LOAN AND SECURITY AGREEMENT

BETWEEN

ENTREPRENEUR GROWTH CAPITAL LLC
505 Park Avenue
New York, New York 10022

AND

BIOANALYTICAL SYSTEMS, INC.
2701 Kent Avenue
West Lafayette, IN 47906

 
 

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This LOAN AND SECURITY AGREEMENT (“Agreement”) dated January 13, 2010 between
BIOANALYTICAL SYSTEMS INC., a Indiana corporation having its principal place of
business at 2701 Kent Avenue, West Lafayette, IN  47906 ("Borrower") and
ENTREPRENEUR GROWTH CAPITAL, LLC, a Delaware limited liability company, having a
principal office at 505 Park Avenue, 6th Floor, New York, NY 10022 (hereinafter
called "Lender").  This Agreement sets forth the terms and conditions upon which
Lender may, in its reasonable business discretion, make loans, advances and
other financial accommodations to or for the benefit of Borrower upon the
security referred to herein.

SECTION 1.         DEFINED TERMS

1.1.           All capitalized terms used in this Agreement are defined either
in this Agreement, in the attached loan schedule (“Loan Schedule”), or in any
supplement to this Agreement or Loan Schedule.  All terms used herein which are
defined in Article 1 or Article 9 of the Uniform Commercial Code (the "UCC")
shall have the same meaning as presently or as may hereafter be given therein
unless otherwise defined in this Agreement.  All references to the plural shall
also mean the singular.

1.2.           "Account" or "Accounts" shall have the same meaning as contained
in Article 9 of the UCC and shall also include contract rights and general
intangibles related to Accounts, payment intangibles, instruments, and all
proceeds thereof including, but not limited to, the proceeds of any insurance
thereon whether or not specifically assigned to Lender.

1.3.           "Account Debtor" shall have the same meaning as contained in
Article 9 of the UCC and shall also include each debtor or obligor in any way
obligated on or in connection with any Account.

1.4.           “Closing Date” means the date of the initial advance made by
Lender pursuant to this Agreement.

1.5.           "Collateral" shall have the meaning set forth in Section 3.1 of
this Agreement.

1.6.           "Collateral Monitoring Fee" shall have the meaning set forth in
the Loan Schedule.

1.7.           "Costs and Expenses" shall include, but not be limited to
commissions, fees, appraisal fees, taxes, title insurance premiums, internal and
external field examination expenses for routine and non-routine audits and field
examinations, filing, recording and search expenses, reasonable internal and
external attorney's fees and disbursements (as may be incurred with respect to
the effectuation of this Agreement or any claim of any nature or litigation
whatsoever arising out of or as a result of the interpretation of this Agreement
or the financing provided for hereunder, including, but not limited to, all fees
and expenses for the service and filing of papers, premiums on bonds and
undertakings, fees of marshals, sheriffs, custodians, auctioneers and others,
travel expenses and all court costs and collection charges), postage, wire
transfer fees, check dishonor fees and other internal and/or external fees,
costs and expenses arising out of or relating to the negotiations, preparation,
consummation, administration and enforcement of this Agreement or any other
agreement between Borrower and Lender including, but not limited to any guaranty
of the Obligations (as defined herein).

 
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1.8            "Eligible Accounts" means Accounts arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
Lender, in its reasonable business discretion, shall deem eligible based on such
considerations as Lender may from time to time deem appropriate.  Without
limiting the foregoing, an Account shall not be deemed to be an Eligible Account
if (i) the Account Debtor has failed to pay the Account within a period of
ninety (90) days after invoice date; (ii) the account debtor has failed to pay
more than 25% of all outstanding Accounts owed by it to Borrower within ninety
(90) days after invoice date; (iii) the Account Debtor's total obligations to
Borrower exceed 15% of all Eligible Accounts, to the extent of such excess; (iv)
the Account Debtor is a subsidiary or affiliate of Borrower; (v) the goods
relating thereto are placed on consignment, guaranteed sale, “bill and hold,”
“COD” or other terms pursuant to which payment by the Account Debtor may be
conditional; (vi) the Account Debtor is not located in the United States unless
the Account is supported by a letter of credit or other form of guaranty or
security, in each case in form and substance satisfactory to Lender; (vii) the
Account Debtor is the United States or any department, agency or instrumentality
thereof or any State, city or municipality of the United States, except as
otherwise agreed to in writing by Lender; (viii) Borrower is or may become
liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower; (ix) the Account Debtor disputes liability or makes any
claim with respect thereto, or is subject to any insolvency or bankruptcy
proceeding, or becomes insolvent, fails or goes out of a material portion of its
business; (x) the amount thereof consists of late charges or finance charges;
(xi) the amount thereof consists of a credit balance more than ninety (90) days
past due; (xii) the invoice constitutes a progress billing on a project not yet
completed in a manner inconsistent with Borrower’s ordinary course practices,
except that the final billing at such time as the matter has been completed and
delivered to the customer may be deemed an Eligible Account; (xiii) the amount
thereof is not yet represented by an invoice or bill issued in the name of the
applicable Account Debtor; (xiv) the amount thereof is denominated in or payable
with any currency other than U.S. Dollars; or (xv) such Account is not at all
times subject to Lender’s duly perfected first priority security interest.  In
determining eligibility, Lender may, but need not, rely on agings, reports and
schedules of Accounts furnished by Borrower but reliance by Lender thereon from
time to time shall not be deemed to limit its right to revise standards of
eligibility at any time without notice as to both Borrower's present and future
Accounts.

1.9.           "Facility Fee" shall have the meaning set forth in the Loan
Schedule.

1.10.         "Line of Credit" as used herein is $3,000,000.00.

1.11.         "Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower and payable to Lender, the patent and/or trademark
and/or copywrite security agreement(s), and any other present or future
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.

1.12.         “Loan Party” "means Borrower, each guarantor and each other party
(other than Lender) to any Loan Document.

1.13.         "Material Adverse Change" shall mean, when used in connection with
the Borrower, any event, state of facts, circumstance, change, development,
action or omission or effect (any such item, an "Change") that, individually or
in the aggregate, has been or could reasonably be expected to be materially
adverse to the business, operations, properties, assets, liabilities, condition
(financial or otherwise), other than any Change resulting from (A) the economy,
political conditions or the financial markets in general (including any changes
resulting from terrorist activities, war or other armed hostilities to the
extent that such Change does not disproportionately affect the Borrower, taken
as a whole, in relation to other companies in the industry in which the Borrower
operates), (B) general changes in the industries in which the Borrower operate
to the extent that such Change does not disproportionately affect the Borrower,
taken as a whole, in relation to other companies in the industry in which the
Borrower operates, (C) changes in law, GAAP or in any interpretation thereof, or
(D) changes in foreign currency exchange rates.

1.14.         "Material Agreement" shall mean any material contract, agreement
or other arrangement that is required to be filed by the Borrower as an exhibit
to a report with the Securities and Exchange Commission.

