SUN HYDRAULICS CORP
EX-10.10 JULY 23, 2003 CREDIT & SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>3
<FILENAME>g84379exv10w10.htm
<DESCRIPTION>EX-10.10 JULY 23, 2003 CREDIT & SECURITY AGREEMENT
<TEXT>
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<P align="right"><FONT size="2">Exhibit&nbsp;10.10
</FONT>


<P align="center"><FONT size="2"><B>CREDIT AND SECURITY AGREEMENT</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Credit and Security Agreement (the &#147;Agreement&#148;) dated as of this 23rd
day of July, 2003, is by and between <B>SUN HYDRAULICS CORPORATION, </B>a Florida
corporation, <B>SUN HYDRAULIK HOLDINGS LIMITED</B>, a company incorporated in England
and Wales, and <B>SUN HYDRAULICS LIMITED, </B>a company incorporated in England and
Wales, (collectively, the &#147;Borrower&#148;) and <B>SOUTHTRUST BANK</B>, an Alabama Banking
corporation (the &#147;Bank&#148;). The parties hereto hereby agree as follows:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower and the Bank agree as follows:
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE I</B>
</FONT>


<P align="center"><FONT size="2"><B>DEFINITIONS AND ACCOUNTING TERMS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 1.01. Defined Terms</B>. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Account&#148; or &#147;Accounts&#148; </B>means a right to payment of a monetary obligation,
whether or not earned by performance, (i)&nbsp;for property that has been or is to
be sold, leased, licensed, assigned, or otherwise disposed of, (ii)&nbsp;for
services rendered or to be rendered, (iii)&nbsp;for a policy of insurance issued or
to be issued, (iv)&nbsp;for a secondary obligation incurred or to be incurred, (v)
for energy provided or to be provided, (vi)&nbsp;for the use or hire of a vessel
under a charter or other contract, (vii)&nbsp;arising out of the use of a credit or
charge card or information contained on or for use with the card, or (viii)&nbsp;as
winnings in a lottery or other game of chance operated or sponsored by a State,
governmental unit of a State, or person licensed or authorized to operate the
game by a State or governmental unit of a State. The term includes
health-care-insurance receivables.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Advance&#148; or &#147;Advances&#148; </B>means advances made to Borrower by the Bank under
the Revolving Line of Credit Facility.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Affiliate&#148; </B>means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with that
Person. For purposes of this definition, &#147;control&#148; as applied to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
the ownership of voting securities, by contract, or otherwise.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Agreement&#148; </B>means this Credit Agreement, as amended, supplemented, or
modified from time to time.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Applicable Margin&#148; </B>means the percentage added to the Interbank Rate
(Reserve Adjusted) to determine the LIBOR Rate at which interest shall accrue
on the Loans and, when the Base Rate applies to the Loans, the percentage added
to the Base Rate, determined as follows:
</FONT>

<P align="center"><FONT size="2">&nbsp;</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="87%"><FONT size="2">Commencing on the Closing Date and continuing to
the first anniversary of the Closing Date:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>LIBOR</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Base Rate</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Facility</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Margin</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Margin</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fee</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.90%</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.000</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">Commencing on the first anniversary of the Closing
Date and continuing through the Term Loan Maturity Date, the
Applicable Margin shall be adjusted in accordance with the
following Performance Pricing Matrix:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Leverage Ratio</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>LIBOR</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Base Rate</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Facility</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Funded Debt/EBIDTA</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Margin</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Margin</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fee</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#060;1.50:1.0</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.75</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.000</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#062;=1.50:1.0 &#038; &#060;2.0:1.0</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.90</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.000</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#062;=2.0:1.0 &#038; &#060;2.50:1.0</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.10</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.000</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#062;=2.50:1.0 &#038; &#060;2.75:1.0</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.40</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.50</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.000</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#062;=2.75:1.0 &#038; &#060;3.25:1.0</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.75</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.125</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
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<P align="left"><FONT size="2">The Applicable Margin shall be based on changes in the Funded Debt to EBIDTA
Ratio as set forth above calculated quarterly based upon a rolling four quarter
calculation of EBIDTA, and shall be determined based on the computations set
forth in the Compliance Certificate furnished to the Bank pursuant to <B>Section
6.08(4) </B>and shall be effective commencing on the date following the date such
Certificate is received (or if earlier, the date such Certificate was required
to be delivered), and in each case, until the date following the date on which
a new Certificate is delivered or is required to be delivered, whichever shall
first occur, provided however, that if the Borrower shall fail to deliver any
such Certificate within the time period required by <B>Section&nbsp;6.08(4)</B>, or if the
Bank in the exercise of reasonable business judgment determines that the
calculations contained in such Certificate are inaccurate or incomplete and
such inaccuracy or incompleteness is not cured by Borrower to the Bank&#146;s
reasonable satisfaction within 15&nbsp;days after receipt by Borrower of a written
notice of such inaccuracy or incompleteness from the Bank, then the Applicable
Margin shall be at the highest level until an appropriate, accurate and
complete Certificate is delivered to the Bank showing that a different level is
applicable.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Applicable Rate&#148; </B>means the interest rate selected by Borrower to apply to
the Term Note or to Advances under the Revolving Line of Credit Facility and
which may be either the Base Rate plus the Applicable Margin or the LIBOR Rate.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Assets&#148; </B>means, at any time, all assets that should, in accordance with
GAAP consistently applied, be classified as assets on a balance sheet of the
Borrower.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Bank Affiliate&#148; </B>means any entity directly or indirectly controlling,
controlled by, or under
</FONT>
<P align="center"><FONT size="2">2</FONT>

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<P align="left"><FONT size="2">common control with the Bank. For purposes of this
definition, &#147;control&#148; means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
entity, whether through the ownership of voting securities, by contract, or
otherwise.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Base Rate&#148; </B>means the lending rate as announced by the Bank from time to
time, as its base rate which may change as often as daily, provided however,
that at no time shall the rate of interest exceed the highest rate allowed by
law. In the event that Bank does not, for any reason, announce a Base Rate or
discontinues the use of the term &#147;Base Rate&#148; as a benchmark for interest rate
on its loans, the Base Rate shall be the rate quoted as the &#147;prime rate&#148; as
reported in the &#147;Money Rates&#148; section of the Wall Street Journal (or the
arithmetic average of the rates so quoted, if more than one rate is quoted) or,
in the event of discontinuance of such publication or such section thereof, the
Base Rate shall mean the monthly average prime rate as reported and published
in the Federal Reserve Bulletin published monthly by the Board of Governors of
the Federal Reserve System under the table styled &#147;Prime Rate Charged by Banks
on Short Term Business Loans&#148;. In the event of the discontinuance of both such
publications or such section or table thereof, the Base Rate shall mean the
prime rate as from time to time announced or published by Citibank, N.A. at its
principal office in New York, New York.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms &#147;Base Rate&#148; and &#147;Prime Rate&#148; are intended by the parties to be
benchmarks only and are not to be construed as indicating that such rates are
the best or lowest rates offered by the Lender to any of its customers
regardless of their creditworthiness.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Base Rate Advance&#148; </B>means an advance under the Revolving Line of Credit
Facility bearing interest at the Base Rate plus the Applicable Margin.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Borrower&#146;s Books&#148; </B>means all of the Borrower&#146;s books and records
including, without limitation, ledgers; records indicating, summarizing or
evidencing Borrower&#146;s properties or assets (including the Collateral) or
liabilities; all information relating to Borrower&#146;s business operations or
financial condition; and all computer programs, disc or tape files, printouts,
runs, or other computer prepared information.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Borrowing Base&#148; </B>means the sum of (a)&nbsp;85% of domestic Eligible Accounts,
plus (b)&nbsp;40% of foreign Eligible Accounts (expressly excluding any Accounts of
Sun Hydraulik GmbH and of Sun Hydraulics Korea Corporation), plus (c)&nbsp;50% of
domestic Eligible Inventory (provided that Advances based on foreign Eligible
Accounts shall not exceed $1,250,000 outstanding at any time and Advances based
on domestic Eligible Inventory shall not exceed $3,000,000 outstanding at any
time), plus (d)&nbsp;60% of the net book value of domestic machinery and Equipment
(provided that Advances based on domestic machinery and Equipment shall not
exceed $8,000,000 outstanding at any time and that such advance limit shall
reduce by $1,000,000 annually on each anniversary of the Closing Date).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Borrowing Base Certificate&#148; </B>is defined in <B>Section&nbsp;2.05</B>.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Business Day&#148; </B>means any day other than a Saturday, Sunday, or other day
on which commercial banks in Tampa, Florida or Birmingham, Alabama are authorized or
required to close under applicable law.
</FONT>

<P align="center"><FONT size="2">3</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Capital Lease&#148; </B>means all leases which have been or should be capitalized
on the books of the lessee in accordance with GAAP.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Chattel Paper&#148; </B>means a record or records that evidence both a monetary
obligation and a security interest in specific goods, a security interest in
specific goods and software used in the goods, a security interest in specific
goods and license of software used in the goods, a lease of specific goods, or
a lease of specific goods and license of software used in the goods. For the
purposes hereof, &#147;monetary obligation&#148; means a monetary obligation secured by
the goods or owed under a lease of the goods and includes a monetary obligation
with respect to software used in the goods. If a transaction is evidenced by
records that include an instrument or series of instruments, the group of
records taken together constitutes chattel paper.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Closing Date&#148; </B>means the date of this Credit Agreement upon which the Loan
Documents have been executed by the Borrower and delivered to the Bank.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Collateral&#148; </B>means the Stock Collateral, the Real Property Collateral and
all of the Borrower&#146;s domestic and foreign assets (excluding real property
located outside the United States, &#163;240,000 in blocked account number 5071475,
sort code 30-92-33, titled &#147;Lloyds TSB re Sun Hydraulics Ltd, BIGs liability&#148;,
and assets of Sun Hydraulik GmbH and of Sun Hydraulics Korea Corporation)
including, without limitation, Items of Payment, Accounts, Chattel Paper,
Commercial Tort Claims, Commodity Accounts, Commodity Contracts, Deposit
Accounts, Equipment, General Intangibles, Goods, Health Care Insurance
Receivables, Instruments, Inventory, Investment Property, Letter of Credit
Rights, Payment Intangibles and all other tangible and intangible Assets of
Borrower including, without limitation, Borrower&#146;s Books relating to
Collateral, and the proceeds of Collateral whether cash or non-cash including,
without limitation, insurance proceeds.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Commercial Tort Claims&#148; </B>means a claim or claims arising in tort with
respect to which:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(A)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the claimant is an organization; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(B)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the claimant is an individual and the claim:</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;arose in the course of the claimant&#146;s business or
profession; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;does not include damages arising out of personal
injury to or the death of an individual.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Commitment&#148; </B>means the Bank&#146;s obligation to make Advances to the Borrower
under the Revolving Line of Credit Facility pursuant to Article&nbsp;II of this
Agreement in the amount referred to therein.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Commodity Account&#148; </B>means an account maintained by a commodity
intermediary in which a commodity contract is carried for a commodity customer.
</FONT>

