section 1.1, without limiting
the generality thereof, each Grantor collaterally assigns to Lender all of such
Grantor’s right, title and interest in and to all of such Grantor’s contracts,
licenses, leases and other agreements and all rights, interests, powers,
privileges and other benefits thereunder (including the rights to receive all
proceeds and payments under each such contract, license, lease and other
agreement). This assignment of each contract, license, lease and other
agreement constitutes a fully perfected, absolute, unconditional and present
assignment, provided, however, that prior to the occurrence of an Event of
Default, such Grantor may exercise any rights and powers under and may receive
all payments and enjoy all other benefits of each such contract, license, lease
and other agreement, subject to the terms and provisions of this Security
Agreement and the other Loan Documents.

                  b. Lender’s Right to Cure. Lender shall have the right (but not the
obligation) to cure or remedy any breach or default under any contract,
license, lease or other agreement on the part of any Grantor. The exercise by
Lender of any of its rights hereunder will not release any Grantor from any of
its duties or obligations under any such contracts, licenses, leases or other
agreements included in the Collateral. Lender shall have no obligation or
liability under any such contracts, licenses, leases or other agreements
included in the Collateral by reason of this Security Agreement, nor is Lender
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

         1.7. Collateral Interest in Certain Intellectual Property.
Notwithstanding the language of Section 1.1, Lender’s interest in Copyrights,
Patents and Trademarks (and any applications therefor) is as a security
interest and pledge and not as an absolute assignment.

         1.8. Restrictions on Granting Security Interests and Collateral
Assignments. Notwithstanding the terms of this Security Agreement, the
collateral assignment of and security

-8-

 

interest in a Grantor’s interests in
contracts, licenses, leases and other agreements shall not apply to any
contract, license, lease or other agreement to the extent that each of the
following characteristics are satisfied with respect thereto: (a) it either (i)
exists on the Closing Date, or (ii) is a Material Contract entered into after
the Closing Date in accordance with the standards under Section 5.15 of the
Credit Agreement, or (iii) is not a Material Contract, and (b) its existence
has been disclosed to Lender to the extent it is a Material Contract, and (c)
it expressly prohibits the granting of a security
interest in or the collateral assignment of such Grantor’s interest
therein, and (d) such prohibition is enforceable under applicable law.

ARTICLE 2: REPRESENTATIONS AND WARRANTIES

         Each Grantor hereby represents and warrants to Lender as set forth in this
Article.

         2.1. Location of Collateral. Except as identified on Schedule 2.1, all of
the Collateral of each Grantor is and has been for the previous five (5) years
located in the jurisdictions set forth on Schedule 2.1. The names and
addresses of all persons or entities other than the Grantors that have
possession or are intended to have possession of any of the Collateral is set
forth on Schedule 2.1. The principal places of business and chief executive
office of each Grantor and the offices where each Grantor keeps its records
concerning the Contract Rights and Related Contracts are located at the address
identified on Schedule 2.1.

         2.2. Operating Names; State of Organization. Except as identified on
Schedule 2.2, during the preceding 12 years, no Grantor has been (a) operating
under or known by any legal or trade name different from the one set forth on
the signature page hereto (which name is the exact name of such Grantor as it
appears in such Grantor’s organizational documents, as amended, as filed in
such Grantor’s jurisdiction of organization) or (b) the subject of any merger
or other corporate reorganization. Each Grantor’s Federal Employer
Identification Number and its organizational identification number, if
applicable, are each set forth on Schedule 2.2. Each Grantor’s state of
organization is and has been for the four (4) month period preceding the date
hereof in the jurisdictions set forth on Schedule 2.2.

         2.3. Ownership; No Liens. Except as identified on Schedule 2.3, Grantors
are the sole and exclusive owners of or have the irrevocable, exclusive and
transferable right to possess and use or the power to transfer the Collateral,
and Grantors have full authority to pledge, assign and grant a security
interest in the Collateral. The Collateral is free and clear of any Lien
except (a) the security interest, collateral assignment and pledge created by
this Security Agreement and (b) as otherwise permitted by the Credit Agreement.
No effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording office,
except (1) financing statements and intellectual property security agreements
filed in favor of Lender relating to this Security Agreement and (2) such other
financing statements and instruments as identified on Schedule 2.3.

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         2.4. Government Contracts. Except as identified on Schedule 2.4, no
Grantor is a party to any Federal, state, provincial, or local government
contract (either domestic or foreign).

         2.5. Negotiable Documents, Instruments, Certificated Securities and
Chattel Paper. Contemporaneously with the execution hereof, each Grantor has
delivered to Lender possession of all originals of all negotiable documents,
certificated securities, instruments and chattel paper (other than checks
received in the ordinary course of business) currently owned or held by such
Grantor (duly endorsed in blank, if requested by Lender).

         2.6. Intellectual Property Collateral. With respect to each item of
Intellectual Property Collateral:

                  a. Such Intellectual Property Collateral is subsisting, valid and
enforceable, and to each Grantor’s knowledge (after due inquiry), such
Intellectual Property Collateral has not been adjudged invalid or
unenforceable, in whole or in part.

                  b. To each Grantor’s knowledge (after due inquiry), no claim has been made
that the use of any Intellectual Property Collateral does or may violate the
asserted rights of any third party.

                  c. Each Grantor has performed all acts and has paid all required fees and
taxes to maintain each and every item of its Intellectual Property Collateral
in full force and effect throughout the world, as applicable, except where such
fees and taxes are being contested in good faith with diligent prosecution.

                  d. Each Grantor owns directly, or is entitled to use by license or
otherwise, all Patents, Trademarks, Trade Secrets, Copyrights, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of such Grantor’s
business. To the extent any such Intellectual Property Collateral was
developed or created for or on behalf of any Grantor as a “work for hire,” then
such Grantor has obtained a waiver of any rights herein by the author or
creator hereof.

         2.7. As to Pledged Shares. With respect to any Pledged Equity
constituting Collateral, all of such Pledged Equity is duly authorized and
validly issued, fully paid, and non-assessable. The Pledged Equity constitutes
all of the issued and outstanding shares (and other rights) of equity ownership
of each Pledged Equity Issuer owned by any Grantor.

         2.8. Valid and Perfected Security Interest. This Security Agreement
creates a valid security interest in and collateral assignment and pledge of
the Collateral and proceeds thereof securing the payment of the Secured
Obligations. All filings and other actions necessary or desirable to perfect
and protect such security interest, collateral assignment and pledge have been
duly taken or will be duly taken as of the effective date hereof. Schedule 2.8
(a) lists each filing (including filing locations and “debtor” names) that is
necessary or appropriate to perfect the security interests, collateral
assignments and pledges created hereby (including with respect to Intellectual
Property Collateral), and Schedule 2.8 (b) identifies the items of Collateral
that must be delivered to or

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possessed by Lender to perfect Lender’s interest
hereunder. Upon perfection (as described in this Section), such security
interest, collateral assignment and pledge will be of a first priority ranking
except as and to the extent noted in Section 2.3 (or on the corresponding
schedule thereto).

         2.9. Authorization and Approval. Except as noted in Section 2.8 (or on
the corresponding schedule thereto), no authorization, approval or other action
by (and no notice to or filing with) any Official Body or other Person is
required either (a) for the grant by any Grantor of the security interest,
collateral assignment and pledge granted hereby, or (b) for the execution,
delivery and performance of this Security Agreement by any Grantor, or (c) for
the perfection by Lender of its
rights and interests hereunder, or (d) except as provided in Section
5.9(d), for the exercise by Lender of its rights and remedies hereunder.

         2.10. Compliance with Laws and Contracts. Each Grantor is (and after
execution and delivery of the Loan Documents to which such Grantor is a party,
such Grantor will be) in compliance in all material respects with the
requirements of all applicable laws, rules, regulations, policies, orders and
decrees of every Official Body and with all contractual restrictions, in either
instance the non-compliance with which individually or in the aggregate could
reasonably be expected to have or cause a Material Adverse Effect.

         2.11. Validity of Obligations. This Security Agreement constitutes the
legal, valid and binding obligation of each Grantor and is enforceable against
each Grantor in accordance with the terms hereof.

         2.12. Solvency; Fraudulent Transfers. No Grantor is “insolvent,” as such
term is defined in Section 101(32) of the Bankruptcy Code (11 U.S.C. § 101(32))
or any applicable law of another foreign jurisdiction, including without
limitation, the Bankruptcy and Insolvency Act (Canada). No Grantor, by virtue
of its obligations and actions in connection with the Loan Documents, has
engaged or is engaging in any transaction that constitutes a fraudulent
transfer or fraudulent conveyance under applicable federal, provincial, or
state law (including without limitation under Section 548 of the Bankruptcy
Code or under the Uniform Fraudulent Transfer Act or the Uniform Fraudulent
Conveyance Act).

         2.13. Commercial Tort Claims. Except as described in Schedule 2.13, no
Grantor holds any Commercial Tort Claims or is aware of any such pending
claims.

ARTICLE 3: COVENANTS

         Each Grantor covenants and agrees that, so long as this Security Agreement
remains effective, each Grantor will comply with the covenants set forth in
this Article, unless Lender otherwise consents in writing.