1.15          "Minimum Interest Charge" shall have the meaning set forth in the
Loan Schedule.

1.16.         "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less sales, excise or similar taxes, and less returns,
discounts, claims, credits, reasonable reserves consistent with past practices
(as determined by Lender in its reasonable business discretion) and allowances
of any nature at any time issued, owing, granted, outstanding, available or
claimed.

1.17.         "Obligations" shall mean any and all loans, advances,
accommodations, indebtedness, liabilities, Costs and Expenses and all
obligations of every kind and nature owing by Borrower to Lender under this
Agreement or any supplement to hereto, however evidenced, whether now existing
or hereafter arising, whether direct or indirect, absolute or contingent, joint
or several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, original, renewed, modified or extended, and including,
without limitation, all sums chargeable to Borrower hereunder or under any of
the other Loan Documents, of whatever nature, including commissions, interest,
expenses, costs and attorneys' fees.  .

 
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1.18.         "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, government, or any agency or political division
thereof, or any other entity.
 
SECTION 2.         LOANS AND ADVANCES; INTEREST RATE AND OTHER CHARGES

2.1.           Loans.  Whenever the Borrower makes a request (but not more
frequently than twice a week unless Lender consents), Lender shall make loans,
advances and/or extend credit to or for the Borrower; but Lender shall not be
obligated to make loans, advances and/or extend credit beyond the Line of Credit
set forth in the Loan Schedule and subject to deduction of any reasonable loan
reserves (“Loan Reserves”) Lender deems proper from time to time in its
reasonable business discretion consistent with past practices, and less amounts
Lender may be obligated to pay in the future on behalf of Borrower.  Advances
under the Line of Credit (“Loans” and individually, a “Loan”) shall be comprised
of the amounts shown on the Loan Schedule.

2.2            Interest and Fees.  The Borrower shall pay Lender the interest
and fees set forth on the Loan Schedule, but only to the maximum extent
permitted by applicable law.  Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any other Loan Document, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.  In no event shall the Revolving Interest Rate or the
Default Rate of Interest exceed the highest rate permitted under any applicable
law or regulation.  If any part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto, and any payment of interest and fees which
individually or collectively might be deemed to be in excess of the highest rate
permitted by law shall be credited against Borrower's Obligations as principal
repayments of loans and advances made hereunder, to the extent of such excess.

2.3            Overlines; Overadvances.  If at any time or for any reason the
outstanding amount of advances extended or issued pursuant hereto exceeds any of
the dollar limitations (“Overline”) or percentage limitations (“Overadvance”) in
the Loan Schedule on any day in any month, then Borrower shall, upon Lender's
demand, immediately pay to Lender, in cash, the full amount of such Overline or
Overadvance which shall be applied to reduce the outstanding principal balance
of the Loans or any other Obligations.  Without limiting Borrower's obligation
to repay to Lender on demand the amount of any Overline or Overadvance, Borrower
agrees to pay Lender interest on the outstanding principal amount of any
Overline or Overadvance, on demand, at the rate set forth on the Loan Schedule,
whether any such Overline or Overadvance is made with or without Lender's
knowledge or consent.

2.4.           (a)           Establishment of a Lockbox Account or Dominion
Account.  Except as otherwise provided in Section 2.4(b), Borrower shall cause
all proceeds of Collateral to be remitted directly to Lender by instructing its
Account Debtors to direct their payments as follows:
 
Name of Borrower
Accounting Department
505 Park Avenue, 6th Floor
New York, NY 10022

   (b)           Lender may, at any time and from time to time, direct Borrower
to collect and deliver to Lender in their original form, on the same date as the
date of the actual receipt thereof, all checks, drafts, notes, acceptances,
cash, wire transfers and any other evidences of payment, and/or direct Borrower
to cause all proceeds of Collateral to be deposited into a lock box account or
other blocked account as Lender may require or take any other action Lender may
require.  Without limiting any rights of Lender to require Borrower to cause
proceeds of Collateral to be delivered to the address set forth in Section
2.4(a) above, upon the execution of a control agreement on terms and conditions
satisfactory to Lender with Borrower’s lockbox bank, Lender agrees that Borrower
may, pursuant to this Section 2.4(b), cause all proceeds of Collateral to be
deposited into a lockbox account or other blocked account upon which Lender
shall have control (and Borrower shall not have access to) pursuant to said
control agreement.

 
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                2.5.          Clearance or Float Days.  In computing interest on
the Obligations, all checks, wire transfers and other items of payment received
by Lender (including proceeds of Accounts and payment of the Obligations in
full) shall be deemed applied by Lender on account of the Obligations on the day
such payment is received or, if received after 12:00 noon New York, NY time, the
next business day.  However, Lender shall be entitled to charge Borrower’s
account five (5) business days of “clearance” or “float” at the Revolving
Interest Rate set forth in the Loan Schedule, on all checks, wire transfers and
other items received by Lender, regardless of whether such five (5) business
days of clearance or float actually occur, and such charge shall be deemed to be
the equivalent of charging five (5) business days of interest on such payments
and/or collections.  The five (5) business days clearance or float charge on all
payments and collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Lender’s financing to Borrower.  Lender shall
not, however, be required to credit Borrower’s account for the amount of any
item of payment which is unsatisfactory to Lender, in Lenders reasonable
business discretion, and Lender may charge Borrower’s loan account for the
amount of any item of payment which is returned to Lender unpaid until Lender
confirms collection or clearance of such item of payment, and Lender may, in
either case, charge Borrower’s loan account for the amount of any item of
payment which is returned to Lender unpaid.

2.6.           Application of Collateral and Payments.  Except as otherwise
provided herein, Lender shall have the continuing and exclusive right to apply
or reverse and re-apply any and all payments to any portion of the Obligations
in such order and manner as Lender shall determine in its reasonable business
discretion.  To the extent that Borrower makes a payment or Lender receives any
payment or proceeds of the Collateral for Borrower’s benefit that is
subsequently invalidated, set aside or required to be repaid to any other
Person, then, to such extent, the Obligations intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Lender and Lender may appropriately adjust the Loan balances, in its reasonable
business discretion.

2.7.           Monthly Accountings.  All Obligations shall be charged to an
account in the Borrower's name as maintained on Lender's books.  Lender shall
render to Borrower a monthly statement of its account which statement shall be
deemed correct, accepted by, and conclusively binding upon Borrower as an
account stated, except to the extent that Borrower shall deliver to Lender
written notice of any specific exceptions thereto within twenty (20) days after
the date such statement is rendered.

2.8.           Charges to Borrower’s Account.  All principal, interest, fees
(including Documentation Fees), commissions, charges, Costs and Expenses
incurred with or in respect of this Agreement, the other Loan Documents or any
supplement or amendment hereto or thereto (all of which shall be cumulative and
not exclusive) and any and all Obligations shall be charged to Borrower's
account as maintained by Lender.  In furtherance thereof, Borrower hereby
authorizes Lender to charge the Borrower's loan account on the first day of each
month or as Lender otherwise determines: (a) all Costs and Expenses; (b) all
interest; and (c) all fees and other charges provided in this Agreement and the
other Loan Documents.

