Exhibit 10.1

 

Conformed Copy

 

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”)
dated as of April 25, 2011 but effective as of the Effective Date between
SILICON VALLEY BANK, a California corporation, with its principal place of
business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan
production office located at 275 Grove Street, Suite 2-200, Newton,
Massachusetts 02466 (“Bank”), and AXCELIS TECHNOLOGIES, INC. and AXCELIS
TECHNOLOGIES CCS CORPORATION, each a Delaware corporation with offices located
at 108 Cherry Hill Drive, Beverly, Massachusetts 01915 (individually and
collectively, jointly and severally “Borrower”), provides the terms on which
Bank shall lend to Borrower and Borrower shall repay Bank.  This Agreement
amends and restates in its entirety that certain Amended and Restated Loan and
Security Agreement dated as of March 12, 2010 by and among Borrower and Bank. 
The parties agree as follows:

 

1                                         ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following
GAAP.  Calculations and determinations must be made following GAAP.  Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13.  All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

 

2                                         LOAN AND TERMS OF PAYMENT

 

2.1                               Promise to Pay.  Borrower hereby
unconditionally promises to pay Bank the outstanding principal amount of all
Credit Extensions and accrued and unpaid interest thereon as and when due in
accordance with this Agreement.

 

2.1.1                     Revolving Advances.

 

(a)                                  Availability.  Subject to the terms and
conditions of this Agreement and to deduction of Reserves, Bank shall make
Advances not exceeding the Availability Amount.  Amounts borrowed under the
Revolving Line may be repaid and, prior to the Revolving Line Maturity Date,
reborrowed, subject to the applicable terms and conditions precedent herein.

 

(b)                                 Termination; Repayment.  The Revolving Line
terminates on the Revolving Line Maturity Date, when the principal amount of all
Advances, the unpaid interest thereon, and all other Obligations relating to the
Revolving Line shall be immediately due and payable.

 

2.1.2                     Letters of Credit Sublimit.

 

(a)                                  As part of the Revolving Line and subject
to the deduction of Reserves, Bank shall issue Letters of Credit for Borrower’s
account.  The face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed
the lesser of (A) Ten Million Dollars ($10,000,000), minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the FX Reserve,
or (B) the lesser of Revolving Line or the Borrowing Base, minus (i) the sum of
all outstanding principal amounts of any Advances (including any amounts used
for Cash Management Services), and minus (ii) the FX Reserve.  If, on the
Revolving Line Maturity Date (or the effective date of any termination of this
Agreement), there are any outstanding Letters of Credit, then on such date
Borrower shall provide to Bank cash collateral in an amount equal to 105% of the
face amount of all such Letters of Credit plus all interest, fees, and costs due
or to become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to said Letters of
Credit.  All Letters of Credit shall be in form and substance acceptable to Bank
in its sole discretion and shall be subject to the terms and conditions of
Bank’s standard Application and Letter of Credit Agreement (the “Letter of
Credit Application”).  Borrower agrees to execute any further documentation in

 

--------------------------------------------------------------------------------

 

connection with the Letters of Credit as Bank may reasonably request.  Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guarantied by Bank and opened for Borrower’s account or
by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s
account, and Borrower understands and agrees except in the case of gross
negligence or willful misconduct by Bank that Bank shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.

 

(b)                                 The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute,
unconditional, and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, such Letters of Credit, and the Letter of
Credit Application.

 

(c)                                  Borrower may request that Bank issue a
Letter of Credit payable in a Foreign Currency.  If a demand for payment is made
under any such Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus fees and charges in
connection therewith such as wire, cable, SWIFT or similar charges) in Dollars
at the then-prevailing rate of exchange in San Francisco, California, for sales
of the Foreign Currency for transfer to the country issuing such Foreign
Currency.

 

(d)                                 To guard against fluctuations in currency
exchange rates, upon the issuance of any Letter of Credit payable in a Foreign
Currency, Bank shall create a reserve (the “Letter of Credit Reserve”) under the
Revolving Line in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit.  The amount of the Letter of Credit Reserve may be
adjusted by Bank from time to time to account for fluctuations in the exchange
rate.  The availability of funds under the Revolving Line shall be reduced by
the amount of such Letter of Credit Reserve for as long as such Letter of Credit
remains outstanding.

 

2.1.3                     Foreign Exchange Sublimit.  As part of the Revolving
Line and subject to the deduction of Reserves, Borrower may enter into foreign
exchange contracts with Bank under which Borrower commits to purchase from or
sell to Bank a specific amount of Foreign Currency (each, a “FX Forward
Contract”) on a specified date (the “Settlement Date”).  FX Forward Contracts
shall have a Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to Ten
Million Dollars ($10,000,000.00) (the “FX Reserve”). The aggregate amount of FX
Forward Contracts at any one time shall not exceed ten (10) times the lesser of
(A) Ten Million Dollars ($10,000,000), minus (i) the sum of all amounts used for
Cash Management Services, and minus (ii) the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve), or (B) the lesser of Revolving Line or the Borrowing
Base, minus (i) the sum of all outstanding principal amounts of any Advances
(including any amounts used for Cash Management Services), and minus (ii) the
face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve).  Any amounts
needed to fully reimburse Bank will be treated as Advances under the Revolving
Line and will accrue interest at the interest rate applicable to Advances.

 

2.1.4                     Cash Management Services Sublimit.  Borrower may use
up to the lesser of (A) Ten Million Dollars ($10,000,000), minus (i) the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve), and minus (ii) the FX
Reserve, or (B) the lesser of Revolving Line or the Borrowing Base, minus
(i) the sum of all outstanding principal amounts of any Advances, minus the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve), and minus (iii) the FX
Reserve, for Bank’s cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank’s various cash management services agreements
(collectively, the “Cash Management Services”).  Any amounts Bank pays on behalf
of Borrower for any Cash Management Services and not immediately reimbursed will
be treated as Advances under the Revolving Line and will accrue interest at the
interest rate applicable to Advances.

 

2.2                               Overadvances. If, at any time, (i) the sum of
(a) the outstanding principal amount of any Advances (including any amounts used
for Cash Management Services), plus (b) the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve), plus (c) the aggregate amount of any outstanding FX
Forward Contracts exceeds (ii) the lesser of either the Revolving Line or the
Borrowing Base (the amount by which (i) exceeds (ii) being an “Overadvance”),
Borrower shall immediately pay to Bank in cash such Overadvance.  Without
limiting Borrower’s obligation to repay Bank any amount of the

 

2

--------------------------------------------------------------------------------

 

Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of
any Overadvance, on demand, at the Default Rate.

 

2.2.1                     General Provisions Relating to the Credit Extensions. 
Each Credit Extension shall, at Borrower’s option in accordance with the terms
of this Agreement, be either in the form of a Prime Rate Credit Extension or a
LIBOR Credit Extension; provided that in no event shall Borrower maintain at any
time LIBOR Credit Extensions having more than three (3) different Interest
Periods.  Borrower shall pay interest accrued on the Credit Extensions at the
rates and in the manner set forth in Section 2.3.

 

2.3                               Payment of Interest on the Credit Extensions.

 

(a)                                  Computation of Interest.  Interest on the
Credit Extensions and all fees payable hereunder shall be computed on the basis
of a 360-day year and the actual number of days elapsed in the period during
which such interest accrues.  In computing interest on any Credit Extension, the
date of the making of such Credit Extension shall be included and the date of
payment shall be excluded; provided, however, that if any Credit Extension is
repaid on the same day on which it is made, such day shall be included in
computing interest on such Credit Extension.

 

(b)                                 Credit Extensions.  Each Credit Extension
shall bear interest on the outstanding principal amount thereof from the date
when made, continued or converted until paid in full at a rate per annum equal
the Prime Rate plus the Prime Rate Margin or the LIBOR Rate plus the LIBOR Rate
Margin, as the case may be.  On and after the expiration of any Interest Period
applicable to any LIBOR Credit Extension outstanding on the date of occurrence
of an Event of Default or acceleration of the Obligations, the Effective Amount
of such LIBOR Credit Extension shall, during the continuance of such Event of
Default or after acceleration, bear interest at a rate per annum equal to the
Prime Rate plus the Prime Rate Margin plus three and one half of one percent
(3.50%).  Pursuant to the terms hereof, interest on each Credit Extension shall
be paid in arrears on each Interest Payment Date.  Interest shall also be paid
on the date of any prepayment of any Credit Extension pursuant to this Agreement
for the portion of any Credit Extension so prepaid and upon payment (including
prepayment) in full thereof.  All accrued but unpaid interest on the Credit
Extensions shall be due and payable on the Revolving Line Maturity Date.

 

(c)                                  Default Interest.  Except as otherwise
provided in Section 2.3(b), after an Event of Default, Obligations shall bear
interest three and one half of one percent (3.50%) above the rate effective
immediately before the Event of Default (the “Default Rate”).  Payment or
acceptance of the increased interest provided in this Section 2.3(c) is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

 

(d)                                 Prime Rate Credit Extensions.  Each change
in the interest rate of the Prime Rate Credit Extensions based on changes in the
Prime Rate shall be effective on the effective date of such change and to the
extent of such change.  Bank shall use its best efforts to give Borrower prompt
notice of any such change in the Prime Rate; provided, however, that any failure
by Bank to provide Borrower with notice hereunder shall not affect Bank’s right
to make changes in the interest rate of the Prime Rate Credit Extensions based
on changes in the Prime Rate.

 

(e)                                  LIBOR Credit Extensions.  The interest rate
applicable to each LIBOR Credit Extension shall be determined in accordance with
Section 3.6(a) hereunder.  Subject to Sections 3.6 and 3.7, such rate shall
apply during the entire Interest Period applicable to such LIBOR Credit
Extension, and interest calculated thereon shall be payable on the Interest
Payment Date applicable to such LIBOR Credit Extension.

 

(f)                                    Debit of Accounts.  Bank may debit any of
Borrower’s deposit accounts, including the Designated Deposit Account, for
principal and interest payments or any other amounts Borrower owes Bank when
due.  These debits shall not constitute a set-off.

 

(g)                                 Payments.  Unless otherwise provided,
interest is payable monthly in arrears on the Interest Payment Date of each
month.  Payments of principal and/or interest received after 12:00 p.m. Eastern
time are considered received at the opening of business on the next Business
Day.  When any payment is due on a day that is not a Business Day, the payment
shall be due the next Business Day and all fees or interest, as applicable,
shall continue to accrue until paid.

 

3

--------------------------------------------------------------------------------

 

(h)                                 Application of Payments.  Subject to
Section 6.3(c), Bank shall apply the whole or any part of collected funds
against the Revolving Line or credit such collected funds to a depository
account of Borrower with Bank (or an account maintained by an Affiliate of
Bank), the order and method of such application to be in the sole discretion of
Bank.  Borrower shall have no right to specify the order or the accounts to
which Bank shall allocate or apply any payments required to be made by Borrower
to Bank or otherwise received by Bank under this Agreement when any such
allocation or application is not specified elsewhere in this Agreement.

 

2.4                               Fees.  Borrower shall pay to Bank:

 

(a)                                  Commitment Fee.  A fully earned, non
refundable commitment fee of $150,000.00 on the Effective Date; and

 

(b)                                 Letter of Credit Fees.  Bank’s customary
fees and expenses for the issuance, modification or renewal of Letters of
Credit, including, without limitation, its customary fees upon the issuance,
each anniversary of the issuance, modification and the renewal of such Letter of
Credit by Bank; and

 

(c)                                  Termination Fee.  In accordance with the
terms of Section 12.1, a termination fee; and

 

(d)                                 Unused Revolving Line Facility Fee.  A fee
(the “Unused Revolving Line Facility Fee”), payable monthly, in arrears, on a
calendar year basis, in an amount per annum equal to the Unused Line Fee
Percentage of the average unused portion of the Revolving Line, as reasonably
determined by Bank.  The unused portion of the Revolving Line, for the purposes
of this calculation, shall include amounts reserved under the Cash Management
Services Sublimit for products provided and under the Foreign Exchange Sublimit
for FX Forward Contracts.  Borrower shall not be entitled to any credit, rebate
or repayment of any Unused Revolving Line Facility Fee previously earned by Bank
pursuant to this Section notwithstanding any termination of the Agreement, or
suspension or termination of Bank’s obligation to make loans and advances
hereunder; and

 

(e)                                  Bank Expenses.  All Bank Expenses
(including reasonable attorneys’ fees and expenses, plus expenses, for
documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due.

 

2.5                               Withholding.  Payments received by Bank from
Borrower hereunder will be made free and clear of any withholding taxes. 
Specifically, however, if at any time any governmental authority, applicable
law, regulation or international agreement requires Borrower to make any such
withholding or deduction from any such payment or other sum payment hereunder to
Bank, Borrower hereby covenants and agrees that the amount due from Borrower
with respect to such payment or other sum payable hereunder will be increased to
the extent necessary to ensure that, after the making of such required
withholding or deduction, Bank receives a net sum equal to the sum which it
would have received had no withholding or deduction been required and Borrower
shall pay the full amount withheld or deducted to the relevant governmental
authority.  Borrower will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower has made such withholding payment provided,
however, that Borrower need not make any withholding payment if the amount or
validity of such withholding payment is contested in good faith by appropriate
and timely proceedings and as to which payment in full is bonded or reserved
against by Borrower.  The agreements and obligations of Borrower contained in
this Section 2.5 shall survive the termination of this Agreement.

 

3                                         CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial Credit
Extension.  Bank’s obligation to make the initial Credit Extension is subject to
the condition precedent that Borrower shall consent to or have delivered, in
form and substance satisfactory to Bank, such documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate, including,
without limitation:

 

(a)                                  duly executed original signatures to the
Loan Documents to which it is a party;

 

(b)                                 its Operating Documents and a good standing
certificate of Borrower certified by the Secretary of State of the State of
Delaware as of a date no earlier than thirty (30) days prior to the Effective
Date;

 

4

--------------------------------------------------------------------------------

 

(c)                                  completed Borrowing Resolutions for
Borrower;

 

(d)                                 certified copies, dated as of a recent date,
of financing statement searches, as Bank shall request, accompanied by written
evidence (including any UCC termination statements) that the Liens indicated in
any such financing statements either constitute Permitted Liens or have been or,
in connection with the initial Credit Extension, will be terminated or released;

 

(e)                                  the Perfection Certificates executed by
Borrower and each Guarantor;

 

(f)                                    [intentionally omitted];

 

(g)                                 [intentionally omitted];

 

(h)                                 [intentionally omitted];

 

(i)                                     the First Amendment to Intellectual
Property Security Agreement executed by Borrower;

 

(j)                                     evidence satisfactory to Bank that the
insurance policies required by Section 6.7 hereof are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of Bank; and

 

(k)                                  payment of the fees and Bank Expenses then
due as specified in Section 2.4 hereof.