<P align="center"><FONT size="2">4</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Commodity Contract&#148; </B>means a commodity futures contract, an option on a
commodity futures contract, a commodity option, or another contract if the
contract or option is:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(A)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to
federal commodities laws; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(B)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">traded on a foreign commodity board of trade, exchange, or
market, and is carried on the books of a commodity intermediary for a
commodity customer.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Current Ratio&#148; </B>means current assets divided by current liabilities.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"<B>Debt&#148; </B>means (1)&nbsp;indebtedness or liability for borrowed money or for the
deferred purchase price of property or services (including trade obligations);
(2)&nbsp;obligations as lessee under Capital Leases; (3)&nbsp;current liabilities in
respect of unfunded vested benefits under any Plan; (4)&nbsp;obligations under
letters of credit issued for the account of any Person; (5)&nbsp;all obligations
arising under a Note; (6)&nbsp;all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to
invest in any Person, or otherwise to assure a creditor against loss; and (7)
obligations secured by any Lien on property owned by the Borrower, whether or
not the obligations have been assumed; but excluding obligations of Borrower
under the Stock Repurchase Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Default&#148; </B>means any of the events specified in <B>Section&nbsp;9.01</B>, whether or
not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Default Rate&#148; </B>means a fixed rate of interest of 18% per annum.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Deposit Accounts&#148; </B>means, singly or collectively as the context may
require, a demand, time, savings, passbook, or similar account maintained with
a bank.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;EBIDTA&#148; </B>means net income before provision for interest depreciation,
provision for income taxes and amortization.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Eligible Accounts&#148; </B>means, Borrower&#146;s domestic and foreign Accounts
(excluding Accounts of Sun Hydraulik GmbH and of Sun Hydraulics Korea
Corporation), in which the Bank has a first priority, perfected security
interest, that are owing to Borrower by solvent account debtors less Accounts
(i)&nbsp;outstanding for more than 90&nbsp;days or (ii)&nbsp;in default, contested, subject to
an asserted setoff, defense, counterclaim or claim of any person, other than
the Borrower or the Bank, or (iii)&nbsp;billed but for which goods have not been
shipped, or (iv)&nbsp;owed by any Affiliate. Any Account of the Borrower in which
the Bank does not have a first priority, perfected security interest shall not
be an Eligible Account.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Eligible Inventory&#148; </B>means all Borrower&#146;s domestic Inventory excluding
work in progress
provided, however, that the Bank has a first priority, perfected security
interest therein. Any Inventory of the Borrower in which the Bank does not have
a first priority, perfected security interest shall not be Eligible Inventory.
</FONT>

<P align="center"><FONT size="2">5</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Equipment&#148; </B>means goods other than inventory, farm products or consumer
goods and includes, without limitation, machinery of all types, heavy
equipment, non-titled vehicles, computers, printers and office equipment.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;ERISA&#148; </B>means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;ERISA Affiliate&#148; </B>means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section&nbsp;4001 of ERISA.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Eurocurrency Reserve Percentage&#148; </B>means, with respect to each Interest
Period, a percentage (expressed as a decimal) equal to the percentage in effect
two Business Days prior to the first day of such Interest Period, as prescribed
by the Board of Governors of the Federal Reserve System (or any successor), for
determining reserve requirements applicable to any &#147;Eurocurrency liabilities&#148;
pursuant to Regulation&nbsp;D or any other applicable regulation of the Board of
Governors which prescribes reserve requirements applicable to &#147;Eurocurrency
liabilities&#148; as presently defined in Regulation&nbsp;D.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Event of Default&#148; </B>means any of the events specified in <B>Section&nbsp;9.01</B>,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Fixed Charges Coverage Ratio&#148; </B>means net income less dividend expense
(excluding the special one-time dividend of $2.00 per share paid during FYE
2003) plus interest expense plus depreciation expense plus lease expense plus
rent expense all divided by the aggregate of Current Maturities of Long Term
Debt plus interest expense plus rent expense plus lease expense. Calculation
of Fixed Charges Coverage shall be based upon a rolling four quarters basis for
all items except Current Maturities of Long Term Debt which is already
annualized.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Funded Debt&#148; </B>means the sum of all debt for borrowed money (including,
without limitation, capital lease obligations, subordinated debt, and
unreimbursed drawings under letters of credit) or evidenced by a note, bond,
debenture or similar instrument of that person, and shall, in addition, include
contingent reimbursement obligations for outstanding letters of credit (to the
extent not resulting in double-counting).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;GAAP&#148; </B>means generally accepted accounting principles in the United States
consistently applied.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;General Intangibles&#148; </B>means any personal property, including things in
action, other than
Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents,
Goods, Instruments, Investment Property, Letter-of-Credit Rights, Letters of
Credit, Money and oil, gas, or other minerals before extraction. The term
includes, without limitation, payment intangibles and software, books,
correspondence, credit files, records, computer programs, computer tapes, cards
and other papers and documents in the possession or control of Borrower, claims
(including without limitation all claims for
<P align="center"><FONT size="2">6</FONT>

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</FONT>

<P align="left"><FONT size="2">income tax and other refunds),
choses in action , contract rights, judgments, patents, patent licenses,
trademarks, trademark licenses, licensing agreements, rights in intellectual
property, goodwill (including all goodwill of the Borrower&#146; business symbolized
by and associated with any and all trademarks, trademark licenses, copyrights
and/or service marks), royalty payments, contractual rights, rights as lessee
under any lease of real or personal property, literary rights, copyrights,
service names, service marks, logos, trade secrets, all amounts received as an
award in or settlement of a suit in damages, deposit accounts interest in joint
ventures or general or limited partnerships, rights in applications for any of
the foregoing, and all proceeds (cash and non-cash) of the foregoing.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Goods&#148; </B>means all things that are movable when a security interest
attaches. The term includes (i)&nbsp;fixtures, (ii)&nbsp;standing timber that is to be
cut and removed under a conveyance or contract for sale, (iii)&nbsp;the unborn young
of animals, (iv)&nbsp;crops grown, growing, or to be grown, even if the crops are
produced on trees, vines, or bushes, and (v)&nbsp;manufactured homes. The term also
includes a computer program embedded in goods and any supporting information
provided in connection with a transaction relating to the program if (i)&nbsp;the
program is associated with the goods in such a manner that it customarily is
considered part of the goods or (ii)&nbsp;by becoming the owner of the goods, a
person acquires a right to use the program in connection with the goods. The
term does not include a computer program embedded in goods that consist solely
of the medium in which the program is embedded.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Health Care Insurance Receivable&#148; </B>means an interest in or claim under a
policy of insurance which is a right to payment of a monetary obligation for
health care goods or services provided.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Hedge Agreement&#148; </B>means any ISDA Master Agreement, Confirmation and
Schedules between a Borrower and Bank or any Bank Affiliate executed at closing
or at any time prior to or after closing or any other agreement between
Borrower and Bank or any Bank Affiliate heretofore or hereafter entered into,
which provides for an interest rate, currency, equity, credit or commodity
swap, cap, floor or collar, spot or foreign exchange transaction,
cross-currency rate swap, currency option, any combination thereof, or option
with respect to, any of the foregoing or any similar transactions, for the
purpose of hedging Borrower&#146;s exposures to fluctuations in interest rates,
exchange rates, currency, stock, portfolio or loan valuations or commodity
prices (including any such or similar agreement or transaction entered into by
Bank or any Bank Affiliate thereof in connection with any other agreement or
transaction between Borrower and Bank or any Bank Affiliate thereof).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Instrument&#148; </B>means a negotiable instrument or any other writing that
evidences a right to the payment of a monetary obligation, is not itself a
security agreement or lease, and is of a type that in
ordinary course of business is transferred by delivery with any necessary
indorsement or assignment.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Interbank Rate&#148; </B>means, with respect to each Interest Period, the rate per
annum at which dollar deposits in immediately available funds are offered to
the Bank two Business Days prior to the beginning of such Interest Period by
major banks in the London interbank eurodollar market as at or about 11:00&nbsp;a.m.
London time, for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to the amount of
the Loan to which such Interest Period relates.
</FONT>

<P align="center"><FONT size="2">7</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Interbank Rate (Reserve Adjusted)&#148; </B>means, for any Interest Period, a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined pursuant to the following formula:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="70%">
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Interbank Rate<BR>
(Reserve Adjusted)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
=
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Interbank Rate
<HR size="1" noshade>
1 &#151; Eurocurrency Reserve Percentage</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Interest Period&#148; </B>means (i)&nbsp;for Base Rate Advances, one (1)&nbsp;day; (ii)&nbsp;for
LIBOR Advances, the period beginning on (and including) the date on which the
Advance is made and ending on (but excluding) the first day of each month
thereafter and each one month period thereafter; and (iii)&nbsp;for the Term Loan,
(a)&nbsp;while the Applicable Rate is the Base Rate plus the Applicable Margin, one
(1)&nbsp;day; and (b)&nbsp;while the Applicable Rate is the LIBOR Rate, the period
beginning on (and including) the date on which the Loan is made and ending on
(but excluding) the day one month thereafter and each one month period
thereafter.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Inventory&#148; </B>means goods, other than farm products, which:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(A)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">are leased by a person as lessor;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(B)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">are held by a person for sale or lease or to be furnished under
a contract of services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(C)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">are furnished by a person under a contract of service; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(D)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">consist of raw materials, work in process, or materials used or
consumed in a business.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Investment Property&#148; </B>means a security, whether certificated or
uncertificated, security entitlement, securities account, Commodity Contract,
or Commodity Account.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Item of Payment&#148; or &#147;Items of Payment&#148; </B>means, singly or collectively as
the context may require, each check, draft, cash, money, instrument, item, and
other remittance in payment or on account of payment with respect to any
Collateral, and other proceeds or products of Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Letter of Credit Right&#148; </B>means a right to payment or performance under a
letter of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance. The term does not include the right
of a beneficiary to demand payment or performance under a letter of credit.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Leverage Ratio&#148; </B>shall mean the sum of all Funded Debt divided by EBIDTA.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;LIBOR Advance&#148; </B>means an Advance under the Revolving Line of Credit
Facility bearing interest at the LIBOR Rate.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;LIBOR Rate&#148; </B>means an adjustable rate of interest per annum equal to the
Interbank Rate (Reserve Adjusted) for Interest Periods of one month, plus the
Applicable Margin, fixed for one month periods and adjusted on the first day of
each calendar month.
</FONT>