 
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SECTION 3.          GRANTING PROVISIONS; SECURITY INTEREST

3.1            Grant of Security.  As security for the prompt performance,
observance and payment in full of all Obligations, Borrower hereby pledges,
assigns, transfers and grants to Lender a first priority security interest in,
and continuing lien upon, and right of setoff against, all of the personal
property assets of every kind and nature of Borrower, in each case, whether now
owned or existing or hereafter created, acquired or arising and wherever
located, all of which are herein collectively referred to as the "Collateral"
including but not limited to, the following assets as defined under the UCC: (a)
Accounts, contract rights and the proceeds thereof;  (b) Chattel Paper,
including Electronic Chattel Paper and tangible Chattel Paper;  (c)
Collateral;  (d) Commercial Tort Claims;  (e) Deposit Accounts;  (f)
Documents;  (g) subject to the liens of the Equipment Lender as described in
Section 4.1(a), Equipment, machinery, furniture, furnishings and fixtures and
all parts, tools, accessories and Accessions;  (h) Fixtures;  (i) General
Intangibles, including but not limited to patents, trademarks and tradenames and
the goodwill and inherent value associated therewith, tax refunds, customer
lists, insurance claims and goodwill of Borrower;  (j) Goods;  (k) Health Care
Insurance Receivables;  (l) Instruments;  (m) Inventory, merchandise, materials,
whether raw, work in progress or finished goods, packaging and shipping
materials and all other tangible property held for sale or lease;  (n)
Investment Property;  (o) Letter of Credit Rights;  (p) Payment Intangibles; (q)
Proceeds, including Cash Proceeds and Non-Cash Proceeds, and proceeds of any
insurance policies covering any of the Collateral;  (r) Promissory Notes;  (s)
Records, including all books, records and other property at any time evidencing
or relating to any of the foregoing, and all electronic means of storing such
Records;  (t) to the extent not otherwise included above, all collateral support
and Supporting Obligations relating to any of the foregoing; and  (u) to the
extent not otherwise included above, all Proceeds, products, accessions, rents
and profits of or in respect of any of the foregoing; provided however that
Lender shall not be granted a lien and security interest in shares representing
35% of the outstanding shares of each of Borrower's non-US subsidiaries.  The
security interests granted herein shall remain effective whether or not the
Collateral covered thereby is acceptable to Lender or deemed by Lender to be
ineligible for the purposes of any Loans or advances contemplated under this
Agreement.

3.2.           In addition to the foregoing, the Obligations of Borrower shall
be secured by, and the following shall be deemed to be part of the Collateral:
(i) specific liens on and assignments of Borrower’s intellectual property, to be
evidenced by appropriate security agreements and recorded in the United States
Patent and Trademark Office; (ii) a mortgage evidenced by a real estate mortgage
security agreement or other similar instrument in form and substance reasonably
acceptable to Lender, to be recorded on Borrower’s real property located in West
Lafayette, Indiana, subordinate in right only to that certain real estate
mortgage recorded by Regions Bank (f/k/a Union Planters Bank, N.A.); (iii) the
corporate guaranty executed by BAS Evansville, Inc. guaranteeing the Obligations
of Borrower to Lender and secured by a mortgage evidenced by a real estate
mortgage security agreement or other similar instrument in form and substance
reasonably acceptable to Lender, to be recorded on Borrower’s real property
located in Mt. Vernon, Indiana, subordinate in right only to that certain real
estate mortgage recorded by Regions Bank (f/k/a Union Planters Bank, N.A.), and
(iv)  such other collateral as may be hereafter deposited with and/or or pledged
by Borrower and/or any Loan Party, including the guarantors, to Lender.

3.3.           Authorization to File Financing Statements.  Borrower hereby
authorizes Lender to execute and/or file UCC financing statements (including
amendments) in order to perfect the security interests granted to Lender under
this Agreement, the other Loan Documents or otherwise, as well as record
assignments of Borrower’s intellectual property in the United States Patent and
Trademark Office.

3.4.           Assignment of Accounts and Other Collateral.  Borrower shall
collaterally assign and deliver to Lender a duplicate and/or original invoice,
and all original documents evidencing the delivery of goods or the performance
of services with regard to each Account, including but not limited to all
original contracts, purchase orders, invoices, time sheets, bills of lading,
warehouse receipts, delivery tickets and shipping receipts, together with
schedules describing the Accounts and/or written confirmatory assignments to
Lender of each Account, in form and substance satisfactory to Lender and duly
executed by Borrower, together with such other information as Lender may
request.  In no event shall the making (or the failure to make) of any schedule
or assignment or the content of any schedule or assignment or Borrower's failure
to comply with the provisions hereof be deemed or construed as a waiver,
limitation or modification of Lender's security interest in, lien upon and
assignment of the Collateral or Borrower's representations, warranties or
covenants under this Agreement or any supplement or amendment hereto.

SECTION 4.         REPRESENTATIONS, WARRANTIES AND COVENANTS

Borrower hereby represents, warrants and covenants to Lender the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which, and continuing compliance with, being a continuing
condition of the making of all loans and advances hereunder by Lender or under
any supplement or amendment hereto:

 
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4.1.           Owner of Collateral; Validity of Accounts.

(a)            Borrower is and shall be the owner of or has other rights in the
Collateral free and clear of all liens, security interests, claims and
encumbrances of every kind and nature, except in Lender's favor or as otherwise
consented to in writing by Lender, and Borrower shall indemnify and defend
Lender from and against all cost, loss and expense with regard to the
same.  None of Borrower's Accounts has been previously sold or assigned to any
Person and will not be sold or assigned, other than to Lender, at any time
during the term of this Agreement without first obtaining Lender's consent in
writing.  Borrower shall not execute any security agreement in favor of any
other party or borrow against the security of any corporate asset, including but
not limited to the Collateral, or authorize any Person other than Lender to file
UCC financing statements naming Borrower as Debtor, without first obtaining
Lender's consent in writing; provided, however, that Lender hereby acknowledges,
agrees and consents (i) that Borrower may borrow up to $1 million against its
machinery and equipment and grant a lien and security interest to the lender
thereof (the “Equipment Lender”) against Collateral consisting of Borrower’s
machinery and equipment, and (ii) that such lien and security interest in such
machinery and equipment Collateral shall be subject to the terms and conditions
set forth in a certain Lien Subordination Agreement entered into (or to be
entered into) by and between Lender and the Equipment Lender, in form and
substance acceptable to Lender; provided, further, that Lender shall have no
obligation to subordinate its lien in machinery and equipment Collateral if, at
the time of such request, (i) an Event of Default shall have occurred and be
continuing, (ii) Borrower is in breach of a covenant, term or condition of this
Agreement, whether or not Lender elects to call a default, or (iii) if Borrower
is in an Overadvance or Overline.