 

3.2                               Conditions Precedent to all Credit
Extensions.  Bank’s obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following:

 

(a)                                  timely receipt of a completed and executed
Transaction Report (if such Credit Extension would cause the aggregate
outstanding Credit Extensions to exceed the Non-Formula Amount) and Notice of
Borrowing; and

 

(b)                                 the representations and warranties in
Section 5 shall be true, accurate and complete in all material respects on the
date of the Transaction Report and on the Funding Date of each Credit Extension;
provided, however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Default or Event of Default shall have occurred and be continuing or result from
the Credit Extension.  Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
remain true, accurate and complete in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and

 

(c)                                  as determined in Bank’s reasonable business
judgment, there has not been a Material Adverse Change.

 

3.3                               Covenant to Deliver.  Borrower agrees to
deliver to Bank each item required to be delivered to Bank under this Agreement
as a condition to any Credit Extension.  Borrower expressly agrees that a Credit
Extension made prior to the receipt by Bank of any such item shall not
constitute a waiver by Bank of Borrower’s obligation to deliver such item, and
any such Credit Extension in the absence of a required item shall be made in
Bank’s sole discretion.

 

3.4                               Procedures for Borrowing.

 

(a)                                  Subject to the prior satisfaction of all
other applicable conditions to the making of a Credit Extension set forth in
this Agreement, each Credit Extension shall be made upon Borrower’s irrevocable
written notice delivered to Bank in the form of a Transaction Report (if
required pursuant to

 

5

--------------------------------------------------------------------------------

 

Section 3.2(a)) and Notice of Borrowing, each executed by a Responsible Officer
of Borrower or his or her designee or without instructions if the Credit
Extensions are necessary to meet Obligations which have become due.  Bank may
rely on any telephone notice given by a person whom Bank reasonably believes is
a Responsible Officer or designee.  Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.  Such Notice of Borrowing must be received by
Bank prior to 11:00 a.m. Eastern time, (i) at least three (3) Business Days
prior to the requested Funding Date, in the case of LIBOR Credit Extensions, and
(ii) by 12:00 P.M. Pacific time on the requested Funding Date, in the case of
Prime Rate Credit Extensions, specifying:

 

(1)                                  the amount of the Credit Extension, which,
if a LIBOR Credit Extension is requested, shall be in an aggregate minimum
principal amount of $500,000 or in any integral multiple of $500,000 in excess
thereof;

 

(2)                                  the requested Funding Date;

 

(3)                                  whether the Credit Extension is to be
comprised of LIBOR Credit Extensions or Prime Rate Credit Extensions; and

 

(4)                                  the duration of the Interest Period
applicable to any such LIBOR Credit Extensions included in such notice; provided
that if the Notice of Borrowing shall fail to specify the duration of the
Interest Period for any Credit Extension comprised of LIBOR Credit Extensions,
such Interest Period shall be one (1) month.

 

(b)                                 The proceeds of all such Credit Extensions
will then be made available to Borrower on the Funding Date by Bank by transfer
to the Designated Deposit Account and, subsequently, by wire transfer to such
other account as Borrower may instruct in the Notice of Borrowing.  No Credit
Extensions shall be deemed made to Borrower, and no interest shall accrue on any
such Credit Extension, until the related funds have been deposited in the
Designated Deposit Account.

 

3.5                               Conversion and Continuation Elections.

 

(a)                                  So long as (i) no Event of Default or
Default exists; (ii) Borrower shall not have sent any notice of termination of
this Agreement; and (iii) Borrower shall have complied with such customary
procedures as Bank has established from time to time for Borrower’s requests for
LIBOR Credit Extensions, Borrower may, upon irrevocable written notice to Bank:

 

(1)                                  elect to convert on any Business Day, Prime
Rate Credit Extensions in an amount equal to Five Hundred Thousand Dollars
($500,000.00) or any integral multiple of Five Hundred Thousand Dollars
($500,000.00) in excess thereof into LIBOR Credit Extensions;

 

(2)                                  elect to continue on any Interest Payment
Date any LIBOR Credit Extensions maturing on such Interest Payment Date (or any
part thereof in an amount equal to Five Hundred Thousand Dollars ($500,000.00)
or any integral multiple of Five Hundred Thousand Dollars ($500,000.00) in
excess thereof); provided, that if the aggregate amount of LIBOR Credit
Extensions shall have been reduced, by payment, prepayment, or conversion of
part thereof, to be less than Five Hundred Thousand Dollars ($500,000.00), such
LIBOR Credit Extensions shall automatically convert into Prime Rate Credit
Extensions, and on and after such date the right of Borrower to continue such
Credit Extensions as, and convert such Credit Extensions into, LIBOR Credit
Extensions shall terminate; or

 

(3)                                  elect to convert on any Interest Payment
Date any LIBOR Credit Extensions maturing on such Interest Payment Date (or any
part thereof in an amount equal to Five Hundred Thousand Dollars ($500,000.00)
or any integral multiple of Five Hundred Thousand Dollars ($500,000.00) in
excess thereof) into Prime Rate Credit Extensions.

 

(b)                                 Borrower shall deliver a Notice of
Conversion/Continuation in accordance with Section 10 to be received by Bank
prior to 11:00 a.m. Eastern time at least (i) three (3) Business Days in

 

6

--------------------------------------------------------------------------------

 

advance of the Conversion Date or Continuation Date, if any Credit Extensions
are to be converted into or continued as LIBOR Credit Extensions; and (ii) one
(1) Business Day in advance of the Conversion Date, if any Credit Extensions are
to be converted into Prime Rate Credit Extensions, in each case specifying the:

 

(1)                                  proposed Conversion Date or Continuation
Date;

 

(2)                                  aggregate amount of the Credit Extensions
to be converted or continued which, if any Credit Extensions are to be converted
into or continued as LIBOR Credit Extensions, shall be in an aggregate minimum
principal amount of Five Hundred Thousand Dollars ($500,000.00) or in any
integral multiple of Five Hundred Thousand Dollars ($500,000.00) in excess
thereof;

 

(3)                                  nature of the proposed conversion or
continuation; and

 

(4)                                  duration of the requested Interest Period.

 

(c)                                  If upon the expiration of any Interest
Period applicable to any LIBOR Credit Extensions, Borrower shall have failed to
timely select a new Interest Period to be applicable to such LIBOR Credit
Extensions, Borrower shall be deemed to have elected to convert such LIBOR
Credit Extensions into Prime Rate Credit Extensions.

 

(d)                                 Any LIBOR Credit Extensions shall, at Bank’s
option, convert into Prime Rate Credit Extensions in the event that (i) an Event
of Default or Default shall exist, or (ii) the aggregate principal amount of the
Prime Rate Credit Extensions which have been previously converted to LIBOR
Credit Extensions, or the aggregate principal amount of existing LIBOR Credit
Extensions continued, as the case may be, at the beginning of an Interest Period
shall at any time during such Interest Period exceed the Revolving Line. 
Borrower agrees to pay Bank, upon demand by Bank (or Bank may, at its option,
charge the Designated Deposit Account or any other account (other than any
payroll, trust, or escrow accounts) Borrower maintains with Bank) any amounts
required to compensate Bank for any loss (including loss of anticipated
profits), cost, or expense incurred by Bank, as a result of the conversion of
LIBOR Credit Extensions to Prime Rate Credit Extensions pursuant to this
Section 3.5(d).

 

(e)                                  Notwithstanding anything to the contrary
contained herein, Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable LIBOR market to fund
any LIBOR Credit Extensions, but the provisions hereof shall be deemed to apply
as if Bank had purchased such deposits to fund the LIBOR Credit Extensions.

 

3.6                               Special Provisions Governing LIBOR Credit
Extensions.  Notwithstanding any other provision of this Agreement to the
contrary, the following provisions shall govern with respect to LIBOR Credit
Extensions as to the matters covered:

 

(a)                                  Determination of Applicable Interest Rate. 
As soon as practicable on each Interest Rate Determination Date, Bank shall
determine (which determination shall, absent manifest error in calculation, be
final, conclusive and binding upon all parties) the interest rate that shall
apply to the LIBOR Credit Extensions for which an interest rate is then being
determined for the applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to Borrower.

 

(b)                                 Inability to Determine Applicable Interest
Rate.  In the event that Bank shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any LIBOR Credit Extension, that by
reason of circumstances affecting the London interbank market adequate and fair
means do not exist for ascertaining the interest rate applicable to such Credit
Extension on the basis provided for in the definition of LIBOR, Bank shall on
such date give notice (by facsimile or by telephone confirmed in writing) to
Borrower of such determination, whereupon (i) no Credit Extensions may be made
as, or converted to, LIBOR Credit Extensions until such time as Bank notifies
Borrower that the circumstances giving rise to such notice no longer exist, and
(ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Borrower with respect to Credit Extensions in respect of which such
determination was made shall be deemed to be rescinded by Borrower.

 

7

--------------------------------------------------------------------------------

 

(c)                                  Compensation for Breakage or
Non-Commencement of Interest Periods.  Borrower shall compensate Bank, upon
written request by Bank (which request shall set forth the manner and method of
computing such compensation), for all reasonable losses, expenses and
liabilities, if any (including any interest paid by Bank to lenders of funds
borrowed by it to make or carry its LIBOR Credit Extensions and any loss,
expense or liability incurred by Bank in connection with the liquidation or
re-employment of such funds) such that Bank may incur: (i) if for any reason
(other than a default by Bank or due to any failure of Bank to fund LIBOR Credit
Extensions due to inability to determine the applicable interest rate under
Section 3.6(b) or impracticability or illegality under Sections 3.7(e) and
3.7(f)) a borrowing or a conversion to or continuation of any LIBOR Credit
Extension does not occur on a date specified in a Notice of Borrowing or a
Notice of Conversion/Continuation, as the case may be, or (ii) if any principal
payment or any conversion of any of its LIBOR Credit Extensions occurs on a date
prior to the last day of an Interest Period applicable to that Credit Extension.

 

(d)                                 Assumptions Concerning Funding of LIBOR
Credit Extensions.  Calculation of all amounts payable to Bank under this
Section 3.6 and under Section 3.5 shall be made as though Bank had actually
funded each of its relevant LIBOR Credit Extensions through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to the
definition of LIBOR Rate in an amount equal to the amount of such LIBOR Credit
Extension and having a maturity comparable to the relevant Interest Period;
provided, however, that Bank may fund each of its LIBOR Credit Extensions in any
manner it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this Section 3.6 and under
Section 3.5.

 

(e)                                  LIBOR Credit Extensions After Default. 
After the occurrence and during the continuance of an Event of Default,
(i) Borrower may not elect to have a Credit Extension be made or continued as,
or converted to, a LIBOR Credit Extension after the expiration of any Interest
Period then in effect for such Credit Extension and (ii) subject to the
provisions of Section 3.6(c), any Notice of Conversion/Continuation given by
Borrower with respect to a requested conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Borrower and be deemed a request to
convert or continue Credit Extensions referred to therein as Prime Rate Credit
Extensions.

 

3.7                               Additional Requirements/Provisions Regarding
LIBOR Credit Extensions.

 

(a)                                  If for any reason (including voluntary or
mandatory prepayment or acceleration), Borrower pays to Bank all or part of the
principal amount of a LIBOR Credit Extension prior to the last day of the
Interest Period for such Credit Extension, Borrower shall immediately notify
Borrower’s account officer at Bank and, on demand by Bank, pay Bank the amount
(if any) by which (i) the additional interest which would have been payable on
the amount so received had it not been received until the last day of such
Interest Period exceeds (ii) the interest which would have been recoverable by
Bank by placing the amount so received on deposit in the certificate of deposit
markets, the offshore currency markets, or United States Treasury investment
products, as the case may be, for a period starting on the date on which it was
so received and ending on the last day of such Interest Period at the interest
rate determined by Bank in its reasonable discretion.  Bank’s determination as
to such amount shall be conclusive absent manifest error.

 

(b)                                 Borrower shall pay Bank, upon demand by
Bank, from time to time such amounts as Bank may reasonably determine to be
necessary to compensate it for any costs incurred by Bank that Bank reasonably
determines are attributable to its making or maintaining of any amount
receivable by Bank hereunder in respect of any Credit Extensions relating
thereto (such increases in costs and reductions in amounts receivable being
herein called “Additional Costs”), in each case resulting from any Regulatory
Change which:

 

(1)                                  changes the basis of taxation of any
amounts payable to Bank by Borrower under this Agreement in respect of any
Credit Extensions (other than changes which affect taxes measured by or imposed
on the overall net income of Bank by any jurisdiction in which Bank has its
principal office);

 

8

--------------------------------------------------------------------------------

 

(2)                                  imposes or modifies any reserve, special
deposit or similar requirements relating to any extensions of credit or other
assets of, or any deposits with, or other liabilities of Bank relating to
Borrower or this Agreement (including any Credit Extensions or any deposits
referred to in the definition of LIBOR); or

 

(3)                                  imposes any other condition affecting this
Agreement (or any of such extensions of credit or liabilities relating to
Borrower).

 

(c)                                  Bank will notify Borrower of any event
occurring after the Closing Date which will entitle Bank to compensation
pursuant to this Section 3.7 as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation.  Bank will
furnish Borrower with a statement setting forth in reasonable detail the basis
and amount of each request by Bank for compensation under this Section 3.7. 
Determinations and allocations by Bank for purposes of this Section 3.7 of the
effect of any Regulatory Change on its costs of maintaining its obligations to
make Credit Extensions, of making or maintaining Credit Extensions, or on
amounts receivable by it in respect of Credit Extensions, and of the additional
amounts required to compensate Bank in respect of any Additional Costs, shall be
conclusive absent manifest error.

 

(d)                                 If Bank shall determine that the adoption or
implementation of any applicable law, rule, regulation, or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by Bank (or its applicable lending office) with any respect or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank, or comparable agency, has or would have the
effect of reducing the rate of return on capital of Bank or any person or entity
controlling Bank (a “Parent”) as a consequence of its obligations hereunder to a
level below that which Bank (or its Parent) could have achieved but for such
adoption, change, or compliance (taking into consideration policies with respect
to capital adequacy) by an amount deemed by Bank to be material, then from time
to time, within fifteen (15) days after demand by Bank (made by Bank as promptly
as practicable after it obtains knowledge thereof and determines to request such
compensation), Borrower shall pay to Bank such additional amount or amounts as
will compensate Bank for such reduction.  A statement of Bank claiming
compensation under this Section 3.7(c) and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive absent manifest error.

 

(e)                                  If, at any time, Bank, in its sole and
absolute discretion, determines that (i) the amount of LIBOR Credit Extensions
for periods equal to the corresponding Interest Periods are not available to
Bank in the offshore currency interbank markets, or (ii) LIBOR does not
accurately reflect the cost to Bank of lending the LIBOR Credit Extensions, then
Bank shall promptly give notice thereof to Borrower.  Upon the giving of such
notice, Bank’s obligation to make the LIBOR Credit Extensions shall terminate;
provided, however, Credit Extensions shall not terminate if Bank and Borrower
agree in writing to a different interest rate applicable to LIBOR Credit
Extensions.

