Document:

exv10w38

 

Exhibit 10.38

Equity Office Properties Trust

2003 Share Option and Share Incentive Plan

Participant Summary and

Restricted Share Agreement for Employees

 

INTRODUCTION

Equity Office Properties Trust (“Equity Office”) has established the Equity
Office Properties Trust 2003 Share Option and Share Incentive Plan, as amended (the “Plan”).
Under the Plan, certain employees, officers, trustees and consultants may receive various
rights related to common shares of beneficial interest (“Shares”) of Equity Office.

This Summary and Agreement is intended as a guide to the terms and
conditions of the grant of an award of restricted Shares pursuant to
the Plan. In addition, this Summary and Agreement is intended to
serve as an agreement between you (the “Grantee”) and Equity Office,
governing the terms and conditions of the grant of restricted Shares
(the “Share Award”) to you on _________.

This Summary and Agreement is subject to and governed by all the
terms and conditions of the Plan, which are hereby incorporated by
reference. In the event of any discrepancy between the terms and
conditions of this Summary and Agreement and those of the Plan, the
terms and conditions of the Plan (including amendments to the Plan)
will control. Any other rights that may be granted to you under the
Plan or rights that may be granted to other individuals will be
described in separate documents for those individuals who are
eligible to receive them.

This Summary and Agreement includes a Glossary that defines certain
words and phrases used in this Summary.

The effective date of the agreement reflected

in this document with respect to the Share Award is _____________.

This Document Constitutes Part of a Prospectus Covering Securities that have been

Registered under the Securities Act of 1933

The date of this Prospectus is _________________

 

 

 

PLAN ADMINISTRATION

The Plan is administered by the Compensation Committee
(the “Committee”) of Equity Office’s Board of Trustees
(the “Board”), which consists of at least three
non-employee members of the Board. The Board selects
the Committee members and may remove Committee members at any time.

The Committee designates those individuals eligible to receive awards
under the Plan and determines the terms, conditions and restrictions
governing the awards.

The Committee has the power, in connection with the administration of
the Plan, to interpret the terms, conditions and restrictions of the
Plan and this Summary and Agreement and to take any actions it deems
necessary to carry out the terms and purpose of the Plan. Any
interpretation or action by the Committee with respect to the Plan is
final and binding on each participant and his or her heirs and
transferees. Members of the Committee can be reached at the address
shown below.

 

ADDITIONAL INFORMATION

If you have any questions about the
Plan or if you would like to receive
a copy of the Plan, any additional
information relating to the Plan or
documents that have been filed by
Equity Office with the Securities
and Exchange Commission (including
Equity Office’s latest annual
report, the description of the
Shares being registered and any
other reports filed by Equity Office
pursuant to the Securities Exchange
Act of 1934, all of which are
incorporated by reference herein),
which are available without charge,
upon written or oral request, you
should contact Ms. Robin Mariella in the legal department at:

Equity Office Properties Trust

Two North Riverside Plaza

Suite 1600

Chicago, IL 60606

(312) 466-3646

robin_mariella@equityoffice.com

2

 

 

RESTRICTED SHARE AWARDS

	 	Q	 	What is a restricted Share Award?
	 
	 	A	 	You were granted ______ Shares as a
restricted Share Award. A restricted Share Award
is an issuance of Shares that you will forfeit
(see page 5 of this Summary and Agreement) if you
do not satisfy the vesting conditions established
by the Committee (see page 5 of this Summary and
Agreement). As of the “Grant Date” (as defined
in the Glossary), you will have the right to vote
the Shares and to receive an amount equal to
dividends as and if declared. Your other rights
as an Equity Office shareholder with respect to
the awarded Shares will be restricted.
 

The Committee determines the terms, conditions
and restrictions that apply to each Share Award
granted under the Plan. In no event, however,
may the terms, conditions and restrictions be
inconsistent with those of the Plan. Further,
the grant of a Share Award does not confer upon
you the right to be retained in the “Service” of
Equity Office. For purposes of the Plan, your
Service ends when you no longer perform services
as an employee, officer, trustee of Equity Office
or any “Subsidiary” (as defined in the Plan).
	 
	 	Q	 	Will Share certificates be issued in my name
at the time of grant?
	 
	 	A	 	No. At the time of grant, Equity Office
will reflect your ownership by book entry. For a
fee, Fidelity will issue Share certificates upon
your request after you become vested in the
Shares. Those employees who are eligible to
participate in the Equity Office Supplemental
Retirement Savings Plan (“SERP”) and have elected
to defer receipt of their Shares by exchanging
them for Phantom Share Units under the SERP also
may be issued Share certificates when Shares are
distributed from the SERP in exchange for such
Phantom Share Units.

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	 	Q	 	Can I defer my Shares into the SERP?
	 
	 	A	 	If you are eligible to participate in the SERP, you will have until
December 31 of the year prior to the year in which the Share Award is made
to make an election to defer receipt of the Shares into the SERP by
exchanging them for Phantom Share Units under the SERP at the time the
Shares vest (see page 5 of this Summary and Agreement).
	 
	 	Q	 	Can I transfer my Share Award?
	 
	 	A	 	You may not sell, assign or otherwise transfer any non-vested Shares.
Any attempt to do so will be void and without effect. However, when you
become vested in the awarded Shares, you will have the right to transfer
the Shares. If you are eligible to elect to defer receipt of Shares under
the SERP, transferability of the Phantom Share Units credited to your
account under the SERP will be controlled by the SERP plan document.
	 
	 	Q	 	Are there times when I cannot transfer my vested Shares?
	 
	 	A	 	Yes. There may be times when Equity Office’s Chief Legal Counsel
imposes a “blackout period” because of the existence or potential
existence of significant non-public information, such as a large
acquisition or earnings that differ from stock market expectations, or if
Equity Office conducts an additional offering to sell more Shares. During
these times, you may have to temporarily wait to sell your vested Shares,
whether or not such information is communicated to you.
	 
	 	 	 	In addition, while an employee, if you are restricted to trading within
the window periods established under Equity Office’s insider trading
policy (as determined by the Chief Legal Counsel), you cannot sell any
vested Shares (or any other holdings of Equity Office shares) outside of
the window periods following the release of quarterly financial
information, or otherwise in violation of any trading policy established
by Equity Office’s Chief Legal Counsel and applicable to you.
	 
	 	 	 	If you are an “affiliate” of Equity Office under the federal securities
laws, your sales of Shares must comply with Rule 144. You will be advised
if you are subject to Rule 144.

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VESTING

	 	Q	 	When will I become vested in the awarded Shares?
	 
	 	A	 	You will become vested in ______ percent (___%) of the awarded
Shares on ______ and will be vested in an additional ___
percent (___%) of the Shares on _________.
	 
	 	Q	 	What if there are any fractional Shares at the time of vesting?
	 
	 	A	 	Any fractional Shares will be rounded down to the next whole Share.
The fractional Shares shall remain unvested until, when combined with
other fractional Shares that would otherwise be vested, they equal a whole
Share.
	 
	 	Q	 	Are there any other circumstances under which I will vest in the
awarded Shares?
	 
	 	A	 	Yes. You will become fully vested in the Shares if your Service with
Equity Office is terminated:

	 	•	 	because of your death or “Disability” (as defined in the Glossary);
	 
	 	•	 	in connection with your retirement at or after age 62;
	 
	 	•	 	as a result of a “Change in Control” (as more particularly and specifically defined in the Plan) of Equity Office; or
	 
	 	•	 	under circumstances that the “Plan Administrator” (as defined in the Glossary) deems to warrant full vesting.

 

FORFEITURE

	 	Q	 	What happens if I leave Equity Office before I vest in the awarded Shares?
	 
	 	A	 	Unless your Service is terminated because of death, Disability or
retirement or as a result of a Change in Control of Equity Office or under
circumstances the Plan Administrator deems to warrant vesting some or all
of your non-vested Shares, you will forfeit to Equity Office any
non-vested Shares upon your termination of Service with Equity Office and
all Subsidiaries.

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TAX CONSEQUENCES

	 	Q	 	When do I pay tax on the restricted Share Award?
	 
	 	A	 	Normally you do not recognize compensation (ordinary) income at the
time you receive a restricted Share Award. As your Shares vest, you will
recognize ordinary income in an amount equal to the “Fair Market Value”
(as defined in the Glossary) of the vested Shares and you will be subject
to income taxes and FICA (Medicare and social security taxes) on that
amount. Equity Office’s designated agent for the Plan Administrator
(currently Fidelity Investments) will provide you with a calculation of
the tax withholding due.
	 
	 	 	 	Alternatively, you may choose one of the following options which means
that the amount of tax you pay and the time at which you pay it will
differ as explained below:

Option 1

Section 83(b) Election. Under Internal Revenue Service (“IRS”) rules, you
may elect to recognize as ordinary income and pay tax on the Fair Market
Value of your Shares as of the Grant Date, rather than as of the date(s)
your Shares vest. To elect this method of recognizing income for purposes
of tax treatment, you must complete and file an election under Section
83(b) of the Internal Revenue Code (“83(b) Election”) with the IRS within
thirty (30) days of the restricted Share Grant Date and provide a copy to
Equity Office’s human resources department. You will also need to attach
a copy of your 83(b) Election to your tax return when you file for the
calendar year. You should note that an 83(b) Election is irrevocable upon
submission.

If you choose to file an 83(b) Election, you will be required at that time
to pay the total applicable tax withholding due, which will include income
taxes and FICA, based on the ordinary income recognized under the
election. Equity Office will provide you with a calculation of the tax
withholding due.

Please be advised: If, under the terms of this Summary and Agreement or
the Plan, you fail to vest in your restricted Shares, you will not be
eligible to claim any deduction or credit for the taxes paid pursuant to
your irrevocable 83(b) Election regarding those Shares.

6

 

Option 2

SERP Deferment. If you are eligible to participate in the SERP and you
elect to defer receipt of your Shares by exchanging them for Phantom Share
Units, you will be required to pay FICA when the Shares vest, and Equity
Office or its agent will provide you with a calculation of the tax
withholding due. You will recognize ordinary income (and be subject to
income taxes) in an amount equal to the Fair Market Value of the Shares
when the Shares (or their proceeds) are distributed to you.

	 	Q	 	What is the tax treatment for dividends received under a restricted
Share Award?
	 
	 	A	 	Any dividends received on non-vested Shares will be treated as
compensation includable in your gross income reported on IRS Form W-2 (if
you did not file an 83(b) Election for the Shares) or Form 1099-DIV (if
you filed an 83(b) Election for the Shares) and in either case taxed as
ordinary income.
	 
	 	Q	 	Is any income I recognize with respect to the awarded Shares subject
to any withholding taxes and how will I pay my taxes?
	 
	 	A	 	Yes. Any income you recognize with respect to the awarded Shares is
subject to all tax withholding requirements. Payment of part or all of
the required withholding taxes may be satisfied as follows:

	 	•	 	you may elect to sell unrestricted Shares through Equity Office’s
designated broker (currently Fidelity Investments) to satisfy all tax
withholding requirements provided that you are in compliance with Equity
Office’s insider trading policy. Executive officers of Equity Office
subject to Section 16 of Securities Exchange Act of 1934 must obtain prior
approval from the Chief Legal Counsel to sell Shares to satisfy tax
withholding requirements.

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	 	•	 	you may elect to deliver to Equity Office’s designated broker
(currently Fidelity Investments) any unrestricted Shares having a Fair
Market Value determined as of the date of such delivery equal to the
amount required to be withheld;
	 
	 	•	 	Equity Office may permit any delivery of unrestricted Shares to be
made by withholding Shares otherwise issuable pursuant to the Share Award
equal to the amount required to be withheld; or
	 
	 	•	 	you may remit to Equity Office’s agent for the Plan Administrator
(currently Fidelity Investments) an amount sufficient to satisfy payment
of the taxes.

 

ELIGIBILITY

	 	Q	 	Who is eligible to participate in the Plan?
	 
	 	A	 	Certain employees, officers, trustees and consultants of Equity Office and its Subsidiaries are eligible
to receive awards under the Plan. The Committee designates the individuals who receive awards under the Plan.

 

SHARES SUBJECT TO THE PLAN

The maximum aggregate number of Shares of Equity Office for which awards may be granted under the Plan shall
not exceed 20,000,000 Shares. No more than 10,000,000 Shares may be available for issuance pursuant to awards
other than options. To the extent that awards granted under the Plan expire unexercised or are forfeited,
terminated, surrendered or canceled, the Shares allocated to such awards shall again become available for
future grants under the Plan, unless the Plan has terminated.

In the event of any change in the outstanding Shares due to a Share dividend, split, recapitalization, merger,
consolidation, combination, exchange or similar change, the number and kind of Shares reserved for issuance
under the Plan and Shares subject to outstanding awards shall be proportionately adjusted by the Committee such
that the value of the Shares available for awards under the Plan and the value of Shares subject to outstanding
awards remains unchanged.

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The Committee may make this adjustment in any manner it deems equitable; however, in no event shall:

	•	 	the aggregate exercise price payable with respect to Shares subject to an outstanding option or SAR be
changed; or

	•	 	the exercise price of an option be adjusted below par value of the Shares; or

	•	 	any fractional Shares be issued pursuant to any such adjustment.

If the adjustments result in fractional Shares, the fractional Shares will be eliminated by rounding down to
the nearest whole Share.

If you receive cash or another security in exchange for a non-vested Share in connection with any of the
foregoing, any conditions and restrictions applicable to the Share will continue to apply to the cash or
property received until the Share would have vested.

 

MORE INFORMATION ABOUT SHARES

Equity Office Properties Trust Shares are traded on the New York Stock Exchange under the symbol “EOP.” Like
other publicly traded shares, the price for Shares will vary due to many factors, such as:

	•	 	general economic and political conditions,

	•	 	tax and interest rates,

	•	 	actual and expected changes in our earnings as compared to past results,

	•	 	comparisons with the earnings of other public companies, and

	•	 	other factors over which Equity Office has no control.

9

 

 

SECTION 16 TRUSTEES & OFFICERS OF EQUITY OFFICE

Rules promulgated under Section 16 of the Securities Exchange Act of 1934 apply to Plan transactions by
executive officers and trustees of Equity Office. Such individuals must consult Equity Office’s Chief Legal
Counsel or his designee, prior to selling or transferring any Shares acquired under the Plan.

 

DURATION, MODIFICATION & TERMINATION OF THE PLAN

Unless terminated earlier, the Plan will expire on March 26, 2013 and no awards may be granted under the Plan
after that date. Notwithstanding the foregoing, Equity Office reserves the right to amend or terminate the
Plan at any time, subject to the approval of Equity Office’s shareholders as may be required by law. Any
amendment or termination of the Plan will not alter or impair any Share Award previously granted to you without
your consent.

 

APPLICABLE LAWS

The Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended.

 

NOTICES

All notices under the agreement incorporated in this Summary and Agreement shall be in writing and sent by
certified mail or by a nationally recognized overnight delivery service, postage or charges prepaid. All
notices to Equity Office should be addressed to the attention of the Chief Legal Counsel and sent to the
address provided on page 2 of this Agreement. All notices to you will be sent to your last known address on
the records of Equity Office.

Any such written notice or communication given by mail will be deemed to have been given two (2) business days
after the date the notice or communication was mailed; or, if sent by an overnight delivery service, it shall
be deemed to have been given one (1) business day after the date sent.

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	 	EQUITY OFFICE PROPERTIES TRUST

 	 
	 	By:  	Richard Kincaid
 	 
	 	 	President and Chief Executive Officer 	 
	 	 	 	 
	 
	 	GRANTEE 	 
	 	 	 
	 	         <<FIRSTNAME>> <<LASTNAME>> 	 

 

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GLOSSARY OF TERMS

A Change in Control (as more particularly and specifically defined in the Plan) shall be
deemed to occur upon:

	•	 	the acquisition by any entity, person or group of more than thirty
percent (30%) of the combined voting power of the outstanding
voting securities of Equity Office;

	•	 	approval by shareholders of Equity Office of a merger,
consolidation or reorganization of Equity Office with one (1) or
more other entities, as a result of which the holders of all
outstanding voting securities of Equity Office immediately prior
to such transaction hold less than seventy percent (70%) of the
combined voting power of the outstanding voting securities of the
surviving or resulting corporation in substantially the same
relative proportion as their ownership of the outstanding voting
securities of Equity Office immediately before the transaction and
the incumbent members of the Board of Trustees of Equity Office
immediately before the transaction do not constitute at least a
majority of the members of the board of the resulting corporation;
or

	•	 	approval by shareholders of Equity Office of a complete
liquidation or dissolution of Equity Office; or

	•	 	the rejection by the voting beneficial owners of the outstanding
Shares of the entire slate of trustees proposed by the Board at a
single election of trustees; or

	•	 	the rejection by the voting beneficial owners of the outstanding
Shares of one-half or more of the trustees proposed by the Board
over any two or more consecutive elections of trustees; or

	•	 	approval by shareholders of Equity Office of an agreement for the
sale of substantially all of the assets of Equity Office other
than to an entity of which Equity Office directly or indirectly
owns at least seventy percent (70%) of the voting shares.

Committee means the Compensation Committee of the Board of Trustees of Equity Office.

Disability means a physical or mental condition that entitles a participant to benefits under the
employer-sponsored long-term disability plan in which he or she participates, as determined by the
Plan Administrator in its sole and absolute discretion.

Equity Office means Equity Office Properties Trust, the sponsor of the Plan.

The Fair Market Value of a Share means different things for different purposes. Please refer to
the Plan document for the applicable definition.

12

 

Grant Date means the date you receive a Share Award and, for purposes of this Summary and
Agreement, is _________.

Phantom Share Unit means a bookkeeping entry representing an obligation of Equity Office to pay the
value of Shares that vested and that you elected to defer receipt of by participating in the SERP.

Plan means the Equity Office Properties Trust 2003 Share Option and Share Incentive Plan, as
amended from time to time.

Plan Administrator means the President and Chief Executive Officer of Equity Office and any one
member of the Committee, or the full Committee. Notwithstanding the foregoing, where the affected
Grantee is a “covered employee” for purposes of Section 162(m) of the Code:

	•	 	any authority of the Plan Administrator under the Plan may be
exercised only if the exercise of such authority would not cause
the related Share Award, to fail to constitute performance-based
compensation on its Grant Date under Treasury Regulation Section
1.162-27; and

	•	 	“Plan Administrator” means the full Committee only if the exercise
of such authority by the President and Chief Executive Officer and
any one member of the Committee would adversely affect the grant’s
status as performance-based compensation and its exercise by the
full Committee would not so affect such status.

Service means your performance of services as an employee, officer, trustee for Equity Office or
any Subsidiary.

Share Award means the grant of an award of Shares reflected herein.

Shares means common shares of beneficial ownership of Equity Office, having a par value of $.01.

Vested means the Shares are no longer subject to any substantial restrictions, other than those
arising under federal securities laws.

13exv10w1

 

Exhibit 10.1

CREDIT AND SECURITY AGREEMENT

Dated as of March 13, 2006

     SYNERGETICS, INC., a Missouri corporation (“Synergetics”) and SYNERGETICS USA, INC., a
Delaware corporation (“Synergetics USA”) (individually, a “Borrower” and together, the
“Borrowers”), and Regions Bank (the “Lender”), hereby agree as follows:

RECITALS

     A. Borrowers desire that Lender extend to Borrowers certain revolving credit loans for which
Borrowers will be jointly and severally liable as co-primary-obligors.

     B. Borrowers, jointly and severally, are willing to grant to Lender a security interest in and
lien upon personal property described in this Agreement to secure all Obligations (as herein
defined).

     C. Each Borrower directly and materially benefits and will continue to benefit from its joint
and several borrowing relationship hereunder and the borrowing availability afforded each Borrower
that Borrowers believe would not be available to either Borrower individually.

ARTICLE I

Definitions

     Section 1.1 General Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

          (a) the terms defined in this Article include the plural as well as the singular; and

          (b) all accounting terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP.

     Section 1.2 Primary Definitions. As used herein, the following terms shall have the
following meanings:

     “Applicable Percentage” means the percentage value of the Applicable LIBOR Rate Margin and the
Unused Line Fee set forth in the table below with respect to each Leverage Ratio level identified
in the first column of each row:

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	The Applicable	 	The Applicable	 	 
	 	 	LIBOR Rate Margin	 	Prime Rate Margin	 	The Unused Line Fee (see
	If the Leverage Ratio as of the last day of the prior fiscal quarter is:	 	is:	 	is:	 	Section 2.17(b)) is:
	Less than or equal
to 2.00

	 	 	2.00	%	 	 	- 1.000	%	 	 	0.200	%
	 
	Greater than 2.01
but less than or
equal to 2.50

	 	 	2.25	%	 	 	- 0.750	%	 	 	0.200	%
	 
	Greater than 2.51
but less than or
equal to 3.00

	 	 	2.50	%	 	 	- 0.250	%	 	 	0.250	%
	 
	Greater than 3.01

	 	 	2.75	%	 	 	0.000	%	 	 	0.250	%

     “Availability” means at any time the amount by which the Borrowing Base less the L/C
Amount and less reserves imposed pursuant to Section 2.1 hereof, exceeds the outstanding balance of
the Advances.