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         3.1. As to Equipment and Inventory.

                  a. Except as permitted by Section 5.13 of the Credit Agreement, each
Grantor will keep all the Equipment and Inventory (other than Inventory and
Equipment sold in the ordinary course of business or as otherwise permitted by
the Credit Agreement) at the places therefor specified in Section 2.1 or (upon
prior written notice to Lender of at least 30 calendar days) at such other
places in a jurisdiction where all of the representations and warranties in
Article 2 at that time will be true and correct. Each Grantor will take all
actions necessary to ensure the continued perfection of Lender’s interest in
such Equipment and Inventory.

                  b. Each Grantor will maintain and preserve the Equipment in the same
condition, repair and working order as when new (ordinary wear and tear
excepted) and in all material respects in accordance with all manufacturer’s
manuals. Each Grantor will forthwith (or, in the case of any
loss or damage to any Equipment, as quickly as practicable after the
occurrence thereof) make or cause to be made all repairs, replacements and
other improvements in connection with the Equipment that are necessary or
desirable to maintain the Equipment in accordance with the standard set forth
in this Section. Each Grantor will promptly furnish to Lender a statement
respecting any loss or damage to any of the Equipment, the value of which,
individually or in the aggregate, is the excess of $50,000.

                  c. Each Grantor will pay promptly before delinquent all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (whether for labor, materials or supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in good
faith by appropriate proceedings diligently prosecuted and for which adequate
reserves in accordance with GAAP have been set aside.

                  d. If any inventory or other goods are at any time in the possession of a
bailee, Grantors shall promptly notify Lender thereof and shall promptly obtain
an acknowledgment from the bailee, in form and substance satisfactory to
Lender, that the bailee holds such Collateral for the benefit of Lender and
shall act upon the instructions of Lender without the further consent of any
Grantor. Lender agrees to not give any such instructions unless an Event of
Default has occurred and is continuing (and any applicable grace period under
Section 7.2 of the Credit Agreement has expired) or would occur after taking
into account any action by any Grantor with respect to the bailee.

         3.2. As to Contracts and Related Rights.

                  a. Each Grantor will keep its principal place of business and chief
executive office and the office where it keeps its records concerning the
Contract Rights and Related Contracts, and all originals of all chattel paper
which evidence Contract Rights, located at the places therefor specified in
Section 2.1 or (upon prior written notice to Lender of at least 30 calendar
days) at such other places in a jurisdiction where all of the representations
and warranties in Article 2 at that time will be true and correct. Each
Grantor will take all actions necessary to ensure the continued perfection of
Lender’s interest in the Contract Rights and Related Contracts. No Grantor
will change its (a) name, (b) state of organization or information, (c)
organizational identification numbers, or (d)

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type of organization except upon
prior written notice to Lender of at least 30 calendar days. Each Grantor will
hold and preserve such records and chattel paper concerning the Contract Rights
and Related Contracts and will permit representatives of Lender at any time
during normal business hours to inspect and make abstracts from such records
and chattel paper.

                  b. Each Grantor will remain liable under the contracts, licenses, leases
and other agreements included in the Collateral to the extent set forth
therein. Without limiting the foregoing, unless a Grantor otherwise receives
Lender’s prior written consent (which consent will not be unreasonably withheld
while no Default is occurring), then such Grantor (a) will faithfully abide by,
perform and discharge each and every material obligation, covenant and
agreement under each Material Contract (as such term is defined in the Credit
Agreement) to be performed by such Grantor, and (b) will not materially amend,
modify or otherwise alter the terms of any Material Contract (including the
term or duration thereof or the amount of or methodology for calculating the
compensation due thereunder), and (c) will not assign its rights under any
Material Contract, and (d) will not accept (and will not take any action to cause) a surrender,
termination, revocation or cancellation of any Material Contract unless
replaced by a substantially similar contractual relationship reasonably
acceptable to Lender, and (e) will enforce the performance of each and every
material obligation, covenant and condition of each Material Contract to be
performed by the other parties thereto, and (f) will appear in and defend any
action or proceeding arising under or in any manner connected with any Material
Contract.

                  c. Each Grantor will give prompt written notice to Lender of the
occurrence of any default, breach or other material event, condition or
circumstance relating to any of such Grantor’s Material Contracts (together, if
applicable, with a true and complete copy of any related written notice that
such Grantor may have given to or received from any other party thereto).

                  d. For each deposit or similar account that any Grantor at any time opens
or maintains, such Grantor shall, at Lender’s request and option, pursuant to
an agreement in form and substance satisfactory to Lender, either (a) cause the
depositary bank to agree to comply at any time with instructions from Lender to
such depositary bank directing the disposition of funds from time to time
credited to such deposit account, without further consent of such Grantor, or
(b) arrange for Lender to become the customer of the depositary bank with
respect to the deposit account, with such Grantor being permitted, only with
the consent of Lender, to exercise rights to withdraw funds from such deposit
account. Lender shall not give any such instructions or withhold any
withdrawal rights from such Grantor, unless an Event of Default has occurred
and is continuing (and any applicable grace period under Section 7.2 of the
Credit Agreement has expired), or, after giving effect to any withdrawal not
otherwise permitted by the Loan Documents, would occur. As of the date of this
Agreement, all deposit and similar accounts maintained by Grantors are set
forth in Schedule 3.2 to this Agreement. Grantors shall not open any new
depositary or similar account unless (1) Grantors shall have given Lender at
least fifteen (15) days prior written notice thereof and (2) Grantors shall
have taken all actions requested to be taken by Lender with respect thereto as
otherwise described above in this Section of this Agreement. The provisions of
this Section of this Agreement shall not apply to (i) any deposit account for
which any Grantor, the depositary bank, and Lender have entered into a cash
collateral agreement specifically negotiated among such Grantor, the depositary
bank, and Lender for the specific purpose set forth therein, (ii) deposit
accounts for which Lender is the

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depositary, and (iii) deposit accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of such Grantor’s salaried
employees.

                  e. If any Grantor at any time holds or acquires an interest in any
electronic chattel paper or any “transferable record,” as that term is defined
in Section 201 of the federal Electronic Signatures in Global and National
Commerce Act, or in § 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction, such Grantor shall promptly notify Lender
thereof and, at the request of Lender, shall take such action as Lender may
reasonably request to vest in Lender control of such electronic chattel paper
or control under Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, § 16 of the Uniform Electronic
Transaction is Act, as so in effect in such jurisdiction, of such transferable
record. Lender will arrange, pursuant to procedures satisfactory to Lender and
so long as such procedures will not result in Lender’s loss of control, for
such Grantor to make alterations to the electronic chattel paper or
transferable record permitted under the New York UCC, any UCC of any other
applicable jurisdiction or, as the case maybe, Section 201 of the federal
Electronic Signatures
in Global and National Commerce Act or § 16 of the Uniform Electronic
Transactions Act for a party in control to make without loss of control, unless
an Event of Default has occurred and is continuing (and after any applicable
grace period under Section 7.2 of the Credit Agreement has expired) or would
occur after taking into account any action by such Grantor with respect to such
electronic chattel paper or transferable record.

         3.3. As to Pledged Equity Collateral.

                  a. Powers and Appointments. Each Grantor agrees that all Pledged Equity
(and all other equity ownership interests constituting Pledged Equity
Collateral) delivered by any Grantor pursuant to this Security Agreement will
be accompanied by duly executed undated blank powers, appointments or other
equivalent instruments of transfer acceptable to Lender. From time to time at
Lender’s request, each Grantor will promptly deliver to Lender such powers,
appointments, instruments and similar documents (satisfactory in form and
substance to Lender) with respect to the Collateral. From time to time at
Lender’s request after the occurrence and during the continuance of any Event
of Default (and after any applicable grace period under Section 7.2 of the
Credit Agreement has expired), each Grantor will promptly transfer any Pledged
Equity or other shares of capital stock or ownership interests constituting
Collateral into the name of any nominee designated by Lender.

                  b. Continuous Pledge; Protect Pledged Equity Collateral. At all times,
each Grantor will keep pledged to Lender pursuant hereto all Pledged Equity,
all other Pledged Collateral, all Dividends and Distributions with respect
thereto (subject, however, to Section 1.5.c), and all other securities,
instruments, proceeds, capital accounts, and rights from time to time received
by or distributable to any Grantor in respect of any Pledged Equity Collateral.
Each Grantor will warrant and defend the right and title herein granted to
Lender in and to the Pledged Equity Collateral (and all right, title, and
interest represented by the Pledged Equity Collateral) against the claims and
demands of all persons whomsoever.

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                  c. Delivery of Dividends, Distributions and Other Collateral. Except as
provided in the Credit Agreement, promptly upon receipt and without any request
by Lender, each Grantor agrees to deliver to Lender (properly endorsed if
required hereby or requested by Lender) all Distributions, all Dividends
(subject, however, to Section 1.5.c), all other non-Dividend cash payments, and
all proceeds thereof, all of which will be held by Lender separate, segregated
and apart from its other property as additional Pledged Equity Collateral. All
Dividends, Distributions, cash payments, and proceeds that at any time and from
time to time may be delivered to any Grantor but which such Grantor is then
obligated to deliver to Lender, as additional collateral hereunder, until
delivery to Lender, must be held by such Grantor (a) in trust for Lender and
(b) separate, segregated and apart from its other property.

                  d. Voting Rights.

