Document:

exv10w1

 

Exhibit 10.1

WELLS FARGO BUSINESS CREDIT

CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (THE “AGREEMENT”) IS DATED MARCH 27, 2008, AND IS ENTERED INTO
BETWEEN IRIDEX CORPORATION, A DELAWARE CORPORATION (“COMPANY”), AND WELLS FARGO BANK, NATIONAL
ASSOCIATION (AS MORE FULLY DEFINED IN EXHIBIT A, “WELLS FARGO”), ACTING THROUGH ITS WELLS FARGO
BUSINESS CREDIT OPERATING DIVISION.

RECITALS

Company has asked Wells Fargo to provide it with an $8,000,000 revolving line of credit (the “Line
of Credit”) for working capital purposes and to facilitate the issuance of letters of credit.
Wells Fargo is agreeable to meeting Company’s request, provided that Company agrees to the terms
and conditions of this Agreement.

For purposes of this Agreement, capitalized terms not otherwise defined in the Agreement shall have
the meaning given them in Exhibit A.

	1.	 	AMOUNT AND TERMS OF THE LINE OF CREDIT
	 
	1.1	 	Line of Credit; Limitations on Borrowings; Termination Date; Use of Proceeds.
	 
	(a)	 	Line of Credit and Limitations on Borrowing. Wells Fargo shall make Advances to
Company under the Line of Credit that (i) together with the L/C Amount and the aggregate
outstanding amount of Indebtedness and other obligations owing under or in connection with the
Ex-Im Credit Agreement, shall not at any time exceed in the aggregate $8,000,000 (the “Maximum
Line Amount”), and (ii) together with the L/C Amount, exceed in the aggregate the Borrowing
Base limitations described in Section 1.2. Within these limits, Company may periodically
borrow, prepay in whole or in part, and reborrow. Wells Fargo has no obligation to make an
Advance during a Default Period or at any time Wells Fargo believes that an Advance would
result in an Event of Default.
	 
	(b)	 	Maturity and Termination Dates. Company may request Advances from the date that the
conditions set forth in Section 3 are satisfied until the earlier of: (i) March 27, 2011 (the
“Maturity Date”), (ii) the date Company terminates the Line of Credit, or (iii) the date Wells
Fargo terminates the Line of Credit following an Event of Default (the earliest of such dates,
the “Termination Date”).
	 
	(c)	 	Use of Line of Credit Proceeds. Company shall use the proceeds of each Advance and
each Letter of Credit for ordinary working capital purposes.
	 
	(d)	 	Revolving Note. Company’s obligation to repay Line of Credit Advances, regardless of
how initiated under Section 1.3, shall be evidenced by a revolving promissory note (as
renewed, amended or replaced from time to time, the “Revolving Note”).

 

 

	1.2	 	Borrowing Base; Mandatory Prepayment.
	 
	(a)	 	Borrowing Base. The borrowing base (the “Borrowing Base”) is an amount equal to:

     (i) 80% or such lesser percentage of Eligible Accounts as Wells Fargo in its sole
discretion may deem appropriate; provided that, as of any date of determination, this rate
shall be reduced one (1) percent for each percentage point by which Dilution is in excess
of ten percent (10%), plus

     (ii) 20% or such lesser percentage of Eligible Inventory as Wells Fargo in its sole
discretion may deem appropriate, or $500,000, whichever is less, less

     (iii) a reserve equal to 10% of the aggregate outstanding amount of Indebtedness and
other obligations owing under or in connection with the Ex-Im Credit Agreement from time to
time, less

     (iv) the Borrowing Base Reserve, less

     (v) without duplication of clause (iii) of this Section 1.2(a),
Indebtedness that Company owes Wells Fargo that has not been advanced on the Revolving Note
(other than Indebtedness constituting “Advances” under the Ex-Im Credit Agreement),
less

     (vi) Indebtedness that Wells Fargo in its sole discretion finds on the date of
determination to be equal to Wells Fargo’s net credit exposure with respect to any swap,
derivative, foreign exchange, hedge, deposit, treasury management or similar product or
transaction extended to Company by Wells Fargo that is not otherwise described in Section 1
and any Indebtedness owed by Company to Wells Fargo Merchant Services, L.L.C.

	(b)	 	MANDATORY PREPAYMENT; OVERADVANCES. If unreimbursed Line of Credit Advances
evidenced by the Revolving Note plus the L/C Amount exceed the Borrowing Base, or if the sum
of the unreimbursed Line of Credit Advances evidenced by the Revolving Note, the L/C Amount,
and the aggregate outstanding amount of Indebtedness and other obligations owing under or in
connection with the Ex-Im Credit Agreement exceeds the Maximum Line Amount at any time, then
Company shall immediately prepay the Revolving Note in an amount sufficient to eliminate the
excess, and if payment in full of the Revolving Note is insufficient to eliminate this excess
and the L/C Amount continues to exceed the Borrowing Base, then Company shall deliver cash to
Wells Fargo in an amount equal to the remaining excess for deposit to the Special Account,
unless in each case, Wells Fargo has delivered to Company an Authenticated Record consenting
to the Overadvance prior to its occurrence, in which event the Overadvance shall be
temporarily permitted on such terms and conditions as Wells Fargo in its sole discretion may
deem appropriate, including the payment of additional fees or interest, or both.

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	1.3	 	Procedures for Line of Credit Advances.
	 
	(a)	 	Advances to Operating Account. Advances shall be credited to Company’s demand
deposit account maintained with Wells Fargo (the “Operating Account”), unless the parties
agree in a Record Authenticated by both of them to disburse to another account.

     (i) Advances upon Company’s Request. Line of Credit Advances may be funded
upon Company’s request. No request will be deemed received until Wells Fargo acknowledges
receipt, and Company, if requested by Wells Fargo, confirms the request in an Authenticated
Record. Company shall repay all Advances, even if the Person requesting the Advance on
behalf of Company lacked authorization.

     (A) Floating Rate Advances. If Company wants a Floating Rate Advance,
it shall make the request no later than 9:30 a.m. Pasadena, California Time on the
Business Day on which it wants the Floating Rate Advance to be funded, which
request shall specify the principal Advance amount being requested.

     (B) LIBOR Advances. If Company wants a LIBOR Advance, it shall make
the request no later than 9:30 a.m. Pasadena, California Time three (3) Business
Days preceding the Business Day on which it wants the LIBOR Advance to be funded,
which request shall specify both the principal Advance amount and Interest Period
being requested. No more than four (4) separate LIBOR Advance Interest Periods may
be outstanding at any time under this Agreement and the Ex-Im Credit Agreement, on
a combined basis. Each LIBOR Advance shall be in multiples of $1,000,000 and in
the minimum amount of at least $1,000,000. LIBOR Advances are not available for
Advances made through the Loan Manager Service, and shall not be available during
Default Periods. Notwithstanding anything to the contrary in this Agreement, the
aggregate outstanding amount of LIBOR Advances under this Agreement and the Ex-Im
Credit Agreement shall not exceed $6,000,000 (the “LIBOR Limitation Amount”).

     (ii) Advances through Loan Manager. If Wells Fargo has separately agreed that
Company may use the Wells Fargo Loan Manager service (“Loan Manager”), Line of Credit
Advances will be initiated by Wells Fargo and credited to the Operating Account as Floating
Rate Advances as of the end of each Business Day in an amount sufficient to maintain an
agreed upon ledger balance in the Operating Account, subject only to Line of Credit
availability as provided in Section 1.1(a). If Wells Fargo terminates Company’s access to
Loan Manager, Company may continue to request Line of Credit Advances as provided in
Section 1.3(a)(i). Wells Fargo shall have no obligation to make an Advance through Loan
Manager during a Default Period, or in an amount in excess of Line of Credit availability,
and may terminate Loan Manager at any time in its sole discretion.

	(b)	 	Protective Advances; Advances to Pay Indebtedness Due. Wells Fargo may initiate a
Floating Rate Advance on the Line of Credit in its sole discretion for

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	 	 	any reason at any time, without
Company’s compliance with any of the
conditions of this Agreement, and (i)
disburse the proceeds directly to third
Persons in order to protect Wells
Fargo’s interest in Collateral or to
perform any of Company’s obligations
under this Agreement, or (ii) apply the
proceeds to the amount of any
Indebtedness then due and payable to
Wells Fargo.
	 
	1.4	 	LIBOR Advances.
	 
	(a)	 	Funding Line of Credit Advances as LIBOR Advances for Fixed Interest Periods.
Subject to the LIBOR Limitation Amount, Company may fund a Line of Credit Advance as a LIBOR
Advance for one, three, or six month periods (each period an “Interest Period”, as more fully
defined in Exhibit A).
	 
	(b)	 	Procedure for Converting Floating Rate Advances to LIBOR Advances. Subject to the
LIBOR Limitation Amount, Company may request that all or any part of an outstanding Floating
Rate Advance be converted to a LIBOR Advance, provided that no Default Period is in effect,
and that Wells Fargo receives the request no later than 9:30 a.m. Pasadena, California Time
three (3) Business Days preceding the Business Day on which Company wishes the conversion to
become effective. Each request shall (i) specify the principal amount of the Floating Rate
Advance to be converted, (ii) the Business Day of conversion, and (iii) the Interest Period
desired. The request shall be confirmed in an Authenticated Record if requested by Wells
Fargo. Each conversion to a LIBOR Advance shall be in multiples of $1,000,000 and in the
minimum amount of at least $1,000,000.
	 
	(c)	 	Expiring LIBOR Advance Interest Periods. Unless Company requests a new LIBOR
Advance, or prepays an outstanding LIBOR Advance at the expiration of an Interest Period,
Wells Fargo shall convert each LIBOR Advance to a Floating Rate Advance on the last day of the
expiring Interest Period. If no Default Period is in effect, Company may request that all or
part of any expiring LIBOR Advance be renewed as a new LIBOR Advance, provided that Wells
Fargo receives the request no later than 9:30 a.m. Pasadena, California Time three (3)
Business Days preceding the Business Day that constitutes the first day of the new Interest
Period. Each request shall specify the principal amount of the expiring LIBOR Advance to be
continued and Interest Period desired, and shall be confirmed in an Authenticated Record if
requested by Wells Fargo. Each renewal of a LIBOR Advance shall be in multiples of $1,000,000
and in the minimum amount of at least $1,000,000.
	 
	(d)	 	Quotation of LIBOR Advance Interest Rates. Wells Fargo shall, with respect to any
request for a new or renewal LIBOR Advance, or the conversion of a Floating Rate Advance to a
LIBOR Advance, provide Company with a LIBOR quote for each Interest Period identified by
Company on the Business Day on which the request was made, if the request is received by Wells
Fargo no later than 9:30 a.m. Pasadena, California Time three (3) Business Days preceding the
Business Day on which Company has requested that the LIBOR Advance be made effective. If
Company does not immediately accept a LIBOR quote, the quoted rate shall expire and any
subsequent request for a LIBOR quote shall be subject to redetermination by Wells Fargo.

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	(e)	 	Taxes and Regulatory Costs. Company shall also pay Wells Fargo with respect to any
LIBOR Advance all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign governmental authority
that are related to LIBOR, and (ii) future, supplemental, emergency or other changes in the
LIBOR Reserve Percentage, the assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar costs imposed by any domestic or foreign governmental authority or
resulting from compliance by Wells Fargo with any request or directive (whether or not having
the force of law) from any central bank or other governmental authority that are related to
LIBOR but not otherwise included in the calculation of LIBOR. In determining which of these
amounts are attributable to an existing LIBOR Advance, any reasonable allocation made by Wells
Fargo among its operations shall be deemed conclusive and binding.
	 
	1.5	 	Collection of Accounts and Application to Revolving Note.
	 
	(a)	 	The Collection Account. Company has granted a security interest to Wells Fargo in
the Collateral, including all Accounts. Except as otherwise agreed by both parties in an
Authenticated Record, all Proceeds of Accounts and other Collateral, upon receipt or
collection, shall be deposited each Business Day into the Collection Account. Funds so
deposited (“Account Funds”) may only be withdrawn from the Collection Account by Wells Fargo
for application in accordance with Section 1.5(c) or as otherwise provided in the Loan
Documents or by applicable law.
	 
	(b)	 	Payment of Accounts by Company’s Account Debtors. Company shall instruct all account
debtors to make payments either directly to the Lockbox for deposit by Wells Fargo directly to
the Collection Account, or instruct them to deliver such payments to Wells Fargo by wire
transfer, ACH, or other means as Wells Fargo may direct for deposit to the Collection Account
or for direct application to the Line of Credit. If Company receives a payment or the Proceeds
of Collateral directly, Company will promptly deposit the payment or Proceeds into the
Collection Account. Until deposited, it will hold all such payments and Proceeds in trust for
Wells Fargo without commingling with other funds or property. All deposits held in the
Collection Account shall constitute Proceeds of Collateral and shall not constitute the
payment of Indebtedness.
	 
	(c)	 	Application of Payments to Revolving Note. Wells Fargo will withdraw Account Funds
deposited to the Collection Account and pay down borrowings on the Line of Credit by applying
them to the Revolving Note on the first Business Day following the Business Day of deposit to
the Collection Account, or, if payments are received by Wells Fargo that are not first
deposited to the Collection Account pursuant to any treasury management service provided to
Company by Wells Fargo, such payments shall be applied to the Revolving Note as provided in
the Master Agreement for Treasury Management Services and the relevant service description.
	 
	1.6	 	Interest and Interest Related Matters.
	 
	(a)	 	Interest Rates Applicable to Line of Credit. Except as otherwise provided in this
Agreement, the unpaid principal amount of each Line of Credit Advance

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	 	 	evidenced by the Revolving Note shall accrue interest at an annual interest rate calculated
as follows:

Floating Rate:

Line of Credit Advances = Prime Rate plus the applicable Margin, which interest
rate shall change whenever the Prime Rate changes (the “Floating Rate”); or

LIBOR Advance Rate for One-, Three-, or Six-Month Interest Periods:

Line of Credit Advances = LIBOR plus the applicable Margin (the “LIBOR Advance
Rate”)

	 	 	Multiple Advances under the Line of Credit may simultaneously accrue interest at both the
Floating Rate and at the LIBOR Advance Rate, subject to the limitations of Section
1.3(a)(i).
	 
	 	 	The Margins through and including the adjustment occurring as specified below shall be
0.75% per annum for Floating Rate Advances, and 3.50% per annum for LIBOR Advances. The
Margins shall be reduced by 0.25% per annum on a one-time basis if the Company’s Earnings
Before Taxes, Depreciation, and Amortization for any fiscal year ending on or after
December 31, 2008, is greater than $1,500,000.
	 
	 	 	The Margin reduction provided for in the immediately preceding paragraph shall become
effective on the first calendar day of the first calendar month following the month of
receipt by Wells Fargo of fiscal year end financial statements that have been audited by
independent certified public accountants acceptable to Wells Fargo.
	 
	 	 	If amended or restated financial statements would change previously calculated Margins, or
if Wells Fargo determines that any financial statements have materially misstated Company’s
financial condition, then Wells Fargo may, using the most accurate information available to
it (it being agreed that if Company files amended and restated financial statements with
the U.S. Securities and Exchange Commission that modify financial statements previously
submitted to Wells Fargo, such amended and restated financial statements shall be deemed to
be the most accurate information available to Wells Fargo), recalculate the financial test
or tests governing the Margins and retroactively reduce or increase the Margins from the
date of receipt of such amended or restated financial statements and charge Company
additional interest, which may be imposed on them from the beginning of the appropriate
month to which the restated statements or recalculated financial tests relate, as Wells
Fargo in its sole discretion deems appropriate.
	 
	(b)	 	Minimum Interest Charge. Notwithstanding the other terms of Section 1.6 to the
contrary, and except as limited by the usury savings provision of Section 1.6(e), Company
shall pay Wells Fargo at least $20,000 of interest each calendar month under this Agreement
and the Ex-Im Credit Agreement combined (the

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	 	 	“Minimum Interest Charge”) during the term of this Agreement, and Company shall pay any
deficiency between the Minimum Interest Charge and the aggregate amount of interest
otherwise payable under this Agreement and the Ex-Im Credit Agreement on the first day of
each month and on the Termination Date. When calculating this deficiency, the Default Rate
set forth in Section 1.6(c), if applicable, shall be disregarded.
	 
	(c)	 	Default Interest Rate. Commencing on the day an Event of Default occurs, through and
including the date identified by Wells Fargo in a Record as the date that the Event of Default
has been cured or waived (each such period a “Default Period”), or during a time period
specified in Section 1.9, or at any time following the Termination Date, in Wells Fargo’s sole
discretion and without waiving any of its other rights or remedies, the principal amount of
the Revolving Note shall bear interest at a rate that is three percent (3.0%) above the
contractual rate set forth in Section 1.6(a) (the “Default Rate”), or any lesser rate that
Wells Fargo may deem appropriate, starting on the first day of the month in which the Default
Period begins through the last day of that Default Period, or any shorter time period to which
Wells Fargo may agree in an Authenticated Record.
	 
	(d)	 	Interest Accrual on Payments Applied to Revolving Note. Payments received by Wells
Fargo shall be applied to the Revolving Note as provided in Section 1.4(c), but the principal
amount paid down shall continue to accrue interest through the end of the first Business Day
following the Business Day that the payment was applied to the Revolving Note.
	 
	(e)	 	Usury. No interest rate shall be effective which would result in a rate greater than
the highest rate permitted by law. Payments in the nature of interest and other charges made
under any Loan Documents that are later determined to be in excess of the limits imposed by
applicable usury law will be deemed to be a payment of principal, and the Indebtedness shall
be reduced by that amount so that such payments will not be deemed usurious.
	 
	1.7	 	Fees.
	 
	(a)	 	Origination Fee. [INTENTIONALLY OMITTED].
	 
	(b)	 	Unused Line Fee. Company shall pay Wells Fargo an unused line fee of one-quarter of
one percent (0.25%) per annum of the daily average of the Maximum Line Amount reduced by
outstanding Advances, the L/C Amount, and outstanding “Advances” under the Ex-Im Credit
Agreement (the “Unused Amount”), from the date of this Agreement to and including the
Termination Date, which unused line fee shall be payable monthly in arrears on the first day
of each month and on the Termination Date; provided that for purposes of calculating the
Unused Amount for each month there shall be deemed outstanding at least the minimum amount of
Advances that would accrue interest equal to the Minimum Interest Charge for such month.
	 
	(c)	 	Facility Fee. [INTENTIONALLY OMITTED].

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	(d)	 	Collateral Exam Fees. Company shall pay Wells Fargo fees in connection with any
collateral exams, audits or inspections conducted by or on behalf of Wells Fargo at the
current rates established from time to time by Wells Fargo as its collateral exam fees (which
fees are currently $105 per hour per collateral examiner), together with all actual
out-of-pocket costs and expenses incurred in conducting any collateral examination or
inspection.
	 
	(e)	 	Collateral Monitoring Fees. Company shall pay Wells Fargo a fee at the rates
established from time to time by Wells Fargo (or any other Person providing such services to
the Wells Fargo, including, but not limited to, Collateral Services, Inc.) as its Collateral
monitoring fees (which fees currently consist of a monthly fee of $250), due and payable
monthly in advance on the first day of the month.
	 
	(f)	 	Line of Credit Termination and/or Reduction Fees. If (i) Wells Fargo terminates the
Line of Credit during a Default Period, or if (ii) Company terminates the Line of Credit on a
date prior to the Maturity Date, or if (iii) Company and Wells Fargo agree to reduce the
Maximum Line Amount, then Company shall pay Wells Fargo as liquidated damages a termination or
reduction fee in an amount equal to a percentage of the Maximum Line Amount (or the reduction
of the Maximum Line Amount, as the case may be) calculated as follows: (A) three percent
(3.0%) if the termination occurs on or before the first anniversary of the first Line of
Credit Advance; (B) one percent (1.0%) if the termination or reduction occurs after the first
anniversary of the first Line of Credit Advance, but on or before the second anniversary of
the first Line of Credit Advance; and (C) zero percent (-0-%) if the termination or reduction
occurs after the second anniversary of the first Line of Credit Advance.
	 
	(g)	 	Overadvance Fees. Company shall pay a $500 Overadvance fee for each day that an
Overadvance exists which was not agreed to by Wells Fargo in an Authenticated Record prior to
its occurrence; provided that Wells Fargo’s acceptance of the payment of such fees shall not
constitute either consent to the Overadvance or waiver of the resulting Event of Default.
Company shall pay additional Overadvance fees and interest in such amounts and on such terms
as Wells Fargo in its sole discretion may consider appropriate for any Overadvance to which
Wells Fargo has specifically consented in an Authenticated Record prior to its occurrence.
	 
	(h)	 	Treasury Management Fees. Company will pay service fees to Wells Fargo for treasury
management services provided pursuant to the Master Agreement for Treasury Management Services
or any other agreement entered into by the parties, in the amount prescribed in Wells Fargo’s
current service fee schedule.
	 
	(i)	 	Letter of Credit Fees. Company shall pay a fee with respect to each Letter of Credit
issued by Wells Fargo of one and one-half percent (1.5%) of the aggregate undrawn amount of
the Letter of Credit (the “Aggregate Face Amount”) accruing daily from and including the date
the Letter of Credit is issued until the date that it either expires or is returned, which
shall be payable monthly in arrears on the first day of each month and on the date that the
Letter of Credit either expires or is returned; and following an Event of Default, this fee
shall increase to four and one-half percent (4.5%) of the Aggregate Face

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	 	 	Amount, commencing on the first day of the month in which the Default Period begins and
continuing through the last day of such Default Period, or any shorter time period that
Wells Fargo in its sole discretion may deem appropriate, without waiving any of its other
rights and remedies.
	 
	(j)	 	Letter of Credit Administrative Fees. Company shall pay all administrative fees
charged by Wells Fargo in connection with the honoring of drafts under any Letter of Credit,
and any amendments to or transfers of any Letter of Credit, and any other activity with
respect to the Letters of Credit at the current rates published by Wells Fargo for such
services rendered on behalf of its customers generally.
	 
	(k)	 	Other Fees and Charges. Wells Fargo may impose additional fees and charges during a
Default Period for (i) waiving an Event of Default, or for (ii) the administration of
Collateral by Wells Fargo. All such fees and charges shall be imposed at Wells Fargo’s sole
discretion following oral notice to Company on either an hourly, periodic, or flat fee basis,
and in lieu of or in addition to imposing interest at the Default Rate, and Company’s request
for an Advance following such notice shall constitute Company’s agreement to pay such fees and
charges.
	 
	(l)	 	LIBOR Advance Breakage Fees. Company may prepay any LIBOR Advance at any time in any
amount, whether voluntarily or by acceleration; provided, however, that if the
LIBOR Advance is prepaid, Company shall pay Wells Fargo upon demand a LIBOR Advance breakage
fee equal to the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Interest Period matures, calculated as follows for
each such month:

     (i) Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the applicable Interest Period.

     (ii) Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the remaining term of
such Interest Period at LIBOR in effect on the date of prepayment for new loans made for
such term in a principal amount equal to the amount prepaid.

     (iii) If the result obtained in (ii) for any month is greater than zero, discount that
difference by LIBOR used in (ii) above.

Company acknowledges that prepayment of the Revolving Note may result in Wells Fargo
incurring additional costs, expenses or liabilities, and that it is difficult to ascertain
the full extent of such costs, expenses or liabilities. Company agrees to pay the
above-described LIBOR Advance breakage fee and agrees that this amount represents a
reasonable estimate of the LIBOR Advance breakage costs, expenses and/or liabilities of
Wells Fargo.

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	1.8	 	Interest Accrual; Principal and Interest Payments; Computation.
	 
	(a)	 	Interest Payments and Interest Accrual. Accrued and unpaid interest under the
Revolving Note shall be due and payable on the first day of each month (each an “Interest
Payment Date”) and on the Termination Date, and shall be paid in the manner provided in
Section 1.4(c). Interest shall accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of Advance to the Interest Payment Date.
	 
	(b)	 	Payment of Revolving Note Principal. The principal amount of the Revolving Note
shall be paid from time to time as provided in this Agreement, and shall be fully due and
payable on the Termination Date.
	 
	(c)	 	Payments Due on Non-Business Days. If an Interest Payment Date or the Termination
Date falls on a day which is not a Business Day, payment shall be made on the next Business
Day, and interest shall continue to accrue during that time period.
	 
	(d)	 	Computation of Interest and Fees. Interest accruing on the unpaid principal amount
of the Revolving Note and fees payable under this Agreement shall be computed on the basis of
the actual number of days elapsed in a year of 360 days.
	 
	(e)	 	Liability Records. Wells Fargo shall maintain accounting and bookkeeping records of
all Advances and payments under the Line of Credit and all other Indebtedness due to Wells
Fargo in such form and content as Wells Fargo in its sole discretion deems appropriate. Wells
Fargo’s calculation of current Indebtedness shall be presumed correct unless proven otherwise
by Company. Upon Wells Fargo’s request, Company will admit and certify in a Record the exact
principal balance of the Indebtedness that Company then believes to be outstanding. Any
billing statement or accounting provided by Wells Fargo shall be conclusive and binding unless
Company notifies Wells Fargo in a detailed Record of its intention to dispute the billing
statement or accounting within 30 days of receipt.

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	1.9	 	Termination or Reduction of Line of Credit by Company; Notice. Company may terminate or
reduce the Line of Credit at any time prior to the Maturity Date, if it (i) delivers an
Authenticated Record notifying Wells Fargo of its intentions at least 10 Business Days prior
to the proposed Termination Date (which notice may be contingent on the occurrence of an
event; provided that (x) if Company does not terminate or reduce the Line of Credit on the
date specified in such notice, Company may subsequently terminate or reduce the Line of Credit
only upon delivering Wells Fargo a new notice, as provided above, and complying with all other
terms of this paragraph, and (y) no more than three such notices may be provided within any 60
consecutive day period), (ii) pays Wells Fargo the termination fee set forth in Section
1.7(f), and (iii) pays the Indebtedness in full or down to the reduced Maximum Line Amount.
	 
	1.10	 	Letters of Credit.
	 
	(a)	 	Issuance of Letters of Credit; Amount. Wells Fargo, subject to the terms and
conditions of this Agreement, shall issue, on or after the date that Wells Fargo is obligated
to make its first Advance under this Agreement and prior to the Termination Date, one or more
irrevocable standby or documentary letters of credit (each, a “Letter of Credit”, and
collectively, “Letters of Credit”) for Company’s account. Wells Fargo will not issue any
Letter of Credit if the face amount of the Letter of Credit would exceed the least of: (i)
$1,000,000 less the L/C Amount, (ii) the Borrowing Base, less an amount equal to aggregate
unreimbursed Line of Credit Advances plus the L/C Amount, or (iii) the Maximum Line Amount,
less an amount equal to the aggregate unreimbursed Line of Credit Advances, plus the L/C
Amount, plus the aggregate unreimbursed “Line of Credit Advances” outstanding under the Ex-Im
Credit Agreement.
	 
	(b)	 	Additional Letter of Credit Documentation. Prior to requesting issuance of a Letter
of Credit, Company shall first execute and deliver to Wells Fargo a Standby Letter of Credit
Agreement or a Commercial Letter of Credit Agreement, as applicable, an L/C Application, and
any other documents that Wells Fargo may request, which shall govern the issuance of the
Letter of Credit and Company’s obligation to reimburse Wells Fargo for any related Letter of
Credit draws (the “Obligation of Reimbursement”).
	 
	(c)	 	Expiration. No Letter of Credit shall be issued that has an expiry date that is
later than one (1) year from the date of issuance, or the Maturity Date in effect on the date
of issuance, whichever is earlier.
	 
	(d)	 	Obligation of Reimbursement During Default Periods. If Company is unable, due to the
existence of a Default Period or for any other reason, to obtain an Advance to pay any
Obligation of Reimbursement, Company shall pay Wells Fargo on demand and in immediately
available funds, the amount of the Obligation of Reimbursement together with interest, accrued
from the date presentment of the underlying draft until reimbursement in full at the Default
Rate. Wells Fargo is authorized, alternatively and in its sole discretion, to make an Advance
in an amount sufficient to discharge the Obligation of Reimbursement and pay all accrued but
unpaid interest and fees with respect to the Obligation of Reimbursement.

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	1.11	 	Special Account. If the Line of Credit is terminated for any reason while a Letter of Credit
is outstanding, or if after prepayment of the Revolving Note the L/C Amount continues to
exceed the Borrowing Base, then Company shall promptly pay Wells Fargo in immediately
available funds for deposit to the Special Account, an amount equal, as the case may be, to
either (a) the L/C Amount plus any anticipated fees and costs, or (b) the amount by which the
L/C Amount exceeds the Borrowing Base. If Company fails to pay these amounts promptly, then
Wells Fargo may in its sole discretion make an Advance to pay these amounts and deposit the
proceeds to the Special Account. The Special Account shall be an interest bearing account
maintained with Wells Fargo or any other financial institution acceptable to Wells Fargo.
Wells Fargo may in its sole discretion apply amounts on deposit in the Special Account to the
Indebtedness. Company may not withdraw amounts deposited to the Special Account until the
Line of Credit has been terminated and all outstanding Letters of Credit have either been
returned to Wells Fargo or have expired and the Indebtedness has been fully paid.
	 
	2.	 	SECURITY INTEREST AND OCCUPANCY OF COMPANY’S PREMISES
	 
	2.1	 	Grant of Security Interest. Company hereby pledges, assigns and grants to Wells Fargo, for
the benefit of Wells Fargo and as agent for Wells Fargo Merchant Services, L.L.C., a Lien and
security interest (collectively referred to as the “Security Interest”) in the Collateral, as
security for the payment and performance of the Indebtedness. Following request by Wells
Fargo, Company shall grant Wells Fargo, for the benefit of Wells Fargo and as agent for Wells
Fargo Merchant Services, L.L.C., a Lien and security interest in all commercial tort claims
that it may have against any Person.
	 
	2.2	 	Notifying Account Debtors and Other Obligors; Collection of Collateral. Wells Fargo may at
any time (whether or not a Default Period then exists) deliver a Record giving an account
debtor or other Person obligated to pay an Account, a General Intangible, or other amount due,
notice that the Account, General Intangible, or other amount due has been assigned to Wells
Fargo for security and must be paid directly to Wells Fargo. Company shall join in giving
such notice and shall Authenticate any Record giving such notice upon Wells Fargo’s request.
After Company or Wells Fargo gives such notice, Wells Fargo may, but need not, in Wells
Fargo’s or in Company’s name, demand, sue for, collect or receive any money or property at any
time payable or receivable on account of, or securing, such Account, General Intangible, or
other amount due, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including collateral
obligations) of any account debtor or other obligor. Wells Fargo may, in Wells Fargo’s name
or in Company’s name, as Company’s agent and attorney-in-fact, notify the United States Postal
Service to change the address for delivery of Company’s mail to any address designated by
Wells Fargo, otherwise intercept Company’s mail, and receive, open and dispose of Company’s
mail, applying all Collateral as permitted under this Agreement and holding all other mail for
Company’s account or forwarding such mail to Company’s last known address.

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	2.3	 	Assignment of Insurance. As additional security for the Indebtedness, Company hereby assigns
to Wells Fargo and to Wells Fargo Merchant Services, L.L.C., all rights of Company under every
policy of insurance covering the Collateral and all business records and other documents
relating to it, and all monies (including proceeds and refunds) that may be payable under any
policy, and Company hereby directs the issuer of each policy to pay all such monies directly
to Wells Fargo. At any time, whether or not a Default Period then exists, Wells Fargo may
(but need not), in Wells Fargo’s or Company’s name, execute and deliver proofs of claim,
receive payment of proceeds and endorse checks and other instruments representing payment of
the policy of insurance, and adjust, litigate, compromise or release claims against the issuer
of any policy. Any monies received under any insurance policy assigned to Wells Fargo, other
than liability insurance policies, or received as payment of any award or compensation for
condemnation or taking by eminent domain, shall be paid to Wells Fargo and, as determined by
Wells Fargo in its sole discretion, either be applied to prepayment of the Indebtedness or
disbursed to Company under staged payment terms reasonably satisfactory to Wells Fargo for
application to the cost of repairs, replacements, or restorations which shall be effected with
reasonable promptness and shall be of a value at least equal to the value of the items or
property destroyed.
	 
	2.4	 	Company’s Premises.
	 
	(a)	 	Wells Fargo’s Right to Occupy Company’s Premises. Company hereby grants to Wells
Fargo the right, at any time during a Default Period and without notice or consent, to take
exclusive possession of all locations where Company conducts its business or has any rights of
possession, including the locations described on Exhibit B (the “Premises”), until the earlier
of (i) payment in full and discharge of all Indebtedness and termination of the Line of
Credit, or (ii) final sale or disposition of all items constituting Collateral and delivery of
those items to purchasers.
	 
	(b)	 	Wells Fargo’s Use of Company’s Premises. Wells Fargo may use the Premises to store,
process, manufacture, sell, use, and liquidate or otherwise dispose of items that are
Collateral, and for any other incidental purposes deemed appropriate by Wells Fargo in good
faith.
	 
	(c)	 	Company’s Obligation to Reimburse Wells Fargo. Wells Fargo shall not be obligated to
pay rent or other compensation for the possession or use of any Premises, but if Wells Fargo
elects to pay rent or other compensation to the owner of any Premises in order to have access
to the Premises, then Company shall promptly reimburse Wells Fargo all such amounts, as well
as all taxes, fees, charges and other expenses at any time payable by Wells Fargo with respect
to the Premises by reason of the execution, delivery, recordation, performance or enforcement
of any terms of this Agreement.
	 
	2.5	 	License. Without limiting the generality of any other Security Document, Company hereby
grants to Wells Fargo a non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all Intellectual Property Rights of Company for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such materials
become saleable

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	 	 	Inventory, all in accordance with the same quality standards previously adopted by Company
for its own manufacturing and subject to Company’s reasonable exercise of quality control;
and (b) selling, leasing or otherwise disposing of any or all Collateral during any Default
Period.
	 
	2.6	 	Financing Statements. Company authorizes Wells Fargo to file financing statements describing
Collateral to perfect Wells Fargo’s Security Interest in the Collateral, and Wells Fargo may
describe the Collateral as “all personal property” or “all assets” or describe specific items
of Collateral including commercial tort claims as Wells Fargo may consider necessary or useful
to perfect the Security Interest. All financing statements filed before the date of this
Agreement to perfect the Security Interest were authorized by Company and are hereby
re-authorized. Following the termination of the Line of Credit and payment of all
Indebtedness, Wells Fargo shall, at Company’s expense and within the time periods required
under applicable law, release or terminate any filings or other agreements that perfect the
Security Interest.
	 
	2.7	 	Setoff. Wells Fargo may at any time, in its sole discretion and without demand or notice to
anyone, setoff any liability owed to Company by Wells Fargo against any Indebtedness then due
and unpaid.
	 
	2.8	 	Collateral Related Matters. This Agreement does not contemplate a sale of Accounts or
chattel paper, and, as provided by law, Company is entitled to any surplus and shall remain
liable for any deficiency. Wells Fargo’s duty of care with respect to Collateral in its
possession (as imposed by law) will be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody or possession
of a bailee or other third Person, exercises reasonable care in the selection of the bailee or
third Person, and Wells Fargo need not otherwise preserve, protect, insure or care for such
Collateral. Wells Fargo shall not be obligated to preserve rights Company may have against
prior parties, to liquidate the Collateral at all or in any particular manner or order or
apply the Proceeds of the Collateral in any particular order of application. Wells Fargo has
no obligation to clean-up or prepare Collateral for sale. Company waives any right it may
have to require Wells Fargo to pursue any third Person for any of the Indebtedness.
	 
	2.9	 	Notices Regarding Disposition of Collateral. If notice to Company of any intended
disposition of Collateral or any other intended action is required by applicable law in a
particular situation, such notice will be deemed commercially reasonable if given in the
manner specified in Section 7.4 at least ten calendar days before the date of intended
disposition or other action.
	 
	3.	 	CONDITIONS PRECEDENT
	 
	3.1	 	Conditions Precedent to Initial Advance and Issuance of Initial Letter of Credit. Wells
Fargo’s obligation to make the initial Advance or issue the first Letter of Credit shall be
subject to the condition that Wells Fargo shall have received and accepted this Agreement and
each of the Loan Documents, fees, and other documents and information described in Exhibit C,
executed and in form and content satisfactory to Wells Fargo (such date that all such items
have been received and accepted by Wells Fargo, the “Closing Date”).