<P align="center"><FONT size="2">8</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"<B>Lien&#148; </B>means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Loan&#148; or &#147;Loans&#148; </B>means, singly or collectively as the context may
require, the Term Loan and the Advances made under the Revolving Line of Credit
Facility.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Loan Documents&#148; </B>means this Agreement, the Notes, the Mortgage, any
financing statements relating to the Collateral and all other documents
executed by the parties in connection with the transactions contemplated
thereby.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Master List&#148; </B>is defined in <B>Section&nbsp;3.01(4)</B>.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Maximum Amount&#148; </B>means the maximum principal amount of Advances
outstanding from time to time under the Revolving Line of Credit Facility which
shall not exceed the lesser of (i) <B>TWELVE MILLION DOLLARS ($12,000,000.00)</B>, or
(ii)&nbsp;the Borrowing Base.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Mortgage&#148; </B>means the Mortgage, Security Agreement and Assignment of Rents
and Leases of even date with this Agreement pursuant to which the Real Property
Collateral is pledged and mortgaged to secure the Term Loan.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Multiemployer Plan&#148; </B>means a multiemployer plan as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section&nbsp;414 of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, in which
employees of Borrower or an ERISA Affiliate participate or to which Borrower or
any ERISA Affiliate contribute or are required to contribute.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"<B>Note&#148; or &#147;Notes&#148; </B>means, singly or collectively as the context may
require, the Term Loan Note and the Revolving Line of Credit Facility Note and
any renewals or replacements thereof.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Other Agreements&#148; </B>means all agreements, instruments and documents,
including, without
limitation, the Notes, any Hedge Agreement and any other notes, guarantees,
mortgages, deeds of trust, chattel mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, leases,
financing statements, borrowing base certificates, subordination agreements,
trust account agreements and all other written matter whether heretofore, now
or hereafter executed by or on behalf of Borrower with respect to, or in
connection with, this Agreement, the transactions contemplated by this
Agreement or the transactions contemplated by any other loan document or Hedge
Agreement between the Borrower and the Bank or any Bank Affiliate, together
with any and all amendments, modifications, extensions, substitutions and
renewals thereof.
</FONT>

<P align="center"><FONT size="2">9</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Payment Intangible&#148; </B>means a general intangible under which the account
debtor&#146;s principal obligation is a monetary obligation.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Person&#148; </B>means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Plan&#148; </B>means any plan established, maintained, or to which contributions
have been made by the Borrower or any ERISA Affiliate.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Real Property Collateral&#148; </B>means the real property described in <B>Exhibit
&#147;A&#148; </B>attached to this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Responsible Officer&#148; </B>means, as applicable, the chief executive officer of
Borrower or the president of Borrower, or, with respect to financial matters,
the chief financial officer of Borrower.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"<B>Revolving Line of Credit Facility&#148; </B>means the line of credit facility to
be made available by the Bank to the Borrower pursuant to <B>Section&nbsp;2.02 </B>of this
Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"<B>Revolving Line of Credit Facility Maturity Date&#148; </B>means July&nbsp;23, 2006.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Revolving Note&#148; </B>means the promissory note of the Borrower of even date
with this Agreement evidencing Borrower&#146;s obligation to repay Advances under
the Revolving Line of Credit Facility.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Stock Collateral&#148; </B>means all of the authorized and issued capital stock of
Sun Hydraulik GmbH, a German corporation and of Sun Hydraulics Korea
Corporation, a Korean corporation.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Stock Repurchase Agreement&#148; </B>means that certain Stock Repurchase Agreement
dated as of June&nbsp;22, 2002 between the Koski Family Limited Partnership and
Borrower.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Subsidiary&#148; </B>means, as to any Person, a corporation of which shares of
stock having ordinary
voting power (other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Tangible Net Worth&#148; </B>means total assets minus Total Liabilities. For
purposes of this computation, the aggregate amount owing from any officers,
stockholders or other Affiliates and the aggregate amount of any intangible
assets including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets.
</FONT>

<P align="center"><FONT size="2">10</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Term Loan&#148; </B>means the term loan made by the Bank to the Borrower pursuant
to <B>Section&nbsp;2.01 </B>of this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Term Note&#148; </B>means the promissory note of the Borrower of even date
herewith evidencing Borrower&#146;s obligation to repay the Term Loan.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Term Loan Maturity Date&#148; </B>means July&nbsp;23, 2008.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Total Liabilities&#148; </B>means all liabilities including, without limitation,
capitalized leases and all reserves for deferred taxes and other deferred sums
appearing on the liabilities side of a balance sheet in accordance with GAAP
applied on a consistent basis.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 1.02. Accounting Terms and Uniform Commercial Code</B>. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles. When used
herein, the term &#147;financial statements&#148; shall include the notes and schedules
thereto. Terms relating to Collateral, if not expressly defined herein, shall
have the meanings ascribed thereto in the Uniform Commercial Code as enacted in
the State of Florida including, without limitation, Florida Statutes Chapter
679 relating to secured transactions, as amended from time to time.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 1.03. Construction. </B>Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term &#147;including&#148; is not limiting, and
the term &#147;or&#148; has, except where otherwise indicated, the inclusive meaning
represented by the phrase &#147;and/or&#148;. The words &#147;hereof&#148;, &#147;herein&#148;, &#147;hereby&#146;,
&#147;hereunder&#148;, and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions and supplements thereto and thereof, as applicable.
All of the schedules and exhibits attached to this Agreement shall be deemed
incorporated herein by reference. Each references to &#147;Borrower&#148; or &#147;Borrowers&#148;
shall be deemed to relate to each Borrower individually and to all Borrowers
collectively it being the intent of the parties
that the obligations, representations, warranties and pledges of each Borrower
hereunder shall be joint and several.
</FONT>

<P align="center"><FONT size="2">11</FONT>

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<P align="center"><FONT size="2"><B>ARTICLE II</B>
</FONT>


<P align="center"><FONT size="2"><B>THE LOANS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.01. (a)&nbsp;The Term Loan. </B>The Bank agrees, on the terms
hereinafter set forth, to make a loan to Borrower (the &#147;Term Loan&#148;) in the
principal amount of <B>ELEVEN MILLION DOLLARS ($11,000,000.00)</B>. There is no
revolving feature to the Loan and Borrower may not re-borrow any sums repaid
thereunder.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp; The Note. </B>The Borrower&#146;s obligation to repay the Term Loan shall be
evidenced by a Term Note of Borrower of even date with this Agreement in
substantially the form attached hereto as <B>Exhibit &#147;B&#148;.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c)&nbsp; Interest Rate. </B>The principal amount of the Term Note outstanding from
time to time shall bear interest at the Applicable Rate based upon selections
made by Borrower in accordance with <B>Section&nbsp;2.01(e)</B>. Interest shall be
calculated based on a 360&nbsp;day year for the actual number of days elapsed during
any Interest Period.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(d)&nbsp; Payments Under the Term Note. </B>Borrower shall repay the Term Loan
under the Term Note in equal monthly installments of principal in the amount of
$45,833.33, plus interest commencing with a payment due one month from the date
of the Term Note and on the same day of each month thereafter until the Term
Loan Maturity Date on which date all outstanding principal and accrued interest
shall be due and payable. All payments received by the Bank shall be applied
first to payment of any costs and expenses to which the Bank may be entitled
under any Loan Document, then to payment of accrued interest and then to
payment of principal.
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><B>(e)</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Selection and Conversion of Interest Rate.</B></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Subject to the provisions hereof, the Borrower shall have the
right to (i)&nbsp;select an initial Applicable Rate to apply to the Term
Note at Closing, and (ii)&nbsp;thereafter continue the Applicable Rate for
the Term Loan as the LIBOR Rate, or (ii)&nbsp;to convert the Applicable
Rate from the LIBOR Rate to the Base Rate plus the Applicable Margin,
or (iii)&nbsp;to convert back from the Base Rate plus the Applicable
Margin to the LIBOR Rate. In each case conversion shall be effected
by submitting to the Bank written notice (effective upon receipt) (a)
in the case of conversion from the Base Rate plus the Applicable
Margin to the LIBOR Rate, on or before 11:00&nbsp;a.m. Eastern Time at
least two (2)&nbsp;Business Days prior to the effective date of
conversion, and (b)&nbsp;in the case of conversion from the LIBOR Rate to
the Base Rate plus the Applicable Margin, on or before 11:00&nbsp;a.m.
Eastern Time on the last day of a current Interest Period. Such
conversion shall take effect at the end of the current Interest
Period. If no such notice of election is received by the Bank from
the Borrower within the time prescribed prior to the end of a current
Interest Period, then the Applicable Rate shall be continued as the
same type with the same Interest Period. Notwithstanding anything
herein to the
contrary, no Interest Period may end later than the </FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">12</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Term Loan Maturity Date.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">After the occurrence and during the continuance of an
Event of Default, the interest Applicable Rate may not be
continued at the LIBOR Rate or the Base Rate plus the Applicable
Margin, but shall be deemed automatically to have been converted
to the Default Rate.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(f)&nbsp; Right of Prepayment of Loan. </B>Borrower shall have the right any time
and from time to time to prepay the principal outstanding under the Term Note,
in whole or in part, without premium or penalty provided, however, that
Borrower shall pay accrued interest to the date of such prepayment.
Prepayments shall be made to Bank in immediately available funds, and any such
prepayment shall not affect or vary the obligation of Borrower to pay any
installment when due.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(g)&nbsp; Use of Proceeds of Term Loan. </B>The proceeds of the Term Loan shall be
used to fund a special dividend to shareholders of $2.00 per share and to
refinance existing debt owed to Northern Trust Bank.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(h)&nbsp; Collateral for Term Loan. </B>The Term Loan shall be secured by a first
mortgage on the Real Property Collateral and by a first priority security
interest in the non-Real Property Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.02. The Revolving Line of Credit Facility. (a) </B>The Bank
agrees, on the terms hereinafter set forth, to make Advances to Borrower from
time to time until the Revolving Line of Credit Facility Maturity Date in an
aggregate principal amount outstanding at any time not to exceed the Maximum
Amount. Within the aforesaid limits, and subject to the provisions of this
Agreement, the Borrower may borrow, make payments, and reborrow under the
Revolving Line of Credit Facility until the Revolving Line of Credit Facility
Maturity Date, after which the Bank&#146;s obligation to make advances to Borrower
under the Revolving Line of Credit Facility shall terminate. Anything to the
contrary in this Agreement notwithstanding, the Bank shall not be obligated to
make Advances under the Revolving Line of Credit Facility after the occurrence
and during the pendency of an Event of Default or any occurrence which, with
the passage of time or the giving of notice and without cure as may be provided
in the applicable Loan Document, would constitute and Event of Default.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp; The Revolving Note. </B>The Borrower&#146;s obligation to repay Advances under
the Revolving Line of Credit Facility shall be evidenced by a Revolving Note of
Borrower of even date with this Agreement in substantially the form attached
hereto as <B>Exhibit &#147;C&#148;.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c)&nbsp; Revolving Line of Credit Facility Advances Interest Rate. </B>The
principal amount of the Advances outstanding from time to time under the
Revolving Note shall bear interest at the Applicable Rate based upon
selections made by Borrower in accordance with <B>Section&nbsp;2.02(e)</B>. Interest shall
be calculated based on a 360&nbsp;day year for the actual number of days elapsed
during any Interest Period.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(d)&nbsp; Requests for Revolving Line of Credit Facility Advances.</B>
</FONT>