                           1. Unless and until an Event of Default has occurred and is continuing
(and any applicable grace period under Section 7.2 of the Credit Agreement has
expired), each Grantor will have the exclusive right to exercise all voting
rights with respect to its Pledged Equity. Upon written request from a Grantor
(and at such Grantor’s sole expense), Lender will promptly execute and deliver
such proxies and other documents, if any, as reasonably requested in writing by
such Grantor (together with a reasonably acceptable form thereof) that are
necessary to allow such Grantor to exercise voting power with respect to any
such Pledged Equity owned by such Grantor constituting Pledged Equity
Collateral; provided, however, that no vote may be cast or other action taken
by any Grantor (including, the giving of any consent, waiver, or ratification)
that could impair any Pledged Equity Collateral or would otherwise be
inconsistent with or violate any provision of any Loan Document (including this
Security Agreement).

                           2. After any Event of Default has occurred and is continuing (and any
applicable grace period under Section 7.2 of the Credit Agreement has expired)
and Lender has notified any Grantor of Lender’s intention to exercise its
voting power, unless otherwise then expressly impermissible under applicable
law, Lender may exercise (to the exclusion of each Grantor) the voting power
and all other incidental rights of ownership with respect to any Pledged Equity
or other ownership interests constituting Pledged Equity Collateral. Each
Grantor hereby grants Lender an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Equity and such other Pledged Equity
Collateral. Each Grantor hereby covenants to promptly deliver to Lender such
additional proxies, appointments and other documents as may be necessary to
allow Lender to exercise such voting power and other incidental ownership
rights.

         3.4. As to Intellectual Property Collateral.

                  a. No Grantor (1) will fail to maintain (in a manner consistent with its
historical practices) the quality of products and services offered under all of
the Trademark Collateral, or (2) will fail to employ with all of the Trademark
Collateral (whether or not registered with any Official Body) an appropriate
notice of such trademark, or (3) will fail to employ with all of the Copyright
Collateral an appropriate notice of such copyright, or (4) will fail to employ
with any Patent Collateral registered with the U.S. Patent and Trademark
Office, or in a foreign country, an appropriate notice of such registration.

-15-

 

                  b. No Grantor will do or permit any act (or knowingly omit to do any act)
whereby any of the Intellectual Property Collateral may lapse or become
abandoned, forfeited, invalid, dedicated to the public or unenforceable (except
upon expiration of the end of an unrenewable term of a registration thereof)
without the prior written consent of Lender (which consent will not be
unreasonably withheld while no Default is occurring).

                  c. Each Grantor will promptly notify Lender if such Grantor believes (or
has reason to believe) that (1) any application or registration relating to any
material item of the Intellectual Property Collateral may become abandoned,
dedicated to the public, placed in the public domain, invalid or unenforceable,
or (2) there has been or will be an adverse determination or development
(including the institution of, or any determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any other Official Body) regarding such Grantor’s ownership
of any material item of the Intellectual Property Collateral, its right to
register the same, or its right to keep, maintain and enforce the same.

                  d. If any Grantor files an application for the registration of any
Intellectual Property Collateral with the United States Patent and Trademark
Office, the United States Copyright Office or any other Official Body, then
such Grantor must notify Lender thereof within 30 calendar
days thereafter, and upon request of Lender, must promptly execute and
deliver any and all agreements, instruments, documents and papers that Lender
may request to evidence Lender’s security interest in such Intellectual
Property Collateral.

                  e. Each Grantor will perform all acts and will pay all required fees and
taxes (including in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any other Official
Body) to maintain each and every item of Intellectual Property Collateral in
full force and effect throughout the world and to pursue any application filed
with respect to the Intellectual Property Collateral, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
opposition, and interference and cancellation proceedings.

                  f. Upon any Grantor’s acquiring any Intellectual Property Collateral the
acquisition of which must be recorded in order to perfect such Grantor’s
interest therein, then such Grantor will promptly record its interest therein
and will notify Lender thereof within 30 calendar days thereafter.

                  g. Each Grantor (1) will protect, defend and maintain the validity and
enforceability of the Intellectual Property Collateral, and (2) will use its
best efforts to detect infringements of the Intellectual Property Collateral
and promptly notify Lender in writing of material infringements detected.

                  h. Each Grantor, on a continuing basis, will register such Grantor’s
Trademarks, pursue patent protection for such Grantor’s inventions, and
register the most recent versions of any of such Grantor’s Copyrights.

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                  i. No Grantor will enter into any agreement that would materially impair
or conflict with such Grantor’s obligations hereunder with respect to its
Intellectual Property Collateral. No Grantor will permit the inclusion in any
material contract to which it becomes a party any provisions that could in any
way prevent the creation of a security interest in such Grantor’s rights and
interest in any property included within the definition of the Intellectual
Property Collateral acquired or licensed under such contracts. No Grantor will
arrange for the creation or development of any Intellectual Property Collateral
as a “work for hire” without concurrently obtaining a waiver of all rights
therein by the author or creator thereof.

                  j. Each Grantor will promptly notify Lender in writing upon obtaining
knowledge of any event that materially adversely affects (1) the value of any
material Intellectual Property Collateral, or (2) the ability of such Grantor
to dispose of any material Intellectual Property Collateral, or (3) the rights
and remedies of Lender in relation thereto, including the levy of any legal
process against any of the Intellectual Property Collateral.

                  k. Each Grantor, on a continuing basis, will make, execute, acknowledge
and deliver, and will file and record in the proper filing and recording places
in the United States and Canada, all such instruments, collateral agreements
and filings (including all appropriate financing and continuation statements)
with the United States Patent and Trademarks Office, the Register of
Copyrights, and the Canadian Intellectual Property Office and will take all
such action as Lender may
reasonably deem to be necessary or advisable to perfect or protect
Lender’s security interest in all Intellectual Property Collateral and
otherwise to carry out the intent and purpose of this Security Agreement, or
for assuring and confirming to Lender the grant or perfection of a security
interest in all Intellectual Property Collateral.

         3.5. As to Customer and Material Business Records and Computer Software.

                  a. Upon Lender’s request, each Grantor (at its cost and expense) will
maintain at a separate location a duplicate current copy of (1) all lists,
files and records of active and prospective customers and patients, and (2) all
material computer software and data bases (including all material application
and operating system software and all material data files and operating
manuals), and (3) all other material business files, records and software that
Lender may reasonably request in writing from time to time. Unless Lender
otherwise consents, such records, materials and information must be kept (at
Grantors’ election) either with Lender or with an unrelated business that is
engaged in the business of storing such items and that is reasonably acceptable
to Lender. For purposes of this Clause, such records, materials and
information will be considered “current” if they were accurate and complete
within the immediately preceding 30 calendar days.

                  b. If any Grantor elects to keep such records, materials and information
with an unrelated business, then (upon Lender’s request) such Grantor will
notify such business at which such records, materials and information are
maintained (1) that Lender and its representatives are authorized from time to
time to inspect, examine, audit and make copies and abstracts of such records,
materials and information during normal business hours, and (2) that, upon
receipt of written notice from Lender that an Event of Default has occurred and
is continuing under the Loan Documents (and after any applicable grace period
under Section 7.2 of the Credit Agreement has

-17-

 

expired), such business is to
release and deliver such records, materials and information to Lender in such
manner and at such place as Lender may direct (in its sole and absolute
discretion), and (3) that such business is not to release or return such
records, materials or information to any Grantor without Lender’s prior written
consent unless (a) such Grantor has delivered a more current version thereof to
such business or (b) this Security Agreement has been terminated in accordance
with Section 1.3.

                  c. Each Grantor, and Lender to the extent it has access thereto or
possession thereof, will also otherwise utilize standard industry precautions
to safeguard the utility, value and confidentiality of all such records,
materials and information covered by this Section.

         3.6. As to Certain Investment Property (including Margin Stock). Without
obtaining Lender’s prior written consent (which consent will not be
unreasonably withheld while no Default is occurring), no Grantor will establish
or maintain any “securities account” or “financial asset” with any “securities
intermediary” (as such terms are defined in Article 8 of the UCC), unless a
control agreement acceptable in form and substance to Lender is first executed
by such “securities intermediary” securing Lender’s first priority interest and
rights in and to all “financial assets” and “security entitlements” associated
with such “securities account”. Without obtaining Lender’s prior written
consent (which consent will not be unreasonably withheld while no Default is
occurring), no Grantor will purchase or carry any “Margin Stock” within the
meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System.

