Exhibit 10.2

 

CREDIT AND SECURITY AGREEMENT

 

between

 

MEMRY CORPORATION

 

as Borrower

 

and

 

WEBSTER BUSINESS CREDIT CORPORATION,

as Lender

 

Signing Date: November 9, 2004

 

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CREDIT AND SECURITY AGREEMENT

 

PREAMBLE. This Credit and Security Agreement (herein, together with all
schedules and exhibits hereto, and as it may be amended or modified from time to
time, called this “Agreement”), dated as of November 9, 2004 (the “Signing
Date”), is made between (i) MEMRY CORPORATION, a Delaware corporation (herein
sometimes called “Initial Borrower”), and together with each other Person which,
on or subsequent to the Closing Date, agrees in writing to become a “borrower”
hereunder, herein called, individually, a “Borrower” and, collectively, the
“Borrowers,” and pending the inclusion by written agreement of any other such
Person, besides each Initial Borrower, as a “Borrower” hereunder, all references
herein to “Borrowers,” “each Borrower,” the “applicable Borrower,” “such
Borrower” or any similar variations thereof (whether singular or plural) shall
all mean and refer to the Initial Borrower or each one of them collectively);
and (ii) WEBSTER BUSINESS CREDIT CORPORATION, a corporation organized under the
laws of the State of New York (“WBCC”), individually, as lender hereunder and as
agent for itself and each other Lender Party (as hereinafter defined) (WBCC,
acting in both such capacities, herein called “Lender”).

 

STATEMENT OF THE TRANSACTION. Capitalized terms used in this statement of the
transaction shall have the meanings ascribed to such terms in Annex One. Initial
Borrower has applied to WBCC for financing to retire the Existing Loans, to pay
closing costs associated herewith, and to supplement its working capital needs
on an ongoing basis. WBCC, as Lender hereunder, has agreed to provide this
financing, subject, however, to the terms, covenants and conditions hereinafter
set forth.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings herein
contained, each Initial Borrower and Lender, each intending to be legally bound
hereby, hereby covenant and agree as follows:

 

I. DEFINITIONS.

 

1.1. Accounting Terms. As used in this Agreement, any Note, or any certificate,
report or Other Document, accounting terms not defined in Annex One or elsewhere
in this Agreement and accounting terms partly defined in Annex One (to the
extent not defined) shall have the respective meanings given to them under GAAP;
provided, however, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP as applied in
preparation of the Historical Financial Statements. Certain other definitions,
used in the calculation of the Financial Covenants, are set forth in Section
8.1.

 

1.2. General Terms. Certain other terms which are capitalized hereinbelow, but
not expressly defined hereinbelow, shall have the meanings given to such terms
in Annex One.

 

1.3. Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code shall have the meaning given therein unless otherwise
defined herein. Without limitation of the foregoing, the terms “accounts,”
“chattel paper,” “instruments,” “general intangibles,” “payment intangibles,”
“securities,” “investment property,”

 

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“documents,” “supporting obligations,” “deposit accounts,” “payment
intangibles,”, “commercial tort claims”, “software,” “letter of credit rights,”
“inventory,” “equipment” and “fixtures,” as and when used in the description of
Collateral, shall have the meanings given to such terms in Articles 8 or 9 (as
applicable) of the Uniform Commercial Code.

 

II. ADVANCES, PAYMENTS.

 

2.1. Revolving Advances; Term Loans and Capital Expenditure Loan.

 

(a) Subject to the terms and conditions set forth in this Agreement, Lender will
make Revolving Advances and, subject to the terms of Annex Two, Letters of
Credit available to Borrowers in aggregate amounts outstanding at any time equal
to the lesser of (i) the Maximum Revolving Amount, or (ii) the Borrowing Base.
The Revolving Advances shall be evidenced by a secured promissory note issued to
Lender in a principal amount equal to the Maximum Revolving Amount (the
“Revolving Credit Note”), substantially in the form attached hereto as Exhibit
2.1(a).

 

(b) Subject to the terms and conditions of this Agreement, Lender will make
available to Borrowers Term Loan A. Term Loan A shall be advanced on the Closing
Date and shall be, with respect to principal, payable in consecutive monthly
installments, each equal in amount to $31,666.00, due and payable beginning on
December 9, 2004, and continuing on the same day of each succeeding calendar
month, with the entire remaining principal balance thereof being due and
payable, in full, in a balloon payment on the expiration of the Term; subject,
however, to acceleration upon (or following) the occurrence of an Event of
Default under this Agreement or earlier termination of this Agreement, as
provided hereinbelow. Term Loan A shall be evidenced by a secured promissory
note issued to Lender equal in principal amount to Term Loan A (the “Term Loan A
Note”) in substantially the form attached hereto as Exhibit 2.1(b). Term Loan A
shall be subject to mandatory prepayment as provided in Section 2.10. Term Loan
A may be voluntarily prepaid, in whole or in part, at any time or from time to
time, without premium or penalty subject to Section 2.2(e) and the payment, as
appropriate, of any Early Termination Fee then due if such prepayment is made in
connection with a termination of this Agreement; provided, however, that: (i)
Lender receives at least five (5) Business Days advance written notice of any
intended prepayment; (ii) any partial prepayments shall be made (A) only on a
date prescribed above for the payment of principal installments of Term Loan A,
and (B) only in an amount equal to the principal installment amount for Term
Loan A prescribed hereinabove (or integral multiples thereof); (iii) any partial
prepayments shall be applied to the principal installments of Term Loan A then
remaining to be repaid in the reverse order of their respective maturities; and
(iv) any full prepayments of the principal balance of Term Loan A shall be
accompanied by the payment of accrued interest thereon through the date of
prepayment.

 

(c) Subject to the terms and conditions of this Agreement, Lender will make
available to Borrowers Term Loan B. Term Loan B shall be advanced on the Closing
Date and shall be, with respect to principal, payable in thirty-six consecutive
monthly installments, each equal in amount to Sixty-Nine Thousand Four Hundred
Forty-Five Dollars ($69,445), due and payable beginning on December 9, 2004, and
continuing on the same day of each succeeding

 

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calendar month, with the entire remaining principal balance thereof being due
and payable, in full, on Term Loan B Maturity Date; subject, however, to
acceleration upon (or following) the occurrence of an Event of Default under
this Agreement or earlier termination of this Agreement, as provided
hereinbelow. Term Loan B shall be evidenced by a secured promissory note issued
to Lender equal in principal amount to Term Loan B (the “Term Loan B Note”) in
substantially the form attached hereto as Exhibit 2.1(c). Term Loan B shall be
subject to mandatory prepayment as provided in Section 2.10. Term Loan B may be
voluntarily prepaid, in whole or in part, at any time or from time to time,
without premium or penalty subject to Section 2.2(e) and the payment, as
appropriate, of any Early Termination Fee then due if such prepayment is made in
connection with a termination of this Agreement; provided, however, that: (i)
Lender receives at least five (5) Business Days advance written notice of any
intended prepayment; (ii) any partial prepayments shall be made (A) only on a
date prescribed above for the payment of principal installments of Term Loan B,
and (B) only in an amount equal to the principal installment amount for Term
Loan B prescribed hereinabove (or integral multiples thereof); (iii) any partial
prepayments shall be applied to the principal installments of Term Loan B then
remaining to be repaid in the reverse order of their respective maturities; and
(iv) any full prepayments of the principal balance of Term Loan B shall be
accompanied by the payment of accrued interest thereon through the date of
prepayment.

 

(d) Subject to the terms and conditions of this Agreement, Lender will make
available to Borrowers the Capital Expenditure Loan commencing on the Closing
Date through the Capital Expenditure Loan Conversion Date (the “Capital
Expenditure Loan Period”), until terminated as provided below, in principal
amounts not exceeding in the aggregate at any one time outstanding the Capital
Expenditure Loan Borrowing Base, it being agreed and understood that at no time
shall the maximum aggregate principal amount of the Capital Expenditure Loans
made by Lender exceed the Capital Expenditure Loan Borrowing Base. The Capital
Expenditure Loans shall be evidenced by a secured promissory note issued to
Lender (the “Capital Expenditure Loan Note”), in substantially the form attached
hereto as Exhibit 2.1(d). The Capital Expenditure Loan shall be subject to
mandatory prepayment as provided in Section 2.10. The Capital Expenditure Loan
may be voluntarily prepaid, in whole or in part, at any time or from time to
time, without premium or penalty subject to Section 2.2(e) and the payment, as
appropriate, of any Early Termination Fee then due if such prepayment is made in
connection with a termination of this Agreement; provided, however, that: (i)
Lender receives at least five (5) Business Days advance written notice of any
intended prepayment; (ii) any partial prepayments shall be made (A) only on a
date prescribed above for the payment of principal installments of the Capital
Expenditure Loans and (B) only in an amount equal to the principal installment
amount for the Capital Expenditure Loan prescribed hereinabove (or integral
multiples thereof); (iii) any partial prepayments shall be applied to the
principal installments of the Capital Expenditure Loan then remaining to be
repaid in the reverse order of their respective maturities; and (iv) any full
prepayments of the principal balance of the Capital Expenditure Loan shall be
accompanied by the payment of accrued interest thereon through the date of
prepayment.

 

2.2. Procedure for Borrowing.

 

(a) (i) Borrowing Representative, on behalf of any Borrowers, may notify Lender
prior to 11:00 a.m. on a Business Day of a Borrower’s request to incur, on that

 

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day, a Revolving Advance hereunder. Should any amount required to be paid as
interest hereunder, or as fees or other charges under this Agreement or any
other agreement with any Lender Party, or with respect to any other Obligation,
become due, the same shall be deemed a request for a Revolving Advance as of the
date such payment is due, in the amount required to pay in full such interest,
fee, charge or Obligation under this Agreement or any other agreement with any
Lender Party, and such request shall be irrevocable. Lender shall cause the
proceeds of such Revolving Advance to be paid to such Person. If requested by
Lender, each notice of borrowing shall be made (or confirmed after telephonic
notice) in writing in such form as may be required or approved by Lender from
time to time.

 

(ii) Borrowing Representative, on behalf of any Borrowers, may request
borrowings (but in any event, no more than four times during the Capital
Expenditure Loan Period) and repay BUT NOT REBORROW Capital Expenditure Loans.
To be eligible to obtain Capital Expenditure Loan, Borrower must submit to
Lender at least three (3) Business Days prior to the date on which Borrower
requests Lender to make such Capital Expenditure Loan, enforceable at the sole
option of Lender: (a) copies of invoices which reflect the actual cost of the
Eligible Equipment being purchased with the proceeds of such Capital Expenditure
Loan, including, if any, installation and other services and costs associated
therewith; (b) evidence satisfactory to Lender that upon payment of the purchase
price therefor, the Eligible Equipment shall be in the Borrower’s physical
possession and that (1) the Borrower has acquired good title to such Eligible
Equipment, and (2) such Eligible Equipment is not subject to any pledge, lien,
lease, encumbrance or charge of any kind whatsoever, other than in favor of
Lender. Whenever Borrower desires an advance, Borrower shall notify Lender
(which notice shall be irrevocable) by telecopy or telephone of the proposed
borrowing. Such notice (each, a “Notice of Capital Expenditure Loan Borrowing”)
shall specify (i) the proposed funding date of such Capital Expenditure Loan
requested, (ii) the principal amount of the Capital Expenditure Loan requested,
(iii) the Interest Period for such Equipment Loan (if applicable), and (iv) the
Type of such Equipment Loan. Each Notice of Capital Expenditure Loan Borrowing
must be received by Lender (a) no later than 11:00 a.m. on the Business Day of
the proposed funding of any Domestic Rate Loan and (b) not less than three (3)
Business Days prior to the proposed funding date of any Eurodollar Rate Loan.