<P align="center"><FONT size="2">13</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">All requests for Advances after the initial Advance made
pursuant to <B>Section&nbsp;2.03 </B>shall be submitted to the Bank on a Business
Day and all Advances shall be made on Business Days.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Requests for Advances shall be made in writing signed by the
Borrower (which may be by telefacsimile) and shall specify the
principal amount requested.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Bank shall, if all of the conditions precedent set forth in
this <B>Article&nbsp;II </B>and in <B>Article&nbsp;III </B>of this Agreement have been met,
make the Advances requested by Borrower pursuant to this Agreement on
the same Business Day after receipt of a written request for such
Advance received by the Bank prior to 11:00&nbsp;a.m. Eastern Time, and on
the next Business Day after receipt of a written request for such
Advance received by the Bank at or after 11:00&nbsp;a.m. Eastern Time.
Each written request for an Advance shall be effected by crediting
the amount thereof to a deposit account designated by Borrower
maintained with the Bank or with a Bank Affiliate.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><B>(e)</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Selection and Conversion of Interest Rate.</B></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><B>(1)</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Subject to the provisions hereof, the Borrower shall have the
right to (i)&nbsp;select the initial Applicable Rate to apply to an
Advance commencing on the date of the Advance, and (ii)&nbsp;to continue
any Advance as a LIBOR Advance or as a Base Rate Advance, or (iii)&nbsp;to
convert any Advance from either a LIBOR Advance or a Base Rate
Advance to the other. In each case conversion shall be effected by
submitting to the Bank written notice (effective upon receipt) (a)&nbsp;in
the case of conversion from a Base Rate Advance to a LIBOR Advance,
on or before 11:00&nbsp;a.m. Eastern Time at least two (2)&nbsp;Business Days
prior to the effective date of conversion, and (b)&nbsp;in the case of
conversion from a LIBOR Advance to a Base Rate Advance, on or before
11:00&nbsp;a.m. Eastern Time on the last day of a current Interest Period.
Such conversion shall take effect at the end of the current Interest
Period. If no such notice of election is received by the Bank from
the Borrower within the time prescribed prior to the end of a current
Interest Period, then the Advance shall be continued as the same type
of Advance with the same Interest Period. Notwithstanding anything
herein to the contrary, no Interest Period may end later than the
Revolving Line of Credit Maturity Date.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><B>(2)</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">After the occurrence and during the continuance of an Event of
Default, the interest rate may not be continued at the LIBOR Rate or
the Base Rate plus the Applicable Margin, but shall be deemed
automatically to have been converted to the Default Rate.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(f)&nbsp; Payments Under the Revolving Note. </B>Interest shall be paid to the
Bank on the amount of the Advances outstanding from time to time and shall be
payable monthly commencing with a payment due on the first (1st) day of the
month following the Closing Date and on the first (1st) day of each month
thereafter (each such date being an
&#147;Interest Payment Date&#148;) provided, however, that all outstanding principal plus
accrued interest on each Advance shall be due and payable on the Revolving Line
of Credit Facility Maturity Date. All payments received by the Bank shall be
applied first to payment of any costs and expenses to which the Bank may be
entitled under any Loan Document, then to payment of accrued interest and then
to payment of principal.
</FONT>

<P align="center"><FONT size="2">14</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(g)&nbsp; Right of Prepayment of Advances. </B>Borrower shall have the right any
time and from time to time to prepay the Advances outstanding under the
Revolving Line of Credit Facility, in whole or in part, without premium or
penalty provided, however, that Borrower shall pay accrued interest to the date
of such prepayment. Prepayments shall be made to Bank in immediately available
funds, and any such prepayment shall not affect or vary the obligation of
Borrower to pay any installment when due.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(h)&nbsp; Use of Proceeds of Revolving Line of Credit Facility Advances. </B>The
proceeds of the Advances made under the Revolving Line of Credit Facility after
the initial Advance at Closing shall be used to fund a special dividend to
shareholders of $2.00 per share and to fund Borrower&#146;s working capital needs.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(i)&nbsp; Collateral Security for the Revolving Line of Credit Facility
Advances. </B>The Advances made under the Revolving Line of Credit Facility shall
be secured by Borrower granting to the Bank a duly perfected first priority
security interest in the Collateral other than the Real Property Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(j)&nbsp; Facility Fee. </B>Borrower shall pay to the Bank annually, on the
anniversary of the Closing Date, a facility fee calculated and due as shown in
the pricing matrix used for determination of Applicable Margin. The facility
fee shall be the percentage shown in said pricing matrix times the stated
principal amount of the Revolving Note.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.03. Closing Disbursements. </B>The Bank shall make full
disbursement of the proceeds of the Term Loan at Closing first, to pay all
closing costs and disbursements shown on a closing statement relating to the
Loans executed by the Bank and the Borrower at Closing, then the remainder of
the principal of the Term Loan shall be disbursed to Borrower at Closing.
The Revolving Line of Credit Facility shall be available for disbursement for
Borrower after Closing. Borrower&#146;s execution of such closing statement shall be
conclusive evidence of Borrower&#146;s approval of the disbursements shown on the
closing statement and of Borrower&#146;s authorization for the Bank to pay such
disbursements with the proceeds of the Term Loan.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.04. Mandatory Prepayment of Advances. </B>Notwithstanding any
other provision of this Agreement, the aggregate outstanding principal balance
of the Revolving Line of Credit Facility Advances shall not at any time exceed
the Maximum Amount. If the aggregate outstanding principal balance of such
Advances at any time exceeds the Maximum Amount as otherwise determined by the
Bank, then the Borrower shall immediately pay to the Bank an amount equal to
such excess. Borrower shall not be entitled to borrow or reborrow under the
Revolving Line of Credit Facility so long as the aggregate outstanding
principal balance of Advances exceeds the Maximum Amount nor if the result of
any requested Advance would cause the aggregate outstanding
principal balance of all Advances to exceed the Maximum Amount.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.05. Borrowing Base Certificates. </B>Borrower shall submit to the
Bank a Borrowing Base Certificate (a &#147;Borrowing Base Certificate&#148;) on the date
of this Agreement and at least monthly thereafter within thirty (30)&nbsp;days of
the end of the fiscal month reported . Each such Borrowing Base
</FONT>
<P align="center"><FONT size="2">15</FONT>

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<P align="left"><FONT size="2">Certificate shall be signed and certified by the Responsible Officer of the Borrower and
shall, as of the last day of the month reported, (i)&nbsp;list all Eligible Accounts
providing the name, address and contact telephone number for each account
debtor and providing account agings for each, (ii)&nbsp;list all Eligible Inventory,
and (iii)&nbsp;update the Master List by adding all newly purchased domestic
machinery and Equipment. The Borrowing Base Certificate shall show Borrower&#146;s
calculation of the Borrowing Base as of the date of the certificate and shall
certify, based upon calculations provided therein showing the principal amount
of all outstanding Advances, that to the best of the certifying person&#146;s
knowledge, the Maximum Amount has not been exceeded and that no Default or
Event of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof
and the action which is proposed to be taken with respect thereto.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.06. Non Usury. </B>Notwithstanding any other provision of this
Agreement, the Note or of any instrument securing the Note or any other
instrument executed in connection with the Loans evidenced thereby, it is
expressly agreed that amounts payable under the Note or under the other
aforesaid instruments for the payment of interest or any other payment in the
nature of or which would be considered as interest or other charge for the use
or loan of money shall not exceed the highest rate allowed by law, from time to
time, and in the event the provisions of this Agreement, the Note or of such
other instruments referred to above in this paragraph with respect to the
payment of interest or other charge for the use or loan of money shall result
in payments of interest exceeding such limitation, then the excess over such
limitation shall not be payable and the amount otherwise agreed to have been
paid shall be reduced by the excess so that such limitation will not be
exceeded, and if any payment actually made shall result in such limitation
being exceeded, the amount of the excess shall constitute and be treated as a
repayment of principal and shall operate to reduce such principal by the amount
of such excess, or if any such payment is in excess of the principal
indebtedness, such excess shall be refunded.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.07. LIBOR Rate Lending Unlawful. </B>If as a result of a regulatory
change the Bank shall reasonably determine that it is unlawful for the Bank to
make, continue or maintain any Loans accruing interest at a LIBOR Rate, the
obligation of the Bank to make, continue or maintain any such Loans at a LIBOR
Rate shall, upon such determination (and telephonic notice thereof, to be
subsequently confirmed in writing, to the Borrower which notice shall, in the
absence of manifest error, create a rebuttable presumption as to the effect of
such regulatory change as specified above), forthwith be suspended until the
earliest date the Bank can determine and notify the Borrower that the
circumstances causing such suspension no longer exist, and the LIBOR Rate
applicable to all Loans shall automatically convert to the Base Rate on the
last day(s) of the then current respective Interest Period(s) with respect
thereto or sooner, if required by such regulatory change, provided that the
Bank shall take any reasonable actions available to it (including designation
of its lending offices) consistent with legal and regulatory restrictions that
will avoid the need for such suspension and will not, in the
reasonable judgment of the Bank, be otherwise materially disadvantageous to the
Bank.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.08. Deposits Unavailable</B>. If the Bank shall have reasonably
determined that quotations of interest rates for the relevant deposits referred
to in the definition of &#147;Interbank Rate&#148; are not being provided in the relevant
amounts or for the relevant maturities for purposes of determining rates of
interest for LIBOR Rate determinations as provided herein or that, by reason of
circumstances affecting the London interbank eurodollar market, adequate means
do not exist for ascertaining the LIBOR Rate
</FONT>
<P align="center"><FONT size="2">16</FONT>

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<P align="left"><FONT size="2">for any Loan to which such rate is
the Applicable Rate, then, upon telephonic notice from the Bank to the Borrower
to be subsequently confirmed in writing (such notice, in the absence of
manifest error, to create a rebuttable presumption as to the effect specified
above), the obligations of the Bank to make or continue any Loan at a LIBOR
Rate shall forthwith be suspended until the earliest date that the Bank can
reasonably determine and notify the Borrower that the circumstances causing
such suspension no longer exist, provided that the Bank shall take any
reasonable actions available to it to obtain the necessary quotations of
interest rates in the London interbank eurodollar market (or another eurodollar
market acceptable to the Bank and to the Borrower).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.09. Treatment of Affected Loans. </B>If the obligation of the Bank
to make, continue or maintain any Loan at a LIBOR Rate shall be suspended
pursuant to <B>Section&nbsp;2.07 or 2.08 </B>above, the Applicable Rate shall be
automatically converted to the Base Rate on the last day(s) of the then current
Interest Period(s) for such Loan (or, in the case of a suspension pursuant to
<B>Section&nbsp;2.07</B>, sooner, if required by the regulatory change that gave rise to
such suspension) and, unless and until the Bank gives notice as provided below
that the circumstances specified in <B>Section&nbsp;2.07 or 2.08 </B>(as the case may be)
that gave rise to such suspension no longer exist all Loans that would
otherwise be made or continued at a LIBOR Rate by the Bank shall be made or
continued instead at the Base Rate.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Bank gives notice to the Borrower that the circumstances specified
in <B>Section&nbsp;2.07 or 2.08 </B>that gave rise to such suspension no longer exist
(which the Bank agrees to do promptly upon such circumstances ceasing to exist)
Advances converted to accrue interest at the Base Rate shall be re-converted,
on the first day(s) of the next succeeding Interest Period(s) for such
outstanding Advances, to the LIBOR Rate based upon an Interest Period elected
by the Borrower pursuant to written notice received by the Bank at least three
(3)&nbsp;Business Days prior to the end of the current Interest Period and, if none
is so elected by Borrower, for an Interest Period of thirty (30)&nbsp;days.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.10. LIBOR Related Losses and Expenses. </B>In the event that the
Bank shall incur any loss or expense (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by the Bank to make, continue or maintain any portion of the principal amount
of any Loan at a LIBOR Rate) as a result of any repayment or prepayment of the
principal amount of any Loan on a date other than the scheduled last day of the
Interest Period applicable thereto then, upon written notice from the Bank to
the Borrower the Borrower shall, within five days of its receipt thereof, pay
directly to the Bank such amount as will (in the reasonable determination of
the Bank) reimburse the Bank for such loss or expense. Such written notice
shall, in the absence of manifest error, create a rebuttable presumption of the
amount of such losses or expenses.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.11. Payments and Computations. </B>All payments on account of the
indebtedness evidenced by the Notes shall be made in lawful money no later than
1:00 p.m. Eastern Time on the date due in immediately available United States
funds. All payments shall be first applied to payment of costs and expenses to
which the Bank may be entitled under the Loan Documents, then to accrued
interest and the remainder to principal. All computations of interest shall be
made on the basis of a year of 360&nbsp;days charged for the actual number of days
elapsed. Payments are to be made to the Bank in Birmingham, Alabama, or at
any one other place in the continental United States as the Bank may, from time
to time, in
</FONT>
<P align="center"><FONT size="2">17</FONT>