     “Balance Sheet Date” has the meaning specified in Section 5.5 hereof.

     “Borrowing Base” means, at any time and subject to change from time to time in the Lender’s
sole discretion, the lesser of

	 	(a)	 	the Revolving Loan Commitment, or
	 
	 	(b)	 	the sum of

	 	(i)	 	up to 85% of Eligible Accounts, plus
	 
	 	(ii)	 	the lesser of (A) up to 50% of Eligible Inventory.

     “Capital Expenditures” means all expenditures which, in accordance with GAAP, would be
required to be capitalized and shown on the consolidated balance sheet of Borrowers and their
subsidiaries, but excluding expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or other similar
recoveries) paid on account of the loss of or damage to the assets being replaced or restored or
(ii) with awards of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.

     “Collateral” means all of the Borrowers’ assets; specifically excluding all of Borrowers now
existing and hereafter acquired patents, trade names, trademarks, service marks; but specifically
including, without limitation, all of Borrowers’ other personal property, including without
limitation all of Borrowers’ Equipment, Accounts, General Intangibles, Inventory, Chattel Paper,
Securities, Investment Property, Financial Assets, Letter of Credit Rights, Deposit Accounts,
Instruments, Documents, Supporting Obligations, money and Books and Records, together with all
substitutions and replacements for and products of any of the foregoing and together with proceeds
of any and all of the foregoing and, in the case of all tangible Collateral, together with all
accessions and together with (i) all accessories, attachments, parts, equipment and repairs now or
hereafter attached or affixed to or used in connection with any such goods,
(ii)
all warehouse receipts, bills of lading and other documents of title now or hereafter
covering

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such goods and (iii) all Commercial Tort Claims subject to Borrower’s compliance with
Section 6.1(o) hereof.

     “Consolidated Indebtedness” shall mean, as of the date of any determination thereof, all
Indebtedness of Borrowers and all subsidiaries as of such date, determined on a consolidated basis
and in accordance with GAAP.

     “Current Maturities of Long-Term Debt” means for any period all long-term debt payments
payable during such period by Borrowers and their subsidiaries on a consolidated basis and in
accordance with GAAP.

     “Default Rate” means at any time three percent (3%) per annum plus the rate of interest
otherwise applicable under this Agreement immediately prior to giving effect to the application of
the Default Rate, which Default Rate shall change, in the case of the Prime Rate Portion, when and
as the Prime Rate changes.

     “Disclosure Schedule” has the meaning specified in Section 5.1 hereof.

     “EBITDA” means with respect to the Borrowers and their subsidiaries on a consolidated basis,
applicable period-to-date net after-tax income, determined in accordance with GAAP, plus
depreciation, plus amortization, plus interest expense, plus taxes, plus other non-cash
non-operating expense items, minus other non-cash non-operating income items.

     “Eligible Accounts” means all unpaid Accounts, net of any credits, except the following shall
in no event be deemed Eligible Accounts:

     (1) Any Account over 90 days past invoice date;

     (2) That portion of Accounts that are disputed or subject to a claim of offset;

     (3) Any Account that is subject to a contra account;

     (4) That portion of Accounts not yet earned by the final delivery of goods or rendition
of services, as applicable, by a Borrower to the customer;

     (5) Accounts owed by any unit of government (other than those of the Veterans
Administration), whether foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by such units of government with
respect to which a Borrower has provided evidence satisfactory to the Lender that (A) the
Lender has a first priority perfected security interest and (B) such Accounts may be
enforced by the Lender directly against such unit of government under the Federal Assignment
of Claims Act or other applicable law);

     (6) Accounts owed by an account debtor located outside the United States and that are
not secured by irrevocable letters of credit acceptable to Lender and assigned to Lender or
subject to guarantees by the Export/Import Bank of the United States in favor
of Lender or accounts receivable insurance with Lender as beneficiary on terms
acceptable to Lender;

3

 

     (7) Accounts owed by an account debtor that is the subject of bankruptcy proceedings or
has gone out of business;

     (8) Accounts owed by a shareholder, subsidiary, Affiliate, officer or employee of a
Borrower or owed by any “consumer debtor” (as defined in the UCC);

     (9) Accounts not subject to a duly perfected security interest in favor of the Lender
or which are subject to any lien, security interest or claim in favor of any Person other
than the Lender;

     (10) That portion of Accounts that have been restructured, extended, amended or
modified;

     (11) That portion of Accounts that constitutes finance charges, service charges or
sales or excise taxes;

     (12) Accounts 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 (1), (2) or (10) above;

     (13) All Accounts (including any and all royalty fees) of, or related to the assets of,
Synergetics IP, Inc.

     “Eligible Inventory” means all inventory of the Borrowers, at the lower of cost or market
value as determined in accordance with GAAP, not more frequently than once per year; provided,
however, that the following shall in no event be deemed Eligible Inventory:

     (1) Inventory that is: (a) in-transit; (b) located at any location not owned by a
Borrower and for which a Borrower has not delivered to the Lender an appropriate landlord’s
or warehouseman’s waiver, as applicable, in form and substance satisfactory to the Lender
(other than sales demo models, inventory at sterilization location(s) and rental inventory);
(c) in the possession of a bailee or other third Person (other than a consignee), including
Inventory held by a third Person for processing, and for which a Borrower has not delivered
to the Lender an appropriate bailee’s waiver, in form and substance satisfactory to the
Lender; (d) not subject to a security interest in favor of the Lender; (e) covered by any
negotiable or non-negotiable warehouse receipt, bill of lading or other document of title;
or (f) on consignment to or from any other Person;

     (2) Supplies, packaging or parts inventory;

     (3) Work-in-process inventory;

     (4) Without duplication of any other clause of this definition, inventory that is
damaged, obsolete, slow moving, or not currently saleable in the normal course of the
Borrowers’ operations;

     (5) Inventory that the Borrowers have returned, have attempted to return, are in the
process of returning or intend to return to the vendor thereof;

4

 

     (6) Inventory that is subject to a security interest in favor of any Person other than
the Lender except Permitted Encumbrances.

     “Fixed Charge Coverage Ratio” means consolidated EBITDA less unfinanced Capital Expenditures,
cash taxes paid, and distributions (including dividend distributions) divided by Current Maturities
of Long Term Debt and interest expense.

     “Indebtedness” shall mean, with respect to any Person, without duplication, all indebtedness,
liabilities and obligations of such Person which in accordance with GAAP are required to be
classified upon a balance sheet of such Person as liabilities of such Person, and in any event
shall include all (a) obligations of such Person for borrowed money or which have been incurred in
connection with the purchase or other acquisition of Property, (b) obligations secured by any Lien
(other than mechanics’, materialman’s, architect’s, or similar Lien arising in the ordinary course
of a construction business) on, or payable out of the proceeds of or production from, any Property
owned by such Person, whether or not such Person has assumed or become liable for the payment of
such obligations, (c) indebtedness, liabilities and obligations of third parties, including joint
ventures and partnerships of which such Person is a venturer or general partner, recourse to which
may be had against such Person, (d) obligations created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such Person, notwithstanding
the fact that the rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of such Property, (e) Capitalized Lease
Obligations of such Person, (f) the aggregate undrawn face amount of all letters of credit issued
for the account of and/or upon the application of such Person together with all unreimbursed
drawings with respect thereto, and (g) trade account payables and all other liabilities of such
Person as defined by GAAP.

     “Interest Period” means, with respect to any LIBOR Portion, the period commencing on, as the
case may be, the creation, continuation or conversion date with respect to such LIBOR Portion and
ending 1, 2, 3 or 6 months thereafter as selected by the Borrowers in their notice as provided
herein; provided that all of the foregoing provisions relating to Interest Periods are subject to
the following:

     (i) if any Interest Period would otherwise end on a day which is not a Banking Day,
that Interest Period shall be extended to the next succeeding Banking Day, unless the result
of such extension would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately preceding Banking Day;

     (ii) no Interest Period may extend beyond the final maturity date of the Note;

     (iii) the interest rate to be applicable to each LIBOR Portion for each Interest Period
shall apply from and including the first day of such Interest Period to but excluding the
last day thereof, and

     (iv) no Interest Period may be selected if after giving effect thereto the Borrowers
will be unable to make a principal payment scheduled to be made during such

5

 

Interest Period
without paying part of a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.

     For purposes of determining an Interest Period, a month means a period starting on one day in
a calendar month and ending on a numerically corresponding day in the next calendar month,
provided, however, (i) if an Interest Period begins on the last day of a month, then such Interest
Period shall end on the last day of the next calendar month and (ii) if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such Interest Period
shall end on the last Banking Day of such month.

     “Leverage Ratio” means Consolidated Indebtedness as divided by Tangible Net Worth.

     “LIBOR” means a rate per annum determined by the Bank in accordance with the following
formula:

	 	 	 	 	 	 	 	 	 
	 

	 	LIBOR
	 	=
	 	Base LIBOR
	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	100% – Reserve Percentage	 	 

For purposes hereof, “Reserve Percentage” means, for the purpose of computing LIBOR, the maximum
rate of all reserve requirements (including, without limitation, any marginal, emergency, or other
special reserves) imposed by the Board of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities (as such term is defined in Regulation D)
for the applicable Interest Period as of the first day of such Interest Period, but subject to any
amendments to such reserve requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such Interest Period. For purposes of
this definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities as defined in
Regulation D without benefit of or credit for prorations, exemptions or offsets under Regulation D.
As of this date, the Reserve Percentage is 0%. “Base LIBOR” means, for each Interest Period, (a)
the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR
Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) at which deposits in U.S. Dollars in
immediately available funds are offered to the Bank at 11:00 a.m. (London, England time) two (2)
Banking Days before the beginning of such Interest Period by three (3) or more major banks in the
interbank eurodollar market selected by the Bank for a period equal to such Interest Period and in
an amount equal to the applicable LIBOR Portion scheduled to be outstanding from the Bank during
such Interest Period. “LIBOR Index Rate” means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point)
for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the
Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two (2) Banking Days before
the commencement of such Interest Period. “Telerate Page 3750” means the display designated as
“Page 3750” on the Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British Bankers’ Association as the information
vendor for the purpose of displaying British Bankers’ Association interest settlement rates for
United States
Dollar deposits). Each determination of LIBOR made by the Lender shall be conclusive and binding
absent manifest error.

6

 

     “LIBOR Portion” has the meaning specified in Section 2.8(a) hereof.

     “LIBOR Revolving Portion” has the meaning specified in Section 2.8(a) hereof.

     “Malis Note” means that certain Secured Term Promissory Note between Synergetics USA, Inc.,
Synergetics IP, Inc. and the Estate of Leonard I. Malis dated October 12, 2005.

     “Material Adverse Effect” means a material adverse effect on (a) the business, properties,
operations, condition (financial or otherwise) or prospects of the Borrowers, as the case may be,
(b) a material portion of the Collateral, or (c) the ability of the Borrowers to perform their
respective obligations under this Agreement and the other Loan Documents.

     “Note” means the Revolving Note.

     “Permitted Encumbrances” means the following encumbrances: (a) liens for taxes or assessments
or other governmental charges not yet due and payable or not yet required to be paid pursuant to
Section 6.4 hereof; (b) pledges or deposits of money securing statutory obligations under workmen’s
compensation, unemployment insurance, social security or public liability laws or similar
legislation (excluding liens under ERISA); (c) pledges or deposits of money securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which a Person is a party as
lessee made in the ordinary course of business; (d) inchoate and unperfected workers’, mechanics’
or similar liens arising in the ordinary course of business, so long as such liens attach only to
Equipment, fixtures and/or real property; (e) carriers’, warehousemen’s, suppliers’ or other
similar possessory liens arising in the ordinary course of business, so long as such liens attach
only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Person is a party; (g) any attachment or judgment lien not constituting a
Default under this Agreement; (h) zoning restrictions, easements, licenses, or other restrictions
on the use of any real property owned or leased by Borrowers or other minor irregularities in title
(including leasehold title) thereto, so long as the same do not materially impair the use, value,
or marketability of such real property owned or leased by Borrowers; and (i) presently existing or
hereinafter created liens in favor of Lender.

     “Portion” has the meaning specified in Section 2.8(a) hereof.

     “Prime Rate Portion” has the meaning specified in Section 2.8(a) hereof.

     “Prime Rate Revolving Portion” has the meaning specified in Section 2.8(a) hereof.

     “Related Documents” has the meaning specified in Section 2.6(a) hereof.

     “Revolving Credit Facility” means the right of Borrowers to obtain Advances under the
Revolving Loan Commitment.

     “Revolving Note” has the meaning specified in Section 2.2 hereof.

7

 

     “Revolving Loan Commitment” means $5,500,000, unless said amount is reduced pursuant to
Section 2.11(b) hereof, in which event it means the amount to which said amount is reduced.

     “Security Documents” means the Intellectual Property Security Agreements, as described in
Section 4.1 hereof together with each other agreement, instrument or document received by the
Lender in connection with the grant or perfection of a lien on Collateral to secure the Obligations

     “Tangible Net Worth” means on a consolidated basis (and in accordance with GAAP) the sum of
all assets as presented in the balance sheet in the financial statements of Borrowers and their
subsidiaries, minus intangible assets (all assets shown on the balance sheet of such financial
statements which lack physical substance or which represent a right granted by the government or by
another company, including without limitation such assets as goodwill, patents, trademarks,
franchises, licenses, contract rights and other similar assets), minus total Indebtedness of
Borrowers and their subsidiaries.

     “Termination Date” means December 1, 2007.

     Section 1.3 General Definitions. In addition to the foregoing, certain defined terms
used in this Agreement have the meanings as set forth in Exhibit A attached hereto.

ARTICLE II

Amount and Terms of the Revolving Credit Facility

     Section 2.1 Advances. The Lender agrees, on the terms and subject to the conditions
herein set forth, to make Advances to the Borrowers from time to time during the period from the
date hereof to and including the Termination Date, or the earlier date of termination in whole of
the Revolving Credit Facility pursuant to Section 2.10 or Section 8.2 hereof, in an aggregate
amount at any time outstanding not to exceed the Borrowing Base, less the L/C Amount, which
Advances shall be secured by the Collateral as provided in Article III hereof. The Borrowers agree
to comply with the following procedures in requesting Advances under this Section 2.1:

     (a) The Lender shall not make any Advance under this Section 2.1 if, after giving effect to
such requested Advance, the sum of the outstanding and unpaid Advances under this Section 2.1 or
otherwise would exceed the Borrowing Base, less the L/C Amount. So long as any Default exists, the
Lender shall have no obligation to make any Advance.

     (b) Each request for an Advance under the Prime Rate Revolving Portion shall be made to the
Lender prior to 11:00 a.m. (St. Louis, Missouri time) of the day of the requested Advance by the
requesting Borrower (or in accordance with an electronic mechanism established
by Bank for such advances). Each request for an advance under the LIBOR Revolving Portion
shall be made by notice given as provided in section 2.8(e) hereof. Each request for an Advance or
request for an automated Advance mechanism may be made in writing or by telephone, specifying the
date of the requested Advance and the amount thereof, and shall be made by (i) any officer of a
Borrower; or (ii) any person designated as such Borrower’s agent by any

8

 

officer of such Borrower in
a writing delivered to the Lender; or (iii) any person reasonably believed by the Lender to be an
officer of such Borrower or such a designated agent.

     (c) Upon fulfillment of the applicable conditions set forth in Article IV hereof, the Lender
shall disburse loan proceeds by crediting the same to the requesting Borrower’s demand deposit
account maintained with Lender, or its Affiliates, unless the Lender and the requesting Borrower
shall agree in writing to another manner of disbursement. Upon request of the Lender, and in any
event if any Advance is to be made to any account other than the above-referenced account, the
requesting Borrower shall promptly provide such confirmation that the Lender may require. The
Borrowers shall be obligated to repay all Advances under this Section 2.1 notwithstanding the
failure of the Lender to receive such confirmation and notwithstanding the fact that the person
requesting the same was not in fact authorized to do so. Any request for an Advance under this
Section 2.1, whether written or telephonic, shall be deemed to be a representation by the Borrowers
that (i) the condition set forth in Section 2.1(a) hereof has been met, and (ii) the conditions set
forth in Section 4.2 hereof have been satisfied as of the time of the request.

     Section 2.2 Notes; Obligations Joint and Several. All Advances made by the Lender
under Section 2.1 hereof shall be evidenced by, and repayable with, interest in accordance with the
Revolving Note attached hereto as Exhibit B (the “Revolving Note”). The principal of the Revolving
Note shall be payable as provided herein and on the earlier of the Termination Date or acceleration
by the Lender pursuant to Section 8.2 hereof, and shall bear interest as provided in
Section 2.8 hereof.

     Section 2.3 Issuance of Letters of Credit.

     (a) The Lender agrees, on the terms and subject to the conditions herein set forth, to issue
or cause to be issued by an Issuer one or more letters of credit for the account of the Borrowers
(each a “Letter of Credit”) from time to time during the period from the date hereof until the
earlier of the Termination Date or the date the Revolving Credit Facility has been terminated
pursuant to Section 2.11 or Section 8.2 hereof, in an aggregate amount at any time outstanding not
to exceed the Borrowing Base less the sum of (i) all outstanding and unpaid Advances hereunder,
(ii) the unpaid amount of the Obligation of Reimbursement, and (iii) reserves imposed by Section
2.1, if any, but no event shall the unpaid amount of all Obligations of Reimbursement exceed
$2,000,000. Each Letter of Credit, if any, shall be issued pursuant to a separate L/C Application
entered into by the Borrowers and the Lender as co-applicants for the benefit of the Issuer,
completed in a manner satisfactory to the Lender and the Issuer. The terms and conditions set
forth in each such L/C Application shall supplement the terms and conditions hereof, but in the
event of inconsistency between the terms of any such L/C Application and the terms hereof, the
terms hereof shall control.

     (b) No Letter of Credit shall be issued under this Section 2.3 if, after the issuance of such
requested Letter of Credit, the sum of the face amounts of all issued and outstanding Letters of
Credit would exceed the Borrowing Base less the sum of (i) all outstanding and unpaid Advances
hereunder, (ii) the unpaid amount of the Obligation of Reimbursement, and (iii) reserves imposed by
Section 2.1, if any.

9

 

     (c) No Letter of Credit shall be issued with an expiry date later than the Termination Date in
effect as of the date of issuance.

     (d) Any request for the issuance of a Letter of Credit under this Section 2.3 shall be deemed
to be a representation by the Borrowers that (i) the condition set forth in Section 2.3(b) hereof
has been met, and (ii) the conditions set forth in Section 4.1 or Section 4.2 hereof (as the case
may be) have been satisfied as of the time of the request.

     (e) No Letter of Credit shall be issued so long as any Default exists.

     Section 2.4 Payment of Amounts Drawn Under Letters of Credit. The Borrowers
acknowledge that the Lender, as co-applicant, will be liable to the Issuer of any Letter of Credit
for reimbursement of any and all draws thereunder and all other amounts required to be paid under
the applicable L/C Application. Accordingly, the Borrowers agree to pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as required to be paid
thereby, and the amounts designated below, when and as designated:

     (a) The Borrowers hereby agree to pay the Lender on the day a draft is honored under any
Letter of Credit a sum equal to all amounts drawn under such Letter of Credit plus any and all
reasonable charges and expenses that the Issuer or the Lender may pay or incur relative to such
draw, plus interest on all such amounts, charges and expenses as set forth below (all such amounts
are hereinafter referred to, collectively, as the “Obligation of Reimbursement”).

     (b) The Borrowers hereby agree to pay the Lender on demand interest on all amounts, charges
and expenses payable by the Borrowers to the Lender under this Section 2.4, accrued from the date
any such draft, charge or expense is paid by the Issuer until payment in full by the Borrowers at
the Default Rate.

If the Borrowers fail to pay to the Lender promptly the amount of its Obligation of Reimbursement
in accordance with the terms hereof and the L/C Application pursuant to which such Letter of Credit
was issued, the Lender is hereby irrevocably authorized and directed, in its sole discretion, to
make an Advance in an amount sufficient to discharge the Obligation of Reimbursement, including all
interest accrued thereon but unpaid at the time of such Advance, and such Advance shall be
evidenced by the Revolving Note and shall bear interest as provided in Section 2.8 hereof for Prime
Rate Revolving Portions.

     Section 2.5 Special Account. If the Revolving Credit Facility is terminated for any
reason whatsoever while any Letter of Credit is outstanding, the Borrowers shall thereupon pay the
Lender in immediately available funds for deposit in the Special Account an amount equal to the
maximum aggregate amount available to be drawn under all Letters of Credit then outstanding,
assuming compliance with all conditions for drawing
thereunder. The Special Account shall be maintained for the Lender by any financial
institution acceptable to the Lender. Any interest earned on amounts deposited in the Special
Account shall be credited to the Special Account. Amounts on deposit in the Special Account may be
applied by the Lender at any time or from time to time to the Borrowers’ Obligation of
Reimbursement or any other Obligations, in the Lender’s sole discretion, and shall not be subject
to withdrawal by the Borrowers so long as the Lender maintains a security interest therein. The
Lender agrees to transfer any balance in the

10

 

Special Account to the Borrowers at such time as all
obligations of the Issuer under all Letters of Credit are terminated.