 

(iii) Notwithstanding anything to the contrary contained herein, so long as
Borrowers are in compliance with all of the terms and conditions of this
Agreement and no Default or Event of Default shall have occurred and be
continuing, on the Capital Expenditure Loan Conversion Date the then outstanding
principal balance of the Capital Expenditure Loans shall convert into term
indebtedness, continuing to bear interest at a rate determined in accordance
with Section 3.1 hereof, and be payable in substantially equal, consecutive
monthly payments of principal in accordance with an eighty-four (84) month
amortization schedule, due and payable beginning on December 9, 2005, and
continuing on the same day of each succeeding calendar month, with the entire
remaining principal balance thereof being due and payable, in a balloon payment
upon expiration of the Term. On and after the Capital Expenditure Loan
Conversion Date, Borrower shall

 

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have no ability to request, and Lender shall have no obligation to make, any
further Capital Expenditure Loans.

 

(b) Notwithstanding the provisions of subsection (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Representative
shall give Lender at least three (3) Business Days’ prior written notice,
specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to
be borrowed, which amount shall be an integral multiple of Five Hundred Thousand
Dollars ($500,000), and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for one (1), two
(2), three (3) or six (6) months. Notwithstanding the foregoing, however, unless
otherwise approved by Lender, no Eurodollar Rate Loan shall be made available to
Borrowers until thirty (30) days after the Closing Date, or, in any event,
during the continuance of a Default or Event of Default. There shall not be
outstanding at any time more than three (3) Eurodollar Rate Loans. Each Interest
Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate
Loan is made and shall end on such date as Borrowing Representative may elect as
set forth in clause (iii) above, provided that the exact length of each Interest
Period shall be determined in accordance with the practice of the interbank
market for offshore Dollar deposits and no Interest Period shall end after the
last day of the Term. Borrowing Representative shall elect the initial Interest
Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to
Lender pursuant to Section 2.2(a) or by its notice of conversion given to Lender
pursuant to this subsection (b), as the case may be. Borrowing Representative
shall elect the duration of each succeeding Interest Period by giving
irrevocable written notice to Lender of such duration not less than three (3)
Business Days prior to the last day of the then current Interest Period
applicable to such Eurodollar Rate Loan. If Lender does not receive timely
notice of the Interest Period elected by Borrowing Representative, Borrowers
shall be deemed to have elected to convert to a Domestic Rate Loan subject to
Section 2.2(c) hereinbelow.

 

(c) Provided that no Default or Event of Default shall have occurred and be
continuing, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such Loan into a
Loan of another type, provided that any conversion of a Eurodollar Rate Loan
shall be made only on the last Business Day of the then current Interest Period
applicable to such Eurodollar Rate Loan. If a Borrower desires to convert a
Loan, Borrowing Representative shall give Lender not less than three (3)
Business Days’ prior written notice to convert from a Domestic Rate Loan to a
Eurodollar Rate Loan or one (1) Business Day’s prior written notice to convert
from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date of such
conversion, the loans to be converted and if the conversion is from a Domestic
Rate Loan to any other type of loan, the duration of the first Interest Period
therefor. After giving effect to each such conversion, there shall not be
outstanding more than three (3) Eurodollar Rate Loans, in the aggregate.

 

(d) At its option and upon three (3) Business Days’ prior written notice, any
Borrower may prepay the Eurodollar Rate Loans in whole at any time or in part
from time to time, without premium or penalty, but with accrued interest on the
principal being prepaid to the date of such repayment. Such Borrower shall
specify the date of prepayment of Advances which are Eurodollar Rate Loans and
the amount of such prepayment. In the event that any prepayment

 

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of a Eurodollar Rate Loan is required or permitted on a date other than the last
Business Day of the then current Interest Period with respect thereto, such
Borrower shall indemnify Lender therefor in accordance with Section 2.2(e)
hereof.

 

(e) Each Borrower shall indemnify Lender and hold Lender harmless from and
against any and all losses or expenses that Lender may sustain or incur as a
consequence of any prepayment, conversion of or any default by any Borrower in
the payment of the principal of or interest on any Eurodollar Rate Loan or
failure by any Borrower to complete a borrowing of, a prepayment of or
conversion of or to a Eurodollar Rate Loan after notice thereof has been given,
including, but not limited to, any interest payable by Lender to any lender of
funds obtained by it in order to make or maintain its Eurodollar Rate Loans
hereunder. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lender to Borrowing Representative shall be
conclusive absent manifest error.

 

(f) Notwithstanding any other provision hereof, if any applicable law, treaty,
regulation or directive, or any change therein or in the interpretation or
application thereof, shall make it unlawful for Lender (for purposes of this
subsection (f), the term “Lender” shall include Lender and the office or branch
where Lender or any corporation or the Bank makes or maintains any Eurodollar
Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of
Lender to make Eurodollar Rate Loans hereunder, as the case may be, shall
forthwith be cancelled and Borrowers shall, if any affected Eurodollar Rate
Loans are then outstanding, promptly upon request from Lender, either pay all
such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into loans of another type. If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Lender, upon
Lender’s request, such amount or amounts as may be necessary to compensate
Lender for any loss or expense sustained or incurred by Lender in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lender to a lender
of funds obtained by Lender in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lender to Borrowing Representative shall be
conclusive absent manifest error.

 

2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Lender may designate from time to time and,
together with any and all other Obligations of Borrowers to Lender, shall be
charged to Borrowers’ Account on Lender’s books. During the Term, Borrowers may
use the Revolving Advances by borrowing, prepaying and reborrowing, all in
accordance with the terms and conditions hereof. The proceeds of each Revolving
Advance requested by Borrowers or deemed to have been requested by Borrowers
under Section 2.2(a) hereof shall, with respect to requested Revolving Advances
to the extent Lender makes such Revolving Advances, be made available to the
applicable Borrower on the day so requested by way of credit to such Borrower’s
operating account at the Bank or such other bank as Borrowing Representative may
designate following notification to Lender, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by any Borrower, be disbursed to Lender
to be applied to the outstanding Obligations giving rise to such deemed request.

 

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2.4. Maximum Revolving Advances. The aggregate balance of all Revolving Advances
and any Letters of Credit outstanding at any time shall not exceed the lesser of
(a) the Maximum Revolving Amount or (b) the Borrowing Base, in any event.

 

2.5. Repayment of Advances.

 

(a) All Advances shall be due and payable in full on the last day of the Term,
subject to earlier prepayment, in whole or in part, as provided in this
Agreement or in any Other Document.

 

(b) All payments of principal, interest fees and other amounts payable
hereunder, or under any of the Other Documents shall be made to Lender at the
Payment Office not later than 1:00 p.m. on the due date therefor in lawful money
of the United States of America in federal funds or other funds immediately
available to Lender. Lender shall have the right to effectuate payment on any
and all Obligations due and owing hereunder by charging Borrowers’ Account or by
making Revolving Advances as provided in Section 2.2(a) hereof.

 

(c) Borrowers shall be obliged to pay principal, interest, fees and all other
amounts payable hereunder, or under any Other Documents as and when due, without
any deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.

 

2.6. Repayment of Overadvances. The aggregate balance of Advances (other than
the Term Loans and the Capital Expenditure Loan) outstanding at any time in
excess of the maximum amount of Advances (other than the Term Loans and the
Capital Expenditure Loan) permitted to be hereunder, i.e. any “overadvances,”
shall be immediately due and payable without the necessity of any demand, at the
Payment Office, whether or not a Default or Event of Default has occurred.

 

2.7. Statement of Account. Lender shall maintain, in accordance with its
customary procedures, a loan account (“Borrowers’ Account”) in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Lender and the date and amount of each payment in respect thereof; provided,
however, that the failure by Lender to record the date and amount of any Advance
shall not adversely affect Lender. Each month, Lender shall send to Borrowing
Representative a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Lender and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lender and Borrowers unless Lender receives
a written statement of Borrowers’ specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Representative. The records
of Lender with respect to the Borrowers’ Account shall be conclusive evidence
absent manifest error of the amounts of Advances and other charges thereto and
of payments applicable thereto.

 

2.8. Additional Payments. Any sums expended by Lender due to any Borrower’s
failure to perform or comply with its obligations under this Agreement or any
Other Document, may be charged to Borrowers’ Account as a Revolving Advance and
added to the Obligations.

 

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2.9. Manner of Payment. Except as otherwise may be expressly provided herein,
all payments (including prepayments) to be made by Borrower on account of
principal, interest and fees shall be made to Lender at the Payment Office, in
each case on or prior to 1:00 P.M., in Dollars and in immediately available
funds.

 

2.10. Mandatory Prepayments.

 

(a) When any Borrower sells or otherwise disposes of any Collateral other than
Inventory in the ordinary course of business, or when any Borrower suffers an
insured loss in respect of any Collateral, then, except as otherwise provided in
Section 4.11, Borrowers shall repay the Advances in an amount equal to the net
proceeds derived from such sale or other disposition or received as any loss
recovery from insurance, i.e., gross proceeds thereof less any reasonable costs
incurred by such Borrower in connection with the receipt of such proceeds, such
repayments to be made promptly but in no event more than one (1) Business Day
following receipt of such net proceeds, and until the date of payment, such
proceeds shall be held in trust for Lender. The foregoing shall not be deemed to
be an implied consent to any such sale or disposition otherwise prohibited by
the terms and conditions hereof. Such proceeds shall be applied, if derived from
other than the sale of Inventory or Receivables, first to Term Loan B, in the
reverse order of the respective installment maturities thereof (beginning with
the last payment) until Term Loan B is paid in full, then to Term Loan A, in the
reverse order of the respective installment maturities thereof (beginning with
the last payment) until Term Loan A is paid in full, then to the Capital
Expenditure Loan (if converted into term indebtedness as provided for herein),
in the inverse order of the respective installment maturities thereof (beginning
with the last payment) until the Capital Expenditure Loan is paid in full, but
otherwise all such proceeds shall be applied to Revolving Advances without
reduction, however, in Borrowers’ ability to reborrow Revolving Advances in
accordance with the terms hereof.

 

(b) Borrowers shall prepay the outstanding amount of the Term B Loan in an
amount equal to fifty percent (50%) of Excess Cash Flow (as hereinafter defined)
for each Fiscal Year ending subsequent to the Closing Date, payable upon
delivery of the financial statements to Lender referred to in and required by
Section 10.7 for such Fiscal Year but in any event not later than ninety (90)
days after the end of each such Fiscal Year, such delivery of payment to be
accompanied by the Excess Cash Flow Certificate attached hereto as Exhibit
2.10(b). This prepayment shall be made without premium or penalty, except as
provided in Section 2.2(e) hereof. This payment of Excess Cash Flow shall be
applied to the outstanding principal installments of the Term Loan B in the
reverse order of the respective installment maturities thereof (beginning with
the last payment). In the event that the aforesaid financial statement is not so
delivered, then a calculation based upon estimated amounts shall be made by
Lender upon which calculation Borrowers shall make the prepayment required by
this Section, subject to adjustment when the financial statement is delivered to
Lender as required hereby. The calculation made by Lender shall not be deemed a
waiver of any rights Lender or may have as a result of the failure by Borrowers
to deliver such financial statement. “Excess Cash Flow,” as used herein, shall
mean an amount equal to: (i) EBITDA, as defined in Article VIII, minus, the sum
of (a) Unfinanced Capital Expenditures, as defined in Article VIII, (b) Fixed
Charges, as defined in Article VIII, and (c) voluntary principal prepayments by
the Borrower of the Term Loans or the Capital Expenditure Loan; in each case,
for each covered Fiscal Year of Borrowers.

 

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2.11. Use of Proceeds. Borrowers shall apply the proceeds of (i) any Revolving
Advances, the Term Loans and the Capital Expenditure Loan made on the Closing
Date to retire the Existing Loans and to pay closing costs and expenses
associated with this transaction, (ii) the Term Loans to acquire substantially
all of the assets of Putnam Plastics, Inc. pursuant to the Putnam Acquisition
Agreement and related costs and expenses, (iii) Revolving Advances made on and
after the Closing Date to provide for their respective working capital needs,
and (iv) Capital Expenditure Loans to acquire Eligible Equipment.