         3.7. Insurance. Each Grantor will maintain insurance coverages to the
same extent and subject to the same requirements and conditions as required for
Borrowers under the Credit Agreement. Payments and proceeds of claims or
losses in respect of insurance coverage are to be delivered to Lender and may
be held by Lender (at its discretion) as additional Collateral for, and at any
time during the occurrence of an Event of Default (and after any applicable
grace period under Section 7.2 of the Credit Agreement has expired) may be
applied by Lender in whole or in part against, all or any part of the Secured
Obligations in such order as Lender elects.

         3.8. Transfers and Other Liens.

                  a. No Grantor will sell, transfer, assign, lease, license or otherwise
dispose of any of the Collateral, except (1) Inventory sold, leased or licensed
in the ordinary course of business to unrelated third parties for value
received, and (2) Equipment that has become obsolete or worn out, and (3)
Equipment leased or licensed in the ordinary course of business to unrelated
third parties for value received, and (4) Intellectual Property Collateral
licensed to unrelated third parties for value received and subject to at least
commercially reasonable terms and conditions from the perspective of such
Grantor, and (5) as otherwise permitted by the Credit Agreement.

                  b. Each Grantor will maintain the security interest, collateral assignment
and pledge created hereby as a first priority interest (except as otherwise
permitted by the Credit Agreement), and no Grantor will create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure any
indebtedness or obligations of any Person, (except as otherwise permitted by
the Credit Agreement).

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         3.9. Letter of Credit Rights. If any Grantor is at any time a beneficiary
under a letter of credit, such Grantor shall promptly notify Lender thereof
and, at the request and option of Lender, such Grantor shall, pursuant to an
agreement in form and substance satisfactory to Lender, either (a) arrange for
the issuer and any confirmer of such letter of credit to consent to an
assignment to Lender of the proceeds of any drawing under the letter of credit,
or (b) arrange for Lender to become the transferee beneficiary of the letter of
credit, with Lender agreeing, in each case, that the proceeds of any drawing
under the letter of credit are to be applied as provided in the Credit
Agreement which is one of the Loan Documents.

         3.10. Commercial Tort Claims. If any Grantor shall at any time hold or
acquire a commercial tort claim, such Grantor shall immediately notify Lender
in a writing signed by such Grantor and describing the brief details thereof
and grant to Lender in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to Lender.

         3.11. Further Assurances. Each Grantor (from time to time at its own
expense) will promptly execute and deliver all further instruments and
documents to the extent, if any, that such Grantor’s signature thereof is
required, and will take all further action, that may be necessary or desirable
(or that Lender may reasonably request) in order to perfect, preserve and
protect any security interest, collateral assignment or pledge granted or
purported to be granted hereby or to enable Lender to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, each Grantor:

                  a. Will mark conspicuously each chattel paper included in the Contract
Rights and, at the request of Lender, each of its records pertaining to the
Collateral with a legend (in form and substance reasonably satisfactory to
Lender) indicating that such chattel paper is subject to the security interest,
collateral assignment and pledge granted hereby; and

                  b. If any Contract Rights shall be evidenced by a promissory note or other
instrument, negotiable document or chattel paper, then will deliver and pledge
to Lender hereunder such promissory note, instrument, negotiable document or
chattel paper duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance reasonably satisfactory to
Lender; and

                  c. Will execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary
(or as Lender may reasonably request), to the extent, if any, that such
Grantor’s signature thereof is required, in order to perfect and preserve the
security interests, collateral assignments, pledges and other rights granted
or purported to be granted to Lender hereby; and

                  d. Will furnish to Lender (from time to time at Lender’s request)
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Lender may reasonably
request, all in reasonable detail.

-19-

 

With respect to the foregoing and the grant of the security interest,
collateral assignment and pledge hereunder, each Grantor hereby authorizes
Lender to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral. A carbon, photographic
or other reproduction of this Security Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.

ARTICLE 4: LENDER

         4.1. Lender Appointed Attorney-in-Fact. Each Grantor hereby irrevocably
appoints Lender as such Grantor’s attorney-in-fact, with full authority in the
name, place and stead of such Grantor or otherwise, from time to time in
Lender’s reasonable discretion, to take any action and to execute any
instrument which Lender may deem reasonably necessary or advisable to
accomplish the purposes of this Security Agreement upon the occurrence and
during the continuation of an Event of Default. This authority includes the
following:

	 	 	 	 	 
	 	 	
a.
	 	To ask, demand, collect, sue for, recover,
compromise, restructure, receive and give acquittance and
receipts for moneys due and to become due under or in respect
of any of the Collateral; and/or
	
	
	
	

	
	 	 	 	 
	
	
	
	

	 	 	
b.
	 	To notify the parties obligated on any of the
Collateral to make payment to Lender of any amount due or to
become due in connection therewith; and/or
	
	
	
	

	
	 	 	 	 
	
	
	
	

	 	 	
c.
	 	To receive, endorse, and collect any drafts, checks
or other instruments, documents and chattel paper in connection
with Clause “a” of this Section; and/or
	
	
	
	

	
	 	 	 	 
	
	
	
	

	 	 	
d.
	 	To file any claims or take any action or institute
any proceedings which Lender may deem reasonably necessary or
desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Lender or any Grantor with
respect to any of the Collateral; and/or
	
	
	
	

	
	 	 	 	 
	
	
	
	

	 	 	
e.
	 	To execute (in the name, place and stead of any
Grantor) endorsements, assignments, powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral; and/or
	
	
	
	

	
	 	 	 	 
	
	
	
	

	 	 	
f.
	 	To perform any and all of the affirmative
obligations and covenants of such Grantor hereunder (with
notice thereof to be provided to such Grantor by Lender within
a reasonable time thereafter).

Each Grantor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with
an interest, but that it will terminate upon the termination of this
Security Agreement pursuant to Section 1.3.

-20-

 

         4.2. Lender May Perform. From time to time, Lender (at its option) may
perform (or may cause the performance of) any act which any Grantor agrees
hereunder to perform and which such Grantor fails to perform after being
requested in writing so to perform (it being understood that no such request
need be given during the continuance of an Event of Default), and Lender from
time to time may also take any other action which Lender reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein or collateral assignments or
pledges thereof. The costs and expenses of Lender incurred in connection with
any such performance will be payable by Grantors (jointly and severally)
pursuant to Section 5.5 hereof.

         4.3. Lender Has No Duty. The rights and powers conferred upon Lender
hereunder are solely to protect Lender’s interest in the Collateral and do not
impose any duty on Lender to exercise any such rights or powers. Except for
reasonable care of any Collateral in Lender’s possession and the accounting for
moneys actually received by it hereunder, Lender has no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.

         4.4. Reasonable Care. Lender is required to exercise reasonable care in
the custody and preservation of any of the Collateral in its possession;
provided, however, Lender will be deemed to have exercised such reasonable care
in the custody and preservation of any of the Collateral if Lender takes such
action for that purpose as any Grantor reasonably requests in writing at times
other than after the occurrence or during the continuance of an Event of
Default (and after any applicable grace period under Section 7.2 of the Credit
Agreement has expired). Notwithstanding the foregoing, any failure or refusal
by Lender at any time to comply with any such request by any Grantor will not
in itself be deemed a failure to exercise reasonable care.

ARTICLE 5: DEFAULTS AND REMEDIES

         5.1. Events of Default. The occurrence of any “Event of Default” under
and as defined in the Credit Agreement will constitute an independent Event of
Default (“Event of Default”) hereunder.

         5.2. Certain Remedies. If any Event of Default occurs and is continuing:

                  a. In addition to other rights and remedies provided for herein (including
under Article 4) or otherwise available to Lender (including under the other
Loan Documents and/or applicable law), Lender may also exercise in respect of
the Collateral all the rights and remedies of a secured party upon default
under the UCC or PPSA, as applicable (whether or not the UCC or PPSA applies to
the affected Collateral). Upon the occurrence of any Event of Default and
during the continuance, Lender will have the immediate right to enforce and
realize upon any and all collateral security granted under the Loan Documents
(including the Collateral hereunder) in any manner or order that Lender deems
expedient without regard to any equitable principles of marshalling or
otherwise. All rights and remedies available to Lender are to be considered
cumulative in nature. With respect to any Collateral consisting of Commercial
Tort Claims, Grantors, on demand, shall cause such Collateral to become an
assignment, transfer and conveyance of such Collateral by the Grantors to the
Lender on such terms and conditions and in such manner as Lender shall
determine.