 

(f)                                    If it shall become unlawful for Bank to
continue to fund or maintain any LIBOR Credit Extensions, or to perform its
obligations hereunder, upon demand by Bank, Borrower shall either prepay the
LIBOR Credit Extensions in full with accrued interest thereon and all other
amounts payable by Borrower hereunder (including, without limitation, any amount
payable in connection with such prepayment pursuant to Section 3.7(a)) or
convert such LIBOR Credit Extensions to Prime Rate Credit Extensions. 
Notwithstanding the foregoing, to the extent a determination by Bank as
described above relates to a LIBOR Credit Extensions then being requested by
Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Borrower shall have the option, subject to the
provisions of Section 3.6(c), to (i) rescind such Notice of Borrowing or Notice
of Conversion/Continuation by giving notice (by facsimile or by telephone
confirmed in writing) to Bank of such rescission on the date on which Bank gives
notice of its determination as described above, or (ii) modify such Notice of
Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Credit
Extension or to have outstanding Credit Extensions converted into or continued
as Prime Rate Credit Extensions by giving notice (by facsimile or by telephone
confirmed in writing) to Bank of such modification on the date on which Bank
gives notice of its determination as described above.

 

9

--------------------------------------------------------------------------------

 

4                                         CREATION OF SECURITY INTEREST

 

4.1                               Grant of Security Interest.  Borrower hereby
grants Bank, to secure the payment and performance in full of all of the
Obligations, a continuing security interest in, and pledges to Bank, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof.  Borrower represents, warrants,
and covenants that the security interest granted herein is and shall at all
times continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior priority to
Bank’s Lien under this Agreement).  If Borrower shall acquire a commercial tort
claim, Borrower shall promptly notify Bank in a writing signed by Borrower of
the general details thereof and upon request of Bank grant to Bank in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.

 

Bank’s lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations in cash.  Upon payment in full in cash
of the Obligations (except for contingent indemnification obligations for which
no claim has been made) and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall, at Borrower’s sole cost and expense,
release its Liens in the Collateral and all rights therein shall revert to
Borrower.

 

4.2                               Authorization to File Financing Statements. 
Borrower hereby authorizes Bank to file financing statements, without notice to
Borrower, with all appropriate jurisdictions to perfect or protect Bank’s
interest or rights hereunder, including a notice that any disposition of the
Collateral except as permitted by the terms of this Agreement, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.  Such financing statements may indicate the Collateral as “all
assets of the Debtor” or words of similar effect, or as being of an equal or
lesser scope, or with greater detail, all in Bank’s discretion, provided that
such financing statements shall acknowledge the rights of SEN under the SEN
License.

 

5                                         REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows:

 

5.1                               Due Organization, Authorization; Power and
Authority.  Borrower and each of its Domestic Subsidiaries is validly existing
and in good standing as a Registered Organization in its jurisdiction of
formation and is qualified and licensed to do business and is in good standing
in any jurisdiction in which the conduct of its business or its ownership of
property requires that it be qualified except where the failure to do so could
not reasonably be expected to have a material adverse effect on Borrower’s
business.  In connection with this Agreement, Borrower has delivered to Bank
completed certificates each signed by Borrower and Guarantor, respectively,
entitled “Perfection Certificate”.  Borrower represents and warrants to Bank
that (a) Borrower’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; (b) Borrower is an organization of
the type and is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s
organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of
business, or, if more than one, its chief executive office as well as Borrower’s
mailing address (if different than its chief executive office); (e) Borrower
(and each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to Borrower and
each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement).  If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.

 

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full

 

10

--------------------------------------------------------------------------------

 

force and effect or (v) constitute an event of default under any material
agreement by which Borrower is bound.  Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a material adverse effect on Borrower’s
business.

 

5.2          Collateral.  Borrower has good title to, has rights in, and the
power to transfer each item of the Collateral upon which it purports to grant a
Lien hereunder, free and clear of any and all Liens except Permitted Liens. 
Borrower has no deposit accounts other than the deposit accounts with Bank, the
deposit accounts, if any, described in the Perfection Certificate delivered to
Bank in connection herewith, or of which Borrower has given Bank notice and
taken such actions as are necessary to give Bank a perfected security interest
therein.  The Accounts are bona fide, existing obligations of the Account
Debtors.

 

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate.  None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2. 
Borrower shall at all times during the term of this Agreement maintain at least
two-thirds of its Inventory (based upon the fair market value of all Inventory)
at Borrower’s 108 Cherry Hill Drive, Beverly, Massachusetts location and at
other locations of the Borrower for which Bank has received a landlord’s waiver
in form and substance reasonably satisfactory to Bank.

 

All Inventory is in all material respects of good and marketable quality, free
from material defects.

 

Axcelis Technologies, Inc. and Axcelis Technologies CCS Corporation, either
individually or jointly, are the sole owners of the intellectual property which
Borrower owns or purports to own, including, without limitation, the
intellectual property set forth on the Perfection Certificate, except for
non-exclusive licenses granted to its customers in the ordinary course of
business.  Each patent which Borrower owns or purports to own is valid and
enforceable and no part of the intellectual property has been judged invalid or
unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no
claim has been made that any part of the intellectual property violates the
rights of any third party.

 

Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is it bound by, any Restricted License.

 

5.3          Accounts Receivable; Inventory.

 

(a)           For each Account with respect to which Advances are requested, on
the date each Advance is requested and made, such Account shall be an Eligible
Account.

 

(b)           All statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all respects what they
purport to be.  Whether or not an Event of Default has occurred and is
continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s
security interest in such funds.  All sales and other transactions underlying or
giving rise to each Eligible Account shall comply in all material respects with
all applicable laws and governmental rules and regulations.  Borrower has no
knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor
whose accounts are Eligible Accounts in any Transaction Report.  To the best of
Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine, and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.

 

(c)           For any item of Inventory, such Inventory (i) meets all applicable
governmental standards; (ii) has been manufactured in compliance with the Fair
Labor Standards Act; (iii) is not subject to any Liens, except the first
priority Liens granted in favor of Bank under this Agreement or any of the other
Loan Documents or Permitted Liens; and (iv) is located at (A) the Headquarters
Location which is (1) prior to the Real Estate Financing or Sale/Leaseback
Transaction, owned by Borrower or (2) (x) after the Real Estate Financing,
either owned by Borrower or owned by the Special Subsidiary or (y) after the
Sale/Leaseback Transaction, leased by Borrower, in each case provided that Bank
has received a landlord’s waiver in form and substance reasonably satisfactory
to Bank or (B) Borrower’s 75 Sylvan Street, Danvers, Massachusetts location
provided that Bank has received a landlord waiver for such location in form and
substance reasonably satisfactory to Bank or (C) at McCollisters

 

11

--------------------------------------------------------------------------------

 

United’s location at 29B Concord Street, Reading, Massachusetts provided that
Bank has received a bailee’s waiver for such location in form and substance
reasonably satisfactory to Bank.

 

5.4          Litigation.  There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than, individually or in the
aggregate, One Million Dollars ($1,000,000) or that would reasonably be expected
to have a material adverse effect on Borrower’s business.

 

5.5          No Material Deviation in Financial Statements.  All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower’s consolidated financial
condition and Borrower’s consolidated results of operations.  There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

 

5.6          Solvency.  The fair salable value of Borrower’s assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.

 

5.7          Regulatory Compliance.  Borrower is not an “investment company” or
a company “controlled” by an “investment company” under the Investment Company
Act of 1940, as amended.  Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of
the Federal Reserve Board of Governors).  Borrower has complied in all material
respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of
its Subsidiaries is a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” as each term is defined and
used in the Public Utility Holding Company Act of 2005.  Borrower has not
violated any laws, ordinances or rules, the violation of which could reasonably
be expected to have a material adverse effect on its business.  None of
Borrower’s or any of its Subsidiaries’ properties or assets has been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally.  Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all Government
Authorities that are necessary to continue their respective businesses as
currently conducted except where the failure to make such declarations, notices
or filings could not reasonably be expected to have a material adverse effect on
Borrower’s business.

 

5.8          Subsidiaries; Investments.  Borrower does not own any stock,
partnership interest or other equity securities except for Permitted
Investments.

 

5.9          Tax Returns and Payments; Pension Contributions.  Borrower and its
Subsidiaries have timely filed all required tax returns and reports, and have
timely paid all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by Borrower or such Subsidiary.  Borrower may defer
payment of any contested taxes, provided that Borrower (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings, and (c) posts
bonds or takes any other steps required to prevent the governmental authority
levying such contested taxes from obtaining a Lien upon any of the Collateral
that is other than a “Permitted Lien”.  Borrower is unaware of any claims or
adjustments proposed for any of Borrower’s prior tax years which could result in
additional taxes becoming due and payable by Borrower.  Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

 

5.10        Use of Proceeds.  Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements and not for personal, family, household or agricultural purposes.

 

5.11        Full Disclosure.  No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was

 

12

--------------------------------------------------------------------------------

 

made, taken together with all such written certificates and written statements
given to Bank, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained in the
certificates or statements not misleading (it being recognized by Bank that the
projections and forecasts provided by Borrower in good faith and based upon
reasonable assumptions are not viewed as facts and that actual results during
the period or periods covered by such projections and forecasts may differ from
the projected or forecasted results).

 

5.12        Designation of Obligations as Designated Senior Indebtedness.  All
Obligations, including all principal, interest (including all interest accruing
after the commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such
proceeding), and all fees, costs, expenses and other amounts accrued or due
under this Agreement and otherwise shall at all times constitute “Designated
Senior Indebtedness” or a similar concept thereof for purposes of any
Indebtedness of the Borrower.

 

6              AFFIRMATIVE COVENANTS

 

Borrower shall do all of the following:

 

6.1          Government Compliance.

 

(a)           Subject to Sections 7.2 and 7.3, maintain its and all its
Subsidiaries’ legal existence and good standing in their respective
jurisdictions of formation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to have a material
adverse effect on Borrower’s business.  Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower’s business.

 

(b)           Obtain all of the Governmental Approvals necessary for the
performance by Borrower of its obligations under the Loan Documents to which it
is a party and the grant of a security interest to Bank in all of its property. 
Borrower shall promptly provide copies of any such obtained Governmental
Approvals to Bank.

 

6.2          Financial Statements, Reports, Certificates.

 

(a)           Borrower shall provide Bank with the following:

 

(i)            upon each request for a Credit Extension that would cause the
aggregate outstanding Credit Extensions to exceed the Non-Formula Amount and, in
all events, within thirty (30) days after the end of each month a Transaction
Report (and any schedules related thereto including, but not limited to, a
schedule of any litigation of the type described in Section 5.4 which may arise
or be threatened from and after the Effective Date);

 

(ii)           within thirty (30) days after the end of each month, (A) monthly
accounts receivable agings, aged by invoice date, (B) monthly accounts payable
agings, aged by invoice date, and outstanding or held check registers, if any,
(C) monthly reconciliations of accounts receivable agings for accounts under
this Agreement (aged by invoice date), transaction reports and general ledger,
and (D) monthly inventory reports for Inventory valued on a first-in, first-out
basis at the lower of cost or market (in accordance with GAAP), Inventory
backlog reports, or such other inventory reports as are requested by Bank in its
good faith business judgment;

 

(iii)          within forty-five (45) days after the end of each fiscal quarter
of Borrower, a Compliance Certificate signed by a Responsible Officer,
certifying that as of the end of such quarter, Borrower was in full compliance
with all of the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement and such other information as Bank shall reasonably request,
including, without limitation, a statement that at the end of such quarter there
were no held checks;

 

(iv)          as soon as available, and in any event within forty-five (45) days
after the end of each fiscal quarter of Borrower, quarterly unaudited financial
statements, prepared on a consolidated and consolidating basis, in a form
reasonably satisfactory to Bank;

 

13

--------------------------------------------------------------------------------

 

(v)           within sixty (60) days after the end of each fiscal year of
Borrower, (A) annual operating budgets (including income statements, balance
sheets and cash flow statements, by quarter) for the then current fiscal year of
Borrower, and (B) annual financial projections for the then current fiscal year
(on a quarterly basis) as approved by Borrower’s board of directors, together
with any related business forecasts used in the preparation of such annual
financial projections, all prepared on a consolidated and consolidating basis in
a form reasonably satisfactory to Bank;

 

(vi)          as soon as available, and in any event within one hundred twenty
(120) days following the end of Borrower’s fiscal year, annual financial
statements prepared on a consolidated and consolidating basis in a form
reasonably satisfactory to Bank, certified by, and with an unqualified opinion
of, independent certified public accountants acceptable to Bank;

 

(vii)         within five (5) days of delivery, copies of all statements,
reports and notices made available to Borrower’s security holders or to any
holders of Subordinated Debt (which if filed with the Securities and Exchange
Commission may be provided by a link thereto on Borrower’s or another website on
the Internet);

 

(viii)        prompt report of any legal actions pending or threatened in
writing against Borrower or any of its Subsidiaries that could result in damages
or costs to Borrower or any of its Subsidiaries of, individually or in the
aggregate, One Million Dollars ($1,000,000) or more; and

 

(ix)           as soon as available, and in any event within forty-five (45)
days after the end of each month, monthly unaudited financial statements,
prepared on a consolidated basis, in a form reasonably satisfactory to Bank.

 

(b)           within ten (10) days after filing, all reports on Form 10-K, 10-Q
and 8-K filed with the Securities and Exchange Commission or a link thereto on
Borrower’s or another website on the Internet.

 

(c)           with the monthly reporting provided pursuant to
Section 6.2(a)(ii) above, written notice of (i) any material change in the
composition of the intellectual property, (ii) the registration of any copyright
(including any subsequent ownership right of Borrower in or to any copyright),
patent or trademark not previously disclosed to Bank, or (iii) Borrower’s
knowledge of an event that materially adversely affects the value of the
intellectual property.

 

6.3          Accounts Receivable.

 

(a)           Schedules and Documents Relating to Accounts.  Borrower shall
deliver to Bank Transaction Reports, as provided in Section 6.2, on Bank’s
standard forms; provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and other rights in all
of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a
specific Account affect or limit Bank’s Lien and other rights therein.  If
requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s
request, originals) of all contracts, orders, invoices, and other similar
documents, and all shipping instructions, delivery receipts, bills of lading,
and other evidence of delivery, for any goods the sale or disposition of which
gave rise to such Accounts.  In addition, Borrower shall deliver to Bank, on its
request, the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any Accounts,
in the same form as received, with all necessary indorsements, and copies of all
credit memos.

 

(b)           Disputes.  Borrower shall promptly notify Bank of all disputes or
claims relating to material Accounts.  Borrower may forgive (completely or
partially), compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does so in good faith,
in a commercially reasonable manner, in the ordinary course of business, in
arm’s-length transactions, and reports the same to Bank in the regular reports
provided to Bank; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) after taking into account all such discounts, settlements
and forgiveness, the total outstanding Advances will not exceed the Availability
Amount.