     Section 2.6 Obligations Absolute. The obligations of the Borrowers arising under this
Agreement with respect to the Obligation of Reimbursement shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including (without limitation) the following circumstances:

     (a) any lack of validity or enforceability of any Letter of Credit or any other agreement or
instrument relating to any Letter of Credit (collectively the “Related Documents”);

     (b) any amendment or waiver of or any consent to departure from the terms of all or any of the
Related Documents;

     (c) the existence of any claim, setoff, defense or other right which a Borrower may have at
any time, against any beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be acting), or other person or
entity, whether in connection with this Agreement, the transactions contemplated herein or in the
Related Documents or any unrelated transactions;

     (d) any statement or any other document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;

     (e) payment by or on behalf of the Issuer or the Lender under any Letter of Credit against
presentation of a draft or certificate which does not strictly comply with the terms of such Letter
of Credit; or

     (f) any other circumstance or happening whatsoever, whether or not similar to any of the
foregoing; provided that none of such circumstances will affect any rights of Borrowers against the
Issuer of any Letter of Credit.

     Section 2.7 Capital Adequacy.

     (a) If Lender shall have determined that the adoption after the date hereof of any law, rule
or regulation regarding capital adequacy, or any change therein after the date hereof or in the
interpretation or application thereof, or compliance by Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any central bank or
governmental authority enacted after the date of this Agreement, does or shall have the effect of
reducing the rate of return on any of the Lender’s capital as a consequence of its obligations
hereunder to a level below that which Lender could have achieved but for such adoption, change
or compliance (taking into consideration such Lender’s policies with respect to capital
adequacy) by a material amount, then from time to time, after submission by Lender to Borrowers of
a written demand therefor together with the certificate described below, Borrowers shall pay to
Lender such additional amount or amounts as will compensate Lender for such reduction, such demand
to be made with reasonable promptness following such determination. A certificate of Lender
claiming entitlement to payment as set forth above shall be conclusive in the absence of manifest
error. Such certificate shall set forth the nature of the occurrence giving rise to such

11

 

reduction, the amount of such charge to be paid to Lender, and the method by which such amount was
determined. In determining such amount, such Lender may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.

     (b) If Lender invokes the provisions of subsection (a) hereof, it shall promptly notify
Borrowers. Borrowers, by notice given to Lender within 30 days of such action, may, within 60 days
of the date of such notice to Lender, prepay in full all Obligations without prepayment penalty,
anything in Section 2.11 to the contrary notwithstanding.

     Section 2.8 Interest.

     (a) Subject to all of the terms and conditions of this Section 2.8, portions of the
principal Indebtedness evidenced by the Note (all of the Indebtedness evidenced by the Note bearing
interest at the same rate for the same period of time being hereinafter referred to as a “Portion”)
may, at the option of the Borrowers, bear interest with reference to the Prime Rate (“Prime Rate
Portions”) or with reference to the LIBOR (“LIBOR Portions”), and Portions may be converted from
time to time from one basis to the other. All of the Indebtedness evidenced by the Revolving Note
which is not part of a LIBOR Portion shall constitute a single Prime Rate Portion (a “Prime Rate
Revolving Portion”) and all of the Indebtedness evidenced by the Revolving Note which bears
interest with reference to a particular LIBOR for a particular Interest Period shall constitute a
single LIBOR Portion (a “LIBOR Revolving Portion”). There shall not be more than four (4) LIBOR
Portions applicable to the Note outstanding at any one time. Anything contained herein to the
contrary notwithstanding, the obligation of the Lender to create, continue or effect by conversion
any LIBOR Portion shall be conditioned upon the fact that at the time no Default or Event of
Default shall have occurred and be continuing. The Borrowers hereby promise to pay interest on the
applicable Portions at the rates and times specified in this Section 2.8.

     (b) The Prime Rate Portions shall bear interest at the rate per annum determined by
adding the Applicable Prime Rate Margin then in effect in accordance with the definition of
Applicable Percentage to the Prime Rate as in effect from time to time. Interest on the Prime Rate
Portions shall be compiled on the basis of actual days elapsed in a 360-day year. Interest on the
Prime Rate Portions shall be payable monthly in arrears on the first day of each month in each year
(commencing April 1, 2006) and at maturity or prepayment of the Note, and interest after maturity
(whether by lapse of time, acceleration or otherwise) shall be due and payable upon demand. Any
change in the interest rate on the Prime Rate Portions resulting from a change in the Prime Rate
shall be effective on the date of the relevant change in the Prime Rate.

     (c) Each LIBOR Portion shall bear interest for each Interest Period selected
therefor at a rate per annum determined by adding the Applicable LIBOR Margin then in effect in
accordance with the definition of Applicable Percentage to the LIBOR for such Interest Period.
If an Event of Default occurs and is then continuing, effective at the end of each then existing
Interest Period, each then existing LIBOR Portion shall automatically be converted into and added
to an appropriate Prime Rate Portion and shall thereafter bear interest at the interest rate
applicable to such Prime Rate Portion unless and until converted in accordance with the terms
hereof. Interest on the LIBOR Portions shall be computed on the basis of actual days elapsed in a
360-day year. Interest on each LIBOR Portion shall be due and payable in arrears on the first

12

 

day
of each month, on the last day of each Interest Period applicable thereto, and at maturity or
prepayment of the Note, and interest after maturity (whether by lapse of time, acceleration or
otherwise) shall be due and payable upon demand. The Borrowers shall notify the Lender on or
before 11:00 a.m. (St. Louis, Missouri time) on the third Banking Day preceding the end of an
Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR
Portion, in which event the Borrowers shall notify the Lender of the new Interest Period selected
therefor, and in the event the Borrowers shall fail to so notify the Lender, such LIBOR Portion
shall automatically be converted into and added to the applicable Prime Rate Portion as of and on
the last day of such Interest Period.

     (d) Each LIBOR Portion shall be in an amount equal to $250,000 or such greater
amount which is an integral multiple of $50,000.

     (e) The Borrowers shall notify the Lender by 11:00 a.m. (St. Louis, Missouri time)
at least three Banking Days prior to the date upon which the Borrowers request that any LIBOR
Portion be created or that any part of a Prime Rate Portion be converted into a LIBOR Portion (each
such notice to specify in each instance the amount thereof and the Interest Period selected
therefor). If any request is made to convert a LIBOR Portion into another type of Portion
available hereunder, such conversion shall only be made so as to become effective as of the last
day of the Interest Period applicable thereto. All requests for the creation, continuance and
conversion of Portions under this Agreement shall be irrevocable. Such requests may be in writing
or by telephone and shall be made by (i) any officer of the requesting Borrower; or (ii) any person
designated as such Borrower’s agent by any officer of the Borrower in a writing delivered to the
Lender; or (iii) any person reasonably believed by the Lender to be an officer of such Borrower or
such a designated agent.

     (f) Notwithstanding anything to the contrary contained herein, (i) from and after
the date of the occurrence of any Default or Event of Default, in the Lender’s discretion, the
principal amount of the Advances, outstanding from time to time shall bear interest at the Default
Rate; and (ii) during any period that the sum of the outstanding principal balance of all Advances
exceeds the sum of the Borrowing Base, the L/C Amount and reserves imposed pursuant to Section 2.1
hereof, if any, the principal of the Advances shall automatically bear interest at the Default
Rate; and provided, further, that in any event no rate change shall be put into effect which would
result in a rate greater than the highest rate permitted by law.

     (g) Notwithstanding any other provision of this Agreement or the Note, if at any
time the Lender shall determine that any change in applicable laws, treaties or regulations or in
the interpretation thereof by any court or governmental authority charged with the administration
thereof makes it unlawful, as a result of compliance by the Lender in good faith with such laws,
treaties, regulations or interpretations thereof, for the Lender to create or continue to maintain
any LIBOR Portion, it shall promptly so notify the Borrowers and the obligation of the Lender
to create, continue or maintain any such LIBOR Portion under this Agreement shall terminate until
it is no longer unlawful for the Lender to create, continue or maintain such LIBOR Portion. The
Borrowers, on demand, shall, if the continued maintenance of any such LIBOR Portion is unlawful,
thereupon prepay the outstanding principal amount of the affected LIBOR Portion, together with all
interest accrued thereon and all other amounts payable to the Lender with respect thereto under
this Agreement; provided, however, that the Borrowers may elect to

13

 

convert the principal amount of
the affected Portion into another type of Portion available hereunder, subject to the terms and
conditions of this Agreement.

     (h) Notwithstanding any other provision of this Agreement or the Note, if prior to
the commencement of any Interest Period, the Lender shall determine that deposits in the amount of
any LIBOR Portion scheduled to be outstanding during such Interest Period are not generally
available in the relevant market or, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining LIBOR, then the Lender shall promptly
give notice thereof to the Borrowers and the obligations of the Lender to create, continue or
effect by conversion any such LIBOR Portion in such amount and for such Interest Period shall
terminate until deposits in such amount and for the Interest Period selected by the Borrowers shall
again be generally available in the relevant market and adequate and reasonable means exist for
ascertaining LIBOR.

     (i) With respect to any LIBOR Portion, if the Lender shall determine that any change
in any applicable law, treaty, regulation or guideline (including, without limitation, Regulation D
of the Board of Governors of the Federal Reserve System) or any new law, treaty, regulation or
guideline, or any interpretation of any of the foregoing by any governmental authority charged with
the administration thereof or any central bank or other fiscal, monetary or other authority having
jurisdiction over the Lender or its lending branch or the LIBOR Portions contemplated by this
Agreement (whether or not having the force of law), shall:

          (i) impose, increase, or deem applicable any reserve, special deposit or
similar requirement against assets held by, or deposits in or for the account of, or loans
by, or any other acquisition of funds or disbursements by, the Lender which is not in any
instance already accounted for in computing the interest rate applicable to such LIBOR
Portion;

          (ii) subject the Lender, any LIBOR Portion or any of the Note to the extent
it evidences such a LIBOR Portion to any tax (including, without limitation, any United
States interest equalization tax or similar tax however named applicable to the acquisition
or holding of debt obligations and any interest or penalties with respect thereto), duty,
charge, stamp tax, fee, deduction or withholding in respect of this Agreement, any LIBOR
Portion or any of the Note to the extent it evidences such a LIBOR Portion, except such
taxes as may be measured by the overall net income or gross receipts of the Lender or its
lending branches and imposed by the jurisdiction, or any political subdivision, or taxing
authority thereof, in which the Lender’s principal executive office or its lending branch is
located;

          (iii) change the basis of taxation of payments of principal and interest due
from the Borrowers to the Lender hereunder or under any of the Note to the extent it
evidences any LIBOR Portion (other than by a change in taxation of the overall net income or
gross receipts of the Lender); or

          (iv) impose on the Lender any penalty with respect to the foregoing or any
other condition regarding this Agreement, any LIBOR Portion, or its disbursement, or any of
the Note to the extent it evidences any LIBOR Portion;

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and the Lender shall determine that the result of any of the foregoing is to increase the
cost (whether by incurring a cost or adding to a cost) to the Lender of creating or
maintaining any LIBOR Portion hereunder or to reduce the amount of principal or interest
received or receivable by the Lender, Lender shall promptly advise the Borrowers of the
foregoing and then the Borrowers shall pay to the Lender, within fifteen (15) days after
demand therefor by the Lender, such additional amounts as the Lender shall reasonably
determine are sufficient to compensate and indemnify it for such increased cost or reduced
amount.

     (j) In the event the Lender shall incur any loss, cost or expense (including,
without limitation, any loss (including loss of profit), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by the
Lender to fund or maintain any LIBOR Portion or the relending or reinvesting of such deposits or
other funds or amounts paid or prepaid to the Lender) as a result of:

     (i) any payment of a LIBOR Portion on a date other than the last day of the
then applicable Interest Period for any reason, whether before or after an Event of Default
or Default, and whether or not such payment is required by any provisions of this Agreement;
or

     (ii) any failure by the Borrowers to create, borrow, continue or effect by
conversion a LIBOR Portion on the date specified in a notice given pursuant to this
Agreement;

then within fifteen (15) days after demand therefor by the Lender, the Borrowers shall pay
to the Lender such amount as will reimburse the Lender for such loss, cost or expense.

     (k) The Lender may, at its option, elect to make, fund or maintain Portions of the
Loans hereunder at such of its branches or offices as the Lender may from time to time elect.

     (l) Notwithstanding any provision of this Agreement to the contrary, the Lender
shall be entitled to fund and maintain its funding of all or any part of the Note in any manner it
sees fit, it being understood, however, that for the purposes of this Agreement all determinations
hereunder (including, without limitation, determinations under Sections 2.8(h), (i) and (j) hereof)
shall be made as if the Lender had actually funded and maintained each LIBOR Portion during each
Interest Period applicable thereto through the purchase of deposits in the relevant market in the
amount of such LIBOR Portion, having a maturity corresponding to such Interest
Period, and, in the case of any LIBOR Portion, bearing an interest rate equal to the LIBOR, as
the case may be, for such Interest Period.

     (m) If the Lender sells a participation (as opposed to a sale of a direct interest)
in the Loans, no such sale will result in a change in the rate of interest being assessed against
the Obligations.

     Section 2.9 Maximum Interest Rate. In no event shall any interest rate provided for
hereunder exceed the maximum rate, if any, permissible for corporate borrowers under applicable law
for loans of the type provided for hereunder (the “Maximum Rate”). If, in any

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month, any interest
rate, absent such limitation, would have exceeded the Maximum Rate, then the interest rate for that
month shall be the Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate until such
time as the amount of interest paid hereunder equals the amount of interest which would have been
paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full
of the Obligations under this Agreement, the total amount of interest paid or accrued under the
terms of this Agreement is less than the total amount of interest which would, but for this Section
2.9, have been paid or accrued if the interest rates otherwise set forth in this Agreement had at
all times been in effect, then the Borrowers shall, to the extent permitted by applicable law, pay
the Lender, an amount equal to the difference between (a) the lesser of (i) the amount of interest
which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the
amount of interest which would have accrued had the interest rates otherwise set forth in this
Agreement, at all times, been in effect and (b) the amount of interest actually paid or accrued
under this Agreement. In the event that a court determines that the Lender has received interest
and other charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on
account of, and shall automatically be applied to reduce, the Obligations other than interest, in
the inverse order of maturity, and if there are no Obligations outstanding, the Lender shall refund
to the Borrowers such excess.

     Section 2.10 Voluntary Prepayment; Termination of Agreement by Borrowers; Permanent
Reduction of Commitment.

     (a) Except as otherwise provided herein, the Borrowers may, in their discretion, prepay the
Obligations in whole at any time or from time to time in part.

     (b) The Borrowers may at any time and from time to time, upon at least 30 days’ prior written
notice to the Lender, permanently reduce in part or terminate the Revolving Loan Commitment;
provided, however, that no reduction shall reduce the Revolving Loan Commitment to an amount less
than the then-aggregate amount of the Advances; plus the L/C Amount.

     Section 2.11 Mandatory Prepayment. Without notice or demand and without limiting
Borrowers’ obligation to pay interest at the Default Rate as required under Section 2.8(f)(i) or
(ii), if the sum of the outstanding principal balance of the Advances plus the L/C Amount plus
reserves imposed
pursuant to Section 2.1 hereof, if any, shall at any time exceed the Borrowing Base (an
“Overadvance”), the Borrowers shall (i) first, immediately prepay the Advances to the extent
necessary to eliminate such excess; and (ii) if prepayment in full of the Advances is insufficient
to eliminate such excess, pay to the Lender in immediately available funds for deposit in the
Special Account an amount equal to the remaining excess. Any payment received by the Lender under
this Section 2.11 or under Section 2.10 may be applied to the Obligation of Reimbursement, or the
Advances, including interest thereon and any fees, commissions, costs and expenses required to be
paid hereunder and under the Security Documents, in such order and in such amounts as the Lender,
in its discretion, may from time to time determine.

     Section 2.12 Payment. All payments of principal of and interest on the Advances, the
Obligation of Reimbursement, the commissions and fees hereunder and amounts required to be paid to
the Lender for deposit in the Special Account shall be made to the Lender in United

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States dollars
constituting immediately available funds. The Borrowers hereby authorize the Lender, in its
discretion at any time or from time to time and without request by the Borrowers, to make an
Advance to the extent necessary to pay any such amounts and any fees, costs or expenses hereunder
or under the Security Documents.

     Section 2.13 Payment on Non-Banking Days. Subject to clause (i) of the definition of
Interest Period, whenever any payment to be made hereunder shall be stated to be due on a day which
is not a Banking Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest on the Advances or
the fees hereunder, as the case may be.

     Section 2.14 Use of Proceeds. The proceeds of Advances and each Letter of Credit
caused to be issued shall be used by the Borrowers for repayment of Borrowers’ prior revolving line
of credit and for Capital Expenditures, stock acquisitions, permitted acquisitions and other
general corporate needs.

     Section 2.15 Liability Records. The Lender may maintain from time to time, at its
discretion, liability records as to any and all Advances made or repaid, interest accrued or paid
under this Agreement, outstanding Letters of Credit and fees thereon and the Borrowers’ Obligation
of Reimbursement. All entries made on any such record shall be presumed correct until the
Borrowers establish the contrary. On demand by the Lender, the Borrowers will admit and certify in
writing the exact principal balance that the Borrowers then assert to be outstanding to the Lender
for Advances under this Agreement and the amount of any Letters of Credit outstanding. Any billing
statement or accounting rendered by the Lender shall be presumed correct, until Borrowers establish
the contrary.

     Section 2.16 Fees.

     (a) The Borrowers agree to pay the Lender a fee at the rate of the Unused Line Fee applicable
at such time in accordance with the definition of Applicable Percentage on the average daily unused
amount of the Revolving Loan Commitment from the date hereof to and including the date on which
such facility is terminated, due and payable quarterly in arrears on
the first day of each quarter, commencing April 1, 2006, provided that any such fee remaining
unpaid upon termination of the total credit facility or acceleration of the Note by the Lender
pursuant to Section 8.2 hereof shall be due and payable on the date of such termination or
acceleration. Such fee shall be calculated on the basis of actual days elapsed in a 360-day year.

     (b) The Borrowers agree to pay the Lender a commission with respect to each Letter of Credit,
if any, accruing on a daily basis and computed at the rate of two percent (2%) [per annum] of the
available amount of such Letter of Credit (as it may be changed from time to time) from and
including the date of issuance of such Letter of Credit until such date as such Letter of Credit is
terminated, payable monthly in arrears, and prorated for any part of a full calendar month in which
such Letter of Credit remains outstanding. The foregoing commission shall be in addition to any
and all customary fees, commissions and charges of any Issuer of a Letter of Credit with respect to
or in connection with such Letter of Credit.

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2.17 Joint and Several Liability of Borrowers; Rights of Contribution among Borrowers.

     (a) Each Borrower states and acknowledges that: (1) pursuant to this Agreement, the Borrowers
desire to utilize their borrowing potential on a consolidated basis to the same extent possible as
if they were merged into a single corporate entity; (2) each Borrower has determined that it will
benefit specifically and materially from the advances of credit contemplated by this Agreement; (3)
it is both a condition precedent to the obligations of the Lender hereunder and a desire of each
Borrower that each Borrower execute and deliver to Lender this Agreement; and (4) each Borrower has
requested and bargained for the structure and terms of and security for the advances contemplated
by this Agreement.

     (b) Each Borrower hereby irrevocably and unconditionally: (i) agrees that it is jointly and
severally liable to the Lender for the full and prompt payment and performance of the Obligations
and agreements of each Borrower under this Agreement and each other document related hereto that
may specify that a particular Borrower is responsible for a given payment or performance; (ii)
agrees to fully and promptly perform all of its obligations hereunder with respect to each advance
of credit hereunder as if such advance had been made directly to it; and (iii) agrees as a primary
obligation to indemnify Lender, on demand, for and against any loss incurred by Lender as a result
of any Borrower being or becoming void, voidable, unenforceable or ineffective for any reason
whatsoever, whether or not known to the subject Borrower or any Person, the amount of such loss
being the amount which the Lender would otherwise have been entitled to recover from the Borrower.

     (c) It is the intent of each Borrower that the indebtedness, obligations and liabilities
hereunder of no one of them be subject to challenge on any basis related to any federal or state
law dealing with fraudulent conveyances or any other law related to transfers for less than fair or
reasonably equivalent value. Accordingly, as of the date hereof, the liability of each Borrower
under this Section 2.17 together with all of its other liabilities to all Persons as of the
date hereof and as of any other date on which a transfer is deemed to occur by virtue of this
Agreement, calculated in amount sufficient to pay its probable net liabilities on its existing
indebtedness as the same become absolute and matured. (“Dated Liabilities”) is and is to
be, less than the
amount of the aggregate of a fair valuation of its property as of such corresponding date
(“Dated Assets”). To this end, each Borrower under this Section 2.17 (i) grants to
and recognizes in each other Borrower ratably, rights of subrogation and contribution in the
amount, if any, by which the Dated Assets of such Borrower, but for the aggregate rights of
subrogation and contribution in its favor recognized herein, would exceed the Dated Liabilities of
such Borrower or, as the case may be, and (ii) acknowledges receipt of and recognizes its rights to
subrogation and contribution ratably from the other Borrower in the amount, if any, by which the
Dated Liabilities of such Borrower, but for the aggregate of subrogation and contribution in its
favor recognized herein, would exceed the Dated Assets of such U.S. Borrower under this Section
2.17. In recognizing the value of the Dated Assets and the Dated Liabilities, it is understood
that each Borrower will recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder. It is a material
objective of this Section 2.17 that each Borrower recognizes rights to subrogation and
contribution rather than be deemed to be insolvent (or in contemplation thereof by reason of an
arbitrary interpretation of its joint and several obligations hereunder).