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<P align="left"><FONT size="2">writing designate. Any payment made after 1:00 p.m. Eastern Time
shall be deemed received on the next Business Day and must include interest up
to but not including such next Business Day. If any payment becomes due on a
Saturday, Sunday, or any day on which banks in Tampa, Florida or Birmingham,
Alabama are legally closed to business, such payment shall be made on the next
succeeding Business Day, and, in the case of a principal payment, interest on
such principal payment shall be payable for such extension of time and shall be
included with such payment.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.12. Default Rate. </B>Upon and after the occurrence of an Event of
Default hereunder, all principal amounts due under the Note shall bear
interest, payable on demand, at the Default Rate.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.13. Costs. </B>If any miscellaneous items of cost or expense, or
any other expenditures are incurred by Bank in connection with the Term Loan or
the Revolving Line of Credit Facility, or in order to protect, preserve or
further secure the Bank&#146;s interests with respect thereto, or, if any action or
proceedings shall be commenced by any person other than the Bank to which
action or proceedings the Bank is made a party or in which it shall become
necessary to defend the interests of the Bank or the provisions of this
Agreement, all sums paid or incurred by the Bank for such expenses, including
reasonable attorney&#146;s fees, shall be paid by the Borrower, together with
interest thereon at the Default Rate from the date of demand by the Bank for
payment. The sums paid or incurred by the Bank in accordance with the terms of
this paragraph shall be paid by the Borrower to the Bank within ten (10)&nbsp;days
of demand and the failure or omission of the Borrower to do so shall entitle
the Bank to add such sums to the principal indebtedness of one of the
respective Notes, or, at its option, to declare the Notes to be in default,
thereupon maturing all of the unpaid indebtedness including the sums advanced
hereunder.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.14. Creditors&#146; Inquiries. </B>Borrower hereby grants to the proper
officials of Bank the right to make response to any inquiries of creditors
and/or suppliers of the Borrower concerning the status of the Loan. Bank
agrees to furnish such information from time to time to the best of its
knowledge, provided, however, that the only duty of Bank in the furnishing of
such information shall be not to affirmatively deceive, as construed by
decisions of the courts of the State of Florida, which is equivalent to fraud
and willful misrepresentation.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.15. Additional Remedies of Bank. </B>In addition to other remedies
available to the Bank in an Event of Default under this Agreement, should
Borrower default, violate, breach or fail to comply with and perform in any
material respect any one or more of the express covenants,
conditions, and provisions of this Agreement, which default, violation, breach
or failure remains uncured ten (10)&nbsp;days after written notice thereof to the
Borrower, or default under either of the Notes then the Bank shall have the
absolute right, at its option and election, to (1)&nbsp;cancel this Agreement by
written notice to the Borrower; (2)&nbsp;institute appropriate proceedings to
specifically enforce performance hereof; (3)&nbsp;withhold further Advances
hereunder; (4)&nbsp;take immediate possession of the Collateral; (5)&nbsp;appoint a
receiver, as a matter of strict right without regard to the solvency of
Borrower, for the purpose of preserving the Collateral, preventing waste, and
to protect all rights accruing to Bank by virtue of this Agreement. All
expenses incurred in connection with the appointment of said receiver, or in
protecting or preserving the Collateral shall be chargeable against the
Borrower and shall be enforced as a lien against the Collateral. Nothing
herein shall be construed to require notice or opportunity to cure in the event
that Borrower defaults in any obligation to pay money under the Note. The said
remedies and rights of Bank shall be
<P align="center"><FONT size="2">18</FONT>

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</FONT>

<P align="left"><FONT size="2">cumulative and not exclusive, the Bank to
be privileged and have the absolute right to resort to any one or more, or all
of the said remedies, neither to the limited exclusion of the other, or any
other remedy available to the Bank at law or equity, in the event of any such
default or breach of said agreement or provisions by the Borrower. The Bank
shall have the absolute right to apply any balance of the Loan funds as a
payment toward the Note, and no other party shall have any interest in any Loan
funds so applied and shall not have any right to garnish, require or compel
payment thereof toward discharge or satisfaction of any claim or lien which
they or any of them have or may have.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.16. Further Assurances. </B>Borrower agrees upon demand to do any
act or execute any additional documents (including, without limitation,
security agreements and/or financing statements on any personalty included or
to be included as Collateral) as may be required by Bank to secure the Notes.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.17. Time is of the Essence. </B>It is specifically agreed that
time is of the essence of this Agreement, and that no waiver of any obligation
or requirement hereunder shall at any time thereafter be held to be a waiver of
the terms hereunder.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 2.18. Taxes. </B>All payments of the principal of and interest on
the Note shall be made without deduction for any present and future taxes,
levies, imposts, deductions, charges or withholdings (other than any of the
foregoing levied on or measured by the net income of the Bank pursuant to the
tax laws of the jurisdictions in which it is incorporated or where such Bank&#146;s
lending installations are located or managed and controlled) which amount shall
be paid by Borrower. Borrower will pay the amounts necessary so that the gross
amount of the principal and interest paid is not less than that which would
have been required by the Note if such taxes and other items were not payable.
All stamp and documentary taxes shall be paid by Borrower. If, notwithstanding
the previous three sentences, the Bank pays any such taxes, Borrower will
reimburse the Bank for the amount paid, including interest and penalties for
late payment, if any.
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE III</B>
</FONT>


<P align="center"><FONT size="2"><B>CONDITIONS PRECEDENT</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 3.01</B>. <B>Conditions Precedent to Making Advances</B>. In addition to
the conditions precedent set forth in Article&nbsp;II of this Agreement, the
obligation of the Bank to make Advances to Borrower as provided in Article&nbsp;II
of this Agreement is subject to the further condition precedent that the Bank
shall have received at Closing or on or before the day of closing each Advance,
as applicable, each of the following in form and substance satisfactory to the
Bank and its counsel:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp; <B>Notes</B>. The Term Note and the Revolving Note duly executed by
Borrower;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp; <B>Evidence of all authorizing action by the Borrower</B>. Copies of all
corporate action taken by the Borrower, certified as of the date of this
Agreement, including resolutions of Borrower&#146;s Board of Directors, authorizing
the execution, delivery, and performance of the Loan Documents to which
Borrower is a party;
</FONT>

<P align="center"><FONT size="2">19</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp; <B>Incumbency and signature certificate of the Borrower</B>. A certificate
(dated as of the date of this Agreement) of Borrower certifying the names,
incumbency and true signatures of Borrower&#146;s officers authorized to sign the
Loan Documents to which Borrower is a party and the other documents to be
delivered by the Borrower under this Agreement, and having attached thereto
certified copies of Borrower&#146;s Articles of Incorporation and By-Laws, and all
amendments thereto;
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Items Relating to Collateral.</B></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Bank shall have received from Borrower prior to Closing (i)
a list of all domestic machinery and Equipment currently owned by
Borrower providing serial numbers or other identification numbers to
the extent available and the net book value or each item of machinery
and Equipment (the &#147;Master List&#148;); (ii)&nbsp;a current UCC lien search in
a form and from a source satisfactory to the Bank relating to the
Borrower and showing that no other liens or security interests of
equal or greater priority than the lien or security interest of the
Bank exist with respect to the non-real property Collateral except
such as will be paid, satisfied and discharged with the proceeds of
the Loan and, in such event, that each such lienor or secured party
has prepared and delivered for filing with the appropriate
governmental agency upon payment an appropriate satisfaction of lien;
(iii)&nbsp;a Security Agreement (which may be incorporated in this
Agreement), in form and substance acceptable to the Bank, granting
the Bank a security interest in the Collateral; (iv)&nbsp;UCC-1 financing
statements, in form and substance acceptable to the Bank which, upon
filing with the appropriate governmental office, will duly perfect a
first priority security interest in the non-real property Collateral
in favor of the Bank as secured party;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Bank shall have received within thirty (30)&nbsp;days after
Closing possession all of the authorized and issued stock of Sun
Hydraulics Korea Corporation; and</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp; <B>Items Relating to Real Property Collateral. </B>The Bank shall have
received, at or prior to the Closing Date, (a)&nbsp;a mortgage from Borrower
securing the Term Note, in form and substance acceptable to the Bank, duly
executed in recordable form by Borrower naming the Bank as mortgagee,
encumbering the Real Property Collateral; (b)&nbsp;a loan title insurance commitment
relating
to the Real Property Collateral, naming the Bank as the insured mortgagee, and
showing (i)&nbsp;good and marketable fee simple title or a leasehold interest
acceptable to the Bank being vested in Borrower, and (ii)&nbsp;that the Bank&#146;s
mortgage will be a first priority lien encumbering the mortgaged property
without qualification or exception other than permitted encumbrances accepted
by the Bank in writing; and (c)&nbsp;an environmental indemnification agreement, in
form and substance acceptable to the Bank, relating to the Real Property
Collateral, whereupon Borrower agrees to indemnify the Bank against such
environmental hazards and other matters as the Bank may require;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp; <B>Insurance. </B>The Bank shall have received evidence satisfactory to it
that all Collateral subject to theft or casualty loss, if any, is insured
against fire, flood, theft and casualty loss to its full insurable value in
substance and with coverage amounts reasonably satisfactory to the Bank; and
that the Bank is named as loss payee and an additional insured as its interest
may appear in all such insurance
<P align="center"><FONT size="2">20</FONT>