(b)            Each Account represents a valid and legally enforceable
indebtedness based upon a bona fide sale and delivery of goods or rendition of
services usually dealt in by Borrower in the ordinary course of its
business.  Each Account is and will be for a liquidated amount maturing as
stated in the invoice rendered to the Account Debtor who is unconditionally
liable to make payment of the amount stated in each invoice, document or
instrument evidencing the Account in accordance with the terms thereof, without
offset, defense, deduction, counterclaim, discount or condition, except ordinary
course discounts or deductions consistent with Borrower’s past practices, all of
which Borrower shall promptly notify Lender.  If any Account is not paid in full
within the eligibility parameters set forth in Section 1.8 above or as otherwise
determined by Lender in Lender’s reasonable business discretion (i.e., Lender is
notified of a dispute of deduction of the Account otherwise becomes ineligible),
the amount of such unpaid Account (whether in whole or in part) may be charged
against and deducted from any advance then or thereafter made by Lender to
Borrower or, in the event Borrower then has no borrowing availability, Borrower
shall pay Lender, upon demand, the full amount remaining unpaid thereon.  Such
payment or deduction shall not constitute a reassignment, and Lender may retain
the Account as collateral for all Obligations of Borrower to Lender until the
same have been fully satisfied.

(c)            All statements made and all unpaid balances appearing in the
invoices, documents and instruments evidencing each Account are true and correct
and are in all respects what they purport to be and to Borrower's knowledge all
signatures and endorsements that appear thereon are genuine and all signatories
and endorsers have full capacity to contract.  To Borrower’s knowledge, each
Account Debtor is solvent and financially able to pay in full each
Account.  None of the transactions underlying or giving rise to any Account
shall violate any state or federal laws or regulations, and all documents
relating to the Accounts shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms and
all recording, filing and other requirements of giving public notice under any
applicable law have been and shall be duly complied with.

(d)            Without first obtaining Lender's consent in writing (which
consent shall not be unreasonably withheld) Borrower will not directly or
indirectly sell, lease, transfer, abandon or otherwise dispose of all or any
material portion of the Collateral (except in the ordinary course of business)
or consolidate or merge with or into any other entity or permit any other entity
to consolidate or merge with or into Borrower.

4.2.           Corporate Authority.

(a)            The execution, delivery and performance of this Agreement, any
supplement or amendment hereto, or any agreements, instruments and documents
executed and delivered in connection herewith, are within Borrower's corporate
powers, have been duly authorized, are not in contravention of law or the terms
of Borrower's charter, by-laws or other incorporation papers, or of any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound.

 
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(b)            The Loan Schedule annexed hereto and incorporated herein by
reference sets forth the Borrower's exact legal name, the Borrower's type of
organization, the jurisdiction in which Borrower was organized, the Borrower's
organizational identification number or accurately states that the Borrower has
none, the Borrower's place of business or if more than one, its chief executive
office as well as all other locations including the Borrower's mailing address
if different, the address of every location or place of business previously
maintained by the Borrower during the past five years and the location at which,
or Person with which, any of the Collateral has been previously held at any time
during the past twelve months;

(c)            Borrower is in good standing as a corporation or other legal
entity, validly existing under the laws of its state of incorporation or
organization, and will preserve, renew and keep in full force and effect
Borrower's existence and good standing as a corporation or other legal entity
and its rights and franchises with respect thereto and will not change its state
of incorporation or organization;

(d)            Borrower shall obtain and preserve, renew and keep in full force
and effect Borrower's authority to do business in all jurisdictions where the
Borrower now or hereafter does business;

(e)            Borrower will continue to engage in a business of the same type
as Borrower is engaged as of the date hereof;

(f)            Borrower will give Lender thirty (30) days prior written notice
of any proposed change in Borrower's legal  name which notice shall set forth
the new name; and

(g)            Borrower will give Lender thirty (30) days prior written notice
of any use of any corporate name or tradename in addition to those names set
forth on the annexed Loan Schedule.

4.3.           Chief Executive Office.  Borrower's Records and principal
executive office are maintained at the address referred to herein and Borrower
shall furnish Lender reasonably prompt written notice of any change to such
location.

4.4.           Books, Records, Financial Statements.

(a)            Borrower shall maintain its shipping forms, invoices and other
related documents in a form satisfactory to Lender and shall maintain its books,
records and accounts in accordance with generally accepted accounting principles
consistently applied.  Borrower agrees to promptly furnish Lender monthly but in
no event later than ten (10) days after the end of each month, accounts
receivable agings, together with reconciliation and recap sheets, accounts
payable agings and inventory reports (if requested by Lender).

(b)            Borrower shall furnish to Lender, as soon as available, but in
any event not later than ninety days (90) after the close of each fiscal year,
Borrower’s audited financial statements for such fiscal year (including balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, setting forth in each
case, in comparative form, figures for the previous fiscal year, all in
reasonable detail, fairly representing in all material respects the financial
position and the results of Borrower’s operations as at the date thereof and for
the fiscal year then ended and prepared in accordance with generally accepted
accounting principles consistently applied.  Such reviewed statements shall be
examined in accordance with generally accepted auditing practices and certified
by independent certified public accountants selected by Borrower and acceptable
to Lender.

(c)           Borrower shall also furnish to Lender, as Lender may reasonably
request, quarterly (or monthly if reasonably requested) unaudited financial
statements (including balance sheets, statements of income and loss, statements
of cash flows and statements of shareholders' equity) and the accompanying notes
thereto, all in reasonable detail, fairly presenting  in all material respects
the financial position and results of Borrower’s operation as at the date
thereof and for such period prepared in accordance with generally accepted
accounting principles consistently applied and such other information with
respect to Borrower’s business, operations and condition (financial and
otherwise) as Lender may from time to time reasonably request. Such financial
statements shall be certified for accuracy by Borrower’s chief financial
officer.

 
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(d)            Provided such information may be freely disseminated without
violating any laws, statutes or regulations applicable to publicly traded
entities, Borrower hereby irrevocably authorizes and directs all accountants,
auditors and any other third parties to deliver to Lender, at Borrower's
expense, copies of Borrower's financial statements, papers related thereto, and
other accounting records of any kind or nature in their possession and to
disclose to Lender any information they may have regarding Borrower's business
affairs and financial condition; provided, however that Borrower shall not  have
any liability to Lender for any failure by its accountants, auditors or other
third parties to comply with such direction and any such failure shall not
constitute an Event of Default hereunder.

4.5.           Further Information.  Lender shall have the right to request and
receive from the Borrower's agents, employees, attorneys and accountants all
information pertaining to the Borrower which Lender may reasonably request, and
such persons are hereby authorized and directed by the Borrower to furnish such
information, subject to applicable laws, statutes and regulations regarding
publicly traded entities and privileged communications; provided, however that
Borrower shall not  have any liability to Lender for any failure by its
accountants, auditors or other third parties to comply with such direction and
any such failure shall not constitute an Event of Default hereunder.