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     2.18 Waiver of Suretyship and Other Defenses. To the extent a Borrower is deemed to
be a surety, secondary obligor, endorser or accommodation party with respect to Obligations
incurred under this Agreement, each Borrower waives, to the full extent permitted by applicable
law, all suretyship defenses and all defenses and rights of an endorser or accommodation party
provided in Section 400.3-605 of the UCC and all other defenses allowed by law provided to Persons
holding such status.

ARTICLE III

Security Interest

     Section 3.1 Grant of Security Interest. The Borrowers hereby assign and grant to the
Lender a lien upon and security interest (collectively referred to as the “Security Interest”) in
the Collateral, as security for the payment and performance of each and every debt, liability and
obligation of every type and description which the Borrowers, or any Borrower, may now or at any
time hereafter owe to the Lender or to any affiliate of Lender (whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises in a transaction
involving the Lender alone, any affiliate of the Lender, or in a transaction involving other
creditors of any Borrower, and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and
several, and including specifically, but not limited to, the Obligation of Reimbursement and all
indebtedness of the Borrowers arising under this Agreement, the Note, any L/C Application or any
other loan or credit agreement or guaranty between any Borrower and the Lender, whether now in
effect or hereafter entered into; all such debts, liabilities and obligations are herein
collectively referred to as the “Obligations”).

     Section 3.2 Notification of Account Debtors and Other Obligors. In addition to the
rights of the Lender under Section 6.10 hereof, with respect to any and all rights to payment
constituting
Collateral, the Lender may at any time (following the occurrence of an Event of Default)
notify any account debtor or other person obligated to pay the amount due that such right to
payment has been assigned or transferred to the Lender for security and shall be paid directly to
the Lender. The Borrowers will join in giving such notice if the Lender so requests. At any time
after the Borrowers or the Lender give such notice to an account debtor or other obligor, the
Lender may, but need not, in the Lender’s name or in the applicable Borrower’s name, (a) demand,
sue for, collect or receive any money or property at any time payable or receivable on account of,
or securing, any such right to payment, 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 such account debtor or other obligor; and (b) as agent and attorney
in fact of such Borrower, notify the United States Postal Service to change the address for
delivery of such Borrower’s mail to any address designated by the Lender, otherwise intercept such
Borrower’s mail, and receive, open and dispose of such Borrower’s mail, applying all Collateral as
permitted under this Agreement and holding all other mail for such Borrower’s account or forwarding
such mail to such Borrower’s last known address.

     Section 3.3 Assignment of Insurance. As additional security for the payment and
performance of the Obligations, the Borrowers hereby assign to the Lender any and all monies

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(including, without limitation, proceeds of insurance and refunds of unearned premiums) due or to
become due under, and all other rights of the Borrowers with respect to, any and all policies of
insurance now or at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrowers following an Event of
Default hereby direct the issuer of any such policy to pay all such monies directly to the Lender.
Following the occurrence of any Event of Default, the Lender may (but need not), in the Lender’s
name or in a Borrower’s name, execute and deliver proof of claim, receive all such monies, endorse
checks and other instruments representing payment of such monies, and adjust, litigate, compromise
or release any claim against the issuer of any such policy.

     Section 3.4 Occupancy.

     (a) The Borrowers hereby irrevocably grant to the Lender the right to take possession of the
Premises at any time after the occurrence and during the continuance of an Event of Default.

     (b) The Lender may use the Premises only to hold, process, manufacture, sell, use, store,
liquidate, realize upon or otherwise dispose of goods that are Collateral and for other purposes
that the Lender may in good faith deem to be related or incidental purposes.

     (c) The right of the Lender to hold the Premises shall cease and terminate upon the earlier of
(i) payment in full and discharge of all Obligations, and (ii) final sale or disposition of all
goods constituting Collateral and delivery of all such goods to purchasers.

     (d) The Lender shall not be obligated to pay or account for any rent or other compensation for
the possession, occupancy or use of any of the Premises; provided, however, in the event that the
Lender does pay or account for any rent or other compensation for the possession, occupancy or use
of any of the Premises, the Borrowers shall reimburse the Lender
promptly for the full amount thereof. In addition, the Borrowers will pay, or reimburse the
Lender for, all taxes, fees, duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery, existence, recordation, performance
or enforcement of this Agreement or the provisions of this Section 3.4.

     Section 3.5 License. The Borrowers hereby grant to the Lender a non-exclusive,
worldwide and royalty-free license or sublicense (or, to the extent Borrowers’ rights are derived
from licenses from another Person, a sublicense co-extensive with Borrowers’ license rights, except
to the extent prohibited by such license) to use or otherwise exploit all trademarks, franchises,
trade names, copyrights and patents of the Borrowers, or used by the Borrowers under license, for
the purpose of selling, leasing or otherwise disposing of any or all Collateral following an Event
of Default. If required by the terms of any license agreement (a true copy of each of which the
Borrowers have delivered and, regarding future agreements, will deliver to Lender), the Borrowers
will cause all licensors of such rights to consent to such grant of sublicense rights to the Lender
on terms acceptable to the Lender. The Borrowers hereby agree that during the term of this
Agreement, neither Borrower will sell, hypothecate or allow any lien to encumber their respective
patents, trademarks, trade names, trade secrets, copyrights or license rights described above.

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     Section 3.6 Springing Security Interest in Intellectual Property. In conjunction with
the execution of this Agreement, the Borrowers agree to deliver to Lender those certain fully
executed, Patent, Trademark and License Collateral Assignment and Security Agreements attached
hereto in Exhibit E dated as of the date hereof (the “IP Security Agreements”) to hold the
same in trust until the IP Security Agreements are released in accordance with the terms of this
Section 3.6. In conjunction with the occurrence of an Event of Default (following applicable cure
periods) hereunder, Borrowers hereby agree that (i) the IP Security Agreements shall be released to
the Lender, (ii) the IP Security Agreements shall be deemed in full force and effect from the date
hereof and (iii) the Lender (in addition to all rights granted pursuant to the IP Security
Agreements) is authorized to file in all desired federal and state recording offices such documents
as are deemed appropriate by Lender, at such time, to reflect Lender’s security interest in
Borrowers assets described therein, including the filing of any UCC-1 financing statements.

     Section 3.7 Security Interest in Special Account and Collateral Account. The
Borrowers hereby pledge, and grant to the Lender a security interest in, all funds held in the
Special Account and in the Collateral Account from time to time and all proceeds thereof, as
security for the payment of all present and future Obligations of Reimbursement and all other
Obligations. The Borrowers will execute and deliver to the Lender such Deposit Account control
agreements as the Lender may require in its sole discretion to perfect the Lender’s security
interest in the Special Account and the Collateral Account.

ARTICLE IV

Conditions of Lending

     Section 4.1 Conditions Precedent to the Initial Advance. The obligation of the Lender
to make the initial Advance under the Revolving Credit Facility or to cause to be issued any Letter
of Credit hereunder shall be subject to the condition precedent that the Lender shall have received
all of the following, each in form and substance satisfactory to the Lender in Lender’s sole
discretion.

     (a) This Agreement, properly executed on behalf of the Borrowers;

     (b) The Note, properly executed on behalf of the Borrowers;

     (c) A true and correct copy of any and all leases pursuant to which the Borrowers are leasing
the Premises, together with a landlord’s disclaimer and consent with respect to each such lease;

     (d) Current searches of appropriate filing offices showing that (i) no state or federal tax or
judgment liens have been filed and remain in effect against any Borrower, (ii) no financing
statements have been filed and remain in effect against the Borrowers, except those financing
statements relating to liens permitted pursuant to Section 7.1 hereof and those financing
statements filed by the Lender, and (iii) the Lender has duly filed all financing statements
necessary to perfect the Security Interests granted hereunder, to the extent the Security Interests
are capable of being perfected by filing;

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     (e) A certificate of the Secretary or an Assistant Secretary of each Borrower, certifying as
to (i) the resolutions of the directors and, if required, the shareholders of such Borrower,
authorizing the execution, delivery and performance of this Agreement and the other Loan Documents,
(ii) the articles of incorporation and bylaws of such Borrower, and (iii) the signatures of the
officers or agents of such Borrower authorized to execute and deliver this Agreement, the other
Loan Documents and other instruments, agreements and certificates, including Advance requests, on
behalf of such Borrower;

     (f) A current certificate issued by the Secretary of State of the state of each Borrower’s
incorporation, certifying that such Borrower is in compliance with all corporate organizational
requirements of such state;

     (g) Evidence that each Borrower is duly 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;

     (h) A certificate of an officer of each Borrower confirming the representations and warranties
set forth in Article V hereof;

     (i) An opinion of counsel to each Borrower, addressed to the Lender in form and substance and
from counsel satisfactory to the Lender in its sole discretion;

     (j) Certificates of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in favor of the Lender and with all liability insurance naming
the Lender as an additional insured;

     (k) a Borrowing Base certificate in the form attached hereto as Exhibit D
demonstrating to Lender’s satisfaction that the initial Advance does not exceed the Borrowing Base,
less the L/C Amount, if any, and less reserves imposed pursuant to Section 2.1 hereof, if any.

     (l) Waiver of any interest of the owner of each premises (other than the premises that are the
subject of landlord’s disclaimers and consents referred to in subsection (c) above) upon which any
Inventory may be located (acknowledging that such Inventory is owned by a Borrower and that the
Lender holds a first priority security interest therein and waving any lien or other right that any
such entity may otherwise claim in such inventory), which agreement shall be on terms acceptable to
the Lender in its sole discretion;

     (m) Payment of the fees and commissions due through the date of the initial Advance, and
expenses incurred by the Lender through such date and required to be paid by the Borrowers under
Section 9.6 hereof;

     (p) A copy of each Borrower’s Articles of Incorporation certified by the Secretary of State of
the state of such Borrower’s organization confirming the exact name of such Borrower and the
identification number assigned to such Borrower by such office.

     (q) Such patent, trademark and copyright security agreements and related regulatory filings,
executed by Borrowers and filed by Lender at Borrowers’ expense, as Lender may

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require in its sole
discretion to confirm to Lender’s satisfaction the perfection of Lender’s security interest in that
portion of the Collateral constituting intellectual property of any kind (the “Intellectual
Property Security Agreements”); and

     (r) Such other documents as the Lender in its sole discretion may require.

     Section 4.2 Conditions Precedent to All Advances. The obligation of the Lender to
make each Advance or cause to be issued any Letter of Credit (after the initial Advance) shall be
subject to the further conditions precedent that on such date:

     (a) the representations and warranties contained in Article V hereof are correct on and as of
the date of such Advance or Letter of Credit issuance as though made or issued on and as of such
date, except to the extent that such representations and warranties relate solely to an earlier
date; and

     (b) no event has occurred and is continuing, or would result from such Advance or the issuance
of such Letter of Credit, as the case may be, which constitutes a Default or an Event of Default.

ARTICLE V

Representations and Warranties

     The Borrowers jointly and severally represent and warrant to the Lender as follows:

     Section 5.1 Corporate Existence and Power; Name; Chief Executive Office; Inventory and
Equipment Locations. Each Borrower is a corporation duly organized, validly existing and in
good standing under the laws of its State of organization, and is duly 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. The names
of Borrowers set forth in the first paragraph of this Agreement are the exact and current legal
names of Borrowers. The organizational number issued to Synergetics by the Missouri Secretary of
State is 431585312; the organizational number issued to Synergetics USA by the Delaware Secretary
of State is 232131580. The Borrowers have all requisite power and authority, corporate or
otherwise, to conduct their business, to own their properties and to execute and deliver, and to
perform all of their obligations under, the Loan Documents. During their corporate existence, the
Borrowers have done business solely under the names set forth in Section 5.1 of the Disclosure
Schedule attached hereto (the “Disclosure Schedule”). The chief executive office and principal
place of business of each Borrower is located at the address set forth in Section 5.1 of the
Disclosure Schedule hereto, and all of the Borrowers’ records relating to their 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 in Section 5.1 of the Disclosure Schedule hereto.

     Section 5.2 Authorization of Borrowing; No Conflict as to Law or Agreements. The
execution, delivery and performance by the Borrowers of the Loan Documents and the borrowings from
time to time hereunder have been duly authorized by all necessary corporate

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action and do not and
will not (a) require any consent or approval of the stockholders of any Borrower, (b) require any
authorization, consent or approval by, or registration, declaration or filing with, or notice to,
any governmental department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given prior to the date hereof,
(c) violate any provision of any law, rule or regulation (including, without limitation, Regulation
X of the Board of Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to any Borrower or of the Articles of Incorporation
or Bylaws of any Borrower, (d) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other material agreement, lease or instrument to which any Borrower
is a party or by which it or its properties may be bound or affected, or (e) result in, or require,
the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other
charge or encumbrance of any nature (other than the Security Interests) upon or with respect to any
of the properties now owned or hereafter acquired by any Borrower.

     Section 5.3 Legal Agreements. This Agreement constitutes and, upon due execution by
the Borrowers, the other Loan Documents will constitute the legal, valid and binding obligations of
the Borrowers, enforceable against the Borrowers in accordance with their respective terms.

     Section 5.4 Subsidiaries. Except as set forth in Section 5.4 of the Disclosure
Schedule attached hereto, the Borrowers have no Subsidiaries or Affiliates. Section 5.4 of
the Disclosure Schedule sets forth in reasonable detail the ownership or other relationship of all
Affiliates with the Borrowers.

     Section 5.5 Financial Condition; No Adverse Change. The Borrowers have heretofore
furnished to the Lender unaudited financial statements of the Borrowers for the 3 months ended
October 30, 2005, and those statements fairly present the financial condition of the Borrowers on
the dates thereof and the results of their operations and cash flows for the periods then ended and
were prepared in accordance with GAAP. Since the Balance Sheet Date, there has been no material
adverse change in the business, properties or condition (financial or otherwise) or prospects of
the Borrowers.

   
  Section 5.6 Litigation. Except
as set forth in Section 5.6 of the Disclosure Schedule attached hereto,
there are no actions, suits or proceedings pending or, to the knowledge of the Borrowers,
threatened against or affecting a Borrower or any of its Affiliates or
the properties of a Borrower 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 a Borrower or any of its Affiliates, would have a Material Adverse Effect on the
financial condition, properties or operations of a Borrower or any of its Affiliates.

     Section 5.7 Regulation U. The Borrowers are not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

24

 

     Section 5.8 Taxes. The Borrowers and their 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. The Borrowers and their Affiliates have filed all federal, state and local tax
returns which to the knowledge of the officers of the Borrowers or any Affiliate, as the case may
be, are required to be filed, and the Borrowers and their Affiliates have paid or caused to be paid
to the respective taxing authorities all taxes as shown on said returns or on any assessment
received by any of them to the extent such taxes have become due.

     Section 5.9 Titles and Liens. Each Borrower has good and absolute title to all
Collateral described in the collateral reports provided to the Lender purported to be owned by such
Borrower and all other Collateral, properties and assets reflected in the latest balance sheet
referred to in Section 5.5 hereof and all proceeds thereof, free and clear of all mortgages,
security interests, liens and encumbrances, except for (i) mortgages,
security interests and liens permitted by Section 7.1 hereof, and (ii) in the case of any such
property which is not Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the business or operations of any Borrower as presently conducted. No
financing statement naming a Borrower as debtor is on file in any office except to perfect only
security interests permitted by Section 7.1 hereof.

     Section 5.10 Plans. Except as stated in Section 5.10 of the Disclosure Schedule,
neither a Borrower nor any of its Affiliates maintains or has maintained any Plan. Neither a
Borrower nor any Affiliate has received any notice or has any knowledge to the effect that it is
not in full compliance with any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan’s tax qualified status exists in
connection with any Plan. Neither a Borrower nor any of its Affiliates has: (a) Any accumulated
funding deficiency within the meaning of ERISA; or (b) Any liability or knows of any fact or
circumstances which could result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in connection with any Plan
(other than accrued benefits which or which may become payable to participants or beneficiaries of
any such Plan).

     Section 5.11 Default. Each Borrower 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.

     Section 5.12 Environmental Protection. Except as heretofore disclosed in writing to
Lender and/or would not result in a Material Adverse Effect, the Borrowers have obtained all
permits, licenses and other authorizations which are required under federal, state and local laws
and regulations relating to emissions, discharges, releases of pollutants, contaminants, hazardous
or toxic materials, or wastes into ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or hazardous or toxic materials or wastes (“Environmental
Laws”) at the Borrowers’ facilities or in connection with the operation of such facilities. Except
as previously disclosed to the Lender in writing, the Borrowers and all activities of the Borrowers
at such facilities comply with all Environmental Laws and with all terms and conditions of any
required permits, licenses and authorizations applicable to the Borrowers with respect thereto.
Except as previously disclosed to the Lender in writing and/or

25

 

would not result in a Material
Adverse Effect, the Borrowers are also in compliance in all material respects with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Laws or contained in any plan, order, decree, judgment or
notice of which the Borrowers are aware. Except as previously disclosed to the Lender in writing
and/or would not result in a Material Adverse Effect, the Borrowers are not aware of, nor has any
Borrower received notice of, any events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent continued compliance with, or which
may give rise to any liability under, any Environmental Laws.

     Section 5.13 Submissions to Lender. All financial and other information provided to
the Lender by or on behalf of any Borrower in connection with any Borrower’s request for the credit
facilities contemplated hereby is true and correct in all material respects. As to projections,
valuations or pro forma financial statements, such information presents a good faith opinion as to
such projections, valuations and pro forma financial statements.

     Section 5.14 Rights to Payment. Except as reported to Lender in writing from time to
time, each right to payment and each instrument, document, chattel paper and other agreement
constituting or evidencing Collateral or other collateral covered by the Security Documents is (or,
in the case of all future Collateral or such other 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 therein or in the Borrowers’ records pertaining
thereto as being obligated to pay such obligation.

     Section 5.15 No Violation of Law. No Borrower is in violation of any law, statute,
regulation, ordinance, judgment, order, or decree applicable to such Borrower, which violation
would in any respect materially and adversely affect the Collateral, the obligations of such
Borrower arising under this Agreement or such Borrower’s property, business, operations or
condition (financial or otherwise).

     Section 5.16 Disclosure. Neither this Agreement nor the documents and statements
furnished to Lender by or in behalf of Borrowers hereunder, taken as a whole, contain any untrue
statement of a material fact or omit to state any material fact necessary in order to make the
statements contained herein or therein not misleading.

     Section 5.17 Licenses. Except with respect to the Malis Agreement, the Borrowers are
not parties to any license or similar agreement relating to the use of trademarks, franchises,
trade names, copyrights or patents that prohibits or limits the right of the Borrowers to
sublicense (co-extensive with the Borrowers’ license rights) their rights thereunder to the Lender.

     Section 5.18 Affiliate Transactions. Except as set forth in Section 5.18 of the
Disclosure Schedule, the Borrower is not a party to any contract or agreement with any of its
Affiliates, and all such contracts and agreements are on terms and conditions that are no less
favorable to such Borrower than would be usual and customary in similar contracts or agreements
between Persons not affiliated with each other.