 

III. INTEREST AND FEES.

 

3.1. Interest. Interest on Advances shall be payable to Lender in arrears on the
first day of each month, commencing on the first day of the calendar month
immediately following the Closing Date with respect to Domestic Rate Loans and,
with respect to Eurodollar Rate Loans, at the end of each Interest Period or,
for Eurodollar Rate Loans with an Interest Period in excess of three (3) months,
at the earlier of (a) each three (3) months’ anniversary date of the
commencement of such Eurodollar Rate Loan or (b) the end of the Interest Period.
Interest charges shall be computed on the actual principal amount of Advances
outstanding during the month (the “Monthly Advances”) at a rate per annum equal
to (i) with respect to Revolving Advances, the applicable Revolving Interest
Rate, and (ii) with respect to Term Loan A, the applicable Term Loan A Rate,
(iii) with respect to Term Loan B, the applicable Term Loan B Rate, and (iv)
with respect to the Capital Expenditure Loan, the applicable Capital Expenditure
Loan Rate (as applicable, the “Contract Rate”). Whenever, subsequent to the date
of this Agreement, the Alternate Base Rate is increased or decreased, the
applicable Contract Rate for Domestic Rate Loans shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Alternate Base Rate during the time such change or changes remain
in effect. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the otherwise
applicable Contract Rate plus an additional two (2%) percent per annum (as
applicable, the “Default Rate”).

 

3.2. Closing Fee; Unused Line Fee.

 

(a) On the Closing Date, Borrower shall pay to Lender a fully earned,
nonrefundable closing fee equal in amount to One Hundred Thirty-Five Thousand
Dollars ($135,000), less any portion thereof theretofore remitted to Lender in
partial payment thereof as a commitment fee, if so provided prior to or upon its
payment in any applicable Commitment Letter.

 

(b) If, for any calendar month (or portion thereof) during the Term, the average
daily unpaid balance of Revolving Advances and Letters of Credit outstanding for
each day of such monthly period does not equal or exceed $4,000,000, then
Borrowers agree to pay Lender a fully earned, non-refundable fee at a rate equal
to one-half of one percent (0.50%) per annum on the amount by which $4,000,000
exceeds such average daily unpaid balance for such monthly period. Such fee
shall be payable monthly in arrears on the first day of each calendar month for
the immediately preceding calendar month following the Closing Date, and
continuing thereafter on the first day of each succeeding calendar month through
the end of the Term. The initial fee shall be determined based on the period
from the Closing Date to the end of the calendar month containing the Closing
Date.

 

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3.3. Collateral Monitoring Fee. Monthly, commencing on the first day of the
first calendar month following the Closing Date, and continuing on the same day
of each succeeding calendar month until this Agreement is terminated, Borrowers
shall pay to Lender a fully earned, nonrefundable collateral monitoring fee
equal in amount to One Thousand Five Hundred Dollars ($1,500) per month.

 

3.4. Audit Fees. Borrower shall pay to Lender audit fees in connection with each
field audit conducted by Lender equal in amount to Lender’s customary per diem
charges therefor (which as of the Closing Date, equal Seven Hundred Fifty
Dollars ($750) per diem per auditor, subject to change from time to time
thereafter) plus usual and customary out-of-pocket expenses for internal
auditors, and the usual and customary fees and charges (including out-of-pocket
expenses) of external auditors.

 

3.5. Computation of Interest and Fees; Collection Days. Interest and per annum
fees hereunder shall be computed on the basis of a year of 360 days and for the
actual number of days elapsed. If any payment to be made hereunder becomes due
and payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the applicable Contract Rate during such extension; provided,
however, that the foregoing extension shall not be considered when determining
Borrowers’ ongoing compliance with Financial Covenants that concern or include
scheduled principal payments within specified dates. For purposes of computing
interest and any fees based on the amount of Revolving Advances outstanding from
time to time, one (1) additional collection day shall be charged, effective from
the Application Date.

 

3.6. Maximum Charges. In no event whatsoever shall interest and other charges
charged hereunder exceed the highest rate permissible under law. In the event
interest and other charges as computed hereunder would otherwise exceed the
highest rate permitted under law, such excess amount shall be first applied to
any unpaid principal balance owed by Borrowers, and if the then remaining excess
amount is greater than the previously unpaid principal balance, Lender shall
promptly refund such excess amount to Borrowers and the provisions hereof shall
be deemed amended to provide for such permissible rate.

 

3.7. Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes hereof, the term
“Lender” shall include Lender and any corporation or bank controlling Lender)
and the office or branch where Lender (as so defined) makes or maintains any
Eurodollar Rate Loans with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or other
authority, shall:

 

(a) subject Lender any tax of any kind whatsoever with respect to this Agreement
or any Other Document or change the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable hereunder or under any
Other Documents (except for changes in the rate of tax on the overall net income
of Lender by the jurisdiction in which it maintains its principal office);

 

(b) impose, modify or hold applicable any reserve, special deposit, assessment
or similar requirement against assets held by, or deposits in or for the account
of, advances or

 

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loans by, or other credit extended by, any office of Lender, including (without
limitation) pursuant to Regulation D of the Board of Governors of the Federal
Reserve System; or

 

(c) impose on Lender or the London interbank Eurodollar market any other
condition with respect to this Agreement or any Other Document; and the result
of any of the foregoing is to increase the cost to Lender making, renewing or
maintaining its Advances hereunder by an amount that Lender or such Lender deems
to be material or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the Advances by an amount that
Lender or such Lender deems to be material, then, each and any such case.

 

(d) Borrowers shall promptly pay Lender, upon its demand, such additional amount
as will compensate Lender for such additional cost or such reduction, as the
case may be, provided that the foregoing shall not apply to increased costs
which are reflected in the Eurodollar Rate. Lender shall certify the amount of
such additional cost or reduced amount to Borrowers, and such certification
shall be conclusive absent manifest error.

 

3.8. Capital Adequacy. In the event that Lender shall have determined that any
applicable law, rule, regulation or guideline 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 Lender (for purposes
of this Section, the term “Lender” shall include Lender and each other Lender
Party) and the office or branch where Lender (as so defined) makes or maintains
any Eurodollar Rate Loans with any request 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 Lender’s capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such adoption, change
or compliance (taking into consideration Lender’s policies with respect to
capital adequacy) by an amount deemed by Lender to be material, then, from time
to time, Borrowers shall pay upon demand to Lender such additional amount or
amounts as will compensate Lender for such reduction. In determining such amount
or amounts, Lender may use any reasonable averaging or attribution methods. The
protection of this Section shall be available to Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition. A certificate of Lender setting forth
such amount or amounts as shall be necessary to compensate Lender with respect
to this Section when delivered to Borrowing Representative shall be conclusive
absent manifest error.

 

3.9. Basis For Determining Interest Rate Inadequate or Unfair. In the event that
Lender shall have determined that either: (a) reasonable means do not exist for
ascertaining the Eurodollar Rate for any Interest Period; or (b) Dollar deposits
in the relevant amount and for the relevant maturity are not available in the
London interbank Eurodollar market, with respect to an outstanding Eurodollar
Rate Loan, a proposed Eurodollar Rate Loan, or a proposed conversion of a
Domestic Rate Loan into a Eurodollar Rate Loan; then, Lender shall give
Borrowing Representative prompt written, telephonic or telegraphic notice of
such determination. If such notice is given, (i) any such requested Eurodollar
Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing Representative
shall notify Lender no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request

 

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for such borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which
was to have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if Borrowing
Representative shall notify Lender, no later than 10:00 a.m. (New York City
time) two (2) Business Days prior to the proposed conversion, shall be
maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any
outstanding affected Eurodollar Rate Loans shall be converted into a Domestic
Rate Loan, or, if Borrowing Representative shall notify Lender, no later than
10:00 a.m. (New York City time) two (2) Business Days prior to the last Business
Day of the then current Interest Period applicable to such affected Eurodollar
Rate Loan, shall be converted into an unaffected type of Eurodollar Rate Loan,
on the last Business Day of the then current Interest Period for such affected
Eurodollar Rate Loans. Until such notice has been withdrawn, Lender shall have
no obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and no Borrower shall have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.

 

IV. COLLATERAL; GENERAL TERMS.

 

4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to each Lender Party of all Obligations, each Borrower hereby
assigns, pledges and grants to Lender, in its capacity as Lender and as agent
for the ratable benefit of each Lender Party, a continuing security interest in
and to all of its Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Each Borrower shall mark its books
and records as may be necessary or appropriate to evidence, protect and perfect
Lender’s security interest in the Collateral and shall cause its financial
statements to reflect such security interest.

 

4.2. Perfection of Security Interest. Borrowers shall take all action that may
be necessary or desirable, or that Lender may reasonably request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Lender’s security interest in the Collateral or to enable Lender to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords’, warehouse operators’, bailees’ or
mortgagees’ lien waivers and related agreements, (iii) delivering to Lender,
endorsed or accompanied by such instruments of assignment as Lender may specify,
and stamping or marking, in such manner as Lender may specify, any and all
chattel paper, instruments, letters of credit and advices thereof and documents
evidencing or forming a part of the Collateral, (iv) entering into warehousing,
lockbox and other custodial arrangements satisfactory to Lender, (v) executing
(as appropriate) and delivering authorizations for the recording of financing
statements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance satisfactory to Lender, relating to the creation,
validity, perfection, maintenance or continuation of Lender’s security interest
under the Uniform Commercial Code or other applicable law; (vi) obtaining
acknowledgments, in form and substance satisfactory to Lender, from any bailee
having possession of any Collateral at any time, stating that the bailee holds
such Collateral on behalf of Lender, (vii) obtaining “control” of any investment
property, deposit account, letter-of-credit right or electronic chattel paper
(the term “control” as used in respect of the foregoing types of Collateral
having the meaning set forth in Articles 8 and 9 of the UCC), with any
agreements

 

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establishing such “control” to be in form and substance satisfactory to Lender,
and (viii) if a Borrower at any time has or acquires a commercial tort claim,
such Borrower shall promptly notify Lender thereof, in writing, and grant a
specific collateral assignment of such claim to Lender as additional Collateral.
Without limiting the generality of the foregoing, in the specific case of
in-transit Inventory, unless and except to the extent otherwise required or
approved by Lender from time to time, each Borrower shall (i) deliver (or cause
to be delivered) to Lender copies of all invoices, manifests and documents of
title pertaining to such Inventory promptly upon such Borrower’s receipt
thereof, but in any event not later than five (5) Business Days after receipt,
(ii) cause all such documents of title to be issued in the Lender’s name, or to
its order (or, if negotiable in form, Borrower may, instead, cause such
documents of title to be endorsed to Lender, or in “blank”); (iii) provide
Lender with evidence of appropriate marine or like insurance in respect of the
transit of such Inventory to Borrower, and (iv) as necessary, provide Lender
with access custodianship and similar agreements of Lender’s selection from
warehouse operators, consolidators, customs house operators, custom brokers and
other third parties to facilitate Lender’s control over, access to and/or
repossession of, such in-transit Inventory, including, without limitation, as
and where requested by Lender, a customs agent agreement. Lender is hereby
authorized to file financing statements in accordance with the applicable
provisions of the UCC, including, without limitation financing statements that
describe the Collateral covered thereby as “all personal property”, “all assets”
or words of similar effect (subject, however, to any limitations thereon set
forth in the definition of “Collateral”), at any time or from time to time
hereafter, in any jurisdiction; and Borrowers hereby ratify, approve and affirm
the filing of any such financing statements heretofore filed by Lender in
respect of any Borrower (including any predecessor-in-interest thereof). All
charges, expenses and fees Lender may incur in doing any of the foregoing, and
any local taxes relating thereto, shall be charged to Borrowers’ Account as a
Revolving Advance and added to the Obligations, or, at Lender’s option, shall be
paid to the Lender immediately upon demand.