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	3.2	 	Additional Conditions Precedent to All Advances and Letters of Credit. Wells Fargo’s
obligation to make any Advance (including the initial Advance) or issue any Letter of Credit
shall be subject to the further additional conditions: (a) that the representations and
warranties described in Exhibit D are correct on the date of the Advance or the issuance of
the Letter of Credit, except to the extent that such representations and warranties relate
solely to an earlier date; and (b) that no event has occurred and is continuing, or would
result from the requested Advance or issuance of the Letter of Credit that would result in an
Event of Default.
	 
	4.	 	REPRESENTATIONS AND WARRANTIES
	 
	 	 	To induce Wells Fargo to enter into this Agreement, Company makes the representations and
warranties described in Exhibit D. Any request for an Advance will be deemed a
representation by Company that all representations and warranties described in Exhibit D
are true, correct, and complete as of the time of the request, unless they relate
exclusively to an earlier date. Company shall promptly deliver a Record notifying Wells
Fargo of any change in circumstance that would affect the accuracy of any representation or
warranty, unless the representation and warranty specifically relates to an earlier date.
	 
	5.	 	COVENANTS
	 
	 	 	So long as the Indebtedness remains unpaid, or the Line of Credit has not been terminated,
Company shall comply with each of the following covenants, unless Wells Fargo shall consent
otherwise in an Authenticated Record delivered to Company.
	 
	5.1	 	Reporting Requirements. Company shall deliver to Wells Fargo the following information,
compiled where applicable using GAAP consistently applied, in form and content acceptable to
Wells Fargo:
	 
	(a)	 	Annual Financial Statements. As soon as available and in any event within 120 days
after Company’s fiscal year end, Company’s audited financial statements prepared by an
independent certified public accountant acceptable to Wells Fargo, which shall include
Company’s balance sheet, income statement, and statement of retained earnings and cash flows
prepared, if requested by Wells Fargo, on a consolidated and consolidating basis to include
Company’s Subsidiaries. The annual financial statements shall be accompanied by a certificate
(the “Compliance Certificate”) in the form of Exhibit E that is signed by Company’s chief
financial officer.
	 
	 	 	Each Compliance Certificate that accompanies an annual financial statement shall also be
accompanied by copies of all management letters prepared by Company’s accountants.
	 
	(b)	 	Quarterly Financial Statements. As soon as available and in any event within 30 days
for the first two fiscal quarters in Company’s fiscal year 2008 and 25 days for each fiscal
quarter thereafter for preliminary statements and within 45 days for final statements, in each
case after the end of each fiscal quarter, the unaudited/internal balance sheet and statements
of income and retained

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	 	 	earnings of Company as at the end of and for such quarter and for the year to date period
then ended, prepared, if Wells Fargo so requests, on a consolidated and consolidating
basis to include Company’s Subsidiaries, in reasonable detail, all prepared in accordance
with GAAP, subject to year-end audit adjustments and without footnotes, and which fairly
represent Company’s financial position and the results of its operations. The final
quarterly financial statements (i.e., the statements due within 45 days after the end of
each fiscal quarter) shall be accompanied by a Compliance Certificate in the form of
Exhibit E that is signed by Company’s chief financial officer.
	 
	(c)	 	Monthly Financial Statements. As soon as available and in any event within 30 days
after the end of each month for each month through August, 2008 and within 25 days after the
end of each month for each month thereafter, a Company prepared balance sheet, income
statement, and statement of retained earnings prepared for that month and for the year–to-date
period then ended, prepared, if requested by Wells Fargo, on a consolidated and consolidating
basis to include Company’s Subsidiaries, and stating in comparative form the figures for the
corresponding date and periods in the prior fiscal year, subject to year-end adjustments and
without footnotes. The monthly financial statements shall be accompanied by a Compliance
Certificate in the form of Exhibit E that is signed by Company’s chief financial officer.
	 
	(d)	 	Collateral Reports. No later than 15 days after each month end (or more frequently
if Wells Fargo shall request it), (i) detailed agings of Company’s accounts receivable and
accounts payable, a detailed inventory report, an inventory certification report (including a
listing by location and category), an accounts receivable reconciliation report, and a
calculation of Company’s Accounts (including an accounts receivable ineligibility
certification), Eligible Accounts, Inventory and Eligible Inventory as of the end of that
month or shorter time period requested by Wells Fargo, and (ii) Company shall provide Wells
Fargo with copies of bank account statements for each deposit or other account maintained by
Company. Accounts receivable agings shall be delivered electronically to Wells Fargo in
accordance with the instructions and procedures established by Wells Fargo from time to time.
	 
	(e)	 	Projections. No later than 30 days prior to each fiscal year end for a draft, and no
later than 30 days after the commencement of each fiscal year for a final, projected balance
sheet and income statement and statement of retained earnings and cash flows for each month of
the next fiscal year for Company, certified as accurate by Company’s chief financial officer
and accompanied by a statement of assumptions and supporting schedules and information.
	 
	(f)	 	Supplemental Reports. Weekly, or more frequently if Wells Fargo requests, Company’s
standard form of “daily collateral report”, together with sales reports, credit memos and
other accounts receivable adjustments, receivables schedules, collection reports, inventory
reports by category and location, copies of Company’s five (5) largest invoices (by Dollar
amount) together with related shipment documents and delivery receipts for goods.
	 
	(g)	 	Litigation. No later than three days after discovery, a Record notifying Wells Fargo
of any litigation or other proceeding before any court or governmental

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	 	 	agency which seeks a monetary recovery against Company in excess of $250,000.
	 
	(h)	 	Intellectual Property. (i) No later than 30 days before it acquires material
Intellectual Property Rights, a Record notifying Wells Fargo of Company’s intention to acquire
such rights; (ii) except for transfers permitted under Section 5.18, no later than 30 days
before it disposes of material Intellectual Property Rights, a Record notifying Wells Fargo of
Company’s intention to dispose of such rights, along with copies of all proposed documents and
agreements concerning the disposal of such rights as requested by Wells Fargo; (iii) promptly
upon discovery, a Record notifying Wells Fargo of (A) any Infringement of Company’s
Intellectual Property Rights by any Person, (B) claims that Company is Infringing another
Person’s Intellectual Property Rights and (C) any threatened cancellation, termination or
material limitation of Company’s Intellectual Property Rights; and (iv) promptly upon receipt,
copies of all registrations and filings with respect to Company’s Intellectual Property
Rights.
	 
	(i)	 	Defaults. No later than three days after learning of the probable occurrence of any
Event of Default, a Record notifying Wells Fargo of the Event of Default and the steps being
taken by Company to cure the Event of Default.
	 
	(j)	 	Disputes. Promptly upon discovery, a Record notifying Wells Fargo of (i) any
disputes or claims by Company’s customers exceeding $250,000 in the aggregate during any
three-month period; (ii) credit memos not previously reported in Section 5.1(e); and (iii) any
goods returned to or recovered by Company outside of the ordinary course of business or in the
ordinary course of business but with a value in an amount in excess of $250,000.
	 
	(k)	 	Changes in Officers and Directors. Promptly following occurrence, a Record notifying
Wells Fargo of any change in the persons constituting Company’s executive Officers and
Directors.
	 
	(l)	 	Collateral. Promptly upon discovery, a Record notifying Wells Fargo of any loss of
or material damage to any Collateral or of any substantial adverse change in any Collateral or
the prospect of its payment.
	 
	(m)	 	Commercial Tort Claims. Promptly upon discovery, a Record notifying Wells Fargo of
any commercial tort claims brought by Company against any Person, including the name and
address of each defendant, a summary of the facts, an estimate of Company’s damages, copies of
any complaint or demand letter submitted by Company, and such other information as Wells Fargo
may request.
	 
	(n)	 	Reports to Owners. Promptly upon distribution, copies of all financial statements,
reports and proxy statements which Company shall have sent to its Owners; provided that
delivery to Wells Fargo of an email link that enables Wells Fargo to obtain complete copies of
the foregoing statements and reports shall satisfy such requirement.

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	(o)	 	Tax Returns of Company. No later than thirty (30) days after the earlier of the date
that they are filed or required to be filed, copies of Company’s signed and dated state and
federal income tax returns and all related schedules, and copies of any extension requests.
	 
	(p)	 	Tax Returns and Personal Financial Statements of Owners and Guarantors.
[INTENTIONALLY OMITTED].
	 
	(q)	 	Violations of Law. No later than three days after discovery of any violation, a
Record notifying Wells Fargo of Company’s violation of any law, rule or regulation, the
non-compliance with which could have a Material Adverse Effect on Company.
	 
	(r)	 	Pension Plans. (i) Promptly upon discovery, and in any event within 30 days after
Company knows or has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, a Record authenticated by Company’s chief financial officer notifying Wells
Fargo of the Reportable Event in detail and the actions which Company proposes to take to
correct the deficiency, together with a copy of any related notice sent to the Pension Benefit
Guaranty Corporation; (ii) promptly upon discovery, and in any event within 10 days after
Company fails to make a required quarterly Pension Plan contribution under Section 412(m) of
the IRC, a Record authenticated by the Company’s chief financial officer notifying Wells Fargo
of the failure in detail and the actions that Company will take to cure the failure, together
with a copy of any related notice sent to the Pension Benefit Guaranty Corporation; and (iii)
promptly upon discovery, and in any event within 10 days after Company knows or has reason to
know that it may be liable or may be reasonably expected to have liability for any withdrawal,
partial withdrawal, reorganization or other event under any Multiemployer Plan under Sections
4201 or 4243 of ERISA, a Record authenticated by Company’s chief financial officer notifying
Wells Fargo of the details of the event and the actions that Company proposes to take in
response.
	 
	(s)	 	Other Reports. From time to time, with reasonable promptness, all receivables
schedules, inventory reports, collection reports, deposit records, equipment schedules,
invoices to account debtors, shipment documents and delivery receipts for goods sold, and such
other materials, reports, records or information as Wells Fargo may reasonably request.
	 
	5.2	 	Financial Covenants. Company agrees to comply with the financial covenants described below,
which shall be calculated using GAAP consistently applied, except as they may be otherwise
modified by the following capitalized definitions:
	 
	(a)	 	Minimum Net Income. Company shall achieve, for each period described below, the sum
of (i) Net Income, plus (ii) non-cash expenses (to the extent deducted from Company’s
net income in order to calculate Net Income), not to exceed $10,000,000, incurred in fiscal
2008 by Company that arise from the write-down of Company’s intangible assets in connection
with the Company’s analysis, as audited by Company’s independent certified public accountants,
of the impairment of Company’s book value of its goodwill, plus (iii) non-recurring
cash expenses, not to exceed $710,000, incurred in fiscal year 2008 by

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Company as a result of the winding up of Company’s United Kingdom and French subsidiaries,
less (iv) to the extent included in the calculation of Net Income, any payments
received by Company under or in connection with that certain Settlement Agreement, dated
April 6, 2007, among Company, Synergetics, Inc., and Synergetics USA, Inc., of not less
than the amount set forth for each such period (numbers appearing between “< >“ are
negative):

	 	 	 	 	 
	 	 	Minimum Net Income
	 	 	plus approved intangible
	Period	 	expense adjustments
	April 1, 2008 through April 30, 2008
	 	$	<1,285,000>	 
	 
	 	 	 	 
	April 1, 2008 through May 31, 2008
	 	$	<1,875,000>	 
	 
	 	 	 	 
	April 1, 2008 through June 30, 2008
	 	$	<2,130,000>	 
	 
	 	 	 	 
	April 1, 2008 through July 31, 2008
	 	$	<2,745,000>	 
	 
	 	 	 	 
	April 1, 2008 through August 31, 2008
	 	$	<3,010,000>	 
	 
	 	 	 	 
	April 1, 2008 through September 30, 2008
	 	$	<3,245,000>	 
	 
	 	 	 	 
	April 1, 2008 through October 31, 2008
	 	$	<3,880,000>	 
	 
	 	 	 	 
	April 1, 2008 through November 30, 2008
	 	$	<4,430,000>	 
	 
	 	 	 	 
	April 1, 2008 through December 31, 2008
	 	$	<4,765,000>	 

	(b)	 	Minimum Debt Service Coverage Ratio. Company shall maintain, as of the last day of
each period described below, a Debt Service Coverage Ratio, determined as at the end of each
month, of not less than the ratio set forth for each such period:

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	Period	 	Debt Service Coverage Ratio
	April 1, 2008 through April 30, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through May 31, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through June 30, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through July 31, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through August 31, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through September 30, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through October 31, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through November 30, 2008

	 	1.10 to 1.0
	 
	 	 
	April 1, 2008 through December 31, 2008

	 	1.10 to 1.0

          If Company fails to satisfy the foregoing Debt Service Coverage Ratio covenant on any test
date, but Company has maintained an average daily ending cash balance in its deposit accounts (net
of book overdrafts and past due accounts payable owing by Company) for the 30-day period ending on
such test date that equals or exceeds an amount equal to double the deficiency in Net Income that
would have resulted in compliance with such Debt Service Coverage Ratio, Company will be deemed to
be in compliance with the Debt Service Coverage Ratio on such test date.

          If Company does not have any term debt outstanding (including no obligations outstanding to
American Medical Systems, Inc.), Company shall not be required to comply with the foregoing Debt
Service Coverage Ratio.

	(c)	 	Capital Expenditures. Company shall not incur or contract to incur Capital
Expenditures of more than $250,000 in the aggregate during any fiscal year.
	 
	5.3	 	Other Liens and Permitted Liens.
	 
	(a)	 	Other Liens; Permitted Liens. Company shall not create, incur or suffer to exist any
Lien upon any of its assets, now owned or later acquired, as security for

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	 	 	any indebtedness, with the exception of the following (each a “Permitted Lien”;
collectively, “Permitted Liens”): (i) In the case of real property, covenants,
restrictions, rights, easements and minor irregularities in title which do not materially
interfere with Company’s business or operations as presently conducted; (ii) Liens in
existence on the date of this Agreement that are described in Exhibit F and secure
indebtedness for borrowed money permitted under Section 5.4; (iii) The Security Interest
and Liens created by the Security Documents; (iv) Purchase money Liens (including any
capital lease and any sale-leaseback of equipment occurring within 90 days of the
acquisition of such equipment) relating to the acquisition of Equipment not exceeding the
lesser of cost or fair market value, not exceeding $100,000 in the aggregate during any
fiscal year, and so long as no Default Period is then in existence and none would exist
immediately after such acquisition; (v) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in accordance
with GAAP, provided the same have no priority over any of Wells Fargo’s security interests;
(vi) Liens existing on equipment at the time of its acquisition, provided that the Lien is
confined solely to the property so acquired and improvements thereon, and the proceeds of
such equipment; (vii) Liens to secure payment of workers’ compensation, employment
insurance, old age pensions, social security or other like obligations incurred in the
ordinary course of business; (viii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 6.1(h); (ix) Liens in
favor of other financial institutions arising in connection with accounts at such
institutions to secure standard fees for services, but not financing made available by such
institution; (x) carriers’ warehousemen’s, mechanics, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not delinquent or which are
being contested in good faith and by appropriate proceedings and for which Company
maintains adequate reserves in accordance with GAAP; (xi) leases or subleases and licenses
or sublicenses granted to others in the ordinary course of business which do not interfere
in any material respect with the business operations of Company or any applicable
Subsidiary; (xii) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customs duties in connection with the importation of goods; and
(xiii) Liens incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (ii) and (iv) above,
provided that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase.
	 
	(b)	 	Financing Statements. Company shall not authorize the filing of any financing
statement by any Person as Secured Party with respect to any of Company’s assets, other than
Wells Fargo or in connection with Permitted Liens. Company shall not amend any financing
statement filed by Wells Fargo as Secured Party except as permitted by law.
	 
	5.4	 	Indebtedness. Company shall not incur, create, assume or permit to exist any Debt, except:
(a) Indebtedness arising under this Agreement and the Ex-Im Credit Agreement; (b) Debt of
Company described on Exhibit F; (c) Debt

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	 	 	secured by Permitted Liens; and (d) inter-company unsecured Debt owing by Company to a
Subsidiary; provided, that, upon the request of Wells Fargo, such Debt shall be evidenced
by promissory notes having terms (including subordination terms) satisfactory to Wells
Fargo, the sole originally executed counterparts of which shall be pledged and delivered to
Wells Fargo as security for the Indebtedness. With respect to the Debt owing by Company to
American Medical Systems, Inc. that is described on Exhibit F (the “AMS Debt”), Company
shall make payments owing with respect to the AMS Debt when due (and in no event shall the
AMS Debt be prepaid) in accordance with the terms and conditions of the agreements
governing the AMS Debt that are in existence as of the Closing Date, except to the extent
such payments of the AMS Debt would be prohibited by the terms of the Subordination
Agreement entered into between American Medical Systems, Inc. and Wells Fargo. With
respect to any other Debt owing by Company to any Subordinated Creditor other than American
Medical Systems, Inc., Company may only make payments of interest and principal to the
extent such interest and/or principal payments are permitted under the terms and conditions
of the Subordination Agreement entered into by Wells Fargo and the relevant Subordinated
Creditor.
	 
	5.5	 	Guaranties. Company shall not assume, guarantee, endorse or otherwise become directly or
contingently liable for the obligations of any Person, except: (a) the endorsement of
negotiable instruments by Company for deposit or collection or similar transactions in the
ordinary course of business; (b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in existence on the date of
this Agreement and described in Exhibit F; and (c) Investments permitted under Section 5.6.
	 
	5.6	 	Investments and Subsidiaries. Company shall not make or permit to exist any loans or
advances to, any guaranties or other credit support for the benefit of, or make any investment
or acquire any interest whatsoever in (collectively, “Investments”), any Person or Affiliate,
including any partnership or joint venture, nor purchase or hold beneficially any stock or
other securities or evidence of indebtedness of any Person or Affiliate, except:
	 
	(a)	 	Investments in (i) direct obligations issued or unconditionally guaranteed by the United
States government and backed by the full faith and credit of the United States government;
(ii) certificates of deposit and time deposits, bankers’ acceptances and floating rate
certificates of deposit issued by any commercial bank organized under the laws of the United
States, any state thereof, the District of Columbia, any foreign bank, or its branches or
agencies, the long-term indebtedness of which institution at the time of acquisition is rated
A- (or better) by Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc. (“S&P”) or
A3 (or better) by Moody’s Investors Service, Inc. (“Moody’s”), and which certificates of
deposit and time deposits are fully protected against currency fluctuations for any such
deposits with a term of more than ninety (90) days; (iii) shares of money market, mutual or
similar funds having assets in excess of $100,000,000 and the investments of which are limited
to (a) investment grade securities (i.e., securities rated at least Baa by Moody’s or at least
BBB by S&P) and (b) commercial paper of United States and foreign banks and bank holding
companies and their subsidiaries and United States and foreign finance, commercial industrial
or utility companies which, at the time

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	 	 	of acquisition, are rated A-2 (or better) by S&P or P-2 (or better) by Moody’s (all such
institutions being, “Qualified Institutions”); and (iv) commercial paper of
Qualified Institutions; provided that the maturities of any of the foregoing
Investments shall not exceed three hundred sixty-five (365) days from the date of
acquisition thereof.
	 
	(b)	 	Travel advances or loans to Company’s Officers and employees not exceeding at any one time an
aggregate of $50,000;
	 
	(c)	 	Prepaid rent not exceeding one month or security deposits;
	 
	(d)	 	Current Investments in those Subsidiaries in existence on the date of this Agreement which
are identified on Exhibit D, and Investments in Subsidiaries after the Closing Date not to
exceed $250,000 in the aggregate. Except to the extent permitted in the immediately preceding
sentence, Company shall not make any further capital contributions or loans to any
Subsidiaries after the Closing Date, guarantee, otherwise become liable for, or provide any
other form of credit support for any obligations of any Subsidiaries after the Closing Date,
or transfer any assets to any Subsidiaries after the Closing Date;
	 
	(e)	 	Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and
other disputes with, customers or suppliers arising in the ordinary course of Company’s
business;
	 
	(f)	 	Investments consisting of accounts receivable of, notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates, in the
ordinary course of Company’s business; and
	 
	(g)	 	Other Investments by Company which do not exceed $250,000 in the aggregate in any fiscal
year.
	 
	5.7	 	Dividends and Distributions. Company shall not declare or pay any dividends (other than
dividends payable solely in Permitted Securities of Company on any class of its stock), or
make any payment on account of the purchase, redemption or retirement of any shares of its
stock, or other securities or evidence of its indebtedness or make any distribution regarding
its stock, either directly or indirectly; provided that Company may (i) make payments in lieu
of fractional shares in connection with any stock split or consolidation, (ii) repurchase
stock from directors, officers or employees in connection with employee benefit arrangements
or upon termination of employment in an amount not to exceed $100,000 in any fiscal year, and
(iii) retain stock in lieu of withholding obligations.
	 
	5.8	 	Salaries. [INTENTIONALLY OMITTED].
	 
	5.9	 	Key Person Life Insurance. [INTENTIONALLY OMITTED].

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	5.10	 	Books and Records; Collateral Examination; Inspection and Appraisals.
	 
	(a)	 	Books and Records; Inspection. Company shall keep complete and accurate books and
records with respect to the Collateral and Company’s business and financial condition and any
other matters that Wells Fargo may request, in accordance with GAAP. Company shall permit any
employee, attorney, accountant or other agent of Wells Fargo to audit, review, make extracts
from and copy any of its books and records at any time during ordinary business hours, and to
discuss Company’s affairs with any of its Directors, Officers, employees, Owners or agents.
	 
	(b)	 	Authorization to Company’s Agents to Make Disclosures to Wells Fargo. Company
authorizes all accountants and other Persons acting as its agent to disclose and deliver to
Wells Fargo’s employees, accountants, attorneys and other Persons acting as its agent, at
Company’s expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding Company.
	 
	(c)	 	Collateral Exams and Inspections. Company shall permit Wells Fargo’s employees,
accountants, attorneys or other Persons acting as its agent, to examine and inspect any
Collateral or any other property of Company at any time during ordinary business hours.
	 
	(d)	 	Collateral Appraisals. Wells Fargo may also obtain, from time to time, at Company’s
expense, an appraisal of the Collateral by an appraiser acceptable to Wells Fargo in its sole
discretion.
	 
	5.11	 	Account Verification; Payment of Permitted Liens.
	 
	(a)	 	Account Verification. Wells Fargo or its agents may (i) contact account debtors and
other obligors at any time to verify Company’s Accounts; and (ii) require Company to send
requests for verification of Accounts or send notices of assignment of Accounts to account
debtors and other obligors.
	 
	(b)	 	Covenant to Pay Permitted Liens. Company shall pay when due each account payable due
to any Person holding a Permitted Lien (as a result of such payable) on any Collateral.
	 
	5.12	 	Compliance with Laws.
	 
	(a)	 	General Compliance with Applicable Law; Use of Collateral. Company shall (i) comply,
and cause each Subsidiary to comply, with the requirements of applicable laws and regulations,
the non-compliance with which would have a Material Adverse Effect on its business or its
financial condition and (ii) use and keep the Collateral, and require that others use and keep
the Collateral, only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.
	 
	(b)	 	Compliance with Federal Regulatory Laws. Company shall (i) prohibit, and cause each
Subsidiary to prohibit, any Person that is an Owner or Officer from being listed on the
Specially Designated Nationals and Blocked Person List or

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	 	 	other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury or included in any Executive Orders, (ii) not permit the
proceeds of the Line of Credit or any other financial accommodation extended by Wells Fargo
to be used in any way that violates any foreign asset control regulations of OFAC or other
applicable law, (iii) comply, and cause each Subsidiary to comply, with all applicable Bank
Secrecy Act laws and regulations, as amended from time to time, and (iv) otherwise comply
with the USA Patriot Act and Wells Fargo’s related policies and procedures.
	 
	(c)	 	Compliance with Environmental Laws. Company shall (i) comply, and cause each
Subsidiary to comply, with the requirements of applicable Environmental Laws and obtain and
comply with all permits, licenses and similar approvals required by them, and (ii) not
generate, use, transport, treat, store or dispose of any Hazardous Substances in such a manner
as to create any material liability or obligation under the common law of any jurisdiction or
any Environmental Law.
	 
	5.13	 	Payment of Taxes and Other Claims. Company shall pay or discharge, when due, and cause each
Subsidiary to pay or discharge, when due, (a) all taxes, assessments and governmental charges
exceeding $25,000 in the aggregate that are levied or imposed upon it or upon its income or
profits, upon any properties belonging to it (including the Collateral), or upon or against
the creation, perfection or continuance of the Security Interest, prior to the date on which
penalties attach, (b) all federal, state and local taxes required to be withheld by it, and
(c) all lawful claims for labor, materials and supplies which, if unpaid, might by law become
a Lien upon any properties of Company, although Company shall not be required to pay any such
tax, assessment, charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which proper reserves have been made.
	 
	5.14	 	Maintenance of Collateral and Properties.
	 
	(a)	 	Company shall keep and maintain the Collateral and all of its other properties necessary or
useful in its business in good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any worn, defective or broken parts,
although Company may discontinue the operation and maintenance of any properties if Company
believes that such discontinuance is desirable to the conduct of its business and not
disadvantageous in any material respect to Wells Fargo. Company shall take all commercially
reasonable steps necessary to protect and maintain its Intellectual Property Rights.
	 
	(b)	 	Company shall defend the Collateral against all Liens, claims and demands of all third
Persons claiming any interest in the Collateral. Company shall keep all Collateral free and
clear of all Liens except Permitted Liens. Company shall take all commercially reasonable
steps necessary to prosecute any Person Infringing its Intellectual Property Rights and to
defend itself against any Person accusing it of Infringing any Person’s Intellectual Property
Rights.
	 
	5.15	 	Insurance. Company shall at all times maintain insurance with insurers acceptable to Wells
Fargo, in such amounts, on such terms (including any

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deductibles) and against such risks as Wells Fargo may require (which, at a minimum shall
be in such amounts and against such risks as are usually carried by companies engaged in
similar business and owning similar properties in the same geographical areas in which
Company operates). Without limiting the generality of the foregoing, Company shall, at all
times and without limitation, maintain business interruption insurance (including force
majeure coverage) and keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as Wells Fargo may reasonably request,
with any loss payable to Wells Fargo to the extent of its interest, and all such policies
of insurance shall contain a lender’s loss payable endorsement for the benefit of Wells
Fargo. All policies of liability insurance shall name Wells Fargo as an additional
insured.

	5.16	 	Preservation of Existence. Company shall preserve and maintain its existence and all of its
rights, privileges and franchises necessary or desirable in the normal conduct of its business
and shall conduct its business in an orderly, efficient and regular manner.
	 
	5.17	 	Delivery of Instruments, etc. Upon request by Wells Fargo, Company shall promptly deliver to
Wells Fargo in pledge all instruments, documents and chattel paper constituting Collateral,
endorsed or assigned by Company.
	 
	5.18	 	Sale or Transfer of Assets; Suspension of Business Operations. Company shall not sell,
lease, assign, transfer, license, or otherwise dispose of (each, a “Transfer”) (a) the stock
of any Subsidiary, (b) all or a substantial part of its assets, or (c) any Collateral or any
interest in Collateral (whether in one transaction or in a series of transactions) to any
other Person other than (i) the sale of Inventory in the ordinary course of business and the
licensing of Intellectual Property Rights in the ordinary course of its business in connection
with sales of Inventory or the provision of services to its customers, (ii) Transfers of
worn-out, obsolete or unneeded equipment, and (iii) Transfers constituting Permitted
Investments. Company shall not liquidate, dissolve or suspend business operations. Company
shall not permit its rights as licensee of Licensed Intellectual Property to lapse, except
that Company may transfer such rights or permit them to lapse if it has reasonably determined
that such Intellectual Property Rights are no longer useful in its business.
	 
	5.19	 	Consolidation and Merger; Asset Acquisitions. Company shall not consolidate with or merge
into any other entity, or permit any other entity to merge into it, or acquire (in a
transaction analogous in purpose or effect to a consolidation or merger) all or substantially
all of the assets of any other entity; provided that any Subsidiary of Company may merge with
and into Company so long as Company is the surviving entity.
	 
	5.20	 	Sale and Leaseback. Company shall not enter into any arrangement, directly or indirectly,
with any other Person pursuant to which Company shall sell or transfer any real or personal
property, whether owned now or acquired in the future, and then rent or lease all or part of
such property or any other property which Company intends to use for substantially the same
purpose or purposes

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	 	 	as the property being sold or transferred, except in connection with a financing that would
be permitted under Section 5.3(a)(iv).
	 
	5.21	 	Restrictions on Nature of Business. Company will not engage in any line of business
materially different from that presently engaged in by Company, and will not purchase, lease
or otherwise acquire assets not related to its business.
	 
	5.22	 	Accounting. Company will not adopt any material change in accounting principles except as
required by GAAP, consistently applied. Company will not change its fiscal year.
	 
	5.23	 	Discounts, etc. After notice from Wells Fargo, Company will not grant any discount, credit
or allowance to any customer of Company or accept any return of goods sold except in the
ordinary course of Company’s business. Company will not at any time modify, amend,
subordinate, cancel or terminate any Account except in the ordinary course of Company’s
business.
	 
	5.24	 	Pension Plans. Except as disclosed to Wells Fargo in a Record prior to the date of this
Agreement, neither Company nor any ERISA Affiliate will (a) adopt, create, assume or become
party to any Pension Plan, (b) become obligated to contribute to any Multiemployer Plan, (c)
incur any obligation to provide post-retirement medical or insurance benefits with respect to
employees or former employees (other than benefits required by law) or (d) amend any Plan in a
manner that would materially increase its funding obligations.
	 
	5.25	 	Place of Business; Name. Company will not transfer its chief executive office or principal
place of business, or move, relocate, close or sell any business Premises, without prior
written notice to Wells Fargo. Company will not change its name or jurisdiction of
organization without prior written notice to Wells Fargo.
	 
	5.26	 	Constituent Documents. Company will not amend its Constituent Documents.
	 
	5.27	 	Performance by Wells Fargo. If Company fails to perform or observe any of its obligations
under this Agreement at any time, Wells Fargo may, but need not, perform or observe them on
behalf of Company and may, but need not, take any other actions which Wells Fargo may
reasonably deem necessary to cure or correct this failure; and Company shall pay Wells Fargo
upon demand the amount of all costs and expenses (including reasonable attorneys’ fees and
legal expense) incurred by Wells Fargo in performing these obligations, together with interest
on these amounts at the Default Rate.
	 
	5.28	 	Wells Fargo Appointed as Company’s Attorney in Fact. To facilitate Wells Fargo’s performance
or observance of Company’s obligations under this Agreement, Company hereby irrevocably
appoints Wells Fargo and Wells Fargo’s agents, as Company’s attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) to create, prepare,
complete, execute, deliver, endorse or file on behalf of Company any instruments, documents,
assignments, security agreements, financing statements, applications for insurance and any
other agreements or any Record required to

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	 	 	be obtained, executed, delivered or endorsed by Company in accordance with the terms of
this Agreement.
	 
	6.	 	EVENTS OF DEFAULT AND REMEDIES
	 
	6.1	 	Events of Default. An “Event of Default” means any of the following:
	 
	(a)	 	Company fails to pay any the amount of any Indebtedness on the date that it becomes due and
payable;
	 
	(b)	 	Company fails to observe or perform any covenant or agreement of Company set forth in this
Agreement, in any of the Loan Documents, or in the Master Agreement for Treasury Management
Services, or any covenant in Section 5.2 becomes inapplicable due to the lapse of time, and
Wells Fargo and Company fail to come to an agreement acceptable to Wells Fargo in Wells
Fargo’s sole discretion to amend the covenant to apply to future periods;
	 
	(c)	 	An Overadvance arises as the result of any reduction in the Borrowing Base and the amount of
the Overadvance is not immediately repaid, or arises in any manner or on terms not otherwise
approved of in advance by Wells Fargo in a Record that it has Authenticated and the amount of
the Overadvance is not immediately repaid;
	 
	(d)	 	A Change of Control shall occur;
	 
	(e)	 	Company or any Guarantor becomes insolvent or admits in a Record an inability to pay debts as
they mature, or Company or any Guarantor makes an assignment for the benefit of creditors; or
Company or any Guarantor applies for or consents to the appointment of any receiver, trustee,
or similar officer for the benefit of Company or any Guarantor, or for any of their
properties; or any receiver, trustee or similar officer is appointed without the application
or consent of Company or such Guarantor and such appointment is not vacated within 30 days; or
any judgment, writ, warrant of attachment or execution or similar process is issued or levied
against a substantial part of the property of Company or any Guarantor and such process is not
vacated within 30 days;
	 
	(f)	 	Company or any Guarantor files a petition under any chapter of the United States Bankruptcy
Code or under the laws of any other jurisdiction naming Company or such Guarantor as debtor;
or any such petition is instituted against Company or any such Guarantor and such petition is
not dismissed within 30 days; or Company or any Guarantor institutes (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, debt
arrangement, dissolution, liquidation or similar proceeding under the laws of any
jurisdiction; or any such proceeding is instituted (by petition, application or otherwise)
against Company or any such Guarantor and such proceeding is not dismissed within 30 days;
	 
	(g)	 	Any representation or warranty made by Company in this Agreement or by any Guarantor in any
Guaranty, or by Company (or any of its Officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement delivered to Wells Fargo in
connection with this Agreement or

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	 	 	pursuant to such Guaranty is untrue or misleading in any material respect when delivered to
Wells Fargo;
	 
	(h)	 	A final, non-appealable arbitration award, judgment, or decree or order for the payment of
money in an amount in excess of $250,000 which is not insured or subject to indemnity, is
entered against Company which is not satisfied, stayed or appealed within 10 days;
	 
	(i)	 	Company is in default with respect to any bond, debenture, note or other evidence of
indebtedness in an amount in excess of $250,000 issued by Company that is held by any third
Person other than Wells Fargo, or under any instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any material lease or other
contract, and the applicable grace period, if any, has expired and the holder of such
indebtedness has the right to accelerate the maturity of such indebtedness;
	 
	(j)	 	Company fails to pay any indebtedness or obligation owed to Wells Fargo which is unrelated to
the Line of Credit or this Agreement as it becomes due and payable;
	 
	(k)	 	Any Guarantor repudiates or purports to revokes the Guarantor’s Guaranty, or fails to perform
any obligation under such Guaranty, or any individual Guarantor dies or becomes incapacitated,
or any other Guarantor ceases to exist for any reason;
	 
	(l)	 	Company engages in any act prohibited by any Subordination Agreement, or makes any payment on
Subordinated Indebtedness (as defined in the Subordination Agreement) or other debt or
obligations that in each case the Subordinated Creditor was not contractually entitled to
receive;
	 
	(m)	 	Any event or circumstance occurs that Wells Fargo in good faith believes may impair the
prospect of payment of all or part of the Indebtedness, or Company’s ability to perform
material obligations under any of the Loan Documents or the Master Agreement for Treasury
Management Services, or there occurs any material adverse change in the business or financial
condition of Company;
	 
	(n)	 	The chairman, president or chief financial officer of Company or any Owner of at least forty
percent (40%) of the issued and outstanding common stock or other equity interests of Company
is convicted of a felony under state or federal law;
	 
	(o)	 	Any Reportable Event, which Wells Fargo in good faith believes to constitute sufficient
grounds for termination of any Pension Plan or for the appointment of a trustee to administer
any Pension Plan, has occurred and is continuing 30 days after Company gives Wells Fargo a
Record notifying it of the Reportable Event; or a trustee is appointed by an appropriate court
to administer any Pension Plan; or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate or appoint a trustee to administer any Pension Plan; or Company or
any ERISA Affiliate files for a distress termination of any Pension Plan under Title IV of
ERISA; or Company or any ERISA Affiliate fails to make any quarterly Pension Plan contribution
required under Section

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	 	 	412(m) of the IRC, which Wells Fargo in good faith believes may, either by itself or in
combination with other failures, result in the imposition of a Lien on Company’s assets in
favor of the Pension Plan; or any withdrawal, partial withdrawal, reorganization or other
event occurs with respect to a Multiemployer Plan which could reasonably be expected to
result in a material liability by Company to the Multiemployer Plan under Title IV of
ERISA; or
	 
	(p)	 	Any “Event of Default” occurs under any of the Ex-Im Loan Documents.
	 