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ARTICLE VI

Affirmative and Financial Covenants of the Borrowers

     So long as the Note shall remain unpaid, the Revolving Credit Facility or any Letter of Credit
shall be outstanding, the Borrowers will comply with the following requirements, unless the Lender
shall otherwise consent in writing:

     Section 6.1 Reporting Requirements. The Borrowers will deliver, or cause to be
delivered, to the Lender each of the following, which shall be in form and detail acceptable to the
Lender:

     (a) as soon as available, and in any event within 120 days after the end of each
fiscal year of the Borrowers, audited financial statements of the Borrowers for the fiscal year
then ended with the unqualified opinion of independent certified public accountants selected by the
Borrowers and acceptable to the Lender, together with all management letters or similar letters
from such independent certified public accountants directed to management in connection with the
audit, which annual financial statements shall include the balance sheet of the Borrowers as at the
end of such fiscal year and the related statements of income, retained earnings and cash flows of
the Borrowers for the fiscal year then ended, prepared on a consolidating and consolidated basis,
all in reasonable detail and prepared in accordance with GAAP, together with a certificate of the
chief financial officer of the Borrowers in the form and substance set forth in Exhibit C hereto,
stating, among other things, that such financial statements have been prepared in accordance with
GAAP and whether or not such officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts with respect thereto;

     (b) as soon as available and in any event within 60 days after the end of each
month, an unaudited/internal balance sheet and statements of income and retained earnings of the
Borrowers as at the end of and for such month and for the year to date period then ended, prepared
on a consolidating and consolidated basis, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all prepared in accordance
with GAAP; and accompanied by a certificate of the chief financial officer of the Borrowers, on the
terms requested by Lender, stating (i) that such financial statements have been prepared in
accordance with GAAP, (ii) whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, (iii) whether or not any Borrower has changed (a)
its corporate name; (b) the location of its chief executive office; (c) the location where the
books and records relating to Accounts are located; or (d) its identity or structure (whether by
merger, consolidation, acquisition, change in form, nature or jurisdiction of organization, or
otherwise) or has conducted business or owned any property under any name or conducted business or
stored Equipment, Eligible Inventory or other property at any address not theretofore reported to
the Lender and, if so, setting forth in reasonable detail the facts with respect thereto, and (iv)
all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the
Borrowers are in compliance with the
requirements set forth in Section 6.11 through Section 6.14 hereof on the form attached hereto
as Exhibit C;

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     (c) within 30 days after the end of each quarter, agings of the Borrowers’ accounts
receivable and their accounts payable report as at the end of such month;

     (d) as soon as available, and in any event within 60 days after the end of each
month (or more frequently if requested by the Lender), a Borrowing Base certificate in a form
acceptable to the Lender (initially the form attached hereto as Exhibit D), showing the
computation of the Borrowing Base as of the close of business on the last day of the immediately
preceding fiscal month, prepared by the Borrowers and certified by the Borrowers’ chief financial
officers;

     (e) immediately after the commencement thereof, notice in writing of all litigation
and of all proceedings before any governmental or regulatory agency affecting any Borrower of the
type described in either Section 5.6 or Section 51.2 hereof or which seeks a monetary recovery
against any Borrower in excess of $50,000;

     (f) as promptly as practicable (but in any event not later than five business days)
after an officer of any Borrower obtains knowledge of the occurrence of any breach, default or
event of default under any Security Document or any event which constitutes a Default or Event of
Default hereunder, notice of such occurrence, together with a detailed statement by a responsible
officer of the Borrowers of the steps being taken by the Borrowers to cure the effect of such
breach, default or event;

     (g) as soon as possible and in any event within five days after any Borrower knows
or has reason to know that any Reportable Event with respect to any Plan has occurred, the
statement of the chief financial officer of such Borrower setting forth details as to such
Reportable Event and the action which the Borrowers propose to take with respect thereto, together
with a copy of the notice of such Reportable Event to the Pension Benefit Guaranty Corporation;

     (h) as soon as possible, and in any event within 10 days after a Borrower fails to
make any quarterly contribution required with respect to any Plan under Section 412(m) of
the Internal Revenue Code of 1986, as amended, the statement of the chief financial officer of the
Borrowers setting forth details as to such failure and the action which the Borrowers propose to
take with respect thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;

     (i) promptly upon knowledge thereof, notice of (i) any disputes or claims by
customers of a Borrower with a dispute value in excess of $200,000; (ii) any goods returned to or
recovered by a Borrower with a value in excess of $200,000; and (iii) any change in the persons
constituting the officers and directors of a Borrower;

     (j) promptly upon knowledge thereof, notice of any loss of or material damage to any
Collateral or other collateral covered by the Security Documents or of any substantial adverse
change in any Collateral or such other collateral or the prospect of payment thereof;

     (k) promptly upon their distribution, copies of all financial statements, reports
and proxy statements which a Borrower shall have sent to its stockholders;

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     (l) promptly after the sending or filing thereof, copies of all regular and periodic
financial reports which a Borrower shall file with the Securities and Exchange Commission or any
national securities exchange;

     (m) promptly upon knowledge thereof, notice of the violation by a Borrower of any
law, rule or regulation, the non-compliance with which could materially and adversely affect its
business or its financial condition; and

     (n) promptly upon knowledge thereof, the existence of, and a reasonably detailed
description of, any Commercial Tort Claim or circumstance that could result in a Commercial Tort
Claim in favor of a Borrower and, upon request of Lender, Borrower shall promptly enter into an
amendment to this Agreement and do such other acts or things deemed appropriate by Lender to give
Lender a perfected security interest in any such Commercial Tort Claim.

     Section 6.2 Books and Records; Inspection and Examination. Each Borrower will keep
accurate books of record and account for itself pertaining to the Collateral and pertaining to such
Borrower’s business and financial condition and such other matters as the Lender may from time to
time request in which true and complete entries will be made in accordance with GAAP and, upon
request of the Lender, will permit any officer, employee, attorney or accountant for the Lender to
audit, review, make extracts from or copy any and all corporate and financial books and records of
the Borrowers at all times during ordinary business hours, and to discuss the affairs of the
Borrowers with any of their directors, officers, employees or agents. The Borrowers will permit
the Lender, or its employees, accountants, attorneys or agents, to examine and inspect any
Collateral, other collateral covered by the Security Documents or any other property of the
Borrowers at any time during ordinary business hours.

     Section 6.3 Compliance with Laws; Environmental Indemnity. The Borrowers will (a)
comply in all material respects with the requirements of applicable laws and regulations, the
non-compliance with which would have a Material Adverse Effect, (b) comply with all applicable
Environmental Laws and obtain any permits, licenses or similar approvals required by any such
Environmental Laws where the failure to do so would have a Material Adverse Effect, and (c) use and
keep the Collateral, and will require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or ordinance where the
failure to do so would have a Material Adverse Effect. THE BORROWERS WILL INDEMNIFY, DEFEND AND
HOLD THE LENDER HARMLESS FROM AND AGAINST ANY CLAIMS, LOSS OR DAMAGE TO WHICH THE LENDER MAY BE
SUBJECTED AS A RESULT OF ANY PAST, PRESENT OR FUTURE EXISTENCE, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS WASTE OR SUBSTANCE OR TOXIC SUBSTANCE BY THE BORROWERS
OR ON PROPERTY OWNED, LEASED OR CONTROLLED BY THE BORROWERS, EVEN IF A COURT DETERMINES THAT
LENDER’S NEGLIGENCE CAUSED SUCH LOSS OR DAMAGE IN WHOLE OR IN PART. THIS INDEMNIFICATION AGREEMENT
SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT AND THE DISCHARGE OF BORROWERS’ OTHER OBLIGATIONS.

     Section 6.4 Payment of Taxes and Other Claims. Each Borrower will pay or discharge,
when due, (a) all taxes, assessments and governmental charges levied or imposed

29

 

upon it or upon its
income or profits, upon any properties belonging to it (including, without limitation, the
Collateral) or upon or against the creation, perfection or continuance of the Security Interests,
prior to the date on which penalties attach thereto, (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 or charge upon any properties of such Borrower.

     Section 6.5 Maintenance of Properties.

     (a) The Borrowers will keep and maintain the Collateral, the other collateral covered by the
Security Documents and all of their other properties necessary or useful in their 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; provided, however, that nothing in this
Section 6.5 shall prevent the Borrowers from discontinuing the operation and maintenance of any of
their properties if such discontinuance is, in the judgment of the Borrowers, desirable in the
conduct of the Borrowers’ businesses. Borrowers will not be in violation of their maintenance
obligation hereunder with respect to any Collateral, other than Inventory (as to which this
sentence shall not apply in any respect), until Lender shall have given Borrowers written notice of
such failure and Borrowers shall have failed to correct or cure such failure within 15 days
thereafter.

     (b) The Borrowers will defend the Collateral against all claims or demands of all persons
(other than the Lender) claiming the Collateral or any interest therein.

     (c) The Borrowers will keep all Collateral and other collateral covered by the Security
Documents free and clear of all security interests, liens and encumbrances except the Security
Interests and other security interests permitted by Section 7.1 hereof.

     Section 6.6 Insurance. (a) The Borrowers will obtain and at all times maintain
insurance with insurers believed by the Borrowers to be responsible and reputable, in such amounts
and against such risks as may from time to time be required by the Lender, but in all events in
such amounts and against such risks as is usually carried by companies engaged in similar business
and owning similar properties in the same general areas in which the Borrowers operate. Without
limiting the generality of the foregoing, the Borrowers will at all times 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 the
Lender may reasonably request, with any loss payable to the Lender to the extent of its interest,
and all policies of such insurance shall contain a lender’s loss payable endorsement for the
benefit of the Lender. All policies of liability insurance required hereunder shall name the
Lender as an additional insured.

     (b) Unless the Borrowers provide the Lender with evidence of the insurance coverage required
by this Agreement, the Lender may purchase insurance at the Borrowers’ expense, to protect the
Lender’s interests in the Collateral. This insurance may, but need not, protect the interests of
the Borrowers. The coverage that the Lender purchases may not pay any claim that a Borrower may
make or any claim that is made against a Borrower in connection with the Collateral. The Borrowers
may later cancel any insurance purchased by the Lender, but only

30

 

after providing the Lender with
evidence that the Borrowers have obtained insurance as required by this Agreement. If the Lender
purchases insurance for the Collateral, the Borrowers will be responsible for the costs of that
insurance, including interest and any other charges that may be imposed in connection with the
placement of the insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Loans. The costs of the insurance may
be more than the cost of insurance that the Borrowers may be able to obtain on its own.

     Section 6.7 Preservation of Corporate Existence. The Borrowers will preserve and
maintain their corporate existence and all of their rights, privileges and franchises necessary or
desirable in the normal conduct of their businesses and shall conduct their businesses in an
orderly, efficient and regular manner.

     Section 6.8 Delivery of Instruments, etc. Upon request by the Lender, the Borrowers
will, within 5 days thereafter, deliver to the Lender in pledge all instruments, documents and
chattel papers constituting Collateral, duly endorsed or assigned by the applicable Borrower.

     Section 6.9 Performance by the Lender. If the Borrowers at any time fail to perform
or observe any of the foregoing covenants contained in this Article VI or elsewhere herein, and if
such failure shall continue for a period of ten calendar days after the Lender gives the Borrowers
written notice thereof (or in the case of the agreements contained in Section 6.4, Section 6.6 and
Section 6.9 hereof, immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf and in the name,
place and stead of the Borrowers (or, at the Lender’s option, in the Lender’s name) and may, but
need not, take any and all other actions which the Lender may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed to account debtors
or other obligors, the procurement and maintenance of insurance, the execution of assignments,
security agreements and financing statements, and the endorsement of instruments); and the
Borrowers shall thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such agreements or the taking
of such action by the Lender, together with interest thereon from the date expended or incurred at
the rate then in effect for the Prime Rate Portion. To facilitate the performance or observance by
the Lender of such covenants of the Borrowers, the Borrowers hereby irrevocably appoint the Lender,
or the delegate of the Lender, acting alone, as the attorney in fact of the Borrowers (which
appointment is coupled with an interest) with the right following an Event of Default (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse or file in the name
and on behalf of the Borrowers any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and other agreements and
writings required to be obtained, executed, delivered or endorsed by the applicable Borrower under
this Section 6.10.

     Section 6.10. Minimum Fixed Charge Coverage Ratio. Borrowers will, as of the end of
each fiscal year, maintain a Fixed Charge Coverage Ratio for the four fiscal quarters then ended of
not less than the 1.10 to 1.00.

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     Section 6.11 Maximum Leverage Ratio. The Borrowers will not, as of the end of each
fiscal quarter, allow their Leverage Ratio to be greater than 3.75 to 1.00.

     Section 6.12 License Rights. The Borrowers will notify Lender within 30 days of
entering into any license agreements after the date hereof relating to the Borrowers’ use of
trademarks, franchises, trade names, copyrights or patents of a third party. In addition, the
Borrowers will notify Lender within 10 days of any default under any license agreement through
which the Borrower acquired the right to use the trademarks, franchises, trade names, copyrights or
patents of a third party.

     Section 6.13 Authorization to File Financing Statements. Borrowers hereby irrevocably
authorize Lender at any time and from time to time to file in any filing office in any UCC
jurisdiction any initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of a Borrower or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of such
jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide
any other information required by part 5 of Article 9 of the UCC of such jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or amendment, including (i)
whether a Borrower is an organization, the type of organization and any organizational
identification number issued to such Borrower and, (ii) in the case of a financing statement filed
as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. Borrowers agree to
furnish any such information to Lender promptly upon the Lender’s request. Borrowers also ratify
their authorization for the Lender to have filed in any UCC jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.

ARTICLE VII

Negative Covenants

     So long as the Note shall remain unpaid, the Revolving Credit Facility shall be outstanding or
any Letter of Credit shall be outstanding, the Borrowers agree that, without the prior written
consent of the Lender:

     Section 7.1 Liens. The Borrowers will not create, incur or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, assignment or transfer upon or of any of
their assets, now owned or hereafter acquired, to secure any indebtedness; excluding, however, from
the operation of the foregoing:

     (a) mortgages, deeds of trust, pledges, liens, security interests and assignments in existence
on the date hereof and listed in Section 7.1(a) of the Disclosure Schedule, securing indebtedness
for borrowed money permitted under Section 7.2 hereof;

     (b) the Security Interests;

32

 

     (c) purchase money security interests and capitalized leases relating to the acquisition of
machinery and equipment of the Borrowers so long as the Borrowers are in, and maintain, compliance
with every other provision of this Agreement; and

     (d) Permitted Encumbrances.

     Section 7.2 Indebtedness. The Borrowers will not incur, create, assume or permit to
exist any indebtedness for borrowed money, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:

	 	(a)	 	indebtedness arising hereunder;
	 
	 	(b)	 	the Malis Note;
	 
	 	(c)	 	that certain unsecured indebtedness owed by Synergetics USA to Wachovia Bank,
N.A. in the maximum principal amount of $1,000,000;

     (d) indebtedness relating to liens permitted in accordance with Section 7.1(c) hereof; and

     (e) leases required to be treated as capitalized leases by GAAP, provided that, with respect
to any such lease under which a Borrower incurs obligations in excess of $100,000, such lease will
be included under this exception only if the lessor and Lender enter into an intercreditor
agreement on terms acceptable to Lender.

     Section 7.3 Guaranties. The Borrowers will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any obligations of any other
Person, except:

     (a) the endorsement of negotiable instruments by a Borrower for deposit or collection or
similar transactions in the ordinary course of business; and

     (b) guaranties, endorsements and other direct or contingent liabilities in connection with the
obligations of other Persons in existence on the date hereof and listed in Schedule 7.3 of the
Disclosure Schedule.

     Section 7.4 Investments and Subsidiaries. (a) The Borrowers will not purchase or hold
beneficially any stock or other securities or evidences of indebtedness of, make or permit to exist
any loans or advances to, or make any investment or acquire any interest whatsoever in, any other
Person, including specifically but without limitation any partnership or joint venture, except:

          (1) investments in direct obligations of the United States of America or any agency or
instrumentality thereof whose obligations constitute full faith and credit obligations of
the United States of America having a maturity of one year or less, commercial paper issued
by U.S. corporations rated “A-1” or “A-2” by Standard & Poors Corporation or “P-1” or “P-2”
by Moody’s Investors Service or certificates of deposit or bankers’ acceptances having a
maturity of one year or less issued by members of the

33

 

Federal Reserve System having deposits
in excess of $100,000,000 (which certificates of deposit or bankers’ acceptances are fully
insured by the Federal Deposit Insurance Corporation);

     (2) travel advances or loans to officers and employees of the Borrowers not exceeding
at any one time an aggregate of $5,000; and

     (3) advances in the form of progress payments, prepaid rent or security deposits.

     (b) The Borrowers will not create or permit to exist any Subsidiary, other than any Subsidiary
in existence on the date hereof and listed in Section 5.4 of the Disclosure Schedule.

     (c) Notwithstanding the foregoing, Borrowers shall be permitted to acquire an aggregate of
$1,000,000 in stock of Synergetics USA on an annual basis, so long as any such purchase with the
giving of notice, the passage of time or both, would not constitute an Event of Default hereunder.

     Section 7.5 Dividends. No Borrower will declare or pay any dividends (other than
dividends payable solely in stock of such Borrower) on any class of its stock or make any payment
on account of the purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly if following such dividend or
distribution, (i) the Borrowers’ Fixed Charge Coverage Ratio for the four fiscal quarters then
ended will be less than the 1.10 to 1.00, or (ii) with the giving of notice, the passage of time or
both, an Event of Default would result therefrom.

     Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations. The
Borrowers will not sell, lease, assign, transfer or otherwise dispose of (i) the stock of any
Subsidiary, (ii) all or a substantial part of its assets, or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any other Person other than
the sale of Inventory in the ordinary course of business and will not liquidate, dissolve or
suspend business operations. The Borrowers will not in any manner transfer any property without
prior or present receipt of full and adequate consideration.

     Section 7.7 Consolidation and Merger; Asset Acquisitions. The Borrowers will not
consolidate with or merge into any Person, or permit any other Person to merge into them, or
acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all or
substantially all the assets of any other Person, if such consolidation, merger or acquisition
requires aggregate consideration from Borrowers in excess of $1,500,000 in any given calendar year.

     Section 7.8 Sale and Leaseback. The Borrowers will not enter into any arrangement,
directly or indirectly, with any other Person whereby the Borrowers shall sell or transfer any real
or personal property, whether now owned or hereafter acquired, and then or thereafter rent or lease
as lessee such property or any part thereof or any other property which the Borrowers intend to use
for substantially the same purpose or purposes as the property being sold or transferred.

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     Section 7.9 Restrictions on Nature of Business. The Borrowers will not engage in any
line of business materially different from that presently engaged in by the Borrowers and will not
purchase, lease or otherwise acquire assets not related to its business.

     Section 7.10 Accounting. The Borrowers will not adopt any material change in
accounting principles other than as required by GAAP. The Borrowers will not adopt, permit or
consent to any change in their fiscal year.

     Section 7.11 Discounts, etc. Following the occurrence of an Event of Default, the
Borrowers will not, after notice from the Lender, grant any discount, credit or allowance to any
customer of a Borrower or accept any return of goods sold, or at any time (whether before or after
notice from the Lender) modify, amend, subordinate, cancel or terminate the obligation of any
account debtor or other obligor of a Borrower, other than in the ordinary course of business and
consistent with the past practices of a Borrower.

     Section 7.12 Defined Benefit Pension Plans. The Borrowers will not adopt, create,
assume or become a party to any defined benefit pension plan, unless disclosed to the Lender
pursuant to Section 5.10 hereof.

     Section 7.13 Other Defaults. The Borrowers will not permit any breach, default or
event of default to occur under any note, loan agreement, indenture, lease, mortgage, contract for
deed, security agreement or other contractual obligation binding upon a Borrower and obligating a
Borrower to pay in the aggregate more than $250,000 thereunder.

     Section 7.14 Place of Business; Name. The Borrowers will not transfer their chief
executive office or principal place of business, or move, relocate, close or sell any business
location without providing Lender at least 30 Banking Days’ prior written notice. The Borrowers
will not permit any tangible Collateral or any records pertaining to the Collateral to be located
in any state or area in which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to perfect the
Security Interests without providing Lender at least
30 Banking Days’ prior written notice. The Borrowers will not change their name or their
state organizational number.

     Section 7.15 Organizational Documents; S Corporation Status. The Borrowers will not
amend their certificates of incorporation, articles of incorporation or bylaws or change their form
of organization in any manner. No Borrower will become an S Corporation within the meaning of the
Internal Revenue Code of 1986, as amended, or, if a Borrower already is such an S Corporation, it
shall not change or rescind its status as an S Corporation.

     Section 7.16 Restrictions on Affiliate Transactions. The Borrowers will not enter
into any contract, agreement or business arrangement, including any arrangement to pay any
management, consulting or similar fee, with any of their Affiliates (other than another Borrower)
unless the terms thereof are on an arm’s length basis.