 

4.3. Disposition of Collateral. Each Borrower will safeguard and protect all
Collateral for Lender’s general account and make no disposition thereof whether
by sale, lease or otherwise except for the sale of Inventory in the ordinary
course of business.

 

4.4. Preservation of Collateral. Following the occurrence of an Event of Default
and the demand by Lender for payment of all Obligations due and owing, in
addition to the rights and remedies set forth in Section 12.1 hereof, Lender:
(a) may at any time take such steps as Lender deems necessary to protect
Lender’s interest in and to preserve the Collateral, including the hiring of
such security guards or the placing of other security protection measures as
Lender may deem appropriate; (b) may employ and maintain at any Borrower’s
premises a custodian who shall have full authority to do all acts necessary to
protect Lender’s interests in the Collateral; (c) may lease warehouse facilities
to which Lender may move all or part of the Collateral; (d) may use any
Borrower’s owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any Borrower’s owned or leased
property to obtain such Collateral. Each Borrower shall cooperate fully with all
of Lender’s efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Lender may direct. All of Lender’s expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers’ Account as a Revolving Advance and
added to the Obligations.

 

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4.5. Ownership of Collateral. With respect to the Collateral, at the time the
Collateral becomes subject to Lender’s security interest: (a) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Lender; and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by each Borrower or delivered to Lender in
connection with this Agreement shall be true and correct in all respects; (c)
all signatures and endorsements of each Borrower that appear on such documents
and agreements shall be genuine and each Borrower shall have full capacity to
execute same; and (d) each Borrower’s Equipment and Inventory shall be located
as set forth on Schedule 4.5 or at such other locations within the United States
of America as Lender may receive notice of, and approve, from time to time
pursuant to Section 10.12 (all such locations herein called, collectively, the
“Collateral Locations” and, individually, a “Collateral Location”); and shall
not be removed from such Collateral Locations without the prior written consent
of Lender except with respect to the sale of Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3 hereof, and except
for Equipment that is moved from one such Collateral Location of a Borrower to
another such Collateral Location of another Borrower.

 

4.6. Defense of Lender’s Interests. Unless and until (a) payment and performance
in full of all of the Obligations and (b) termination of this Agreement,
Lender’s security interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Lender’s prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
other transfers to the extent permitted in Section 7.2 hereof), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Lender’s security interest in the
Collateral against any and all Persons whatsoever. At any time following the
occurrence and during the continuance of an Event of Default, Lender shall have
the right to take possession of the indicia of the Collateral and the Collateral
in whatever physical form contained, including without limitation: labels,
stationery, documents, instruments and advertising materials. If Lender
exercises this right to take possession of the Collateral, Borrowers shall, upon
demand, assemble it in the best manner possible and make it available to Lender
at each Collateral Location. In addition, with respect to all Collateral, Lender
shall be entitled to all of the rights and remedies set forth herein and further
provided by the Uniform Commercial Code or other applicable law. During any
period that an Event of Default exists, each Borrower shall, and Lender may, at
its option, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Lender holds a security interest to deliver same to Lender and/or subject to
Lender’s order and if they shall come into Borrower’s possession, they, and each
of them, shall be held by such Borrower in trust as Lender’s trustee, and
Borrower will immediately deliver them to Lender in their original form together
with any necessary endorsement.

 

4.7. Books and Records. Each Borrower shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for

 

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premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of the Accountants.

 

4.8. Financial and Other Disclosure. Each Borrower hereby irrevocably authorizes
and directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Lender copies of any of the Borrower’s
financial statements, trial balances or other accounting records of any sort in
the accountant’s or auditor’s possession, and to disclose to Lender any
information such accountants may have concerning such Borrower’s financial
status and business operations, but only to the extent the accountants and
auditors can do so in accordance with law and all applicable professional
standards. In respect of the foregoing, Borrowing Representative shall execute
and deliver to its accountants and auditors employed on the Closing Date and, if
such accountants and auditors are changed by Borrowers subsequent to the Closing
Date, a letter directly authorizing them to act in the manner so provided
hereinabove when requested by Lender, such letter to be substantially in the
form of Exhibit 4.8, it being agreed and understood that Borrower has been
informed that, upon its receipt of such a letter, its auditors will respond by
sending a letter in substantially the form of Exhibit 4.8(b). Each Borrower
hereby authorizes all federal, state and municipal authorities, to the extent
permitted by applicable law, to furnish to Lender copies of reports or
examinations relating to such Borrower, whether made by such Borrower or
otherwise; however, Lender will attempt to obtain such information or materials
directly from such Borrower prior to obtaining such information or materials
from such accountants or such authorities.

 

4.9. Compliance with Laws. Each Borrower shall comply in all material respects
with all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of such Borrower’s business the non-compliance with
which could reasonably be expected to have a Material Adverse Effect on such
Borrower. Each Borrower may, however, contest or dispute any acts, rules,
regulations, orders and directions of those bodies or officials in any
reasonable manner, provided that any related Lien is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of Lender to
protect Lender’s Lien on or security interest in the Collateral.

 

4.10. Inspection of Premises. At all reasonable times, Lender shall have full
access to and the right to audit, check, inspect and make abstracts and copies
from each Borrower’s books, records, audits, correspondence and all other papers
relating to the Collateral and the operation of each Borrower’s business from
time to time in Lender’s sole credit judgment. Lender may also enter upon any of
Borrower’s premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower’s business which, initially is intended by Lender to occur at least
quarterly (if not more frequently).

 

4.11. Insurance. Each Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At each Borrower’s own cost
and expense in amounts and with carriers reasonably acceptable to Lender, each
Borrower shall (a) keep all its insurable properties and properties in which
each Borrower has an interest insured against the hazards of

 

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fire, flood (if any property is in a special flood hazard area and flood
insurance is available in such area), sprinkler leakage, those hazards covered
by extended coverage insurance and such other hazards, and for such amounts, as
is customary in the case of companies engaged in businesses similar to such
Borrower’s including, without limitation, products liability insurance and
business interruption insurance; (b) maintain a bond or other surety in such
amounts as is customary in the case of companies engaged in businesses similar
to such Borrower insuring against larceny, embezzlement or other criminal
misappropriation of insured’s officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of such
Borrower either directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker’s compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Borrower is engaged in business; (e) furnish Lender with (i) copies of all
policies and evidence of the maintenance of such policies by the renewal thereof
at least thirty (30) days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to Lender, naming Lender
as a co-insured (with respect to liability insurance) and loss payee (with
respect to casualty insurance and business interruption insurance) as its
interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, to the extent affecting or relating to Collateral and
providing (A) that all proceeds thereunder shall be payable to Lender, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days’ prior written notice is given to Lender. In the event of any
loss thereunder, the carriers named therein hereby are directed by Lender and
the applicable Borrower to make payment for such loss to Lender and not to such
Borrower and Lender jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Lender jointly, Lender may endorse
such Borrower’s name thereon and do such other things as Lender may deem
advisable to reduce the same to cash. If no Event of Default then exists, the
Borrower shall have the right to adjust or compromise the applicable insurance
claim, but if the loss or damage relates to insurance coverage under clause (a)
or (b) above, and is equal to or more than the Materiality Threshold, no such
adjustment or compromise shall be made without the prior written consent of the
Lender, such consent not to be unreasonably withheld or delayed. If an Event of
Default then exists, the Lender shall have the right and the Lender is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above. All loss recoveries received by Lender upon any
such insurance shall either be paid over to Borrowers or applied by the Lender
as follows: (i) if no Event of Default then exists, and the loss recovery so
received by Lender is less than or equal to the Materiality Threshold, then,
Lender shall remit such loss recovery to the Borrowers for use in the repair,
replacement or restoration of the insured property which was the subject of the
insured loss, provided, that, in the case business interruption proceeds same
shall be applied by the Borrower to its working capital needs or to the payment
of the Obligations; (ii) if no Event of Default then exists, and the loss
recovery received by Lender is more than the Materiality Threshold, then, Lender
shall apply such loss recovery to the Revolving Advances(without a reduction in
Borrower’s ability to re-borrow Revolving Advances) (anything contained in
Section 2.10(a) to the contrary notwithstanding), provided, that, in the case of
business interruption insurance proceeds, the same shall be applied by the
Borrower to its working capital needs or to the payment of the

 

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Obligations; and (iii) if any Event of Default then exists, then Lender shall,
at its complete discretion, anything contained in Section 2.10 to the contrary
notwithstanding, receive and apply such loss recovery to the Obligations in such
order as Lender, in its sole discretion, shall determine or to such repair,
replacement or restoration. Any surplus of such proceeds remaining after such
application shall be paid by Lender to Borrowers or applied as may be otherwise
required by law. If, at the applicable time, a Default but not an Event of
Default then exists, no adjustment or compromise of the applicable claim shall
be made and the Lender shall have the right to hold all insurance proceeds until
such time as the event or condition constituting such Default is either timely
cured or waived in accordance the terms and provisions hereof or becomes an
Event of Default, as the case may be, so as to be able to determine which of the
procedures with respect to settlement, compromise and application of insurance
proceeds set forth above shall be used. Anything hereinabove to the contrary
notwithstanding, Lender shall not be obligated to remit any insurance proceeds
to Borrowers unless Borrowers shall have provided Lender with evidence
reasonably satisfactory to Lender that the insurance proceeds will be used by
Borrowers to repair, replace or restore the insured property which was the
subject of the insured loss. The Collateral at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the Collateral so that such insurance shall remain in
full force and effect. If any Borrower fails to obtain insurance as hereinabove
provided, or to keep the same in force, Lender, if Lender so elects, may obtain
such insurance and pay the premium therefor for Borrowers’ Account, and charge
Borrowers’ Account therefor and such expenses so paid shall be part of the
Obligations.

 

4.12. Payment of Taxes. Each Borrower will pay, when due, all taxes, assessments
and other Charges lawfully levied or assessed upon such Borrower or any of the
Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes. If any tax by any governmental authority
is or may be imposed on or as a result of any transaction between any Borrower
and Lender which Lender may be required to withhold or pay or if any taxes,
assessments, or other Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Lender’s opinion, may possibly
create a valid Lien on the Collateral, Lender may, unless the Borrowers have
done so within five (5) Business Days after the Borrowing Representative
receives written notice from the Lender that they do so, pay the taxes,
assessments or other Charges and each Borrower hereby indemnifies and holds
Lender and each Lender harmless in respect thereof. Lender will not pay any
taxes, assessments or Charges to the extent that any Borrower has contested or
disputed those taxes, assessments or Charges in good faith, by expeditious
protest, administrative or judicial appeal or similar proceeding provided that
any related tax lien is stayed and sufficient reserves are established to the
reasonable satisfaction of Lender to protect Lender’s security interest in or
Lien on the Collateral. The amount of any payment by Lender under this Section
shall be charged to Borrowers’ Account as a Revolving Advance and added to the
Obligations and, until Borrowers shall furnish Lender with an indemnity therefor
(or supply Lender with evidence satisfactory to Lender that due provision for
the payment thereof has been made), Lender may hold without interest any balance
standing to Borrowers’ credit and Lender shall retain its security interest in
any and all Collateral held by Lender.

 

4.13. Payment of Leasehold Obligations. Each Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and shall otherwise

 

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comply, in all material respects, with all other material terms of such leases
and, at Lender’s request, will provide evidence of having done so.

 

4.14. Receivables.

 

(a) Each of the Receivables shall be a bona fide and valid account representing
a bona fide indebtedness incurred by the Customer therein named, for a fixed sum
as set forth in the invoice relating thereto (provided immaterial or
unintentional invoice errors shall not be deemed to be a breach hereof) with
respect to an absolute sale or lease and delivery of goods upon stated terms of
a Borrower, or work, labor or services theretofore rendered by a Borrower as of
the date each Receivable is created. Same shall be due and owing in accordance
with the applicable Borrower’s standard terms of sale without dispute, setoff or
counterclaim except as may be stated on the accounts receivable schedules
delivered by Borrowers to Lender.