	6.2	 	Rights and Remedies. During any Default Period, Wells Fargo may in its discretion exercise
any or all of the following rights and remedies:
	 
	(a)	 	Wells Fargo may terminate the Line of Credit and decline to make Advances, and terminate any
services extended to Company under the Master Agreement for Treasury Management Services;
	 
	(b)	 	Wells Fargo may declare the Indebtedness to be immediately due and payable and accelerate
payment of the Revolving Note, and all Indebtedness shall immediately become due and payable,
without presentment, notice of dishonor, protest or further notice of any kind, all of which
Company hereby expressly waives;
	 
	(c)	 	Wells Fargo may, without notice to Company, apply any money owing by Wells Fargo to Company
to payment of the Indebtedness;
	 
	(d)	 	Wells Fargo may exercise and enforce any rights and remedies available upon default to a
secured party under the UCC, including the right to take possession of Collateral, proceeding
with or without judicial process (without a prior hearing or notice of hearing, which Company
hereby expressly waives) and sell, lease or otherwise dispose of Collateral for cash or on
credit (with or without giving warranties as to condition, fitness, merchantability or title
to Collateral, and in the event of a credit sale, Indebtedness shall be reduced only to the
extent that payments are actually received), and Company will upon Wells Fargo’s demand
assemble the Collateral and make it available to Wells Fargo at any place designated by Wells
Fargo which is reasonably convenient to both parties;
	 
	(e)	 	Wells Fargo may exercise and enforce its rights and remedies under any of the Loan Documents;
	 
	(f)	 	Company will pay Wells Fargo upon demand in immediately available funds an amount equal to
the Aggregate Face Amount plus any anticipated costs and fees for deposit to the Special
Account pursuant to Section 1.10;
	 
	(g)	 	Wells Fargo may for any reason apply for the appointment of a receiver of the Collateral, to
which appointment Company hereby consents; and
	 
	(h)	 	Wells Fargo may exercise any other rights and remedies available to it by law or agreement.
	 
	6.3	 	Immediate Default and Acceleration. Following the occurrence of an Event of Default
described in Section 6.1(e) or (f), the Line of Credit shall immediately

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	 	 	terminate and all of Company’s Indebtedness shall immediately become due and payable
without presentment, demand, protest or notice of any kind.
	 
	7.	 	MISCELLANEOUS
	 
	7.1	 	No Waiver; Cumulative Remedies. No delay or any single or partial exercise by Wells Fargo of
any right, power or remedy under the Loan Documents shall constitute a waiver of any other
right, power or remedy under the Loan Documents. No notice to or demand on Company in any
circumstance shall entitle Company to any additional notice or demand in any other
circumstances. The remedies provided in the Loan Documents are cumulative and not exclusive
of any remedies provided by law. Wells Fargo may comply with applicable law in connection
with a disposition of Collateral, and such compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral.
	 
	7.2	 	Amendment of Loan Documents; Consents and Waivers; Authentication. No amendment or
modification of any Loan Documents, or consent to or waiver of any Event of Default, or
consent to or waiver of the application of any covenant or representation set forth in any of
the Loan Documents, or any release of Wells Fargo’s Security Interest in any Collateral, shall
be effective unless it has been agreed to by Wells Fargo and memorialized in a Record that:
(a) specifically states that it is intended to amend or modify specific Loan Documents, or
waive any Event of Default or the application of any covenant or representation of any terms
of specific Loan Documents, or is intended to release Wells Fargo’s Security Interest in
specific Collateral; and (b) is Authenticated by the signature of an authorized employee of
both parties, or by an authorized employee of Wells Fargo with respect to a consent or waiver.
The terms of an amendment, consent or waiver memorialized in any Record shall be effective
only to the extent, and in the specific instance, and for the limited purpose to which Wells
Fargo has agreed.
	 
	7.3	 	Execution in Counterparts; Delivery of Counterparts. This Agreement and all other Loan
Documents, and any amendment or modification to them may be Authenticated by the parties in
any number of counterparts, each of which, once authenticated and delivered in accordance with
the terms of this Section 7.3, will be deemed an original, and all such counterparts, taken
together, shall constitute one and the same instrument. Delivery by fax or by encrypted
e-mail or e-mail file attachment of any counterpart to any Loan Document Authenticated by an
authorized signature will be deemed the equivalent of the delivery of the original
Authenticated instrument. Company shall send the original Authenticated counterpart to Wells
Fargo by first class U.S. mail or by overnight courier, but Company’s failure to deliver a
Record in this form shall not affect the validity, enforceability, and binding effect of this
Agreement or the other Loan Documents.
	 
	7.4	 	Notices, Requests, and Communications; Confidentiality. Except as otherwise expressly
provided in this Agreement:
	 
	(a)	 	Delivery of Notices, Requests and Communications. Any notice, request, demand, or
other communication by either party that is required under the Loan

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	 	 	Documents to be in the form of a Record (but excluding any Record containing information
Company must report to Wells Fargo under Section 5.1) may be delivered (i) in person,
(ii) by first class U.S. mail, (iii) by overnight courier of national reputation, or (iv)
by fax, or the Record may be sent as an Electronic Record and delivered (v) by an encrypted
e-mail, or (vi) through Wells Fargo’s Commercial Electronic Office® (“CEO®”) portal or
other secure electronic channel to which the parties have agreed.
	 
	(b)	 	Addresses for Delivery. Delivery of any Record under this Section 7.4 shall be made
to the appropriate address set forth on the last page of this Agreement (which either party
may modify by a Record sent to the other party), or through Wells Fargo’s CEO portal or other
secure electronic channel to which the parties have agreed.
	 
	(c)	 	Date of Receipt. Each Record sent pursuant to the terms of this Section 7.4 will be
deemed to have been received on (i) the date of delivery if delivered in person, (ii) the date
deposited in the mail if sent by mail, (iii) the date delivered to the courier if sent by
overnight courier, (iv) the date of transmission if sent by fax, or (v) the date of
transmission, if sent as an Electronic Record by electronic mail or through Wells Fargo’s CEO
portal or similar secure electronic channel to which the parties have agreed; except
that any request for an Advance or any other notice, request, demand or other
communication from Company required under Section 1, and any request for an accounting under
Section 9-210 of the UCC, will not be deemed to have been received until actual receipt by
Wells Fargo on a Business Day by an authorized employee of Wells Fargo.
	 
	(d)	 	Confidentiality of Unencrypted E-mail. Company acknowledges that if it sends an
Electronic Record to Wells Fargo without encryption by e-mail or as an e-mail file attachment,
there is a risk that the Electronic Record may be received by unauthorized Persons, and that
by so doing it will be deemed to have accepted this risk and the consequences of any such
unauthorized disclosure.
	 
	7.5	 	Company Information Reporting; Confidentiality. Except as otherwise expressly provided in
this Agreement:
	 
	(a)	 	Delivery of Company Information Records. Any information that Company is required to
deliver under Section 5.1 in the form of a Record may be delivered to Wells Fargo (i) in
person, or by (ii) first class U.S. mail, (iii) overnight courier of national reputation, or
(iv) fax, or the Record may be sent as an Electronic Record (v) by encrypted e-mail, or (vi)
through the file upload service of Wells Fargo’s CEO portal or other secure electronic channel
to which the parties have agreed.
	 
	(b)	 	Addresses for Delivery. Delivery of any Record to Wells Fargo under this Section 7.5
shall be made to the appropriate address set forth on the last page of this Agreement (which
Wells Fargo may modify by a Record sent to Company), or through Wells Fargo’s CEO portal or
other secure electronic channel to which the parties have agreed.
	 
	(c)	 	Date of Receipt. Each Record sent pursuant to this Section will be deemed to have
been received on (i) the date of delivery to an authorized employee of

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	 	 	Wells Fargo, if delivered in person, or by U.S. mail, overnight courier, fax, or e-mail; or
(ii) the date of transmission, if sent as an Electronic Record through Wells Fargo’s CEO
portal or similar secure electronic channel to which the parties have agreed.
	 
	(d)	 	Authentication of Company Information Records. Company shall Authenticate any Record
delivered (i) in person, or by U.S. mail, overnight courier, or fax, by the signature of the
Officer or employee of Company who prepared the Record; (ii) as an Electronic Record sent via
encrypted e-mail, by the signature of the Officer or employee of Company who prepared the
Record by any file format signature that is acceptable to Wells Fargo, or by a separate
certification signed and sent by fax; or (iii) as an Electronic Record via the file upload
service of Wells Fargo’s CEO portal or similar secure electronic channel to which the parties
have agreed, through such credentialing process as Wells Fargo and Company may agree to under
the CEO agreement.
	 
	(e)	 	Certification of Company Information Records. Any Record (including any Electronic
Record) Authenticated and delivered to Wells Fargo under this Section 7.5 will be deemed to
have been certified as materially true, correct, and complete by Company and each Officer or
employee of Company who prepared and Authenticated the Record on behalf of Company, and may be
legally relied upon by Wells Fargo without regard to method of delivery or transmission.
	 
	(f)	 	Confidentiality of Company Information Records Sent by Unencrypted E-mail. Company
acknowledges that if it sends an Electronic Record to Wells Fargo without encryption by e-mail
or as an e-mail file attachment, there is a risk that the Electronic Record may be received by
unauthorized Persons, and that by so doing it will be deemed to have accepted this risk and
the consequences of any such unauthorized disclosure. Company acknowledges that it may
deliver Electronic Records containing Company information to Wells Fargo by e-mail pursuant to
any encryption tool acceptable to Wells Fargo and Company, or through Wells Fargo’s CEO portal
file upload service without risk of unauthorized disclosure.
	 
	7.6	 	Further Documents. Company will from time to time execute, deliver, endorse and authorize
the filing of any instruments, documents, conveyances, assignments, security agreements,
financing statements, control agreements and other agreements that Wells Fargo may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or Wells Fargo’s
rights under the Loan Documents (but any failure to request or assure that Company executes,
delivers, endorses or authorizes the filing of any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).
	 
	7.7	 	Costs and Expenses. Company shall pay on demand all costs and expenses, including reasonable
attorneys’ fees, incurred by Wells Fargo in connection with the Indebtedness, this Agreement,
the Loan Documents, or any other document or agreement related to this Agreement, and the
transactions contemplated by this Agreement, including all such costs, expenses and fees
incurred in

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	 	 	connection with the negotiation, preparation, execution, amendment, administration,
performance, collection and enforcement of the Indebtedness and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure or
enforcement of the Security Interest.
	 
	7.8	 	Indemnity. In addition to its obligation to pay Wells Fargo’s expenses under the terms of
this Agreement, Company shall indemnify, defend and hold harmless Wells Fargo, its parent
Wells Fargo & Company, and any of its affiliates and successors, and all of their present and
future Officers, Directors, employees, attorneys and agents (the “Indemnitees”) from and
against any of the following (collectively, “Indemnified Liabilities”):
	 
	(a)	 	Any and all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan Documents or the
making of the Advances;
	 
	(b)	 	Any claims, loss or damage to which any Indemnitee may be subjected if any representation or
warranty contained in Exhibit D proves to be incorrect in any respect or as a result of any
violation of the covenants contained in Section 5.12; and
	 
	(c)	 	Any and all other liabilities, losses, damages, penalties, judgments, suits, claims, costs
and expenses of any kind or nature whatsoever (including the reasonable fees and disbursements
of counsel) in connection with this Agreement and any other investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be designated a party to such
proceedings, which may be imposed on, incurred by or asserted against any such Indemnitee, in
any manner related to or arising out of or in connection with the making of the Advances and
the Loan Documents or the use or intended use of the proceeds of the Advances, with the
exception of any Indemnified Liability caused by the gross negligence or willful misconduct of
an Indemnitee.
	 
	 	 	If any investigative, judicial or administrative proceeding described in this Section is
brought against any Indemnitee, upon the Indemnitee’s request, Company, or counsel
designated by Company and satisfactory to the Indemnitee, will resist and defend the
action, suit or proceeding to the extent and in the manner directed by the Indemnitee, at
Company’s sole cost and expense. Each Indemnitee will use its best efforts to cooperate in
the defense of any such action, suit or proceeding. If this agreement to indemnify is held
to be unenforceable because it violates any law or public policy, Company shall
nevertheless make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities to the extent permissible under applicable law. Company’s
obligations under this Section shall survive the termination of this Agreement and the
discharge of Company’s other obligations under this Agreement.
	 
	7.9	 	Retention of Company’s Records. Wells Fargo shall have no obligation to maintain Electronic
Records or retain any documents, schedules, invoices, agings, or other Records delivered to
Wells Fargo by Company in connection with the Loan Documents for more than 30 days after
receipt by Wells Fargo. If there is a special need to retain specific Records, Company must
notify Wells

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	 	 	Fargo of its need to retain or return such Records with particularity, which notice must be
delivered to Wells Fargo in accordance with the terms of this Agreement at the time of the
initial delivery of the Record to Wells Fargo.
	 
	7.10	 	Binding Effect; Assignment; Complete Agreement. The Loan Documents shall be binding upon and
inure to the benefit of Company and Wells Fargo and their respective successors and assigns,
except that Company shall not have the right to assign its rights under this Agreement or any
interest in this Agreement without Wells Fargo’s prior consent, which must be confirmed in a
Record Authenticated by Wells Fargo. To the extent permitted by law, Company waives and will
not assert against any assignee any claims, defenses or set-offs which Company could assert
against Wells Fargo. This Agreement shall also bind all Persons who become a party to this
Agreement as a borrower. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter of this Agreement and
supersedes all prior agreements, whether oral or evidenced in a Record. To the extent that
any provision of this Agreement contradicts other provisions of the Loan Documents other than
this Agreement, this Agreement shall control.
	 
	7.11	 	Sharing of Information. Wells Fargo may share any information that it may have regarding
Company and its Affiliates with its accountants, lawyers, and other advisors, and Wells Fargo
and each direct and indirect subsidiary of Wells Fargo & Company may also share any
information that they have with each other, and Company waives any right of confidentiality it
may have with respect to the sharing of all such information.
	 
	7.12	 	Severability of Provisions. Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining terms of this Agreement.
	 
	7.13	 	Headings. Section and subsection headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other purpose.
	 
	7.14	 	Governing Law; Jurisdiction, Venue. The Loan Documents shall be governed by and construed in
accordance with the substantive laws (other than conflict laws) of the State of California.
The parties to this Agreement (a) consent to the personal jurisdiction of the state and
federal courts located in the State of California in connection with any controversy related
to this Agreement; (b) waive any argument that venue in any such forum is not convenient;
(c) agree that any litigation initiated by Wells Fargo or Company in connection with this
Agreement or the other Loan Documents may be venued in either the state or federal courts
located in the City of Los Angeles, County of Los Angeles, State of California; and (d) agree
that a final judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by
law.
	 
	7.15	 	Arbitration.
	 
	(a)	 	Arbitration. The parties hereto agree, upon demand by any party, to submit to binding
arbitration all claims, disputes and controversies between or among

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	 	 	them (and their respective employees, officers, directors, attorneys, and other agents),
whether in tort, contract or otherwise arising out of or relating to in any way (i) the
loan and related Loan Documents which are the subject of this Agreement and its
negotiation, execution, collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement, default or termination; or
(ii) requests for additional credit.
	 
	(b)	 	Governing Rules. Any arbitration proceeding will (i) proceed in a location in California
selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of
law provision in any of the documents between the parties; and (iii) be conducted by the AAA,
or such other administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the
arbitration shall be conducted in accordance with the AAA’s optional procedures for large,
complex commercial disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as applicable, as the
“Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any dispute. Nothing contained herein shall
be deemed to be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. §91 or any similar applicable state law.
	 
	(c)	 	No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement
does not limit the right of any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral
such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as
replevin, injunctive relief, attachment or the appointment of a receiver, before during or
after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver
of the right or obligation of any party to submit any dispute to arbitration or reference
hereunder, including those arising from the exercise of the actions detailed in sections (i),
(ii) and (iii) of this paragraph.
	 
	(d)	 	Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according
to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in
which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a
panel of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state or federal
judiciary of California, in either case with a minimum of ten years experience in the
substantive law applicable to the subject matter of the dispute to be arbitrated. The
arbitrator will determine whether or not an issue is arbitratable and will give effect to the
statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator
will decide (by documents

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	 	 	only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are
similar to motions to dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance with the substantive
law of California and may grant any remedy or relief that a court of such state could order
or grant within the scope hereof and such ancillary relief as is necessary to make
effective any award. The arbitrator shall also have the power to award recovery of all
costs and fees, to impose sanctions and to take such other action as the arbitrator deems
necessary to the same extent a judge could pursuant to the Federal Rules of Civil
Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon
the award rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party contests
such action for judicial relief.
	 
	(e)	 	Discovery. In any arbitration proceeding discovery will be permitted in accordance with the
Rules. All discovery shall be expressly limited to matters directly relevant to the dispute
being arbitrated and must be completed no later than 20 days before the hearing date and
within 180 days of the filing of the dispute with the AAA. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is available.
	 
	(f)	 	Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the
terms of this Agreement shall be determined by a separate arbitration proceeding and such
dispute shall not be consolidated with other disputes or included in any class proceeding.
	 
	(g)	 	Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of
the arbitration proceeding.
	 
	(h)	 	Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the
contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness
secured directly or indirectly, in whole or in part, by any real property unless (i) the
holder of the mortgage, lien or security interest specifically elects in writing to proceed
with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that
might accrue to them by virtue of the single action rule statute of California, thereby
agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and
security interests securing such indebtedness and obligations, shall remain fully valid and
enforceable. If any such dispute is not submitted to arbitration, the dispute shall be
referred to a referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically enforceable in
accordance with said Section 638. A referee with the qualifications required herein for
arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the
decision rendered by a referee shall be entered in the court in which such proceeding

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	 	 	was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
	 
	(i)	 	Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties
shall take all action required to conclude any arbitration proceeding within 180 days of the
filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding
may disclose the existence, content or results thereof, except for disclosures of information
by a party required in the ordinary course of its business or by applicable law or regulation.
If more than one agreement for arbitration by or between the parties potentially applies to a
dispute, the arbitration provision most directly related to the Loan Documents or the subject
matter of the dispute shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the Loan Documents or any relationship between the parties.

[signatures on next page]

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COMPANY AND WELLS FARGO HAVE EXECUTED THIS AGREEMENT THROUGH THEIR AUTHORIZED OFFICERS AS OF THE
DATE SET FORTH ABOVE.

	 	 	 
	WELLS FARGO BANK,	 	IRIDEX CORPORATION
	NATIONAL ASSOCIATION	 	 
	 	 	 
	By:            /s/ Jorge Visitacion	 	By:            /s/ James Mackaness
	 
	 	 

	Print
Name:      Jorge Visitacion	 	Print Name:        James Mackaness
	 
	 	 

	Title:        AVP
+ Relationship Manager	 	Title:                           CFO
	 
	 	 

	 	 	 
	Wells Fargo Bank, National Association	 	IRIDEX Corporation
	245 Los Robles Avenue, Suite 700	 	1212 Terra Bella Avenue
	Pasadena, California 91101	 	Mountain View, California 94043
	Fax: 626.844.9063	 	Fax:                                                     
	Attention: Jorge Visitacion	 	Attention: James Mackaness
	e-mail: jorge.c.visitacion@wellsfargo.com 	 	e-mail:                                                   
	 	 	 
	 	 	Federal Employer
	 	 	Identification No.:                                              
	 	 	 
	 	 	Organizational

 Identification No.:                                                         

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Exhibit A to Credit and Security Agreement

DEFINITIONS

“Account Funds” is defined in Section 1.4(a).

“Accounts” shall have the meaning given it under the UCC.

“Advance” and “Advances” means an advance or advances under the Line of Credit.

“Affiliate” or “Affiliates” means any Person controlled by, controlling or under common control
with Company, including any Subsidiary of Company. For purposes of this definition, “control,”
when used with respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

“Aggregate Face Amount” means the aggregate amount that may then be drawn under each outstanding
Letter of Credit, assuming compliance with all conditions for drawing.

“Agreement” means this Credit and Security Agreement.

“Authenticated” means (a) to have signed; or (b) to have executed or to have otherwise adopted a
symbol, or have encrypted or similarly processed a Record in whole or in part, with the present
intent of the authenticating Person to identify the Person and adopt or accept a Record.

“Borrowing Base” is defined in Section 1.2(a).

“Borrowing Base Reserve” means, as of any date of determination, an amount or a percent of a
specified category or item that Wells Fargo establishes in its sole discretion from time to time to
reduce availability under the Borrowing Base (a) to reflect events, conditions, contingencies or
risks which affect the assets, business or prospects of Company, or the Collateral or its value, or
the enforceability, perfection or priority of Wells Fargo’s Security Interest in the Collateral, as
the term “Collateral” is defined in this Agreement, or (b) to reflect Wells Fargo’s judgment that
any collateral report or financial information relating to Company and furnished to Wells Fargo may
be incomplete, inaccurate or misleading in any material respect.

“Business Day” means a day on which the Federal Reserve Bank of New York is open for business and,
if such day relates to a LIBOR Advance, a day on which dealings are carried on in the London
interbank eurodollar market.

“Capital Expenditures” means for a period, any expenditure of money during such period for the
lease, purchase or other acquisition of any capital asset, or for the lease of any other asset
whether payable currently or in the future.

“CEO” is defined in Section 7.4(a).

“Change of Control” means the occurrence of any of the following events:

	(a)	 	Any Person or “group” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, except that any such

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	 	 	Person, entity or group will be deemed to have “beneficial ownership” of all securities that
such Person, entity or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more than
thirty-three and one-third percent (33.33%) of the voting power of all classes of ownership
of Company;
	 
	(b)	 	During any consecutive two-year period, individuals who at the beginning of such period
constituted the board of Directors of Company (together with any new Directors whose election
to such board of Directors, or whose nomination for election by the Owners of Company, was
approved by a vote of two thirds of the Directors then still in office who were either
Directors at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the board of
Directors of Company then in office.

“Collateral” means all of Company’s Accounts, chattel paper and electronic chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods, instruments, Inventory, Investment
Property, letter-of-credit rights, letters of credit, all sums on deposit in any Collection
Account, and any items in any Lockbox; together with (a) all substitutions and replacements for and
products of such property; (b) in the case of all goods, all accessions; (c) all accessories,
attachments, parts, Equipment and repairs now or subsequently attached or affixed to or used in
connection with any goods; (d) all warehouse receipts, bills of lading and other documents of title
that cover such goods now or in the future; (e) all collateral subject to the Lien of any of the
Security Documents; (f) any money, or other assets of Company that come into the possession,
custody, or control of Wells Fargo now or in the future; (g) Proceeds of any of the above
Collateral; (h) books and records of Company, including all mail or e-mail addressed to Company;
and (i) all of the above Collateral, whether now owned or existing or acquired now or in the future
or in which Company has rights now or in the future; provided, however, that the term “Collateral”
shall not include more than 66% of the stock of any Subsidiary that is a “controlled foreign
corporation” as defined in the U.S. Internal Revenue Code.

“Closing Date” is defined in Section 3.1.

“Collection Account” means “Collection Account” as defined in the Master Agreement for Treasury
Management Services and related Lockbox and Collection Account Service Description or Collection
Account Service Description, whichever is applicable. .

“Compliance Certificate” is defined in Section 5.1(a) and is in the form of Exhibit E.

“Commercial Letter of Credit Agreement” means an agreement governing the issuance of documentary
letters of credit entered into between Company as applicant and Wells Fargo as issuer.

“Constituent Documents” means with respect to any Person, as applicable, that Person’s certificate
of incorporation, articles of incorporation, by-laws, certificate of formation, articles of
organization, limited liability company agreement, management agreement, operating agreement,
shareholder agreement, partnership agreement or similar document or agreement governing such
Person’s existence, organization or management or concerning disposition of ownership interests of
such Person or voting rights among such Person’s owners.

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“Current Maturities of Long Term Debt” means, during a period beginning and ending on designated
dates, the amount of Company’s long-term debt and capitalized leases which become due during that
period.

“Debt” means, as applied to any Person, (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, hedges, derivatives, or other
financial products, (c) all obligations as a lessee under leases required to be capitalized in
accordance with GAAP, (d) all obligations or liabilities of others secured by a Lien on any asset
of such Person or its Subsidiaries, irrespective of whether such obligation or liability is
assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other
than trade payables incurred in the ordinary course of business and repayable in accordance with
customary trade practices), (f) all obligations of such Person owing under swap, cap, floor, collar
or similar hedging arrangements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse)
any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through
(f) above.

“Debt Service Coverage Ratio” means (a) the sum of (i) Funds from Operations, plus (ii) Interest
Expense, minus (iii) unfinanced Capital Expenditures, plus (iv) to the extent not included in Net
Income, cash payments received by Company under that certain Settlement Agreement, dated April 6,
2007, among Company, Synergetics, Inc., and Synergetics USA, Inc., divided by (b) the sum of
(i) monthly contractual debt payments paid or payable to American Medical Systems, (ii) other
Current Maturities of Long Term Debt, (iii) Interest Expense, (iv) any cash dividends or
distributions paid or payable, and (v) any amounts paid to redeem or repurchase stock or other
equity interests of Company.

“Default Period” is defined in Section 1.6(c).

“Default Rate” is defined in Section 1.6(c).

“Dilution” means, as of any date of determination, a percentage, based upon the prior six (6)
months, which is the result of dividing (a) actual bad debt write-downs, discounts, advertising
allowances, credits, and any other items with respect to the Accounts determined to be dilutive by
Wells Fargo in its sole discretion during this period, by (b) Company’s net sales during such
period (excluding extraordinary items) plus the amount of clause (a).

“Director” means a director if Company is a corporation.

“Dollars” or “$” shall mean the lawful currency of the United States.

“Earnings Before Taxes, Depreciation, and Amortization” means Company’s pretax earnings from
operations, excluding extraordinary gains, but including extraordinary losses, as determined prior
to deduction for depreciation and amortization.

“Electronic Record” means a Record that is created, generated, sent, communicated, received, or
stored by electronic means, but does not include any Record that is sent, communicated, or
received by fax.

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“Eligible Accounts” means all unpaid Accounts of Company arising from the sale or lease of goods or
the performance of services, net of any credits, but excluding any Accounts having any of the
following characteristics:

	(a)	 	That portion of Accounts unpaid 90 days or more after the invoice date;
	 
	(b)	 	That portion of Accounts related to goods or services with respect to which Company has
received notice of a claim or dispute, which are subject to a claim of offset or a contra
account, or which reflect a reasonable reserve for warranty claims or returns;
	 
	(c)	 	That portion of Accounts not yet earned by the final delivery of goods or that portion of
Accounts not yet earned by the final rendition of services by Company to the account debtor,
including with respect to both goods and services, progress billings, and that portion of
Accounts for which an invoice has not been sent to the applicable account debtor;
	 
	(d)	 	Accounts owed by any unit of government, whether foreign or domestic (except that there shall
be included in Eligible Accounts that portion of Accounts owed by such units of government for
which Company has provided evidence satisfactory to Wells Fargo that (i) Wells Fargo’s
Security Interest constitutes a perfected first priority Lien in such Accounts, and (ii) such
Accounts may be enforced by Wells Fargo directly against such unit of government under all
applicable laws);
	 
	(e)	 	Accounts denominated in any currency other than United States Dollars;
	 
	(f)	 	Accounts owed by an account debtor located outside the United States or Canada which are not
(i) backed by a bank letter of credit naming Wells Fargo as beneficiary or assigned to Wells
Fargo, in Wells Fargo’s possession or control, and with respect to which a control agreement
concerning the letter-of-credit rights is in effect, and acceptable to Wells Fargo in all
respects, in its sole discretion, or (ii) covered by a foreign receivables insurance policy
acceptable to Wells Fargo in its sole discretion;
	 
	(g)	 	Accounts owed by an account debtor that is insolvent, the subject of bankruptcy proceedings
or has gone out of business;
	 
	(h)	 	Accounts owed by an Owner, Subsidiary, Affiliate, Officer or employee of Company;
	 
	(i)	 	Accounts not subject to the Security Interest or which are subject to any Lien in favor of
any Person other than Wells Fargo;
	 
	(j)	 	That portion of Accounts that has been restructured, extended, amended or modified;
	 
	(k)	 	That portion of Accounts that constitutes advertising, finance charges, service charges or
sales or excise taxes;
	 
	(l)	 	That portion of Accounts owed by an account debtor, regardless of whether otherwise eligible,
to the extent that the aggregate balance of such Accounts exceeds 15% of the aggregate amount
of all Eligible Accounts;

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	(m)	 	Accounts owed by an account debtor, regardless of whether otherwise eligible, if 25% or more
of the total amount of Accounts due from such debtor is ineligible under clauses (a), (b), or
(k) above;
	 
	(n)	 	Any Accounts deemed to be “Eligible Accounts” under the Ex-Im Credit Agreement; and
	 
	(o)	 	Accounts, or portions of Accounts, otherwise deemed ineligible by Wells Fargo in its sole
discretion.

“Eligible Inventory” means all Inventory of Company, valued at the lower of cost or market in
accordance with GAAP; but excluding Inventory having any of the following characteristics:

	(a)	 	Inventory that is: in-transit; located at any warehouse, job site or other premises not
approved by Wells Fargo in an Authenticated Record delivered to Company; not subject to a
perfected first priority Lien in Wells Fargo’s favor; subject to any Lien or encumbrance that
is subordinate to Wells Fargo’s first priority Lien; covered by any negotiable or
non-negotiable warehouse receipt, bill of lading or other document of title; on consignment
from any consignor; or on consignment to any consignee or subject to any bailment unless the
consignee or bailee has executed an agreement with Wells Fargo;
	 
	(b)	 	Supplies, packaging, parts or sample Inventory, or customer supplied parts or Inventory;
	 
	(c)	 	Work-in-process Inventory;
	 
	(d)	 	Inventory that is damaged, defective, obsolete, slow moving or not currently saleable in the
normal course of Company’s operations, or the amount of such Inventory that has been reduced
by shrinkage;
	 
	(e)	 	Inventory that Company has returned, has attempted to return, is in the process of returning
or intends to return to the vendor of the Inventory;
	 
	(f)	 	Inventory that is perishable or live;
	 
	(g)	 	Inventory manufactured by Company pursuant to a license unless the applicable licensor has
agreed in a Record that has been Authenticated by licensor to permit Wells Fargo to exercise
its rights and remedies against such Inventory;
	 
	(h)	 	Inventory that is subject to a Lien in favor of any Person other than Wells Fargo;
	 
	(i)	 	Inventory stored at locations holding less than 10% of the aggregate value of Company’s
Inventory;
	 
	(j)	 	Inventory that is deemed to be “Eligible Inventory” under the Ex-Im Credit Agreement; and
	 
	(k)	 	Inventory otherwise deemed ineligible by Wells Fargo in its sole discretion.

“Environmental Law” means any federal, state, local or other governmental statute, regulation, law
or ordinance dealing with the protection of human health and the environment.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 5

 

“Equipment” shall have the meaning given it under the Uniform Commercial Code in effect in the
state whose laws govern this Agreement.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of a
group which includes Company and which is treated as a single employer under Section 414 of the
IRC.

“Event of Default” is defined in Section 6.1.

“Ex-Im Credit Agreement” means that certain Credit and Security Agreement (Ex-Im Subfacility),
between the Company and Wells Fargo of even date with this Agreement.

“Ex-Im Loan Documents” means the Ex-Im Credit Agreement and all other documents, agreements,
instruments, and certificates now or hereafter executed or provided in connection with the Ex-Im
Credit Agreement.

“Floating Rate” is defined in Section 1.6(a).

“Floating Rate Advance” means an Advance bearing interest at the Floating Rate.

“Funds from Operations” means for a given period, the sum of (a) Net Income, (b) depreciation and
amortization, (c) stock-based compensation expenses, (d) any increase (or decrease) in lifo
reserves, each as determined for such period in accordance with GAAP, and (e) during the period
April 1, 2008 to December 31, 2008, an amount equal to the value (based on cost) of inventory sold
during the relevant measurement period, less an amount equal to the product of the applicable
advance rate (set forth in Section 1.2) for such inventory multiplied by such inventory sold.

“GAAP” means generally accepted accounting principles, applied on a basis consistent with the
accounting practices applied in the financial statements described on Exhibit D.

“General Intangibles” shall have the meaning given it under the UCC.

“Guarantor(s)” means any Person now or in the future guaranteeing the Indebtedness through the
issuance of a Guaranty.

“Guaranty” means an unconditional continuing guaranty executed by a Guarantor in favor of Wells
Fargo (if more than one, the “Guaranties”).

“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed
in, regulated by or identified in any Environmental Law.

“Indebtedness” is used in its most comprehensive sense and means any debts, obligations and
liabilities of Company to Wells Fargo, whether incurred in the past, present or future, whether
voluntary or involuntary, and however arising, and whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and including without limitation
indebtedness arising under any swap, derivative, foreign exchange, hedge, deposit,

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 6

 

treasury management or any similar transaction or arrangement that Company may enter into at any
time with Wells Fargo or with Wells Fargo Merchant Services, L.L.C., whether or not Company may be
liable individually or jointly with others, or whether recovery upon such Indebtedness may
subsequently become unenforceable.

“Indemnified Liabilities” is defined in Section 7.8.

“Indemnitees” is defined in Section 7.8.

“Infringement” or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.

“Intellectual Property Rights” means all actual or prospective rights arising in connection with
any intellectual property or other proprietary rights, including all rights arising in connection
with copyrights, patents, service marks, trade dress, trade secrets, trademarks, trade names or
mask works.

“Interest Expense” means for any period, Company’s total gross interest expense during such period
(excluding interest income), and shall in any event include (a) interest expensed (whether or not
paid) on all Debt, (b) the amortization of debt discounts, (c) the amortization of all fees payable
in connection with the incurrence of Debt to the extent included in interest expense, and (d) the
portion of any capitalized lease obligation allocable to interest expense.

“Interest Payment Date” is defined in Section 1.8(a).

“Interest Period” means the period that commences on (and includes) the Business Day on which
either a LIBOR Advance is made or continued or on which a Floating Rate Advance is converted to a
LIBOR Advance, and ending on (but excluding) the Business Day numerically corresponding to that
date that falls the number of months afterward as selected by Company pursuant to Section 1.3A,
during which period the outstanding principal amount of the LIBOR Advance shall bear interest at
the LIBOR Advance Rate; provided, however, that:

	(a)	 	If an Interest Period would otherwise end on a day which is not a Business Day, then it shall
end on the next Business Day, unless that day is the first Business Day of a month, in which
case the Interest Period shall end on the last Business Day of the preceding month;
	 
	(b)	 	No Interest Period applicable to an Advance may end later than the Maturity Date; and
	 
	(c)	 	In no event shall Company select Interest Periods with respect to LIBOR Advances which would
result in the payment of a LIBOR Advance breakage fee under this Agreement in order to make
required principal payments.

“Inventory” shall have the meaning given it under the UCC.

“Investment Property” shall have the meaning given it under the UCC.

“L/C Amount” means the sum of (a) the Aggregate Face Amount of any outstanding Letters of Credit,
plus (b) the amount of each Obligation of Reimbursement that either remains unreimbursed or has not
been paid through an Advance on the Line of Credit.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 7

 

“L/C Application” means an application for the issuance of standby or documentary Letters of Credit
pursuant to the terms of a Standby Letter of Credit Agreement or Commercial Letter of Credit
Agreement, in form acceptable to Wells Fargo.

“Letter of Credit” and “Letters of Credit” are each defined in Section 1.10(a).

“Licensed Intellectual Property” is defined in Exhibit D.

“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8th of one percent (1%)) determined pursuant to the following formula:

	 	 	 	 	 
	LIBOR =

	 	Base LIBOR
 

100% — LIBOR Reserve Percentage
	 	 

	(a)	 	“Base LIBOR” means the rate per annum for United States dollar deposits quoted by Wells Fargo
as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by
Wells Fargo for the purpose of calculating effective rates of interest for loans making
reference to it, on the first day of an Interest Period for delivery of funds on that date for
a period of time approximately equal to the number of days in that Interest Period and in an
amount approximately equal to the principal amount to which that Interest Period applies.
Company understands and agrees that Wells Fargo may base its quotation of the Inter-Bank
Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as
Wells Fargo in its discretion deems appropriate including the rate offered for U.S. dollar
deposits on the London Inter-Bank Market.
	 
	(b)	 	“LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in
Regulation D of the Federal Reserve Board, as amended), adjusted by Wells Fargo for expected
changes in such reserve percentage during the applicable Interest Period.

“LIBOR Advance” means an Advance bearing interest at the LIBOR Advance Rate.

“LIBOR Advance Rate” is defined in Section 1.6(a).

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance,
title retention agreement or analogous instrument or device, including the interest of each lessor
under any capitalized lease and the interest of any bondsman under any payment or performance bond,
in, of or on any assets or properties of a Person, whether now owned or subsequently acquired and
whether arising by agreement or operation of law.

“Line of Credit” is defined in the Recitals.