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ARTICLE VIII

Events of Default, Rights and Remedies

     Section 8.1 Events of Default. “Event of Default,” wherever used herein, means any
one of the following events:

     (a) Default in the payment of any interest on or principal of either of the Note when it
becomes due and payable; or

     (b) Failure to pay when due any amount specified in Section 2.5 hereof relating to the
Borrowers’ Obligation of Reimbursement, or failure to pay immediately when due or upon termination
of the Revolving Credit Facility any amounts required to be paid for deposit in the Special Account
as required under this Agreement within 10 days after notice from Lender to Borrowers; or

     (c) Default in the payment of any fees or commissions required to be paid by the Borrowers
under this Agreement when due or default in the payment of reimbursable costs and expenses within
10 days after notice from Lender to Borrowers; or

     (d) Default in the performance, or breach, of any covenant or agreement of the Borrowers
contained in this Agreement and, with respect to defaults that can be cured, the continuation of
such default for 30 days after notice from Lender to Borrowers; or

     (e) The Borrowers are not Solvent on a consolidated basis, or any Borrower admits in writing
its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors;
or any Borrower applies for or consents to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of such Borrower; or any
Borrower shall institute (by petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against any Borrower, other than as described in
Section 8.1(f) hereof; or any judgment, writ, warrant of attachment, garnishment or execution or
similar process shall be issued or levied against a substantial part of the property of any
Borrower; or

     (f) A petition shall be filed by or against any Borrower under the United States Bankruptcy
Code naming any Borrower as debtor; provided, that in the case of such a petition filed against any
Borrower, such petition has not been stayed or dismissed within 60 days; or

     (g) Any representation or warranty made by any Borrower in this Agreement, delivered to the
Lender or by any Borrower (or any of its officers) in any agreement, certificate, instrument or
financial statement or other statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have been incorrect in any
material respect when deemed to be effective; or

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     (h) The rendering against any Borrower of a final judgment, decree or order for the payment of
money in excess of $500,000 and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of 30 consecutive days without a stay of execution; or

     (i) Any Reportable Event, which the Lender determines in good faith might constitute grounds
for the termination of any Plan or for the appointment by the appropriate United States District
Court of a trustee to administer any Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been given to any Borrower by the Lender; or a trustee
shall have been appointed by an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted proceedings to terminate any Plan or
to appoint a trustee to administer any Plan; or any Borrower shall have filed for a distress
termination of any Plan under Title IV of ERISA; or any Borrower shall have failed to make any
quarterly contribution required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, which the Lender determines in good faith may by itself,
or in combination with any such failures that the Lender may determine are likely to occur in the
future, result in the imposition of a lien on the assets of any Borrower in favor of the Plan; or

     (j) An event of default shall occur under any Security Document or under any other security
agreement, mortgage, deed of trust, assignment, guaranty or other instrument or agreement securing
any obligations of any Borrower hereunder or under any note; or

     (k) Any Borrower shall liquidate, dissolve, terminate or suspend its business operations or
otherwise fail to operate its business in the ordinary course, or sell all or substantially all of
its assets, without the prior written consent of the Lender; or

     (l) Any Borrower shall fail to pay, withhold, collect or remit any tax or tax deficiency when
assessed or due (other than any tax deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate reserves therefor) or
notice of any state or federal tax liens shall be filed or issued; or

     (m) Default in the payment of any amount owed by any Borrower to the Lender other than any
indebtedness arising hereunder and the continuation thereof following the expiration of any
applicable cure or grace period.

     Section 8.2 Rights and Remedies. Upon the occurrence of an Event of Default or at any
time thereafter, the Lender may exercise any or all of the following rights and remedies:

     (a) The Lender may, by notice to the Borrowers, declare the Revolving Credit Facility to be
terminated, whereupon the same shall forthwith terminate;

     (b) The Lender may, by notice to the Borrowers, declare to be forthwith due and payable the
entire unpaid principal amount of the Note then outstanding, all interest accrued and unpaid
thereon, all amounts payable under this Agreement and any other Obligations, whereupon the Note,
all such accrued interest and all such amounts and Obligations shall become and be forthwith due
and payable, without presentment, notice of dishonor, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrowers;

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     (c) The Lender may, without notice to the Borrowers and without further action, apply any and
all money owing by the Lender to any Borrower to the payment of the Advances, including interest
accrued thereon, and of all other sums then owing by any Borrower hereunder, including without
limitation, the Obligation of Reimbursement;

     (d) The Lender may make demand upon the Borrowers and, forthwith upon such demand, the
Borrowers will pay to the Lender in immediately available funds for deposit in the Special Account
an amount equal to the maximum aggregate amount available to be drawn under all Letters of Credit
then outstanding, assuming compliance with all conditions for drawing thereunder;

     (e) THE LENDER MAY EXERCISE AND ENFORCE ANY AND ALL RIGHTS AND REMEDIES AVAILABLE UPON DEFAULT
TO A SECURED PARTY UNDER THE UCC, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO TAKE POSSESSION OF
ANY OR ALL OF THE COLLATERAL, OR ANY EVIDENCE THEREOF, PROCEEDING WITHOUT JUDICIAL PROCESS OR BY
JUDICIAL PROCESS (WITHOUT A PRIOR HEARING OR NOTICE THEREOF, WHICH THE BORROWERS HEREBY EXPRESSLY
WAIVE) AND THE RIGHT TO SELL, LEASE OR OTHERWISE DISPOSE OF ANY OR ALL OF THE COLLATERAL, AND, IN
CONNECTION THEREWITH, THE BORROWERS WILL ON DEMAND ASSEMBLE THE COLLATERAL AND MAKE IT AVAILABLE TO
THE LENDER AT A PLACE TO BE DESIGNATED BY THE LENDER WHICH IS REASONABLY CONVENIENT TO BOTH
PARTIES;

     (f) the Lender may exercise and enforce its rights and remedies under the Loan Documents; and

     (g) the Lender may exercise any other rights and remedies available to it by law or agreement.

Notwithstanding the foregoing, upon the occurrence of an Event of Default described in Section
8.1(e) or Section 8.1(f) hereof, the entire unpaid principal amount of the Note and the Obligation
of Reimbursement (whether contingent or funded), all interest accrued and unpaid thereon, all other
amounts payable under this Agreement and any other Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.

     Section 8.3 Certain Notices. If notice to the Borrowers of any intended disposition
of Collateral or any other intended action is required by law in a particular instance, such notice
shall be deemed commercially reasonable if given (in the manner specified in Section 9.3) at least
ten calendar days prior to the date of intended disposition or other action.

     Section 8.4 Standards for Exercising Rights and Remedies. To the extent that
applicable law imposes duties on the Lender to exercise remedies in a commercially reasonable
manner, the Borrowers acknowledge and agree that it is not commercially unreasonable for the Lender
(a) to fail to incur expenses reasonably deemed significant by the Lender to prepare Collateral for
disposition or otherwise to fail to complete raw material or work in process into finished goods or
other finished products for disposition, (b) to fail to obtain third party consents

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for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of collateral to be
collected or disposed of, (c) to fail to exercise collection remedies against Account debtors or
other persons obligated on Collateral or to fail to remove liens or encumbrances on or any adverse
claims against Collateral, (d) to exercise collection remedies against Account debtors and other
persons obligated on Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through publications or media
of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact
other persons, whether or not in the same business as any Borrower, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the collateral is of a specialized nature,
(h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of doing so, or that
match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements
to insure the Lender against risks of loss, collection or disposition of Collateral or to provide
to the Lender a guaranteed return from the collection or disposition of Collateral, or (l) to the
extent deemed appropriate by the Lender, to obtain the services of brokers, investment bankers,
consultants and other professionals to assist the Lender in the collection or disposition of any of
the Collateral. The Borrowers acknowledge that the purpose of this Section 8.4 is to provide
non-exhaustive indications of what actions or omissions by the Lender would fulfill the Lender’s
duties under the UCC in the Lender’s exercise of remedies against the Collateral and that other
actions or omissions by the Lender shall not be deemed to fail to fulfill such duties solely on
account of not being indicated in this Section 8.4. Without limitation upon the foregoing, nothing
contained in this Section 8.4 shall be construed to grant any rights to the Borrowers or to impose
any duties on the Lender that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this Section 8.4.

ARTICLE IX

Miscellaneous

     Section 9.1 No Waiver; Cumulative Remedies. No failure or delay on the part of the
Lender in exercising any right, power or remedy under the Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and not exclusive of
any remedies provided by law.

     Section 9.2 Amendments, Etc. No amendment, modification, termination or waiver of any
provision of any Loan Document or consent to any departure by the Borrowers therefrom or any
release of a Security Interest shall be effective unless the same shall be in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the Borrowers in any case
shall entitle the Borrowers to any other or further notice or demand in similar or other
circumstances.

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     Section 9.3 Addresses for Notices, Etc. Except as otherwise expressly provided
herein, all notices, requests, demands and other communications provided for under the Loan
Documents shall be in writing and shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or (d) transmitted by telecopy
followed, within twenty-four (24) hours, by personal delivery to the Lender or deposit with an
overnight courier of national reputation, in each case addressed to the party to whom notice is
being given at its address as set forth below and, if telecopied, transmitted to that party at its
telecopier number set forth below:

If to the Borrowers:

Synergetics, Inc.

3845 Corporate Centre Dr.

O’Fallon, MO 63368

(636) 939-5100

1-800-600-0565

Telecopier: (636) 939-6885

Attention: Pamela G. Boone

If to the Lender:

Regions Bank

8182 Maryland Avenue

St. Louis, Missouri 63105

Telecopier: (314) 615-2355

Attention: Loan Officer for Synergetics, Inc.

or, as to each party, at such other address or telecopier number as may hereafter be designated by
such party in a written notice to the other party complying as to delivery with the terms of this
Section. All such notices, requests, demands and other communications shall be deemed to have been
given on (a) the date received if personally delivered, (b) when deposited in the mail if delivered
by mail, (c) the date sent if sent by overnight courier, or (d) the date of transmission if
delivered by telecopy, provided such telecopy is followed within 24 hours of transmission by
delivery to the Lender or deposit with an overnight carrier of an original of the telecopied
document, except that notices or requests to the Lender pursuant to any of the provisions of
Article II hereof shall not be effective until received by the Lender.

     Section 9.4 Further Documents. The Borrowers will from time to time execute and
deliver or endorse any and all instruments, documents, conveyances, assignments, security
agreements, financing statements and other agreements and writings that the Lender may reasonably
request in order to secure, protect, perfect or enforce the Security Interests or the rights of the
Lender under this Agreement (but any failure to request or assure that the Borrowers execute,
deliver or endorse any such item shall not affect or impair the validity, sufficiency or
enforceability of this Agreement and the Security Interests, regardless of whether any such item
was or was not executed, delivered or endorsed in a similar context or on a prior occasion).

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     Section 9.5 Collateral. This Agreement does not contemplate a sale of accounts,
contract rights or chattel paper, and, as provided by law, the Borrowers are entitled to any
surplus and shall remain liable for any deficiency. The Lender’s duty of care with respect to
Collateral in its possession (as imposed by law) shall 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 other third person, and the Lender need not otherwise preserve, protect, insure or care
for any Collateral. The Lender shall not be obligated to preserve any rights the Borrowers may
have against prior parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of application.

     Section 9.6 Costs and Expenses. The Borrowers agree to pay on demand all reasonable
costs and expenses, including (without limitation) attorneys’ fees, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents, any Letters of Credit and any
other document or agreement related hereto or thereto, and the transactions contemplated hereby,
including without limitation all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the creation, perfection,
protection, satisfaction, foreclosure or enforcement of the Security Interests.

     Section 9.7 Indemnity. In addition to the payment of expenses pursuant to Section 9.7
hereof and the environmental indemnity pursuant to Section 6.3 hereof, the Borrowers agree to
indemnify, defend and hold harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and all present and
future officers, directors, employees and agents of the
foregoing (the “Indemnitees”), from and against (i) any and all transfer taxes, documentary
taxes, assessments or charges made by any governmental authority by reason of the execution and
delivery of this Agreement and the other Loan Documents or the making of the Advances or issuance
of any Letter of Credit, and (ii) any and all liabilities, losses, damages, penalties, judgments,
suits, claims, costs and expenses of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel) in connection with any investigative,
administrative or judicial proceedings, whether or not such Indemnitee shall be designated a party
thereto, which may be imposed on, incurred by or asserted against such Indemnitee, in any manner
relating to or arising out of or in connection with the making of the Advances, the issuance of any
Letter of Credit, this Agreement and all other Loan Documents or the use or intended use of the
proceeds of the Advances or any Letter of Credit or arising out of noncompliance by any Person with
any Environmental Law (the “Indemnified Liabilities”), UNLESS A COURT DETERMINES THAT THE LENDER’S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT CAUSED SUCH LOSS, LIABILITY OR EXPENSE IN WHOLE OR IN PART.
If any investigative, judicial or administrative proceeding arising from any of the foregoing is
brought against any Indemnitee, upon request of such Indemnitee, any Borrower, or counsel
designated by any Borrower and satisfactory to the Indemnitee, will resist and defend such action,
suit or proceeding to the extent and in the manner directed by the Indemnitee, at the Borrowers’
sole cost and expense. Each Indemnitee will use its best efforts to cooperate in the defense of
any such action, suit or proceeding. If the foregoing undertaking to indemnify, defend and hold
harmless may be held to be unenforceable because it violates any law or public policy,

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the
Borrowers shall nevertheless make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law. The obligation of the
Borrowers under this Section 9.7 shall survive the termination of this Agreement and the discharge
of the Borrowers’ other Obligations.

     Section 9.8 Execution in Counterparts. This Agreement and other Loan Documents may be
executed in any number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which counterparts, taken together, shall constitute but one
and the same instrument. Delivery of an executed counterpart of this Agreement by telefacsimile
shall be equally as effective as delivery of an original executed counterpart of this Agreement.
Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver
an original executed counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

     Section 9.9 Binding Effect; Assignment; Complete Agreement. The Loan Documents shall
be binding upon and inure to the benefit of the Borrowers and the Lender and their respective
successors and assigns, except that the Borrowers shall not have the right to assign their rights
thereunder or any interest therein without the prior written consent of the Lender. The Lender
shall have the right at any time to assign its rights under, or grant participations in, this
Agreement or the Loan Documents or the loans made pursuant thereto without notice to or consent of
the Borrowers. This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof.

     Section 9.10 Governing Law; Jurisdiction, Venue. The Loan Documents shall be governed
by and construed in accordance with the internal substantive laws (other than conflicts-of-law
principles) of the State of Missouri, regardless of the place of execution of this Agreement by any
party hereto. Each party consents to the personal jurisdiction of the state and federal courts
located in the State of Missouri in connection with any controversy related to this Agreement,
waives any argument that venue in any such forum is not convenient and agrees that any litigation
initiated by any of them in connection with this Agreement shall be venued in either the Circuit
Court of St. Louis County, Missouri, or the United States District Court, Eastern District of
Missouri.

     Section 9.11 Waiver of Jury Trial. THE BORROWERS HEREBY WAIVE ANY RIGHT TO TRIAL BY
JURY (WHICH THE LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND,
REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED ARISING OUT OF OR OTHERWISE RELATING TO THIS
AGREEMENT, THE OBLIGATIONS, ANY OF THE LOAN DOCUMENTS OR THE LENDER’S CONDUCT IN RESPECT OF ANY OF
THE FOREGOING. TO EFFECTUATE THE FOREGOING, THE LENDER IS HEREBY GRANTED AN IRREVOCABLE POWER OF
ATTORNEY TO FILE, AS ATTORNEY-IN-FACT FOR THE BORROWERS, A COPY OF THIS AGREEMENT IN ANY COURT
PURSUANT TO MO.REV.STAT. § 510.190 AND RULE 69.01, V.A.M.R. AND/OR ANY OTHER APPLICABLE LAW, AND
THE COPY OF THIS AGREEMENT SO FILED SHALL CONCLUSIVELY BE DEEMED TO CONSTITUTE THE

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BORROWERS’
WAIVER OF TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT,
THE OBLIGATIONS, ANY OF THE LOAN DOCUMENTS OR THE LENDER’S CONDUCT IN RESPECT OF ANY OF THE
FOREGOING. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL
DAMAGES. REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED, THE OBLIGATION OF THE BORROWERS
UNDER THIS SECTION 9.12 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND THE DISCHARGE OF
BORROWERS’ OTHER OBLIGATIONS.

     Section 9.12 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 provisions hereof.

     Section 9.13 Headings. Article and Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this Agreement for any
other purpose.

     Section 9.14 Consent to Publicity. With prior consent of Borrowers, Lender may issue
and disseminate to the public information describing the credit accommodations entered into
pursuant to this Agreement,
including the name, logo and location of the Borrowers, the amounts of loans available
hereunder and a general description of Borrowers’ business.

     Section 9.15 Statutory Notice Regarding Insurance. The following notice is given
pursuant to Section 427.120 of the Missouri Revised Statutes; nothing contained in such notice
shall be deemed to limit or modify the terms of the Loan Documents:

UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY
PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE
MAY, BUT NEED NOT, PROTECT YOUR INTERESTS. THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM
THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL. YOU MAY
LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE
OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT. IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU
WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND
ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE
EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY
BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE
THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.

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     Section 9.16 Statutory Notice Regarding Oral Agreements. The following notice is
given pursuant to Section 432.045 and Section 432.047 of the Missouri Revised Statutes; nothing
contained in such notice may be deemed to limit or modify the terms of the Loan Documents:

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

     Section 9.17 Reasonableness. When in this Agreement action is stated to be taken or
not taken “reasonably” by Lender or is otherwise based upon the reasonableness of Lender, Lender
will be deemed to meet such requirements unless Borrowers meet the burden of proof by clear and
convincing evidence that
the action or inaction of Lender shall have been taken or omitted arbitrarily or capriciously.
Lender acknowledges that the foregoing does not affect Lender’s obligation to act reasonably to
the extent required under Article 9, Part 6 of the UCC.

     Section 9.18 Retention of Borrowers’ Records. Lender shall have no obligation to
maintain any electronic records or any documents, schedules, invoices, agings, or other papers
delivered to Lender by Borrowers or in connection with the Loan Documents.

     Section 9.19 Electronic Submissions. Upon not less than thirty (30) days’ prior
written notice (the “Approved Electronic Form Notice”), Lender may permit or require that any of
the documents, certificates, forms, deliveries or other communications, authorized, required or
contemplated by this Agreement or the Other Agreements, be submitted to Lender in “Approved
Electronic Form” (as hereafter defined), subject to any reasonable terms, conditions and
requirements in the applicable Approved Electronic Forms Notice. For purposes hereof “Electronic
Form” means e-mail, e-mail attachments, data submitted on web-based forms or any other
communication method that deliver machine readable data or information to Lender, and “Approved
Electronic Form” means an Electronic Form that has been approved in writing by Lender (which
approval has not been revoked or modified by Lender) and sent to Borrowers in an Approved
Electronic Form Notice. Except as otherwise specifically provided in the applicable Approved
Electronic Form Notice, any submissions made in an applicable Approved Electronic Form shall have
the same force and effect that the same submissions would have had if they had been submitted in
any other applicable form authorized, required or contemplated by this Agreement or the Other
Agreements.

     Section 9.20 Review and Construction of Documents. Borrowers hereby acknowledge,
represent and warrant to Lender, that (a) Borrowers have had the opportunity to consult with legal
counsel of its own choice and has been afforded an opportunity to review this Agreement with its
legal counsel, (b) Borrowers have reviewed this Agreement and fully

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understand the effects thereof
and all terms and provisions contained herein, (c) Borrowers have executed this Agreement of their
own free will and volition, and (d) this Agreement shall be construed as if jointly drafted by
Borrowers and Lender.

     Section 9.21 Confidentiality . Lender agrees to keep confidential all business,
financial and other information provided by the Borrowers to Lender and agrees to provide that any
potential or actual assignees or participants of Lender shall be also bound to this Section 9.21.

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

45

 

(Signature Page to Credit and Security Agreement)

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

	 	 	 	 	 	 	 
	 	 	BORROWERS:	 	 
	 
	 	 	 	 	 	 
	 	 	SYNERGETICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ Pamela G. Boone	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	NAME: Pamela G. Boone	 	 
	 

	 	 	 	TITLE: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	and	 	 
	 
	 	 	 	 	 	 
	 	 	SYNERGETICS USA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ Pamela G. Boone	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	NAME: Pamela G. Boone	 	 
	 

	 	 	 	TITLE: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	REGIONS BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ Anne D. Silvestri	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	NAME: Anne D. Silvestri	 	 
	 

	 	 	 	TITLE: Senior Vice President	 	 

46

 

	 	 	 
	 

	 	Exhibit A to Credit and
	 

	 	Security
Agreement      

GENERAL DEFINITIONS

     The following definitions, in addition to the definitions set forth in Section 1.2 hereof,
shall be applicable to the Agreement as if fully set forth therein:

     “Accounts” means all of each Borrower’s accounts, as such term is defined in the UCC,
including without limitation, the aggregate unpaid obligations of customers and other account
debtors to a Borrower arising out of the sale or lease of goods or rendition of services by a
Borrower on an open account or deferred payment basis, and each and every right of a Borrower to
the payment of money, whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods or other property, out
of a rendering of services, out of a loan, out of the overpayment of taxes or other liabilities, or
otherwise arises under any contract or agreement, whether such right to payment is created,
generated or earned by a Borrower or by some other person who subsequently transfers such person’s
interest to a Borrower, whether such right to payment is or is not already earned by performance,
and howsoever such right to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which a Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but not limited to all present
and future accounts, contract rights, loans and obligations receivable, chattel papers, bonds,
notes and other debt instruments, tax refunds and rights to payment in the nature of general
intangibles..

     “Advance” means an advance to the Borrowers by the Lender under the Revolving Credit Facility.

     “Affiliate” or “Affiliates” means Synergetics Development Company, L.L.C., Synergetics IP,
Inc. and any other Person controlled by, controlling or under common control with the Borrowers,
including (without limitation) any Subsidiary of a Borrower. 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.

     “Approved Electronic Form” and “Approved Electronic Form Notice” have the respective meanings
specified in Section 9.17 hereof.

     “Bank” means Regions Bank.

     “Banking Day” means a day other than a Saturday or Sunday on which banks are generally open
for business in St. Louis, Missouri.

1

 

     “Books and Records” means all books, records, databases, computer hardware and software,
information and other informational material regarding the Collateral.