 

(b) Each Customer, to the best of each Borrower’s knowledge, as of the date each
Receivable is created, is and will be solvent and able to pay all Receivables on
which the Customer is obligated in full when due or with respect to such
Customers of any Borrower who are not solvent such Borrower has set up on its
books and in its financial records bad debt reserves adequate to cover such
Receivables.

 

(c) Each Borrower’s chief executive office is located at the address set forth
on Schedule 4.14(c) hereto. Until written notice is given to Lender by Borrowing
Representative of any other office at which any Borrower keeps its records
pertaining to Receivables, all such records shall be kept at such executive
office.

 

(d) On the Closing Date, each Borrower and MPAV shall establish a lock-box
account (the “Lock-Box Account”) pursuant to a lock-box agreement, to be in form
and substance satisfactory to Lender (the “Lock-Box Agreement”) with the Bank,
any Lender or any other financial institution as is acceptable to the Lender (a
“Lock-Box Bank”) in which all Customers shall be directed by the Borrower and
MPAV to directly remit all payments on their Receivables. All available amounts
on deposit in each Lock-Box Account first be used to pay the principal of all
outstanding Revolving Advances with any remaining balance to be transferred on a
daily basis by wire transfer of immediately available funds to any Pledged
Account (as defined below) with the Bank and designated by the Borrowers,
provided, that, during the continuance of any Event of Default the Lender shall
have the right to send a notice to the Bank that an Event of Default exists and
to instruct the Bank to follow the instructions of the Lender as to the
disposition of all of the funds in the Lock-Box Account and upon giving such
notice the Lender shall have the right to apply all funds in the Lock-Box
Account to the Obligations in such manner as the Lender shall elect. Unless
otherwise agreed to by the Lender, the Lock-Box Bank shall acknowledge and
agree, pursuant to its respective Lock-Box Agreement, that all payments and
deposits made to the Lock-Box Account of such Lock-Box Bank are the sole and
exclusive property of Lender, for the benefit of itself, the Bank, the Issuers
and the Lender, that each of such Lock-Box Bank a has no right to setoff against
its Lock-Box Account, as the case may be, except as expressly provided in its
respective Lock-Box Agreement, and that such Lock-Box Bank will apply and
disburse the available funds in the Lock-Box Account as aforesaid. Each Borrower
agrees that all payments, whether by cash, check, wire transfer or any other
instrument on deposit in the Lock-Box Account shall be the

 

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sole and exclusive property of the Lender, for the benefit of itself, the Bank,
the Issuers and the Lender, and the Borrowers shall not have any right, title or
interest therein or in any Lock-Box Account. None of the Bank, Lender, any
Issuer or any Lender assumes any responsibility for such Lock Box Account
(unless such Person shall also be the applicable Lock-Box Bank and in such event
only as set forth in the applicable Lockbox Account Agreement), including
without limitation, any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Each Borrower shall notify all
Customers of such Borrowers to remit directly all payments constituting proceeds
of Collateral to an applicable Lock-Box Account in the form received. All such
payments, whether by cash, check, wire transfer or other instrument, made to
each Lock-Box Account, shall be the exclusive property of the Lender, for the
benefit of itself, the Bank, the Issuers and the Lender, and the Borrowers shall
not have any right, title or interest therein. Except for deposit accounts,
which, in the aggregate do not contain more than $100,000 at any given time, the
Borrowers shall not, without obtaining the prior consent of the Lender,
establish any deposit accounts, other than the Lock-Box Accounts, pursuant to
which payments on account of Receivables are made to or on behalf of any of the
Borrowers. In addition, the Borrowers shall not modify in any respect, without
the prior consent of the Lender, any Lock-Box Agreement or other arrangement
relating to the Lock-Box Account.

 

(e) In addition to the requirements set forth in subsection (d) above, not later
than the Closing Date, each Borrower shall have caused all Deposit Accounts
(other than deposit accounts, which, in the aggregate do not contain more than
$100,000 at any given time) existing on the Closing Date other than any
constituting a Lockbox Account (herein, a “Pledged Account”), to be made the
subject of a tri-party agreement among such Borrower, the bank having such
Pledged Account and Lender, to be in form and substance satisfactory to Lender
(a “Pledged Account Agreement”), pursuant to which the pledge of such Pledged
Account and all funds on deposit therein to Lender as security for the payment
and performance of all Obligations shall be established and confirmed. The
Borrower shall have the right to withdraw funds and otherwise give instructions
to such Pledged Accounts provided that such tri-party agreements shall provide
that the Lender shall have the right to send a notice to such bank, pursuant to
such tri-party agreement, that an Event of Default exists and to instruct such
bank to follow the instructions of the Lender as to the disposition of the funds
in the Pledged Account and upon giving such notice the Lender shall have the
right to apply all funds in such Pledged Account to the Obligations in such
manner as the Lender shall elect. In addition to any other rights provided for
herein, the Lender shall have the right to have monies in any Pledged Account
with the Bank applied to the payment of any Obligations then due and payable.

 

(f) Notwithstanding terms of subsection (d) above, but in addition thereto, if
and to the extent that (i) Customers remit any payments on account of the
Receivables of the Borrowers directly to any of them or (ii) any Customer is
prohibited by law to remit payments to a given Lock-Box Account (due to such
Lock-Box Account’s location outside the state where such Customer is located or
otherwise), or (iii) any Customer pays cash to Borrower for any Inventory or
other Collateral, then, such payments shall be held by the Borrowers in trust
for the Lender, on behalf of itself, the Bank, the Issuers and the Lender, and
shall, promptly upon receipt thereof, be sent via overnight delivery service for
deposit in the same form received into the Lock-Box Account.

 

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(g) All available amounts deposited in the Lock-Box Account from time to time
shall be applied to the principal amount of the Revolving Advances (nothing
contained in this sentence shall be interpreted or construed to limit the right
of the Lender to apply the said amounts to all of the Obligations if an Event of
Default then exists). Each prepayment of a Revolving Advance pursuant to this
Section shall be applied, first, to the payment of Domestic Rate Loans and
second, to the payment of Eurodollar Rate Loans. If sufficient funds are not
available to fund all payments then to be made in respect of any Obligations,
the available funds being applied with respect to such Obligations shall be
allocated to the payment of such Obligations ratably, in such order and manner
as Lender shall elect, and Borrowers shall continue to be liable for any
deficiency.

 

(h) If at any time Lender determines that any funds held in the Lock-Box Account
are subject to the Lien of any Person, other than the Lender as herein provided,
(a) Borrowers agree, forthwith upon demand by Lender, to pay to Lender as
additional funds to be deposited and held in a Pledged Account, an amount equal
to the amount of funds subject to such Lien, or (b) if no such payment is made,
Lender shall establish sufficient reserves in the amount of such funds.

 

(i) At any time following the occurrence and during the continuance of an Event
of Default, Lender shall have the right to send notice of the assignment of, and
Lender’s security interest in, the Receivables to any and all Customers or any
third party holding or otherwise concerned with any of the Collateral.
Thereafter, Lender shall have the sole right to collect the Receivables, take
possession of the Collateral, or both. Lender’s actual collection expenses,
including, but not limited to, stationery and postage, telephone and telecopy,
secretarial and clerical expenses and the salaries of any collection personnel
used for collection, may be charged to Borrowers’ Account and added to the
Obligations.

 

(j) Lender shall have the right to receive, endorse, assign and/or deliver in
the name of Lender or any Borrower any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and each
Borrower hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Borrower hereby constitutes Lender or Lender’s
designee as such Borrower’s attorney with power at any time hereafter (i) to
endorse such Borrower’s name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral; (ii) to sign such Borrower’s
name on any invoice or bill of lading relating to any of the Receivables, drafts
against Customers, assignments and verifications of Receivables; (iii) in
Lender’s Credit judgment, to send verifications of Receivables to any Customer;
and (iv) to sign such Borrower’s name on any documents or instruments deemed
necessary or appropriate by Lender to preserve, protect, or perfect Lender’s
interest in the Collateral and to file same. Following the occurrence and during
the continuance of an Event of Default, and during its continuation, each
Borrower shall hereby constitute Lender or Lender’s designee as such Borrower’s
attorney with additional power (i) to demand payment of the Receivables; (ii) to
enforce payment of the Receivables by legal proceedings or otherwise; (iii) to
exercise all of Borrowers’ rights and remedies with respect to the collection of
the Receivables and any other Collateral; (iv) to settle, adjust, compromise,
extend or renew the Receivables; and (v) to settle, adjust or compromise any
legal proceedings brought to collect Receivables. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of omission or

 

20

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commission nor for any error of judgment or mistake of fact or of law, unless
done maliciously or with gross (not mere) negligence; this power being coupled
with an interest is irrevocable while any of the Obligations remain unpaid.
Lender shall have the right at any time following the occurrence and during the
continuance of an Event of Default, to change the address for delivery of mail
addressed to any Borrower to such address as Lender may designate and to
receive, open and dispose of all mail addressed to any Borrower.

 

(k) Lender shall not, under any circumstances or in any event whatsoever, have
any liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof, or for any damage resulting therefrom, except for
any such errors or omissions or delays of any kind determined by a court of
competent jurisdiction in a final proceeding to have resulted primarily from
Lender’s gross (not mere) negligence or willful misconduct. Following the
occurrence and during the continuance of an Event of Default, Lender may,
without notice or consent from any Borrower, sue upon or otherwise collect,
extend the time of payment of, compromise or settle for cash, credit or upon any
terms any of the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. Lender is authorized and
empowered to accept following the occurrence and during the continuance of an
Event of Default the return of the goods represented by any of the Receivables,
without notice to or consent by any Borrower, all without discharging or in any
way affecting any Borrower’s liability hereunder.

 

(l) No Borrower will, without Lender’s consent, compromise or adjust any
material amount of the Receivables (or extend the time for payment thereof) or
accept any material returns of merchandise or grant any additional discounts,
allowances or credits thereon except for those compromises, adjustments,
returns, discounts, credits and allowances as have been heretofore customary in
the business of such Borrower.

 

(m) Notwithstanding the fact that MPAV is not a signatory to this Agreement,
Sections 4.14 and 4.15 shall apply to MPAV (and references to the Borrower in
such Sections shall be deemed to include MPAV as well), as if they were a party
hereto, and MPAV, by execution of its Guaranty, shall be deemed to have made the
same representations and warranties made by the Borrowers hereunder relating to
such sections.

 

4.15. Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.

 

4.16. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation.

 

4.17. Exculpation of Lender. Nothing herein contained shall be construed to
constitute Lender as any Borrower’s agent for any purpose whatsoever, nor shall
Lender be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral

 

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wherever the same may be located and regardless of the cause thereof. Lender
shall not, whether by anything herein or in any assignment or otherwise, assume
any Borrower’s obligations under any contract or agreement assigned to Lender,
and Lender shall not be responsible in any way for the performance by Borrower
of any of the terms and conditions thereof.

 

4.18. Environmental Matters.

 

(a) Borrowers shall ensure that the Real Property remains in compliance with all
Environmental Laws, and they shall not place or permit to be placed any
Hazardous Substances on any Real Property except as not prohibited by applicable
law or appropriate governmental authorities, except in either case to the extent
failure to comply could not reasonably be expected to have a Material Adverse
Effect.

 

(b) Borrowers shall establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.