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</FONT>

<P align="left"><FONT size="2">policies and certificates;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)&nbsp; <B>Opinion of Counsel for Borrower</B>. An opinion of counsel for the
Borrower as to such matters and in form and substance acceptable to the Bank;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)&nbsp; <B>Other Documents</B>. The Bank shall have received such other approvals,
opinions, or documents as the Bank may reasonably request;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9)&nbsp; <B>No Defaults. </B>The Bank shall have received a certificate signed by the
Borrower dated the date of such Advance, stating that no Default or Event of
Default has occurred and is continuing, or would result from the passage of
time or the giving of notice;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10)&nbsp; <B>Payment of Fees. </B>Borrower shall have paid to or for the benefit of
the Bank all fees properly payable by the Borrower to the Bank; and
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11)&nbsp; <B>General. </B>All agreements, instruments and proceedings in connection
with the transactions contemplated by this Agreement shall be satisfactory in
form and substance to Bank, and Bank shall have received on the date of this
Agreement copies of all documents which it may have requested in connection
with this transaction.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 3.02. Conditions Precedent for the Bank&#146;s Benefit. </B>The foregoing
conditions precedent exist solely for the Bank&#146;s benefit, and the Bank in its
sole discretion shall determine whether they have been satisfied. The Bank
shall have the right, in its sole and absolute discretion, to waive any
conditions precedent without notice to or the approval of any other entity or
person including, without limitation, any guarantor, provided, however, that
such waiver shall not be enforceable against the Bank without its consent
unless the waiver is in writing signed by the Bank.
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE IV</B>
</FONT>


<P align="center"><FONT size="2"><B>SECURITY AGREEMENT</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the payment of the Loan and for the performance of all of
Borrower&#146;s Obligations under the Loan Documents, the Borrower hereby assigns,
grants and conveys to the Bank and agrees that the Bank shall have a perfected,
continuing security interest in all of the Collateral. The Borrower further
agrees that the Bank shall have in respect of the Collateral all of the rights
and remedies of a secured party under the applicable provisions of the Uniform
Commercial Code and under other applicable laws and Loan Documents, as well as
those provided in this Agreement. The Borrower covenants and agrees to execute
and deliver such financing statements and other instruments and filings as are
necessary in the opinion of the Bank to perfect such security interest.
Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, the Borrower may not dispose of the Collateral, or any part
thereof, other than in the ordinary course of business or otherwise as may be
permitted by this Agreement. Borrower shall, if requested by the Bank, execute
a separate Security Agreement in favor of the Bank relating to the Collateral
which shall be construed in conjunction with and as supplemental to this
section.
</FONT>

<P align="center"><FONT size="2">21</FONT>

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<P align="center"><FONT size="2"><B>ARTICLE V</B>
</FONT>


<P align="center"><FONT size="2"><B>REPRESENTATION AND WARRANTIES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower represents and warrants to the Bank that:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.01. Organization, Good Standing, and Due Qualification</B>.
Borrower is a corporation duly organized, validly existing, and having an
active status under the laws of Borrower&#146;s state or country of organization;
has the power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged; and is duly qualified as a
foreign business entity and in good standing under the laws of each other
jurisdiction in which such qualification is required, if any, except where the
failure to so qualify would not have a material adverse effect on Borrower&#146;s
business or financial condition.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.02. Power and Authority</B>. The execution, delivery, and
performance by the Borrower of the Loan Documents to which Borrower is a party
has been duly authorized by all necessary action of the Borrower&#146;s board of
directors and does not and will not (1)&nbsp;require any consent or approval of the
shareholders of the Borrower or of any other entity; (2)&nbsp;contravene any of
Borrower&#146;s articles of incorporation or by-laws; (3)&nbsp;violate any provision of
any law, rule, regulation (including, without limitation, Regulation&nbsp;U of the
Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination, or award presently in effect having
applicability to Borrower; (4)&nbsp;result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease,
or instrument to which Borrower is a party or by which it or its properties may
be bound or affected; (5)&nbsp;result in or require the creation or imposition of
any Lien upon or with respect to any of the properties now owned or hereafter
acquired by Borrower except as granted to the Bank; or (6)&nbsp;cause Borrower to be
in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award or any such indenture, agreement,
lease, or instrument.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.03. Legally Enforceable Agreement</B>. This Agreement, and each of
the other Loan Documents to which the Borrower is party, and all of Borrower&#146;s
undertakings thereunder, when such Loan Documents have been duly executed and
delivered under this Agreement will be, legal, valid, and binding obligations
of the Borrower enforceable against Borrower in accordance with their
respective terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws affecting creditors&#146;
rights generally, and principles of equity. Each Borrower represents and
warrants that it is not insolvent or contemplating filing a voluntary petition
for bankruptcy nor are any of them aware of any possibility or threat of being
subject to any petition for involuntary bankruptcy.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.04. Financial Statements. </B>All financial statements of the
Borrower which have been furnished to the Bank are complete and correct and
fairly present in all material respects the financial condition of the Borrower
and the results of the operations of the Borrower for the periods covered by
such statements, all in accordance with GAAP consistently applied and there has
been no material adverse change in the condition (financial or otherwise),
business, or operations of the Borrower. There are no
<P align="center"><FONT size="2">22</FONT>

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</FONT>

<P align="left"><FONT size="2">liabilities of the
Borrower fixed or contingent (except obligations of the Borrower under the
Stock Repurchase Agreement or with respect to the funding of the dividend
referred to in <B>Section&nbsp;2.02(h)</B>), which are material but are not reflected in
the financial statements, other than liabilities arising in the ordinary course
of business. No information, exhibit, or report furnished by the Borrower to
the Bank in connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially misleading.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.05. Labor Disputes and Acts of God</B>. Neither the business nor
the properties of any Borrower are now affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty, nor
does any Borrower have any reason to believe that they will be affected in the
future, by any strike, lockout or other labor dispute or embargo (whether or
not any of the foregoing are covered by insurance) materially and adversely
affecting such business or properties or the operation of any Borrower.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.06</B>. <B>Other Agreements</B>. Borrower is not a party to any
indenture, loan, or credit agreement, or, to any Borrower&#146;s knowledge, to any
lease or other agreement or instrument, or subject to any charter or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations, or conditions, financial or otherwise, of
Borrower, or the ability of Borrower to carry out its obligations under the
Loan Documents to which it is a party. Borrower is not in default in any
respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.07</B>. <B>Litigation</B>. There is no pending or, to Borrower&#146;s
knowledge, threatened action or proceedings against or affecting Borrower
before any court, governmental agency or arbitrator which may, in any one case
or in the aggregate, materially adversely affect the financial condition,
operations, properties, or business of any Borrower or the ability of any
Borrower to
perform its obligations under the Loan Documents to which it is a party.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.08. No Defaults on Outstanding Judgments or Orders</B>. Borrower
has satisfied all judgments against it and Borrower is not in default with
respect to any judgment, writ, injunction, decree, rule, or regulation of any
court, arbitrator, or federal, state, municipal, or other governmental
authority, commission, board, bureau, agency or instrumentality, domestic or
foreign.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.09. Ownership and Liens</B>. Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets pledged as Collateral to the Bank (other
than any properties or assets disposed of in the ordinary course of business),
and none of the properties and assets owned by the Borrower is subject to any
Lien, except such as may be permitted by this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.10. ERISA</B>. Neither Borrower nor any ERISA Affiliate (if any)
is party to or a participant in any Multiemployer Plan that is subject to
ERISA.
</FONT>

<P align="center"><FONT size="2">23</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.11. Operation of Business</B>. To the best of Borrower&#146;s
knowledge, Borrower possesses all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct their
business substantially as now conducted and as presently proposed to be
conducted, and Borrower is not in violation of any valid rights of others with
respect to any of the foregoing.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 5.12. Taxes</B>. Borrower has filed all tax returns (federal, state
and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon which are due, including interest and
penalties.
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE VI</B>
</FONT>


<P align="center"><FONT size="2"><B>AFFIRMATIVE COVENANTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.01</B>. <B>Maintenance of Existence</B>. Preserve and maintain its
existence and good standing in the jurisdiction of its organization, and
qualify and remain qualified as a foreign business entity in each jurisdiction
in which such qualification is required, except where the failure to so qualify
would not have a material adverse effect on Borrower&#146;s business or financial
condition.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.02. Maintenance of Records</B>. Keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Borrower.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.03. Maintenance of Properties</B>. Maintain, keep, and preserve,
all of its
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.04. Conduct of Business</B>. Continue to engage in business of the
same general type as conducted by it on the date of this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.05. Maintenance of Insurance</B>. Maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated, which insurance may
provide for reasonable deductibility from coverage thereof, and shall include,
without limitation, (i)&nbsp;fire, theft and casualty insurance insuring property
pledged to secure the Loan in an amount of not less than full replacement value
and (ii)&nbsp;public liability insurance including, without limitation automobile
and appropriate liability coverage relating to the Collateral in the amount of
not less that $1,000,000.00 per occurrence and $2,000,000.00 annual aggregate,
and (iii)&nbsp;business interruption insurance. All personal property and
Improvements pledged as Collateral for the Loan shall be insured against fire,
theft and casualty loss to the full insurable value thereof.
</FONT>

<P align="center"><FONT size="2">24</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrower shall immediately notify the Bank upon the occurrence of any
material business interruption or of any material casualty, damage or loss to
Collateral or seizure of any Collateral for any reason including, without
limitation, action of any foreign government.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.06. Compliance with Laws</B>. Comply in all material respects with
all applicable laws, rules, regulations, and orders, such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments, and governmental charges imposed upon it or upon its
property unless same are being contested by Borrower in good faith in a manner
that precludes the issuance of any tax deed or foreclosure of any lien or claim
for unpaid taxes against the Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.07</B>. <B>Right of Inspection. </B>Upon reasonable prior notice, at any
reasonable time and from time to time, permit the Bank or any agent or
representative thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrower, and
to discuss the affairs, finances, and accounts of the Borrower with any of its
officers and directors and the Borrower&#146;s independent accountants.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.08. Reporting Requirements</B>. Furnish to the Bank:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) (A) <B>Quarterly Financial Statements</B>. As soon as available and in any
event within forty five (45)&nbsp;days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, internally prepared
financial statements including, without limitation, statements of income
of the Borrower and balance sheets for the period commencing at the end of
the previous fiscal quarter, if any, and ending with the end of such
quarter, and a statement of change in cash flow of the Borrower for the
portion of the fiscal year ended with the last day of such quarter, all in
reasonable detail and stating in comparative form the respective figures
for the corresponding date and period in the previous fiscal year, if any,
and all prepared on a consolidated and consolidating basis in accordance
with GAAP consistently applied and
certified by the controller, treasurer or chief financial officer of the
Borrower (subject to year-end adjustments).</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) <B>Annual Audited Financial Statements</B>. As soon as available and in any
event within one hundred twenty (120)&nbsp;days after the end of each fiscal
year of the Borrower, audited financial statements prepared by an
independent certified public accountant reasonably acceptable to the Bank
including, without limitation, a balance sheet of the Borrower as of the
end of such fiscal year and a statement of income and retained earnings of
the Borrower for such fiscal year, and a statement of change in cash flow,
all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year, if
any, and all prepared on a consolidated and consolidating basis in
accordance with GAAP consistently applied and certified by the controller,
treasurer or chief financial officer of the Borrower.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp; <B>Management Letters. </B>Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants
in connection with examination of the financial statements of the Borrower or
any Subsidiary made by such accountants;
</FONT>