     “Chattel Paper” means all of Borrowers’ chattel paper as such term is defined in the UCC.

     “Commercial Tort Claim” has the meaning specified in the UCC.

     “Dated Assets” and “Dated Liabilities” have the meanings specified in Section 2.17 hereof.

     “Default” means an event that, with the giving of notice or passage of time or both, would
constitute an Event of Default.

     “Deposit Accounts” means all demand, time, savings, passbook or similar accounts maintained
with a financial institution.

     “Documents” means a document of title or a warehouse receipt of the type described in Article
7 of the UCC.

     “Environmental Laws” has the meaning specified in Section 5.12 hereof.

     “Equipment” means all of a Borrower’s equipment, as such term is defined in the UCC, whether
now owned or hereafter acquired, including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically (without limitation) the goods
described in any equipment schedule or list herewith or hereafter furnished to the Lender by a
Borrower.

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

     “Event of Default” has the meaning specified in Section 8.1 hereof.

     “Financial Assets” means all of each Borrower’s financial assets, as such term is defined in
the UCC.

     “GAAP” means generally accepted accounting principles, applied on a basis consistent with the
accounting practices applied in the financial statements described in Section 5.5 hereof, except
for any change in accounting practices to the extent that, due to a promulgation of the Financial
Accounting Standards Board changing or implementing any new accounting standard, the Borrowers
either (i) are required to implement such change, or (ii) for future periods will be required to
and for the current period may in accordance with generally accepted accounting principles
implement such change, for its financial statements to be in conformity with generally accepted
accounting principles (any such change is hereinafter referred to as a “Required GAAP Change”),
provided that (1) the Borrowers shall fully disclose in such financial statements any such Required
GAAP Change and the effects of the Required GAAP Change on the Borrowers’ income, retained earnings
or other accounts, as applicable, and (2) the Borrowers’ financial

2

 

covenants set forth in Sections
6.11, 6.12, 6.13, and 6.14 hereof shall be adjusted as necessary to reflect the effects of such
Required GAAP Change.

     “General Intangibles” means all of a Borrower’s general intangibles, as such term is defined
in the UCC, whether now owned or hereafter acquired, including (without limitation) all present and
future payment intangibles (as defined in the UCC), patents, patent applications, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and contracts, contract rights,
manuals, operating instructions, permits, franchises, the right to use the Borrower’s name, and the
goodwill of a Borrower’s business.

     “Indemnified Liabilities” and “Indemnitee” have the respective meanings set forth in Section
9.7 hereof.

     “Instruments” means all instruments as such term is defined in the UCC, including without
limitation, all writings evidencing a right to the payment of money and all promissory notes (as
defined in the UCC).

     “Intellectual Property Security Agreements” has the meaning specified in Section 4.1(r)
hereof.

     “Inventory” means all of a Borrower’s inventory, as such term is defined in the UCC, whether
now owned or hereafter acquired, whether consisting of whole goods, spare parts or components,
supplies or materials, whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.

     “Investment Property” means all of a Borrower’s investment property as such term is defined in
the UCC, including but not limited to all securities, securities entitlements, securities accounts,
commodity accounts, stocks, bonds, mutual fund shares, money market shares and government
securities.

     “Issuer” means the issuer of any Letter of Credit.

     “L/C Amount” means the sum of (i) the aggregate face amount of any issued and outstanding
Letters of Credit and (ii) the unpaid amount of the Obligation of Reimbursement.

     “L/C Application” means an application and agreement for letters of credit in a form
acceptable to the Issuer and the Lender.

     “Letter of Credit” has the meaning specified in Section 2.4 hereof.

     “Letter of Credit Rights” means all of Borrowers’ Letter of Credit Rights, as such term is
defined in the UCC.

     “Loan Documents” means this Agreement, the Note, the Security Documents and any and all other
documents or instruments now or hereafter evidencing or securing Loans, and all documents specified
in Article IV hereof and each and every other document to be delivered from time to time pursuant
to this Agreement with respect to Loans or otherwise.

3

 

     “Maximum Rate” has the meaning specified in Section 2.9 hereof.

     “Obligation of Reimbursement” has the meaning specified in Section 2.4 hereof.

     “Obligations” has the meaning specified in Section 3.1 hereof.

     “Overadvance” has the meaning specified in Section 2.13(a) hereof.

     “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 thereof.

     “Plan” means an employee benefit plan or other plan maintained for employees of a Borrower and
covered by Title IV of ERISA.

     “Premises” means all premises where a Borrower conducts its business and has any rights of
possession.

     “Prime Rate” means the rate of interest publicly announced from time to time by Regions Bank,
St. Louis, Missouri, as its “prime rate” or, if such bank ceases to announce a rate so designated,
any similar successor rate designated by the Lender. It is not necessarily the lowest rate charged
by Lender and is established by Lender in its sole discretion, and Lender may charge rates at,
below, or above the Prime Rate.

     “Reportable Event” shall have the meaning assigned to that term in Title IV of ERISA.

     “Securities” means all stock and other instruments, now owned or hereafter acquired evidencing
an ownership interest in any partnership, corporation, limited liability company, entity or
enterprise; all securities accounts, securities entitlements and all financial assets now owned or
hereafter acquired by a Borrower.

     “Security Interest” has the meaning specified in Section 3.1 hereof.

     “Solvent” means, with respect to any Person on a particular date, that on such date (a) at
fair valuations, all of the properties and assets of such Person are greater than the sum of the
debts, including contingent liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and matured, (c) such Person
is able to realize upon its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course of business, (d)
such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s
ability to pay as such debts mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which such Person’s
properties and assets would constitute unreasonably small capital after giving due consideration to
the prevailing practices in the industry in which such Person is engaged. In computing the amount
of contingent liabilities at any time, it is intended that such liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such time, represents the
amount that reasonably can be expected to become an actual or matured liability.

4

 

     “Special Account” means a specified cash collateral account maintained by a financial
institution acceptable to the Lender in connection with Letters of Credit, as contemplated by
Section 2.6 and Section 3.6 hereof.

     “Subsidiary” means any corporation of which more than 50% of the outstanding shares of capital
stock having general voting power under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the time stock 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 a Borrower, by a Borrower and one or more other
Subsidiaries, or by one or more other Subsidiaries.

     “Supporting Obligations” means all letter of credit rights or secondary obligations that
support the payment or performance of an Account, Chattel Paper, a Document, a General Intangible,
an Instrument or Investment Property.

     “UCC” means: (a) the Uniform Commercial Code as currently in effect in the State of Missouri,
or in any other state whose laws are held to govern this Agreement or any portion hereof; and (b)
the Uniform Commercial Code as may hereafter at any time be in effect in the State of Missouri or
in any other state whose laws are held to govern this Agreement or any portion hereof from and
after the date of effectiveness thereof. Without limiting the foregoing, all terms describing
Collateral shall be as defined under the applicable version of the definition contained in the
Uniform Commercial Code that results in the most expansive coverage of property, whether it be
under the Uniform Commercial Code as currently in effect or as may hereafter at any time be in
effect.

5

 

	 	 	 
	 

	 	Exhibit B to Credit and
	 

	 	Security Agreement      

REVOLVING NOTE

			
	 	 	 
	$5,500,000
	 	St. Louis, Missouri
	 
	 	March 13, 2006

     FOR VALUE RECEIVED, the undersigned, SYNERGETICS, INC., a Missouri corporation (“Synergetics”)
and SYNERGETICS USA, INC., a Delaware corporation (“Synergetics USA”) (individually, a “Borrower”
and together, the “Borrowers”), hereby jointly and severally promise to pay on the Termination Date
to the order of Regions Bank (the “Lender”), at its main office in St. Louis, Missouri, or at any
other place designated at any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of Five Million Five Hundred Thousand
and 00/100 ($5,500,000) or, if less, the aggregate unpaid principal amount of all
Advances made by the Lender to the Borrowers under the Credit Agreement (defined below), together
with interest on the principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note
is fully paid at the rate from time to time in effect under the Credit and Security Agreement of
even date herewith (the “Credit Agreement”) by and between the Lender and the Borrowers. The
principal hereof and interest accruing thereon shall be due and payable as provided in the Credit
Agreement. This Note may be prepaid only in accordance with the Credit Agreement.

     This Note is issued pursuant, and is subject, to the Credit Agreement, which provides, among
other things, for acceleration hereof. This Note is the Revolving Note referred to in the Credit
Agreement.

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

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

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

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

     ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS
OF THE LEGAL THEORY UPON WHICH IT IS

1

 

BASED, THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWERS) AND US
(LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
CONTAINED IN THE CREDIT AGREEMENT AND THE LOAN DOCUMENTS REFERRED TO THEREIN, WHICH ARE THE
COMPLETE AND EXCLUSIVE STATEMENTS OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.

	 	 	 	 	 	 	 
	 	 	BORROWERS:	 	 
	 
	 	 	 	 	 	 
	 	 	SYNERGETICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	NAME: Pamela G. Boone	 	 
	 

	 	 	 	TITLE: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	and	 	 
	 
	 	 	 	 	 	 
	 	 	SYNERGETICS USA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	NAME: Pamela G. Boone	 	 
	 

	 	 	 	TITLE: Chief Financial Officer	 	 

2

 

	 	 	 
	 

	 	Exhibit C to Credit and
	 

	 	Security Agreement      

FORM OF COMPLIANCE CERTIFICATE

TO: REGIONS BANK

This Compliance Certificate is furnished pursuant to that certain Credit and Security Agreement
dated as of                                         ,                      (as the same may be amended, restated or otherwise modified from
time to time, the “Credit Agreement”), among SYNERGETICS, INC., a Missouri corporation
(“Synergetics”) and SYNERGETICS USA, INC., a Delaware corporation (“Synergetics USA”)
(individually, a “Borrower” and together, the “Borrowers”), and Regions Bank. Unless otherwise
defined herein, capitalized terms used in this Compliance Certificate have the meanings defined in
the Credit Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

	1.	 	I am the duly elected Chief Financial Officer of Borrowers.

	2.	 	I have reviewed the terms of the Credit Agreement and the other Loan Documents and I have
made, or have caused to be made under my supervision, a review of the transactions and
conditions of Borrowers during the accounting period covered by the attached Financial
Statements.

	3.	 	The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the
existence of any condition or event which constitutes a Default or an Event of Default as of
the date of this Compliance Certificate; and to my knowledge all of the representations and
warranties of Borrowers contained in the Credit Agreement and other Loan Documents are true
and correct.

	4.	 	The attached Financial Statements are complete and correct in all material respects and have
been prepared in accordance with GAAP applied consistently throughout the period and with
prior periods (except as disclosed therein).

	5.	 	Borrowers are in compliance with all of the covenants in the Credit Agreement, including the
financial covenants in Sections 6.12 through 6.15 and the schedule attached hereto, contains
calculations based on Borrowers’ Financial Statements and other financial records that show
Borrowers’ compliance with such financial covenants. The calculations and the data upon which
they are based are believed by me to be complete and correct.

This Compliance Certificate, together with the schedules hereto, is executed and delivered this
                     day of                                         , 200                    .

	 	 	 	 	 
	 

	 	 

Print Name: Pamela G. Boone
	 	 
	 

	 	Title: Chief Financial Officer	 	 

1

 

Covenant Calculations

	1.)	 	Leverage Ratio (Consolidated Indebtedness/Tangible Net Worth):

	 	 	 	 	 	 	 
	 	 	As of the quarter	 	 	 	 
	 	 	Ended	 	Required	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	No more than
	 	 
	 

	 	 	 	3.75 to 1	 	 
	 

	 	 

	 	 	 	 

	2.)	 	Fixed Charge Coverage Ratio (EBITDA Less: un-financed Capital Expenditures, cash taxes and
dividend distributions/ Current Maturities of Long Term Debt plus Interest Expense)

Fiscal Year End

	 	 	 	 	 	 	 
	 	 	 	 	Required	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	no less than 1.10x
	 	 

Definitions:

Indebtedness shall mean with respect to any Person, without duplication, all indebtedness,
liabilities and obligations of such Person which in accordance with GAAP are required to be
classified upon a balance sheet of such person as liabilities of such Person, and in any event
shall include all (a) obligations of such Person for borrowed money or which have been incurred in
connection with the purchase or other acquisition of Property, (b) obligations secured by any Lien
(other than mechanics’, materialman’s architect’s, or similar Lien arising in the ordinary course
of a construction business) on, or payable out of the proceeds of or production from, any Property
owned by such Person, whether or not such Person has assumed or become liable for the payment of
such obligations, (c) indebtedness, liabilities and obligations of third parties, including joint
ventures and partnerships of which such Person is a venturer or general partner, recourse to which
may be had against such Person, (d) obligations created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such Person, notwithstanding
the fact that the rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of such Property, (e) Capitalized Lease
Obligations of such Person, (f) the aggregate undrawn face amount of all letters on credit issued
for the account of and upon the application such Person together with all unreimbursed drawings
with respect thereto, and (g) trade account payable and all other liabilities of such Person as
defined by GAAP.

2

 

Tangible Net Worth means on a consolidated basis (and in accordance with GAAP) the sum of all
assets as presented in the balance sheet in the financial statements of Borrowers and their
subsidiaries, minus intangible assets ( all assets shown an the balance sheet of such financial
statements which lack physical substance or which represent a right granted by the government or
by another company, including without limitation such assets as goodwill, patents, trademarks,
franchises, licenses, contract rights and other similar assets), minus total Indebtedness of
Borrowers and their subsidiaries according to GAAP.

EBITDA means with respect to the Borrowers and their subsidiaries on a consociated basis,
applicable period-to-date net after tax income, determined in accordance with GAAP, plus
depreciation, plus amortization, plus interest expense, plus taxes, plus other non-cash
non-operating expense items, minus other non-cash non-operating income items.

Current Maturities of Long Term Debt means for any period all long-term debt payments payable
during such period by Borrowers and their subsidiaries on a consolidated basis and in accordance
with GAAP.

3

 

			
	 
	 	Exhibit D to
	 
	 	Credit and Security Agreement

BORROWING BASE CERTIFICATE

Date of Computation:                                                             

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

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

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

 

 

	 	 	 	 	 
	a.) Work in Process
	 	 	                                        	 
	 
	 	 	 	 
	b.) Slow Moving
	 	 	                                        	 
	 
	 	 	 	 
	c.) Obsolete
	 	 	                                        	 
	 
	 	 	 	 
	7.) Eligible Inventory
	 	 	                                        	 
	 
	 	 	 	 
	8.) Loan Value of Inventory
	 	 	 	 
	(50% of Line 7)
	 	 	                                        	 
	 
	 	 	 	 
	9.) Outstanding Principal Balance and Letters of Credit
	 	 	                                        	 
	 
	 	 	 	 
	10.) Excess (Deficit) Availability (line 4+ Line 8
minus Line 9)
	 	 	                                        	 

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

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

Borrowers: SYNERGETICS, INC

	 	 	 	 	 	 	 
	Dated:                                         

	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	and	 	 	 
	 
	 	 	 	 	 	 
	 	 	SYNERGETICS USA, INC.
	 	 
	 
	 	 	 	 	 	 
	Dated:                                         

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

 

 

			
	 
	 	Exhibit E to
	 
	 	Credit and Security Agreement

EXECUTED IP SECURITY AGREEMENTS

 

 

PATENT, TRADEMARK AND LICENSE COLLATERAL

ASSIGNMENT AND SECURITY AGREEMENT

     THIS PATENT, TRADEMARK AND LICENSE COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT (“Collateral
Assignment”) is made as of the 13th day of March, 2006 (the “Effective Date”) by and
between REGIONS BANK (“Lender”) and SYNERGETICS, INC., a Missouri corporation (“Assignor”).

W I T N E S S E T H:

     WHEREAS, pursuant to the terms of a certain Credit and Security Agreement, dated as of even
date herewith (the “Credit Agreement”) by and among Lender, Synergetics USA, Inc. and Assignor,
Assignor has mortgaged, pledged and granted to Lender a lien on and security interest in
substantially all of Assignor’s assets;

     NOW, THEREFORE, Assignor and Lender agree as follows:

    1. Incorporation of Credit Agreement. The Credit Agreement and all the terms and
provisions thereof are hereby incorporated herein. Each capitalized term used herein that is not
defined in this Collateral Assignment shall have the meaning given such term in the Credit
Agreement.

    2. Collateral Assignment of Patents, Trade Names, Trademarks and Licenses. To secure the
complete and timely satisfaction of all of the “Obligations” and subject to the terms and
conditions of this Collateral Assignment:

    A. Assignor hereby grants, assigns and conveys to Lender, by way of collateral security,
the entire right, title and interest of Assignor in and to all of the following, whether now
owned or existing and filed or hereafter acquired and filed: (i) Assignor’s now existing and
hereafter acquired patents and patent applications, including, without limitation, those
patents listed on Schedule A, and (a) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof and (b) all rights corresponding thereto (all
of the foregoing sometimes hereinafter collectively referred to as the “Patents”); (ii)
Assignor’s technical information used in connection with the Patents (all of the foregoing
are hereinafter collectively referred to as the “Technical Information”) and (iii)
Assignor’s license agreements relating to or involving any of the Patents or Technical
Information with any other party, whether Assignor is a licensor or licensee, including,
without limitation, the licenses listed on Schedule C (all of the foregoing included license
agreements being hereinafter referred to collectively as the “Patent Licenses”); and

    B. Assignor hereby grants, assigns and conveys to Lender a security interest in the
following property: (i) Assignor’s now existing and hereafter acquired trade names,
trademarks, service marks and related registrations and applications, including, without
limitation, the trade names, trademarks, service marks and registrations and applications
listed on Schedule B, and (a) renewals thereof and (b) all rights corresponding thereto
(including goodwill) (all of the foregoing sometimes hereinafter collectively referred to as
the “Trademarks”); and (ii) license agreements whereby Assignor has granted to a person a
license to any of the Trademarks, including without limitation, the licenses listed on
Schedule C (all of the foregoing are hereinafter referred to collectively as the “Trademark
Licenses”).

 

 

     3. Restrictions on Future Agreements. Assignor agrees that until the Obligations
shall have been satisfied in full and Lender has no further obligation to make any loan to
Assignor, Assignor will not, without Lender’s prior written consent, take any action, or permit any
action to be taken by others subject to Assignor’s control, including licensees, or fail to take
any action, which would affect in any material respect the validity or enforcement of the rights
granted to Lender under this Collateral Assignment.

     4. Term. THIS COLLATERAL ASSIGNMENT IS MADE FOR COLLATERAL SECURITY PURPOSES ONLY.
The term of the assignment of the various interests granted herein shall terminate on the date on
which the Obligations have been satisfied in full and Lender has no further obligation to make any
loan to or financial accommodation for the benefit of Assignor. So long as no Event of Default
under the Credit Agreement has occurred and is continuing, Lender shall not exercise any right
under or with respect to any Patent or Technical Information except as provided in Paragraph 7
hereof. From and after the occurrence of an Event of Default and upon notice by Lender to
Assignor, Assignor’s license with respect to the Patents and Technical Information as set forth in
this paragraph 7 shall terminate forthwith, to be reinstated only if and when such Event of Default
is cured or waived, and Lender shall have, in addition to all other rights and remedies given it by
this Collateral Assignment, those allowed by law and the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in the State of Missouri. Until the occurrence of an
“Event of Default,” Lender hereby grants to Assignor the exclusive, nontransferable worldwide,
royalty free, right and license, with the right to sublicense, under the Patents and Technical
Information, and to make, have made, use, import, license, sell and otherwise exploit any product
or services or the inventions disclosed and claimed in the Patents.

     5. Assignor’s Right to Use Trademarks and Trademark Licenses. So long as no Event of
Default has occurred and is continuing, Assignor reserves the exclusive right, subject to Lender’s
security interest, to own and use the Trademarks and to exercise all rights derived from the
Trademark Licenses. Until the Obligations have been satisfied in full and Lender has no further
obligation to make any loan to or financial accommodation for the benefit of Assignor, Assignor
agrees to undertake all necessary acts to maintain and preserve the Trademarks and the rights under
the Trademark Licenses. From and after the occurrence of an Event of Default and notice by Lender
to Assignor, Assignor’s exclusive rights to own and use the Trademarks and Trademark Licenses as
set forth in this paragraph 8 shall terminate forthwith, to be reinstated only if and when such
Event of Default is cured or waived in writing, and Lender shall have, in addition to all other
rights and remedies given it by this Collateral Assignment, those allowed by law and the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in the State of Missouri.

     6. Reassignment to Assignor. Upon satisfaction in full of the Obligations (provided
that Lender has no further obligation to make any loan to or financial accommodation for the
benefit of Assignor), Lender’s security interest in the Patents, Technical Information, Trademarks
and Trademark Licenses shall terminate.

     7. Lender’s Right to Sue. At any time after the occurrence and during the
continuance of an “Event of Default,” Lender shall have the right, but shall in no way be
obligated, to bring suit in its own name to enforce the Patents, Trademarks, and Trademark Licenses
and, if Lender shall commence any such suit, Assignor shall, at the request of Lender, do any and
all lawful acts and execute any and all proper documents reasonably required by Lender in aid of
such enforcement and Assignor shall promptly, upon demand, reimburse and indemnify Lender for all
costs and expenses incurred by Lender in the exercise of its rights under this Paragraph 7.