“Loan Documents” means this Agreement, the Revolving Note, each Guaranty, each Subordination
Agreement, each Patent and Trademark Security Agreement, each Standby Letter of Credit Agreement,
each Commercial Letter of Credit Agreement, any L/C Applications, and the Security Documents,
together with every other agreement, note, document, contract or instrument to which Company now or
in the future may be a party and which may be required by Wells Fargo.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 8

 

“Loan Manager” means the treasury management service defined in the Master Agreement for Treasury
Management Services and related Loan Manager Service Description.

“Lockbox” means “Lockbox” as defined in the Master Agreement for Treasury Management Services and
related Lockbox and Collection Account Service Description.

”Margin” means a rate per annum, expressed as a percentage, as more fully described in Section
1.6(a).

“Master Agreement for Treasury Management Services” means the Master Agreement for Treasury
Management Services, the related Acceptance of Services, and the Service Description governing each
treasury management service used by Company.

“Material Adverse Effect” means any of the following:

	(a)	 	A material adverse effect on the business, operations, results of operations, assets,
liabilities or financial condition of Company;
	 
	(b)	 	A material adverse effect on the ability of Company to perform its obligations under the Loan
Documents; or
	 
	(c)	 	A material adverse effect on the ability of Wells Fargo to enforce the Indebtedness or to
realize the intended benefits of the Security Documents, including a material adverse effect
on the validity or enforceability of any Loan Document or of any rights against any Guarantor,
or on the status, existence, perfection, priority (subject to Permitted Liens) or
enforceability of any Lien securing payment or performance of the Indebtedness.

“Maturity Date” is defined in Section 1.1(b).

“Maximum Line Amount” is defined in Section 1.1(a).

“Minimum Interest Charge” is defined in Section 1.6(b).

“Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Company or any ERISA Affiliate contributes or is obligated to contribute.

“Net Income” means fiscal year-to-date after-tax net income from continuing operations, including
extraordinary losses but excluding extraordinary gains, all as determined in accordance with GAAP.

“Obligation of Reimbursement” is defined in Section 1.10(b).

“OFAC” is defined in Section 5.12(b).

“Officer” means with respect to Company, an officer of the Company.

“Operating Account” is defined in Section 1.3(a), and maintained in accordance with the terms of
Wells Fargo’s Commercial Account Agreement in effect for demand deposit accounts.

“Overadvance” means the amount, if any, by which the unpaid principal amount of the Revolving Note,
plus the L/C Amount, is in excess of the then-existing Borrowing Base.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 9

 

“Owned Intellectual Property” is defined in Exhibit D.

“Owner” means with respect to Company, each Person having legal or beneficial title to an ownership
interest in Company or a right to acquire such an interest.

“Patent and Trademark Security Agreement” means each Patent and Trademark Security Agreement
entered into between Company and Wells Fargo.

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for employees
of Company or any ERISA Affiliate and covered by Title IV of ERISA.

“Permitted Lien” and “Permitted Liens” are defined in Section 5.3(a).

“Permitted Securities” shall mean any shares, units or interests of equity securities or ownership
interests of Company that by their terms (or by the terms of any security into which they are
convertible or for which they are exchangeable) or upon the happening of any event or otherwise
(A) are not convertible or exchangeable for Debt or any securities that are not Permitted
Securities, (B) (i) do not mature and (ii) are not putable or redeemable at the option of the
holder thereof, in each case in whole or in part on or prior to the date that is six months after
the earlier of the Maturity Date or the actual payment in full in cash of the Indebtedness, (C) do
not require payments of dividends or distributions in cash on or prior to the date that is six
months after the earlier of the Maturity Date or the actual payment in full in cash of the
Indebtedness, and (D) are not secured by any Liens in property of Company.

“Person” means any individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or government or any agency or
political subdivision of a governmental entity.

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for
employees of Company or any ERISA Affiliate.

“Premises” is defined in Section 2.4(a).

“Prime Rate” means at any time the rate of interest most recently announced by Wells Fargo at its
principal office as its Prime Rate, with the understanding that the Prime Rate is one of Wells
Fargo’s base rates, and serves as the basis upon which effective rates of interest are calculated
for those loans making reference to it, and is evidenced by its recording in such internal
publication or publications as Wells Fargo may designate. Each change in the rate of interest
shall become effective on the date each Prime Rate change is announced by Wells Fargo.

“Proceeds” shall have the meaning given it under the UCC.

“Record” means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes all information
that is required to be reported by Company to Wells Fargo pursuant to Section 5.1.

“Reportable Event” means a reportable event (as defined in Section 4043 of ERISA), other than an
event for which the 30-day notice requirement under ERISA has been waived in regulations issued by
the Pension Benefit Guaranty Corporation.

“Revolving Note” is defined in Section 1.1(d).

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 10

 

“Security Documents” means this Agreement, the Patent and Trademark Security Agreement(s), and any
other document delivered to Wells Fargo from time to time to secure the Indebtedness.

“Security Interest” is defined in Section 2.1.

“Special Account” means a specified cash collateral account maintained with Wells Fargo or another
financial institution acceptable to Wells Fargo in connection with each undrawn Letter of Credit
issued by Wells Fargo, as more fully described in Section 1.10.

“Standby Letter of Credit Agreement” means an agreement governing the issuance of standby letters
of credit by Wells Fargo entered into between Company as applicant and Wells Fargo as issuer.

“Subordinated Creditor(s)” means American Medical Systems, Inc. (“AMS”) , a Delaware corporation,
Laserscope, a California corporation and wholly-owned subsidiary of AMS, and any other Person now
or in the future subordinating indebtedness of Company held by that Person to the payment of the
Indebtedness.

“Subordination Agreement” means a subordination agreement executed by a Subordinated Creditor in
favor of Wells Fargo (if more than one, the “Subordination Agreements”).

“Subsidiary” means any Person of which more than 50% of the outstanding ownership interests having
general voting power under ordinary circumstances to elect a majority of the board of directors or
the equivalent of such Person, irrespective of whether or not at the time ownership interests of
any other class or classes shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.

“Termination Date” is defined in Section 1.1(b).

“UCC” means the Uniform Commercial Code in effect in the state designated in this Agreement as the
state whose laws shall govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion of this Agreement.

“Unused Amount” is defined in Section 1.7(b).

“Wells Fargo” means Wells Fargo Bank, National Association in its broadest and most comprehensive
sense as a legal entity, and is not limited in its meaning to the Wells Fargo Business Credit
operating division, or to any other operating division of Wells Fargo.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit A — Page 11

 

Exhibit B to Credit and Security Agreement

PREMISES

     The Premises referred to in the Credit and Security Agreement have an address of 1212 Terra
Bella Avenue, Mountain View, California 94043,

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit B — Page 1

 

Exhibit C to Credit and Security Agreement

CONDITIONS PRECEDENT

Wells Fargo’s obligation to make an initial Advance shall be subject to the condition that Wells
Fargo shall have received the following, duly executed and in form and content satisfactory to
Wells Fargo. The following descriptions are limited descriptions for reference purposes only and
should not be construed as limiting in any way the subject matter that Wells Fargo requires each
document to address.

	A.	 	Loan Documents to be Executed by Company:
	 
	(1)	 	The Revolving Note.
	 
	(2)	 	The Credit and Security Agreement.
	 
	(3)	 	The Master Agreement for Treasury Management Services, the Acceptance of Services, and the
related Service Description for each deposit or treasury management related product or service
that Company will subscribe to, including the Loan Manager Service Description and the Lockbox
and Collection Account Service Description.
	 
	(4)	 	The Patent and Trademark Security Agreement.
	 
	(5)	 	The Ex-Im Bank Documents.
	 
	B.	 	Loan Documents to be Executed by Third Parties:
	 
	(1)	 	The Subordination Agreement of American Medical Systems, Inc. and Laserscope, pursuant to
which each Subordinated Creditor shall unconditionally subordinate payment of any indebtedness
of Company held by the Subordinated Creditor to the full and prompt payment of all Company’s
Indebtedness.
	 
	(2)	 	A Landlord’s Disclaimer and Consent to each lease entered into by Company and that Landlord
with respect to the Premises, pursuant to which the Landlord waives its Lien in any goods or
other Inventory of Company located on the Premises.
	 
	(3)	 	Certificates Insurance required under this Agreement, with all hazard insurance containing a
lender’s loss payable endorsement in Wells Fargo’s favor and with all liability insurance
naming Wells Fargo as additional insured.
	 
	(4)	 	Any Ex-Im Loan Documents requiring the execution by a third party (including, but not limited
to, the Export-Import Bank of the United States).
	 
	C.	 	Documents Related to the Premises
	 
	(1)	 	Any leases pursuant to which Company is leasing the Premises from a lessor.
	 
	(2)	 	Every bailment or consignment pursuant to which any property of Company is in the possession
of a third Person such as a consignee or subcontractor, together with, in the case of any
goods held by such Person for resale, UCC financing statements sufficient to protect Company’s
and Wells Fargo’s interests in such goods.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit C — Page 1

 

	D.	 	Federal Tax, State Tax, Judgment, UCC and Intellectual Property Lien Searches
	 
	(1)	 	Current searches of Company in appropriate filing offices showing that (i) no Liens have been
filed and remain in effect against Company and Collateral except Permitted Liens or Liens held
by Persons who have agreed in an Authenticated Record that upon receipt of proceeds of the
initial Advances, they will satisfy, release or terminate such Liens in a manner satisfactory
to Wells Fargo, and (ii) Wells Fargo has filed all UCC financing statements necessary to
perfect the Security Interest, to the extent the Security Interest is capable of being
perfected by filing.
	 
	(2)	 	Current searches of Third Persons in appropriate filing offices with respect to any of the
Collateral that is in the possession of a Person other than Company that is held for resale,
showing that (i) UCC financing statements sufficient to protect Company’s and Wells Fargo’s
interests in such Collateral have been filed, and (ii) no other secured party has filed a
financing statement against such Person and covering property similar to Company’s, other than
Company, or if there exists any such secured party, evidence that each such party has received
notice from Company and Wells Fargo sufficient to protect Company’s and Wells Fargo’s
interests in Company’s goods from any claim by such secured party.
	 
	E.	 	Constituent Documents:
	 
	(1)	 	The Certificate of Authority of Company, which shall include as part of the Certificate or as
exhibits to the Certificate, (i) the Resolution of Company’s Directors and, if required,
Owners, authorizing the execution, delivery and performance of the Loan Documents, (ii) an
Incumbency Certificate containing the signatures of Company’s Officers or agents authorized to
execute and deliver the Loan Documents and other instruments, agreements and certificates,
including Advance requests, on Company’s behalf, (iii) Company’s Constituent Documents, (iv) a
current Certificate of Good Standing or Certificate of Status issued by the secretary of state
or other appropriate authority for Company’s state of organization, certifying that Company is
in good standing and in compliance with all applicable organizational requirements of the
state of organization, and (v) a Secretary’s Certificate of Company’s secretary or assistant
secretary certifying that the Certificate of Authority of Company is true, correct and
complete.
	 
	(2)	 	The Certificate of Authority of Corporate Guarantor, which shall include as part of the
Certificate or as exhibits to the Certificate, (i) the Resolution of Guarantor’s Directors
and, if required, Owners, authorizing the execution, delivery and performance of the Guaranty
of Corporation, (ii) an Incumbency Certificate containing the signatures of Guarantor’s
Officers or agents authorized to execute and deliver the Guaranty by Corporation on
Guarantor’s behalf, (iii) Guarantor’s Constituent Documents, (iv) a current Certificate of
Good Standing or Certificate of Status issued by the secretary of state or other appropriate
authority for Guarantor’s state of organization, certifying that Guarantor is in good standing
and in compliance with all applicable organizational requirements of the state of
organization, and (v) a Secretary’s Certificate of Guarantor’s secretary or assistant
secretary certifying that the Certificate of Authority of Corporate Guarantor and all attached
exhibits are true, correct and complete.
	 
	(3)	 	Evidence that Company is licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the business transacted
by it makes such licensing or qualification necessary.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit C — Page 2

 

	(4)	 	An Officer’s Certificate of an appropriate Officer of Company confirming, in his or her
personal capacity, the representations and warranties set forth in this Agreement.
	 
	(5)	 	A Customer Identification Information Form and such other forms and verification as Wells
Fargo may need to comply with the U.S.A. Patriot Act.
	 
	F.	 	Miscellaneous Matters or Documents:
	 
	(1)	 	Payment of fees and reimbursable costs and expenses due under this Agreement through the date
of initial Advance or issuance of a Letter of Credit, including all legal expenses incurred
through the date of the closing of this Agreement.
	 
	(2)	 	Evidence that after making the initial Advance and issuing the initial Letter of Credit,
establishing all reserves under the Borrowing Base (including a reserve equal to 10% of the
outstanding balance (or initial projected balance) under the Ex-Im Credit Agreement), and
satisfying all obligations owed to Company’s prior lender and all trade payables older than
60 days from invoice date, book overdrafts and closing costs and fees (including any fees
deemed paid), the combined availability under the Line of Credit under this Agreement and the
“Line of Credit” under the Ex-Im Credit Agreement is not less than $1,000,000.
	 
	(3)	 	Such other documents as Wells Fargo in its sole discretion may require.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit C — Page 3

 

Exhibit D to Credit and Security Agreement

REPRESENTATIONS AND WARRANTIES

	 	 	Company represents and warrants to Wells Fargo as follows:
	 
	(a)	 	Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Federal Employer Identification Number and Organizational Identification Number. Company
is a corporation organized, validly existing and in good standing under the laws of the State
of Delaware and is licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. Company has all requisite power and authority to
conduct its business, to own its properties and to execute and deliver, and to perform all of
its obligations under, the Loan Documents. During its existence, Company has done business
solely under the names set forth below in addition to its correct legal name. Company’s chief
executive office and principal place of business is located at the address set forth below,
and all of Company’s records relating to its business or the Collateral are kept at that
location. All Inventory and Equipment is located at that location or at one of the other
locations set forth below. Company’s name, Federal Employer Identification Number and
Organization Identification Number are correctly set forth at the end of the Agreement next to
Company’s signature.

Trade Names

IRIS Medical Instruments, Inc.

Prospero Surgical, Inc.

Trilogy Medical Systems, Inc.

Chief Executive Office / Principal Place of Business

1212 Terra Bella Avenue, Mountain View, California 94043

Other Inventory and Equipment Locations

Aeronet

1751 Junction Ave

San Jose, CA 95112

(offsite inventory purchased from AMS)

	(b)	 	Capitalization. [INTENTIONALLY OMITTED].
	 
	(c)	 	Authorization of Borrowing; No Conflict as to Law or Agreements. The execution,
delivery and performance by Company of the Loan Documents and borrowing under the Line of
Credit have been authorized and do not (i) require the consent or approval of Company’s
Owners; (ii) require the authorization, consent or approval by, or registration, declaration
or filing with, or notice to, any governmental agency or instrumentality, whether domestic or
foreign, or any other Person, except to the extent obtained, accomplished or given prior to
the date of this Agreement; (iii) violate any provision of any law, rule or regulation
(including Regulation X of the Board of Governors of the

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 1

 

	 	 	Federal Reserve System) or of any order, writ, injunction or decree presently in effect
having applicability to Company or of Company’s Constituent Documents; (iv) result in a
breach of or constitute a default or event of default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which Company is a party
or by which it or its properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than the Security Interest) upon or with respect
to any of the properties now owned or subsequently acquired by Company.
	 
	(d)	 	Legal Agreements. This Agreement constitutes and, upon due execution by Company, the
other Loan Documents will constitute the legal, valid and binding obligations of Company,
enforceable against Company in accordance with their respective terms.
	 
	(e)	 	Subsidiaries. Except as disclosed below, Company has no Subsidiaries.

Subsidiaries

1.   IRIDEX UK Limited

2.   IRIDEX France S.A.

3.   Iris Medical Instruments, Inc. – wholly-owned subsidiary but not active

4.   Light Solutions Corporation – wholly-owned subsidiary but not active

	(f)	 	Financial Condition; No Adverse Change. Company has furnished to Wells Fargo its
audited financial statements for its fiscal year ended December 30, 2006, and unaudited
financial statements for the fiscal-year-to-date period ended September 29, 2007, and those
statements fairly present Company’s financial condition as of those dates and the results of
Company’s operations and cash flows for the periods then ended and were prepared in accordance
with GAAP. Since the date of the most recent financial statements, there has been no Material
Adverse Effect in Company’s business, properties or condition (financial or otherwise).
	 
	(g)	 	Litigation. There are no actions, suits or proceedings pending or, to Company’s
knowledge, threatened against or affecting Company or any of its Affiliates or the properties
of Company or any of its Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely
to Company or any of its Affiliates, would have a Material Adverse Effect on the financial
condition, properties or operations of Company or any of its Affiliates.
	 
	(h)	 	Intellectual Property Rights.

(i) Owned Intellectual Property. Set forth below is a complete list of all patents,
applications for patents, trademarks, applications to register trademarks, service marks,
applications to register service marks, mask works, trade dress and copyrights for which
Company is the owner of record (the “Owned Intellectual Property”). Except as set forth
below, (A) Company owns the Owned Intellectual Property free and clear of all restrictions
(including covenants not to sue any Person), court orders, injunctions, decrees, writs or
Liens, whether by agreement memorialized in a Record Authenticated by Company or otherwise,
(B) no Person other than Company owns or has been granted any right in the Owned
Intellectual Property, (C) all Owned Intellectual Property is valid, subsisting and
enforceable, and (D) Company has taken all commercially reasonable action necessary to
maintain and protect the Owned Intellectual Property.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 2

 

(ii) Agreements with Employees and Contractors. Company has entered into a legally
enforceable agreement with each Person that is an employee or subcontractor obligating that
Person to assign to Company, without additional compensation, any Intellectual Property
Rights created, discovered or invented by that Person in the course of that Person’s
employment or engagement with Company (except to the extent prohibited by law), and further
obligating that Person to cooperate with Company, without additional compensation, to secure
and enforce the Intellectual Property Rights on behalf of Company, unless the job
description of the Person is such that it is not reasonably foreseeable that the employee or
subcontractor will create, discover, or invent Intellectual Property Rights.

(iii) Intellectual Property Rights Licensed from Others. Set forth below is a
complete list of all agreements under which Company has licensed Intellectual Property
Rights from another Person (“Licensed Intellectual Property”) other than readily available,
non-negotiated licenses of computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”) and a summary of any ongoing payments Company is obligated to make with respect
thereto. Except as set forth below or in any other Record, copies of which have been given
to Wells Fargo, Company’s licenses to use the Licensed Intellectual Property are free and
clear of all restrictions, Liens, court orders, injunctions, decrees, or writs, whether by
agreed to in a Record Authenticated by Company or otherwise. Except as disclosed below,
Company is not contractually obligated to make royalty payments of a material nature, or pay
fees to any owner of, licensor of, or other claimant to, any Intellectual Property Rights.

(iv) Other Intellectual Property Needed for Business. Except for Off-the-shelf
Software and as disclosed below, the Owned Intellectual Property and the Licensed
Intellectual Property constitute all Intellectual Property Rights used or necessary to
conduct Company’s business as it is presently conducted or as Company reasonably foresees
conducting it.

(v) Infringement. Except as disclosed below, Company has no knowledge of, and has
not received notice either orally or in a Record alleging, any Infringement of another
Person’s Intellectual Property Rights (including any claim set forth in a Record that
Company must license or refrain from using the Intellectual Property Rights of any Person)
nor, to Company’s knowledge, is there any threatened claim or any reasonable basis for any
such claim.

Intellectual Property Disclosures

(h)(i) — Please see attached

(h)(iii) — Inbound License Agreements

1.   Laserscope / AMS – paid up license

2.   Georgetown University – 5% on G-probes

3.   Palomar – 7.5% on Lyra and 3.75% on Gemini

4.   Colder Products – $5.00 on each RFID Console (IQ577) manufactured

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 3

 

	(i)	 	Taxes. Except as disclosed below, Company and its Affiliates have paid or caused to
be paid to the proper authorities when due all federal, state and local taxes required to be
withheld by each of them. Company and its Affiliates have filed all federal, state and local
tax returns which to the knowledge of the Officers of Company or any Affiliate, as the case
may be, are required to be filed, and Company and its Affiliates have paid or caused to be
paid to the respective taxing authorities all taxes as shown on these returns or on any
assessment received by any of them to the extent such taxes have become due.

Taxes

Company received and has responded to an inquiry from the State of
Iowa regarding $9,900 of back taxes.

	(j)	 	Titles and Liens. Company has good and absolute title to all Collateral free and
clear of all Liens other than Permitted Liens. No financing statement naming Company as
debtor is on file in any office except to perfect only Permitted Liens.
	 
	(k)	 	No Defaults. Except as disclosed below, Company is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or by which it or
its property is bound or affected, the breach or default of which could have a Material
Adverse Effect on Company’s financial condition, properties or operations.

No Defaults

Company is not in compliance with certain provisions of the
Business Loan and Security Agreement by and among IRIDEX
Corporation and Mid-Peninsula Bank, part of Greater Bay Bank N.A.,
dated January 16, 2007.

	(l)	 	Submissions to Wells Fargo. All financial and other information provided to Wells
Fargo by or on behalf of Company in connection with Company’s request for the credit
facilities contemplated hereby is (i) true and correct in all material respects, (ii) does not
omit any material fact that would cause such information to be misleading, and (iii) as to
projections, valuations or proforma financial statements, present a good faith opinion as to
such projections, valuations and proforma condition and results.
	 
	(m)	 	Financing Statements. Company has previously authorized the filing of financing
statements sufficient when filed to perfect the Security Interest and other Liens created by
the Security Documents. When such financing statements are filed, Wells Fargo will have a
valid and perfected security interest in all Collateral capable of being perfected by the
filing of financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing has been filed with respect to such Collateral.
	 
	(n)	 	Rights to Payment. Each right to payment and each instrument, document, chattel
paper and other agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, setoff or counterclaim of the account debtor or other
obligor named in that instrument.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 4

 

	(o)	 	Employee Benefit Plans.

(i) Maintenance and Contributions to Plans. Except as disclosed below, neither
Company nor any ERISA Affiliate (A) maintains or has maintained any Pension Plan,
(B) contributes or has contributed to any Multiemployer Plan, or (C) provides or has
provided post-retirement medical or insurance benefits to employees or former employees
(other than benefits required under Section 601 of ERISA, Section 4980B of the IRC, or
applicable state law).

(ii) Knowledge of Plan Noncompliance with Applicable Law. Except as disclosed
below, neither Company nor any ERISA Affiliate has (A) knowledge that Company or the ERISA
Affiliate is not in full compliance with the requirements of ERISA, the IRC, or applicable
state law with respect to any Plan, (B) knowledge that a Reportable Event occurred or
continues to exist in connection with any Pension Plan, or (C) sponsored a Plan that it
intends to maintain as qualified under the IRC that is not so qualified, and no fact or
circumstance exists which may have an adverse effect on such Plan’s tax-qualified status.

(iii) Funding Deficiencies and Other Liabilities. Neither Company nor any ERISA
Affiliate has liability for any (A) accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the IRC) under any Plan, whether or not waived,
(B) withdrawal, partial withdrawal, reorganization or other event under any Multiemployer
Plan under Section 4201 or 4243 of ERISA, or (C) event or circumstance which could result in
financial obligation to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan (other than
routine claims for benefits under the Plan).

	 	 	Employee Benefit Plans
	 
	 	 	None
	 
	(p)	 	Environmental Matters.

(i) Hazardous Substances on Premises. Except as disclosed below, there are not present in,
on or under the Premises any Hazardous Substances in such form or quantity as to create any
material liability or obligation for either Company or Wells Fargo under the common law of
any jurisdiction or under any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on or under the
Premises in such a way as to create a material liability.

(ii) Disposal of Hazardous Substances. Except as disclosed below, Company has not
disposed of Hazardous Substances in such a manner as to create any material liability under
any Environmental Law.

(iii) Claims and Proceedings with Respect to Environmental Law Compliance. Except
as disclosed below, there have not existed in the past, nor are there any threatened or
impending requests, claims, notices, investigations, demands, administrative proceedings,
hearings or litigation relating in any way to the Premises or

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 5

 

Company, alleging material liability under, violation of, or noncompliance with any
Environmental Law or any license, permit or other authorization issued pursuant thereto.

(iv) Compliance with Environmental Law; Permits and Authorizations. Except as
disclosed below, Company (A) conducts its business at all times in compliance with
applicable Environmental Law, (B) possesses valid licenses, permits and other authorizations
required under applicable Environmental Law for the lawful and efficient operation of its
business, none of which are scheduled to expire, or withdrawal, or material limitation
within the next 12 months, and (C) has not been denied insurance on grounds related to
potential environmental liability.

(v) Status of Premises. Except as disclosed below, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.

(vi) Environmental Audits, Reports, Permits and Licenses. Company has delivered to
Wells Fargo all environmental assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or Company’s businesses.

Environmental Matters

Please see attached “Environmental Compliance Plan” submitted by
the Company to the City of Mountain View.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 6

 

Exhibit D – Item (h)(i)

Intellectual Property Disclosures

U.S Issued Patents

	 	 	 	 	 	 	 	 	 
	 	 	DATE	 	 	 	 
	PATENT TITLE	 	ISSUED	 	PATENT NO.	 	HOLDER
	Optical Fiber with
Electrical Encoding

	 	02/4/1992
	 	5,085,492	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Technique for Coupling
Laser Diode to Optical
Fiber

	 	02/18/1992
	 	5,088,803	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Contact Probe for Laser
Cyclophotocoagulation

	 	12/13/1994
	 	5,372,595	 	 	IRIDEX Corporation
Georgetown
University
	 
	 	 	 	 	 	 	 	 
	Passively stabilized
intracavity doubling laser

	 	04/23/1996
	 	5,511,085	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Scalable side-pumped
solid-state laser

	 	05/28/1996
	 	5,521,932	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Fiber stub end-pumped laser

	 	09/2/1997
	 	5,663,979	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Pulsed Laser with Passive
Stabilization

	 	11/9/1999
	 	5,982,789	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Fiber stub end-pumped laser

	 	12/7/1999
	 	5,999,554	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Cw laser amplifier

	 	10/31/2000
	 	6,141,143	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Cw laser amplifier

	 	11/7/2000
	 	6,144,484	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Aspheric Lensing Control
for High Power
Butt-Coupled End-Pumped
Laser

	 	04/24/2001
	 	6,222,869 B1	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Fiber stub end-pumped laser

	 	12/4/2001
	 	6,327,291 B1	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Focusability Enhancing
Optic for Laser Diode

	 	04/23/2002
	 	6,377,599 B1	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Method and Apparatus for
Real-Time Detection,
Control and Recording of
Sub-Clinical Therapeutic
Laser Lesions During
Ocular Laser
Photocoagulation

	 	04/1/2003
	 	6,540,391 B2	 	 	IRIDEX Corporation

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 1

 

	 	 	 	 	 	 	 	 	 
	 	 	DATE	 	 	 	 
	PATENT TITLE	 	ISSUED	 	PATENT NO.	 	HOLDER
	Method and Apparatus for
Controlling Sub-Clinical
Laser Procedures with
Intra-Operataive
Monitoring of
Electrophysiological
Changes

	 	05/11/2004
	 	6,733,490	 	 	IRIDEX Corporation
	 
	 	 	 	 	 	 	 	 
	Treatment Site Cooling
System of Skin Disorders

	 	12/12/2006
	 	7,147,654	 	 	IRIDEX Corporation

U.S Patent Applications

	 	 	 	 	 	 	 
	 	 	DATE	 	 	 	 
	PATENT APPLICATION TITLE	 	FILED	 	APPLICATION NO.	 	HOLDER
	Apparatus for Real-Time
Measurement/Control Of
Intra-Operataive Effects
During Laser Thermal
Treatments, Using Light
Scattering

	 	09/20/2002
	 	60/412,465
	 	IRIDEX Corporation
	 
	 	 	 	 	 	 
	MicroPulse for Uveo/Scleral
Outflow (Provisional)

	 	10/30/2007
	 	60/983,811
	 	IRIDEX Corporation
	 
	 	 	 	 	 	 
	Directional (stepped) Probe
Treatment Apparatus

	 	08/16/2004
	 	11/205,629
	 	IRIDEX Corporation
	 
	 	 	 	 	 	 
	Short Pulse Laser Treatment

	 	02/15/2005
	 	11/066,615
	 	IRIDEX Corporation
	 
	 	 	 	 	 	 
	Flushtip Illuminating EndoProbe

	 	11/3/2006
	 	11/556,504
	 	IRIDEX Corporation
	 
	 	 	 	 	 	 
	Shaped Tip Illuminating
EndoProbe

	 	03/13/2007
	 	11/685,351
	 	IRIDEX Corporation

Foreign Issued Patents

	 	 	 	 	 	 	 	 	 
	TITLE	 	COUNTRY	 	PATENT NO.	 	DATE ISSUED
	Pulsed Laser w/Passive Stabilization
EP0904615

	 	Europe
	 	0904615	 	 	09/5/2001
	 
	 	 	 	 	 	 	 	 
	DE app – 97928819.8

	 	Germany
	 	69706541	 	 	09/5/2001
	 
	 	 	 	 	 	 	 	 
	UK App – 97928819.8

	 	United Kingdom
	 	69706541	 	 	09/5/2001
	 
	 	 	 	 	 	 	 	 
	FR App – 97928819.8

	 	France
	 	69706541	 	 	09/5/2001
	 
	 	 	 	 	 	 	 	 
	Passively Stable Intra-doubling Laser
EP0730783

	 	Europe
	 	0730783	 	 	04/23/2003
	 
	 	 	 	 	 	 	 	 
	DE app – 69530497.6

	 	Germany
	 	69530497.6	 	 	4/23/2003
	 
	 	 	 	 	 	 	 	 
	Passively Stable Intra-doubling Laser

	 	Korea
	 	348012	 	 	07/26/2002

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 2

 

Foreign Patent Applications

	 	 	 	 	 	 	 	 	 
	TITLE	 	COUNTRY	 	SERIAL NUMBER	 	FILING DATE
	Directional (Stepped) Probe
Treatment Apparatus

	 	Germany
	 	2005/038611.3	 	 	08/16/2005
	 
	 	 	 	 	 	 	 	 
	Method and Apparatus for
Controlling Sub-Clinical
Laser Procedures with
Intra-Operataive Monitoring
of Electrophysiological
Changes

	 	Europe
	 	03723833.4	 	 	3/25/2003
	 
	 	 	 	 	 	 	 	 
	Short Pulse (Green microPulse)

	 	Europe
	 	2006/006369	 	 	02/22/2006
	 
	 	 	 	 	 	 	 	 
	Short Pulse (Green microPulse)

	 	Japan
	 	2007-557145	 	 	08/21/2007
	 
	 	 	 	 	 	 	 	 
	Flush and Shaped Tip Illuminating EndoProbes

	 	PCT
	 	2007-083139	 	 	10/31/2007

U.S. Trademark Registrations

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	REGISTRATION
	COUNTRY	 	TRADEMARK	 	REGISTRATION NO.	 	DATE
	U.S.

	 	APEX
	 	2,528,141	 	 	01/08/2002
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	AURA
	 	3,306.455	 	 	10/09/2007
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	COOLSPOT
	 	3,044,965	 	 	01/17/2006
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	DERMASTAT
	 	1,329,417	 	 	04/09/1985
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	DESIGN
	 	1,618,629	 	 	10/23/1990
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	ENDOPROBE
	 	1,622,307	 	 	11/13/1990
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	GEMINI
	 	3,044,850	 	 	01/17/2006
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	IRIDEX
	 	2,204,220	 	 	11/17/1998
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	IRIDEX
	 	2,204,219	 	 	11/17/1998
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	IRIS MEDICAL
	 	1,822,545	 	 	02/22/1994
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	LYRA
	 	3,200,356	 	 	01/23/2007
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	OCULIGHT
	 	1,618,628	 	 	10/23/1990
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	SMARTKEY
	 	1,618,627	 	 	10/23/1990
	 
	 	 	 	 	 	 	 	 
	U.S.

	 	VENUS
	 	3,023,256	 	 	12/06/2005

U.S. Trademark Applications

	 	 	 	 	 	 	 
	COUNTRY	 	TRADEMARK	 	APPLICATION NO.	 	FILING DATE
	U.S.

	 	SOLIS
	 	78/446,386
	 	07/06/2004

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 3

 

Foreign Trademark Registrations

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	REGISTRATION
	COUNTRY	 	TRADEMARK	 	REGISTRATION NO.	 	DATE
	Australia

	 	AURA
	 	852,861	 	 	12/07/2004
	France
	 	 	 	 	 	 	 	 
	Korea
	 	 	 	 	 	 	 	 
	Madrid Protocol
	 	 	 	 	 	 	 	 
	United Kingdom
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	France

	 	GEMINI
	 	838,771	 	 	11/17/2004
	Korea
	 	 	 	 	 	 	 	 
	Madrid Protocol
	 	 	 	 	 	 	 	 
	United Kingdom
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Australia

	 	LYRA
	 	849,033	 	 	12/07/2004
	France
	 	 	 	 	 	 	 	 
	Korea
	 	 	 	 	 	 	 	 
	Madrid Protocol
	 	 	 	 	 	 	 	 
	United Kingdom
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	France

	 	SOLIS
	 	866,673	 	 	12/07/2004
	Madrid Protocol
	 	 	 	 	 	 	 	 
	United Kingdom
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	France

	 	VENUS
	 	849,035	 	 	12/07/2004
	Madrid Protocol
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Canada

	 	GEMINI
	 	TMA707678
	 	02/19/2008

Foreign Trademark Applications

	 	 	 	 	 	 	 	 	 
	COUNTRY	 	TRADEMARK	 	APPLICATION NO.	 	FILING DATE
	Canada

	 	AURA
	 	1,239,900	 	 	12/07/2004
	 
	 	 	 	 	 	 	 	 
	Australia

	 	GEMINI
	 	1,154,571	 	 	12/28/2006
	 
	 	 	 	 	 	 	 	 
	Canada

	 	LYRA
	 	1,239,901	 	 	12/07/2004
	 
	 	 	 	 	 	 	 	 
	Canada

	 	VENUS
	 	1,239,902	 	 	12/07/2004

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 4

 

Exhibit D – Item (p)

(see attached copy)

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit D — Page 1

 

Exhibit E to Credit and Security Agreement

COMPLIANCE CERTIFICATE

	 	 	 
	To:

	 	Wells Fargo Bank, National Association
	Date:

	 	[               
                      
   , 200     ]
	Subject:

	 	Financial Statements

          In accordance with our Credit and Security Agreement dated March           , 2008 (as amended from
time to time, the “Credit Agreement”), attached are the financial statements of IRIDEX CORPORATION
(the “Company”) dated [                                        , 200     ] (the “Reporting Date”) and the year-to-date period
then ended (the “Current Financials”). All terms used in this certificate have the meanings given
in the Credit Agreement.

          A. Preparation and Accuracy of Financial Statements. I certify that the Current Financials
have been prepared in accordance with GAAP, subject to year-end audit adjustments, and fairly
present Company’s financial condition as of the Reporting Date.

          B. Name of Company; Merger and Consolidation. I certify that:

          (Check one)

	 	o	 	Company has not, since the date of the Credit Agreement, changed its name or
jurisdiction of organization, nor has it consolidated or merged with another Person.
	 
	 	o	 	Company has, since the date of the Credit Agreement, either changed its name or
jurisdiction of organization, or both, or has consolidated or merged with another
Person, which change, consolidation or merger: o was consented to in advance by Wells
Fargo in an Authenticated Record, and/or o is more fully described in the statement
of facts attached to this Certificate.

          C. Events of Default. I certify that:

          (Check one)

	 	o	 	I have no knowledge of the occurrence of an Event of Default under the Credit
Agreement, except as previously reported to Wells Fargo in a Record.
	 
	 	o	 	I have knowledge of an Event of Default under the Credit Agreement not previously
reported to Wells Fargo in a Record, as more fully described in the statement of
facts attached to this Certificate, and further, I acknowledge that Wells Fargo may
under the terms of the Credit Agreement impose the Default Rate at any time during
the resulting Default Period.

          D. Litigation Matters. I certify that:

          (Check one)

	 	o	 	I have no knowledge of any material adverse change to the litigation exposure of
Company or any of its Affiliates or of any Guarantor.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit E — Page 1

 

	 	o	 	I have knowledge of material adverse changes to the litigation exposure of Company
or any of its Affiliates or of any Guarantor not previously disclosed in Exhibit D,
as more fully described in the statement of facts attached to this Certificate.

          E. Financial Covenants. I further certify that:

          (Check and complete each of the following)

          1. Minimum Net Income. Pursuant to Section 5.2(a) of the Credit Agreement, as of the
Reporting Date, Company’s Net Income plus approved intangible expense adjustments (approved by
Wells Fargo in Wells Fargo’s sole discretion) was
$                    ,
which o satisfies o does not satisfy
the requirement that Net Income be not less than $                     on the Reporting Date (numbers
appearing between “< >“ are negative).