4.6.            Solvency; Taxes.

(a)             Borrower is solvent and will so remain.

(b)            Borrower's federal, state and local taxes of every kind and
nature, including, but not limited to employment taxes, are current, and except
as otherwise disclosed to Lender and/or disclosed in Borrower’s public filings,
there are no pending tax audits or examinations with respect to Borrower's
federal, state or local tax returns.

(c)            Borrower shall duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets prior to the date on which penalties attach thereto.  Borrower shall be
liable for all taxes and penalties imposed upon any transaction under this
Agreement or any supplement or amendment hereto or giving rise to the Accounts
or any other Collateral or which Lender may be required to withhold or pay on
behalf of Borrower for any reason.  Borrower agrees to repay to Lender on demand
the amount thereof, and until paid by Borrower such amounts shall be added to
and included in Borrower's Obligations.

4.7.           Litigation.  There is no investigation by any state, federal or
local agency pending or threatened against Borrower and there is no action,
suit, proceeding or claim pending or threatened against Borrower or Borrower's
assets or goodwill or affecting any transactions contemplated by this Agreement,
or any supplement or amendment hereto, or any agreements, instruments or
documents delivered in connection herewith or therewith before any court,
arbitrator, or governmental or administrative body or agency which if adversely
determined with respect to Borrower would result in any material adverse change
in Borrower's business, properties, assets, goodwill or condition, financial or
otherwise.

4.8.           Sales, Accounting and Assignment.  Borrower shall keep and
maintain, at its sole cost and expense, satisfactory and complete Records
including records of all Accounts, all payments received and credits granted
thereon, and all other dealings therewith.  Borrower shall make appropriate
entries in its books and records disclosing Lender's security interest in such
Accounts and each Account created by Borrower shall be deemed collaterally
assigned to Lender.

4.9.           Collections.  In the event payments of Accounts or other monies
or property in which Lender has an interest are delivered to or received by
Borrower, including proceeds from the sale of Collateral in the ordinary course
of Borrower’s business, unless otherwise consented to in writing by Lender or
specifically permitted under Section 2.4 herein, Borrower shall hold all such
remittances and proceeds of Accounts and other Collateral, in trust for
Lender.  Borrower shall deliver all such payments to the lockbox account or
blocked account referred to in Section 2.4(b), in kind with an appropriate
endorsement, on the next business day following the date of receipt by Borrower.

 
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4.10.         Further Acts.  Borrower shall, at Borrower's expense, duly execute
and deliver, or shall cause to be duly executed and delivered, such further
agreements, instruments and documents, including, without limitation, additional
security agreements, collateral assignments, UCC financing statements or
amendments and continuations thereof, landlord's or mortgagee's waivers of liens
and consents to the exercise by Lender of all of its rights and remedies
hereunder, under any supplement or amendment hereto, or applicable law with
respect to the Collateral.  In addition, Borrower shall do or cause to be done
such further acts as may be necessary or proper, in Lender's opinion, to
evidence, perfect, maintain and enforce its security interest and the priority
thereof in and to the Collateral and to otherwise effect the provisions and
purposes of this Agreement or any supplement or amendment hereto.  Borrower
hereby authorizes Lender to execute and file UCC financing statements in order
to perfect the security interests granted to Lender under this Agreement,
including amendments and modification statements deemed reasonably necessary by
Lender to perfect and protect Lender’s interest in the Collateral.

4.11.         Insurance.  Borrower shall, at Borrower's expense, maintain
insurance covering the Collateral in such amounts and with such insurance
companies as may be acceptable to Lender in its reasonable business
discretion.  Borrower shall have Lender named as loss payee and additional
insured on all such insurance policies.  In the event Borrower shall fail to
maintain insurance acceptable to Lender, Lender without notice, may obtain such
insurance in the name of the  Borrower and charge Borrower's account with the
costs and expenses of such insurance. All expenses incurred by Lender with
regard to such insurance policies shall be deemed part of the Obligations.

4.12.         Margin Stock.  The Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation G
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any Loan or advances made by Lender to Borrower will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock, or in any manner which might cause such
loan or advance or the application of such proceeds to violate (or require any
regulatory filing under) Regulation G, Regulation U, or Regulation X of the
Board of Governors of the Federal Reserve System, in each case as in effect on
the date or dates of such loan or advance and such use of proceeds.  Further, no
proceeds of any loan or advance will be used to acquire any security of a class
which is registered pursuant to Section 12 of the Securities Exchange Act of
1934.

4.13.         Loan Proceeds for Ordinary Business Use Only.  Any loan at any
time received by the Borrower from Lender shall not be used directly or
indirectly other than in the Borrower's business; it shall not, directly or
indirectly, pay any dividend on its stock other than a dividend payable in
shares of its own stock; it shall not, directly or indirectly, make any loan to,
or pay any claim other than for current remuneration or current reimbursable
expense payable to any person controlling, controlled by or under common control
with the Borrower, and it shall, on demand, obtain and deliver to Lender
subordinations in form and substance satisfactory to Lender of all claims of
controlling and controlled persons consistent with the foregoing.

4.14.         Commercial Tort Claim.  The Borrower shall immediately notify
Lender in a writing signed by the Borrower of any commercial tort claims it
holds or acquires such writing shall set forth the details and grant Lender a
security interest in and to any commercial tort claims it holds or acquires and
in the proceeds thereof, such writing to be satisfactory to Lender in form and
substance.

4.15.         Net Worth Covenant.  Borrower shall have a minimum tangible net
worth (total assets minus intangible assets minus total liabilities, all as
defined in accordance with generally accepted accounting principles in effect in
the United States from time to time) of not less than $9,500,000.

 
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SECTION 5.         ADDITIONAL POWERS; ENFORCEMENT OF RIGHTS IN AND TO COLLATERAL

5.1.           Power of Attorney.  Borrower appoints Lender and Lender’s
designees as Borrower's attorney and attorney-in-fact, at Borrower’s sole cost
and expense, and Lender may exercise at any time (unless otherwise specified
below), in Lender’s reasonable business discretion, all or any of the following
powers which, being coupled with an interest, shall be irrevocable until all
Obligations have been paid in full and Lender’s obligation to provide loans
hereunder shall have terminated:

(a)            endorse Borrower's name on any checks, notes, acceptances, money
orders or other forms of payment or security that come into Lender’s possession;

(b)            sign Borrower's name on any invoice or bill of lading relating to
any Account, on drafts against Account Debtors, on assignments of Accounts, on
notices of assignment, financing statements and other public records, on
verifications of accounts and on notices to Account Debtors;

(c)            send requests for verification of Accounts to Account Debtors
and, after the occurrence of any Event of Default, to notify Account Debtors to
make payment directly to Lender; and

(d)            to do all other things Lender deems reasonably necessary or
desirable to carry out the terms of this Agreement.