-21-

 

Notwithstanding the foregoing, Lender agrees not to enforce and
realize upon any Collateral hereunder during any grace period provided under
Section 7.2 of the Credit Agreement.

                  b. Without notice except as expressly specified herein or required by
applicable law, Lender may also sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Lender’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Lender may deem commercially reasonable. To the extent notice of sale
is required by law, each Grantor agrees that prior notice to a Grantor of at
least ten (10) calendar days indicating the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Lender may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale (without further notice) may be made at the
time and place to which it was so adjourned.

                  c. Lender may require Grantors to, and each Grantor hereby agrees (at its
expense) that it will, forthwith assemble all or part of the Collateral as
directed by Lender and make it available to Lender at a place designated by
Lender that is reasonably convenient to both Lender and Grantors.

                  d. Unless Lender otherwise consents, each Grantor will remit to Lender all
cash proceeds received in respect of any sale of, or collection from, or other
realization upon all or any part of the Collateral. All cash proceeds received
by Lender from any Grantor or otherwise in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral (in the
discretion of Lender) may be held by Lender as additional Collateral for the
Secured Obligations, and/or then or at any time thereafter may be applied in
whole or in part by Lender against all or any part of the Secured Obligations
in an order consistent with the designated application of payments
provided for in Section 1.4 of the Credit Agreement. Any surplus of such
cash or cash proceeds held by Lender and remaining after payment in full of all
the Secured Obligations will be paid over to a Grantor or to whomsoever Lender
reasonably believes may be lawfully entitled to receive such surplus.

                  e. To the extent any of the Collateral represents an interest in a
partnership, a limited liability company or other unincorporated enterprise, in
addition to any other rights and remedies available to Lender under the Loan
Documents or applicable law, Lender (at its option but with notice to the
relevant Grantor) may also exercise all rights and privileges of the holder of
such interest under the agreements governing such Collateral and the Organic
Documents for the related organization or may instruct such Grantor how to
exercise such rights and privileges (with which instructions each Grantor
hereby agrees to comply). Each Grantor, in addition, covenants and agrees (at
Lender’s request) to amend (and to use its best efforts to cause others to
amend) any of the Organic Documents for such organization in order to authorize
Lender to so exercise any such rights and privileges associated with such
Collateral (including voting rights and the rights to participate in management
decisions). The rights of Lender under this Subsection may be transferred to
and exercised by any subsequent acquiror or transferee of the Collateral
pursuant to any sale of or foreclosure on such Collateral. Each Grantor hereby
agrees that the rights of Lender (or any

-22-

 

subsequent acquiror or transferee of
the Collateral) under this Subsection may be enforced by specific performance
or otherwise.

           5.3.     Special Securities-Related Remedies.

                  a. Additional Rights. If, during the continuance of an Event of Default
(and after any applicable grace period under Section 7.2 of the Credit
Agreement has expired), Lender determines to exercise its right to sell all or
any portion of the Pledged Equity Collateral pursuant to Section 5.2, upon
Lender’s request, then each Grantor (at its own expense):

	 	 	 	 	 	 	 
	 	 	 	
1.
	 	 	Will execute and deliver, and will use
best efforts to cause each issuer of the Pledged Equity
Collateral contemplated to be sold (and the directors and
officers thereof) to execute and deliver, all such
instruments and documents, and will do or use best
efforts to cause to be done all such other acts and
things as may be necessary or, in Lender’s opinion,
reasonably advisable (1) to register such Pledged Equity
Collateral under the provisions of the Securities Act,
and (2) to cause the registration statement relating
thereto to become effective and to remain effective for
such period as prospectuses are required by law to be
furnished, and (3) to make all amendments and supplements
thereto and to the related prospectus which, in Lender’s
opinion, are necessary or reasonably advisable, all in
conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and
Exchange Commission applicable thereto; and
	
	
	
	

	
	 	 	 	 	 	 
	
	
	
	

	 	 	 	
2.
	 	 	Will use its best efforts to qualify
the Pledged Equity Collateral under the state securities
or “Blue Sky” laws and to obtain all necessary
governmental approvals for the sale of the Pledged Equity
Collateral, as requested by Lender; and
	
	
	
	

	
	 	 	 	 	 	 
	
	
	
	

	 	 	 	
3.
	 	 	Will use best efforts to cause each
such issuer to make available to its security holders, as
soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities
Act; and
	
	
	
	

	
	 	 	 	 	 	 
	
	
	
	

	 	 	 	
4.
	 	 	Will use its best efforts to qualify
for distribution of resale such Pledged Equity Collateral
pursuant to the relevant Canadian securities legislation,
if applicable, including under any exemption available
under such Canadian securities legislation, and to obtain
all necessary approvals for the sale of the Pledged
Equity Collateral; and
	
	
	
	

	
	 	 	 	 	 	 
	
	
	
	

	 	 	 	
5.
	 	 	Will do or use best efforts to cause to
be done all such other acts and things as may be
reasonably necessary, or in Lender’s opinion, advisable
to make such sale of the Pledged Equity Collateral or any
part thereof valid and binding and in compliance with
applicable law.

-23-

 

In furtherance of the foregoing (and not in limitation of any other
obligations under the Loan Documents), each Grantor covenants that it will
fully cooperate with each other Grantor and Lender, and will comply with
all requests of Lender, in order to permit Lender to fully and timely
exercise the remedies under this Section.

                  b. Compliance with Restrictions. Each Grantor agrees that, in any sale of
any of the Pledged Equity Collateral, Lender is authorized to comply with any
limitation or restriction in connection with the type of such sale pursued as
Lender may be advised by counsel is necessary or reasonably desirable in order
to avoid any violation of applicable law (including compliance with such
procedures as may restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any Official Body. Each Grantor further agrees that such
compliance will not result in such sale being considered or deemed not to have
been made in a commercially reasonable manner, nor will Lender or any Lender be
liable or accountable to any Grantor for any discount allowed by reason of the
fact that such Collateral is sold at foreclosure or otherwise in compliance
with any such limitation or restriction or by reason of the fact that such
Pledge Equity Collateral may represent a minority interest in any Grantor.

         5.4. Special IP-Related Remedies (License of Intellectual Property
Collateral). Each Grantor hereby grants Lender a royalty-free, non-exclusive,
worldwide, irrevocable license (the “Remedies License”) to make, use and sell
from time to time after the occurrence of any Event of Default that is not
waived by Lender (and after any applicable grace period under Section 7.2 of
the Credit Agreement has expired) and delivery of notice thereof by Lender
(unless such Event of Default is under Section 7.1.10 of the Credit Agreement,
in which case no such notification shall be required) all present and future
Intellectual Property Collateral of such Grantor (including the right to
sub-license such Intellectual Property Collateral) in connection with the
maintenance, preservation, preparation, sale, disposition, collection,
foreclosure, or other realization of, upon, or with respect to
the Collateral or payment of the Secured Obligations in accordance with
the Loan Documents. The Remedies License shall remain in full force and effect
until this Security Agreement is terminated in accordance with Section 1.3 (but
any sub-license or transfer of the Remedies License prior to the termination of
the Remedies License shall survive such termination of the Remedies Licenses
unless otherwise provided on such sub-license or transfer document). The
rights of Lender under the Remedies License are assignable by Lender (without
the consent of such Grantor) in connection with (a) any sale or other
disposition of Collateral in accordance with the Loan Documents to the extent
necessary or appropriate to permit the purchaser of such Collateral to have
continuing and royalty-free, worldwide rights with respect to such Collateral
or (b) any assignment or other transfer by Lender of all or any part of its
rights under and in accordance with the Loan Documents. Upon or at any time
after the occurrence and during the continuance of any Event of Default (and
after any applicable grace period under Section 7.2 of the Credit Agreement has
expired), each Grantor will deliver to Lender (at Lender’s request but at such
Grantor’s expense) a copy of all such Intellectual Property Collateral and all
related other Collateral in a form requested by Lender. Lender’s rights as a
licensee under this Section constitute a separately enforceable contract from
the balance of this

-24-

 

Security Agreement.

         5.5. Indemnity and Expenses.

                  a. Each Grantor agrees (jointly and severally) to indemnify and hold
Lender harmless from and against any and all claims, losses and liabilities
arising out of or in any manner resulting from any or all of the following:
(1) any Grantor’s failure to perform or otherwise observe any of its
obligations hereunder, or (2) Lender’s enforcement of any of the provisions
hereof, except where any such claims, losses or liabilities result from
Lender’s own gross negligence, misrepresentation, fraud or willful misconduct,
or (3) any Grantor’s gross negligence, misrepresentation, willful misconduct or
fraud.

                  b. Upon demand, each Grantor (jointly and severally) will pay Lender the
amount of any and all reasonable costs and expenses that Lender may incur in
connection with any of the matters described under clause “a” of this Section.
Without limitation, each Grantor’s obligation to reimburse Lender for such
fees, costs and expenses includes all reasonable fees and disbursements of
Lender’s counsel and any other experts and agents that Lender may retain in
connection herewith (whether or not litigation is commenced)

         5.6. Lender’s Rights Upon Occurrence of Liquidation Events.

                  a. Right to Certain Payments and Distributions. Upon the occurrence of
any Liquidation Event, any payment or distribution of any kind or character
(whether in cash, securities or other property) that but for this Security
Agreement would be payable or deliverable to a Grantor must instead be paid or
delivered directly to Lender for application on the Secured Obligations,
whether or not then due or mature.

                  b. Non-Cash Payments and Distributions. Notwithstanding the provisions of
Clause “a” of this Section, if Lender receives delivery of any such payment or
distribution in connection with a Liquidation Event in a form other than cash,
then Lender may hold such property as additional Collateral for the Secured
Obligations, and neither any Grantor nor any other Obligor of
the Secured Obligations will be entitled to a credit with respect to the
Secured Obligations, nor will the Secured Obligations otherwise be adjusted in
any respect, until such time as Lender (in its sole and absolute discretion)
has sold, discounted or otherwise liquidated such distribution (at a price
considered by Lender to be in its sole best interest) and then (subject to the
terms of Section 7.8), such credit or adjustment to the Secured Obligations
will be limited only to the net cash proceeds realized therefrom after the
payment of all costs and expenses associated with such sale or liquidation.

                  c. Collection of Payments and Distributions. In addition to any rights
otherwise permitted under the Loan Documents or applicable law, each Grantor
hereby irrevocably authorizes and empowers Lender, upon the occurrence of a
Liquidation Event, to file and/or vote claims and take such other proceedings,
in each instance in Lender’s own name or in the name of a Grantor, or
otherwise, all as Lender may deem reasonably necessary or advisable for the
enforcement of this Security Agreement. Each Grantor further agrees duly and
promptly (i) to take such action as may be

-25-

 

requested by Lender to assist in the
collection and/or compromise of any amounts owed to any Grantor, and (ii) to
file appropriate proofs of claim in respect of such amounts, and (iii) to
execute and deliver to Lender on demand such powers of attorney, proofs of
claim, assignments of claim or other instruments as may be requested by Lender
to enable Lender to enforce any and all claims upon or with respect to such
amounts, and (iv) to collect, compromise and receive any and all payments or
distributions which may be payable or deliverable at any time upon or with
respect to such amounts.