          2. Minimum Debt Service Coverage Ratio. Pursuant to Section 5.2(b) of the Credit Agreement,
as of the Reporting Date, Company’s Debt Service Coverage Ratio
was
           to 1.00, which o satisfies o
 does not satisfy the requirement that such ratio be no less than            to 1.00 on the Reporting
Date.

          3. Capital Expenditures. Pursuant to Section 5.2(c) of the Credit Agreement, for the
year-to-date period ending on the Reporting Date, Company has expended or contracted to expend
during the fiscal year ended     
     
     
                , 200          , for Capital Expenditures, $                               in
the aggregate, which o satisfies o does not satisfy the requirement that such expenditures not exceed
$                     in the aggregate.

          Attached are statements of all relevant facts and computations in reasonable detail sufficient
to evidence Company’s compliance with the financial covenants referred to above, which computations
were made in accordance with GAAP.

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Its: Chief Financial Officer
	 	 

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit E — Page 2

 

Exhibit F to Credit and Security Agreement

PERMITTED LIENS

	 	 	 	 	 	 	 	 	 	 	 
	Creditor	 	Collateral	 	Jurisdiction	 	Filing Date	 	Filing No.
	American Medical
Systems (AMS) and
Laserscope

	 	All assets of the
Company
	 	DE
	 	08/16/2007
	 	 	73128476	 

INDEBTEDNESS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current Principal	 	Maturity	 	Monthly	 	 
	Creditor	 	Amt.	 	Date	 	Payment	 	Collateral
	AMS
	 	$	420,192.22	 	 	Aug. 7, 2008	 	$	22,115.38	 	 	See Subordination Agreement
	AMS
	 	$	2,777,591.63	 	 	Sept. 25, 2008	 	$	110,185	 	 	See Subordination Agreement
	AMS1
	 	$	823,536	 	 	Sept.	 	Approx $140,000	 	See Subordination Agreement

GUARANTIES

None.

 

			
	1	 	This indebtedness relates to contractual POS the Company has
placed with AMS for inventory. The Company must prepay when the inventory is
delivered.

Credit and Security Agreement

WFBC/Iridex (domestic facility)

Exhibit F
— Page 1exv10w2

 

Exhibit 10.2

CREDIT AND SECURITY AGREEMENT

(EX-IM SUBFACILITY)

THIS CREDIT AND SECURITY AGREEMENT (EX-IM SUBFACILITY) (THE “AGREEMENT”) IS DATED MARCH 27, 2008,
AND IS ENTERED INTO BETWEEN IRIDEX CORPORATION, A DELAWARE CORPORATION (“COMPANY”), AND WELLS FARGO
BANK, NATIONAL ASSOCIATION (AS MORE FULLY DEFINED IN EXHIBIT A, “WELLS FARGO”), ACTING THROUGH ITS
WELLS FARGO BUSINESS CREDIT OPERATING DIVISION.

RECITALS

Company has asked Wells Fargo to provide it with a $5,000,000 revolving line of credit (the “Line
of Credit”) for working capital purposes, with such Line of Credit constituting a subfacility
within the Domestic Facility Agreement (defined below). Wells Fargo is agreeable to meeting
Company’s request, provided that Company agrees to the terms and conditions of this Agreement.

For purposes of this Agreement, capitalized terms not otherwise defined in the Agreement shall have
the meaning given them in Exhibit A.

	1.	 	AMOUNT AND TERMS OF THE LINE OF CREDIT
	 
	1.1	 	Line of Credit; Limitations on Borrowings; Termination Date; Use of Proceeds.
	 
	(a)	 	Line of Credit and Limitations on Borrowing. Wells Fargo shall make Advances to
Company under the Line of Credit that in the aggregate do not exceed the lesser of (i)
$5,000,000 (the “Maximum Line Amount”), and (ii) the Borrowing Base limitations described in
Section 1.2. Within these limits, Company may periodically borrow, prepay in whole or in
part, and reborrow. Wells Fargo has no obligation to make an Advance during a Default Period
or at any time Wells Fargo believes that an Advance would result in an Event of Default. The
Line of Credit provided for in this Agreement is subject to the limitations set forth in the
Domestic Facility Agreement and is deemed to be a subfacility within the “Line of Credit”
provided for in the Domestic Facility Agreement as set forth therein.
	 
	(b)	 	Maturity and Termination Dates. Company may request Advances from the date that the
conditions set forth in Section 3 are satisfied until the earlier of: (i) March 27, 2009 (the
“Maturity Date”), (ii) the date Company terminates the Line of Credit, or (iii) the date Wells
Fargo terminates the Line of Credit following an Event of Default (the earliest of such dates,
the “Termination Date”). Provided that no Default or Event of Default has occurred and is
continuing, Company has provided Wells Fargo with a written notice of Company’s election to
extend the Maturity Date no less than 45 days prior to the then applicable Maturity Date, and
Wells Fargo has received the Facility Fee required under Section 1.7(c), the Maturity Date may
be extended for consecutive one-year periods; provided that the final Maturity Date shall not
extend beyond the “Maturity Date”

 

 

	 	 	provided for under the Domestic Facility Agreement, it being agreed that the Line of Credit
under this Agreement is co-terminus with the “Line of Credit” under the Domestic Facility
Agreement.
	 
	(c)	 	Use of Line of Credit Proceeds. Company shall use the proceeds of Advances to
provide working capital to fulfill written export orders or contracts from customers outside
the U.S. to purchase goods or services from Company.
	 
	(d)	 	Revolving Notes. Company’s obligation to repay Line of Credit Advances, regardless
of how initiated under Section 1.3, shall be evidenced by one or more revolving promissory
notes (as renewed, amended or replaced from time to time, the “Revolving Notes”).
	 
	1.2	 	Borrowing Base; Mandatory Prepayment.
	 
	(a)	 	Borrowing Base. The borrowing base (the “Borrowing Base”) is an amount equal to:

     (i) 90% or such lesser percentage of Eligible Accounts as Wells Fargo in its sole
discretion may deem appropriate; provided that, as of any date of determination, this rate
shall be reduced one (1) percent for each percentage point by which Dilution is in excess
of ten percent (10%), plus

     (ii) 75% or such lesser percentage of Eligible Inventory as Wells Fargo in its sole
discretion may deem appropriate; provided that no more than 60% of the aggregate
outstanding Advances under the Line of Credit may be supported by Eligible Inventory at any
time, less

     (iii) the Borrowing Base Reserve, less

     (iv) Indebtedness that Company owes Wells Fargo that has not been advanced on the
Revolving Notes (other than Indebtedness constituting “Advances” under the Domestic
Facility Agreement), less

     (v) Indebtedness that Wells Fargo in its sole discretion finds on the date of
determination to be equal to Wells Fargo’s net credit exposure with respect to any swap,
derivative, foreign exchange, hedge, deposit, treasury management or similar product or
transaction extended to Company by Wells Fargo that is not otherwise described in Section 1
and any Indebtedness owed by Company to Wells Fargo Merchant Services, L.L.C.

	(b)	 	MANDATORY PREPAYMENT; OVERADVANCES. If unreimbursed Line of Credit Advances
evidenced by the Revolving Notes exceed the lesser of the Borrowing Base or the Maximum Line
Amount at any time, then Company shall immediately prepay the Revolving Notes in an amount
sufficient to eliminate the excess, unless Wells Fargo has delivered to Company an
Authenticated Record consenting to the Overadvance prior to its occurrence, in which
event the Overadvance shall be temporarily permitted on such terms and conditions as Wells
Fargo in its sole discretion may deem appropriate, including the payment of additional fees or
interest, or both.

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	1.3	 	Procedures for Line of Credit Advances.
	 
	(a)	 	Advances to Operating Account. Advances shall be credited to Company’s demand
deposit account maintained with Wells Fargo (the “Operating Account”), unless the parties
agree in a Record Authenticated by both of them to disburse to another account.

     (i) Advances upon Company’s Request. Line of Credit Advances may be funded
upon Company’s request. No request will be deemed received until Wells Fargo acknowledges
receipt, and Company, if requested by Wells Fargo, confirms the request in an Authenticated
Record. Company shall repay all Advances, even if the Person requesting the Advance on
behalf of Company lacked authorization.

     (A) Floating Rate Advances. If Company wants a Floating Rate Advance,
it shall make the request no later than 9:30 a.m. Pasadena, California Time on the
Business Day on which it wants the Floating Rate Advance to be funded, which
request shall specify the principal Advance amount being requested.

     (B) LIBOR Advances. If Company wants a LIBOR Advance, it shall make
the request no later than 9:30 a.m. Pasadena, California Time three (3) Business
Days preceding the Business Day on which it wants the LIBOR Advance to be funded,
which request shall specify both the principal Advance amount and Interest Period
being requested. No more than four (4) separate LIBOR Advance Interest Periods may
be outstanding at any time under this Agreement and the Domestic Facility
Agreement, on a combined basis. Each LIBOR Advance shall be in multiples of
$1,000,000 and in the minimum amount of at least $1,000,000. LIBOR Advances are
not available for Advances made through the Loan Manager Service, and shall not be
available during Default Periods. Notwithstanding anything to the contrary in this
Agreement, the aggregate outstanding amount of LIBOR Advances under this Agreement
and the Domestic Facility Agreement shall not exceed $6,000,000 (the “LIBOR
Limitation Amount”).

     (ii) Advances through Loan Manager. If Wells Fargo has separately agreed that
Company may use the Wells Fargo Loan Manager service (“Loan Manager”), Line of Credit
Advances will be initiated by Wells Fargo and credited to the Operating Account as Floating
Rate Advances as of the end of each Business Day in an amount sufficient to maintain an
agreed upon ledger balance in the Operating Account, subject only to Line of Credit
availability as provided in Section 1.1(a). If Wells Fargo terminates Company’s access to
Loan Manager, Company may continue to request Line of Credit Advances as provided in
Section 1.3(a)(i). Wells Fargo shall have no obligation to make an Advance through Loan
Manager during a Default Period, or in an amount in excess of Line of Credit availability,
and may terminate Loan Manager at any time in its sole discretion.

	(b)	 	Protective Advances; Advances to Pay Indebtedness Due. Wells Fargo may initiate a
Floating Rate Advance on the Line of Credit in its sole discretion for

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	 	 	any reason at any time, without
Company’s compliance with any of the
conditions of this Agreement, and (i)
disburse the proceeds directly to third
Persons in order to protect Wells
Fargo’s interest in Collateral or to
perform any of Company’s obligations
under this Agreement, or (ii) apply the
proceeds to the amount of any
Indebtedness then due and payable to
Wells Fargo.
	 
	1.4	 	LIBOR Advances.
	 
	(a)	 	Funding Line of Credit Advances as LIBOR Advances for Fixed Interest Periods.
Subject to the LIBOR Limitation Amount, Company may fund a Line of Credit Advance as a LIBOR
Advance for one, three, or six month periods (each period an “Interest Period”, as more fully
defined in Exhibit A).
	 
	(b)	 	Procedure for Converting Floating Rate Advances to LIBOR Advances. Subject to the
LIBOR Limitation Amount, Company may request that all or any part of an outstanding Floating
Rate Advance be converted to a LIBOR Advance, provided that no Default Period is in effect,
and that Wells Fargo receives the request no later than 9:30 a.m. Pasadena, California Time
three (3) Business Days preceding the Business Day on which Company wishes the conversion to
become effective. Each request shall (i) specify the principal amount of the Floating Rate
Advance to be converted, (ii) the Business Day of conversion, and (iii) the Interest Period
desired. The request shall be confirmed in an Authenticated Record if requested by Wells
Fargo. Each conversion to a LIBOR Advance shall be in multiples of $1,000,000 and in the
minimum amount of at least $1,000,000.
	 
	(c)	 	Expiring LIBOR Advance Interest Periods. Unless Company requests a new LIBOR
Advance, or prepays an outstanding LIBOR Advance at the expiration of an Interest Period,
Wells Fargo shall convert each LIBOR Advance to a Floating Rate Advance on the last day of the
expiring Interest Period. If no Default Period is in effect, Company may request that all or
part of any expiring LIBOR Advance be renewed as a new LIBOR Advance, provided that Wells
Fargo receives the request no later than 9:30 a.m. Pasadena, California Time three (3)
Business Days preceding the Business Day that constitutes the first day of the new Interest
Period. Each request shall specify the principal amount of the expiring LIBOR Advance to be
continued and Interest Period desired, and shall be confirmed in an Authenticated Record if
requested by Wells Fargo. Each renewal of a LIBOR Advance shall be in multiples of $1,000,000
and in the minimum amount of at least $1,000,000.
	 
	(d)	 	Quotation of LIBOR Advance Interest Rates. Wells Fargo shall, with respect to any
request for a new or renewal LIBOR Advance, or the conversion of a Floating Rate Advance to a
LIBOR Advance, provide Company with a LIBOR quote for each Interest Period identified by
Company on the Business Day on which the request was made, if the request is received by Wells
Fargo no later than 9:30 a.m. Pasadena, California Time three (3) Business Days preceding the
Business Day on which Company has requested that the LIBOR Advance be made effective. If
Company does not immediately accept a LIBOR quote, the quoted rate shall expire and any
subsequent request for a LIBOR quote shall be subject to redetermination by Wells Fargo.

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	(e)	 	Taxes and Regulatory Costs. Company shall also pay Wells Fargo with respect to any
LIBOR Advance all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign governmental authority
that are related to LIBOR, and (ii) future, supplemental, emergency or other changes in the
LIBOR Reserve Percentage, the assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar costs imposed by any domestic or foreign governmental authority or
resulting from compliance by Wells Fargo with any request or directive (whether or not having
the force of law) from any central bank or other governmental authority that are related to
LIBOR but not otherwise included in the calculation of LIBOR. In determining which of these
amounts are attributable to an existing LIBOR Advance, any reasonable allocation made by Wells
Fargo among its operations shall be deemed conclusive and binding.
	 
	1.5	 	Collection of Accounts and Application to Revolving Notes.
	 
	(a)	 	The Collection Account. Company has granted a security interest to Wells Fargo in
the Collateral, including all Accounts. Except as otherwise agreed by both parties in an
Authenticated Record, all Proceeds of Accounts and other Collateral, upon receipt or
collection, shall be deposited each Business Day into the Collection Account. Funds so
deposited (“Account Funds”) may only be withdrawn from the Collection Account by Wells Fargo
for application in accordance with Section 1.5(c) or as otherwise provided in the Loan
Documents or by applicable law.
	 
	(b)	 	Payment of Accounts by Company’s Account Debtors. Company shall instruct all account
debtors to make payments either directly to the Lockbox for deposit by Wells Fargo directly to
the Collection Account, or instruct them to deliver such payments to Wells Fargo by wire
transfer, ACH, or other means as Wells Fargo may direct for deposit to the Collection Account
or for direct application to the Line of Credit. If Company receives a payment or the Proceeds
of Collateral directly, Company will promptly deposit the payment or Proceeds into the
Collection Account. Until deposited, it will hold all such payments and Proceeds in trust for
Wells Fargo without commingling with other funds or property. All deposits held in the
Collection Account shall constitute Proceeds of Collateral and shall not constitute the
payment of Indebtedness.
	 
	(c)	 	Application of Payments to Revolving Notes. Wells Fargo will withdraw Account Funds
deposited to the Collection Account and pay down borrowings on the Line of Credit by applying
them to the Revolving Notes on a pro rata basis on the first Business Day following the
Business Day of deposit to the Collection Account, or, if payments are received by Wells Fargo
that are not first deposited to the Collection Account pursuant to any treasury management
service provided to Company by Wells Fargo, such payments shall be applied to the Revolving
Notes as provided in the Master Agreement for Treasury Management Services and the relevant
service description.
	 
	1.6	 	Interest and Interest Related Matters.
	 
	(a)	 	Interest Rates Applicable to Line of Credit. Except as otherwise provided in this
Agreement, the unpaid principal amount of each Line of Credit Advance

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	 	 	evidenced by the Revolving Notes shall accrue interest at an annual interest rate
calculated as follows:

	 	 	 	Floating Rate:
	 
	 	 	 	Line of Credit Advances = Prime Rate plus the applicable Margin, which interest
rate shall change whenever the Prime Rate changes (the “Floating Rate”); or
	 
	 	 	 	LIBOR Advance Rate for One-, Three-, or Six-Month Interest Periods:
	 
	 	 	 	Line of Credit Advances = LIBOR plus the applicable Margin (the “LIBOR Advance
Rate”)

	 	 	Multiple Advances under the Line of Credit may simultaneously accrue interest at both the
Floating Rate and at the LIBOR Advance Rate, subject to the limitations of Section
1.3(a)(i).
	 
	 	 	The Margins through and including the adjustment occurring as specified below shall be
0.75% per annum for Floating Rate Advances, and 3.50% per annum for LIBOR Advances. The
Margins shall be reduced by 0.25% per annum on a one-time basis if the Company’s Earnings
Before Taxes, Depreciation, and Amortization for any fiscal year ending on or after
December 31, 2008, is greater than $1,500,000.
	 
	 	 	The Margin reduction provided for in the immediately preceding paragraph shall become
effective on the first calendar day of the first calendar month following the month of
receipt by Wells Fargo of fiscal year end financial statements that have been audited by
independent certified public accountants acceptable to Wells Fargo.
	 
	 	 	If amended or restated financial statements would change previously calculated Margins, or
if Wells Fargo determines that any financial statements have materially misstated Company’s
financial condition, then Wells Fargo may, using the most accurate information available to
it (it being agreed that if Company files amended and restated financial statements with
the U.S. Securities and Exchange Commission that modify financial statements previously
submitted to Wells Fargo, such amended and restated financial statements shall be deemed to
be the most accurate information available to Wells Fargo), recalculate the financial test
or tests governing the Margins and retroactively reduce or increase the Margins from the
date of receipt of such amended or restated financial statements and charge Company
additional interest, which may be imposed on them from the beginning of the appropriate
month to which the restated statements or recalculated financial tests relate, as Wells
Fargo in its sole discretion deems appropriate.
	 
	(b)	 	Minimum Interest Charge. [INTENTIONALLY OMITTED].
	 
	(c)	 	Default Interest Rate. Commencing on the day an Event of Default occurs, through and
including the date identified by Wells Fargo in a Record as the date

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	 	 	that the Event of Default has been cured or waived (each such period a “Default Period”),
or during a time period specified in Section 1.9, or at any time following the Termination
Date, in Wells Fargo’s sole discretion and without waiving any of its other rights or
remedies, the principal amount of the Revolving Notes shall bear interest at a rate that is
three percent (3.0%) above the contractual rate set forth in Section 1.6(a) (the “Default
Rate”), or any lesser rate that Wells Fargo may deem appropriate, starting on the first day
of the month in which the Default Period begins through the last day of that Default
Period, or any shorter time period to which Wells Fargo may agree in an Authenticated
Record.
	 
	(d)	 	Interest Accrual on Payments Applied to Revolving Notes. Payments received by Wells
Fargo shall be applied to the Revolving Notes as provided in Section 1.4(c), but the principal
amount paid down shall continue to accrue interest through the end of the first Business Day
following the Business Day that the payment was applied to the Revolving Notes.
	 
	(e)	 	Usury. No interest rate shall be effective which would result in a rate greater than
the highest rate permitted by law. Payments in the nature of interest and other charges made
under any Loan Documents that are later determined to be in excess of the limits imposed by
applicable usury law will be deemed to be a payment of principal, and the Indebtedness shall
be reduced by that amount so that such payments will not be deemed usurious.
	 
	1.7	 	Fees.
	 
	(a)	 	Origination Fee. [INTENTIONALLY OMITTED].
	 
	(b)	 	Unused Line Fee. [INTENTIONALLY OMITTED].
	 
	(c)	 	Facility Fees. On each anniversary date of this Agreement of this Agreement, Company
shall pay Wells Fargo a facility fee equal to 1.5% of the Maximum Line Amount, which fee when
paid shall be deemed fully earned and non-refundable under all circumstances. In addition to
the foregoing, on or before March 27, 2009, Company shall pay Wells Fargo an additional fee
equal to the product of (i) 1.5% of the Maximum Line Amount, multiplied by (ii) 0.1945 (the
“Supplementary Fee”). The Supplementary Fee is in addition to the annual fee required in the
first sentence of this paragraph.
	 
	(d)	 	Collateral Exam Fees. Company shall pay Wells Fargo fees in connection with any
collateral exams, audits or inspections conducted by or on behalf of Wells Fargo at the
current rates established from time to time by Wells Fargo as its collateral exam fees (which
fees are currently $105 per hour per collateral examiner), together with all actual
out-of-pocket costs and expenses incurred in conducting any collateral examination or
inspection.
	 
	(e)	 	Collateral Monitoring Fees. Company shall pay Wells Fargo a fee at the rates
established from time to time by Wells Fargo (or any other Person providing such services to
the Wells Fargo, including, but not limited to, Collateral Services, Inc.) as its Collateral
monitoring fees (which fees currently consist of a

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	 	 	monthly fee of $250), due and payable monthly in advance on the first day of the month.
	 
	(f)	 	Line of Credit Termination and/or Reduction Fees. [INTENTIONALLY OMITTED].
	 
	(g)	 	Overadvance Fees. Company shall pay a $500 Overadvance fee for each day that an
Overadvance exists which was not agreed to by Wells Fargo in an Authenticated Record prior to
its occurrence; provided that Wells Fargo’s acceptance of the payment of such fees shall not
constitute either consent to the Overadvance or waiver of the resulting Event of Default.
Company shall pay additional Overadvance fees and interest in such amounts and on such terms
as Wells Fargo in its sole discretion may consider appropriate for any Overadvance to which
Wells Fargo has specifically consented in an Authenticated Record prior to its occurrence.
	 
	(h)	 	Treasury Management Fees. Company will pay service fees to Wells Fargo for treasury
management services provided pursuant to the Master Agreement for Treasury Management Services
or any other agreement entered into by the parties, in the amount prescribed in Wells Fargo’s
current service fee schedule.
	 
	(i)	 	Other Fees and Charges. Wells Fargo may impose additional fees and charges during a
Default Period for (i) waiving an Event of Default, or for (ii) the administration of
Collateral by Wells Fargo. All such fees and charges shall be imposed at Wells Fargo’s sole
discretion following oral notice to Company on either an hourly, periodic, or flat fee basis,
and in lieu of or in addition to imposing interest at the Default Rate, and Company’s request
for an Advance following such notice shall constitute Company’s agreement to pay such fees and
charges.
	 
	(j)	 	LIBOR Advance Breakage Fees. Company may prepay any LIBOR Advance at any time in any
amount, whether voluntarily or by acceleration; provided, however, that if the
LIBOR Advance is prepaid, Company shall pay Wells Fargo upon demand a LIBOR Advance breakage
fee equal to the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Interest Period matures, calculated as follows for
each such month:

     (i) Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the applicable Interest Period.

     (ii) Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the remaining term of
such Interest Period at LIBOR in effect on the date of prepayment for new loans made for
such term in a principal amount equal to the amount prepaid.

     (iii) If the result obtained in (ii) for any month is greater than zero, discount that
difference by LIBOR used in (ii) above.

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	 	 	Company acknowledges that prepayment of the Revolving Notes may result in Wells Fargo
incurring additional costs, expenses or liabilities, and that it is difficult to ascertain
the full extent of such costs, expenses or liabilities. Company agrees to pay the
above-described LIBOR Advance breakage fee and agrees that this amount represents a
reasonable estimate of the LIBOR Advance breakage costs, expenses and/or liabilities of
Wells Fargo.
	 
	1.8	 	Interest Accrual; Principal and Interest Payments; Computation.
	 
	(a)	 	Interest Payments and Interest Accrual. Accrued and unpaid interest under the
Revolving Notes shall be due and payable on the first day of each month (each an “Interest
Payment Date”) and on the Termination Date, and shall be paid in the manner provided in
Section 1.4(c). Interest shall accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of Advance to the Interest Payment Date.
	 
	(b)	 	Payment of Revolving Notes Principal. The principal amount of the Revolving Notes
shall be paid from time to time as provided in this Agreement, and shall be fully due and
payable on the Termination Date.
	 
	(c)	 	Payments Due on Non-Business Days. If an Interest Payment Date or the Termination
Date falls on a day which is not a Business Day, payment shall be made on the next Business
Day, and interest shall continue to accrue during that time period.
	 
	(d)	 	Computation of Interest and Fees. Interest accruing on the unpaid principal amount
of the Revolving Notes and fees payable under this Agreement shall be computed on the basis of
the actual number of days elapsed in a year of 360 days.
	 
	(e)	 	Liability Records. Wells Fargo shall maintain accounting and bookkeeping records of
all Advances and payments under the Line of Credit and all other Indebtedness due to Wells
Fargo in such form and content as Wells Fargo in its sole discretion deems appropriate. Wells
Fargo’s calculation of current Indebtedness shall be presumed correct unless proven otherwise
by Company. Upon Wells Fargo’s request, Company will admit and certify in a Record the exact
principal balance of the Indebtedness that Company then believes to be outstanding. Any
billing statement or accounting provided by Wells Fargo shall be conclusive and binding unless
Company notifies Wells Fargo in a detailed Record of its intention to dispute the billing
statement or accounting within 30 days of receipt.
	 
	(f)	 	Pro Rata Application. All payments or other sums received by Wells Fargo and applied
to the Revolving Notes shall be applied on a pro rata basis.
	 
	1.9	 	Termination or Reduction of Line of Credit by Company; Notice. Company may terminate or
reduce the Line of Credit at any time prior to the Maturity Date, if it (i) delivers an
Authenticated Record notifying Wells Fargo of its intentions at least 10 Business Days prior
to the proposed Termination Date (which notice may be contingent on the occurrence of an
event; provided that

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	 	 	(x) if Company does not terminate or reduce the Line of Credit on the date specified in
such notice, Company may subsequently terminate or reduce the Line of Credit only upon
delivering Wells Fargo a new notice, as provided above, and complying with all other terms
of this paragraph, and (y) no more than three such notices may be provided within any 60
consecutive day period), (ii) pays Wells Fargo the termination fee set forth in Section
1.7(f), and (iii) pays the Indebtedness in full or down to the reduced Maximum Line Amount.
	 
	1.10	 	Facility Subject to Ex-Im Bank Rules. Company acknowledges that Wells Fargo is willing to
make the Ex-Im Subfacility available to Company because the Ex-Im Bank is willing to guaranty
payment of a significant portion of the Indebtedness pursuant to the Master Guarantee
Agreement (as defined in the Borrower Agreement). Accordingly, in the event of any
inconsistency between this Agreement and the Master Guarantee Agreement or the Borrower
Agreement, the provision that is the more stringent on Company shall control with respect to
Advances under this Agreement and procedures related thereto. This Agreement is supplemental
to the Borrower Agreement.
	 
	2.	 	SECURITY INTEREST AND OCCUPANCY OF COMPANY’S PREMISES
	 
	2.1	 	Grant of Security Interest. Company hereby pledges, assigns and grants to Wells Fargo, for
the benefit of Wells Fargo and as agent for Wells Fargo Merchant Services, L.L.C., a Lien and
security interest (collectively referred to as the “Security Interest”) in the Collateral, as
security for the payment and performance of the Indebtedness. Following request by Wells
Fargo, Company shall grant Wells Fargo, for the benefit of Wells Fargo and as agent for Wells
Fargo Merchant Services, L.L.C., a Lien and security interest in all commercial tort claims
that it may have against any Person.
	 
	2.2	 	Notifying Account Debtors and Other Obligors; Collection of Collateral. Wells Fargo may at
any time (whether or not a Default Period then exists) deliver a Record giving an account
debtor or other Person obligated to pay an Account, a General Intangible, or other amount due,
notice that the Account, General Intangible, or other amount due has been assigned to Wells
Fargo for security and must be paid directly to Wells Fargo. Company shall join in giving
such notice and shall Authenticate any Record giving such notice upon Wells Fargo’s request.
After Company or Wells Fargo gives such notice, Wells Fargo may, but need not, in Wells
Fargo’s or in Company’s name, demand, sue for, collect or receive any money or property at any
time payable or receivable on account of, or securing, such Account, General Intangible, or
other amount due, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including collateral
obligations) of any account debtor or other obligor. Wells Fargo may, in Wells Fargo’s name
or in Company’s name, as Company’s agent and attorney-in-fact, notify the United States Postal
Service to change the address for delivery of Company’s mail to any address designated by
Wells Fargo, otherwise intercept Company’s mail, and receive, open and dispose of Company’s
mail, applying all Collateral as permitted under this Agreement and holding all other mail for
Company’s account or forwarding such mail to Company’s last known address.

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	2.3	 	Assignment of Insurance. As additional security for the Indebtedness, Company hereby assigns
to Wells Fargo and to Wells Fargo Merchant Services, L.L.C., all rights of Company under every
policy of insurance covering the Collateral and all business records and other documents
relating to it, and all monies (including proceeds and refunds) that may be payable under any
policy, and Company hereby directs the issuer of each policy to pay all such monies directly
to Wells Fargo. At any time, whether or not a Default Period then exists, Wells Fargo may
(but need not), in Wells Fargo’s or Company’s name, execute and deliver proofs of claim,
receive payment of proceeds and endorse checks and other instruments representing payment of
the policy of insurance, and adjust, litigate, compromise or release claims against the issuer
of any policy. Any monies received under any insurance policy assigned to Wells Fargo, other
than liability insurance policies, or received as payment of any award or compensation for
condemnation or taking by eminent domain, shall be paid to Wells Fargo and, as determined by
Wells Fargo in its sole discretion, either be applied to prepayment of the Indebtedness or
disbursed to Company under staged payment terms reasonably satisfactory to Wells Fargo for
application to the cost of repairs, replacements, or restorations which shall be effected with
reasonable promptness and shall be of a value at least equal to the value of the items or
property destroyed.
	 
	2.4	 	Company’s Premises.
	 
	(a)	 	Wells Fargo’s Right to Occupy Company’s Premises. Company hereby grants to Wells
Fargo the right, at any time during a Default Period and without notice or consent, to take
exclusive possession of all locations where Company conducts its business or has any rights of
possession, including the locations described on Exhibit B (the “Premises”), until the earlier
of (i) payment in full and discharge of all Indebtedness and termination of the Line of
Credit, or (ii) final sale or disposition of all items constituting Collateral and delivery of
those items to purchasers.
	 
	(b)	 	Wells Fargo’s Use of Company’s Premises. Wells Fargo may use the Premises to store,
process, manufacture, sell, use, and liquidate or otherwise dispose of items that are
Collateral, and for any other incidental purposes deemed appropriate by Wells Fargo in good
faith.
	 
	(c)	 	Company’s Obligation to Reimburse Wells Fargo. Wells Fargo shall not be obligated to
pay rent or other compensation for the possession or use of any Premises, but if Wells Fargo
elects to pay rent or other compensation to the owner of any Premises in order to have access
to the Premises, then Company shall promptly reimburse Wells Fargo all such amounts, as well
as all taxes, fees, charges and other expenses at any time payable by Wells Fargo with respect
to the Premises by reason of the execution, delivery, recordation, performance or enforcement
of any terms of this Agreement.
	 
	2.5	 	License. Without limiting the generality of any other Security Document, Company hereby
grants to Wells Fargo a non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all Intellectual Property Rights of Company for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such materials
become saleable

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	 	 	Inventory, all in accordance with the same quality standards previously adopted by Company
for its own manufacturing and subject to Company’s reasonable exercise of quality control;
and (b) selling, leasing or otherwise disposing of any or all Collateral during any Default
Period.
	 
	2.6	 	Financing Statements. Company authorizes Wells Fargo to file financing statements describing
Collateral to perfect Wells Fargo’s Security Interest in the Collateral, and Wells Fargo may
describe the Collateral as “all personal property” or “all assets” or describe specific items
of Collateral including commercial tort claims as Wells Fargo may consider necessary or useful
to perfect the Security Interest. All financing statements filed before the date of this
Agreement to perfect the Security Interest were authorized by Company and are hereby
re-authorized. Following the termination of the Line of Credit and payment of all
Indebtedness, Wells Fargo shall, at Company’s expense and within the time periods required
under applicable law, release or terminate any filings or other agreements that perfect the
Security Interest.
	 
	2.7	 	Setoff. Wells Fargo may at any time, in its sole discretion and without demand or notice to
anyone, setoff any liability owed to Company by Wells Fargo against any Indebtedness then due
and unpaid.
	 
	2.8	 	Collateral Related Matters. This Agreement does not contemplate a sale of Accounts or
chattel paper, and, as provided by law, Company is entitled to any surplus and shall remain
liable for any deficiency. Wells Fargo’s duty of care with respect to Collateral in its
possession (as imposed by law) will be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody or possession
of a bailee or other third Person, exercises reasonable care in the selection of the bailee or
third Person, and Wells Fargo need not otherwise preserve, protect, insure or care for such
Collateral. Wells Fargo shall not be obligated to preserve rights Company may have against
prior parties, to liquidate the Collateral at all or in any particular manner or order or
apply the Proceeds of the Collateral in any particular order of application. Wells Fargo has
no obligation to clean-up or prepare Collateral for sale. Company waives any right it may
have to require Wells Fargo to pursue any third Person for any of the Indebtedness.
	 
	2.9	 	Notices Regarding Disposition of Collateral. If notice to Company of any intended
disposition of Collateral or any other intended action is required by applicable law in a
particular situation, such notice will be deemed commercially reasonable if given in the
manner specified in Section 7.4 at least ten calendar days before the date of intended
disposition or other action.
	 
	3.	 	CONDITIONS PRECEDENT
	 
	3.1	 	Conditions Precedent to Initial Advance. Wells Fargo’s obligation to make the initial
Advance shall be subject to the condition that Wells Fargo shall have received and accepted
this Agreement and each of the Loan Documents, fees, and other documents and information
described in Exhibit C, executed and in form and content satisfactory to Wells Fargo (such
date that all such items have been received and accepted by Wells Fargo, the “Closing Date”).

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	3.2	 	Additional Conditions Precedent to All Advances. Wells Fargo’s obligation to make any
Advance (including the initial Advance) shall be subject to the further additional conditions:
(a) that the representations and warranties described in Exhibit D are correct on the date of
the Advance, except to the extent that such representations and warranties relate solely to an
earlier date; and (b) that no event has occurred and is continuing, or would result from the
requested Advance that would result in an Event of Default.
	 
	4.	 	REPRESENTATIONS AND WARRANTIES
	 
	 	 	To induce Wells Fargo to enter into this Agreement, Company makes the representations and
warranties described in Exhibit D. Any request for an Advance will be deemed a
representation by Company that all representations and warranties described in Exhibit D
are true, correct, and complete as of the time of the request, unless they relate
exclusively to an earlier date. Company shall promptly deliver a Record notifying Wells
Fargo of any change in circumstance that would affect the accuracy of any representation or
warranty, unless the representation and warranty specifically relates to an earlier date.
	 
	5.	 	COVENANTS
	 
	 	 	So long as the Indebtedness remains unpaid, or the Line of Credit has not been terminated,
Company shall comply with each of the following covenants, unless Wells Fargo shall consent
otherwise in an Authenticated Record delivered to Company.
	 
	5.1	 	Reporting Requirements. Company shall deliver to Wells Fargo the following information,
compiled where applicable using GAAP consistently applied, in form and content acceptable to
Wells Fargo:
	 
	(a)	 	Annual Financial Statements. As soon as available and in any event within 120 days
after Company’s fiscal year end, Company’s audited financial statements prepared by an
independent certified public accountant acceptable to Wells Fargo, which shall include
Company’s balance sheet, income statement, and statement of retained earnings and cash flows
prepared, if requested by Wells Fargo, on a consolidated and consolidating basis to include
Company’s Subsidiaries. The annual financial statements shall be accompanied by a certificate
(the “Compliance Certificate”) in the form of Exhibit E that is signed by Company’s chief
financial officer.
	 
	 	 	Each Compliance Certificate that accompanies an annual financial statement shall also be
accompanied by copies of all management letters prepared by Company’s accountants.
	 
	(b)	 	Quarterly Financial Statements. As soon as available and in any event within 30 days
for the first two fiscal quarters in Company’s fiscal year 2008 and 25 days for each fiscal
quarter thereafter for preliminary statements and within 45 days for final statements, in each
case after the end of each fiscal quarter, the unaudited/internal balance sheet and statements
of income and retained earnings of Company as at the end of and for such quarter and for the
year to date period then ended, prepared, if Wells Fargo so requests, on a consolidated

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	 	 	and consolidating basis to include Company’s Subsidiaries, in reasonable detail, all
prepared in accordance with GAAP, subject to year-end audit adjustments and without
footnotes, and which fairly represent Company’s financial position and the results of its
operations. The final quarterly financial statements (i.e., the statements due within 45
days after the end of each fiscal quarter) shall be accompanied by a Compliance Certificate
in the form of Exhibit E that is signed by Company’s chief financial officer.
	 