(e)            Borrower hereby ratifies and approves all acts of such
attorney.  Neither Lender nor any of its designees shall be liable for any acts
or omissions nor for any error of judgment or mistake of fact or law while
acting as Borrower's attorney and Borrower hereby releases Lender and Lender's
officers, employees and designees, from all liability arising from any act or
acts under this Agreement or in furtherance thereof, whether by omission or
commission, and whether based upon any error of judgment or mistake of law or
fact.

5.2.           Access to Books, Records and Collateral.  Lender or Lender's
representatives shall at all reasonable times and upon reasonable prior notice
have free access to and right of inspection of the Collateral and have full
access to and the right to examine and make copies of Borrower's Records, to
confirm and verify all Accounts, to perform general audits and field
examinations and to do whatever else Lender deems reasonably necessary to
protect Lender's interests.  Lender may at any reasonable time upon reasonable
prior notice require Borrower to deliver copies of (or after the occurrence of a
material Event of Default, original copies) any Records to Lender.  Lender may,
at Borrower's cost and expense, use any of Borrower's personnel, supplies,
computer equipment (including all computer programs, software and data) and
space at Borrower's places of business or at any other place as Lender may
designate, as may be reasonably necessary for the handling of collections.

5.4.           Returns; Credits.  All returns of merchandise, credits issued by
Borrower, claims or disputes of Account Debtors whether or not accepted by
Borrower or given an allowance of any nature shall be reported by Borrower to
Lender at least weekly.  Each such report shall be accompanied by copies of all
documentation provided to Borrower in support of all merchandise returns,
credits, claims and disputes.  Borrower shall, promptly upon obtaining knowledge
thereof, report to Lender all reclaimed, repossessed and returned goods, Account
Debtor claims and any other matter affecting the value, enforceability or
collectability of Accounts.  At Lender's request, any goods reclaimed or
repossessed by or returned to Borrower will be set aside, marked with Lender's
name and held by Borrower (at Borrower's place of business or at such other
place as Lender may designate) for Lender's account and subject to Lender's
security interest.  Notwithstanding the foregoing, Lender may require Borrower
to pay to Lender the original invoice price of such reclaimed, repossessed or
returned goods.  In case any such goods shall be re-sold, the Account thereby
created shall be subject to Lender's security interest.

5.5            Disputes.  All claims and disputes relating to Accounts shall be
adjusted within a reasonable time at Borrower's own cost and expense.

 
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SECTION 6.          DEFAULTS AND REMEDIES.

6.1.           The occurrence of any one or more of the following constitute
events of default (“Events of Default”):

(a)            The material breach by the Borrower of any of the terms,
representations, warranties, covenants, conditions or provisions of this
Agreement of any of the Loan Documents or any supplement or amendment hereto or
thereto, which, provided it shall not constitute any other Event of Default,
shall remain uncured for more than thirty (30) days after notice thereof to the
Borrower; or

(b)            The failure of the Borrower to pay any Obligation to Lender
calling for the payment of money pursuant to this Agreement or any of the Loan
Documents, as and when the same should be paid; the Borrower becoming insolvent
or otherwise failing to meet its or their debts as they mature; the Borrower
suspending or discontinuing its business for any reason; the Borrower commencing
or having commenced against it a petition for a receivership of its business or
property or a bankruptcy or any other legal proceeding or action relating to the
relief of debtors or the readjustment of debts; the Borrower making an
assignment for the benefit of creditors, seeking a composition of creditors or
calling a meeting of creditors or have a creditors' committee appointed; or
Borrower suffering a lien against or judgment or the attachment of any of its
property (which has not been bonded or otherwise secured); having a receiver,
custodian or trustee of any kind appointed with regard to any property of
Borrower; the Borrower disposing of any property included in the Collateral
otherwise than in accordance with this Agreement; or the Borrower committing or
suffering, by any of its agents or employees, a fraudulent conversion of any
material part of the Collateral;.

(c)            Any Material Adverse Change occurs in Borrower's business,
assets, operations, prospects or condition, financial or otherwise, or the
prospect of repayment of any portion of the Obligations or the value or priority
of Lender’s security interest in the Collateral is materially impaired;

(d)            Any default shall occur under any Material Agreement between
Borrower and any third party including, without limitation, any default which
would result in a right by such third party to accelerate the maturity of any
indebtedness of Borrower to such third party in excess of $ 50,000;

(e)            Any representation or warranty made or deemed to be made by
Borrower, any affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to Lender in connection
therewith shall prove to be false or misleading or the failure to disclose any
material disclosure which if disclosed shall prove to have been misleading in
any material respect;

(f)             Any guarantor of the Obligations hereunder dies, terminates or
attempts to terminate its guaranty or any security therefor or becomes subject
to any bankruptcy or other insolvency proceeding; or

(g)            Any transfer of the issued and outstanding shares of common stock
or other evidence of ownership of Borrower which would result in a change in
control.

NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, LENDER RESERVES THE RIGHT TO
CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND THEREAFTER IF AN
EVENT OF DEFAULT HAS OCCURRED.

 
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6.2.           REMEDIES.

(a)            Upon the occurrence of an Event of Default, Lender may, at its
option and in its sole discretion and in addition to all of its other rights
under the UCC, this Agreement, and the other Loan Documents, cease making
advances or Loans, charge the Default Rate of Interest on all Obligations,
terminate this Agreement and/or declare all of the Obligations to be immediately
payable in full.  Borrower agrees that Lender shall also have all of its rights
and remedies under applicable law, including without limitation, the default
rights and remedies of a secured party under the UCC (which includes the right
to notify Account Debtors of the Borrower to make payment directly to Lender),
and upon the occurrence of an Event of Default, Borrower hereby consents to the
appointment of a receiver by Lender in any action initiated by Lender pursuant
to this Agreement and to the jurisdiction and venue set forth in this Agreement,
and Borrower waives notice and posting of a bond in connection therewith.

                (b)           Lender is authorized and empowered at any time
upon the occurrence and continuation of an Event of Default, to compromise or
extend the time for payment of any Account, for such amounts and upon such terms
as Lender may, in its sole discretion determine and to accept the return of the
merchandise represented by any Account, all without notice to or consent by
Borrower, and without discharging or affecting Borrower's Obligations hereunder
to any extent, and Borrower will, upon demand, pay to Lender the amount of any
allowance given or authorized by Lender hereunder.

(c)            Lender may, at any time upon the occurrence and continuation of
an Event of Default, take possession of the Collateral and keep it on Borrower's
premises, at no cost to Lender, or remove any part of it to such other place(s)
as Lender may desire.  In the event Lender seeks to take possession of all or
any portion of the Collateral by judicial process (including, but not limited
to, Lender obtaining an order of attachment, a temporary restraining order, a
preliminary or permanent injunction or otherwise) against the Borrower or with
regard to the Collateral, Borrower irrevocably waives the posting of any bond,
surety or security with respect thereto which might otherwise be required, any
demand for possession prior to the commencement of any suit or action to recover
the Collateral, and any requirement that Lender retain possession and not
dispose of any Collateral until after trial or final judgment.