 

(c) Borrowers shall (i) employ in connection with the use of the Real Property
appropriate technology necessary to maintain compliance with any applicable
Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at
the Real Property only at facilities and with carriers that maintain valid
permits under RCRA and any other applicable Environmental Laws. Borrowers shall
use their best efforts to obtain certificates of disposal, such as hazardous
waste manifest receipts, from all treatment, transport, storage or disposal
facilities or operators employed by Borrowers in connection with the transport
or disposal of any Hazardous Waste generated at the Real Property.

 

(d) In the event any Borrower obtains, gives or receives notice of any Release
or threat of Release of a reportable quantity of any Hazardous Substances at the
Real Property (any such event being hereinafter referred to as a “Hazardous
Discharge”) or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws affecting the Real Property or any Borrower’s
interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the “Authority”), then Borrowing
Representative shall, within five (5) Business Days, give written notice of same
to Lender detailing facts and circumstances of which any Borrower is aware
giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Lender to protect its security interest
in the Real Property and is not intended to create nor shall it create any
obligation upon Lender with respect thereto.

 

(e) Borrowers shall promptly forward to Lender copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Borrower
to dispose of Hazardous Substances and shall continue to

 

22

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forward copies of correspondence between any Borrower and the Authority
regarding such claims to Lender until the claim is settled. Borrowers shall
promptly forward to Lender copies of all documents and reports concerning a
Hazardous Discharge at the Real Property that any Borrower is required to file
under any Environmental Laws. Such information is to be provided solely to allow
Lender to protect Lender’s security interest in the Real Property and the
Collateral.

 

(f) Borrowers shall respond promptly to any Hazardous Discharge or Environmental
Complaint and take all necessary action in order to safeguard the health of any
Person and to avoid subjecting the Collateral or Real Property to any Lien,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect. If any Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or any Borrower shall fail to
comply with any of the requirements of any Environmental Laws, within thirty
(30) days after the Borrowing Representative receives written notice from the
Lender that it do so, Lender on behalf of Lender may, but without the obligation
to do so, for the sole purpose of protecting Lender’s interest in Collateral:
(A) give such notices or (B) enter onto the Real Property (or authorize third
parties to enter onto the Real Property) and take such actions as Lender (or
such third parties as directed by Lender) deem reasonably necessary or
advisable, to clean up, remove, mitigate or otherwise deal with any such
Hazardous Discharge or Environmental Complaint. All reasonable costs and
expenses incurred by Lender and (or such third parties) in the exercise of any
such rights, including any sums paid in connection with any judicial or
administrative investigation or proceedings, fines and penalties, together with
interest thereon from the date expended at the Default Rate shall be paid upon
demand by Borrowers, and until paid shall be added to and become a part of the
Obligations secured by the Liens created by the terms of this Agreement or any
other agreement between Lender, any Lender and any Borrower.

 

(g) Promptly upon the written request of Lender from time to time, which may be
made at any time following (1) the discovery of any Hazardous Discharge or (2)
the filing of any Environmental Complaint, Borrowers shall provide Lender, at
Borrowers’ expense, with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable in the
reasonable opinion of Lender, to assess with a reasonable degree of certainty
the existence of any Hazardous Discharge and the potential costs in connection
with abatement, cleanup and removal of any Hazardous Substances found on, under,
at or within the Real Property. Any report or investigation of any Hazardous
Discharge proposed and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be acceptable to Lender.
If such estimates, individually or in the aggregate, exceed the Materiality
Threshold Lender shall have the right to require Borrowers to post a bond,
letter of credit or other security reasonably satisfactory to Lender to secure
payment of these costs and expenses.

 

(h) Borrowers shall defend and indemnify each Lender Party and hold each Lender
Party, and its respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorney’s fees, suffered or incurred by such Lender
Party under or on account of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the

 

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Real Property, whether or not the same originates or emerges from the Real
Property or any contiguous real estate, including any loss of value of the Real
Property as a result of the foregoing except to the extent such loss, liability,
damage and expense is attributable to any Hazardous Discharge resulting from
actions on the part of a Lender Party. Borrowers’ obligations under this Section
shall arise upon the discovery of the presence of any Hazardous Substances at
the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrowers’ obligation and the indemnifications hereunder
shall survive the termination of this Agreement.

 

4.19. No Other Financing Statements. Except as respects the financing statements
filed by Lender and financing statements giving notice of otherwise Permitted
Encumbrances, no financing statement covering any of the Collateral or any
proceeds thereof is on file on the date hereof in any public office.

 

4.20. Intellectual Property. Borrowers shall execute and deliver to Lender for
the benefit of all Lender Parties, immediately, either (i) on the Closing Date
with respect to any trademarks, patents or copyrights, registered, or to be
registered, with the applicable federal Governmental Body as of the Closing
Date, or (ii) upon the creation or acquisition by Borrower of any trademarks,
patents or copyrights, registered, or to be registered, with the applicable
federal Governmental Body subsequent to the Closing Date, security agreements
with respect thereto, in registrable form and otherwise to be in form and
substance satisfactory to Lender.

 

V. REPRESENTATIONS AND WARRANTIES.

 

Each Borrower represents and warrants as follows:

 

5.1. Authority. Each Borrower has full power, authority and legal right to enter
into this Agreement and the Other Documents and to perform all its respective
Obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and of the Other Documents (a) are within such Borrower’s
corporate (or other organizational) powers, have been duly authorized, are not
in contravention of law or the terms of such Borrower’s Organic Documents or to
the conduct of such Borrower’s business or of any material agreement or
undertaking to which such Borrower is a party or by which such Borrower is
bound, and (b) will not conflict with nor result in any breach in any of the
provisions of or constitute a default under or result in the creation of any
Lien (except Permitted Encumbrances) upon any asset of such Borrower under the
provisions of any Organic Document or other instrument to which such Borrower or
its property is a party or by which it may be bound.

 

5.2. Formation and Qualification.

 

(a) Each Borrower is duly organized and in good standing under the laws of the
state or other jurisdiction listed on Schedule 5.2 and is qualified to do
business and is in good standing in the states or other jurisdictions listed on
Schedule 5.2 which constitute all states in which qualification and good
standing are necessary for such Borrower to conduct its business and own its
property and where the failure to so qualify could reasonably be expected to
have a

 

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Material Adverse Effect on such Borrower. Each Borrower has delivered to Lender
true and complete copies of its Organic Documents and will promptly notify
Lender of any amendment or changes thereto.

 

(b) Each Borrower’s identification number (if any) assigned to it by the
appropriate Governing Body of the state of its organization, if any, is set
forth on Schedule 5.2.

 

(c) The Subsidiaries (if any) of each Borrower as of the Signing Date are as set
forth in Schedule 5.2.

 

(d) The Equity Interests of each Borrower which are authorized, issued and
outstanding on the Signing Date are set forth and described in Schedule 5.2.

 

(e) This Agreement is, and each Other Document executed by a Borrower
constitutes, the legal, valid and binding obligation of such Borrower,
enforceable against it in accordance with its terms, except as such enforcement
is subject to the effect of (i) any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors’ rights generally, and (ii)
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).

 

5.3. Tax Returns. Each Borrower’s federal tax identification number is set forth
on Schedule 5.3. Each Borrower has filed all federal, state and local tax
returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable, excepting therefrom, (i) any such charges which are being contested by
Borrowers in good faith in appropriate proceedings after the posting of adequate
reserves on the Borrowers’ books to cover the costs thereof and (ii) any such
charges and reports, of which the failure to pay or file respectively would not
have a Material Adverse Effect. Federal, state and local income tax returns of
each Borrower have been examined and reported upon by the appropriate taxing
authority or closed by applicable statute and satisfied for all Fiscal Years
prior to the current Fiscal Year. The provision for taxes on the books of each
Borrower are adequate for all years not closed by applicable statutes, and for
its current Fiscal Year, and no Borrower has any knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.

 

5.4. Financial Statements.

 

(a) The historical audited financial statements of Borrowers and their
Subsidiaries on a consolidated basis for its most recently completed Fiscal
Year, and the related statements of income, changes in stockholder’s equity, and
changes in cash flow for the annual fiscal period ended on such date, all
accompanied by reports thereon containing opinions without qualification by the
Accountants, and the historical unaudited financial statements of Borrowers and
their Subsidiaries on a consolidated and consolidating basis for that portion of
their current Fiscal Year ended with their most recently completed Fiscal
Quarter and Fiscal Month for which financial statements have been reported and
the related statements of income, changes in stockholder’s equity and changes in
cash flow for the fiscal periods ended on such date, (collectively, the
“Historical Financial Statements”), copies of which have been delivered to
Lender, have been prepared in accordance with GAAP, consistently applied (except
for changes

 

25

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in application in which such Accountants have concurred) and present fairly the
financial position of the Borrowers and their respective Subsidiaries on a
consolidated and, as appropriate, consolidating basis at such dates and the
results of their operations for such periods. Since the last day of the
Borrowers’ most recently completed Fiscal Year, there has been no change in the
condition, financial or otherwise, of either of the Borrowers as shown on the
balance sheet of each as of such date and no change in the aggregate value of
machinery, equipment and Real Property owned by them, except changes in the
ordinary course of business, none of which individually or in the aggregate has
had a Material Adverse Effect.

 

(b) The one (1) year cash flow projections (presented on a monthly basis) of the
Borrowers and their Subsidiaries on a consolidated and consolidated basis and
their projected balance sheets as of the Closing Date, furnished to Lender on
the Signing Date (the “Initial Projections”), were prepared by the chief
financial officer of Borrowing Representative, are based on underlying
assumptions which provide a reasonable basis for the projections contained
therein and reflect Borrowers’ collective judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period.

 

5.5. Name. No Borrower has been known by any other organization name in the five
(5) years preceding the Closing Date and does not sell Inventory under any other
name except as set forth on Schedule 5.5; nor has any Borrower been the
surviving organization of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the five (5) years
preceding the Closing Date.

 

5.6. OSHA and Environmental Compliance. Except as may be set forth on Schedule
5.6:

 

(a) Each Borrower has duly complied with, and its facilities, business, assets,
property, leaseholds and Equipment are in compliance in all material respects
with, the provisions of the Federal Occupational Safety and Health Act, the
Environmental Protection Act, RCRA and all other Environmental Laws; there have
been no outstanding citations, notices or orders of non-compliance issued to any
Borrower or relating to its business, assets, property, leaseholds or Equipment
under any such laws, rules or regulations except for those that could not
reasonably be expected to have a Material Adverse Effect.

 

(b) Each Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws
except for those licenses, certificates or permits, which, if not obtained,
could not be reasonably be expected to have a Material Adverse Effect.

 

(c) (i) There are no visible signs, in any material amounts of releases, spills,
discharges, leaks or disposal (collectively referred to as “Releases”) of
Hazardous Substances at, upon, under or within any Real Property or any premises
leased by any Borrower which do not comply in all material respects with all
applicable Environmental Laws in respect thereof; (ii) there are no underground
storage tanks or polychlorinated biphenyls on the Real Property or any premises
leased by any Borrower; (iii) to the best of each Borrower’s knowledge, neither
the Real Property nor any premises leased by any Borrower has ever been used as
a treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present, in

 

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any material amounts on the Real Property or any premises leased by Borrower,
excepting such quantities as are handled in accordance with all applicable
manufacturer’s instructions and governmental regulations and in proper storage
containers and as are necessary for the operation of the commercial business of
any Borrower or of its tenants.

 

5.7. Solvency.

 

(a) The Initial Projections are based on underlying assumptions which provide a
reasonable basis for the Initial Projections and which reflect the Borrowers’
judgment, based on present circumstances, of a reasonably likely set of
conditions and the Borrowers’ reasonably likely course of action for the period
projected.

 

(b) The Initial Projections demonstrate that the Borrowers on a consolidated
basis will have sufficient cash flow to enable them to pay their debts as they
mature.