	(c)	 	Monthly Financial Statements. As soon as available and in any event within 30 days
after the end of each month for each month through August, 2008 and within 25 days after the
end of each month for each month thereafter, a Company prepared balance sheet, income
statement, and statement of retained earnings prepared for that month and for the year–to-date
period then ended, prepared, if requested by Wells Fargo, on a consolidated and consolidating
basis to include Company’s Subsidiaries, and stating in comparative form the figures for the
corresponding date and periods in the prior fiscal year, subject to year-end adjustments and
without footnotes. The monthly financial statements shall be accompanied by a Compliance
Certificate in the form of Exhibit E that is signed by Company’s chief financial officer.
	 
	(d)	 	Collateral Reports. No later than 15 days after each month end (or more frequently
if Wells Fargo shall request it), (i) detailed agings of Company’s accounts receivable and
accounts payable, a detailed inventory report, an inventory certification report (including a
listing by location and category), an accounts receivable reconciliation report, and a
calculation of Company’s Accounts (including an accounts receivable ineligibility
certification), Eligible Accounts, Inventory and Eligible Inventory as of the end of that
month or shorter time period requested by Wells Fargo, (ii) Company shall provide Wells Fargo
with copies of bank account statements for each deposit or other account maintained by
Company, and (iii) Company shall deliver to Wells Fargo a current Borrowing Base Certificate
for Ex-Im Bank Guaranteed Line, the form of which is attached hereto as Exhibit G. Accounts
receivable agings shall be delivered electronically to Wells Fargo in accordance with the
instructions and procedures established by Wells Fargo from time to time.
	 
	(e)	 	Projections. No later than 30 days prior to each fiscal year end for a draft, and no
later than 30 days after the commencement of each fiscal year for a final, projected balance
sheet and income statement and statement of retained earnings and cash flows for each month of
the next fiscal year for Company, certified as accurate by Company’s chief financial officer
and accompanied by a statement of assumptions and supporting schedules and information.
	 
	(f)	 	Supplemental Reports. Weekly, or more frequently if Wells Fargo requests, Company’s
standard form of “daily collateral report”, together with sales reports, credit memos and
other accounts receivable adjustments, receivables schedules, collection reports, inventory
reports by category and location, copies of Company’s five (5) largest invoices (by Dollar
amount) together with related shipment documents and delivery receipts for goods.
	 
	(g)	 	Litigation. No later than three days after discovery, a Record notifying Wells Fargo
of any litigation or other proceeding before any court or governmental

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	 	 	agency which seeks a monetary recovery against Company in excess of $250,000.
	 
	(h)	 	Intellectual Property. (i) No later than 30 days before it acquires material
Intellectual Property Rights, a Record notifying Wells Fargo of Company’s intention to acquire
such rights; (ii) except for transfers permitted under Section 5.18, no later than 30 days
before it disposes of material Intellectual Property Rights, a Record notifying Wells Fargo of
Company’s intention to dispose of such rights, along with copies of all proposed documents and
agreements concerning the disposal of such rights as requested by Wells Fargo; (iii) promptly
upon discovery, a Record notifying Wells Fargo of (A) any Infringement of Company’s
Intellectual Property Rights by any Person, (B) claims that Company is Infringing another
Person’s Intellectual Property Rights and (C) any threatened cancellation, termination or
material limitation of Company’s Intellectual Property Rights; and (iv) promptly upon receipt,
copies of all registrations and filings with respect to Company’s Intellectual Property
Rights.
	 
	(i)	 	Defaults. No later than three days after learning of the probable occurrence of any
Event of Default, a Record notifying Wells Fargo of the Event of Default and the steps being
taken by Company to cure the Event of Default.
	 
	(j)	 	Disputes. Promptly upon discovery, a Record notifying Wells Fargo of (i) any
disputes or claims by Company’s customers exceeding $250,000 in the aggregate during any
three-month period; (ii) credit memos not previously reported in Section 5.1(e); and (iii) any
goods returned to or recovered by Company outside of the ordinary course of business or in the
ordinary course of business but with a value in an amount in excess of $250,000.
	 
	(k)	 	Changes in Officers and Directors. Promptly following occurrence, a Record notifying
Wells Fargo of any change in the persons constituting Company’s executive Officers and
Directors.
	 
	(l)	 	Collateral. Promptly upon discovery, a Record notifying Wells Fargo of any loss of
or material damage to any Collateral or of any substantial adverse change in any Collateral or
the prospect of its payment.
	 
	(m)	 	Commercial Tort Claims. Promptly upon discovery, a Record notifying Wells Fargo of
any commercial tort claims brought by Company against any Person, including the name and
address of each defendant, a summary of the facts, an estimate of Company’s damages, copies of
any complaint or demand letter submitted by Company, and such other information as Wells Fargo
may request.
	 
	(n)	 	Reports to Owners. Promptly upon distribution, copies of all financial statements,
reports and proxy statements which Company shall have sent to its Owners; provided that
delivery to Wells Fargo of an email link that enables Wells Fargo to obtain complete copies of
the foregoing statements and reports shall satisfy such requirement.

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	(o)	 	Tax Returns of Company. No later than thirty (30) days after the earlier of the date
that they are filed or required to be filed, copies of Company’s signed and dated state and
federal income tax returns and all related schedules, and copies of any extension requests.
	 
	(p)	 	Tax Returns and Personal Financial Statements of Owners and Guarantors.
[INTENTIONALLY OMITTED].
	 
	(q)	 	Violations of Law. No later than three days after discovery of any violation, a
Record notifying Wells Fargo of Company’s violation of any law, rule or regulation, the
non-compliance with which could have a Material Adverse Effect on Company.
	 
	(r)	 	Pension Plans. (i) Promptly upon discovery, and in any event within 30 days after
Company knows or has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, a Record authenticated by Company’s chief financial officer notifying Wells
Fargo of the Reportable Event in detail and the actions which Company proposes to take to
correct the deficiency, together with a copy of any related notice sent to the Pension Benefit
Guaranty Corporation; (ii) promptly upon discovery, and in any event within 10 days after
Company fails to make a required quarterly Pension Plan contribution under Section 412(m) of
the IRC, a Record authenticated by the Company’s chief financial officer notifying Wells Fargo
of the failure in detail and the actions that Company will take to cure the failure, together
with a copy of any related notice sent to the Pension Benefit Guaranty Corporation; and (iii)
promptly upon discovery, and in any event within 10 days after Company knows or has reason to
know that it may be liable or may be reasonably expected to have liability for any withdrawal,
partial withdrawal, reorganization or other event under any Multiemployer Plan under Sections
4201 or 4243 of ERISA, a Record authenticated by Company’s chief financial officer notifying
Wells Fargo of the details of the event and the actions that Company proposes to take in
response.
	 
	(s)	 	Other Reports. From time to time, with reasonable promptness, all receivables
schedules, inventory reports, collection reports, deposit records, equipment schedules,
invoices to account debtors, shipment documents and delivery receipts for goods sold, and such
other materials, reports, records or information as Wells Fargo may reasonably request.
	 
	5.2	 	Financial Covenants. Company agrees to comply with the financial covenants described below,
which shall be calculated using GAAP consistently applied, except as they may be otherwise
modified by the following capitalized definitions:
	 
	(a)	 	Minimum Net Income. Company shall achieve, for each period described below, the sum
of (i) Net Income, plus (ii) non-cash expenses (to the extent deducted from Company’s
net income in order to calculate Net Income), not to exceed $10,000,000, incurred in fiscal
2008 by Company that arise from the write-down of Company’s intangible assets in connection
with the Company’s analysis, as audited by Company’s independent certified public accountants,
of the impairment of Company’s book value of its goodwill, plus (iii) non-recurring
cash expenses, not to exceed $710,000, incurred in fiscal year 2008 by

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	 	 	Company as a result of the winding up of Company’s United Kingdom and French subsidiaries,
less (iv) to the extent included in the calculation of Net Income, any payments
received by Company under or in connection with that certain Settlement Agreement, dated
April 6, 2007, among Company, Synergetics, Inc., and Synergetics USA, Inc., of not less
than the amount set forth for each such period (numbers appearing between “< >” are
negative):

	 	 	 
	 	 	Minimum Net Income
	 	 	plus approved intangible
	Period	 	expense adjustments
	April 1, 2008 through April 30, 2008

	 	$<1,285,000>
	April 1, 2008 through May 31, 2008

	 	$<1,875,000>
	April 1, 2008 through June 30, 2008

	 	$<2,130,000>
	April 1, 2008 through July 31, 2008

	 	$<2,745,000>
	April 1, 2008 through August 31, 2008

	 	$<3,010,000>
	April 1, 2008 through September 30, 2008

	 	$<3,245,000>
	April 1, 2008 through October 31, 2008

	 	$<3,880,000>
	April 1, 2008 through November 30, 2008

	 	$<4,430,000>
	April 1, 2008 through December 31, 2008

	 	$<4,765,000>

	(b)	 	Minimum Debt Service Coverage Ratio. Company shall maintain, as of the last day of
each period described below, a Debt Service Coverage Ratio, determined as at the end of each
month, of not less than the ratio set forth for each such period:

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	 	 	Debt Service Coverage
	Period	 	Ratio
	April 1, 2008 through April 30, 2008

	 	1.10 to 1.0
	April 1, 2008 through May 31, 2008

	 	1.10 to 1.0
	April 1, 2008 through June 30, 2008

	 	1.10 to 1.0
	April 1, 2008 through July 31, 2008

	 	1.10 to 1.0
	April 1, 2008 through August 31, 2008

	 	1.10 to 1.0
	April 1, 2008 through September 30, 2008

	 	1.10 to 1.0
	April 1, 2008 through October 31, 2008

	 	1.10 to 1.0
	April 1, 2008 through November 30, 2008

	 	1.10 to 1.0
	April 1, 2008 through December 31, 2008

	 	1.10 to 1.0

     If Company fails to satisfy the foregoing Debt Service Coverage Ratio covenant on any test
date, but Company has maintained an average daily ending cash balance in its deposit accounts (net
of book overdrafts and past due accounts payable owing by Company) for the 30-day period ending on
such test date that equals or exceeds an amount equal to double the deficiency in Net Income that
would have resulted in compliance with such Debt Service Coverage Ratio, Company will be deemed to
be in compliance with the Debt Service Coverage Ratio on such test date.

     If Company does not have any term debt outstanding (including no obligations outstanding to
American Medical Systems, Inc.), Company shall not be required to comply with the foregoing Debt
Service Coverage Ratio.

	(c)	 	Capital Expenditures. Company shall not incur or contract to incur Capital
Expenditures of more than $250,000 in the aggregate during any fiscal year.

	5.3	 	Other Liens and Permitted Liens.
	 
	(a)	 	Other Liens; Permitted Liens. Company shall not create, incur or suffer to exist any
Lien upon any of its assets, now owned or later acquired, as security for

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	 	 	any indebtedness,
with the exception of the following (each a “Permitted Lien”; collectively, “Permitted
Liens”): (i) In the case of real property, covenants, restrictions, rights, easements and
minor irregularities in title which do not materially interfere with Company’s business or
operations as presently conducted; (ii) Liens in existence on the date of this Agreement that
are described in Exhibit F and secure indebtedness for borrowed money permitted under Section
5.4; (iii) The Security Interest and Liens created by the Security Documents; (iv) Purchase
money Liens (including any capital lease and any sale-leaseback of equipment occurring within
90 days of the acquisition of such equipment) relating to the acquisition of Equipment not
exceeding the lesser of cost or fair market value, not exceeding $100,000 in the aggregate
during any fiscal year, and so long as no Default Period is then in existence and none would
exist immediately after such acquisition; (v) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in accordance
with GAAP, provided the same have no priority over any of Wells Fargo’s security interests;
(vi) Liens existing on equipment at the time of its acquisition, provided that the Lien is
confined solely to the property so acquired and improvements thereon, and the proceeds of such
equipment; (vii) Liens to secure payment of workers’ compensation, employment insurance, old
age pensions, social security or other like obligations incurred in the ordinary course of
business; (viii) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 6.1(h); (ix) Liens in favor of other financial
institutions arising in connection with accounts at such institutions to secure standard fees
for services, but not financing made available by such institution; (x) carriers’
warehousemen’s, mechanics, materialmen’s, repairmen’s or other like Liens arising in the
ordinary course of business which are not delinquent or which are being contested in good
faith and by appropriate proceedings and for which Company maintains adequate reserves in
accordance with GAAP; (xi) leases or subleases and licenses or sublicenses granted to others
in the ordinary course of business which do not interfere in any material respect with the
business operations of Company or any applicable Subsidiary; (xii) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; and (xiii) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the type described
in clauses (ii) and (iv) above, provided that any extension, renewal or replacement Lien shall
be limited to the property encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
	 
	(b)	 	Financing Statements. Company shall not authorize the filing of any financing
statement by any Person as Secured Party with respect to any of Company’s assets, other than
Wells Fargo or in connection with Permitted Liens. Company shall not amend any financing
statement filed by Wells Fargo as Secured Party except as permitted by law.
	 
	5.4	 	Indebtedness. Company shall not incur, create, assume or permit to exist any Debt, except:
(a) Indebtedness arising under this Agreement and the Ex-Im Credit Agreement; (b) Debt of
Company described on Exhibit F; (c) Debt

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	 	 	secured by Permitted Liens; and (d) inter-company
unsecured Debt owing by Company to a Subsidiary; provided, that, upon the request of Wells
Fargo, such Debt shall be evidenced by promissory notes having terms (including subordination
terms) satisfactory to Wells Fargo, the sole originally executed counterparts of which shall
be pledged and delivered to Wells Fargo as security for the Indebtedness. With respect to the
Debt owing by Company to American Medical Systems, Inc. that is described on Exhibit F (the
“AMS Debt”), Company shall make payments owing with respect to the AMS Debt when due (and in
no event shall the AMS Debt be prepaid) in accordance with the terms and conditions of the
agreements governing the AMS Debt that are in existence as of the Closing Date, except to the
extent such payments of the AMS Debt would be prohibited by the terms of the Subordination
Agreement entered into between American Medical Systems, Inc. and Wells Fargo. With respect
to any other Debt owing by Company to any Subordinated Creditor other than American Medical
Systems, Inc., Company may only make payments of interest and principal to the extent such
interest and/or principal payments are permitted under the terms and conditions of the
Subordination Agreement entered into by Wells Fargo and the relevant Subordinated Creditor.
	 
	5.5	 	Guaranties. Company shall not assume, guarantee, endorse or otherwise become directly or
contingently liable for the obligations of any Person, except: (a) the endorsement of
negotiable instruments by Company for deposit or collection or similar transactions in the
ordinary course of business; (b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in existence on the date of
this Agreement and described in Exhibit F; and (c) Investments permitted under Section 5.6.
	 
	5.6	 	Investments and Subsidiaries. Company shall not make or permit to exist any loans or
advances to, any guaranties or other credit support for the benefit of, or make any investment
or acquire any interest whatsoever in (collectively, “Investments”), any Person or Affiliate,
including any partnership or joint venture, nor purchase or hold beneficially any stock or
other securities or evidence of indebtedness of any Person or Affiliate, except:
	 
	(a)	 	Investments in (i) direct obligations issued or unconditionally guaranteed by the United
States government and backed by the full faith and credit of the United States government;
(ii) certificates of deposit and time deposits, bankers’ acceptances and floating rate
certificates of deposit issued by any commercial bank organized under the laws of the United
States, any state thereof, the District of Columbia, any foreign bank, or its branches or
agencies, the long-term indebtedness of which institution at the time
of acquisition is rated
A- (or better) by Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc. (“S&P”) or
A3 (or better) by Moody’s Investors Service, Inc. (“Moody’s”), and which certificates of
deposit and time deposits are fully protected against currency fluctuations for any such
deposits with a term of more than ninety (90) days; (iii) shares of money market, mutual or
similar funds having assets in excess of $100,000,000 and the investments of which are limited
to (a) investment grade securities (i.e., securities rated at least Baa by Moody’s or at
least BBB by S&P) and (b) commercial paper of United States and foreign banks and bank
holding companies and their subsidiaries and United States and foreign finance, commercial
industrial or utility companies which, at the time

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		 	of acquisition, are rated A-2 (or
better) by S&P or P-2 (or better) by Moody’s (all such institutions being, “Qualified
Institutions”); and (iv) commercial paper of Qualified Institutions; provided
that the maturities of any of the foregoing Investments shall not exceed three hundred
sixty-five (365) days from the date of acquisition thereof.
	 
	(b)	 	Travel advances or loans to Company’s Officers and employees not exceeding at any one time an
aggregate of $50,000;
	 
	(c)	 	Prepaid rent not exceeding one month or security deposits;
	 
	(d)	 	Current Investments in those Subsidiaries in existence on the date of this Agreement which
are identified on Exhibit D, and Investments in Subsidiaries after the Closing Date not to
exceed $250,000 in the aggregate. Except to the extent permitted in the immediately preceding
sentence, Company shall not make any further capital contributions or loans to any
Subsidiaries after the Closing Date, guarantee, otherwise become liable for, or provide any
other form of credit support for any obligations of any Subsidiaries after the Closing Date,
or transfer any assets to any Subsidiaries after the Closing Date;
	 
	(e)	 	Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and
other disputes with, customers or suppliers arising in the ordinary course of Company’s
business;
	 
	(f)	 	Investments consisting of accounts receivable of, notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates, in the
ordinary course of Company’s business; and
	 
	(g)	 	Other Investments by Company which do not exceed $250,000 in the aggregate in any fiscal
year.
	 
	5.7	 	Dividends and Distributions. Company shall not declare or pay any dividends (other than
dividends payable solely in Permitted Securities of Company on any class of its stock), or
make any payment on account of the purchase, redemption or retirement of any shares of its
stock, or other securities or evidence of its indebtedness or make any distribution regarding
its stock, either directly or indirectly; provided that Company may (i) make payments in lieu
of fractional shares in connection with any stock split or consolidation, (ii) repurchase
stock from directors, officers or employees in connection with employee benefit arrangements
or upon termination of employment in an amount not to exceed $100,000 in any fiscal year, and
(iii) retain stock in lieu of withholding obligations.
	 
	5.8	 	Salaries. [INTENTIONALLY OMITTED].
	 
	5.9	 	Key Person Life Insurance. [INTENTIONALLY OMITTED].

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	5.10	 	Books and Records; Collateral Examination; Inspection and Appraisals.
	 
	(a)	 	Books and Records; Inspection. Company shall keep complete and accurate books and
records with respect to the Collateral and Company’s business and financial condition and any
other matters that Wells Fargo may request, in accordance with GAAP. Company shall permit any
employee, attorney, accountant or other agent of Wells Fargo to audit, review, make extracts
from and copy any of its books and records at any time during ordinary business hours, and to
discuss Company’s affairs with any of its Directors, Officers, employees, Owners or agents.
	 
	(b)	 	Authorization to Company’s Agents to Make Disclosures to Wells Fargo. Company
authorizes all accountants and other Persons acting as its agent to disclose and deliver to
Wells Fargo’s employees, accountants, attorneys and other Persons acting as its agent, at
Company’s expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding Company.
	 
	(c)	 	Collateral Exams and Inspections. Company shall permit Wells Fargo’s employees,
accountants, attorneys or other Persons acting as its agent, to examine and inspect any
Collateral or any other property of Company at any time during ordinary business hours.
	 
	(d)	 	Collateral Appraisals. Wells Fargo may also obtain, from time to time, at Company’s
expense, an appraisal of the Collateral by an appraiser acceptable to Wells Fargo in its sole
discretion.
	 
	5.11	 	Account Verification; Payment of Permitted Liens.
	 
	(a)	 	Account Verification. Wells Fargo or its agents may (i) contact account debtors and
other obligors at any time to verify Company’s Accounts; and (ii) require Company to send
requests for verification of Accounts or send notices of assignment of Accounts to account
debtors and other obligors.
	 
	(b)	 	Covenant to Pay Permitted Liens. Company shall pay when due each account payable due
to any Person holding a Permitted Lien (as a result of such payable) on any Collateral.
	 
	5.12	 	Compliance with Laws.
	 
	(a)	 	General Compliance with Applicable Law; Use of Collateral. Company shall (i) comply,
and cause each Subsidiary to comply, with the requirements of applicable laws and regulations,
the non-compliance with which would have a Material Adverse Effect on its business or its
financial condition and (ii) use and keep the Collateral, and require that others use and keep
the Collateral, only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.

	(b)	 	Compliance with Federal Regulatory Laws. Company shall (i) prohibit, and cause each
Subsidiary to prohibit, any Person that is an Owner or Officer from being listed on the
Specially Designated Nationals and Blocked Person List or

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		 	other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury or included in any Executive Orders, (ii) not permit the
proceeds of the Line of Credit or any other financial accommodation extended by Wells Fargo
to be used in any way that violates any foreign asset control regulations of OFAC or other
applicable law, (iii) comply, and cause each Subsidiary to comply, with all applicable Bank
Secrecy Act laws and regulations, as amended from time to time, and (iv) otherwise comply
with the USA Patriot Act and Wells Fargo’s related policies and procedures.
	 
	(c)	 	Compliance with Environmental Laws. Company shall (i) comply, and cause each
Subsidiary to comply, with the requirements of applicable Environmental Laws and obtain and
comply with all permits, licenses and similar approvals required by them, and (ii) not
generate, use, transport, treat, store or dispose of any Hazardous Substances in such a manner
as to create any material liability or obligation under the common law of any jurisdiction or
any Environmental Law.
	 
	5.13	 	Payment of Taxes and Other Claims. Company shall pay or discharge, when due, and cause each
Subsidiary to pay or discharge, when due, (a) all taxes, assessments and governmental charges
exceeding $25,000 in the aggregate that are levied or imposed upon it or upon its income or
profits, upon any properties belonging to it (including the Collateral) or upon or against the
creation, perfection or continuance of the Security Interest, prior to the date on which
penalties attach, (b) all federal, state and local taxes required to be withheld by it, and
(c) all lawful claims for labor, materials and supplies which, if unpaid, might by law become
a Lien upon any properties of Company, although Company shall not be required to pay any such
tax, assessment, charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which proper reserves have been made.
	 
	5.14	 	Maintenance of Collateral and Properties.
	 
	(a)	 	Company shall keep and maintain the Collateral and all of its other properties necessary or
useful in its business in good condition, repair and working order (normal wear and tear
excepted) and will from time to time replace or repair any worn, defective or broken parts,
although Company may discontinue the operation and maintenance of any properties if Company
believes that such discontinuance is desirable to the conduct of its business and not
disadvantageous in any material respect to Wells Fargo. Company shall take all commercially
reasonable steps necessary to protect and maintain its Intellectual Property Rights.
	 
	(b)	 	Company shall defend the Collateral against all Liens, claims and demands of all third
Persons claiming any interest in the Collateral. Company shall keep all Collateral free and
clear of all Liens except Permitted Liens. Company shall take all commercially reasonable
steps necessary to prosecute any Person Infringing its Intellectual Property Rights and to
defend itself against any Person accusing it of Infringing any Person’s Intellectual Property
Rights.
	 
	5.15	 	Insurance. Company shall at all times maintain insurance with insurers acceptable to Wells
Fargo, in such amounts, on such terms (including any

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	 	 	deductibles) and against such risks as Wells Fargo may require (which, at a minimum shall
be in such amounts and against such risks as are usually carried by companies engaged in
similar business and owning similar properties in the same geographical areas in which
Company operates). Without limiting the generality of the foregoing, Company shall, at all
times and without limitation, maintain business interruption insurance (including force
majeure coverage) and keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as Wells Fargo may reasonably request,
with any loss payable to Wells Fargo to the extent of its interest, and all such policies
of insurance shall contain a lender’s loss payable endorsement for the benefit of Wells
Fargo. All policies of liability insurance shall name Wells Fargo as an additional
insured.
	 
	5.16	 	Preservation of Existence. Company shall preserve and maintain its existence and all of its
rights, privileges and franchises necessary or desirable in the normal conduct of its business
and shall conduct its business in an orderly, efficient and regular manner.
	 
	5.17	 	Delivery of Instruments, etc. Upon request by Wells Fargo, Company shall promptly deliver to
Wells Fargo in pledge all instruments, documents and chattel paper constituting Collateral,
endorsed or assigned by Company.
	 
	5.18	 	Sale or Transfer of Assets; Suspension of Business Operations. Company shall not sell,
lease, assign, transfer, license, or otherwise dispose of (each, a “Transfer”) (a) the stock
of any Subsidiary, (b) all or a substantial part of its assets, or (c) any Collateral or any
interest in Collateral (whether in one transaction or in a series of transactions) to any
other Person other than (i) the sale of Inventory in the ordinary course of business and the
licensing of Intellectual Property Rights in the ordinary course of its business in connection
with sales of Inventory or the provision of services to its customers, (ii) Transfers of
worn-out, obsolete or unneeded equipment, and (iii) Transfers constituting Permitted
Investments. Company shall not liquidate, dissolve or suspend business operations. Company
shall not permit its rights as licensee of Licensed Intellectual Property to lapse, except
that Company may transfer such rights or permit them to lapse if it has reasonably determined
that such Intellectual Property Rights are no longer useful in its business.
	 
	5.19	 	Consolidation and Merger; Asset Acquisitions. Company shall not consolidate with or merge
into any other entity, or permit any other entity to merge into it, or acquire (in a
transaction analogous in purpose or effect to a consolidation or merger) all or substantially
all of the assets of any other entity; provided that any Subsidiary of Company may merge with
and into Company so long as Company is the surviving entity.
	 
	5.20	 	Sale and Leaseback. Company shall not enter into any arrangement, directly or indirectly,
with any other Person pursuant to which Company shall sell or transfer any real or personal
property, whether owned now or acquired in the future, and then rent or lease all or part of
such property or any other property which Company intends to use for substantially the same
purpose or purposes

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	 	 	as the property being sold or transferred, except in connection with a financing that would
be permitted under Section 5.3(a)(iv).
	 
	5.21	 	Restrictions on Nature of Business. Company will not engage in any line of business
materially different from that presently engaged in by Company, and will not purchase, lease
or otherwise acquire assets not related to its business.
	 
	5.22	 	Accounting. Company will not adopt any material change in accounting principles except as
required by GAAP, consistently applied. Company will not change its fiscal year.
	 
	5.23	 	Discounts, etc. After notice from Wells Fargo, Company will not grant any discount, credit
or allowance to any customer of Company or accept any return of goods sold except in the
ordinary course of Company’s business. Company will not at any time modify, amend,
subordinate, cancel or terminate any Account except in the ordinary course of Company’s
business.
	 
	5.24	 	Pension Plans. Except as disclosed to Wells Fargo in a Record prior to the date of this
Agreement, neither Company nor any ERISA Affiliate will (a) adopt, create, assume or become
party to any Pension Plan, (b) become obligated to contribute to any Multiemployer Plan, (c)
incur any obligation to provide post-retirement medical or insurance benefits with respect to
employees or former employees (other than benefits required by law) or (d) amend any Plan in a
manner that would materially increase its funding obligations.
	 
	5.25	 	Place of Business; Name. Company will not transfer its chief executive office or principal
place of business, or move, relocate, close or sell any business Premises, without prior
written notice to Wells Fargo. Company will not change its name or jurisdiction of
organization without prior written notice to Wells Fargo.
	 
	5.26	 	Constituent Documents. Company will not amend its Constituent Documents.
	 
	5.27	 	Performance by Wells Fargo. If Company fails to perform or observe any of its obligations
under this Agreement at any time, Wells Fargo may, but need not, perform or observe them on
behalf of Company and may, but need not, take any other actions which Wells Fargo may
reasonably deem necessary to cure or correct this failure; and Company shall pay Wells Fargo
upon demand the amount of all costs and expenses (including reasonable attorneys’ fees and
legal expense) incurred by Wells Fargo in performing these obligations, together with interest
on these amounts at the Default Rate.
	 
	5.28	 	Wells Fargo Appointed as Company’s Attorney in Fact. To facilitate Wells Fargo’s performance
or observance of Company’s obligations under this Agreement, Company hereby irrevocably
appoints Wells Fargo and Wells Fargo’s agents, as Company’s attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) to create, prepare,
complete, execute, deliver, endorse or file on behalf of Company any instruments, documents,
assignments, security agreements, financing statements, applications for insurance and any
other agreements or any Record required to

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	 	 	be obtained, executed, delivered or endorsed by Company in accordance with the terms of
this Agreement.
	 
	6.	 	EVENTS OF DEFAULT AND REMEDIES
	 
	6.1	 	Events of Default. An “Event of Default” means any of the following:
	 
	(a)	 	Company fails to pay any the amount of any Indebtedness on the date that it becomes due and
payable;
	 
	(b)	 	Company fails to observe or perform any covenant or agreement of Company set forth in this
Agreement, in any of the Loan Documents, or in the Master Agreement for Treasury Management
Services, or any covenant in Section 5.2 becomes inapplicable due to the lapse of time, and
Wells Fargo and Company fail to come to an agreement acceptable to Wells Fargo in Wells
Fargo’s sole discretion to amend the covenant to apply to future periods;
	 
	(c)	 	An Overadvance arises as the result of any reduction in the Borrowing Base and the amount of
the Overadvance is not immediately repaid, or arises in any manner or on terms not otherwise
approved of in advance by Wells Fargo in a Record that it has Authenticated and the amount of
the Overadvance is not immediately repaid;
	 
	(d)	 	A Change of Control shall occur;
	 
	(e)	 	Company or any Guarantor becomes insolvent or admits in a Record an inability to pay debts as
they mature, or Company or any Guarantor makes an assignment for the benefit of creditors; or
Company or any Guarantor applies for or consents to the appointment of any receiver, trustee,
or similar officer for the benefit of Company or any Guarantor, or for any of their
properties; or any receiver, trustee or similar officer is appointed without the application
or consent of Company or such Guarantor and such appointment is not vacated within 30 days; or
any judgment, writ, warrant of attachment or execution or similar process is issued or levied
against a substantial part of the property of Company or any Guarantor and such process is not
vacated within 30 days;
	 
	(f)	 	Company or any Guarantor files a petition under any chapter of the United States Bankruptcy
Code or under the laws of any other jurisdiction naming Company or such Guarantor as debtor;
or any such petition is instituted against Company or any such Guarantor and such petition is
not dismissed within 30 days; or Company or any Guarantor institutes (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, debt
arrangement, dissolution, liquidation or similar proceeding under the laws of any
jurisdiction; or any such proceeding is instituted (by petition, application or otherwise)
against Company or any such Guarantor and such proceeding is not dismissed within 30 days;
	 
	(g)	 	Any representation or warranty made by Company in this Agreement or by any Guarantor in any
Guaranty, or by Company (or any of its Officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement delivered to Wells Fargo in
connection with this Agreement or

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	 	 	pursuant to such Guaranty is untrue or misleading in any material respect when delivered to
Wells Fargo;
	 
	(h)	 	A final, non-appealable arbitration award, judgment, or decree or order for the payment of
money in an amount in excess of $250,000 which is not insured or subject to indemnity, is
entered against Company which is not satisfied, stayed or appealed within 10 days;
	 
	(i)	 	Company is in default with respect to any bond, debenture, note or other evidence of
indebtedness in an amount in excess of $250,000 issued by Company that is held by any third
Person other than Wells Fargo, or under any instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any material lease or other
contract, and the applicable grace period, if any, has expired and the holder of such
indebtedness has the right to accelerate the maturity of such indebtedness;
	 
	(j)	 	Company fails to pay any indebtedness or obligation owed to Wells Fargo which is unrelated to
the Line of Credit or this Agreement as it becomes due and payable;
	 
	(k)	 	Any Guarantor repudiates or purports to revokes the Guarantor’s Guaranty, or fails to perform
any obligation under such Guaranty, or any individual Guarantor dies or becomes incapacitated,
or any other Guarantor ceases to exist for any reason;
	 
	(l)	 	Company engages in any act prohibited by any Subordination Agreement, or makes any payment on
Subordinated Indebtedness (as defined in the Subordination Agreement) or other debt or
obligations that in each case the Subordinated Creditor was not contractually entitled to
receive;
	 
	(m)	 	Any event or circumstance occurs that Wells Fargo in good faith believes may impair the
prospect of payment of all or part of the Indebtedness, or Company’s ability to perform
material obligations under any of the Loan Documents or the Master Agreement for Treasury
Management Services, or there occurs any material adverse change in the business or financial
condition of Company;
	 
	(n)	 	The chairman, president or chief financial officer of Company or any Owner of at least forty
percent (40%) of the issued and outstanding common stock or other equity interests of Company
is convicted of a felony under state or federal law;
	 
	(o)	 	Any Reportable Event, which Wells Fargo in good faith believes to constitute sufficient
grounds for termination of any Pension Plan or for the appointment of a trustee to administer
any Pension Plan, has occurred and is continuing 30 days after Company gives Wells Fargo a
Record notifying it of the Reportable Event; or a trustee is appointed by an appropriate court
to administer any Pension Plan; or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate or appoint a trustee to administer any Pension Plan; or Company or
any ERISA Affiliate files for a distress termination of any Pension Plan under Title IV of
ERISA; or Company or any ERISA Affiliate fails to make any quarterly Pension Plan contribution
required under Section

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	 	 	412(m) of the
IRC, which Wells Fargo in good faith believes may, either by itself or in combination with
other failures, result in the imposition of a Lien on Company’s assets in favor of the
Pension Plan; or any withdrawal, partial withdrawal, reorganization or other event occurs
with respect to a Multiemployer Plan which could reasonably be expected to result in a
material liability by Company to the Multiemployer Plan under Title IV of ERISA; or
	 
	(p)	 	Any “Event of Default” occurs under any of the Ex-Im Loan Documents.
	 
	6.2	 	Rights and Remedies. During any Default Period, Wells Fargo may in its discretion exercise
any or all of the following rights and remedies:
	 
	(a)	 	Wells Fargo may terminate the Line of Credit and decline to make Advances, and terminate any
services extended to Company under the Master Agreement for Treasury Management Services;
	 
	(b)	 	Wells Fargo may declare the Indebtedness to be immediately due and payable and accelerate
payment of the Revolving Notes, and all Indebtedness shall immediately become due and payable,
without presentment, notice of dishonor, protest or further notice of any kind, all of which
Company hereby expressly waives;
	 
	(c)	 	Wells Fargo may, without notice to Company, apply any money owing by Wells Fargo to Company
to payment of the Indebtedness;
	 
	(d)	 	Wells Fargo may exercise and enforce any rights and remedies available upon default to a
secured party under the UCC, including the right to take possession of Collateral, proceeding
with or without judicial process (without a prior hearing or notice of hearing, which Company
hereby expressly waives) and sell, lease or otherwise dispose of Collateral for cash or on
credit (with or without giving warranties as to condition, fitness, merchantability or title
to Collateral, and in the event of a credit sale, Indebtedness shall be reduced only to the
extent that payments are actually received), and Company will upon Wells Fargo’s demand
assemble the Collateral and make it available to Wells Fargo at any place designated by Wells
Fargo which is reasonably convenient to both parties;
	 
	(e)	 	Wells Fargo may exercise and enforce its rights and remedies under any of the Loan Documents;
	 
	(f)	 	Wells Fargo may for any reason apply for the appointment of a receiver of the Collateral, to
which appointment Company hereby consents; and
	 
	(g)	 	Wells Fargo may exercise any other rights and remedies available to it by law or agreement.
	 
	6.3	 	Immediate Default and Acceleration. Following the occurrence of an Event of Default
described in Section 6.1(e) or (f), the Line of Credit shall immediately terminate and all of
Company’s Indebtedness shall immediately become due and payable without presentment, demand,
protest or notice of any kind.

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	7.	 	MISCELLANEOUS
	 
	7.1	 	No Waiver; Cumulative Remedies. No delay or any single or partial exercise by Wells Fargo of
any right, power or remedy under the Loan Documents shall constitute a waiver of any other
right, power or remedy under the Loan Documents. No notice to or demand on Company in any
circumstance shall entitle Company to any additional notice or demand in any other
circumstances. The remedies provided in the Loan Documents are cumulative and not exclusive
of any remedies provided by law. Wells Fargo may comply with applicable law in connection
with a disposition of Collateral, and such compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral.
	 