     8. Severability. The provisions of this Collateral Assignment are severable, and if
any clause or provision shall be held unenforceable in whole or in part in any jurisdiction, then
such invalidity

 

 

or unenforceability shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Collateral Assignment in any jurisdiction.

     9. Cumulative Remedies; Effect on Credit Agreement. All of Lender’s rights and
remedies with respect to the Patents, Patent Licenses, Trademarks and Trademark Licenses, whether
established hereby or by the Credit Agreement, or by any other agreements or by law shall be
cumulative.

     10. Binding Effect; Benefits. This Collateral Assignment shall be binding upon each
party and its respective successors and assigns, and shall inure to the benefit of both parties and
their successors and assigns. This Collateral Assignment cannot be altered, amended or modified in
any way, except as specifically provided in paragraph 4 hereof or by a writing signed by the
parties hereto.

     11. Governing Law. This Collateral Assignment shall be governed by and construed in
accordance with the internal substantive laws of the State of Missouri.

     12. Conflict of Terms. Except as otherwise explicitly provided in this Collateral
Assignment, if any provision contained in this Collateral Assignment is in conflict with or
inconsistent with any provision in this Collateral Assignment, the provisions contained in the
Credit Agreement shall govern and control to the extent of such conflict or inconsistency. Any
notice to be given to Lender or Assignor under this Collateral Assignment shall be given in a
manner and to the parties designated in the Credit Agreement.

     13. Further Assurances. Each party agrees to execute and deliver such further
agreements, instruments and documents, and to perform such further acts, as the other party shall
reasonably request from time to time in order to carry out the purpose of this Collateral
Assignment and agreements set forth herein.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Collateral Assignment as of the
date first set forth above.

	 	 	 	 	 	 	 	 	 	 	 
	
Assignor:	 	 	 	SYNERGETICS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Pamela G. Boone
 

	 	 	 	 
	 	Name: Pamela G. Boone	 	 
	 

	 	 	 	 	 	 	 	Title: Chief Financial Officer	 	 

 

 

	 	 	 	 	 	 	 
	STATE OF Missouri

	 	 	)	 	 	 
	 

	 	 	)	 	 	SS.
	COUNTY OF St. Louis

	 	 	)	 	 	 

     The foregoing Patent, Trademark and License Collateral Assignment and Security Agreement was
executed and acknowledged before me this 13th day of March, 2006, by Pamela G. Boone, personally
known to me to be the Chief Financial Officer of Synergetics, Inc., a Missouri corporation, and
that said instrument was signed and sealed in behalf of said corporation by authority of its Board
of Directors, and said officer acknowledged said instrument to be executed for the purposes therein
stated and as the free act and deed of said corporation.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal, the day and year last
above written.

	 	 	 	 	 
	 

	 	/s/ E. Marion Lyons
	 	[Notary Seal]
	 

	 	 	 	 
	 

	 	Notary Public	 	 

My Commission expires: August 3, 2009

* * * * *

     Agreed and Accepted as of this 13th day of March, 2006.

	 	 	 	 	 
	 	REGIONS BANK

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

 

 

	 	 	 	 	 

PATENT, TRADEMARK AND LICENSE COLLATERAL

ASSIGNMENT AND SECURITY AGREEMENT

     THIS PATENT, TRADEMARK AND LICENSE COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT (“Collateral
Assignment”) is made as of the 13th day of March, 2006 (the “Effective Date”) by and
between REGIONS BANK (“Lender”) and SYNERGETICS USA, INC., a Delaware corporation (“Assignor”).

W I T N E S S E T H:

     WHEREAS, pursuant to the terms of a certain Credit and Security Agreement, dated as of even
date herewith (the “Credit Agreement”) by and among Lender, Synergetics, Inc. and Assignor,
Assignor has mortgaged, pledged and granted to Lender a lien on and security interest in
substantially all of Assignor’s assets;

     NOW, THEREFORE, Assignor and Lender agree as follows:

    1. Incorporation of Credit Agreement. The Credit Agreement and all the terms and
provisions thereof are hereby incorporated herein. Each capitalized term used herein that is not
defined in this Collateral Assignment shall have the meaning given such term in the Credit
Agreement.

    2. Collateral Assignment of Patents, Trade Names, Trademarks and Licenses. To secure the
complete and timely satisfaction of all of the “Obligations” and subject to the terms and
conditions of this Collateral Assignment:

    A. Assignor hereby grants, assigns and conveys to Lender, by way of collateral security,
the entire right, title and interest of Assignor in and to all of the following, whether now
owned or existing and filed or hereafter acquired and filed: (i) Assignor’s now existing and
hereafter acquired patents and patent applications, including, without limitation, those
patents listed on Schedule A, and (a) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof and (b) all rights corresponding thereto (all
of the foregoing sometimes hereinafter collectively referred to as the “Patents”); (ii)
Assignor’s technical information used in connection with the Patents (all of the foregoing
are hereinafter collectively referred to as the “Technical Information”) and (iii)
Assignor’s license agreements relating to or involving any of the Patents or Technical
Information with any other party, whether Assignor is a licensor or licensee, including,
without limitation, the licenses listed on Schedule C (all of the foregoing included license
agreements being hereinafter referred to collectively as the “Patent Licenses”); and

    B. Assignor hereby grants, assigns and conveys to Lender a security interest in the
following property: (i) Assignor’s now existing and hereafter acquired trade names,
trademarks, service marks and related registrations and applications, including, without
limitation, the trade names, trademarks, service marks and registrations and applications
listed on Schedule B, and (a) renewals thereof and (b) all rights corresponding thereto
(including goodwill) (all of the foregoing sometimes hereinafter collectively referred to as
the “Trademarks”); and (ii) license agreements whereby Assignor has granted to a person a
license to any of the Trademarks, including without limitation, the licenses listed on
Schedule C (all of the foregoing are hereinafter referred to collectively as the “Trademark
Licenses”).

 

 

     3. Restrictions on Future Agreements. Assignor agrees that until the Obligations
shall have been satisfied in full and Lender has no further obligation to make any loan to
Assignor, Assignor will not, without Lender’s prior written consent, take any action, or permit any
action to be taken by others subject to Assignor’s control, including licensees, or fail to take
any action, which would affect in any material respect the validity or enforcement of the rights
granted to Lender under this Collateral Assignment.

     4. Term. THIS COLLATERAL ASSIGNMENT IS MADE FOR COLLATERAL SECURITY PURPOSES ONLY.
The term of the assignment of the various interests granted herein shall terminate on the date on
which the Obligations have been satisfied in full and Lender has no further obligation to make any
loan to or financial accommodation for the benefit of Assignor. So long as no Event of Default
under the Credit Agreement has occurred and is continuing, Lender shall not exercise any right
under or with respect to any Patent or Technical Information except as provided in Paragraph 7
hereof. From and after the occurrence of an Event of Default and upon notice by Lender to
Assignor, Assignor’s license with respect to the Patents and Technical Information as set forth in
this paragraph 7 shall terminate forthwith, to be reinstated only if and when such Event of Default
is cured or waived, and Lender shall have, in addition to all other rights and remedies given it by
this Collateral Assignment, those allowed by law and the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in the State of Missouri. Until the occurrence of an
“Event of Default,” Lender hereby grants to Assignor the exclusive, nontransferable worldwide,
royalty free, right and license, with the right to sublicense, under the Patents and Technical
Information, and to make, have made, use, import, license, sell and otherwise exploit any product
or services or the inventions disclosed and claimed in the Patents.

     5. Assignor’s Right to Use Trademarks and Trademark Licenses. So long as no Event of
Default has occurred and is continuing, Assignor reserves the exclusive right, subject to Lender’s
security interest, to own and use the Trademarks and to exercise all rights derived from the
Trademark Licenses. Until the Obligations have been satisfied in full and Lender has no further
obligation to make any loan to or financial accommodation for the benefit of Assignor, Assignor
agrees to undertake all necessary acts to maintain and preserve the Trademarks and the rights under
the Trademark Licenses. From and after the occurrence of an Event of Default and notice by Lender
to Assignor, Assignor’s exclusive rights to own and use the Trademarks and Trademark Licenses as
set forth in this paragraph 8 shall terminate forthwith, to be reinstated only if and when such
Event of Default is cured or waived in writing, and Lender shall have, in addition to all other
rights and remedies given it by this Collateral Assignment, those allowed by law and the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in the State of Missouri.

     6. Reassignment to Assignor. Upon satisfaction in full of the Obligations (provided
that Lender has no further obligation to make any loan to or financial accommodation for the
benefit of Assignor), Lender’s security interest in the Patents, Technical Information, Trademarks
and Trademark Licenses shall terminate.

     7. Lender’s Right to Sue. At any time after the occurrence and during the
continuance of an “Event of Default,” Lender shall have the right, but shall in no way be
obligated, to bring suit in its own name to enforce the Patents, Trademarks, and Trademark Licenses
and, if Lender shall commence any such suit, Assignor shall, at the request of Lender, do any and
all lawful acts and execute any and all proper documents reasonably required by Lender in aid of
such enforcement and Assignor shall promptly, upon demand, reimburse and indemnify Lender for all
costs and expenses incurred by Lender in the exercise of its rights under this Paragraph 7.

     8. Severability. The provisions of this Collateral Assignment are severable, and if
any clause or provision shall be held unenforceable in whole or in part in any jurisdiction, then
such invalidity

 

 

or unenforceability shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Collateral Assignment in any jurisdiction.

     9. Cumulative Remedies; Effect on Credit Agreement. All of Lender’s rights and
remedies with respect to the Patents, Patent Licenses, Trademarks and Trademark Licenses, whether
established hereby or by the Credit Agreement, or by any other agreements or by law shall be
cumulative.

     10. Binding Effect; Benefits. This Collateral Assignment shall be binding upon each
party and its respective successors and assigns, and shall inure to the benefit of both parties and
their successors and assigns. This Collateral Assignment cannot be altered, amended or modified in
any way, except as specifically provided in paragraph 4 hereof or by a writing signed by the
parties hereto.

     11. Governing Law. This Collateral Assignment shall be governed by and construed in
accordance with the internal substantive laws of the State of Missouri.

     12. Conflict of Terms. Except as otherwise explicitly provided in this Collateral
Assignment, if any provision contained in this Collateral Assignment is in conflict with or
inconsistent with any provision in this Collateral Assignment, the provisions contained in the
Credit Agreement shall govern and control to the extent of such conflict or inconsistency. Any
notice to be given to Lender or Assignor under this Collateral Assignment shall be given in a
manner and to the parties designated in the Credit Agreement.

     13. Further Assurances. Each party agrees to execute and deliver such further
agreements, instruments and documents, and to perform such further acts, as the other party shall
reasonably request from time to time in order to carry out the purpose of this Collateral
Assignment and agreements set forth herein.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Collateral Assignment as of the
date first set forth above.

	 	 	 	 	 	 	 	 	 	 	 
	
Assignor:	 	 	 	SYNERGETICS USA, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Pamela G. Boone	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Pamela G. Boone	 	 
	 

	 	 	 	 	 	 	 	Title:  Chief Financial Officer	 	 

 

 

	 	 	 	 	 	 	 
	STATE OF St. Louis

	 	 	)	 	 	 
	 

	 	 	)	 	 	SS.
	COUNTY OF Missouri

	 	 	)	 	 	 

     The foregoing Patent, Trademark and License Collateral Assignment and Security Agreement was
executed and acknowledged before me this 13th day of March, 2006, by Pamela G. Boone,
personally known to me to be the Chief Financial Officer of Synergetics USA, Inc., a Delaware
corporation, and that said instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors, and said officer acknowledged said instrument to be executed
for the purposes therein stated and as the free act and deed of said corporation.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal, the day and year last
above written.

	 	 	 	 	 
	 

	 	/s/ E. Marion Lyons
	 	[Notary Seal]
	 

	 	 	 	 
	 

	 	Notary Public	 	 

My Commission expires: August 3, 2009

* * * * *

     Agreed and Accepted as of this 13th day of March, 2006.

	 	 	 	 	 
	 	REGIONS BANK

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

 

 

CREDIT AND SECURITY AGREEMENT

by and among

SYNERGETICS, INC.

and

SYNERGETICS USA, INC.

as Borrowers

and

REGIONS BANK

as Lender

March 13, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE I
	 	DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	Section 1.1
	 	General Interpretation	 	 	1	 
	Section 1.2
	 	Primary Definitions	 	 	1	 
	Section 1.3
	 	General Definitions	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE II
	 	AMOUNT AND TERMS OF THE REVOLVING CREDIT FACILITY	 	 	8	 
	 
	 	 	 	 	 	 
	Section 2.1
	 	Advances	 	 	8	 
	Section 2.2
	 	Notes; Obligations Joint and Several	 	 	9	 
	Section 2.3
	 	Issuance of Letters of Credit	 	 	9	 
	Section 2.4
	 	Payment of Amounts Drawn Under Letters of Credit	 	 	10	 
	Section 2.5
	 	Special Account	 	 	10	 
	Section 2.6
	 	Obligations Absolute	 	 	11	 
	Section 2.7
	 	Capital Adequacy	 	 	11	 
	Section 2.8
	 	Interest	 	 	12	 
	Section 2.9
	 	Maximum Interest Rate	 	 	15	 
	Section 2.10
	 	Voluntary Prepayment; Termination of Agreement by Borrowers; Permanent Reduction of Commitment	 	 	16	 
	Section 2.11
	 	Mandatory Prepayment	 	 	16	 
	Section 2.12
	 	Payment	 	 	16	 
	Section 2.13
	 	Payment on Non-Banking Days	 	 	17	 
	Section 2.14
	 	Use of Proceeds	 	 	17	 
	Section 2.15
	 	Liability Records	 	 	17	 
	Section 2.16
	 	Fees	 	 	17	 
	Section 2.17
	 	Joint and Several Liability of Borrowers; Rights of Contribution among Borrowers	 	 	18	 
	Section 2.18
	 	Waiver of Suretyship and Other Defenses	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE III
	 	SECURITY INTEREST	 	 	19	 
	 
	 	 	 	 	 	 
	Section 3.1
	 	Grant of Security Interest	 	 	19	 
	Section 3.2
	 	Notification of Account Debtors and Other Obligors	 	 	19	 
	Section 3.3
	 	Assignment of Insurance	 	 	19	 
	Section 3.4
	 	Occupancy	 	 	20	 
	Section 3.5
	 	License	 	 	20	 
	Section 3.6
	 	Security Interest in Special Account and Collateral Account	 	 	21	 
	 
	 	 	 	 	 	 
	ARTICLE IV
	 	CONDITIONS OF LENDING	 	 	21	 
	 
	 	 	 	 	 	 
	Section 4.1
	 	Conditions Precedent to the Initial Advance	 	 	21	 
	Section 4.2
	 	Conditions Precedent to All Advances	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE V
	 	REPRESENTATIONS AND WARRANTIES	 	 	23	 
	 
	 	 	 	 	 	 
	Section 5.1
	 	Corporate Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations	 	 	23	 
	Section 5.2
	 	Authorization of Borrowing; No Conflict as to Law or Agreements	 	 	23	 

i

 

	 	 	 	 	 	 	 
	Section 5.3
	 	Legal Agreements	 	 	24	 
	Section 5.4
	 	Subsidiaries	 	 	24	 
	Section 5.5
	 	Financial Condition; No Adverse Change	 	 	24	 
	Section 5.6
	 	Litigation	 	 	24	 
	Section 5.7
	 	Regulation U	 	 	24	 
	Section 5.8
	 	Taxes	 	 	25	 
	Section 5.9
	 	Titles and Liens	 	 	25	 
	Section 5.10
	 	Plans	 	 	25	 
	Section 5.11
	 	Default	 	 	25	 
	Section 5.12
	 	Environmental Protection	 	 	25	 
	Section 5.13
	 	Submissions to Lender	 	 	26	 
	Section 5.14
	 	Rights to Payment	 	 	26	 
	Section 5.15
	 	No Violation of Law	 	 	26	 
	Section 5.16
	 	Disclosure	 	 	26	 
	Section 5.17
	 	Licenses	 	 	26	 
	Section 5.18
	 	Affiliate Transactions	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE VI
	 	AFFIRMATIVE AND FINANCIAL COVENANTS OF THE BORROWERS	 	 	27	 
	 
	 	 	 	 	 	 
	Section 6.1
	 	Reporting Requirements	 	 	27	 
	Section 6.2
	 	Books and Records; Inspection and Examination	 	 	29	 
	Section 6.3
	 	Compliance with Laws; Environmental Indemnity	 	 	29	 
	Section 6.4
	 	Payment of Taxes and Other Claims	 	 	29	 
	Section 6.5
	 	Maintenance of Properties	 	 	30	 
	Section 6.6
	 	Insurance	 	 	30	 
	Section 6.7
	 	Preservation of Corporate Existence	 	 	31	 
	Section 6.8
	 	Delivery of Instruments, etc.	 	 	31	 
	Section 6.9
	 	Performance by the Lender	 	 	31	 
	Section 6.10
	 	Minimum Fixed Charge Coverage Ratio	 	 	31	 
	Section 6.11
	 	Maximum Leverage Ratio	 	 	32	 
	Section 6.12
	 	License Rights	 	 	32	 
	Section 6.13
	 	Authority to File Financing Statements	 	 	32	 
	 
	 	 	 	 	 	 
	ARTICLE VII
	 	NEGATIVE COVENANTS	 	 	32	 
	 
	 	 	 	 	 	 
	Section 7.1
	 	Liens	 	 	32	 
	Section 7.2
	 	Indebtedness	 	 	33	 
	Section 7.3
	 	Guaranties	 	 	33	 
	Section 7.4
	 	Investments and Subsidiaries	 	 	33	 
	Section 7.5
	 	Dividends	 	 	34	 
	Section 7.6
	 	Sale or Transfer of Assets; Suspension of Business Operations	 	 	34	 
	Section 7.7
	 	Consolidation and Merger; Asset Acquisitions	 	 	34	 
	Section 7.8
	 	Sale and Leaseback	 	 	34	 
	Section 7.9
	 	Restrictions on Nature of Business	 	 	35	 
	Section 7.10
	 	Accounting	 	 	35	 
	Section 7.11
	 	Discounts, etc.	 	 	35	 
	Section 7.12
	 	Defined Benefit Pension Plans	 	 	35	 
	Section 7.13
	 	Other Defaults	 	 	35	 

ii

 

	 	 	 	 	 	 	 
	Section 7.14
	 	Place of Business; Name	 	 	35	 
	Section 7.15
	 	Organizational Documents; S Corporation Status	 	 	35	 
	Section 7.16
	 	Restrictions on Affiliate Transactions	 	 	35	 
	 
	 	 	 	 	 	 
	ARTICLE VIII
	 	EVENTS OF DEFAULT, RIGHTS AND REMEDIES	 	 	36	 
	 
	 	 	 	 	 	 
	Section 8.1
	 	Events of Default	 	 	36	 
	Section 8.2
	 	Rights and Remedies	 	 	37	 
	Section 8.3
	 	Certain Notices	 	 	38	 
	Section 8.4
	 	Standards for Exercising Rights and Remedies	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE IX
	 	MISCELLANEOUS	 	 	39	 
	 
	 	 	 	 	 	 
	Section 9.1
	 	No Waiver; Cumulative Remedies	 	 	39	 
	Section 9.2
	 	Amendments, Etc.	 	 	39	 
	Section 9.3
	 	Addresses for Notices, Etc.	 	 	40	 
	Section 9.4
	 	Further Documents	 	 	40	 
	Section 9.5
	 	Collateral	 	 	41	 
	Section 9.6
	 	Costs and Expenses	 	 	41	 
	Section 9.7
	 	Indemnity	 	 	41	 
	Section 9.8
	 	Execution in Counterparts	 	 	42	 
	Section 9.9
	 	Binding Effect; Assignment; Complete Agreement	 	 	42	 
	Section 9.10
	 	Governing Law; Jurisdiction, Venue	 	 	42	 
	Section 9.11
	 	Waiver of Jury Trial	 	 	42	 
	Section 9.12
	 	Severability of Provisions	 	 	43	 
	Section 9.13
	 	Headings	 	 	43	 
	Section 9.14
	 	Consent to Publicity	 	 	43	 
	Section 9.15
	 	Statutory Notice Regarding Insurance	 	 	43	 
	Section 9.16
	 	Statutory Notice Regarding Oral Agreements	 	 	44	 
	Section 9.17
	 	Reasonableness	 	 	44	 
	Section 9.18
	 	Retention of Borrowers’ Records	 	 	44	 
	Section 9.19
	 	Electronic Submissions	 	 	44	 
	Section 9.20
	 	Review and Construction of Documents	 	 	44	 
	Section 9.21
	 	Confidentiality	 	 	45	 

EXHIBITS

Exhibit A — General Definitions

Exhibit B — Revolving Note

Exhibit C — Compliance Certificate

Exhibit D — Borrowing Base Certificate

Exhibit E — Executed IP Security Agreements

iii

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