<P align="center"><FONT size="2">25</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp; <B>Compliance Certificate. </B>As soon as available and in any event within
forty five (45)&nbsp;days after the end of each of the first three fiscal quarters
of Borrower, and concurrently with delivery to the Bank of the Borrower&#146;s
annual, financial statements, a certificate signed by both the president and
the chief financial officer of Borrower, certified as to accuracy and
completeness, showing (i)&nbsp;compliance with the financial covenants set forth in
<B>Article&nbsp;VIII </B>of this Agreement with all supporting calculations and data, and
(ii)&nbsp;for the purpose of determining the Applicable Margin, a calculation of the
Funded Debt to EBIDTA Ratio, and (iii)&nbsp;certifying that no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp; <B>Notice of Litigation</B>. Promptly after the commencement thereof, notice
of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower or any Subsidiary, which, if determined
adversely to the Borrower or such Subsidiary, would have a material adverse
effect on the financial condition, properties, or operations of the Borrower
and its Subsidiaries taken as a whole;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp; <B>Notice of Defaults and Events of Default</B>. Immediately after the
occurrence of each Default or Event of Default, a written notice setting forth
the details of such Default or Event of Default and the action which is
proposed to be taken by the Borrower with respect thereto;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp; <B>Proxy Statements, Etc. </B>Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements, and reports which the
Borrower or any corporation of which such Borrower is a Subsidiary sends to its
stockholders, and copies of all regular, periodic, and special reports, and all
registration statements which the Borrower or any parent corporation files with
the Securities and Exchange Commission or any governmental authority which may
be substituted therefor, or with any national securities exchange;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)&nbsp; <B>Notice of Acquisition, Bulk Sale, Merger or Change in Control. </B>Prior
to any (i)&nbsp;proposed acquisition of control of or purchase of all or any
substantial part of the assets of any corporation or business entity by the
Borrower; (ii)&nbsp;sale of all or any substantial part of the assets of the
Borrower; or (iii)&nbsp;any merger by the Borrower with any other entity whether or
not a Borrower is to survive the merger; the Bank shall be provided with not
less than thirty (30)&nbsp;days advance written notice.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)&nbsp; <B>Notice of Business Interruption, etc. </B>Borrower shall immediately
notify the Bank upon the occurrence of any business interruption, any casualty
or damage or loss of property which could have a material adverse effect on the
business of the Borrower for any reason, including, but not limited to any
action of any foreign government.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9)&nbsp; <B>Notice of Change of Borrower&#146;s Name or Change in Location of
Collateral. </B>Borrower shall, prior to the effective date of any change in
Borrower&#146;s name and prior to any change in location of any Collateral (except
for Inventory and work in progress moving among Borrower&#146;s and Borrower&#146;s
Subsidiaries&#146; business locations in the ordinary course of Borrower&#146;s
business), notify the Bank in writing of the impending occurrence of any such
event and the effective date thereof.
</FONT>

<P align="center"><FONT size="2">26</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10)&nbsp; <B>General Information. </B>Such other information respecting the condition
or operations, financial or otherwise, of the Borrower or any subsidiary as the
Bank may from time to time reasonably request.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.09. Hedge Agreements. </B>Borrower hereby grants to the Bank a
right of first refusal to enter into any Hedge Agreements with Borrower.
Borrower shall make first inquiry of the Bank regarding the availability of any
such Hedge Agreements and the terms of such offered by the Bank. In the event
that Borrower thereafter negotiates a Hedge Agreement with a third party on
terms more favorable than those offered by the Bank, the Borrower shall
thereupon provide the Bank with the written terms of such third party Hedge
Agreement and the Bank shall have a right of first refusal to enter into a
Hedge Agreement on the same terms. Violation by the Borrower of the Bank&#146;s
right of first refusal hereunder shall constitute an Event of Default under
this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 6.10. Unconditional Obligations. </B>The payment and performance by
the Borrower of its obligations under the Loan Documents shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim Borrower might otherwise have against the Bank and the Borrower
shall pay absolutely net all of its payment obligations under the Loan
Documents free of any deductions and without abatement, diminution or set-off;
and until payment in full of all such obligations, the Borrower: (a)&nbsp;will not
suspend or discontinue any payments provided for in the Note; (b)&nbsp;will perform
and observe all of its other agreements contained in the Loan Documents; and
(c)&nbsp;will not terminate or attempt to terminate this Agreement for any cause.
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE VII</B>
</FONT>


<P align="center"><FONT size="2"><B>NEGATIVE COVENANTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrower will not, without the prior
written consent of the Bank:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.01. Liens. </B>Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist, any Lien
upon or with respect to any of the Collateral now owned or hereafter acquired
except for Liens of the Bank or Liens that are subordinated to those of the
Bank with the Bank&#146;s knowledge and consent.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.02. Mergers, Bulk Sale or Acquisition of Assets, Etc. </B>Merge or
consolidate with, or sell, assign, lease, or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, or acquire all
or substantially all of the assets or the business of any Person, or permit any
Subsidiary to do so, except that (l)&nbsp;any Subsidiary may merge into or transfer
assets to the Borrower and (2)&nbsp;any Subsidiary may merge into or consolidate
with or transfer assets to any other Subsidiary.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.03. Sale and Leaseback. </B>Sell, transfer, or otherwise dispose
of, or permit any
</FONT>
<P align="center"><FONT size="2">27</FONT>

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<P align="left"><FONT size="2">subsidiary to sell, transfer, or otherwise dispose of, any
real or personal property to any Person and thereafter directly or indirectly
lease back the same or similar property, for less than fair market value.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.04. Sale of Assets. </B>Except for (i)&nbsp;the sale of goods and
services in the ordinary course of Borrower&#146;s business, and (ii)&nbsp;the sale or
other disposition of assets that have reached the end of their useful life for
purposes of Borrower&#146;s business and which are to be replaced by assets of like
kind or function, sell, lease, assign, transfer, or otherwise dispose of any of
its now owned or hereafter acquired assets with an individual value of $50,000
or more or in an aggregate value of more than $350,000 annually for other than
a price equal to 90% or more of the original purchase value to be paid to
Borrower in currently available funds at or prior to the transfer.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.05. Investments. </B>Make, or permit any Subsidiary to make, any
loan or advance to any Person, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock or investment
other than in the ordinary course of business or other securities of, make any
capital contribution to, or otherwise invest in or acquire any interest in any
Person, except: (l)&nbsp;direct obligations of the United States or any agency
thereof with maturities of one year or less from the date of acquisition; (2)
commercial paper of a domestic issuer rated at least &#147;A-l&#148; by Standard &#038; Poor&#146;s
Corporation or &#147;P-l&#148; by Moody&#146;s Investors Service, Inc.; (3)&nbsp;certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank having capital and surplus in excess of Twenty Million
Dollars ($20,000,000.00); (4)&nbsp;stock, obligations, or securities received in
settlement of debts (created in the ordinary course of business) owing to the
Borrower or any Subsidiary; (5)&nbsp;loans to or to purchase securities of the
Borrower or a Subsidiary; and (6)&nbsp;to accept promissory notes from employees as
payment for the purchase price of stock purchased pursuant to an employee
stock option plan; and (7)&nbsp;Borrower shall be permitted to perform its
obligations under the Stock Purchase Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.06. Transactions With Affiliates. </B>Except as may otherwise be
permitted by <B>Section&nbsp;7.05, </B>make any loans to any Affiliate nor enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower&#146;s business and upon fair and
reasonable terms no less favorable to the Borrower than would obtain in a
comparable arm&#146;s-length transaction with a Person not an Affiliate.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.07. Stock of Subsidiary, Etc. </B>Sell or otherwise dispose of any
shares of capital stock of any Subsidiary or permit any Subsidiary to issue any
additional shares of its capital stock other than to Borrower or another
Subsidiary.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.08. Guaranties and Contingent Liabilities. </B>Enter into any
guaranty agreement whereby Borrower guaranties payment or performance of any
indebtedness or obligations of any Person other than a Subsidiary; nor assume
any contingent liability of any kind or character whatsoever other than that of
a Subsidiary.
</FONT>

<P align="center"><FONT size="2">28</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.09 Debt. </B>Enter into any capitalized leases or incur any
indebtedness, whether direct or contingent, other than trade payables,
equipment leases and normal accrued expenses which arise under normal operation
of Borrower&#146;s business.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.10. Transfer and Change of Location of Collateral. </B>Transfer or
permit the transfer to another location of any of the Collateral or the books
and records related to any of the Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 7.11. Change of Borrower&#146;s Name. </B>Change Borrower&#146;s name without
giving twenty (20)&nbsp;Business Days prior written notice to the Bank.
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE VIII</B>
</FONT>


<P align="center"><FONT size="2"><B>FINANCIAL COVENANTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 8.01. Fixed Charges Coverage Ratio. </B>The Borrower shall maintain on
a consolidated basis during the term of this Agreement a minimum Fixed Charges
Coverage Ratio of 2.0 to 1.0. Compliance with this covenant shall be
determined quarterly on a rolling four quarters basis.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 8.02. Maximum Total Liabilities to Tangible Net Worth. </B>The
Borrower shall maintain on a consolidated basis determined quarterly during the
term of this Agreement a ratio of Debt to Tangible Net Worth of not more than
1.5 to 1.0.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 8.03. Minimum Current Ratio. </B>The Borrower shall maintain on a
consolidated basis determined quarterly during the term of this Agreement a
minimum Current Ratio of 1.50 to 1.0.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 8.04. Maximum Leverage Ratio. </B>The Borrower shall maintain on a
consolidated basis during the term of this Agreement a maximum ratio of Funded
Debt to EBIDTA of less than 3.25 to 1.0. Compliance with this covenant shall
be determined quarterly on a rolling four quarters basis.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 8.05. Banking Deposit Relationship. </B>Borrower shall, during the
term of this Agreement, maintain its primary domestic depository accounts with
the Bank.
</FONT>


<P align="center"><FONT size="2"><B>ARTICLE IX</B>
</FONT>


<P align="center"><FONT size="2"><B>EVENTS OF DEFAULT</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 9.01. Events of Default. </B>The occurrence of any of the following
events shall constitute an Event of Default:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp; The Borrower should fail to pay the principal of or interest on any of
the Notes, or any
<P align="center"><FONT size="2">29</FONT>