	7.2	 	Amendment of Loan Documents; Consents and Waivers; Authentication. No amendment or
modification of any Loan Documents, or consent to or waiver of any Event of Default, or
consent to or waiver of the application of any covenant or representation set forth in any of
the Loan Documents, or any release of Wells Fargo’s Security Interest in any Collateral, shall
be effective unless it has been agreed to by Wells Fargo and memorialized in a Record that:
(a) specifically states that it is intended to amend or modify specific Loan Documents, or
waive any Event of Default or the application of any covenant or representation of any terms
of specific Loan Documents, or is intended to release Wells Fargo’s Security Interest in
specific Collateral; and (b) is Authenticated by the signature of an authorized employee of
both parties, or by an authorized employee of Wells Fargo with respect to a consent or waiver.
The terms of an amendment, consent or waiver memorialized in any Record shall be effective
only to the extent, and in the specific instance, and for the limited purpose to which Wells
Fargo has agreed.
	 
	7.3	 	Execution in Counterparts; Delivery of Counterparts. This Agreement and all other Loan
Documents, and any amendment or modification to them may be Authenticated by the parties in
any number of counterparts, each of which, once authenticated and delivered in accordance with
the terms of this Section 7.3, will be deemed an original, and all such counterparts, taken
together, shall constitute one and the same instrument. Delivery by fax or by encrypted
e-mail or e-mail file attachment of any counterpart to any Loan Document Authenticated by an
authorized signature will be deemed the equivalent of the delivery of the original
Authenticated instrument. Company shall send the original Authenticated counterpart to Wells
Fargo by first class U.S. mail or by overnight courier, but Company’s failure to deliver a
Record in this form shall not affect the validity, enforceability, and binding effect of this
Agreement or the other Loan Documents.
	 
	7.4	 	Notices, Requests, and Communications; Confidentiality. Except as otherwise expressly
provided in this Agreement:
	 
	(a)	 	Delivery of Notices, Requests and Communications. Any notice, request, demand, or
other communication by either party that is required under the Loan Documents to be in the
form of a Record (but excluding any Record containing information Company must report to Wells
Fargo under Section 5.1) may be delivered (i) in person, (ii) by first class U.S. mail, (iii)
by overnight courier of

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	 	 	national reputation, or (iv) by fax, or the Record may be sent as an Electronic Record and
delivered (v) by an encrypted e-mail, or (vi) through Wells Fargo’s Commercial Electronic
Office® (“CEO®”) portal or other secure electronic channel to which the parties have
agreed.
	 
	(b)	 	Addresses for Delivery. Delivery of any Record under this Section 7.4 shall be made
to the appropriate address set forth on the last page of this Agreement (which either party
may modify by a Record sent to the other party), or through Wells Fargo’s CEO portal or other
secure electronic channel to which the parties have agreed.
	 
	(c)	 	Date of Receipt. Each Record sent pursuant to the terms of this Section 7.4 will be
deemed to have been received on (i) the date of delivery if delivered in person, (ii) the date
deposited in the mail if sent by mail, (iii) the date delivered to the courier if sent by
overnight courier, (iv) the date of transmission if sent by fax, or (v) the date of
transmission, if sent as an Electronic Record by electronic mail or through Wells Fargo’s CEO
portal or similar secure electronic channel to which the parties have agreed; except
that any request for an Advance or any other notice, request, demand or other
communication from Company required under Section 1, and any request for an accounting under
Section 9-210 of the UCC, will not be deemed to have been received until actual receipt by
Wells Fargo on a Business Day by an authorized employee of Wells Fargo.
	 
	(d)	 	Confidentiality of Unencrypted E-mail. Company acknowledges that if it sends an
Electronic Record to Wells Fargo without encryption by e-mail or as an e-mail file attachment,
there is a risk that the Electronic Record may be received by unauthorized Persons, and that
by so doing it will be deemed to have accepted this risk and the consequences of any such
unauthorized disclosure.
	 
	7.5	 	Company Information Reporting; Confidentiality. Except as otherwise expressly provided in
this Agreement:
	 
	(a)	 	Delivery of Company Information Records. Any information that Company is required to
deliver under Section 5.1 in the form of a Record may be delivered to Wells Fargo (i) in
person, or by (ii) first class U.S. mail, (iii) overnight courier of national reputation, or
(iv) fax, or the Record may be sent as an Electronic Record (v) by encrypted e-mail, or (vi)
through the file upload service of Wells Fargo’s CEO portal or other secure electronic channel
to which the parties have agreed.
	 
	(b)	 	Addresses for Delivery. Delivery of any Record to Wells Fargo under this Section 7.5
shall be made to the appropriate address set forth on the last page of this Agreement (which
Wells Fargo may modify by a Record sent to Company), or through Wells Fargo’s CEO portal or
other secure electronic channel to which the parties have agreed.
	 
	(c)	 	Date of Receipt. Each Record sent pursuant to this Section will be deemed to have
been received on (i) the date of delivery to an authorized employee of Wells Fargo, if
delivered in person, or by U.S. mail, overnight courier, fax, or e-mail; or (ii) the date of
transmission, if sent as an Electronic Record through

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	 	 	Wells Fargo’s CEO portal or similar secure electronic channel to which the parties have
agreed.
	 
	(d)	 	Authentication of Company Information Records. Company shall Authenticate any Record
delivered (i) in person, or by U.S. mail, overnight courier, or fax, by the signature of the
Officer or employee of Company who prepared the Record; (ii) as an Electronic Record sent via
encrypted e-mail, by the signature of the Officer or employee of Company who prepared the
Record by any file format signature that is acceptable to Wells Fargo, or by a separate
certification signed and sent by fax; or (iii) as an Electronic Record via the file upload
service of Wells Fargo’s CEO portal or similar secure electronic channel to which the parties
have agreed, through such credentialing process as Wells Fargo and Company may agree to under
the CEO agreement.
	 
	(e)	 	Certification of Company Information Records. Any Record (including any Electronic
Record) Authenticated and delivered to Wells Fargo under this Section 7.5 will be deemed to
have been certified as materially true, correct, and complete by Company and each Officer or
employee of Company who prepared and Authenticated the Record on behalf of Company, and may be
legally relied upon by Wells Fargo without regard to method of delivery or transmission.
	 
	(f)	 	Confidentiality of Company Information Records Sent by Unencrypted E-mail. Company
acknowledges that if it sends an Electronic Record to Wells Fargo without encryption by e-mail
or as an e-mail file attachment, there is a risk that the Electronic Record may be received by
unauthorized Persons, and that by so doing it will be deemed to have accepted this risk and
the consequences of any such unauthorized disclosure. Company acknowledges that it may
deliver Electronic Records containing Company information to Wells Fargo by e-mail pursuant to
any encryption tool acceptable to Wells Fargo and Company, or through Wells Fargo’s CEO portal
file upload service without risk of unauthorized disclosure.
	 
	7.6	 	Further Documents. Company will from time to time execute, deliver, endorse and authorize
the filing of any instruments, documents, conveyances, assignments, security agreements,
financing statements, control agreements and other agreements that Wells Fargo may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or Wells Fargo’s
rights under the Loan Documents (but any failure to request or assure that Company executes,
delivers, endorses or authorizes the filing of any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).
	 
	7.7	 	Costs and Expenses. Company shall pay on demand all costs and expenses, including reasonable
attorneys’ fees, incurred by Wells Fargo in connection with the Indebtedness, this Agreement,
the Loan Documents, or any other document or agreement related to this Agreement, and the
transactions contemplated by this Agreement, including all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Indebtedness

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	 	 	and all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
	 
	7.8	 	Indemnity. In addition to its obligation to pay Wells Fargo’s expenses under the terms of
this Agreement, Company shall indemnify, defend and hold harmless Wells Fargo, its parent
Wells Fargo & Company, and any of its affiliates and successors, and all of their present and
future Officers, Directors, employees, attorneys and agents (the “Indemnitees”) from and
against any of the following (collectively, “Indemnified Liabilities”):
	 
	(a)	 	Any and all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan Documents or the
making of the Advances;
	 
	(b)	 	Any claims, loss or damage to which any Indemnitee may be subjected if any representation or
warranty contained in Exhibit D proves to be incorrect in any respect or as a result of any
violation of the covenants contained in Section 5.12; and
	 
	(c)	 	Any and all other liabilities, losses, damages, penalties, judgments, suits, claims, costs
and expenses of any kind or nature whatsoever (including the reasonable fees and disbursements
of counsel) in connection with this Agreement and any other investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be designated a party to such
proceedings, which may be imposed on, incurred by or asserted against any such Indemnitee, in
any manner related to or arising out of or in connection with the making of the Advances and
the Loan Documents or the use or intended use of the proceeds of the Advances, with the
exception of any Indemnified Liability caused by the gross negligence or willful misconduct of
an Indemnitee.
	 
	 	 	If any investigative, judicial or administrative proceeding described in this Section is
brought against any Indemnitee, upon the Indemnitee’s request, Company, or counsel
designated by Company and satisfactory to the Indemnitee, will resist and defend the
action, suit or proceeding to the extent and in the manner directed by the Indemnitee, at
Company’s sole cost and expense. Each Indemnitee will use its best efforts to cooperate in
the defense of any such action, suit or proceeding. If this agreement to indemnify is held
to be unenforceable because it violates any law or public policy, Company shall
nevertheless make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities to the extent permissible under applicable law. Company’s
obligations under this Section shall survive the termination of this Agreement and the
discharge of Company’s other obligations under this Agreement.
	 
	7.9	 	Retention of Company’s Records. Wells Fargo shall have no obligation to maintain Electronic
Records or retain any documents, schedules, invoices, agings, or other Records delivered to
Wells Fargo by Company in connection with the Loan Documents for more than 30 days after
receipt by Wells Fargo. If there is a special need to retain specific Records, Company must
notify Wells Fargo of its need to retain or return such Records with particularity, which
notice

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	 	 	must be delivered to Wells Fargo in accordance with the terms of this Agreement at the time
of the initial delivery of the Record to Wells Fargo.
	 
	7.10	 	Binding Effect; Assignment; Complete Agreement. The Loan Documents shall be binding upon and
inure to the benefit of Company and Wells Fargo and their respective successors and assigns,
except that Company shall not have the right to assign its rights under this Agreement or any
interest in this Agreement without Wells Fargo’s prior consent, which must be confirmed in a
Record Authenticated by Wells Fargo. To the extent permitted by law, Company waives and will
not assert against any assignee any claims, defenses or set-offs which Company could assert
against Wells Fargo. This Agreement shall also bind all Persons who become a party to this
Agreement as a borrower. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter of this Agreement and
supersedes all prior agreements, whether oral or evidenced in a Record. To the extent that
any provision of this Agreement contradicts other provisions of the Loan Documents other than
this Agreement, this Agreement shall control.
	 
	7.11	 	Sharing of Information. Wells Fargo may share any information that it may have regarding
Company and its Affiliates with its accountants, lawyers, and other advisors and with Ex-Im
Bank, and Wells Fargo, each direct and indirect subsidiary of Wells Fargo & Company, and Ex-Im
Bank may also share any information that they have with each other, and Company waives any
right of confidentiality it may have with respect to the sharing of all such information.
	 
	7.12	 	Severability of Provisions. Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining terms of this Agreement.
	 
	7.13	 	Headings. Section and subsection headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other purpose.
	 
	7.14	 	Governing Law; Jurisdiction, Venue. The Loan Documents shall be governed by and construed in
accordance with the substantive laws (other than conflict laws) of the State of California.
The parties to this Agreement (a) consent to the personal jurisdiction of the state and
federal courts located in the State of California in connection with any controversy related
to this Agreement; (b) waive any argument that venue in any such forum is not convenient; (c)
agree that any litigation initiated by Wells Fargo or Company in connection with this
Agreement or the other Loan Documents may be venued in either the state or federal courts
located in the City of Los Angeles, County of Los Angeles, State of California; and (d) agree
that a final judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by
law.
	 
	7.15	 	Incorporation of Borrower Agreement by Reference. This Agreement shall constitute the “Loan
Agreement” under the Borrower Agreement, and the Line of Credit shall constitute the “Loan
Facility” under the Borrower Agreement. The terms of the Borrower Agreement are hereby
incorporated herein by this reference. In the event that any provision of this Agreement
conflicts with or is

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

33

 

	 	 	inconsistent with any provision of the Borrower Agreement, the provision that is more
burdensome or restrictive as to Company shall control.

[signatures on next page]

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

34

 

COMPANY AND WELLS FARGO HAVE EXECUTED THIS AGREEMENT THROUGH THEIR AUTHORIZED OFFICERS AS OF THE
DATE SET FORTH ABOVE.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	WELLS FARGO BANK,	 	 	 	IRIDEX CORPORATION
	NATIONAL ASSOCIATION	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	/s/ Jorge Visitacion	 	 	 	By:	 	 	 	/s/ James Mackaness
	 	 	 	 	 	 	 	 	 
	Print Name:	 	Jorge Visitacion	 	 	 	Print Name:	 	James Mackaness
	 

	 	 	 	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	AVP + Relationship Manager	 	 	 	Title:	 	 	 	CFO
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Wells Fargo Bank, National Association	 	 	 	IRIDEX Corporation
	245 Los Robles Avenue, Suite 700	 	 	 	1212 Terra Bella Avenue
	Pasadena, California 91101	 	 	 	Mountain View, California 94043
	Fax: 626.844.9063	 	 	 	Fax:                                         
	Attention: Jorge Visitacion	 	 	 	Attention: James Mackaness
	e-mail:
jorge.c.visitacion@wellsfargo.com	 	 	 	e-mail:                                         
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Federal Employer
	 	 	 	 	 	 	 	 	Identification No.:                                         
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Organizational Identifi-
	 	 	 	 	 	 	 	 	cation No.:                                         

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

S-1

 

Exhibit A to Credit and Security Agreement (Ex-Im Subfacility)

DEFINITIONS

“Account Funds” is defined in Section 1.4(a).

“Accounts” shall have the meaning given it under the UCC.

“Advance” and “Advances” means an advance or advances under the Line of Credit.

“Affiliate” or “Affiliates” means any Person controlled by, controlling or under common control
with Company, including any Subsidiary of Company. For purposes of this definition, “control,”
when used with respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

“Agreement” means this Credit and Security Agreement.

“Authenticated” means (a) to have signed; or (b) to have executed or to have otherwise adopted a
symbol, or have encrypted or similarly processed a Record in whole or in part, with the present
intent of the authenticating Person to identify the Person and adopt or accept a Record.

“Borrower Agreement” means the Borrower Agreement, dated on or about the date hereof, made by
Company in favor of Ex-Im Bank and Wells Fargo, as the same may hereafter be amended, modified,
supplemented or restated from time to time.

“Borrowing Base” is defined in Section 1.2(a).

“Borrowing Base Reserve” means, as of any date of determination, an amount or a percent of a
specified category or item that Wells Fargo establishes in its sole discretion from time to time to
reduce availability under the Borrowing Base (a) to reflect events, conditions, contingencies or
risks which affect the assets, business or prospects of Company, or the Collateral or its value, or
the enforceability, perfection or priority of Wells Fargo’s Security Interest in the Collateral, as
the term “Collateral” is defined in this Agreement, or (b) to reflect Wells Fargo’s judgment that
any collateral report or financial information relating to Company and furnished to Wells Fargo may
be incomplete, inaccurate or misleading in any material respect.

“Buyer” shall have the meaning provided for such term in the Borrower Agreement.

“Business Day” means a day on which the Federal Reserve Bank of New York is open for business and,
if such day relates to a LIBOR Advance, a day on which dealings are carried on in the London
interbank eurodollar market.

“Capital Expenditures” means for a period, any expenditure of money during such period for the
lease, purchase or other acquisition of any capital asset, or for the lease of any other asset
whether payable currently or in the future.

“CEO” is defined in Section 7.4(a).

“Change of Control” means the occurrence of any of the following events:

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A
— Page 1

 

	(a)	 	Any Person or “group” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, except that any such Person, entity or group
will be deemed to have “beneficial ownership” of all securities that such Person, entity or
group has the right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than thirty-three and one-third percent
(33.33%) of the voting power of all classes of ownership of Company;
	 
	(b)	 	During any consecutive two-year period, individuals who at the beginning of such period
constituted the board of Directors of Company (together with any new Directors whose election
to such board of Directors, or whose nomination for election by the Owners of Company, was
approved by a vote of two thirds of the Directors then still in office who were either
Directors at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the board of
Directors of Company then in office.

“Collateral” means all of Company’s Accounts, chattel paper and electronic chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods, instruments, Inventory, Investment
Property, letter-of-credit rights, letters of credit, all sums on deposit in any Collection
Account, and any items in any Lockbox; together with (a) all substitutions and replacements for and
products of such property; (b) in the case of all goods, all accessions; (c) all accessories,
attachments, parts, Equipment and repairs now or subsequently attached or affixed to or used in
connection with any goods; (d) all warehouse receipts, bills of lading and other documents of title
that cover such goods now or in the future; (e) all collateral subject to the Lien of any of the
Security Documents; (f) any money, or other assets of Company that come into the possession,
custody, or control of Wells Fargo now or in the future; (g) Proceeds of any of the above
Collateral; (h) books and records of Company, including all mail or e-mail addressed to Company;
and (i) all of the above Collateral, whether now owned or existing or acquired now or in the future
or in which Company has rights now or in the future; provided, however, that the term “Collateral”
shall not include more than 66% of the stock of any Subsidiary that is a “controlled foreign
corporation” as defined in the U.S. Internal Revenue Code.

“Closing Date” is defined in Section 3.1.

“Collection Account” means “Collection Account” as defined in the Master Agreement for Treasury
Management Services and related Lockbox and Collection Account Service Description or Collection
Account Service Description, whichever is applicable.

“Compliance Certificate” is defined in Section 5.1(a) and is in the form of Exhibit E.

“Constituent Documents” means with respect to any Person, as applicable, that Person’s certificate
of incorporation, articles of incorporation, by-laws, certificate of formation, articles of
organization, limited liability company agreement, management agreement, operating agreement,
shareholder agreement, partnership agreement or similar document or agreement governing such
Person’s existence, organization or management or concerning disposition of ownership interests of
such Person or voting rights among such Person’s owners.

“Country Limitation Schedule” shall have the meaning provided for such term in the Borrower
Agreement.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 2

 

“Current Maturities of Long Term Debt” means, during a period beginning and ending on designated
dates, the amount of Company’s long-term debt and capitalized leases which become due during that
period.

“Debt” means, as applied to any Person, (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, hedges, derivatives, or other
financial products, (c) all obligations as a lessee under leases required to be capitalized in
accordance with GAAP, (d) all obligations or liabilities of others secured by a Lien on any asset
of such Person or its Subsidiaries, irrespective of whether such obligation or liability is
assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other
than trade payables incurred in the ordinary course of business and repayable in accordance with
customary trade practices), (f) all obligations of such Person owing under swap, cap, floor, collar
or similar hedging arrangements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse)
any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through
(f) above.

“Debt Service Coverage Ratio” means (a) the sum of (i) Funds from Operations, plus (ii) Interest
Expense, minus (iii) unfinanced Capital Expenditures, plus (iv) to the extent not included in Net
Income, cash payments received by Company under that certain Settlement Agreement, dated April 6,
2007, among Company, Synergetics, Inc., and Synergetics USA, Inc., divided by (b) the sum of (i)
monthly contractual debt payments paid or payable to American Medical Systems, (ii) other Current
Maturities of Long Term Debt, (iii) Interest Expense, (iv) any cash dividends or distributions paid
or payable, and (v) any amounts paid to redeem or repurchase stock or other equity interests of
Company.

“Default Period” is defined in Section 1.6(c).

“Default Rate” is defined in Section 1.6(c).

“Dilution” means, as of any date of determination, a percentage, based upon the prior six (6)
months, which is the result of dividing (a) actual bad debt write-downs, discounts, advertising
allowances, credits, and any other items with respect to the Accounts determined to be dilutive by
Wells Fargo in its sole discretion during this period, by (b) Company’s net sales during such
period (excluding extraordinary items) plus the amount of clause (a).

“Director” means a director if Company is a corporation.

“Dollars” or “$” shall mean the lawful currency of the United States.

“Domestic Facility Agreement” means the Credit and Security Agreement, dated as of March 27, 2008,
between Company and Wells Fargo.

“Earnings Before Taxes, Depreciation, and Amortization” means Company’s pretax earnings from
operations, excluding extraordinary gains, but including extraordinary losses, as determined prior
to deduction for depreciation and amortization.

“Electronic Record” means a Record that is created, generated, sent, communicated, received, or
stored by electronic means, but does not include any Record that is sent, communicated, or
received by fax.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 3

 

“Eligible Accounts” means all unpaid Accounts of Company owing by account debtors located outside
of the United States of America arising from the sale or lease of goods or the performance of
services, net of any credits, except that in no event shall Eligible Accounts include any Account:

(a) that does not arise from the sale of Items in the ordinary course of business;

(b) that is not subject to a valid, perfected first priority Lien in favor of Wells Fargo;

(c) as to which any covenant, representation or warranty contained in the Loan Documents
with respect to such Account has been breached;

(d) that is not owned by Company or that is subject to any right, claim or interest of
another Person other than the Lien in favor of Wells Fargo;

(e) with respect to which an invoice has not been sent;

(f) that arises from the sale of defense articles or defense services;

(g) that is due and payable from a Buyer located in a country with which Ex-Im Bank is
prohibited from doing business as designated in the Country Limitation Schedule;

(h) that does not comply with the requirements of the Country Limitation Schedule;

(i) that is not paid within 90 days from the invoice date;

(j) that arises from a sale of goods to or performance of services for an employee of
Company, a stockholder of Company, a subsidiary of Company, a Person with a controlling
interest in Company or a Person which shares common controlling ownership with Company;

(k) that is backed by a letter of credit unless the Items covered by the subject letter of
credit have been shipped;

(l) that Wells Fargo or Ex-Im Bank, in its reasonable judgment, deems uncollectible for any
reason;

(m) that is due and payable in a currency other than Dollars, except as may be approved in
writing by Ex-Im Bank;

(n) that is due and payable from a military Buyer, except as may be approved in writing by
Ex-Im Bank;

(o) that does not comply with the terms of sale set forth in Section 7 of the Loan
Authorization Notice;

(p) that is due and payable from a Buyer who (A) applies for, suffers, or consents to the
appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or calls a meeting of its
creditors, (B) admits in writing its inability, or is generally unable, to pay its debts as
they become due or ceases operations of its present business, (C) makes a general

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 4

 

assignment for the benefit of creditors, (D) commences a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (E) is adjudicated as bankrupt or
insolvent, (F) files a petition seeking to take advantage of any other law providing for the
relief of debtors, (G) acquiesces to, or fails to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (H) takes any action
for the purpose of effecting any of the foregoing;

(q) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is evidenced by chattel paper;

(r) for which the Items giving rise to such Account have not been shipped and delivered and
accepted by the Buyer or the services giving rise to such Account have not been performed by
Company and accepted by the Buyer or the Account otherwise does not represent a final sale;

(s) that portion of the Account that is subject to any offset, deduction, defense, dispute,
or counterclaim or where the Buyer is also a creditor or supplier of Company or that portion
of the Account that is contingent in any respect or for any reason;

(t) for which Company has made any agreement with the Buyer for any deduction therefrom,
except for discounts or allowances made in the ordinary course of business for prompt
payment, all of which discounts or allowances are reflected in the calculation of the face
value of each respective invoice related thereto;

(u) for which any of the Items giving rise to such Account have been returned, rejected or
repossessed;

(v) to the extent it includes any finance charges, service charges, taxes, discounts,
credits, allowances and Retainages;

(w) that arises from the sale of Items containing less than fifty one percent (51%) U.S.
Content;

(x) that arises from the sale of Items containing any Foreign Content not incorporated into
such Items in the United States;

(y) that arises from the sale of any Items to be used in the construction, alteration,
operation or maintenance of nuclear power, enrichment, reprocessing, research or heavy water
production facilities;

(z) that does not meet the requirements set forth in the definition of “Eligible-Related
Accounts Receivable” in the Borrower Agreement;

(aa) that is not subject to a duly perfected security interest in Wells Fargo’s favor or
which are subject to any Lien in favor of any Person other than Wells Fargo;

(bb) that has been restructured, extended, amended or modified;

(cc) that is owing by an account debtor, regardless of whether otherwise eligible, to the
extent that the balance of such Accounts exceeds either (i) 15% of the sum of (A) the

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 5

 

aggregate amount of all Eligible Accounts and (B) the aggregate amount of all accounts
deemed eligible under the Domestic Facility Agreement or (ii) 50% of the aggregate amount of
all Accounts owed by account debtors located outside the United States;

(dd) that is owed by an account debtor, regardless of whether otherwise eligible, if 50% or
more of the total amount due under Accounts from such debtor is ineligible under clauses
(i), (s), or (bb) above;

(ee) that is included as an “Eligible Account” under the Domestic Facility Agreement;

(ff) that constitutes (i) Proceeds of copyrightable material unless such copyrightable
material shall have been registered with the United States Copyright Office, or (ii)
Proceeds of patentable inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office; and

(gg) that are otherwise deemed ineligible for any reason by Wells Fargo or Ex-Im Bank in
their sole discretion.

For sake of clarity, any Accounts that are deemed to be “Eligible Accounts” under the Domestic
Facility Agreement shall not be Eligible Accounts under this Agreement, and any Eligible Accounts
under this Agreement shall not be deemed to be “Eligible Accounts” under the Domestic Facility
Agreement.

“Eligible Inventory” means all export-related Inventory of Company, valued at the lower of cost or
market in accordance with GAAP; but excluding Inventory having any of the following
characteristics:

(a) Inventory that is: in-transit; located at any warehouse, job site or other premises not
approved by Wells Fargo in an Authenticated Record delivered to Company; not subject to a
perfected first priority Lien in Wells Fargo’s favor; subject to any Lien or encumbrance
that is subordinate to Wells Fargo’s first priority Lien; covered by any negotiable or
non-negotiable warehouse receipt, bill of lading or other document of title; on consignment
from any consignor; or on consignment to any consignee or subject to any bailment unless the
consignee or bailee has executed an agreement with Wells Fargo;

(b) Supplies, packaging, parts or sample Inventory, or customer supplied parts or Inventory;

(c) Inventory that is damaged, defective, obsolete, slow moving or not currently saleable in
the normal course of Company’s operations, or the amount of such Inventory that has been
reduced by shrinkage;

(d) Inventory that Company has returned, has attempted to return, is in the process of
returning or intends to return to the vendor of the Inventory;

(e) Inventory that is perishable or live;

(f) Inventory manufactured by Company pursuant to a license unless the applicable licensor
has agreed in a Record that has been Authenticated by licensor to permit Wells Fargo to
exercise its rights and remedies against such Inventory;

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 6

 

(g) Inventory that is subject to a Lien in favor of any Person other than Wells Fargo;

(h) Inventory stored at locations holding less than 10% of the aggregate value of Company’s
Inventory;

(i) Inventory containing less than fifty one percent (51%) U.S. Content;

(j) Inventory containing any Foreign Content not incorporated into such Inventory in the
United States;

(k) Inventory that does not meet the requirements set forth for eligible inventory in the
Borrower Agreement;

(l) Inventory that was previously exported;

(m) Inventory that consists of proprietary software;

(n) Inventory consisting of defense articles or goods; and

(o) Inventory otherwise deemed ineligible by Wells Fargo or Ex-Im Bank in their sole
discretion.

For sake of clarity, any Inventory that is deemed to be “Eligible Inventory” under the Domestic
Facility Agreement shall not be Eligible Inventory under this Agreement, and any Eligible Inventory
under this Agreement shall not be deemed to be “Eligible Inventory” under the Domestic Facility
Agreement.

“Environmental Law” means any federal, state, local or other governmental statute, regulation, law
or ordinance dealing with the protection of human health and the environment.

“Equipment” shall have the meaning given it under the Uniform Commercial Code in effect in the
state whose laws govern this Agreement.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of a
group which includes Company and which is treated as a single employer under Section 414 of the
IRC.

“Event of Default” is defined in Section 6.1.

“Ex-Im Bank” means the Export-Import Bank of the United States, and its successors and assigns.

“Ex-Im Bank Guaranty” means that certain Master Guarantee Agreement between Wells Fargo and the
Export-Import Bank of the United States, as the same may hereafter be amended, modified,
supplemented or restated from time to time.

“Export Order” means a written export order or contract for the purchase by the Buyer from the
Company of any of the Items.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 7

 

“Floating Rate” is defined in Section 1.6(a).

“Floating Rate Advance” means an Advance bearing interest at the Floating Rate.

“Foreign Content” means, with respect to any Item, all of the labor, materials and services which
are not of United States origin or manufacture, or which are not incorporated into such Item in the
United States.

“Funds from Operations” means for a given period, the sum of (a) Net Income, (b) depreciation and
amortization, (c) stock-based compensation expenses, (d) any increase (or decrease) in lifo
reserves, each as determined for such period in accordance with GAAP, and (e) during the period
April 1, 2008 to December 31, 2008, an amount equal to the value (based on cost) of inventory sold
during the relevant measurement period, less an amount equal to the product of the applicable
advance rate (set forth in Section 1.2) for such inventory multiplied by such inventory sold.

“GAAP” means generally accepted accounting principles, applied on a basis consistent with the
accounting practices applied in the financial statements described on Exhibit D.

“General Intangibles” shall have the meaning given it under the UCC.

“Guarantor(s)” means any Person now or in the future guaranteeing the Indebtedness through the
issuance of a Guaranty.

“Guaranty” means an unconditional continuing guaranty executed by a Guarantor in favor of Wells
Fargo (if more than one, the “Guaranties”).

“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed
in, regulated by or identified in any Environmental Law.

“Indebtedness” is used in its most comprehensive sense and means any debts, obligations and
liabilities of Company to Wells Fargo, whether incurred in the past, present or future, whether
voluntary or involuntary, and however arising, and whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and including without limitation
indebtedness arising under any swap, derivative, foreign exchange, hedge, deposit, treasury
management or any similar transaction or arrangement that Company may enter into at any time with
Wells Fargo or with Wells Fargo Merchant Services, L.L.C., whether or not Company may be liable
individually or jointly with others, or whether recovery upon such Indebtedness may subsequently
become unenforceable.

“Indemnified Liabilities” is defined in Section 7.8.

“Indemnitees” is defined in Section 7.8.

“Infringement” or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.

“Intellectual Property Rights” means all actual or prospective rights arising in connection with
any intellectual property or other proprietary rights, including all rights arising in connection
with

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 8

 

copyrights, patents, service marks, trade dress, trade secrets, trademarks, trade names or mask
works.

“Interest Expense” means for any period, Company’s total gross interest expense during such period
(excluding interest income), and shall in any event include (a) interest expensed (whether or not
paid) on all Debt, (b) the amortization of debt discounts, (c) the amortization of all fees payable
in connection with the incurrence of Debt to the extent included in interest expense, and (d) the
portion of any capitalized lease obligation allocable to interest expense.

“Interest Payment Date” is defined in Section 1.8(a).

“Interest Period” means the period that commences on (and includes) the Business Day on which
either a LIBOR Advance is made or continued or on which a Floating Rate Advance is converted to a
LIBOR Advance, and ending on (but excluding) the Business Day numerically corresponding to that
date that falls the number of months afterward as selected by Company pursuant to Section 1.3A,
during which period the outstanding principal amount of the LIBOR Advance shall bear interest at
the LIBOR Advance Rate; provided, however, that:

	(a)	 	If an Interest Period would otherwise end on a day which is not a Business Day, then it shall
end on the next Business Day, unless that day is the first Business Day of a month, in which
case the Interest Period shall end on the last Business Day of the preceding month;
	 
	(b)	 	No Interest Period applicable to an Advance may end later than the Maturity Date; and
	 
	(c)	 	In no event shall Company select Interest Periods with respect to LIBOR Advances which would
result in the payment of a LIBOR Advance breakage fee under this Agreement in order to make
required principal payments.

“Inventory” shall have the meaning given it under the UCC.

“Investment Property” shall have the meaning given it under the UCC.

“Items” means the finished goods or services which are intended for export from the United States,
as specified in Section 4(A) of the Loan Authorization Notice.

“Joint Application” means the Joint Application for Working Capital Guarantee made by Company and
Wells Fargo to Ex-Im Bank in connection with this Agreement.

“Licensed Intellectual Property” is defined in Exhibit D.

“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8th of one percent (1%)) determined pursuant to the following formula:

	 	 	 	 	 
	LIBOR =

	 	Base LIBOR
 

100% — LIBOR Reserve Percentage
	 	  

	(a)	 	“Base LIBOR” means the rate per annum for United States dollar deposits quoted by Wells Fargo
as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by
Wells Fargo for the purpose of calculating effective rates of interest for loans making
reference to it, on the first day of an Interest Period for delivery of funds on

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 9

 

	 	 	that date for a period of time approximately equal to the number of days in that Interest
Period and in an amount approximately equal to the principal amount to which that Interest
Period applies. Company understands and agrees that Wells Fargo may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators of the
Inter-Bank Market as Wells Fargo in its discretion deems appropriate including the rate
offered for U.S. dollar deposits on the London Inter-Bank Market.
	 
	(b)	 	“LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in
Regulation D of the Federal Reserve Board, as amended), adjusted by Wells Fargo for expected
changes in such reserve percentage during the applicable Interest Period.

“LIBOR Advance” means an Advance bearing interest at the LIBOR Advance Rate.

“LIBOR Advance Rate” is defined in Section 1.6(a).

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance,
title retention agreement or analogous instrument or device, including the interest of each lessor
under any capitalized lease and the interest of any bondsman under any payment or performance bond,
in, of or on any assets or properties of a Person, whether now owned or subsequently acquired and
whether arising by agreement or operation of law.

“Line of Credit” is defined in the Recitals.

“Loan Authorization Notice” means the Loan Authorization Notice executed and delivered in
connection with this Agreement.

“Loan Documents” means this Agreement, the Domestic Facility Agreement, the Revolving Note, the
Ex-Im Bank Guaranty, the Borrower Agreement, the Joint Application, the Loan Authorization Notice,
each Guaranty, each Subordination Agreement, each Patent and Trademark Security Agreement, and the
Security Documents, together with every other agreement, note, document, contract or instrument to
which Company now or in the future may be a party and which may be required by Wells Fargo.

“Loan Manager” means the treasury management service defined in the Master Agreement for Treasury
Management Services and related Loan Manager Service Description.

“Lockbox” means “Lockbox” as defined in the Master Agreement for Treasury Management Services and
related Lockbox and Collection Account Service Description.

“Margin” means a rate per annum, expressed as a percentage, as more fully described in Section
1.6(a).

“Master Agreement for Treasury Management Services” means the Master Agreement for Treasury
Management Services, the related Acceptance of Services, and the Service Description governing each
treasury management service used by Company.

“Material Adverse Effect” means any of the following:

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 10

 

	(a)	 	A material adverse effect on the business, operations, results of operations, assets,
liabilities or financial condition of Company;
	 
	(b)	 	A material adverse effect on the ability of Company to perform its obligations under the Loan
Documents; or
	 
	(c)	 	A material adverse effect on the ability of Wells Fargo to enforce the Indebtedness or to
realize the intended benefits of the Security Documents, including a material adverse effect
on the validity or enforceability of any Loan Document or of any rights against any Guarantor,
or on the status, existence, perfection, priority (subject to Permitted Liens) or
enforceability of any Lien securing payment or performance of the Indebtedness.

“Maturity Date” is defined in Section 1.1(b).

“Maximum Line Amount” is defined in Section 1.1(a).

“Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Company or any ERISA Affiliate contributes or is obligated to contribute.

“Net Income” means fiscal year-to-date after-tax net income from continuing operations, including
extraordinary losses but excluding extraordinary gains, all as determined in accordance with GAAP.

“OFAC” is defined in Section 5.12(b).

“Officer” means with respect to Company, an officer of the Company.

“Operating Account” is defined in Section 1.3(a), and maintained in accordance with the terms of
Wells Fargo’s Commercial Account Agreement in effect for demand deposit accounts.

“Overadvance” means the amount, if any, by which the unpaid principal amount of the Revolving Note
is in excess of the then-existing Borrowing Base.

“Owned Intellectual Property” is defined in Exhibit D.

“Owner” means with respect to Company, each Person having legal or beneficial title to an ownership
interest in Company or a right to acquire such an interest.

“Patent and Trademark Security Agreement” means each Patent and Trademark Security Agreement
entered into between Company and Wells Fargo.

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for employees
of Company or any ERISA Affiliate and covered by Title IV of ERISA.

“Permitted Lien” and “Permitted Liens” are defined in Section 5.3(a).