         5.7. Delivery of Payments and Distributions. If any Grantor receives any
payment, distribution or any other funds or property in contravention of the
provisions hereof or any other Loan Document, then such Grantor must
immediately forthwith deliver such payment, distribution or other funds or
property (or proceeds thereof) to Lender in precisely the form received (except
for the endorsement or assignment without recourse of such Grantor where
necessary) for application on the Secured Obligations (or, at Lender’s option,
held as additional Collateral therefor), whether or not then due or mature.
Until such funds or property are delivered to Lender, such Grantor must hold
such payment, distribution or other funds or property (or proceeds thereof) (a)
in trust for the benefit of and as property of Lender and (b) separate from
(i.e., not commingled with) its other assets. If a Grantor fails or refuses to
make any such endorsement or assignment, then Lender (or any of its officers or
employees) are hereby irrevocably authorized by such Grantor to make the
endorsement and/or assignment.

         5.8. Cooperation and Assistance. Each Grantor agrees (during the
existence of an Event of Default) to take any actions that Lender may
reasonably request in order to enable Lender and each Lender to receive the
full rights and benefits granted to Lender and each Lender by the Loan
Documents. Each Grantor further agrees that, during the existence of an Event
of Default, each Grantor will assist and cooperate with Lender (and will use
its best efforts to cause others to assist and cooperate with Lender) to ensure
that each Grantor continues (a) to operate in the normal course of business,
and (b) to fulfill all of its legal, regulatory and contractual obligations and
(c) to otherwise be properly and professionally managed. At Lender’s request
and the expense of Grantors (jointly and severally), at any time during the
existence of an Event of Default, such assistance and cooperation may include
the employment of (and, to the maximum extent not prohibited by the rules,
regulations and orders of any Official Body with jurisdiction, the delegation
of appropriate management authority to) one or more qualified and independent
consultants and professional
managers acceptable to Lender to assist in the interim operations of
Grantors; all of which each Grantor hereby agrees not to challenge.

         5.9. Special Regulatory Remedies.

                  a. Each Grantor and Lender hereby acknowledge their intent that, during
the existence of an Event of Default (and after any applicable grace period
under Section 7.2 of the Credit Agreement has expired), to the fullest extent
permitted by applicable law and governmental policy, Lender will have all
rights necessary or desirable to obtain, use and/or sell the assets and
operations of each Grantor and the other Collateral, and to exercise all
remedies available to Lender and each Lender under the Loan Documents, the
Uniform Commercial Code or other applicable law, including the PPSA. Each
Grantor and Lender agree that, if any applicable law or governmental policy
changes subsequent to the date hereof that affects in any manner Lender’s
rights of access to,

-26-

 

or use or sale of, any Grantor’s assets or other
Collateral (including patient files) or the procedures necessary to enable
Lender to obtain such rights of access, use or sale during an Event of Default,
then Lender and each Grantor will amend the Loan Documents (in such manner as
Lender reasonably requests) in order to provide Lender with all such rights to
the greatest extent possible consistent with then-applicable law and
governmental policy.

                  b. At any time during the existence of an Event of Default (and after any
applicable grace period under Section 7.2 of the Credit Agreement has expired),
at the cost and expense of Grantors (jointly and severally), each Grantor will
use its best efforts to assist and cooperate in obtaining all approvals which
are then required by applicable law or contract for or in connection with any
action or transaction contemplated by the Loan Documents, the Uniform
Commercial Code or the PPSA. Each Grantor further agrees, upon Lender’s
request and at the expense of Grantors (jointly and severally), at any time
during the existence of an Event of Default (and after any applicable grace
period under Section 7.2 of the Credit Agreement has expired), to prepare,
sign, file and diligently prosecute (and to use its best efforts to cause the
preparation, execution, filing and diligent prosecution by others) with the
applicable Official Body or transferor’s portion of any applications for
consent to the assignment of any Collateral or transfer of control thereof
necessary or appropriate under the rules of each Official Body for approval of
any sale or transfer of any Collateral pursuant to the exercise of Lender’s and
Lenders’ remedies under the Loan Documents. Each Grantor further consents to
(and agrees that it will not challenge), at any time during the existence of an
Event of Default (and after any applicable grace period under Section 7.2 of
the Credit Agreement has expired), the transfer of control or assignment of any
Collateral and other assets to a receiver, trustee, transferee, or similar
official or to any purchaser of the Collateral pursuant to any public or
private sale, judicial sale, foreclosure or exercise of other remedies
available to Lender as permitted by applicable law.

                  c. In addition to the other rights and remedies provided for herein or
otherwise available to Lender, upon the occurrence of an Event of Default (and
after any applicable grace period under Section 7.2 of the Credit Agreement has
expired), Lender may require each Grantor to, and each Grantor (at its sole
expense) hereby agrees that it will take all actions necessary or reasonably
advisable (1) to cooperate with Lender in effecting the transfer of any or all
of its Collateral to a transferee acceptable to the applicable Official Body or
(2) to sell any or all of the Collateral at a public or private sale for cash,
on credit or for future delivery. Each Grantor will also
use its best efforts to sell the Collateral for the best available price,
and (in furtherance of such efforts) each Grantor (a) will hire one or more
brokers to solicit buyers, and (b) will cause such information and materials
regarding the Collateral and its operations to be compiled as is customarily
prepared or as is needed under the circumstances, and (c) will make available
to prospective purchasers such information (including any information compiled
in accordance with Clause “(b)”) as is customary or as is needed under the
circumstances.

                  d. Notwithstanding anything to the contrary contained in any Loan
Document, neither Lender nor any Grantor will take any action pursuant to the
Loan Documents that would constitute or result in any assignment of any
Collateral or any transfer of control of any Grantor if such assignment of
Collateral or transfer of control would require under then existing law
(including the written rules and regulations promulgated by any Official Body)
the prior approval of

-27-

 

any Official Body, unless such approval has been obtained
(as applicable) from such Official Body (to the extent failure to obtain such
approval by Lender could reasonably be expected to have or cause a Material
Adverse Effect). Without limiting the generality of the foregoing, Lender
specifically agrees that (a) voting rights with respect to the pledged equity
interests of each Grantor will remain with the holders of such voting rights
during the existence of an Event of Default (and after any applicable grace
period under Section 7.2 of the Credit Agreement has expired) unless and until
any required prior approvals to the transfer of such voting rights have been
obtained (as applicable) from the applicable Official Body (to the extent
failure to obtain such approval by Lender could reasonably be expected to have
or cause a Material Adverse Effect), and (b) during the existence of any Event
of Default (and after any applicable grace period under Section 7.2 of the
Credit Agreement has expired) and foreclosure upon the Collateral by Lender,
there will be either a private or public sale of the Collateral, and (c) prior
to the exercise of voting rights by the purchaser at any such sale, any consent
of any Official Body under applicable law will be obtained.

ARTICLE 6: DEFINITIONS

         6.1. Credit Agreement Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Security Agreement (including
the preamble and recitals hereof) have the meanings provided in the Credit
Agreement.

         6.2. Rules of Construction. The rules of interpretation and construction
set forth in Section 8.2 of the Credit Agreement apply to the interpretation
and construction of this Security Agreement.

         6.3. Certain Terms. The following terms (whether or not underscored) when
used in this Security Agreement (including the preamble and recitals hereof)
have the following meanings:

                  a. “Lender” means HEARx Ltd. and any successor, assignee, transferee,
pledgee or participant thereof.

                  b. “Borrower(s)” means, individually and collectively, each Borrower under
and as defined in the Credit Agreement, including any successor or assignee
thereof.

                  c. “Collateral” is defined in Section 1.1.

                  d. “Commercial Tort Claims” is defined in Section 1.1.

                  e. “Computer Software Collateral” is defined in Section 1.1.

                  f. “Contract Rights” is defined in Section 1.1.

                  g. “Copyright Collateral” is defined in Section 1.1.

                  h. “Credit Agreement” is defined in the Recitals.