 

(c) Immediately following the execution of this Agreement and the consummation
of the transactions contemplated hereby, (i) the assets of the Borrowers, on a
consolidated basis, at a fair valuation and at their present fair saleable
value, will be in excess of the total amount of their liabilities (including
contingent and unmatured liabilities), (ii) the Borrowers will be able to pay
their Indebtedness as it becomes due and (iii) the Borrowers on a consolidated
basis will not have unreasonably small capital to carry on their business.

 

(d) All material undisputed Indebtedness owing to third parties by the Borrowers
are current and not past due.

 

(e) This Agreement is, and all Other Documents will be, executed and delivered
by the Borrowers, as applicable, to Lender in good faith and in exchange for
reasonably equivalent value and fair consideration.

 

5.8. Litigation. Except as may be disclosed in Schedule 5.8, no Borrower has to
its knowledge, any pending or threatened litigation, arbitration, actions or
proceedings which, if determined adversely to it, would be reasonably expected
to have a Material Adverse Effect.

 

5.9. No Indebtedness. Except as may be disclosed on Schedule 5.9, no Borrower
has any Indebtedness for borrowed funds on the Closing Date.

 

5.10. No Violations. Except as may be disclosed on Schedule 5.10, no Borrower is
in violation of any applicable statute, regulation or ordinance in any respect
which could reasonably be expected to have a Material Adverse Effect on
Borrower, nor is any Borrower in violation of any order of any court,
governmental authority or arbitration board or tribunal.

 

5.11. Plans. No Borrower nor any member of the Controlled Group maintains or
contributes to any Plan (or has assumed any liability in respect of any Plan)
other than those (if any) listed on Schedule 5.11 hereto. Except as set forth in
Schedule 5.11, (i) no Plan has incurred any “accumulated funding deficiency,” as
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, and each Borrower and each member of the Controlled Group has met
all applicable minimum funding requirements under Section 302 of ERISA in
respect of each Plan, (ii) each Plan which is intended to be a qualified plan
under

 

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Section 401(a) of the Code as currently in effect has been determined by the
Internal Revenue Service to be qualified under Section 401(a) of the Code or is
entitled to rely on a prototype or volume submitter plan sponsor’s favorable
letter from the Internal Revenue Service as to its qualification under Section
401(a) of the Code, and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code, (iii) no Borrower nor any member of the
Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan, (vi) no
Borrower or any member of the Controlled Group has breached any of the
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Benefit Plan, to the extent that such breach would reasonably be expected to
result in a material liability to any Borrower (vii) no Borrower nor any member
of a Controlled Group has incurred any liability for any excise tax arising
under Section 4972 or 4980B of the Code that would reasonably be expected to
result in a material liability to any Borrower, and no fact exists which could
give rise to any such liability, (viii) no Borrower nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged
in a non-exempt “prohibited transaction” described in Section 406 of the ERISA
or Section 4975 of the Code that would reasonably be expected to result in a
material liability of any Borrower, nor taken any action which would constitute
or result in a Termination Event with respect to any such Plan which is subject
to ERISA, (ix) each Borrower and each member of the Controlled Group has made
all contributions due under the terms of each Benefit Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR §2615.3 has not been waived, (xi) no Borrower
nor any member of the Controlled Group has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than employees or former employees of any Borrower and any member of the
Controlled Group, and (xii) no Borrower nor any member of the Controlled Group
has withdrawn, completely or partially, from any Multiemployer Plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980.

 

5.12. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, trade names,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.12, are valid and have been duly registered or filed
with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, trade name, trade
secret or license and no Borrower is aware of any grounds for any challenge,
except as set forth in Schedule 5.12. Each patent, patent application, patent
license, trademark, trademark application, trademark license, service mark,
service mark application, service mark license, copyright, copyright application
and copyright license owned or held by any Borrower and all trade secrets used
by any Borrower consist of original material or property developed by such
Borrower or which was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been, or will be, maintained so as
to preserve the value thereof from the date of creation or acquisition thereof.
With respect to all proprietary software developed and used by any Borrower,
such Borrower is in possession of all

 

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source and object codes related to each piece of software or is the beneficiary
of a source code escrow agreement.

 

5.13. Licenses and Permits. Each Borrower (a) is in compliance with and (b) has
procured and is now in possession of, all material licenses or permits required
by any applicable federal, state, provincial or local law or regulation for the
operation of its business in each jurisdiction wherein it is now conducting or
proposes to conduct business and where the failure to procure such licenses or
permits would reasonably be expected to have a Material Adverse Effect.

 

5.14. No Default of Indebtedness. Except as may exist in respect of the Existing
Loans, no Borrower is in default in the payment of the principal of or interest
on any Indebtedness in excess of the Materiality Threshold in principal amount
or under any instrument or agreement under or subject to which any Indebtedness
has been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or the giving of
notice, or both, constitutes or would constitute an event of default thereunder.

 

5.15. No Other Defaults. No Borrower is in default in the payment or performance
of any of its contractual obligations in respect of any Material Agreement.

 

5.16. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which would reasonably be expected to have a
Material Adverse Effect on such Borrower. No Borrower has agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien which is not a Permitted Encumbrance.

 

5.17. No Labor Disputes. No Borrower is involved in any labor dispute; there are
no strikes or walkouts or union organization of any Borrower’s employees
threatened or in existence and no labor contract presently existing (if any) is
scheduled to expire during the Term.

 

5.18. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
“purchasing” or “carrying” “margin stock,” as those terms are defined in
Regulation U of such Board of Governors.

 

5.19. Investment Company Act. No Borrower is an “investment company” registered
or required to be registered under the Investment Company Act of 1940, as
amended, nor is it controlled by such a company.

 

5.20. Disclosure. No representation or warranty made by any Borrower in this
Agreement, or in any financial statement, report, certificate or any Other
Document furnished in connection herewith, including without limitation the
Perfection Certificate, contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements herein or
therein not misleading. There is no fact known to Borrowers which Borrowers have

 

29

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not disclosed to Lender in writing with respect to the transactions contemplated
by this Agreement which would reasonably be expected to have a Material Adverse
Effect.

 

5.21. No Conflicting Agreements or Orders. No provision of any Material
Agreement or judgment, decree or order binding on any Borrower or affecting the
Collateral conflicts with, or requires any consent which has not already been
obtained to, or would in any way prevent the execution, delivery or performance
of, the terms of this Agreement or the Other Documents.

 

5.22. Application of Certain Laws and Regulations. No Borrower nor any Affiliate
of any Borrower is subject to any statute, rule or regulation which regulates
the incurrence of any Indebtedness and which would have an adverse impact or
affect on the Lender or the transactions contemplated hereby, including without
limitation, statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.

 

5.23. Business and Property of Borrower. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than business conducted
by the Borrowers on the Closing Date and activities necessary to conduct the
foregoing. On the Closing Date, each Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of such Borrower.

 

5.24. Hedge Contracts. On the Closing Date, no Borrower is party to any Hedge
Contract, except a Permitted Hedge Contract.

 

5.25. Real Property. On the Closing Date, Borrowers have no interest as owner or
tenant in any Real Property, except as disclosed on Schedule 5.25.

 

5.26. Deposit Accounts. On the Closing Date, no Borrower has any Deposit
Accounts, except as listed on Schedule 5.26.

 

5.27. Foreign Assets Control. No Borrower is a national of a designated blocked
country or a “Specially Designated National,” “Blocked Entity,” “Specially
Designated Terrorist,” “Specially Designated Narcotics Trafficker” or “Foreign
Terrorist Organization,” as defined by the U.S. Office of Foreign Assets
Control.

 

5.28. Brokers. No Borrower has retained the services of any broker to assist
such Borrower in obtaining the benefits of this Agreement unless (i) such broker
has been paid (or is paid on the Closing Date) the full amount due such broker
in such regard, and (ii) such broker executes in favor of Lender a broker’s
release and waiver letter in form and substance satisfactory to Lender on or
prior to the Closing Date.

 

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VI. AFFIRMATIVE COVENANTS.

 

Each Borrower shall, until payment in full of the Obligations and termination of
this Agreement:

 

6.1. Payment of Fees. Pay to Lender on demand all usual and customary fees and
expenses which Lender incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Lockbox Account,
Blocked Account, Pledged Account or Concentration Account. Lender may, without
making demand, charge Borrowers’ Account for all such fees and expenses.

 

6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct
continuously and operate actively its business according to good business
practices and maintain all of its properties useful or necessary in its business
in good working order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of this Agreement),
including, without limitation, all licenses, patents, copyrights, design rights,
trade names, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence except pursuant to a merger expressly permitted under Section 7.1
below; (c) comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(d) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect.

 

6.3. Violations. Promptly notify Lender in writing of any violation of any law,
statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect.

 

6.4. Government Receivables. If requested by Lender to do so in respect of any
Receivable in excess of the Materiality Threshold or at any time after a Default
or Event of Default exists, regardless of amount, take all steps necessary to
protect Lender’s interest in the Collateral under the Federal Assignment of
Claims Act or other applicable state or local statutes or ordinances and deliver
to Lender appropriately endorsed, any instrument or chattel paper connected with
any Receivable arising out of contracts between any Borrower and the United
States, any state or any department, agency or instrumentality of any of them.

 

6.5. Execution of Supplemental Instruments. Execute and deliver to Lender from
time to time, upon demand, such supplemental agreements, statements, assignments
and transfers, or instructions or documents relating to the Collateral, and such
other instruments as Lender may reasonably request, in order that the full
intent of this Agreement and the Other Documents may be carried into effect.

 

6.6. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before
maturity (subject, where applicable, to specified grace periods and, in the case
of the trade payables, to normal payment practices) all its obligations and
liabilities of whatever nature, including any in respect of its Material
Agreements, except when the failure to do so could not reasonably be expected to
have a Material Adverse Effect or when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and each
Borrower shall

 

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have provided for such reserves as required by GAAP, subject at all times to any
applicable subordination arrangement in favor of Lender.

 

6.7. Standards of Financial Statements. Cause all financial statements referred
to herein as to which GAAP is applicable to present fairly in all material
respects the financial condition and results of operations of the Borrower as of
and for the period covered thereby (subject, in the case of interim financial
statements, to normal year-end audit adjustments and lack of footnotes) and to
be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as concurred in by
such reporting accountants or officer, as the case may be, and disclosed
therein).

 

VII. NEGATIVE COVENANTS.

 

Subsequent to the Signing Date, no Borrower shall, nor shall any Borrower permit
any of its Subsidiaries to, until satisfaction in full of the Obligations and
termination of this Agreement:

 

7.1. Merger, Consolidation and Acquisitions. Enter into any merger,
consolidation or other reorganization with or into any other Person or acquire
all or a substantial portion of the assets or Equity Interests of any Person or
permit any other Person to consolidate with or merge with it, except (a) that to
the extent multiple Borrowers exist at any time, so long as Borrowing
Representative gives Lender at least thirty (30) days advance written notice to
such effect, (i) any Borrower may merge into, or consolidate with, any Borrower
or MPAV, so long as a Borrower is the survivor of such merger or consolidation,
and (ii) any Borrower may acquire all or any substantial portion of the assets
or Equity Interests of any other Borrower or MPAV or (b) any applicable
investment expressly permitted under Section 7.5.

 

7.2. Sales of Assets. Sell, lease, transfer or otherwise dispose of any of its
properties or assets, including any Collateral, except for (i) the sale of
Inventory in the ordinary course of its business, (ii) Equipment aggregating
less than $100,000 (measured in fair market value), and (iii) licenses of
intellectual property rights in the ordinary course of business.

 

7.3. Creation of Liens. Create or suffer to exist any Lien or transfer upon or
against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.

 

7.4. Guarantees. Become liable upon the obligations of any Person by assumption,
endorsement or guaranty thereof or otherwise (other than to Lender or any Lender
Party) in connection with this Agreement and the transactions contemplated
herein; except (a) guarantees made in the ordinary course of business up to an
aggregate amount not exceeding the Materiality Threshold; (b) the endorsement of
checks for collection in the ordinary course of business; and (c) guaranties
made by one Borrower (or any Subsidiary of a Borrower) of the obligations of
another Borrower or Borrowers or of any Subsidiary of the Borrower that is a
Guarantor hereunder, and (d) contractual indemnity claims under contracts
entered into in the ordinary course of business or customary indemnity
obligations under its charter documents.