 

14

--------------------------------------------------------------------------------

 

(c)           Collection of Accounts.  Borrower shall have the right to collect
all Accounts, unless and until a Default or an Event of Default has occurred and
is continuing.  Whether or not an Event of Default has occurred and is
continuing, Borrower shall hold all payments on, and proceeds of, Accounts in
trust for Bank, and Borrower shall immediately deliver all such payments and
proceeds to Bank in their original form, duly endorsed, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof.  All payments on, and
proceeds of, Accounts shall be deposited directly by the applicable Account
Debtor into a lockbox account, or such other “blocked account” as Bank may
specify, pursuant to a blocked account agreement in form and substance
reasonably satisfactory to Bank in its sole discretion.  Whether or not an Event
of Default has occurred and is continuing, Borrower shall immediately deliver
all payments on and proceeds of Accounts to an account maintained with Bank to
be applied (i) prior to an Event of Default, to the Revolving Line pursuant to
the terms of Section 2.3(h) hereof, and (ii) after the occurrence and during the
continuance of an Event of Default, pursuant to the terms of Section 9.4
hereof.  Notwithstanding the foregoing, during a Streamline Period, provided no
Event of Default has occurred and is continuing, proceeds of Accounts received
by Bank shall be transferred to Borrower’s Designated Deposit Account.

 

(d)           Returns.  Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly (i) determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and (iii) provide a
copy of such credit memorandum to Bank, upon request from Bank.  In the event
any attempted return occurs after the occurrence and during the continuance of
any Event of Default, Borrower shall hold the returned Inventory in trust for
Bank, and immediately notify Bank of the return of the Inventory.

 

(e)           Verification.  Bank may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, either in the name of Borrower or Bank or such other name as
Bank may choose.

 

(f)            No Liability.  Bank shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Bank be
deemed to be responsible for any of Borrower’s obligations under any contract or
agreement giving rise to an Account.  Nothing herein shall, however, relieve
Bank from liability for its own gross negligence or willful misconduct.

 

6.4          Remittance of Proceeds.  Except as otherwise provided in
Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of
any Collateral to Bank in the original form in which received by Borrower not
later than the following Business Day after receipt by Borrower, to be applied
to the Obligations pursuant to the terms of Section 9.4 hereof; provided that,
if no Default or Event of Default has occurred and is continuing, Borrower shall
not be obligated to remit to Bank the proceeds of the sale of worn out or
obsolete Equipment disposed of by Borrower in good faith in an arm’s length
transaction for an aggregate purchase price of One Hundred Thousand Dollars
($100,000.00) or less (for all such transactions in any fiscal year).  Borrower
agrees that it will not commingle proceeds of Collateral with any of Borrower’s
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Bank.  Nothing in this
Section 6.4 limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.

 

6.5          Taxes; Pensions.  Timely file, and require each of its Subsidiaries
to timely file, all required tax returns and reports and timely pay, and require
each of its Subsidiaries to timely file, all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower and each of its
Subsidiaries, except for deferred payment of any taxes contested pursuant to the
terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.

 

6.6          Access to Collateral; Books and Records.  Upon reasonable notice
(provided no notice is required if an Event of Default has occurred and is
continuing), Bank, or its agents, shall have the right, with such frequency as
Bank shall determine necessary in its sole discretion, to inspect the Collateral
and the right to audit and copy Borrower’s Books.  The foregoing inspections and
audits shall be at Borrower’s expense, and the charge therefor shall be $850 per
person per day (or such higher amount as shall represent Bank’s then-current
standard charge for the same), plus reasonable out-of-pocket expenses; provided,
however, that Bank shall conduct no more

 

15

--------------------------------------------------------------------------------

 

than two (2) such audit(s) per fiscal year at Borrower’s expense in the event no
Event of Default has occurred and is continuing.  In the event Borrower and Bank
schedule an audit more than ten (10) days in advance, and Borrower cancels or
seeks to reschedules the audit with less than ten (10) days written notice to
Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall
pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of the cancellation or
rescheduling.

 

6.7          Insurance.  Keep its business and the Collateral insured for risks
and in amounts standard for companies in Borrower’s industry and location and as
Bank may reasonably request.  Insurance policies shall be in a form, with
companies, and in amounts that are reasonably satisfactory to Bank.  All
property policies shall have a loss payable endorsement showing Bank as loss
payee and waive subrogation against Bank, and all liability policies shall show,
or have endorsements showing, Bank as an additional insured.  All policies (or
the loss payable and additional insured endorsements) shall provide that the
insurer shall endeavor to give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy.  At Bank’s request,
Borrower shall deliver certificates of insurance and/or copies of policies and
evidence of all premium payments.  Proceeds payable under any property policy
shall, at Bank’s option, be payable to Bank on account of the Obligations. 
Notwithstanding the foregoing, (a)(x) so long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy up to One Hundred Thousand Dollars ($100,000.00)
with respect to any loss, but not exceeding Two Hundred Fifty Thousand Dollars
($250,000.00) in the aggregate for all losses under all casualty policies in any
one year, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal or
like value as the replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Bank has been granted a first priority security interest,
and (b) after the occurrence and during the continuance of an Event of Default,
all proceeds payable under such casualty policy shall, at the option of Bank, be
payable to Bank on account of the Obligations.  If Borrower fails to obtain
insurance as required under this Section 6.7 or to pay any amount or furnish any
required proof of payment to third persons and Bank, Bank may make all or part
of such payment or obtain such insurance policies required in this Section 6.7,
and take any action under the policies Bank deems prudent.

 

6.8          Operating Accounts.

 

(a)           Maintain Borrower’s and its Subsidiaries’ primary operating
accounts, disbursement accounts, and other deposit accounts and securities
accounts in the United States with Bank and Bank’s Affiliates.

 

(b)           Provide Bank five (5) days prior written notice before
establishing any Collateral Account within the United States at or with any bank
or financial institution other than Bank or Bank’s Affiliates.  For each
Collateral Account located within the United States that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder which Control Agreement may not
be terminated without the prior written consent of Bank.  The provisions of the
previous sentence shall not apply to (i) deposit or investment accounts
maintained by Borrower and its Subsidiaries in the United States at institutions
other than the Bank and its Affiliates provided that the aggregate amount of
monies or other assets on deposit or maintained in such deposit or investment
account accounts shall not exceed Two Hundred Thousand Dollars ($200,000.00) at
any time, (ii) deposit accounts exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of Borrower’s
employees and identified to Bank by Borrower as such, or (iii) deposit accounts
maintained at Bank.

 

6.9          Financial Covenants.

 

(a)           Adjusted Quick Ratio.  Borrower and its Subsidiaries, on a
consolidated basis, shall maintain at all times (other than the period
commencing April 1, 2011 through and including April 30, 2011), to be tested as
of the last day of each calendar quarter commencing with the calendar quarter
ended March 31, 2011, a ratio of Quick Assets to Current Liabilities minus
Deferred Revenue of at least 1.4:1.0.

 

(b)           Minimum Adjusted Net Income.  Borrower and its Subsidiaries, on a
consolidated basis, shall achieve Adjusted Net Income of at least (i) $3,000,000
for the trailing six (6) month period ending on the last day of the fiscal
quarter ending March 31, 2011; (ii) $5,000,000 for each trailing six (6) month
period ending on the last day of the fiscal quarters ending June 30, 2011,
September 30, 2011 and December 31, 2011; and (iii) $7,500,000

 

16

--------------------------------------------------------------------------------

 

for the trailing six (6) month period ending on the last day of the fiscal
quarter ending March 31, 2012 and for each trailing six (6) month period ending
on the last day of each fiscal quarter thereafter.

 

6.10        Protection and Registration of Intellectual Property Rights.

 

(a)           Borrower shall: (i) protect, defend and maintain the validity and
enforceability of its material intellectual property; (ii) promptly advise Bank
in writing of material infringements of its intellectual property; and (iii) not
allow any intellectual property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent.  If
Borrower (A) obtains any patent, registered trademark or servicemark, registered
copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (B) applies for any
patent or the registration of any trademark or servicemark, then Borrower shall
provide written notice thereof to Bank on a quarterly basis upon the delivery of
the Compliance Certificate for such period, and shall execute such intellectual
property security agreements and other documents and take such other actions as
Bank shall request in its good faith business judgment to perfect and maintain a
first priority perfected security interest in favor of Bank in such property. 
If Borrower decides to register any copyrights or mask works in the United
States Copyright Office, Borrower shall: (x) provide Bank with at least fifteen
(15) days prior written notice of Borrower’s intent to register such copyrights
or mask works together with a copy of the application it intends to file with
the United States Copyright Office (excluding exhibits thereto); (y) execute an
intellectual property security agreement and such other documents and take such
other actions as Bank may request in its good faith business judgment to perfect
and maintain a first priority perfected security interest in favor of Bank in
the copyrights or mask works intended to be registered with the United States
Copyright Office; and (z) record such intellectual property security agreement
with the United States Copyright Office contemporaneously with filing the
copyright or mask work application(s) with the United States Copyright Office. 
Upon Bank’s request, Borrower shall promptly provide to Bank copies of all
applications that it files for patents or for the registration of trademarks,
servicemarks, copyrights or mask works, together with evidence of the recording
of the intellectual property security agreement necessary for Bank to perfect
and maintain a first priority perfected security interest in such property.
Provide written notice to Bank within thirty (30) days of entering or becoming
bound by any Restricted License (other than over-the-counter software that is
commercially available to the public).  Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (i) any Restricted License to be deemed “Collateral” and
for Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such Restricted License, whether now
existing or entered into in the future, and (ii) Bank to have the ability in the
event of a liquidation of any Collateral to dispose of such Collateral in
accordance with Bank’s rights and remedies under this Agreement and the other
Loan Documents.

 

(b)           Borrower and Bank hereby:  (i) acknowledge, confirm, and reaffirm
that the Consent and Agreement remains in full force and effect and
(ii) acknowledge and agree that (A) this Agreement shall be deemed to be the
“Loan Agreement” under the terms of the Consent and Agreement, (B) the Guarantor
Security Agreement shall be deemed to be the “Security Agreement”  under the
terms of the Consent and Agreement, (C) the IP Agreement shall be deemed to be
the “IP Security Agreement” under the terms of the Consent and Agreement and
(D) the Loan Documents shall be deemed to be the “Loan Documents” under the
terms of the Consent and Agreement.

 

6.11        Litigation Cooperation.  From the date hereof and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

 

6.12        Further Assurances.  Execute any further instruments and take
further action as Bank reasonably requests to perfect or continue Bank’s Lien in
the Collateral or to effect the purposes of this Agreement.  Deliver to Bank,
within five (5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.

 

6.13        Designated Senior Indebtedness.     Borrower shall designate all
principal of, interest (including all interest accruing after the commencement
of any bankruptcy or similar proceeding, whether or not a claim for

 

17

--------------------------------------------------------------------------------

 

post-petition interest is allowable as a claim in any such proceeding), and all
fees, costs, expenses and other amounts accrued or due under this Agreement as
“Designated Senior Indebtedness”, or such similar term, in any future
Subordinated Debt incurred by Borrower after the date hereof.

 

6.14        Creation/Acquisition of Subsidiaries.  Notwithstanding and without
limiting the negative covenant contained in Section 7.3 hereof, in the event
Borrower or any Subsidiary creates or acquires any Subsidiary, Borrower and such
Subsidiary shall promptly notify Bank of the creation or acquisition of such new
Subsidiary and, at Bank’s request, in its sole discretion, take all such action
as may be reasonably required by Bank to cause each such Subsidiary (other than
the Special Subsidiary) to, in Bank’s sole discretion, become a co-Borrower or
Guarantor under the Loan Documents and grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower shall grant and pledge to Bank a perfected
security interest in the stock, units or other evidence of ownership of each
Subsidiary(other than the Special Subsidiary).

 

7              NEGATIVE COVENANTS

 

Borrower shall not do any of the following without Bank’s prior written consent:

 

7.1          Dispositions.  Convey, sell, lease, transfer or otherwise dispose
of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, except for Transfers (a) of
Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment; (c) in connection with Permitted Liens and Permitted Investments;
(d) of non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; (e) of the Headquarters
Location to the Special Subsidiary for purposes of effectuating the Real Estate
Financing; and (f) provided no Default or Event of Default has occurred and is
continuing, of the Headquarters Location pursuant to the Sale/Leaseback
Transaction.

 

7.2             Changes in Business, Management, Ownership, Control, or Business
Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower and such
Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or
dissolve; or (c) have a material change in executive management (provided that
Borrower shall have ninety (90) days to retain a replacement reasonably
acceptable to Bank) or permit or suffer any Change in Control.  Borrower shall
not, without at least thirty (30) days prior written notice to Bank: (1) add any
new offices or business locations, including warehouses (unless such new offices
or business locations contain less than One Million Dollars ($1,000,000.00) in
Borrower’s assets or property or Borrower obtains a landlord agreement or bailee
agreement in form and substance reasonably satisfactory to Bank), (2) change its
jurisdiction of organization, (3) change its organizational structure or type,
(4) change its legal name, or (5) change any organizational number (if any)
assigned by its jurisdiction of organization.

 

7.3          Mergers or Acquisitions.  Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person, except for Permitted Acquisitions. 
A Subsidiary (other than a Domestic Subsidiary) may merge or consolidate into
another Subsidiary or into Borrower and a Domestic Subsidiary may merge into
another Domestic Subsidiary or into Borrower.

 

7.4          Indebtedness.  Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

 

7.5          Encumbrance.  Create, incur, allow, or suffer any Lien on any of
its property, or assign or convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, permit any Collateral not to be subject to the first priority
security interest granted herein, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Bank) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s intellectual property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Lien” herein.

 

18

--------------------------------------------------------------------------------

 

7.6          Maintenance of Collateral Accounts.  Maintain any Collateral
Account except pursuant to the terms of Section 6.8.(b) hereof.

 

7.7          Distributions; Investments.  (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock provided
that (i) Borrower may convert any of its convertible securities into other
securities pursuant to the terms of such convertible securities or otherwise in
exchange thereof, and (ii) Borrower may pay dividends solely in common stock; or
(b) directly or indirectly make any Investment other than Permitted Investments,
or permit any of its Subsidiaries to do so.

 

7.8          Transactions with Affiliates.  Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for (i) the sale or other transfer of the Headquarters Location by Borrower to
the Special Subsidiary in order to effectuate the Real Estate Financing,
(ii) the lease of the Headquarters Location by Borrower from the Special
Subsidiary entered into upon such sale, provided that the lease payments payable
by Borrower pursuant to such lease shall not exceed the amount necessary to
service the Indebtedness incurred by Special Subsidiary in the Real Estate
Financing and to pay the ordinary operating costs of the Special Subsidiary and
(ii) transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9          Subordinated Debt.  Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor, or other
similar agreement to which such Subordinated Debt is subject, or amend any
provision in any document relating to the Subordinated Debt which would increase
the amount thereof or adversely affect the subordination thereof to Obligations
owed to Bank.