(d)            Lender shall have the right in such manner and upon such terms as
Lender shall determine in Lender’s reasonable business discretion, to enforce
payment of any Collateral, to settle, compromise or release in whole or in part,
any amounts owing on any Collateral, to prosecute any action, suit or proceeding
with respect to the Collateral, to extend the time of payment of any and all
Collateral, to make allowances and adjustments with respect thereto, to issue
credits in Lender's or Borrower's name, to sell, assign and deliver the
Collateral (or any part thereof) at public or private sale, for cash, upon
credit or otherwise at Lender's sole option and discretion, and Lender may bid
or become purchaser at any such sale, free from any right of redemption which is
hereby expressly waived to the extent permitted by applicable law.  Borrower
agrees that Lender has no obligation to preserve rights to the Collateral or
marshaling any Collateral for the benefit of any Person.  Lender may sell the
Collateral without giving any warranties as to the Collateral and may
specifically disclaim any warranties of title or the like without affecting the
commercial reasonableness of the sale of any of the Collateral.  Lender is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, name, trade secrets, trade names, trademarks and
advertising matter, or any similar property, in completing production,
advertising or selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit.  Borrower agrees
that the giving of ten (10) days' notice by Lender, sent by ordinary mail,
postage prepaid, to Borrower's address set forth herein, designating the place
and time of any public sale or of the time after which any private sale or other
intended disposition of the Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice with respect
thereto.

(e)            The net cash proceeds, after deducting all costs and expenses of
sale (including attorneys’ fees and other professional fees), resulting from the
exercise of any of Lender's rights or remedies under this Agreement, the UCC or
other applicable law, shall be applied by Lender to the payment of the
Obligations in such order as Lender may elect, in Lender’s sole
discretion.  Lender shall return any excess to Borrower and Borrower shall
remain liable to Lender for any deficiency, to the fullest extent permitted by
law.  Without limiting the generality of the foregoing, if Lender enters into
any credit transaction, directly or indirectly, in connection with the
disposition of any Collateral, Lender shall reduce the Obligations by the amount
of such credit transaction.

 
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(f)             The enumeration of the foregoing rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies Lender may have under
the UCC or other applicable law.  Lender shall have the right, in Lender's sole
and absolute discretion, to determine which rights and remedies, and in which
order any of the same, are to be exercised, and to determine which Collateral is
to be proceeded against and in which order, and the exercise of any right or
remedy shall not preclude the exercise of any others, all of which shall be
cumulative.

(g)            No act, failure or delay by Lender shall constitute a waiver of
any of its rights or remedies.  No single or partial waiver by Lender of any
provision of this Agreement or any supplement or amendment hereto, or breach or
default thereunder, or of any right or remedy which Lender may have shall
operate as a waiver of any other provision, breach, default, right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.

(h)            Borrower waives presentment, notice of dishonor, protest and
notice of protest of all instruments included in or evidencing any of the
Obligations or the Collateral and any and all notices or demands whatsoever
(except as expressly provided herein).  Lender may, at all times, proceed
directly against Borrower or any guarantor or endorser to enforce payment of the
Obligations and shall not be required to take any action of any kind to
preserve, collect or protect Lender's or Borrower's rights in the Collateral.

SECTION 7.         MISCELLANEOUS

7.1.           Term.  This Agreement shall become effective upon acceptance by
Lender and shall continue in full force and effect for a term ending on the last
business day of the month, one (1) year from the date hereof (the "Initial
Term") and shall automatically renew from year to year thereafter (each, a
“Renewal Term”) until terminated pursuant to the terms hereof.  In addition to
Lender's right to declare this Agreement immediately terminated at any time upon
the occurrence of an Event of Default, Lender may terminate this Agreement at
the end of the Initial Term or upon the expiration or any Renewal Term by giving
Borrower at least sixty (60) days prior written notice of such termination by
registered or certified mail, return receipt requested.  Borrower may terminate
this Agreement at the expiration of the Initial Term or upon the expiration of
any Renewal Term by giving Lender at least sixty (60) days prior written notice
of such termination by registered or certified mail, return receipt
requested.  No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, obligations and covenants hereunder
until all Obligations have been paid in full and Lender's continuing security
interest in and to the Collateral shall remain in effect until all such
Obligations have been fully discharged.

7.2.           Early Termination Fee.  If Lender terminates this Agreement upon
the occurrence of an Event of Default or if Borrower terminates this Agreement,
in either case prior to the expiration of the Initial Term or the expiration of
any Renewal Term, in view of the impracticality and extreme difficulty in
ascertaining Lender's actual damages and by mutual agreement of the parties as
to a reasonable calculation of Lender's lost profits as a result thereof,
Borrower hereby agrees that, in addition to payment of the Obligations as
provided herein, Borrower shall immediately pay to Lender by wire transfer,
certified check or bank cashier's check, liquidated damages of an amount equal
to the total of the Minimum Interest Charges for the number of months remaining
until the expiration of the Initial Term or the expiration of any Renewal Term,
as applicable.  Prior to its actual receipt of payment as aforesaid, Lender
shall be free to exercise, without limitation, all of its right under this
Agreement.  The liquidated damages provided for in this Section shall be deemed
included in the Obligations and shall be presumed to be the amount of damages
sustained by Lender due to the Borrower's early termination and Borrower agrees
that such damages are reasonable and appropriate under the circumstances
currently existing.

7.3.           One General Obligation; Cross Collateral.  All Loans and advances
by Lender to Borrower under this Agreement, the other Loan Documents and under
all other agreements, present and future, between Lender and Borrower constitute
one loan, and all indebtedness and obligations of Borrower to Lender under this
Agreement, the other Loan Documents, and under all other agreements, present and
future, between Lender and Borrower, constitute one general obligation secured
by the Collateral and security held and to be held by Lender hereunder and by
virtue of all other agreements between Borrower (and all guarantors) and Lender
now and hereafter existing.  It is distinctly understood and agreed that all of
the rights of Lender contained in this Agreement shall likewise apply insofar as
applicable to any modification of or supplement to this Agreement, the other
Loan Documents and to any other agreements, present and future, between Lender
and Borrower.

 
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7.4.           Binding on Successor and Assigns; Severability.  All terms,
conditions, promises, covenants, provisions and warranties shall inure to the
benefit of and bind Lender’s and Borrower's respective representatives,
successors and assigns.  If any provision of this Agreement shall be prohibited
or invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.