-28-

 

                  i. “Distribution” means all equity dividends, liquidating dividends,
shares or interests of equity resulting from (or in connection with the
exercise of) equity splits, reclassifications, warrants, options, non-cash
dividends, mergers, consolidations, distributions of capital accounts, and all
other distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Pledged Equity or other shares or interests of equity
constituting Pledged Equity Collateral, but such term does not include
Dividends.

                  j. “Dividend” means cash dividends and cash distributions with respect to
any Pledged Equity or other Pledged Equity Property made in the ordinary course
of business, but such term shall not include a liquidating dividend.

                  k. “Equipment” is defined in Section 1.1.

                  l. “Fixture” is defined in Section 1.1.

                  m. “Grantor” means each Person that from time to time executes this
Security Agreement (or a counterpart hereof or supplemental addendum hereto) as
a grantor hereunder, and any successor or permitted assignee thereof.

                  n. “Intellectual Property Collateral” means, collectively, the Computer
Software Collateral, the Copyright Collateral, the Patent Collateral, the
Trademark Collateral and the Trade Secrets Collateral, as defined in Section
1.1.

                  o. “Inventory” is defined in Section 1.1.

                  p. “License” means any authorization, permit, call sign, frequency
designation, consent, franchise, ordinance, registration, certificate, license,
agreement or other right filed with, granted by, or entered into by a federal,
state, provincial, or local Official Body.

                  q. “Lien” means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, option, claim, encumbrance, lien (statutory or
otherwise), charge against or interest in property to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement
of any kind or nature whatsoever.

                  r. “Liquidation Event” means any foreclosure on or any sale of all or any
material part of the assets of any Grantor, or any liquidation, dissolution or
other winding up (partial or complete) of any Grantor or any Grantor’s
business, or any sale, receivership, insolvency or bankruptcy proceeding, any
assignment for the benefit of creditors, or any other proceeding by or against
any Grantor or its assets for any relief under any bankruptcy or insolvency law
relating to the relief of debtors, readjustment of indebtedness, arrangements,
reorganizations, compositions or extensions.

                  s. “Official Body” means any federal, state, provincial, local, or other
government (or any political subdivision, agency, authority, bureau,
commission, department or

-29-

 

instrumentality thereof) and any court, tribunal,
grand jury or arbitrator, in each instance whether foreign or domestic.

                  t. “Operating Agreements” means any consulting agreement, management
agreement, employment agreement, cost allocation agreement or other similar
agreement relating to the operation of any Grantor’s business.

                  u. “Patent Collateral” is defined in Section 1.1.

                  v. “Person” means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.

                  w. “Pledged Equity” means all shares of capital stock and all other forms
of equity or ownership rights and interests (whether in the form of partnership
interests, membership interests or otherwise) of or in any corporation,
partnership, limited liability company business trust or other business entity.

                  x. “Pledged Equity Collateral” is defined in Section 1.5.

                  y. “Pledged Equity Issuer” means each Person who is an issuer of Pledged
Equity Collateral.

                  z. “Pledged Equity Property” means all Pledged Equity and all other forms
of equity interests and rights, all other securities (including, without
limitation, all options, warrants and puts for Pledged Equity), all assignments
of any amounts due or to become due, all other instruments which are now being
delivered by any Pledgor to Lender or may from time to time hereafter be
delivered by any Pledgor to Lender for the purpose of pledge under the Security
Agreement, and all proceeds of any of the foregoing.

                  aa. “Pledgor” means each Person (a) who is a Grantor hereunder and (b) who
pledges Pledged Equity Collateral.

                  bb. “Related Contracts” is defined in Section 1.1.

                  cc. “Secured Obligations” is defined in Section 1.2.

                  dd. “Security Agreement” means this Master Security Agreement, Collateral
Assignment and Equity Pledge and all exhibits, schedules and supplemental
addenda hereto, all as may be amended and otherwise modified from time to time
hereafter.

                  ee. “Securities Act” means the Securities Act of 1933, as amended from
time to time, and as implemented by the Securities Exchange Commission.

                  ff. “Trademark Collateral” is defined in Section 1.1.

-30-

 

                  gg. “Trade Secrets Collateral” is defined in Section 1.1.

                  hh. “UCC” means the Uniform Commercial Code as in effect in the State of
New York or, if the laws of some other jurisdiction otherwise dictates, then
the Uniform Commercial Code as in effect in the jurisdiction whose laws govern
the interpretation of the relevant provisions of this Security Agreement.

         6.4. UCC Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the UCC are used
in this Security Agreement (including in the preamble and recitals hereof) with
such meanings.

ARTICLE 7: MISCELLANEOUS PROVISIONS

         7.1. Loan Document. This Security Agreement and each separate assignment
executed in connection herewith are Loan Documents executed pursuant to the
Credit Agreement and (unless otherwise expressly indicated herein) are to be
construed, administered and applied in accordance with the terms and provisions
thereof.

         7.2. Amendments. No amendment to or waiver of any provision of this
Security Agreement, nor consent to any departure by any Grantor herefrom, shall
in any event be effective unless such amendment, waiver or consent is in
writing and signed by Lender. Any such waiver or consent will be effective
only in the specific instance and for the specific purpose for which given.

         7.3. Addresses for Notices. Any notice, request, consent, waiver or other
communication required or permitted under or in connection with this Security
Agreement will be deemed satisfactorily given if it is in writing and is
delivered either personally to the addressee thereof, or by prepaid registered
or certified U.S. mail or Canadian Post (return receipt requested), or by a
nationally recognized commercial courier service with next-day delivery charges
prepaid, or by telegraph, or by facsimile (voice confirmed), or by any other
reasonable means of personal delivery to the party entitled thereto at its
respective address set forth below its signature to this Security Agreement
(or, if blank, then to such party at its address or facsimile number set forth
in the Credit Agreement). If any Grantor fails to insert an address below (and
in the Credit Agreement), then such failure shall constitute a designation of
its last known address as the address for all notices, including notices of
default and sale. Any party to this Security Agreement may change its address
or facsimile number for notice purposes by giving notice thereof to the other
parties hereto in accordance with this Section, provided that such change shall
not be effective until 2 calendar days after notice of
such change. All such notices and other communications will be deemed
given and effective (a) if by mail, then upon actual receipt or 5 calendar days
after mailing as provided above (whichever is earlier), or (b) if by facsimile,
then upon successful transmittal to such party’s designated number, or (c) if
by telegraph, then upon actual receipt or 2 Business Days after delivery to the
telegraph company (whichever is earlier), or (d) if by nationally recognized
commercial courier service, then upon actual receipt or 2 Business Days after
delivery to the courier service (whichever is earlier), or (e) if otherwise
delivered, then upon actual receipt.

-31-

 

         7.4. Severability. Wherever possible, each provision of this Security
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If any provision of this Security Agreement shall be
prohibited by or invalid under such law, then such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.

         7.5. Governing Law; Entire Agreement. This Security Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, except to the extent that the validity or perfection of the security
interest, collateral assignment or pledge hereunder (or remedies hereunder) in
respect of any particular Collateral are required to be governed by the laws of
a jurisdiction other than the State of New York. This Security Agreement and
the other loan documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements (written or oral) with respect thereto.

         7.6. Reinstatement. To the maximum extent not prohibited by applicable
law, this Security Agreement shall continue to be effective or be reinstated if
at any time any amount received by Lender in respect of the Credit Agreement or
any other Loan Document is rescinded or must otherwise be restored or returned
by Lender or such Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Grantor or upon the appointment of any
receiver, intervenor, conservator, trustee or similar official for any Grantor
or any substantial part of any Grantor’s assets, or otherwise, all as though
such payments had not been made.

         7.7. Conflict Provision. In the event of any irreconcilable conflict
between the terms and conditions of this Security Agreement and the terms and
conditions of the Credit Agreement, the terms and conditions of the Credit
Agreement shall govern.

         7.8. Incorporation of Separate IP Security Agreements and Collateral
Assignments of Material Contracts. Each representation, warranty, covenant and
further assurance by any Grantor contained in any separate assignment or
security agreement relating to any Intellectual Property Collateral or any
material contract executed in connection the Credit Agreement is hereby
incorporated herein by reference.

         7.9. Incorporation of Financing Statements and Exhibits Thereto. Each UCC
financing statement (including each exhibit thereto) and PPSA financing
statement executed by any Grantor in connection with this Security Agreement is
hereby incorporated herein by reference.

         7.10. Lender. References in this Security Agreement to Lender shall mean
either to Lender in such capacity or (where appropriate) to Lender for the
benefit of itself. Unless otherwise indicated
in this Security Agreement or the other Loan Documents, all Collateral
held and all payments received by Lender are deemed to be held and received,
respectively, for the benefit of Lender.