 

7.10        Compliance.  Become an “investment company” or a company controlled
by an “investment company”, under the Investment Company Act of 1940, as
amended, or undertake as one of its important activities extending credit to
purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonably be expected to
have a material adverse effect on Borrower’s business, or permit any of its
Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.

 

8              EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

 

8.1          Payment Default.  Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any
other Obligations within three (3) Business Days after such Obligations are due
and payable (which three (3) day grace period shall not apply to payments due on
the Revolving Line Maturity Date).  During the cure period, the failure to cure
the payment default is not an Event of Default (but no Credit Extension will be
made during the cure period);

 

8.2          Covenant Default.

 

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4,
6.7, 6.8, 6.9, 6.12 or violates any covenant in Section 7; or

 

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default

 

19

--------------------------------------------------------------------------------

 

cannot by its nature be cured within the ten (10) day period or cannot after
diligent attempts by Borrower be cured within such ten (10) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall have
an additional period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period).  Grace periods provided under
this section shall not apply, among other things, to financial covenants or any
other covenants set forth in subsection (a) above;

 

8.3          Material Adverse Change.  A Material Adverse Change occurs;

 

8.4          Attachment; Levy; Restraint on Business.  (a) (i) The service of
process seeking to attach, by trustee or similar process, any funds of Borrower
or of any entity under the control of Borrower (including a Subsidiary) on
deposit with Bank or any Bank Affiliate, or (ii) a notice of lien, levy, or
assessment is filed against any of Borrower’s assets by any government agency,
and the same under subclauses (i) and (ii) hereof are not, within ten (10) days
after the occurrence thereof, discharged or stayed (whether through the posting
of a bond or otherwise); provided, however, no Credit Extensions shall be made
during any ten (10) day cure period; and (b) (i) any material portion of
Borrower’s assets is attached, seized, levied on, or comes into possession of a
trustee or receiver, or (ii) any court order enjoins, restrains, or prevents
Borrower from conducting any material part of its business;

 

8.5          Insolvency.  (a) Borrower is unable to pay its debts (including
trade debts) as they become due or otherwise becomes insolvent; (b) Borrower
begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within forty-five (45) days (but no
Credit Extensions shall be made while of any of the conditions described in
clause (a) exist and/or until any Insolvency Proceeding is dismissed);

 

8.6          Other Agreements.  There is a default in any agreement to which
Borrower or any Guarantor is a party with a third party or parties resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand
Dollars ($500,000.00) or that could have a material adverse effect on Borrower’s
or any Guarantor’s business.

 

8.7          Judgments.  One or more judgments, orders, or decrees for the
payment of money in an amount, individually or in the aggregate, of at least
Five Hundred Thousand Dollars ($500,000.00) (not covered by independent
third-party insurance as to which liability has been accepted by such insurance
carrier) shall be rendered against Borrower and shall remain unsatisfied,
unvacated, or unstayed for a period of ten (10) days after the entry thereof
(provided that no Credit Extensions will be made prior to the satisfaction,
vacation, or stay of such judgment, order, or decree);

 

8.8          Misrepresentations.  Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce
Bank to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made;

 

8.9          Subordinated Debt.  A default or breach occurs under any agreement
between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement;

 

8.10        Guaranty; Guarantor Defaults.  (a) Any Guaranty of any Obligations
terminates or ceases for any reason to be in full force and effect; (b) any
Guarantor does not perform any obligation or covenant under any Guaranty of the
Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or
8.8. occurs with respect to any Guarantor; (d) the liquidation, winding up, or
termination of existence of any Guarantor; (e) the occurrence of any “Event of
Default” under (and as defined in) any Guarantor Security Agreement; or (f) the
occurrence of any “Event of Default” under (and as defined in) any Pledge
Agreement executed and delivered by any Guarantor; or

 

8.11        Governmental Approvals.  Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions

 

20

--------------------------------------------------------------------------------

 

described in clause (a) above, and such decision or such revocation, rescission,
suspension, modification or non-renewal (i) has, or could reasonably be expected
to have, a Material Adverse Change, or (ii) adversely affects the legal
qualifications of Borrower or any of its Subsidiaries to hold such Governmental
Approval in any applicable jurisdiction and such revocation, rescission,
suspension, modification or non-renewal could reasonably be expected to affect
the status of or legal qualifications of Borrower or any of its Subsidiaries to
hold any Governmental Approval in any other jurisdiction.

 

9              BANK’S RIGHTS AND REMEDIES

 

9.1          Rights and Remedies.  While an Event of Default occurs and
continues Bank may, without notice or demand, do any or all of the following:

 

(a)           declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);

 

(b)           stop advancing money or extending credit for Borrower’s benefit
under this Agreement or under any other agreement between Borrower and Bank;

 

(c)           demand that Borrower (i) deposits cash with Bank in an amount
equal to the aggregate amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and
(ii) pay in advance all Letter of Credit fees scheduled to be paid or payable
over the remaining term of any Letters of Credit; provided, however, if an Event
of Default described in Section 8.5 occurs, the obligation of Borrower to cash
collateralize all Letters of Credit remaining undrawn shall automatically become
effective without any action by Bank;

 

(d)           terminate any FX Forward Contracts;

 

(e)           settle or adjust disputes and claims directly with Account Debtors
for amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank’s security interest in such funds, and
verify the amount of such account;

 

(f)            make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral.  Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates.  Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank’s rights or remedies;

 

(g)           apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;

 

(h)           ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;

 

(i)            place a “hold” on any account maintained with Bank and/or deliver
a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;

 

(j)            demand and receive possession of Borrower’s Books; and

 

(k)           exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms thereof).

 

21

--------------------------------------------------------------------------------

 

9.2          Power of Attorney.  Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to:  (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower’s insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits.  Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents
necessary to perfect or continue the perfection of Bank’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full (except for contingent indemnification
obligations for which no claim has been made) and Bank is under no further
obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as
Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.

 

9.3          Protective Payments.  If Borrower fails to obtain the insurance
called for by Section 6.7 or fails to pay any premium thereon or fails to pay
any other amount which Borrower is obligated to pay under this Agreement or any
other Loan Document, Bank may obtain such insurance or make such payment, and
all amounts so paid by Bank are Bank Expenses and immediately due and payable,
bearing interest at the then highest applicable rate, and secured by the
Collateral.  Bank will make reasonable efforts to provide Borrower with notice
of Bank obtaining such insurance at the time it is obtained or within a
reasonable time thereafter.  No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.

 

9.4          Application of Payments and Proceeds.  Borrower shall have no right
to specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrower to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement.  If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion.  Any
surplus shall be paid to Borrower by credit to the Designated Deposit Account or
to other Persons legally entitled thereto; Borrower shall remain liable to Bank
for any deficiency.  If Bank, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option, exercisable at
any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Bank of cash therefor.

 

9.5          Bank’s Liability for Collateral.  So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person.  Borrower bears
all risk of loss, damage or destruction of the Collateral.

 

9.6          No Waiver; Remedies Cumulative.  Bank’s failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith.  No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it is
given.  Bank’s rights and remedies under this Agreement and the other Loan
Documents are cumulative.  Bank has all rights and remedies provided under the
Code, by law, or in equity.  Bank’s exercise of one right or remedy is not an
election, and Bank’s waiver of any Event of Default is not a continuing waiver. 
Bank’s delay in exercising any remedy is not a waiver, election, or
acquiescence.

 

9.7          Demand Waiver.  Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.

 

22

--------------------------------------------------------------------------------

 

9.8          Borrower Liability.  Either Borrower may, acting singly, request
Credit Extensions hereunder.  Each Borrower hereby appoints the other as agent
for the other for all purposes hereunder, including with respect to requesting
Credit Extensions hereunder.  Each Borrower hereunder shall be jointly and
severally obligated to repay all Credit Extensions made hereunder, regardless of
which Borrower actually receives said Credit Extension, as if each Borrower
hereunder directly received all Credit Extensions.  Each Borrower waives (a) any
suretyship defenses available to it under the Code or any other applicable law,
and (b) any right to require Bank to: (i) proceed against any Borrower or any
other person; (ii) proceed against or exhaust any security; or (iii) pursue any
other remedy.  Bank may exercise or not exercise any right or remedy it has
against any Borrower or any security it holds (including the right to foreclose
by judicial or non-judicial sale) without affecting any Borrower’s liability. 
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in equity
(including, without limitation, any law subrogating Borrower to the rights of
Bank under this Agreement) to seek contribution, indemnification or any other
form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by Borrower with respect to the Obligations in connection with this
Agreement or otherwise and all rights that it might have to benefit from, or to
participate in, any security for the Obligations as a result of any payment made
by Borrower with respect to the Obligations in connection with this Agreement or
otherwise.  Any agreement providing for indemnification, reimbursement or any
other arrangement prohibited under this Section shall be null and void.  If any
payment is made to a Borrower in contravention of this Section, such Borrower
shall hold such payment in trust for Bank and such payment shall be promptly
delivered to Bank for application to the Obligations, whether matured or
unmatured.

 

10           NOTICES

 

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and be delivered or sent by facsimile at the
addresses or facsimile numbers listed below.  Bank or Borrower may change its
notice address by giving the other party written notice thereof.  Each such
Communication shall be deemed to have been validly served, given, or delivered:
(a) upon the earlier of actual receipt and three (3) Business Days after deposit
in the U.S. mail, registered or certified mail, return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by facsimile
transmission (with such facsimile promptly confirmed by delivery of a copy by
personal delivery or United States mail as otherwise provided in this
Section 10); (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid; or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated below.  Advance requests made
pursuant to Section 3.4 must be in writing and may be in the form of electronic
mail, delivered to Bank by Borrower at the e-mail address of Bank provided below
and shall be deemed to have been validly served, given, or delivered when sent
(with such electronic mail promptly confirmed by delivery of a copy by personal
delivery or United States mail as otherwise provided in this Section 10).  Bank
or Borrower may change its address, facsimile number, or electronic mail address
by giving the other party written notice thereof in accordance with the terms of
this Section 10.

 

If to
Borrower:                                                                  
Axcelis Technologies, Inc.
108 Cherry Hill Drive
Beverly, Massachusetts 01915
Attn:  Jay Zager, Chief Financial Officer and Executive Vice President
Fax:  978-787-4090
Email:   Jay.zager@axcelis.com

 

If to
Borrower:                                                                  
Axcelis Technologies, Inc.
108 Cherry Hill Drive
Beverly, Massachusetts 01915
Attn:  Lynnette C. Fallon, Executive Vice President HR/Legal, General Counsel
and Secretary
Fax:  978-787-4090
Email:   lynnette.fallon@axcelis.com

 

23

--------------------------------------------------------------------------------

 

With a copy to:                                                            
Edward Angell Palmer and Dodge LLP
111 Huntington Avenue
Boston, Massachusetts 02199
Attn:  James I. Rubens, Esquire
Fax: 888-325-9130
Email:   jrubens@eapdlaw.com

 

If to
Bank:                                                                                        
Silicon Valley Bank
275 Grove Street, Suite 2-200
Newton, Massachusetts 02466
Attn:  Lara Chilton
Fax:  617.969.5973
Email:   lchilton@svb.com

 

with a copy to:                                                                
Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: Charles W. Stavros, Esquire
Fax:  617.880.3456
Email:   CStavros@riemerlaw.com

 

11           CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

 

Massachusetts law governs the Loan Documents without regard to principles of
conflicts of law.  Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that
nothing in this Agreement shall be deemed to operate to preclude Bank from
bringing suit or taking other legal action in any other jurisdiction to realize
on the Collateral or any other security for the Obligations, or to enforce a
judgment or other court order in favor of Bank.  Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based upon
lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.  Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL SPECIFICALLY HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST
BORROWER OR ITS PROPERTY.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. 
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

12           GENERAL PROVISIONS

 

12.1        Termination Prior to Revolving Line Maturity Date.  This Agreement
may be terminated prior to the Revolving Line Maturity Date by Borrower,
effective three (3) Business Days after written notice of termination is given
to Bank.  Notwithstanding any such termination, Bank’s lien and security
interest in the Collateral shall continue until Borrower fully satisfies its
Obligations in cash (except for contingent indemnification obligations for which
no claim has been made).  If such termination is at Borrower’s election
(regardless of whether any Default or Event of Default then exists) or at Bank’s
election due to the occurrence and continuance of an Event

 

24

--------------------------------------------------------------------------------

 

of Default, Borrower shall pay to Bank, in addition to the payment of any other
expenses or fees then-owing, a termination fee in an amount equal to Three
Hundred Thousand Dollars ($300,000.00) (i.e., one percent (1.00%) of the
Revolving Line); provided that no termination fee shall be charged if the credit
facility hereunder is refinanced with a new facility from Bank.

 

12.2        Right of Set-Off.  Borrower hereby grants to Bank a Lien and a right
of setoff as security for all Obligations to Bank, whether now existing or
hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Bank (including a subsidiary of Bank) or
in transit to any of them.  At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may setoff
the same or any part thereof and apply the same to any liability or Obligation
of Borrower even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.3        Successors and Assigns.  This Agreement binds and is for the benefit
of the successors and permitted assigns of each party.  Borrower may not assign
this Agreement or any rights or obligations under it without Bank’s prior
written consent (which may be granted or withheld in Bank’s discretion).  Bank
has the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents; provided, however, that prior to the occurrence of an Event of
Default, any such assignment or participation may only be made to an Eligible
Assignee.

 

12.4        Indemnification.  Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against:  (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.

 

12.5        Time of Essence.  Time is of the essence for the performance of all
Obligations in this Agreement.

 

12.6        Severability of Provisions.  Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

 

12.7        Correction of Loan Documents.  Bank may correct patent errors and
fill in any blanks in this Agreement and the other Loan Documents consistent
with the agreement of the parties.

 

12.8        Amendments in Writing; Waiver; Integration.  No purported amendment
or modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought.  Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document.  Any waiver granted shall be limited to the
specific circumstance expressly described in it, and shall not apply to any
subsequent or other circumstance, whether similar or dissimilar, or give rise
to, or evidence, any obligation or commitment to grant any further waiver.  The
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into the Loan
Documents.

 

25

--------------------------------------------------------------------------------

 

12.9        Counterparts.  This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.

 

12.10      Survival.  All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied.  The obligation of Borrower in Section 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.

 

12.11      Confidentiality.  In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise
required in connection with Bank’s examination or audit; (e) as Bank considers
appropriate in exercising remedies under the Loan Documents; and (f) to
third-party service providers of Bank so long as such service providers have
executed a confidentiality agreement with Bank with terms no less restrictive
than those contained herein.  Confidential information does not include
information that either: (i) is in the public domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know that
the third party is prohibited from disclosing the information.

 

Bank may use confidential information for any purpose, including, without
limitation, for the development of client databases, reporting purposes, and
market analysis, so long as Bank does not disclose Borrower’s identity or the
identity of any person associated with Borrower unless otherwise expressly
permitted by this Agreement.  The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.