7.5.           Amendments; Assignments.  This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
Lender, which requirement shall not be modified by oral agreement or by course
of conduct.  Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including, without
limitation, any of Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder.  Borrower hereby consents to Lender’s
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including, without limitation, Lender’s rights,
title, interests, remedies, powers and duties hereunder or thereunder.  In
connection therewith, subject to compliance with federal and state securities
laws regarding the disclosure of material non-public information, Lender may
disclose all documents and information which Lender now or hereafter may have
relating to Borrower or Borrower's business.  To the extent that Lender assigns
its rights and obligations hereunder to a third party, Lender shall thereafter
be released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third party.

7.6.           Integration; Survival.  This Agreement, together with the Loan
Schedule (which is a part hereof) and the other Loan Documents, reflect the
entire understanding of the parties with respect to the transactions
contemplated hereby.  All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties.  No termination of this Agreement (or of any
guaranty of the Obligations) shall affect or impair the powers, obligations,
duties, rights, representations, warranties or liabilities of the parties hereto
and all shall survive such termination.

7.7.           Evidence of Obligations.  Each Obligation may, in Lender’s
discretion, be evidenced by notes or other instruments issued or made by
Borrower to Lender.  If not so evidenced, such Obligation shall be evidenced
solely by entries upon Lender’s books and records.

7.8.           Loan Requests.  Each oral or written request for an advance by
any Person who purports to be any employee, officer or authorized agent of
Borrower shall be made to Lender on or prior to 11:00 a.m., NY time, on the
business day on which the proceeds thereof are requested to be paid to Borrower
and shall be conclusively presumed to be made by a Person authorized by Borrower
to do so and the crediting of a loan to Borrower's operating account shall
conclusively establish Borrower's obligation to repay such loan. Unless and
until Borrower otherwise directs Lender in writing, all loans shall be wired to
Borrower's operating account set forth on the Loan Schedule.

7.9            Brokerage Fees.  Borrower represents and warrants to Lender that,
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission and Borrower agrees to
indemnify and hold Lender harmless against any and all such claims.

7.10           Application of Insurance Proceeds.  The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys’ fees) of collection, shall be applied, at
Lender’s option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to Lender, or toward payment of the
Obligations.  Any proceeds applied to the payment of Obligations shall be
applied in such manner as Lender may elect.  In no event shall such application
relieve Borrower from payment in full of all installments of principal and
interest which thereafter become due in the order of maturity thereof or with
respect to the payment of fees and costs.

 
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               7.11.          Notices, Correspondence.  All notices, requests,
demands and other communications under this Agreement shall be in writing and
will be personally served, telecopied or sent by overnight courier service or
United States mail and will be deemed to have been given: (i) if delivered in
person, when delivered; (ii) if delivered by telecopy, on the date of
transmission if transmitted on a business day before 4:00 p.m. New York time or,
if not, on the next succeeding business day; (iii) if delivered by overnight
courier, the following business day after depositing with such courier, properly
addressed; or (iv) if by U.S. Mail, four (4) business days after depositing in
the United States mail, with postage prepaid and properly addressed.  All
notices, requests and demands are to be given or made to the respective parties
at the addresses set forth herein or at such other addresses as either party may
designate in writing by notice in accordance with the provisions of this
paragraph.  All notices to Lender should be addressed to the attention
of:  Portfolio Manager.  All notices to Borrower should be addressed to the
attention of :  Chief Financial Officer.

7.12.         Governing Law.  This Agreement and all transactions hereunder are
deemed to be consummated in the State of New York and shall be governed by and
interpreted in accordance with the substantive and procedural laws of the State
of New York (without regard to any choice of law rules).  If any part or
provision of this Agreement shall be determined to be invalid or in
contravention of any applicable law or regulation of the controlling
jurisdiction, such part or provision shall be severed without affecting the
validity of any other part or provision of this Agreement.

7.13.         JURY WAIVER.  BORROWER AND LENDER EACH HEREBY WAIVE ALL RIGHTS TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY SUPPLEMENT OR
AMENDMENT HERETO OR THERETO.  BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF SETOFF
AND RIGHTS TO INTERPOSE ANY DEFENSES AND/OR COUNTERCLAIMS IN THE EVENT OF ANY
LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND ANY SUPPLEMENT OR AMENDMENT HERETO OR THERETO (OTHER THAN
DEFENSES OR COUNTERCLAIMS THAT MUST BE MADE OR DEEMED WAIVED).  BORROWER HEREBY
IRREVOCABLY CONSENTS AND SUBMITS TO THE JURISDICTION AND VENUE OF THE COURTS OF
THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK (WITHOUT REGARD TO ANY
CHOICE OF LAW RULES) OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING OF ANY KIND
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY
SUPPLEMENT OR AMENDMENT HERETO OR THERETO.  BORROWER AGREES THAT ANY ACTION
BROUGHT BY IT AGAINST LENDER WITH REGARD TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND ANY SUPPLEMENT OR AMENDMENT HERETO OR THERETO, SHALL BE SUBJECT TO
THE EXCLUSIVE JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO ANY CHOICE OF LAW RULES), LOCATED IN THE COUNTY OF NEW YORK
OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.

7.14.         Service.  In any litigation brought by Lender, Borrower waives
personal service of any summons, complaint or other process and agrees that
service thereof may be made by certified or registered mail directed to Borrower
at Borrower's address set forth in the preamble of this Agreement.

7.15.         Lien Termination.  In recognition of Lender’s right to have all of
its attorneys’ fees and other expenses incurred in connection with this
Agreement secured by the Collateral, notwithstanding the payment in full of the
Obligations, Lender shall not be required to execute or record any terminations
or satisfactions of any of its liens on the Collateral unless and until Borrower
(and all Guarantors) have executed and delivered to Lender general releases of
all claims, in form and substance satisfactory to Lender in Lender’s reasonable
discretion.

7.16          Publication.  Borrower and Lender agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any party without the prior consent of the other parties (which consent shall
not be unreasonably withheld, conditioned or delayed), except as such release or
announcement may be required by law, in which case the party required to make
the release or announcement shall use its reasonable best efforts to allow the
other party reasonable time to comment on such release or announcement in
advance of such issuance.

 
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7.17.         Counterparts; Facsimile Execution.  This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence.  An executed facsimile of
this Agreement shall be deemed to be a valid and binding agreement between the
parties hereto.

 
BIOANALYTICAL SYSTEMS INC.
             
By:
     
Name:
Michael R. Cox
 
Title:
Vice President - Finance
       
ACCEPTED:
       
ENTREPRENEUR GROWTH CAPITAL LLC
       
By:
     
Name:
Dean Landis
 
Title:
President

STATE OF INDIANA
)
 
)ss.:
COUNTY OF
)

On this 13th day of January, 2010 before me personally appeared Michael R.
Cox,  personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he/she a Vice President of BIOANALYTICAL SYSTEMS
INC., the corporation herein described and that he/she executed the same in
his/her capacity as an officer of said corporation, and that he/she signed the
instrument by order of the board of directors of said corporation.

       
Notary Public

 
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