“Permitted Securities” shall mean any shares, units or interests of equity securities or ownership
interests of Company that by their terms (or by the terms of any security into which they are
convertible or for which they are exchangeable) or upon the happening of any event or otherwise (A)
are not convertible or exchangeable for Debt or any securities that are not Permitted Securities,
(B) (i) do not mature and (ii) are not putable or redeemable at the option of

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 11

 

the holder thereof, in each case in whole or in part on or prior to the date that is six months
after the earlier of the Maturity Date or the actual payment in full in cash of the Indebtedness,
(C) do not require payments of dividends or distributions in cash on or prior to the date that is
six months after the earlier of the Maturity Date or the actual payment in full in cash of the
Indebtedness, and (D) are not secured by any Liens in property of Company.

“Person” means any individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or government or any agency or
political subdivision of a governmental entity.

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for
employees of Company or any ERISA Affiliate.

“Premises” is defined in Section 2.4(a).

“Prime Rate” means at any time the rate of interest most recently announced by Wells Fargo at its
principal office as its Prime Rate, with the understanding that the Prime Rate is one of Wells
Fargo’s base rates, and serves as the basis upon which effective rates of interest are calculated
for those loans making reference to it, and is evidenced by its recording in such internal
publication or publications as Wells Fargo may designate. Each change in the rate of interest
shall become effective on the date each Prime Rate change is announced by Wells Fargo.

“Proceeds” shall have the meaning given it under the UCC.

“Record” means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes all information
that is required to be reported by Company to Wells Fargo pursuant to Section 5.1.

“Reportable Event” means a reportable event (as defined in Section 4043 of ERISA), other than an
event for which the 30-day notice requirement under ERISA has been waived in regulations issued by
the Pension Benefit Guaranty Corporation.

“Retainage” shall mean that portion of the purchase price of an Export Order that a Buyer is not
obligated to pay until the end of a specified period of time following the satisfactory performance
under such Export Order.

“Revolving Notes” is defined in Section 1.1(d).

“Security Documents” means this Agreement, the Patent and Trademark Security Agreement(s), the
Domestic Facility Agreement, the Borrower Agreement, and any other document delivered to Wells
Fargo from time to time to secure the Indebtedness.

“Security Interest” is defined in Section 2.1.

“Subordinated Creditor(s)” means American Medical Systems, Inc. (“AMS”) , a Delaware corporation,
Laserscope, a California corporation and wholly-owned subsidiary of AMS, and any other Person now
or in the future subordinating indebtedness of Company held by that Person to the payment of the
Indebtedness.

“Subordination Agreement” means a subordination agreement executed by a Subordinated Creditor in
favor of Wells Fargo (if more than one, the “Subordination Agreements”).

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 12

 

“Subsidiary” means any Person of which more than 50% of the outstanding ownership interests having
general voting power under ordinary circumstances to elect a majority of the board of directors or
the equivalent of such Person, irrespective of whether or not at the time ownership interests of
any other class or classes shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.

“Termination Date” is defined in Section 1.1(b).

“UCC” means the Uniform Commercial Code in effect in the state designated in this Agreement as the
state whose laws shall govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion of this Agreement.

“U.S. Content” means, with respect to any Item, all of the labor, materials and services which are
of United States origin or manufacture, and which are incorporated into such Item in the United
States.

“Wells Fargo” means Wells Fargo Bank, National Association in its broadest and most comprehensive
sense as a legal entity, and is not limited in its meaning to the Wells Fargo Business Credit
operating division, or to any other operating division of Wells Fargo.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit A — Page 13

 

Exhibit B to Credit and Security Agreement (Ex-Im Subfacility)

PREMISES

     The Premises referred to in the Credit and Security Agreement have an address of 1212 Terra
Bella Avenue, Mountain View, California 94043,

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit B — Page 1

 

Exhibit C to Credit and Security Agreement (Ex-Im Subfacility)

CONDITIONS PRECEDENT

Wells Fargo’s obligation to make an initial Advance shall be subject to the condition that Wells
Fargo shall have received the following, duly executed and in form and content satisfactory to
Wells Fargo. The following descriptions are limited descriptions for reference purposes only and
should not be construed as limiting in any way the subject matter that Wells Fargo requires each
document to address.

	A.	 	Loan Documents to be Executed by Company:
	 
	(1)	 	The Revolving Note.
	 
	(2)	 	The Credit and Security Agreement.
	 
	(3)	 	The Master Agreement for Treasury Management Services, the Acceptance of Services, and the
related Service Description for each deposit or treasury management related product or service
that Company will subscribe to, including the Loan Manager Service Description and the Lockbox
and Collection Account Service Description.
	 
	(4)	 	The Patent and Trademark Security Agreement.
	 
	(5)	 	The Domestic Facility Agreement and all related documents, agreements, and instruments.
	 
	(6)	 	The Borrower Agreement.
	 
	(7)	 	The Joint Application.
	 
	B.	 	Loan Documents to be Executed by Third Parties:
	 
	(1)	 	The Subordination Agreement of American Medical Systems, Inc. and Laserscope, pursuant to
which each Subordinated Creditor shall unconditionally subordinate payment of any indebtedness
of Company held by the Subordinated Creditor to the full and prompt payment of all Company’s
Indebtedness.
	 
	(2)	 	A Landlord’s Disclaimer and Consent to each lease entered into by Company and that Landlord
with respect to the Premises, pursuant to which the Landlord waives its Lien in any goods or
other Inventory of Company located on the Premises.
	 
	(3)	 	Certificates Insurance required under this Agreement, with all hazard insurance containing a
lender’s loss payable endorsement in Wells Fargo’s favor and with all liability insurance
naming Wells Fargo as additional insured.
	 
	(4)	 	Any documents, agreements, or instruments requiring the execution by a third party
(including, but not limited to, the Export-Import Bank of the United States).
	 
	C.	 	Documents Related to the Premises
	 
	(1)	 	Any leases pursuant to which Company is leasing the Premises from a lessor.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit C — Page 1

 

 

	(2)	 	Every bailment or consignment pursuant to which any property of Company is in the possession
of a third Person such as a consignee or subcontractor, together with, in the case of any
goods held by such Person for resale, UCC financing statements sufficient to protect Company’s
and Wells Fargo’s interests in such goods.
	 
	D.	 	Federal Tax, State Tax, Judgment, UCC and Intellectual Property Lien Searches
	 
	(1)	 	Current searches of Company in appropriate filing offices showing that (i) no Liens have been
filed and remain in effect against Company and Collateral except Permitted Liens or Liens held
by Persons who have agreed in an Authenticated Record that upon receipt of proceeds of the
initial Advances, they will satisfy, release or terminate such Liens in a manner satisfactory
to Wells Fargo, and (ii) Wells Fargo has filed all UCC financing statements necessary to
perfect the Security Interest, to the extent the Security Interest is capable of being
perfected by filing.
	 
	(2)	 	Current searches of Third Persons in appropriate filing offices with respect to any of the
Collateral that is in the possession of a Person other than Company that is held for resale,
showing that (i) UCC financing statements sufficient to protect Company’s and Wells Fargo’s
interests in such Collateral have been filed, and (ii) no other secured party has filed a
financing statement against such Person and covering property similar to Company’s, other than
Company, or if there exists any such secured party, evidence that each such party has received
notice from Company and Wells Fargo sufficient to protect Company’s and Wells Fargo’s
interests in Company’s goods from any claim by such secured party.
	 
	E.	 	Constituent Documents:
	 
	(1)	 	The Certificate of Authority of Company, which shall include as part of the Certificate or as
exhibits to the Certificate, (i) the Resolution of Company’s Directors and, if required,
Owners, authorizing the execution, delivery and performance of the Loan Documents, (ii) an
Incumbency Certificate containing the signatures of Company’s Officers or agents authorized to
execute and deliver the Loan Documents and other instruments, agreements and certificates,
including Advance requests, on Company’s behalf, (iii) Company’s Constituent Documents, (iv) a
current Certificate of Good Standing or Certificate of Status issued by the secretary of state
or other appropriate authority for Company’s state of organization, certifying that Company is
in good standing and in compliance with all applicable organizational requirements of the
state of organization, and (v) a Secretary’s Certificate of Company’s secretary or assistant
secretary certifying that the Certificate of Authority of Company is true, correct and
complete.
	 
	(2)	 	The Certificate of Authority of Corporate Guarantor, which shall include as part of the
Certificate or as exhibits to the Certificate, (i) the Resolution of Guarantor’s Directors
and, if required, Owners, authorizing the execution, delivery and performance of the Guaranty
of Corporation, (ii) an Incumbency Certificate containing the signatures of Guarantor’s
Officers or agents authorized to execute and deliver the Guaranty by Corporation on
Guarantor’s behalf, (iii) Guarantor’s Constituent Documents, (iv) a current Certificate of
Good Standing or Certificate of Status issued by the secretary of state or other appropriate
authority for Guarantor’s state of organization, certifying that
Guarantor is in good standing and in compliance with all applicable organizational
requirements of the state of organization, and (v) a Secretary’s Certificate of Guarantor’s

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit C — Page 2

 

 

	 	 	secretary or assistant secretary certifying that the Certificate of Authority of Corporate
Guarantor and all attached exhibits are true, correct and complete.
	 
	(3)	 	Evidence that Company is licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the business transacted
by it makes such licensing or qualification necessary.
	 
	(4)	 	An Officer’s Certificate of an appropriate Officer of Company confirming, in his or her
personal capacity, the representations and warranties set forth in this Agreement.
	 
	(5)	 	A Customer Identification Information Form and such other forms and verification as Wells
Fargo may need to comply with the U.S.A. Patriot Act.
	 
	F.	 	Miscellaneous Matters or Documents:
	 
	(1)	 	Payment of fees and reimbursable costs and expenses due under this Agreement through the date
of initial Advance, including all legal expenses incurred through the date of the closing of
this Agreement.
	 
	(2)	 	Evidence that after making the initial Advance, establishing all reserves under the Borrowing
Base, and satisfying all obligations owed to Company’s prior lender and all trade payables
older than 60 days from invoice date, book overdrafts and closing costs and fees (including
any fees deemed paid), the combined availability under the Line of Credit under this Agreement
and the “Line of Credit” under the Domestic Facility Agreement is not less than $1,000,000.
	 
	(3)	 	Such other documents as Wells Fargo in its sole discretion may require.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit C — Page 3

 

 

Exhibit D to Credit and Security Agreement (Ex-Im Subfacility)

REPRESENTATIONS AND WARRANTIES

	 	 	Company represents and warrants to Wells Fargo as follows:
	 
	(a)	 	Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Federal Employer Identification Number and Organizational Identification Number. Company
is a corporation organized, validly existing and in good standing under the laws of the State
of Delaware and is licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. Company has all requisite power and authority to
conduct its business, to own its properties and to execute and deliver, and to perform all of
its obligations under, the Loan Documents. During its existence, Company has done business
solely under the names set forth below in addition to its correct legal name. Company’s chief
executive office and principal place of business is located at the address set forth below,
and all of Company’s records relating to its business or the Collateral are kept at that
location. All Inventory and Equipment is located at that location or at one of the other
locations set forth below. Company’s name, Federal Employer Identification Number and
Organization Identification Number are correctly set forth at the end of the Agreement next to
Company’s signature.

     Trade Names

     IRIS Medical Instruments, Inc.

     Prospero Surgical, Inc.

     Trilogy Medical Systems, Inc.

     Chief Executive Office / Principal Place of Business

     1212 Terra Bella Avenue, Mountain View, California 94043

     Other Inventory and Equipment Locations

     Aeronet

     1751 Junction Ave

     San Jose, CA 95112

     (offsite inventory purchased from AMS)

	(b)	 	Capitalization. [INTENTIONALLY OMITTED].
	 
	(c)	 	Authorization of Borrowing; No Conflict as to Law or Agreements. The execution,
delivery and performance by Company of the Loan Documents and borrowing under the Line of
Credit have been authorized and do not (i) require the consent or approval of Company’s
Owners; (ii) require the authorization, consent or approval by, or registration, declaration
or filing with, or notice to, any governmental agency or instrumentality, whether domestic or
foreign, or any other Person, except to the extent obtained, accomplished or given prior to
the date of this Agreement; (iii) violate any provision of any law, rule or regulation
(including Regulation X of the Board of Governors of the

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 1

 

 

	 	 	Federal Reserve System) or of any order, writ, injunction or decree presently in effect
having applicability to Company or of Company’s Constituent Documents; (iv) result in a
breach of or constitute a default or event of default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which Company is a party
or by which it or its properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than the Security Interest) upon or with respect
to any of the properties now owned or subsequently acquired by Company.
	 
	(d)	 	Legal Agreements. This Agreement constitutes and, upon due execution by Company, the
other Loan Documents will constitute the legal, valid and binding obligations of Company,
enforceable against Company in accordance with their respective terms.
	 
	(e)	 	Subsidiaries. Except as disclosed below, Company has no Subsidiaries.

Subsidiaries

	 	1.	 	IRIDEX UK Limited
	 	2.	 	IRIDEX France S.A.
	 	3.	 	Iris Medical Instruments, Inc. — wholly-owned subsidiary but not active
	 	4.	 	Light Solutions Corporation — wholly-owned subsidiary but not active

	(f)	 	Financial Condition; No Adverse Change. Company has furnished to Wells Fargo its
audited financial statements for its fiscal year ended December 31, 2006, and unaudited
financial statements for the fiscal-year-to-date period ended September 29, 2007, and those
statements fairly present Company’s financial condition as of those dates and the results of
Company’s operations and cash flows for the periods then ended and were prepared in accordance
with GAAP. Since the date of the most recent financial statements, there has been no Material
Adverse Effect in Company’s business, properties or condition (financial or otherwise).
	 
	(g)	 	Litigation. There are no actions, suits or proceedings pending or, to Company’s
knowledge, threatened against or affecting Company or any of its Affiliates or the properties
of Company or any of its Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely
to Company or any of its Affiliates, would have a Material Adverse Effect on the financial
condition, properties or operations of Company or any of its Affiliates.
	 
	(h)	 	Intellectual Property Rights.

(i) Owned Intellectual Property. Set forth below is a complete list of all patents,
applications for patents, trademarks, applications to register trademarks, service marks,
applications to register service marks, mask works, trade dress and copyrights for which
Company is the owner of record (the “Owned Intellectual Property”). Except as set forth
below, (A) Company owns the Owned Intellectual Property free and clear of all restrictions
(including covenants not to sue any Person), court orders, injunctions, decrees, writs or
Liens, whether by agreement memorialized in a Record Authenticated by Company or otherwise,
(B) no Person other than Company owns or has been granted any right in the Owned
Intellectual Property, (C) all Owned Intellectual Property is valid, subsisting and
enforceable, and (D) Company has taken all commercially reasonable action necessary to
maintain and protect the Owned Intellectual Property.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 2

 

 

(ii) Agreements with Employees and Contractors. Company has entered into a legally
enforceable agreement with each Person that is an employee or subcontractor obligating that
Person to assign to Company, without additional compensation, any Intellectual Property
Rights created, discovered or invented by that Person in the course of that Person’s
employment or engagement with Company (except to the extent prohibited by law), and further
obligating that Person to cooperate with Company, without additional compensation, to secure
and enforce the Intellectual Property Rights on behalf of Company, unless the job
description of the Person is such that it is not reasonably foreseeable that the employee or
subcontractor will create, discover, or invent Intellectual Property Rights.

(iii) Intellectual Property Rights Licensed from Others. Set forth below is a
complete list of all agreements under which Company has licensed Intellectual Property
Rights from another Person (“Licensed Intellectual Property”) other than readily available,
non-negotiated licenses of computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”) and a summary of any ongoing payments Company is obligated to make with respect
thereto. Except as set forth below or in any other Record, copies of which have been given
to Wells Fargo, Company’s licenses to use the Licensed Intellectual Property are free and
clear of all restrictions, Liens, court orders, injunctions, decrees, or writs, whether by
agreed to in a Record Authenticated by Company or otherwise. Except as disclosed below,
Company is not contractually obligated to make royalty payments of a material nature, or pay
fees to any owner of, licensor of, or other claimant to, any Intellectual Property Rights.

(iv) Other Intellectual Property Needed for Business. Except for Off-the-shelf
Software and as disclosed below, the Owned Intellectual Property and the Licensed
Intellectual Property constitute all Intellectual Property Rights used or necessary to
conduct Company’s business as it is presently conducted or as Company reasonably foresees
conducting it.

(v) Infringement. Except as disclosed below, Company has no knowledge of, and has
not received notice either orally or in a Record alleging, any Infringement of another
Person’s Intellectual Property Rights (including any claim set forth in a Record that
Company must license or refrain from using the Intellectual Property Rights of any Person)
nor, to Company’s knowledge, is there any threatened claim or any reasonable basis for any
such claim.

Intellectual Property Disclosures

(h)(i) — Please see attached

(h)(iii) — Inbound License Agreements

1. Laserscope / AMS — paid up license

2. Georgetown University — 5% on G-probes

3. Palomar — 7.5% on Lyra and 3.75% on Gemini

4. Colder Products — $5.00 on each RFID Console (IQ577) manufactured

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 3

 

 

	(i)  	 	Taxes. Except as disclosed below, Company and its Affiliates have paid or caused to
be paid to the proper authorities when due all federal, state and local taxes required to be
withheld by each of them. Company and its Affiliates have filed all federal, state and local
tax returns which to the knowledge of the Officers of Company or any Affiliate, as the case
may be, are required to be filed, and Company and its Affiliates have paid or caused to be
paid to the respective taxing authorities all taxes as shown on these returns or on any
assessment received by any of them to the extent such taxes have become due.
	 
	 	 	    Taxes

      Company received and has responded to an inquiry from the State of
Iowa regarding $9,900 of back taxes.

	(j)  	 	Titles and Liens. Company has good and absolute title to all Collateral free and
clear of all Liens other than Permitted Liens. No financing statement naming Company as
debtor is on file in any office except to perfect only Permitted Liens.
	 
	(k)  	 	No Defaults. Except as disclosed below, Company is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or by which it or
its property is bound or affected, the breach or default of which could have a Material
Adverse Effect on Company’s financial condition, properties or operations.
	 
	 	 	   No Defaults

      Company is not in compliance with certain provisions of the
Business Loan and Security Agreement by and among 
      IRIDEX
Corporation and Mid-Peninsula Bank, part of Greater Bay Bank N.A.,
dated January 16, 2007.

	(l)  	 	Submissions to Wells Fargo. All financial and other information provided to Wells
Fargo by or on behalf of Company in connection with Company’s request for the credit
facilities contemplated hereby is (i) true and correct in all material respects, (ii) does not
omit any material fact that would cause such information to be misleading, and (iii) as to
projections, valuations or proforma financial statements, present a good faith opinion as to
such projections, valuations and proforma condition and results.

	(m)	 	Financing Statements. Company has previously authorized the filing of financing
statements sufficient when filed to perfect the Security Interest and other Liens created by
the Security Documents. When such financing statements are filed, Wells Fargo will have a
valid and perfected security interest in all Collateral capable of being perfected by the
filing of financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing has been filed with respect to such Collateral.

	(n) 	 	Rights to Payment. Each right to payment and each instrument, document, chattel
paper and other agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, setoff or counterclaim of the account debtor or other
obligor named in that instrument.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 4

 

 

	(o)	 	Employee Benefit Plans.

(i) Maintenance and Contributions to Plans. Except as disclosed below, neither
Company nor any ERISA Affiliate (A) maintains or has maintained any Pension Plan,
(B) contributes or has contributed to any Multiemployer Plan, or (C) provides or has
provided post-retirement medical or insurance benefits to employees or former employees
(other than benefits required under Section 601 of ERISA, Section 4980B of the IRC, or
applicable state law).

(ii) Knowledge of Plan Noncompliance with Applicable Law. Except as disclosed
below, neither Company nor any ERISA Affiliate has (A) knowledge that Company or the ERISA
Affiliate is not in full compliance with the requirements of ERISA, the IRC, or applicable
state law with respect to any Plan, (B) knowledge that a Reportable Event occurred or
continues to exist in connection with any Pension Plan, or (C) sponsored a Plan that it
intends to maintain as qualified under the IRC that is not so qualified, and no fact or
circumstance exists which may have an adverse effect on such Plan’s tax-qualified status.

(iii) Funding Deficiencies and Other Liabilities. Neither Company nor any ERISA
Affiliate has liability for any (A) accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the IRC) under any Plan, whether or not waived,
(B) withdrawal, partial withdrawal, reorganization or other event under any Multiemployer
Plan under Section 4201 or 4243 of ERISA, or (C) event or circumstance which could result in
financial obligation to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan (other than
routine claims for benefits under the Plan).

Employee Benefit Plans

None

	(p)	 	Environmental Matters.

(i) Hazardous Substances on Premises. Except as disclosed below, there are not present in,
on or under the Premises any Hazardous Substances in such form or quantity as to create any
material liability or obligation for either Company or Wells Fargo under the common law of
any jurisdiction or under any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on or under the
Premises in such a way as to create a material liability.

(ii) Disposal of Hazardous Substances. Except as disclosed below, Company has not
disposed of Hazardous Substances in such a manner as to create any material liability under
any Environmental Law.

(iii) Claims and Proceedings with Respect to Environmental Law Compliance. Except
as disclosed below, there have not existed in the past, nor are there any threatened or
impending requests, claims, notices, investigations, demands, administrative proceedings,
hearings or litigation relating in any way to the Premises or

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 5

 

 

Company, alleging material liability under, violation of, or noncompliance with any
Environmental Law or any license, permit or other authorization issued pursuant thereto.

(iv) Compliance with Environmental Law; Permits and Authorizations. Except as
disclosed below, Company (A) conducts its business at all times in compliance with
applicable Environmental Law, (B) possesses valid licenses, permits and other authorizations
required under applicable Environmental Law for the lawful and efficient operation of its
business, none of which are scheduled to expire, or withdrawal, or material limitation
within the next 12 months, and (C) has not been denied insurance on grounds related to
potential environmental liability.

(v) Status of Premises. Except as disclosed below, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.

(vi) Environmental Audits, Reports, Permits and Licenses. Company has delivered to
Wells Fargo all environmental assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or Company’s businesses.

Environmental Matters

Please see attached “Environmental Compliance Plan” submitted by
the Company to the City of Mountain View.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 6

 

 

Exhibit D — Item (h)(i)

Intellectual Property Disclosures

U.S Issued Patents

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	DATE	 	 	 	 
	PATENT TITLE	 	ISSUED	 	PATENT NO.	 	HOLDER
	Optical Fiber with Electrical Encoding
	 	 	02/4/1992	 	 	 	5,085,492	 	 	IRIDEX Corporation
	Technique for Coupling Laser Diode to Optical
Fiber
	 	 	02/18/1992	 	 	 	5,088,803	 	 	IRIDEX Corporation
	Contact Probe for Laser Cyclophotocoagulation
	 	 	12/13/1994	 	 	 	5,372,595	 	 	IRIDEX
Corporation Georgetown University
	Passively
stabilized intracavity doubling laser
	 	 	04/23/1996	 	 	 	5,511,085	 	 	IRIDEX Corporation
	Scalable side-pumped
solid-state laser
	 	 	05/28/1996	 	 	 	5,521,932	 	 	IRIDEX Corporation
	Fiber stub end-pumped laser
	 	 	09/2/1997	 	 	 	5,663,979	 	 	IRIDEX Corporation
	Pulsed Laser with Passive
Stabilization
	 	 	11/9/1999	 	 	 	5,982,789	 	 	IRIDEX Corporation
	Fiber stub end-pumped laser
	 	 	12/7/1999	 	 	 	5,999,554	 	 	IRIDEX Corporation
	Cw laser amplifier
	 	 	10/31/2000	 	 	 	6,141,143	 	 	IRIDEX Corporation
	Cw laser amplifier
	 	 	11/7/2000	 	 	 	6,144,484	 	 	IRIDEX Corporation
	Aspheric Lensing Control
for High Power
Butt-Coupled End-Pumped
Laser
	 	 	04/24/2001	 	 	 	6,222,869	 B1	 	IRIDEX Corporation
	Fiber stub end-pumped laser
	 	 	12/4/2001	 	 	 	6,327,291	 B1	 	IRIDEX Corporation
	Focusability Enhancing
Optic for Laser Diode
	 	 	04/23/2002	 	 	 	6,377,599	 B1	 	IRIDEX Corporation
	Method and
Apparatus for
Real-Time Detection,
Control and Recording of
Sub-Clinical Therapeutic
Laser Lesions During
Ocular Laser
Photocoagulation
	 	 	04/1/2003	 	 	 	6,540,391	 B2	 	IRIDEX Corporation

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 1

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	DATE	 	 	 	 
	PATENT TITLE	 	ISSUED	 	PATENT NO.	 	HOLDER
	Method and Apparatus for
Controlling Sub-Clinical
Laser Procedures with
Intra-Operataive
Monitoring of
Electrophysiological
Changes
	 	 	05/11/2004	 	 	 	6,733,490	 	 	IRIDEX Corporation
	Treatment Site Cooling
System of Skin Disorders
	 	 	12/12/2006	 	 	 	7,147,654	 	 	IRIDEX Corporation

U.S Patent Applications

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	DATE	 	APPLICATION	 	 
	PATENT APPLICATION TITLE	 	FILED	 	NO.	 	HOLDER
	Apparatus for Real-Time
Measurement/Control Of
Intra-Operataive Effects
During Laser Thermal
Treatments, Using Light
Scattering
	 	 	09/20/2002	 	 	 	60/412,465	 	 	IRIDEX Corporation
	MicroPulse for Uveo/Scleral
Outflow (Provisional)
	 	 	10/30/2007	 	 	 	60/983,811	 	 	IRIDEX Corporation
	Directional (stepped) Probe
Treatment Apparatus
	 	 	08/16/2004	 	 	 	11/205,629	 	 	IRIDEX Corporation
	Short Pulse Laser Treatment
	 	 	02/15/2005	 	 	 	11/066,615	 	 	IRIDEX Corporation
	Flushtip Illuminating EndoProbe
	 	 	11/3/2006	 	 	 	11/556,504	 	 	IRIDEX Corporation
	Shaped Tip Illuminating
EndoProbe
	 	 	03/13/2007	 	 	 	11/685,351	 	 	IRIDEX Corporation

Foreign Issued Patents

	 	 	 	 	 	 	 	 	 	 	 	 	 
	TITLE	 	COUNTRY	 	PATENT NO.	 	DATE ISSUED
	Pulsed Laser w/Passive Stabilization
EP0904615
	 	Europe	 	 	0904615	 	 	 	09/5/2001	 
	DE app — 97928819.8
	 	Germany	 	 	69706541	 	 	 	09/5/2001	 
	UK App — 97928819.8
	 	United Kingdom	 	 	69706541	 	 	 	09/5/2001	 
	FR App — 97928819.8
	 	France	 	 	69706541	 	 	 	09/5/2001	 
	Passively Stable Intra-doubling Laser
EP0730783
	 	Europe	 	 	0730783	 	 	 	04/23/2003	 
	DE app — 69530497.6
	 	Germany	 	 	69530497.6	 	 	 	4/23/2003	 
	Passively Stable Intra-doubling Laser
	 	Korea	 	 	348012	 	 	 	07/26/2002	 

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 2

 

 

Foreign Patent Applications

	 	 	 	 	 	 	 	 	 	 	 	 	 
	TITLE	 	COUNTRY	 	SERIAL NUMBER	 	FILING DATE
	Directional (Stepped) Probe
Treatment Apparatus
	 	Germany	 	 	2005/038611.3	 	 	 	08/16/2005	 
	Method and Apparatus for
Controlling Sub-Clinical
Laser Procedures with
Intra-Operataive Monitoring
of Electrophysiological
Changes
	 	Europe	 	 	03723833.4	 	 	 	3/25/2003	 
	Short Pulse (Green microPulse)
	 	Europe	 	 	2006/006369	 	 	 	02/22/2006	 
	Short Pulse (Green microPulse)
	 	Japan	 	 	2007-557145	 	 	 	08/21/2007	 
	Flush and Shaped Tip
Illuminating EndoProbes
	 	PCT	 	 	2007-083139	 	 	 	10/31/2007	 

U.S. Trademark Registrations

	 	 	 	 	 	 	 	 	 	 	 	 	 
		 	 	 	 	 	 	 	REGISTRATION
	COUNTRY	 	TRADEMARK	 	REGISTRATION NO.	 	DATE
	U.S.	 	 	APEX
	 	 	2,528,141	 	 	 	01/08/2002	 
	U.S.	 	 	AURA
	 	 	3,306.455	 	 	 	10/09/2007	 
	U.S.	 	 	COOLSPOT
	 	 	3,044,965	 	 	 	01/17/2006	 
	U.S.	 	 	DERMASTAT
	 	 	1,329,417	 	 	 	04/09/1985	 
	U.S.	 	 	DESIGN
	 	 	1,618,629	 	 	 	10/23/1990	 
	U.S.	 	 	ENDOPROBE
	 	 	1,622,307	 	 	 	11/13/1990	 
	U.S.	 	 	GEMINI
	 	 	3,044,850	 	 	 	01/17/2006	 
	U.S.	 	 	IRIDEX
	 	 	2,204,220	 	 	 	11/17/1998	 
	U.S.	 	 	IRIDEX
	 	 	2,204,219	 	 	 	11/17/1998	 
	U.S.	 	 	IRIS MEDICAL
	 	 	1,822,545	 	 	 	02/22/1994	 
	U.S.	 	 	LYRA
	 	 	3,200,356	 	 	 	01/23/2007	 
	U.S.	 	 	OCULIGHT
	 	 	1,618,628	 	 	 	10/23/1990	 
	U.S.	 	 	SMARTKEY
	 	 	1,618,627	 	 	 	10/23/1990	 
	U.S.	 	 	VENUS
	 	 	3,023,256	 	 	 	12/06/2005	 

U.S. Trademark Applications

	 	 	 	 	 	 	 	 	 	 	 	 	 
	COUNTRY	 	TRADEMARK	 	APPLICATION NO.	 	FILING DATE
	U.S.
	 	SOLIS	 	 	78/446,386	 	 	 	07/06/2004	 

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 3

 

Foreign Trademark Registrations

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	REGISTRATION
	COUNTRY	 	TRADEMARK	 	REGISTRATION NO.	 	DATE
	Australia

	 	AURA	 	 	852,861	 	 	 	12/07/2004	 
	France

Korea

Madrid Protocol

United Kingdom
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	France

	 	GEMINI	 	 	838,771	 	 	 	11/17/2004	 
	Korea

Madrid Protocol

United Kingdom
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Australia

	 	LYRA	 	 	849,033	 	 	 	12/07/2004	 
	France

Korea

Madrid Protocol

United Kingdom
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	France

	 	SOLIS	 	 	866,673	 	 	 	12/07/2004	 
	Madrid Protocol

United Kingdom
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	France

	 	VENUS	 	 	849,035	 	 	 	12/07/2004	 
	Madrid Protocol
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Canada
	 	GEMINI	 	 	TMA707678	 	 	 	02/19/2008	 

Foreign Trademark Applications

	 	 	 	 	 	 	 	 	 	 	 	 	 
	COUNTRY	 	TRADEMARK	 	APPLICATION NO.	 	FILING DATE
	Canada
	 	AURA	 	 	1,239,900	 	 	 	12/07/2004	 
	Australia
	 	GEMINI	 	 	1,154,571	 	 	 	12/28/2006	 
	Canada
	 	LYRA	 	 	1,239,901	 	 	 	12/07/2004	 
	Canada
	 	VENUS	 	 	1,239,902	 	 	 	12/07/2004	 

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 4

 

 

Exhibit D — Item (p)

(see attached copy)

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit D — Page 1

 

 

Exhibit E to Credit and Security Agreement (Ex-Im Subfacility)

COMPLIANCE CERTIFICATE

	 	 	 
	To:

	 	Wells Fargo Bank, National Association
	Date:

	 	[                    , 200_]
	Subject:

	 	Financial Statements

     In accordance with our Credit and Security Agreement (Ex-Im Subfacility) dated March 27, 2008
(as amended from time to time, the “Credit Agreement”), attached are the financial statements of
IRIDEX CORPORATION (the “Company”) dated [                    , 200_] (the “Reporting Date”) and the
year-to-date period then ended (the “Current Financials”). All terms used in this certificate have
the meanings given in the Credit Agreement.

     A. Preparation and Accuracy of Financial Statements. I certify that the Current Financials
have been prepared in accordance with GAAP, subject to year-end audit adjustments, and fairly
present Company’s financial condition as of the Reporting Date.

     B. Name of Company; Merger and Consolidation. I certify that:

     (Check one)

	 	o	 	Company has not, since the date of the Credit Agreement, changed its name or
jurisdiction of organization, nor has it consolidated or merged with another Person.
	 
	 	o	 	Company has, since the date of the Credit Agreement, either changed its name or
jurisdiction of organization, or both, or has consolidated or merged with another
Person, which change, consolidation or merger: o was consented to in advance by Wells
Fargo in an Authenticated Record, and/or o is more fully described in the statement
of facts attached to this Certificate.

     C. Events of Default. I certify that:

     (Check one)

	 	o	 	I have no knowledge of the occurrence of an Event of Default under the Credit
Agreement, except as previously reported to Wells Fargo in a Record.
	 
	 	o	 	I have knowledge of an Event of Default under the Credit Agreement not previously
reported to Wells Fargo in a Record, as more fully described in the statement of
facts attached to this Certificate, and further, I acknowledge that Wells Fargo may
under the terms of the Credit Agreement impose the Default Rate at any time during
the resulting Default Period.

     D. Litigation Matters. I certify that:

     (Check one)

	 	o	 	I have no knowledge of any material adverse change to the litigation exposure of
Company or any of its Affiliates or of any Guarantor.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit E — Page 1

 

 

	 	o	 	I have knowledge of material adverse changes to the litigation exposure of Company
or any of its Affiliates or of any Guarantor not previously disclosed in Exhibit D,
as more fully described in the statement of facts attached to this Certificate.

     E. Financial Covenants. I further certify that:

     (Check and complete each of the following)

     1. Minimum Net Income. Pursuant to Section 5.2(a) of the Credit Agreement, as of the
Reporting Date, Company’s Net Income plus approved intangible expense adjustments (approved by
Wells Fargo in Wells Fargo’s sole discretion) was $                    , which o satisfies o does not satisfy
the requirement that Net Income be not less than $                     on the Reporting Date (numbers
appearing between “< >” are negative).

     2. Minimum Debt Service Coverage Ratio. Pursuant to Section 5.2(b) of the Credit Agreement,
as of the Reporting Date, Company’s Debt Service Coverage Ratio was                      to 1.00, o which o satisfies
does not satisfy the requirement that such ratio be no less than                      to 1.00 on the Reporting
Date.

     3. Capital Expenditures. Pursuant to Section 5.2(c) of the Credit Agreement, for the
year-to-date period ending on the Reporting Date, Company has expended or contracted to expend
during the fiscal year ended                     , 200___, for Capital Expenditures, $                     in
the aggregate, which o satisfies o does not satisfy the requirement that such expenditures not exceed
$                     in the aggregate.

     Attached are statements of all relevant facts and computations in reasonable detail sufficient
to evidence Company’s compliance with the financial covenants referred to above, which computations
were made in accordance with GAAP.

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Its: Chief Financial Officer
	 	 

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit E — Page 2

 

 

Exhibit F to Credit and Security Agreement (Ex-Im Subfacility)

PERMITTED LIENS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Creditor	 	Collateral	 	Jurisdiction	 	Filing Date	 	Filing No.
	American Medical
Systems (AMS) and
Laserscope
	 	All assets of the Company	 	DE	 	 	08/16/2007	 	 	 	73128476	 

INDEBTEDNESS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current Principal	 	Maturity	 	Monthly	 	 
	Creditor	 	Amt.	 	Date	 	Payment	 	Collateral
	AMS
	 	$	420,192.22	 	 	Aug. 7, 2008	 	$	22,115.38	 	 	See Subordination Agreement
	AMS
	 	$	2,777,591.63	 	 	Sept. 25, 2008	 	$	110,185	 	 	See Subordination Agreement
	AMS1 
	 	$	823,536	 	 	Sept.	 	Approx $140,000	 	See Subordination Agreement

GUARANTIES

None.

 

			
	1	 	This indebtedness relates to contractual POS the Company has
placed with AMS for inventory. The Company must prepay when the inventory is
delivered.

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit F — Page 1

 

 

Exhibit G to Credit and Security Agreement (Ex-Im Subfacility)

Borrowing Base Certificate for Ex-Im Bank Guaranteed Line

(See attached form)

Credit and Security Agreement

WFBC/Iridex (Ex-Im Subfacility)

Exhibit F — Page 1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]