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</FONT>

<P align="left"><FONT size="2">fee, as and when due and payable;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp; Any representation or warranty made or deemed made by the Borrower in
this Agreement or which is contained in any guaranty, certificate, document,
opinion, or financial or other statement furnished at any time under or in
connection with any Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp; Borrower shall fail to perform or observe in any material respect any
term, covenant, or agreement or shall default under any material provision
contained in any Loan Document including, without limitation, the financial
reporting requirements in <B>Article&nbsp;VI </B>and the financial covenants in <B>Article
VIII </B>of this Agreement which are expressly deemed to be material;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp; Borrower or any Subsidiary shall (a)&nbsp;fail to pay any indebtedness for
borrowed money in excess of $50,000.00 (other than the Note), or any interest
or premium thereon, when due or within any applicable grace period (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise),
or (b)&nbsp;fail to perform or observe any material term, covenant, or condition on
its part to be performed or observed under any agreement or instrument relating
to any such indebtedness, when required to be performed or observed, if the
effect of such failure of payment or to perform or observe is to accelerate, or
to permit the acceleration after the giving of notice or passage of time, or
both, of the maturity of such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp; Borrower or any Subsidiary (a)&nbsp;shall generally not, or shall be unable
to, or shall admit
in writing its inability to pay its debts as such debts become due; or (b)
shall make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets; or (c)&nbsp;shall commence any proceeding under any
bankruptcy, reorganization, arrangements, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (d)&nbsp;shall have any such petition or application filed or any such
proceeding commenced against it in which an order for relief is entered or
adjudication or appointment is made and which remains undismissed for a period
of sixty (60)&nbsp;days or more; or (e)&nbsp;by any act or omission shall indicate its
consent to, approval of, or acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver,
or trustee for all or any substantial part of its properties; or (f)&nbsp;shall
suffer any such custodianship, receivership, or trusteeship to continue
undischarged for a period of sixty (60)&nbsp;days or more;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp; One or more judgments, decrees, or orders for the payment of money in
excess of Fifty Thousand Dollars ($50,000.00) in the aggregate shall be
rendered against Borrower or any Guarantor and such judgments, decrees, or
orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied, or stayed or
bonded pending appeal;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)&nbsp; Borrower or any Subsidiary shall in any material respect fail to
comply with any statute, rule, regulation, ordinance, order, or other law or
judicial decree regarding such Borrower, its premises or assets;
</FONT>

<P align="center"><FONT size="2">30</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)&nbsp; Borrower defaults under any Other Agreements and such default
continues beyond any applicable cure period provided therein;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9)&nbsp; Any foreclosure, execution or attachment shall be instituted or levied
against the Collateral, or any part thereof, and such foreclosure, execution or
attachment shall not be dismissed, set aside, discharged or stayed within
thirty (30)&nbsp;days after the same shall have been levied; or
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10)&nbsp; If Borrower&#146;s existence shall be liquidated, dissolved or terminated,
or Borrower shall suspend or terminate a substantial portion of its business
operations.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 9.02. Action if Bankruptcy. </B>If any Event of Default described in
<B>Section&nbsp;9.01 (5) </B>shall occur, the Commitment (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and Advances and all other obligations of the Borrower under
the Loan Documents shall automatically be and become immediately due and
payable, without notice or demand or presentment and the Bank shall, subject to
limitations imposed by laws relating to bankruptcy, moratorium and equitable
limitations on enforcement of creditors&#146; rights generally, pursue any and all
rights of the Bank under the Loan Documents including, without limitation,
foreclosure as to any and all pledged Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 9.03. Action if Other Event of Default. </B>Upon the occurrence of
any of the events described in <B>Section&nbsp;9.01 (2), (3), (4)&nbsp;or (6)&nbsp;through (10)</B>,
the Borrower shall have thirty (30)
days after receipt of written notice from the Bank (which may be given by
telefacsimile) within which to effect a cure. If any Event of Default (other
than any Event of Default described in <B>Section&nbsp;9.01 (5</B>) shall occur for any
reason, whether voluntary or involuntary, and be continuing after any
applicable cure period, then, and in any such event, the Bank may: (l)&nbsp;declare
its obligations under this Agreement to be terminated, whereupon the same shall
forthwith terminate; (2)&nbsp;declare the Note, all interest thereon, and all other
amounts payable under this Agreement and the Loan Documents to be forthwith due
and payable, whereupon the Note, all such interest, and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by the
Borrower; and (3)&nbsp;pursue any and all rights of the Bank under the Loan
Documents including, without limitation, foreclosure as to any and all pledged
Collateral.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 9.04. Specific Rights With Regard to Collateral. </B>In addition to
all other rights and remedies provided hereunder or as shall exist at law or in
equity from time to time upon occurrence of an Event of Default, the Bank may
(but shall be under no obligation to), without notice to the Borrower, and the
Borrower hereby irrevocable appoints the Bank as its attorney-in-fact, with
power of substitution, in the name of the Bank or in the name of the Borrower
or otherwise, for the use and benefit of the Bank, but at the cost and expense
of the Borrower and without notice to Borrower, upon the occurrence of an Event
of Default:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">request any lessee under any Lease to make payments directly to
the Bank to the extent such payments are not already being made
directly to the Bank, with the Bank taking control of the cash and
non-cash proceeds thereof;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">31</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">compromise, extend or renew any of the Collateral or deal with
the same as Bank may deem advisable subject to government tax liens
in respective states and municipalities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(iii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">make exchanges, substitutions or surrenders of all or any part
of the Collateral;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(iv)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">copy, transcribe or remove from any place of business of
Borrower any of Borrower&#146;s Books, records, ledger sheets,
correspondence, invoices and documents in any way relating to or
evidencing any of the Collateral or without cost or expense to the
Bank make such use of any of Borrower&#146;s places of business as may be
reasonably necessary to administer, control, and collect the
Collateral;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(v)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">repair, alter or supply goods if necessary to fulfill in whole
or in part the purchase order of any Account debtor;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(vi)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(vii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon any of the Collateral;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(viii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">settle, renew, extend, compromise, compound, exchange or adjust
claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ix)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">endorse or sign the name of the Borrower upon any items of
payment, certificates of title, instruments, securities, stock
powers, documents, documents of title, or other writing relating to
or part of the Collateral including, without limitation, on any Proof
of Claim in Bankruptcy against an Account debtor;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(x)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">take any other action necessary or beneficial to realize upon
or dispose of the Collateral.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2"><B>ARTICLE X</B>
</FONT>


<P align="center"><FONT size="2"><B>MISCELLANEOUS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.01. Amendments, Etc. </B>No amendment, modification, termination,
or waiver of any provision of any Loan Document to which the Borrower is a
party, nor consent to any departure by the Borrower from any Loan Document to
which it is a party, shall in any event be effective unless the same shall be
in writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.02. Notices, Etc. </B>All notices and other communications
provided for under this Agreement and under the other Loan Documents to which
the Borrower is party shall be in writing (including telefacsimile) and mailed
or delivered, if to the Borrower, at 1500 West University Parkway,
</FONT>
<P align="center"><FONT size="2">32</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<P align="left"><FONT size="2">Sarasota, FL
34243, Attention: Chief Financial Officer, Fax No. (941)&nbsp;362- 1268; and if to
the Bank, at its address at 420 North 20th Street, Birmingham, AL 35203, Attn:
Florida Corporate Banking (Tampa), with copy to SouthTrust Bank, 150 2nd Avenue
North, Suite&nbsp;200, St. Petersburg, FL 33701, Attn: Corporate Banking; or, as to
each party, at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this <B>Section&nbsp;10.02</B>. All such notices and communications shall, when mailed or
delivered, be effective when deposited in the mails or delivered to the courier
service, respectively, addressed as aforesaid, except that notices to the Bank
pursuant to the provisions of Article&nbsp;II shall not be effective until received
by the Bank. Notices sent by telefacsimile shall be deemed to be effective
upon machine confirmation of receipt.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.03. No Waiver; Remedies</B>. No failure on the part of the Bank
to exercise, and no delay in exercising, any right, power, or remedy under any
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any rights under any Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.04. Successors and Assigns. </B>This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower
is party without the prior written consent of the Bank.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.05. Costs, Expenses, and Taxes. </B>The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, and administration of any of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Bank, with respect thereto and with respect to advising the
Bank as to its rights and responsibilities under any of the Loan Documents, and
all costs and expenses, if any, in connection with the enforcement of any of
the Loan Documents. In addition, the Borrower shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of any of the Loan Documents and the
other documents to be delivered under any such Loan Documents, and agree to
save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes and fees.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.06. Right of Setoff. </B>Upon the occurrence and during the
continuance of any Event of Default the Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement or the Note or any other Loan
Document, irrespective of whether or not the Bank shall have made any demand
under this Agreement or the Note or such other Loan Document and although such
obligations may be unmatured. The Bank agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The
rights of the Bank under this <B>Section&nbsp;10.06 </B>are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the Bank
may have.
</FONT>

<P align="center"><FONT size="2">33</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.07. Governing Law and Venue. </B>This Agreement and the Note and
all Loan Documents shall be governed by, and construed in accordance with, the
laws of the State of Florida. Any suit brought under or relating to this
Agreement, the Note or any Loan Document shall be brought exclusively in a
court of competent jurisdiction in Hillsborough County, Florida. The foreign
Borrowers expressly agree to and hereby do (i)&nbsp;submit to personal jurisdiction
and venue in the United States District Court in and for the Middle District of
Florida, and (ii)&nbsp;hereby appoint Sun Hydraulics Corporation as their respective
agent in the United States of America for the purpose of receipt of service of
process on the foreign Borrowers, in each case of (i)&nbsp;and (ii)&nbsp;for any action
arising under or in any way relating to the Loan Documents notwithstanding any
provision to the contrary contained in any Loan Document including, without
limitation, the Stock Pledge Agreements described in <B>Section&nbsp;3.01(4)</B>. The
prevailing party in any action brought under or relating to this Agreement, the
Note or any Loan Document shall be entitled to recover its reasonable
attorneys&#146; fees, paralegal&#146;s fees and costs of suit, including fees and costs
on appeal and in bankruptcy proceedings.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.08. Severability of Provisions. </B>Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.09. Headings. </B>Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SECTION 10.10. Waiver of Jury Trial. </B>As an important inducement to the
Bank to enter this Agreement, Borrower and Bank each waive the right to trial
by jury in any action arising under or in any way related to this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF</B>, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>SOUTHTRUST BANK</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>SUN HYDRAULICS CORPORATION,</B><BR>
a Florida corporation</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">By: /s/ H. Lee Culbreath
&nbsp;&nbsp;&nbsp;<HR size="1" noshade>
Name: H. Lee Culbreath<BR>
Title: Senior Vice President</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:/s/ Allen J. Carlson
&nbsp;&nbsp;&nbsp;<HR size="1" noshade>
Name: Allen J. Carlson<BR>
Title: President, Chief Executive Officer</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>SUN HYDRAULIK HOLDINGS LIMITED,</B><BR>
a company incorporated in England and Wales</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>SUN HYDRAULICS LIMITED</B><BR>
a company incorporated in England and<BR>
Wales</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">By: /s/ Allen J. Carlson
&nbsp;&nbsp;&nbsp;<HR size="1" noshade>
Name: Allen J. Carlson<BR>
Title: Authorized Signatory</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By: /s/ Allen J. Carlson
&nbsp;&nbsp;&nbsp;<HR size="1" noshade>
Name: Allen J. Carlson<BR>
Title:  Authorized Signatory</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">34</FONT>



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