 

12.12      Electronic Execution of Documents.  The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

 

12.13      Captions.  The headings used in this Agreement are for convenience
only and shall not affect the interpretation of this Agreement.

 

12.14      Construction of Agreement.  The parties mutually acknowledge that
they and their attorneys have participated in the preparation and negotiation of
this Agreement.  In cases of uncertainty this Agreement shall be construed
without regard to which of the parties caused the uncertainty to exist.

 

12.15      Relationship.  The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement.  The parties do not
intend to create any agency, partnership, joint venture, trust, fiduciary or
other relationship with duties or incidents different from those of parties to
an arm’s-length contract.

 

12.16      Third Parties.  Nothing in this Agreement, whether express or
implied, is intended to: (a) confer any benefits, rights or remedies under or by
reason of this Agreement on any persons other than the express parties to it and
their respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

 

13           DEFINITIONS

 

13.1        Definitions.  As used in the Loan Documents, the word “shall” is
mandatory, the word “may” is permissive, the word “or” is not exclusive, the
words “includes” and “including” are not limiting, the singular includes the
plural, and numbers denoting amounts that are set off in brackets are negative.
As used in this Agreement, the following terms have the following meanings:

 

26

--------------------------------------------------------------------------------

 

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

 

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Additional Cost” is defined in Section 3.7(b).

 

“Adjusted Net Income” means, on a consolidated basis for Borrower and its
Subsidiaries, for any period, (a) the net profit (or loss), of Borrower and its
Subsidiaries for such period, plus, without duplication, (b) (i) interest
expense, (ii) income tax expense, (iii) depreciation and amortization expense,
(iv) non-cash stock compensation expense, (v) non-realized non-cash losses from
Borrower’s foreign exchange transactions, and (vi) other reasonable add-backs
for non-cash items, which have been approved by Bank in writing in its sole and
absolute discretion on a case-by-case basis, minus (c) (i) Capital Expenditures
(other than Capital Expenditures financed pursuant to a transaction permitted by
clause (c) of the definition of “Permitted Liens”), (ii) taxes paid in cash and
(iii) non-realized non-cash gains from Borrower’s foreign exchange transactions.

 

“Advance” or “Advances” means an advance (or advances) under the Revolving Line.

 

“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Availability Amount” is (i) the lesser of the Revolving Line or the amount
available under the Borrowing Base minus (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an
amount equal to the Letter of Credit Reserve, minus (iii) the FX Reserve, minus
(iv) any amounts used for Cash Management Services, and minus (v) the
outstanding principal balance of any Advances.

 

“Bank” is defined in the preamble hereof.

 

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.

 

“Borrower” is defined in the preamble hereof

 

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

 

“Borrowing Base” is the sum of (a), the Non-Formula Amount, plus (b) 80% of
Eligible Accounts (excluding Foreign Currency Accounts not subject to a Foreign
Currency Hedge Agreement), plus (c) 60% of Foreign Currency Accounts not subject
to a Foreign Currency Hedge Agreement, as determined by Bank from Borrower’s
most recent Transaction Report; provided, however, that Bank may, following any
Collateral inspection or audit conducted by or on behalf of Bank, decrease the
foregoing percentage in its good faith business judgment based on events,
conditions, contingencies, or risks which, as reasonably determined by Bank
after consultation with Borrower, may adversely affect Collateral.

 

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors (or other applicable governing body)
and delivered by such Person to Bank approving the Loan Documents to which such
Person is a party and the transactions contemplated thereby, together with a
certificate executed by its secretary on behalf of such Person certifying that
(a) such Person has the authority to execute, deliver, and perform its
obligations under each of the Loan Documents to which it is a party, (b) that
attached to

 

27

--------------------------------------------------------------------------------

 

such certificate is a true, correct, and complete copy of the resolutions then
in full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.

 

“Business Day” is any day other than a Saturday, Sunday or other day on which
banking institutions in the Commonwealth of Massachusetts are authorized or
required by law or other governmental action to close, except that (a) if any
determination of a “Business Day” shall relate to an FX Forward Contract, the
term “Business Day” shall mean a day on which dealings are carried on in the
country of settlement of the foreign (i.e., non-Dollar) currency. is any day
that is not a Saturday, Sunday or a day on which Bank is closed, and (b) if any
determination of a “Business Day” shall relate to a LIBOR Credit Extension, the
term “Business Day” shall also mean a day on which dealings are carried on in
the London interbank market.

 

“Capital Expenditures” means, with respect to any Person for any period, the sum
of (a) the aggregate of all expenditures by such Person and its Subsidiaries
during such period that are capital expenditures as determined in accordance
with GAAP, whether such expenditures are paid in cash or financed, plus (b) to
the extent not covered by clause (a), the aggregate of all expenditures by such
Person and its Subsidiaries during such period to acquire by purchase or
otherwise the business or capitalized assets or the capital stock of any other
Person.

 

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue.

 

“Cash Management Services” is defined in Section 2.1.4.

 

“Change in Control” means any event, transaction, or occurrence as a result of
which (a) any “person” (as such term is defined in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as an amended (the “Exchange
Act”)), other than a trustee or other fiduciary holding securities under an
employee benefit plan of Borrower, is or becomes a beneficial owner (within the
meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly,
of securities of Borrower, representing twenty-five percent (25%) or more of the
combined voting power of Borrower’s then outstanding securities; or (b) during
any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by the Board of Directors of
Borrower was approved by a vote of at least two-thirds of the directors then
still in office who either were directions at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason other than death or disability to constitute a majority of the
directors then in office.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the Commonwealth of Massachusetts; provided, that, to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank’s Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the Commonwealth
of Massachusetts, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes on the
provisions thereof relating to such attachment, perfection, priority, or
remedies and for purposes of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

 

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

 

28

--------------------------------------------------------------------------------

 

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit B.

 

“Consent and Agreement” means the Consent and Agreement dated as of March 30,
2009 by and among the Bank, SEN, Sumitomo Heavy Industries, Ltd. (solely for
purposes of Section 2(b) thereunder), the Borrower and certain of Borrower’s
Subsidiaries named therein.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such Person as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business. 
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

 

“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services, or any other extension of credit by Bank
for Borrower’s benefit.

 

“Current Liabilities” are all obligations and liabilities of Borrower and its
Subsidiaries to Bank (other than obligations and liabilities which are 100% cash
secured), plus, without duplication, the aggregate amount of Borrower’s and its
Subsidiaries’ consolidated Total Liabilities that mature within one (1) year.

 

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

 

“Default Rate” is defined in Section 2.3(c).

 

“Deferred Revenue” is all amounts received or invoiced by Borrower in advance of
services to be performed under contracts and/or delivery of products and not yet
recognized as revenue.

 

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Designated Deposit Account” is Borrower’s deposit account, account number
330609227, maintained with Bank.

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

 

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United
States or any state or territory thereof or the District of Columbia.

 

“Effective Date” is April 10, 2011.

 

“Eligible Accounts” means Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3.  Bank reserves the right at any time after the Effective Date to
adjust any of the criteria set forth below and to establish new criteria in its
good faith business judgment.   Without limiting the fact that the determination
of which Accounts are eligible for borrowing is a matter of Bank’s good faith
judgment, the following (“Minimum Eligibility Requirements”) are the minimum
requirements for an

 

29

--------------------------------------------------------------------------------

 

Account to be an Eligible Account and, unless Bank agrees otherwise in writing,
Eligible Accounts shall not include:

 

(a)           Accounts that the Account Debtor has not paid within ninety (90)
days of invoice date regardless of invoice payment period terms;

 

(b)           Accounts owing from an Account Debtor, fifty percent (50%) or more
of whose Accounts have not been paid within ninety (90) days of invoice date;

 

(c)           Accounts billed in the United States and owing from an Account
Debtor which does not have its principal place of business in the United States
or Canada, except Eligible Foreign Accounts;

 

(d)           Accounts billed and payable outside of the United States;

 

(e)           Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called “contra” accounts, accounts
payable, customer deposits or credit accounts), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by Borrower in
the ordinary course of its business;

 

(f)            Accounts for which the Account Debtor is Borrower’s Affiliate (or
a company in which Borrower or its Affiliates have greater than a 20% ownership
interest), officer, employee, or agent;

 

(g)           Accounts with credit balances over ninety (90) days from invoice
date;

 

(h)           Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to Borrower exceed forty percent (40.0%) of all Accounts, for
the amounts that exceed that percentage, unless Bank, on a case-by-case basis
and in its sole discretion, otherwise approves any such Account;

 

(i)            Accounts owing from an Account Debtor which is a United States
government entity or any department, agency, or instrumentality thereof unless
Borrower has assigned its payment rights to Bank and the assignment has been
acknowledged under the Federal Assignment of Claims Act of 1940, as amended;

 

(j)            Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on
approval”, or other terms if Account Debtor’s payment may be conditional;

 

(k)           Accounts for which an Account Debtor has not been invoiced or
where goods or services have not yet been rendered to the Account Debtor
(sometimes called memo billings or pre-billings);

 

(l)            Accounts subject to contractual arrangements between Borrower and
an Account Debtor where payments shall be scheduled or due according to
completion or fulfillment requirements and where the Account Debtor has a right
of offset for damages suffered as a result of Borrower’s failure to perform in
accordance with the contract (sometimes called contracts accounts receivable,
progress billings, milestone billings, or fulfillment contracts);

 

(m)          Accounts owing from an Account Debtor the amount of which may be
subject to withholding based on the Account Debtor’s satisfaction of Borrower’s
complete performance (but only to the extent of that portion of the amount
withheld which exceeds ten percent (10%) of the Account; sometimes called
retainage billings);

 

(n)           Accounts subject to trust provisions, subrogation rights of a
bonding company, or a statutory trust;

 

(o)           Accounts owing from an Account Debtor that have been invoiced for
goods that have not been shipped to the Account Debtor unless Bank, Borrower,
and the Account Debtor have entered into an agreement acceptable to Bank in its
sole discretion wherein the Account Debtor acknowledges that (i) it has title to
and has

 

30

--------------------------------------------------------------------------------

 

ownership of the goods wherever located, (ii) a bona fide sale of the goods has
occurred, and (iii) it owes payment for such goods in accordance with invoices
from Borrower (sometimes called “bill and hold” accounts);

 

(p)           Accounts owing from an Account Debtor with respect to which
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue);

 

(q)           Accounts for which the Account Debtor has not been invoiced;

 

(r)            Accounts that represent non-trade receivables or that are derived
by means other than in the ordinary course of Borrower’s business;

 

(s)           Accounts for which Borrower has permitted Account Debtor’s payment
to extend beyond 90 days;

 

(t)            Accounts subject to chargebacks or others payment deductions
taken by an Account Debtor (but only to the extent the chargeback is determined
invalid and subsequently collected by Borrower);

 

(u)           Accounts in which the Account Debtor disputes liability or makes
any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business; and

 

(v)           Accounts for which Bank in its good faith business judgment
determines collection to be doubtful or otherwise ineligible.

 

“Eligible Assignee” shall mean any commercial bank, insurance company,
investment or mutual fund or other entity that is an “accredited investor” (as
defined in Regulation D under the Securities Act) and which extends credit or
buys loans as one of its businesses; provided that any direct competitor of the
Borrower shall not be an Eligible Assignee.

 

“Eligible Foreign Accounts” are accounts from an Account Debtor with its
principal place of business outside of the United States or Canada approved by
Bank in its sole discretion provided that in any event such accounts  shall be
(i) with Account Debtors headquartered in France, Germany, Italy, Japan, or the
United Kingdom, and/or (ii) covered by credit insurance satisfactory to Bank,
less any deductible, and/or (iii) supported by letter(s) of credit acceptable to
Bank, and/or (iv) have a billing and receipt history acceptable to Bank.

 

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.

 

“Event of Default” is defined in Section 8.

 

“Excess Cash” is, on any date of determination, (a) the sum of Borrower’s
unrestricted cash maintained at Bank and Cash Equivalents maintained at Bank,
minus (b) the aggregate outstanding amount of all Obligations.

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“Foreign Currency Accounts” are Eligible Accounts denominated in a Foreign
Currency that have been approved in writing by Bank in its sole discretion.

 

“Foreign Currency Hedge Agreement” means any agreement with respect to any swap,
hedge, forward, future or derivative transaction or option or similar other
similar agreement or arrangement, each of which is (i) for the purpose of
hedging the foreign currency fluctuation exposure associated with Borrower’s
operations and Accounts, (ii) acceptable to Bank, in its reasonable discretion,
and (iii) not for speculative purposes.

 

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

 

31

--------------------------------------------------------------------------------

 

“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.

 

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

 

“FX Forward Contract” is defined in Section 2.1.3.

 

“FX Reserve” is defined in Section 2.1.3.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

 

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

 

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

 

“Guarantor” is any present or future guarantor of the Obligations, including
Fusion Technology International, Inc., Fusion Investments, Inc., High
Temperature Engineering Corporation,  Axcelis  Technologies (Israel), Inc. and
all present or future Domestic Subsidiaries.

 

“Guarantor Security Agreement(s)” is each Amended and Restated Security
Agreement executed and delivered by a Guarantor to Bank to secure the Guaranty
of such Guarantor.

 

“Guaranty(ies)” is any guaranty of the Obligations executed and delivered by a
Guarantor to Bank.

 

“Headquarters Location” is 108 Cherry Hill Drive, Beverly, Massachusetts.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.4.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

32

--------------------------------------------------------------------------------

 

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

 

“IP Agreement” is that certain Amended and Restated Intellectual Property
Security Agreement executed and delivered by Borrower and Guarantors to Bank
dated as of March 12, 2010, as amended by that certain First Amendment to
Intellectual Property Security Agreement dated of even date herewith.

 

“Interest Payment Date” means, (a) with respect to any LIBOR Credit Extension,
(i) the first (1st) calendar day of each month (or, if the first (1st) day of
the month does not fall on a Business Day, then on the first Business Day
following such date), and (ii) the last day of each Interest Period applicable
to such LIBOR Credit Extension, and, (b) with respect to Prime Rate Credit
Extensions, the first (1st) calendar day of each month (or, if the first (1st)
day of the month does not fall on a Business Day, then on the first Business Day
following such date), and each date a Prime Rate Credit Extension is converted
into a LIBOR Credit Extension to the extent of the amount converted to a LIBOR
Credit Extension.

 

“Interest Period” means, as to any LIBOR Credit Extension, the period commencing
on the date of such LIBOR Credit Extension, or on the conversion/continuation
date on which the LIBOR Credit Extension is converted into or continued as a
LIBOR Credit Extension, and ending on the date that is one (1), two (2),  or
three (3) months thereafter, in each case, subject to availability, as Borrower
may elect in the applicable Notice of Borrowing or Notice of
Conversion/Continuation; provided, however, that (a) no Interest Period with
respect to any LIBOR Credit Extension shall end later than the Revolving Line
Maturity Date, (b) the last day of an Interest Period shall be determined in
accordance with the practices of the LIBOR interbank market as from time to time
in effect, (c) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following Business
Day unless, in the case of a LIBOR Credit Extension, the result of such
extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding Business Day,
(d) any Interest Period pertaining to a LIBOR Credit Extension that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period, and (e) interest shall accrue from and include the first
Business Day of an Interest Period but exclude the last Business Day of such
Interest Period.