         7.11. Waiver of Suretyship Defenses. Each Grantor hereby waives any and
all defenses and rights of discharge based on suretyship or impairment of
collateral (including any lack of attachment or perfection with respect
thereto) that it may now have or may hereafter acquire with respect to

-32-

 

Lender
or any of such Grantor’s obligations hereunder or under any other agreement
that it may have or hereafter enter into with Lender.

         7.12. Waiver of Subrogation. Until this Security Agreement is terminated
in accordance with Section 1.3, each Grantor hereby irrevocably waives any
claim or other rights which it may now have or may hereafter acquire against
any other Obligor that arise from the existence, payment, performance or
enforcement of any Grantor’s obligations under this Security Agreement or any
other Loan Document, including any right of subrogation, reimbursement,
contribution, exoneration, or indemnification, any right to participate in any
claim or remedy of Lender against any other Obligor or any collateral which
Lender now has or hereafter acquires, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law.

         7.13. Waiver of Notice; Waiver of Bond. Each Grantor waives all rights of
notice and hearing of any kind prior to the exercise by Lender of its rights
during the continuance of any Event of Default to repossess the Collateral with
judicial process or to replevy, attach or levy upon the Collateral. Each
Grantor waives the posting of any bond otherwise required of Lender in
connection with any judicial process or proceeding to obtain possession of,
replevy, attach or levy upon Collateral or other security for the Secured
Obligations, to enforce any judgment or other court order entered in favor of
Lender, or to enforce by specific performance, temporary restraining order or
preliminary or permanent injunction this Security Agreement or any other Loan
Document.

         7.14. Waiver of Liability. Each Grantor (a) agrees that neither Lender
nor any director, officer, employee or agent of Lender shall have any liability
to any Grantor (whether sounding in tort, contract or otherwise) for losses or
costs suffered or incurred by any Grantor in any way related to the
transactions contemplated or the relationship established by any Loan Document,
or any act, omission or event occurring in connection therewith, except for
foreseeable actual losses resulting from Lender or such Lender’s own gross
negligence, willful misconduct or fraud, and (b) waives, releases and agrees
not to sue upon any claim against Lender (or its directors, officers, employees
or agents) whether sounding in tort, contract or otherwise, except for claims
for foreseeable actual losses resulting from Lender’s own gross negligence,
willful misconduct or fraud. Moreover, whether or not such damages are related
to a claim that is subject to the waiver effected above and whether or not such
waiver is effective, neither Lender nor any director, officer, employee or
agent of Lender or any Lender shall have any liability with respect to (and
each Grantor hereby waives, releases and agrees not to sue upon any claim for)
any special, indirect, consequential, punitive or non-foreseeable damages
suffered by any Grantor in any way related to the transactions contemplated or
the relationship established by any Loan Document, or any act, omission or
event occurring in connection therewith.

         7.15. Forum Selection and Consent to Jurisdiction. Any litigation in any
way related to any Loan Document, or any course of conduct, course of dealing,
statements (whether verbal or written), actions or inactions of Lender or any
Grantor will be brought and maintained exclusively in the courts of the State
of New York or in the United States District Court for the Southern District of
New York; provided, however, that any suit seeking

-33-

 

enforcement against any
Grantor or any Collateral may also be brought (at Lender’s or such Lender’s
option) in the courts of any jurisdiction where such Collateral may be found or
where Lender or any Lender may otherwise obtain personal jurisdiction over such
Grantor. Each Grantor hereby expressly and irrevocably submits to the
jurisdiction of the courts of the State of New York and of the United States
District Court for the Southern District of New York for the purpose of any
such litigation as set forth above and irrevocably agrees to be bound by any
final and non-appealable judgment rendered thereby in connection with such
litigation. Each Grantor further irrevocably consents to the service of
process by registered or certified mail, postage prepaid, or by personal
service within or outside the State of New York. Each Grantor hereby expressly
and irrevocably waives (to the fullest extent permitted by law) any objection
which it may have or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in an inconvenient forum. To the extent that
any Grantor has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, then such Grantor hereby irrevocably waives such
immunity in respect of its obligations under this Security Agreement.

         7.16. Waiver of Jury Trial. Lender, each Lender and each Grantor each
hereby knowingly, voluntarily and intentionally waives any rights it may have
to a trial by jury in respect of any litigation (whether as claim,
counter-claim, affirmative defense or otherwise) in any way related to any Loan
Document, or any course of conduct, course of dealing, statements (whether
verbal or written), actions or inactions of Lender, any Lender or any Grantor.
Each Grantor acknowledges and agrees (a) that it has received full and
sufficient consideration for this provision (and each other provision of each
other Loan Document to which it is a party), and (b) that it has been advised
by legal counsel in connection herewith, and (c) that this provision is a
material inducement for Lender and each Lender entering into the Loan Documents
and funding Advances thereunder.

         7.17. Counterparts. This Security Agreement may be executed in any number
of counterparts with the same effect as if all the signatures on such
counterparts appeared on one document. Each counterpart will be deemed to be
an original, but all counterparts together will constitute one and the same
instrument.

         7.18 Judgment Currency. If for the purpose of obtaining judgment in any
court it is necessary to convert an amount due hereunder in the currency in
which it is due (the “Original Currency”) into another currency (the “Second
Currency”), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, the Lender could purchase in the Toronto
foreign exchange market, the Original Currency with the Second Currency on the
date two (2) Business Days preceding that on which judgment is given. Each
Obligor agrees that its obligation in respect of any Original Currency due from
it hereunder shall, notwithstanding any judgment or
payment in such other currency, be discharged only to the extent that, on the
Business Day following the date the Lender receives payment of any sum so
adjudged to be due hereunder in the Second Currency, the Lender may, in
accordance with normal banking procedures, purchase, in the Toronto foreign
exchange market, the Original Currency with the amount of the Second Currency
so paid;

-34-

 

 and if the amount of the Original Currency so purchased or could have
been so purchased is less than the amount originally due in the Original
Currency, each Obligor agrees as a separate obligation and notwithstanding any
such payment or judgment to indemnify the Lender against such loss. The term
“rate of exchange” in this Section 7.18 means the spot rate at which the
Lenders, in accordance with normal practices, is able on the relevant date to
purchase the Original Currency with the Second Currency and includes any
premium and costs of exchange payable in connection with such purchase.

         7.19 French/English Acknowledgment. It is the express wish of the parties
hereto that this Security Agreement and any related documents be drawn up and
executed in English. Il est la volonté expresse des parties que cette
convention et tous les documents s’y rattachant soient redigés et signés en
anglais.

[BALANCE OF PAGE INTENTIONALLY BLANK]

-35-

 

         IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement, as an instrument under seal (whether or not any such seals are
physically attached hereto), through their duly authorized officers, as of the
date first written above.

	 	 	 
	ATTEST:	 	
HELIX HEARING CARE OF AMERICA CORP.

(Grantor)
	 
	By:                     
                         
                         	 	By:                     
                         
                         
	 
	Name:                     
                         
                     	 	
Name: Steve Forget
	 
	Title:                     
                         
                       	 	
Title: President & Chief Executive Officer
	 
	CORPORATE SEAL:	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
COUSINEAU, DOUCET, PARENT, FORGET

AUDIOPROTHÉSISTES s.e.n.c (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	Name:                     
                         
                     
	 
	 	 	Title:                     
                         
                       
	 
	 	 	
Address:                     
                      
                    
	 
	 	 	
                       
                        
                       
      
	 
	 	 	
Facsimile: (     )           -
               
	 
	 
	 	 	
HELIX HEARING CARE OF AMERICA (U.S.A.)

CORP. (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 
	 	 	
Les services de gestion Hearing Care of

America SGHCA Inc. (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Les services d’ approvsionement Hearing Care

of America SAHCA Inc. (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Les services de location Hearing Care of

America SLHCA Inc. (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 
	 	 	
3371727 Canada Inc. (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (Ohio) Corp.

(Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (New York)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 
	 	 	
Helix Hearing Care of America (Missouri)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (Wisconsin)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (Minnesota)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 
	 	 	
Helix Hearing Care of America (Indiana)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (Pennsylvania)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (Arizona)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 
	 	 	
Helix Hearing Care of America (Washington)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Helix Hearing Care of America (Michigan)

Corp.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
American Hearing Centers, Inc.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029

 

 

	 	 	 
	 
	 	 	
Auxiliary Health Benefits Corporation,

d/b/a National Ear Care Plan  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	 	 	
Thomas W. Fell Co., Inc.  (Grantor)
	 
	 	 	By:                     
                         
                         
	 
	 	 	
Name: Steve Forget
	 
	 	 	
Title: President & Chief Executive Officer
	 
	 	 	
Address: 7100, Jean-Talon East, Suite 610

Montreal, Quebec H1M 3S3

Facsimile: (514) 353-0029
	 
	 
	ATTEST:	 	
HEARx LTD. (Lender)
	 
	By:                     
                         
                         	 	By:                     
                         
                         
	 
	Name:                     
                         
                     	 	
Name: Stephen J. Hansbrough
	 
	Title:                     
                         
                       	 	
Title: President and Chief Operating Officer
	 
	 	 	
Address: 1250 Northpoint Parkway

West Palm Beach, FL 33407

Facsimile: (561) 688-8893

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