 

“Interest Rate Determination Date” means each date for calculating the LIBOR for
purposes of determining the interest rate in respect of an Interest Period.  The
Interest Rate Determination Date shall be the second Business Day prior to the
first day of the related Interest Period for a LIBOR Credit Extension.

 

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.

 

“Letter of Credit Application” is defined in Section 2.1.2(a).

 

“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).

 

“LIBOR” means, for any Interest Rate Determination Date with respect to an
Interest Period for any Credit Extension to be made, continued as or converted
into a LIBOR Credit Extension, the rate of interest per annum determined by Bank
to be the per annum rate of interest at which deposits in United States Dollars
are offered to Bank in the London interbank market (rounded upward, if
necessary, to the nearest 1/100th of one percent (0.01%)) in which Bank
customarily participates at 11:00 a.m. (local time in such interbank market) two
(2) Business Days prior to the first day of such Interest Period for a period
approximately equal to such Interest Period and in an amount approximately equal
to the amount of such Credit Extension.

 

33

--------------------------------------------------------------------------------

 

“LIBOR Credit Extension” means a Credit Extension that bears interest based at
the LIBOR Rate plus the LIBOR Rate Margin.

 

“LIBOR Rate” means, for each Interest Period in respect of LIBOR Credit
Extensions comprising part of the same Credit Extensions, an interest rate per
annum (rounded upward to the nearest 1/16th of one percent (0.0625%)) equal to
LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement
for such Interest Period.

 

“LIBOR Rate Margin” is three and one half of one percent (3.50%).

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the Perfection Certificate,
the IP Agreement, the Pledge Agreements, the Guarantor Security Agreements, each
Guaranty, any note, or notes executed by Borrower or any Guarantor, and any
other present or future agreement executed or delivered by Borrower or any
Guarantor and/or for the benefit of Bank in connection with this Agreement, all
as amended, restated, or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower, taken as a whole; or (c) a material
impairment of the prospect of repayment of any portion of the Obligations or
(d) Bank determines, based upon information available to it and in its
reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during
the next succeeding financial reporting period.

 

“Non-Formula Amount” is an Advance or Advances in an amount equal to Ten Million
Dollars ($10,000,000).”

 

“Notice of Borrowing” means a notice given by Borrower to Bank in accordance
with Section 3.2(a), substantially in the form of Exhibit C, with appropriate
insertions.

 

“Notice of Conversion/Continuation” means a notice given by Borrower to Bank in
accordance with Section 3.5, substantially in the form of Exhibit D, with
appropriate insertions.

 

“Obligations” are Borrower’s obligation to pay when due any debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
whether under this Agreement, the Loan Documents, or otherwise, including,
without limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower  assigned to Bank, and the performance of Borrower’s
duties under the Loan Documents.

 

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified with the Secretary of State of such Person’s state of formation on a
date that is no earlier than 30 days prior to the Effective Date, and, (a) if
such Person is a corporation, its bylaws in current form, (b) if such Person is
a limited liability company, its limited liability company agreement (or similar
agreement), and (c) if such Person is a partnership, its partnership agreement
(or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

 

“Overadvance” is defined in Section 2.2.

 

“Parent” is defined in Section 3.7(d).

 

“Perfection Certificate” is defined in Section 5.1.

 

“Permitted Acquisition” is any acquisition by the Borrower of all or
substantially all of the capital stock, or substantially all of the assets, of a
Person, or of all or substantially all of the assets constituting a division,
product

 

34

--------------------------------------------------------------------------------

 

line or business line of a Person, if such acquisition complies with the
following criteria: (a) no Event of Default exists or would result from such
acquisition; (b) the Person, division, product line or line of business acquired
in such acquisition shall be in the same or substantially similar line of
business as Borrower; (c) Bank shall have received at least five (5) Business
Days prior written notice of the closing date for such acquisition (together
with a description of the proposed acquisition or purchase, all diligence
materials (including, without limitation, a certificate of a Responsible
Officer, in form and substance reasonably satisfactory to Bank certifying that,
as of the date thereof, the proposed purchase or acquisition is in compliance
with Section 7.3 hereof) and other documents and information reasonably
requested by Bank, each of which shall be in form and substance reasonably
satisfactory to Bank); (d) Borrower is the surviving legal entity after such
acquisition; (e) no Indebtedness or Liens are assumed in connection with such
acquisition, other than Permitted Indebtedness and Permitted Liens; (f) any
Person that is acquired and remains a separate legal entity shall, at Bank’s
option, in its sole and absolute discretion, become a borrower or guarantor
pursuant to the terms hereunder and documentation required by Bank in its sole
discretion within thirty (30) days of such acquisition; (g) Borrower has
provided Bank with written confirmation, supported by reasonably detailed
calculations, that on a pro forma basis (including pro forma adjustments arising
out of events which are directly attributable to such acquisition), Borrower
would be in compliance with the financial covenants contained in Section 6.9,
both immediately prior to, and immediately after the consummation of, such
acquisition; (h) such transaction is accretive to Borrower’s EBITDA; and (i) the
aggregate cash and non-cash consideration (including, without limitation, debt
and equity consideration) for all Permitted Acquisitions shall not individually
or in the aggregate exceed Thirty Million Dollars ($30,000,000.00).

 

“Permitted Indebtedness” is:

 

(a)           Borrower’s Indebtedness to Bank under this Agreement and the other
Loan Documents;

 

(b)           Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;

 

(c)           Subordinated Debt;

 

(d)           unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;

 

(e)           unsecured Indebtedness with respect to surety bonds, letters of
credit and/or and similar instruments in connection with value added tax
recovery initiatives of Axcelis Technologies GmbH incurred in the ordinary
course of business;

 

(f)            Indebtedness owing from (i) one Borrower to another Borrower;
(ii) any Borrower to any Subsidiary; and (iii) except for trade indebtedness
incurred in the ordinary course of business consistent with past practice, any
Subsidiary to any Borrower in an aggregate amount of up to $1,000,000, provided
that, in each case, such Indebtedness is incurred in the ordinary course of
business of such Borrower or Subsidiary and pursuant to an arms-length
transaction;

 

(g)           Indebtedness owing by Borrower or the Special Subsidiary pursuant
to the Real Estate Financing provided that (i) such Indebtedness does not exceed
$50,000,000 in the aggregate outstanding at any time, (ii) such Indebtedness is
subject to the terms of an intercreditor agreement in form and substance
acceptable to Bank and (iii) no Event of Default exists immediately prior to the
incurrence of such Indebtedness or results after giving effect to the incurrence
thereof; and

 

(h)           extensions, refinancings, modifications, amendments and
restatements of Permitted Indebtedness referenced in items (a) through (d) and
(f) and (g) above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

(a)           Investments shown on the Perfection Certificate and existing on
the Effective Date;

 

(b)           Cash Equivalents;

 

35

--------------------------------------------------------------------------------

 

(c)           Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;

 

(d)           Investments consisting of deposit accounts maintained with Bank
and subject to Bank’s first priority Lien;

 

(e)           Investments of Subsidiaries in or to Borrower or any Guarantor and
Investments of one Borrower in or to another Borrower;

 

(f)            Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower’s Board of
Directors (or other applicable governing body);

 

(g)           Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;

 

(h)           Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph
(h) shall not apply to Investments of Borrower in any Subsidiary; and

 

(i)            Money market funds that (i) comply with the criteria set forth in
Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P
and Aaa by Moody’s and (iii) have portfolio assets of at least $500,000,000.00;

 

(j)            Other equity and debt investments that are consistent with the
investment policy of the Borrower dated as of March 2003, a copy of which has
been delivered to Bank;

 

(k)           Subject to Section 6.6 hereof, Investments of Borrower and its
Domestic Subsidiaries consisting of deposit accounts held with foreign financial
institutions; provided, that the aggregate dollar value of all such deposit
accounts does not exceed 5% of the dollar value of all unrestricted cash of
Borrower and its Domestic Subsidiaries; and

 

(l)            Investments of Borrower after the Effective Date (i) in
Subsidiaries existing on the Effective Date not to exceed $1,000,000.00 in the
aggregate and (ii) in the Special Subsidiary consisting solely of the ownership
of the capital stock of the Special Subsidiary.

 

“Permitted Liens” are:

 

(a)           Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;

 

(b)           Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, provided that no notice of
any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)           purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
$1,000,000 in the aggregate amount outstanding, or (ii) existing on Equipment
when acquired, if the Lien is confined to the property and improvements and the
proceeds of the Equipment;

 

(d)           Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

 

36

--------------------------------------------------------------------------------

 

(e)           leases or subleases of real property granted in the ordinary
course of business, and leases, subleases, non-exclusive licenses or sublicenses
of property (other than real property or intellectual property) granted in the
ordinary course of Borrower’s business, if such leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;

 

(f)            non-exclusive license of intellectual property granted to third
parties in the ordinary course of business;

 

(g)           the SEN License;

 

(h)           Liens securing the Real Estate Financing provided that the Lien is
limited to a mortgage Lien encumbering the Headquarters Location and related
fixtures; and

 

(i)            Liens arising from attachments or judgments, orders, or decrees
in circumstances not constituting an Event of Default under Sections 8.4 and
8.7.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“Pledge Agreement(s)” those certain Pledge Agreements executed and delivered by
Borrower and Fusion Technology International, Inc. in favor of Bank.

 

“Prime Rate” is, with respect to any day, the “Prime Rate” as quoted in the Wall
Street Journal print edition on such day (or, if such day is not a day on which
the Wall Street Journal is published, the immediately preceding day on which the
Wall Street Journal was published) rate.

 

“Prime Rate Credit Extension” means a Credit Extension that bears interest based
at the Prime Rate plus the Prime Rate Margin.

 

“Prime Rate Margin” is one percent (1.0%).

 

“Quick Assets” is, on any date, Borrower’s and its Subsidiaries’ consolidated
world-wide cash and Cash Equivalents, Accounts, and investments with maturities
of fewer than 12 months determined according to GAAP.

 

“Real Estate Financing” is a mortgage loan financing transaction between
Borrower or the Special Subsidiary and an unaffiliated third-party lender
whereby such unaffiliated third-party lender provides real estate financing
secured solely by a mortgage Lien on the Headquarters Location and related
fixtures.

 

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made

 

“Regulatory Change” means, with respect to Bank, any change on or after the date
of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

 

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“Reserve Requirement” means, for any Interest Period, the average maximum rate
at which reserves (including any marginal, supplemental, or emergency reserves)
are required to be maintained during such Interest Period under Regulation D
against “Eurocurrency liabilities” (as such term is used in Regulation D) by
member

 

37

--------------------------------------------------------------------------------

 

banks of the Federal Reserve System.  Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves required to
be maintained by Bank by reason of any Regulatory Change against (a) any
category of liabilities which includes deposits by reference to which the LIBOR
Rate is to be determined as provided in the definition of LIBOR or (b) any
category of extensions of credit or other assets which include Credit
Extensions.

 

“Reserves” means, as of any date of determination, upon notice to and after
consultation with Borrower,  such amounts as Bank may reasonably from time to
time establish and revise in its good faith business judgment, reducing the
amount of Advances and other financial accommodations which would otherwise be
available to Borrower to reflect events, conditions, contingencies or risks
which, as determined by Bank in its good faith business judgment, do or may
adversely affect in any material way (i) the assets, business or prospects of
Borrower or any Guarantor, or (ii) the security interests and other rights of
Bank in the Collateral (including the enforceability, perfection and priority
thereof).

 

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer and General Counsel.

 

“Restricted License” is any material license or other agreement, excluding the
SEN License, with respect to which Borrower is the licensee (a) that prohibits
or otherwise restricts Borrower from granting a security interest in Borrower’s
interest in such license or agreement or any other property, or (b) for which a
default under or termination of could interfere with the Bank’s right to sell
any Collateral.

 

“Revolving Line” is an Advance or Advances in an amount equal to Thirty Million
Dollars ($30,000,000).

 

“Revolving Line Maturity Date” is April 10, 2015.

 

“Sale/Leaseback Transaction” is a sale/leaseback transaction relating to the
Headquarters Location (excluding Equipment) entered into by Borrower on terms as
favorable to Borrower as would be obtained in an arm’s length transaction with
an unaffiliated third party, the proceeds of which shall be paid to Borrower.

 

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

 

“SEN” means SEN Corporation, a Japanese company.

 

“SEN License” means that certain License Agreement dated March 30, 2009 by and
between the Borrower and SEN.

 

“Settlement Date” is defined in Section 2.1.3.

 

“Special Subsidiary” is a Subsidiary of Borrower formed and operated as a
special purpose entity for the sole purposes of (i) owning the Headquarters
Location, (ii) entering into the Real Estate Financing and (iii) leasing the
Headquarters Location to Borrower.

 

“Streamline Period” is, on and after the Effective Date, provided no default or
Event of Default has occurred and is continuing, the period (i) beginning on the
first (1st) day of any month following a month in which Borrower has, for each
consecutive day in the immediately preceding thirty (30) day period, maintained
Excess Cash, as determined by Bank, in its sole discretion, in an amount at all
times equal to or greater than Ten Million Dollars ($10,000,000.00) (the
“Streamline Balance”); and (ii) ending on the earlier to occur of (A) the
occurrence of a default or an Event of Default; and (B) the first day thereafter
in which Borrower fails to maintain the Streamline Balance, as determined by
Bank, in its sole discretion.  Upon the termination of a Streamline Period,
Borrower must maintain the Streamline Balance each consecutive day for thirty
(30) consecutive days, as determined by Bank, in its sole discretion, prior to
entering into a subsequent Streamline Period.  Borrower shall give Bank
prior-written notice of Borrower’s intention to enter into any such Streamline
Period.

 

38

--------------------------------------------------------------------------------

 

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

 

“Subsidiary” means, with respect to any Person, any Person of which more than
50.0% of the voting stock or other equity interests (in the case of Persons
other than corporations) is owned or controlled directly or indirectly by such
Person or one or more of Affiliates of such Person.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on the consolidated balance sheet of Borrower and its
Subsidiaries, including all Indebtedness, but excluding all other Subordinated
Debt.

 

“Transaction Report” is that certain report of transactions and schedule of
collections in the form attached hereto as Exhibit C.

 

“Transfer” is defined in Section 7.1.

 

“Unused Line Fee Percentage” is three eighths of one percent (0.375%).

 

“Unused Revolving Line Facility Fee” is defined in Section 2.4(d).

 

[Signature page follows.]

 

39

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as a sealed instrument under the laws of the Commonwealth of Massachusetts as of
the Effective Date.

 

BORROWER:

 

AXCELIS TECHNOLOGIES, INC.

 

 

By:

/s/ Mary G. Puma

 

 

Mary G. Puma, President

 

 

 

AXCELIS TECHNOLOGIES CCS CORPORATION

 

 

By:

/s/ Mary G. Puma

 

 

Mary G. Puma, President

 

 

 

BANK:

 

SILICON VALLEY BANK

 

By:

/s/ Larisa B. Chilton

 

Name: Larisa B. Chilton

 

Title: Director

 

 

 

40

--------------------------------------------------------------------------------

 

 

The undersigned, Fusion Technology International, Inc., ratifies, confirms and
reaffirms, all and singular, the terms and conditions of a certain Amended and
Restated Unconditional Guaranty dated March 12, 2010 (the “FTI Guaranty”) and
acknowledges, confirms and agrees that the FTI Guaranty shall remain in full
force and effect and shall in no way be limited by the execution of this
Agreement, or any other documents, instruments and/or agreements executed and/or
delivered in connection herewith.

 

 

 

FUSION TECHNOLOGY INTERNATIONAL, INC.

 

 

 

By:

/s/ Mary G. Puma

 

 

 

Name: Mary G. Puma

 

 

 

Title: President

 

The undersigned, Fusion Investments, Inc., ratifies, confirms and reaffirms, all
and singular, the terms and conditions of a certain Amended and Restated
Unconditional Guaranty dated March 12, 2010 (the “FI Guaranty”) and
acknowledges, confirms and agrees that the FI Guaranty shall remain in full
force and effect and shall in no way be limited by the execution of this
Agreement, or any other documents, instruments and/or agreements executed and/or
delivered in connection herewith.

 

 

 

FUSION INVESTMENTS, INC.

 

 

 

By:

/s/ Mary G. Puma

 

 

 

Name: Mary G. Puma

 

 

 

Title: President

 

 

The undersigned, High Temperature Engineering Corporation, ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Amended
and Restated Unconditional Guaranty dated March 12, 2010 (the “HTEC Guaranty”)
and acknowledges, confirms and agrees that the HTEC Guaranty shall remain in
full force and effect and shall in no way be limited by the execution of this
Agreement, or any other documents, instruments and/or agreements executed and/or
delivered in connection herewith.

 

 

 

HIGH TEMPERATURE ENGINEERING CORPORATION

 

 

 

By:

/s/ Mary G. Puma

 

 

 

Name: Mary G. Puma

 

 

 

Title: President

 

 

The undersigned, Axcelis Technologies (Israel), Inc., ratifies, confirms and
reaffirms, all and singular, the terms and conditions of a certain Amended and
Restated Unconditional Guaranty dated March 12, 2010 (the “ATI Guaranty”) and
acknowledges, confirms and agrees that the ATI Guaranty shall remain in full
force and effect and shall in no way be limited by the execution of this
Agreement, or any other documents, instruments and/or agreements executed and/or
delivered in connection herewith.

 

41

--------------------------------------------------------------------------------

 

 

 

AXCELIS TECHNOLOGIES (ISRAEL), INC.

 

 

 

By:

/s/ Mary G. Puma

 

 

 

Name: Mary G. Puma

 

 

 

Title: President

 

42

--------------------------------------------------------------------------------

 

EXHIBIT A – COLLATERAL DESCRIPTION

 

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

 

All goods, Accounts, Equipment, Inventory, contract rights or rights to payment
of money, leases, license agreements, franchise agreements, General Intangibles,
commercial tort claims, documents, instruments (including any promissory notes),
chattel paper (whether tangible or electronic), cash, deposit accounts, letters
of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations,
and financial assets, whether now owned or hereafter acquired, wherever located;
and

 

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the “Collateral” does not include more than 66%
of the presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any Foreign Subsidiary which shares entitle
the holder thereof to vote for directors or any other matter.

 

The security interest granted by Debtor to Secured Party in the Axcelis Licensed
Intellectual Property (as defined in the SEN License) is subject to the license
granted to SEN Corporation pursuant to the terms of the SEN License in
accordance with that certain Consent and Agreement dated as of March 30, 2009
among the Debtor, the Secured Party, SEN Corporation and others.

 

 

1

--------------------------------------------------------------------------------

 

EXHIBIT B - COMPLIANCE CERTIFICATE

 

TO:

SILICON VALLEY BANK

Date:

 

FROM:

Axcelis Technologies, Inc. and Axcelis Technologies CCS Corporation

 

 

The undersigned authorized officer of Axcelis Technologies, Inc. and Axcelis
Technologies CCS Corporation (“Borrower”) certifies that under the terms and
conditions of the Loan and Security Agreement between, inter alia, Borrower and
Bank (the “Agreement”), (1) Borrower is in complete compliance for the period
ending                                  with all required covenants except as
noted below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, (4) Borrower, and each of its Domestic Subsidiaries, has timely
filed all required tax returns and reports, and Borrower has timely paid all
foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower except as otherwise permitted pursuant to the terms of
Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made
against Borrower or any of its Domestic Subsidiaries relating to unpaid employee
payroll or benefits of which Borrower has not previously provided written
notification to Bank.  Attached are the required documents supporting the
certification.  The undersigned certifies that these are prepared in accordance
with GAAP consistently applied from one period to the next except as explained
in an accompanying letter or footnotes.  The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

Quarterly consolidated and consolidating and financial statements with
Compliance Certificate

 

Quarterly within 45 days

 

Yes No

Annual financial statement (CPA Audited) + CC

 

FYE within 120 days

 

Yes No

10-Q, 10-K and 8-K

 

Within 10 days after filing with SEC

 

Yes No

A/R & A/P Agings, Inventory reports, Backlog Reports

 

Monthly within 30 days

 

Yes No

Transaction Report

 

Monthly within 30 days (bi-weekly if borrowing based on formula)

 

Yes No

Monthly consolidated financial statements and Compliance Certificate

 

Monthly within 45 days (if borrowing based on formula)

 

Yes No

 

The following Intellectual Property was registered (or a registration
application submitted) after the Effective Date (if no registrations, state
“None”)

 

 

 

Financial Covenant

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

Maintain, tested on a quarterly (unless otherwise indicated) basis:

 

 

 

 

 

 

Adjusted Quick Ratio, at all times (unless otherwise specified in
Section 6.9(a) of the Agreement)

 

1.4:1.0

 

     :1.0

 

Yes No

Minimum Adjusted Net Income

 

As set forth in Section 6.9(b) of the Agreement

 

$

 

Yes No

 

--------------------------------------------------------------------------------

 

The following financial covenant analysis and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

 

Schedule 2 attached hereto sets forth all applications for any patent or the
registration of any trademark or servicemark made by Borrower since the date of
the last Compliance Certificate delivered to Bank.

 

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

 

 

 

 

AXCELIS TECHNOLOGIES, INC.

 

BANK USE ONLY

 

 

 

 

 

Received by:

 

By:

 

 

AUTHORIZED SIGNER

Name:

 

 

Date:

 

Title:

 

 

 

 

 

Verified:

 

AXCELIS TECHNOLOGIES CCS CORPORATION

 

AUTHORIZED SIGNER

 

 

Date:

 

 

 

 

By:

 

 

Compliance Status:

Yes

No

Name:

 

 

 

Title:

 

 

 

 

6

--------------------------------------------------------------------------------

 

Schedule 1 to Compliance Certificate

 

Financial Covenants of Borrower

 

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

 

Dated:

 

 

 

I.              Adjusted Quick Ratio (Section 6.9(a))

 

Required:

1.4:1.0

 

 

 

 

Actual:

:1.0

 

 

A.

World-wide consolidated Unrestricted cash and Cash Equivalents

$

 

 

 

B.

Accounts

$

 

 

 

C.

Investments with maturities of fewer than 12 months determined according to GAAP

$

 

 

 

D.

Quick Assets (line A plus line B plus line C)

$

 

 

 

E.

Aggregate value of Obligations to Bank (other than cash secured obligations)

$

 

 

 

F.

Aggregate value of liabilities of Borrower and its Subsidiaries (including all
Indebtedness) that matures within one (1) year

$

 

 

 

G.

Deferred Revenue

$

 

 

 

H.

Current Liabilities (the sum of lines E and F, minus line G)

$

 

 

 

I.

Quick Ratio (line D divided by line H)

 

 

Is Line I equal to or greater than 1.40:1:00?

 

No, not in compliance

Yes, in compliance

 

II.            Minimum Adjusted Net Income (Section 6.9(b))

 

Required: at least (a) $3,000,000 for the trailing six (6) month period ending
on the last day of the fiscal quarter ending March 31, 2011; (b) $5,000,000 for
each trailing six (6) month period ending on the last day of the fiscal quarters
ending June 30, 2011, September 30, 2011 and December 31, 2011; and
(c) $7,500,000 for the trailing six (6) month period ending on the last day of
the fiscal quarter ending March 31, 2012 and for each trailing six (6) month
period ending on the last day of each fiscal quarter thereafter

 

Actual: $

 

A.

Net profit (or loss), of Borrower and its Subsidiaries

$

 

 

 

B.

Interest Expense for Borrower and Subsidiaries

$

 

7

--------------------------------------------------------------------------------

 

C.

Income Tax Expense of Borrower and Subsidiaries

$

 

 

 

D.

Depreciation and Amortization Expense of Borrower and Subsidiaries

$

 

 

 

E.

Non-cash stock compensation expense for Borrower and Subsidiaries

$

 

 

 

F.

The amount of any non-realized non-cash losses associated with Borrower’s
foreign exchange transactions

$

 

 

 

G.

Other reasonable add-backs for non-cash items, which have been approved by Bank
in writing in its sole and absolute discretion on a case-by-case basis*

$

 

 

 

H.

Capital Expenditures (as defined in the Agreement) of Borrower and Subsidiaries

$

 

 

 

I.

Taxes paid in cash by Borrower and Subsidiaries

$

 

 

 

J.

The amount of any non-realized non-cash gains associated with Borrower’s foreign
exchange transactions

$

 

 

 

K.

Adjusted Net Income (Line A, plus the sum of Lines B-G, minus the sum of Lines
H-J

$

 

*Please specify:

 

 

 

 

 

 

 

Is Line K less than or equal to the amount required above

 

No, not in compliance

Yes, in compliance

 

8

--------------------------------------------------------------------------------

 

Schedule 2 to Compliance Certificate

 

IP Applications

 

--------------------------------------------------------------------------------

 

EXHIBIT C

 

FORM OF NOTICE OF BORROWING

 

AXCELIS TECHNOLOGIES, INC.

AXCELIS TECHNOLOGIES CCS CORPORATION

 

Date:

 

 

TO:

SILICON VALLEY BANK

 

3003 Tasman Drive

 

Santa Clara, CA 95054

 

Attention: Corporate Services Department

 

RE:                              Second Amended and Restated Loan and Security
Agreement dated as of April 25, 2011 (as amended, modified, supplemented or
restated from time to time, the “Loan Agreement”), by and among (a) SILICON
VALLEY BANK, a California corporation with a loan production office located at
275 Grove Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”), and
(b) AXCELIS TECHNOLOGIES, INC. and AXCELIS TECHNOLOGIES CCS CORPORATION, each a
Delaware corporation, (individually and collectively, jointly and severally,
“Borrower”)

 

Ladies and Gentlemen:

 

The undersigned refers to the Loan Agreement, the terms defined therein and used
herein as so defined, and hereby gives you notice irrevocably, pursuant to
Section 3.4(a) of the Loan Agreement, of the borrowing of a Credit Extension.

 

The Funding Date, which shall be a Business Day, of the requested borrowing is
                              .

 

The aggregate amount of the requested borrowing is $                          .

 

The requested Credit Extension shall consist of $                       of Prime
Rate Credit Extensions and $             of LIBOR Credit Extensions.

 

The duration of the Interest Period for the LIBOR Credit Extensions included in
the requested Credit Extension shall be                         months.

 

The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the proposed Credit Extension
before and after giving effect thereto, and to the application of the proceeds
therefrom, as applicable:

 

(a)           all representations and warranties of Borrower contained in the
Loan Agreement are true, accurate and complete in all material respects as of
the date hereof; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

 

(b)           no Event of Default has occurred and is continuing, or would
result from such proposed Credit Extension; and

 

(c)           the requested Credit Extension will not cause the aggregate
principal amount of the outstanding Credit Extensions to exceed, as of the
designated Funding Date, the Availability Amount.

 

--------------------------------------------------------------------------------

 

BORROWER

AXCELIS TECHNOLOGIES, INC.

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

AXCELIS TECHNOLOGIES CCS CORPORATION

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

For internal Bank use only

 

LIBOR Pricing Date

 

LIBOR

 

LIBOR Variance

 

Maturity Date

 

 

 

 

 

 

%

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT D

 

FORM OF NOTICE OF CONVERSION/CONTINUATION

 

FORM OF NOTICE OF BORROWING

 

AXCELIS TECHNOLOGIES, INC.

AXCELIS TECHNOLOGIES CCS CORPORATION

 

Date:

 

 

TO:

SILICON VALLEY BANK

 

3003 Tasman Drive

 

Santa Clara, CA 95054

 

Attention: Corporate Services Department

 

RE:          Amended and Restated Loan and Security Agreement dated as of
April 25, 2011 (as amended, modified, supplemented or restated from time to
time, the “Loan Agreement”), by and among (a) SILICON VALLEY BANK, a California
corporation with a loan production office located at 275 Grove Street,
Suite 2-200, Newton, Massachusetts 02466 (“Bank”), and (b) AXCELIS
TECHNOLOGIES, INC. and AXCELIS TECHNOLOGIES CCS CORPORATION, each a Delaware
corporation, (individually and collectively, jointly and severally, “Borrower”)

 

Ladies and Gentlemen:

 

The undersigned refers to the Loan Agreement, the terms defined therein being
used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 3.5 of the Loan Agreement, of the [conversion]
[continuation] of the Credit Extensions specified herein, that:

 

1.             The date of the [conversion] [continuation] is
                                           , 20      .

 

2.             The aggregate amount of the proposed Credit Extensions to be
[converted] is $                              or [continued] is
$                                  .

 

3.             The Credit Extensions are to be [converted into] [continued as]
[LIBOR] [Prime Rate] Credit Extensions.

 

4.             The duration of the Interest Period for the LIBOR Credit
Extensions included in the [conversion] [continuation] shall be           
months.

 

The undersigned, on behalf of Borrower, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
proposed [conversion] [continuation], before and after giving effect thereto and
to the application of the proceeds therefrom:

 

(a)           all representations and warranties of Borrower stated in the Loan
Agreement are true, accurate and complete in all material respects as of the
date hereof; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date; and

 

(b)           no Event of Default has occurred and is continuing, or would
result from such proposed [conversion] [continuation].

 

[Signature page follows.]

 

--------------------------------------------------------------------------------

 

BORROWER

AXCELIS TECHNOLOGIES, INC.

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

AXCELIS TECHNOLOGIES CCS CORPORATION

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

For internal Bank use only

 

LIBOR Pricing Date

 

LIBOR

 

LIBOR Variance

 

Maturity Date

 

 

 

 

 

 

%

 

 

 

2

--------------------------------------------------------------------------------