 

7.5. Investments. Purchase or acquire obligations or Equity Interests of, or any
other interest in, any Person, including, without limitation (a) the acquisition
of all, or substantially all, or any material portion of the assets of a Person;
and (b) any joint venture, except (i) the Biomer Technology Investment, (ii) the
Specified Joint Venture if consented to in writing by the Lender,

 

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such approval to not be unreasonably withheld, (iii) the Borrower’s existing
ownership of (and any existing investment of the Borrower in) MPAV, (iv) the
investments existing on the date hereof in the Other Existing Subsidiaries, (v)
any acquisition, merger or consolidation expressly permitted by Section 7.1
above, (vi) loans permitted pursuant to Section 7.6 below, or (vii) capital
contributions to MPAV, provided that such capital contributions have been
approved in writing in advance by the Lender in its sole discretion.

 

7.6. Loans. Make advances, loans or extensions of credit to any Person,
including particularly, but without limitation, to any Subsidiary or any other
Affiliate, except with respect to (a) the extension of commercial trade credit
to unaffiliated Persons in connection with the sale of Inventory in the ordinary
course of its business, (b) (i) if multiple Borrowers exist, loans and advances
may be made to one Borrower by another Borrower and (ii) loans by the Borrower
to Subsidiaries who are Guarantors and (iii) loans from a Subsidiary to a
Borrower or to another Subsidiary that is a Guarantor, but all such loans and
advance shall be evidenced by one or more promissory notes (which may be
“master” notes evidencing multiple or “revolving” loans), issued to the order of
the lending Borrower, which promissory notes shall be pledged to Lender as
additional Collateral; (c) loans and advances to its employees in the ordinary
course of business not to exceed in aggregate amount (as to all employees) the
Materiality Threshold; and (d) the Biomer Technology Investment.

 

7.7. Dividends. Declare, pay or make any dividend or distribution on any shares
of Equity Interests of any Borrower (other than dividends or distributions
payable in its Equity Interests, or split-ups or reclassifications of its Equity
Interests) or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any Equity Interests, or of any options to
purchase or acquire any Equity Interests of any Borrower; provided, however,
that any Subsidiary of a Borrower may declare and pay dividends or other
distributions to a Borrower or to any Subsidiary that is a Guarantor.

 

7.8. Compensation. Pay compensation (including, for this purpose, salary, bonus,
management or consulting fees, directors fees and any other forms of
remuneration, whether payable in cash or other property) to the Borrower’s
executive officers and directors which is not approved by the Board of Directors
or a duly authorized committee thereof.

 

7.9. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of commercial trade debt incurred in the ordinary course of business)
except in respect of (i) Indebtedness to Lender; (ii) Permitted Subordinated
Debt; (iii) the Existing Loans, pending their full payment on the Closing Date;
(iv) Permitted Hedge Contracts; and (v) purchase money Indebtedness and
Capitalized Leases incurred for Capital Expenditures not prohibited to be made
under this Agreement; (vi) the intercompany loans permitted under clause (b) of
Section 7.6, (vii) the Putnam Plastics Seller Debt; and (vii) the Biomer
Post-Closing Payments and any additional Indebtedness listed in Schedule 7.9.

 

7.10. Nature of Business. Substantially change the nature of the business in
which it is engaged, on the Closing Date, or, except as otherwise specifically
permitted hereby purchase or invest, directly or indirectly, in any assets or
property other than in the ordinary course of business for assets or property
which are useful in, necessary for and are to be used in its business as
presently conducted.

 

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7.11. Transactions with Affiliates. Directly or indirectly, purchase, acquire or
lease any property from, or sell, transfer or lease any property to, or
otherwise deal with, any Affiliate (other than the Borrower or any Guarantor
itself), except (i) transactions which do not exceed the Materiality Threshold,
individually or collectively, (ii) other transactions, in excess of the
Materiality Threshold, individually or collectively, which occur in the ordinary
course of business, on an arm’s length basis on terms no less favorable than
terms which would have been obtainable from a Person other than an Affiliate,
(iii) transactions described in, and governed by, Sections 7.1, 7.5 or 7.7
hereof (as to which neither of clauses (i) or (ii) of this Section 7.11 shall be
applicable), and (iv) the Putnam Lease, and (v) the Foster Supply Agreement.

 

7.12. Subsidiaries. Either: (a) create or acquire any Subsidiary; (b) enter into
any partnership, joint venture or similar arrangement except those expressly
permitted under Section 7.5 above; or (c) dispose of any Equity Interests of any
Subsidiary except pursuant to a merger expressly permitted under Section 7.2.
Without limitation of the foregoing, if and to the extent any Subsidiary is
created or acquired hereafter with Lender’s prior written consent, then, as a
condition to such consent becoming effective, each such Subsidiary must be
joined as a Borrower hereunder, or must become a Guarantor hereof, on terms
satisfactory to Lender. If any of the Other Existing Subsidiaries that is
organized under the laws of any state in the United States at any time has any
assets which Lender in its sole discretion deems to be of material value, it
shall become a Borrower hereunder or a Guarantor hereof on terms satisfactory to
the Lender.

 

7.13. Fiscal Year and Accounting Changes. Change its Fiscal Year from that in
use on the Closing Date or make any significant change (i) in accounting
treatment and reporting practices except as required by GAAP or recommended in
writing by its independent public accountants or (ii) in tax reporting treatment
except as required by law.

 

7.14. Pledge of Credit. Pledge (or purport to pledge) Lender’s credit on any
purchases or for any purpose whatsoever or use any portion of any Advance in or
for any business other than such Borrower’s business as conducted on the Closing
Date.

 

7.15. Amendment of Documents. Amend, modify or waive any term or provision of
(a) its Organic Documents, unless (i) required by law to do so or (ii) such
amendment, modification or waiver does not cause any contravention of, or
conflict with, any material term or condition of this Agreement and would not
otherwise reasonably be expected to have a Material Adverse Effect, or (b) any
Subordinated Debt Document except to the extent expressly permitted under the
Subordination and Intercreditor Agreement, or (c) any Material Agreement if such
amendment, modification or waiver shall cause any contravention or, or conflict
with, any material term or condition of this Agreement.

 

7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.11, (ii) engage, or permit
any member of the Controlled Group to engage, in any non-exempt “prohibited
transaction”, as that term is defined in Section 406 of ERISA and Section 4975
of the Code that would reasonably be expected to result in a material liability
to any Borrower, (iii) incur, or permit any member of the Controlled Group to
incur, any

 

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“accumulated funding deficiency”, as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in any
material liability of any Borrower or any member of the Controlled Group or the
imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.11, (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Lender of the occurrence of
any Termination Event, (viii) fail to comply, or permit a member of the
Controlled Group to fail to comply, with the requirements of ERISA or the Code
or other applicable laws in respect of any Benefit Plan, to the extent such
failure would reasonably be expected to result in a material liability to any
Borrower, (ix) fail to meet, or permit any member of the Controlled Group to
fail to meet, all minimum funding requirements under ERISA or the Code or
postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan.

 

7.17. Prepayment of Indebtedness. At any time, directly or indirectly, either
(i) prepay any Indebtedness (other than to Lender or Bank), or (ii) prior to its
stated maturity, repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Borrower, except that any Borrower (or, if applicable, any
Subsidiary) may (i) prepay or redeem early purchase money debt or Capitalized
Leases permitted under Section 7.9 or intercompany loans permitted under clause
(b) of Section 7.6, in each case without the prior consent of the Lender so long
as (in the case of prepayments of purchase money debt or Capitalized Leases) (x)
the amount of such prepayment or redemption does not exceed the Materiality
Threshold, and (y), to the extent such prepayment or redemption exceeds the
Materiality Threshold, with the consent of the Lender (not to be unreasonably
withheld), or (ii) effect a prepayment consisting of a refinancing of Permitted
Subordinated Debt to the extent such refinancing is permitted pursuant to the
terms of the definition of Permitted Subordinated Debt.

 

7.18. Payment of Subordinated Debt. At any time, directly or indirectly pay the
principal of, interest on or any other charge or fee in respect of any Permitted
Subordinated Debt then outstanding except as expressly permitted by the
Subordination Agreement applicable thereto.

 

7.19. Deposit Accounts. Open any Deposit Account unless a Lockbox Account
Agreement, Blocked Account Agreement or Pledged Account Agreement, as
appropriate, is first executed in respect thereof.

 

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VIII.  FINANCIAL COVENANTS.

 

Borrowers shall, until payment in full of the Obligations and termination of
this Agreement, comply with the financial covenants set forth in Sections 8.1
through 8.4 below:

 

8.1. Controlling Definitions. As used in this Article VIII:

 

“Capital Expenditures” shall mean, for any period, all expenditures of a
Borrower or Borrowers on a consolidated basis for fixed or capital assets which,
in accordance with GAAP, constitute capital expenditures for such period.

 

“EBITDA” shall mean, for any fiscal period the sum of (i) net income (or loss)
of a Borrower or Borrowers on a consolidated basis (as applicable) for such
period (excluding extraordinary gains and losses but including, for the
avoidance of doubt, the net proceeds from business interruption insurance), plus
(ii) to the extent deducted in determining such net income (or loss) of a
Borrower or Borrowers, the following: (A) all interest expense of a Borrower or
Borrowers on a consolidated basis for such period; and (B) amounts expensed by
Borrower or Borrowers on a consolidated basis for such period for federal, state
and local income taxes (including without limitation, for the avoidance of
doubt, the use of deferred tax assets); (C) depreciation expenses for such
period; (D) amortization expenses for such period; and (E) any fees or expenses
incurred in connection with the consummation of this transaction, the
transactions contemplated by the Subordinated Debt Documents, or the acquisition
referred to in Section 9.1(z) to the extent same are not capitalized and do not
exceed the Materiality Threshold (for the avoidance of doubt, if same are
capitalized they shall be covered by clauses (C) or (D) above) and (F) any
non-cash charges or expenses as a result of the operation of SFAS 141 or 142 and
relating to the impairment of goodwill.

 

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any
applicable fiscal period of Borrowers, the ratio of (a) EBITDA for such period,
minus any Unfinanced Capital Expenditures made during such period, to (b) Fixed
Charges for such period.

 

“Fixed Charges” shall mean and include, with respect to any applicable fiscal
period of Borrowers, the sum (without duplication) of (i) all scheduled payments
(excluding mandatory prepayments) of principal made on Funded Indebtedness of
Borrowers and their Subsidiaries on a consolidated basis outstanding during such
period (excluding Revolving Advances), plus (ii) all cash payments of interest
of a Borrower or Borrowers on a consolidated basis (including Revolving
Advances) paid during such period, plus (iii) all capitalized lease payments of
Borrowers on a consolidated basis made during such period, plus (iv) all charges
against income of Borrowers on a consolidated basis for such period for federal,
state and local taxes actually paid in cash during such period.

 

“Funded Indebtedness” shall mean all Indebtedness (without duplication): (i) for
money borrowed, including the Advances (ii) for the deferred payment for a term
of one (1) year or more of the purchase price of any asset, and (iii) consisting
of capitalized lease obligations, minus cash and cash equivalents. For the
avoidance of doubt, Funded Indebtedness shall include Subordinated Debt.

 

“Leverage Ratio” – shall mean, as at any particular date, the ratio of (a)
Funded Indebtedness of Borrowers, determined on a consolidated basis in
accordance with GAAP, as of such date to (b) EBITDA for the twelve (12) Fiscal
Months then ended, provided, that for the first three Fiscal Quarters of 2005,
EBITDA shall be “annualized” (for example, in determining the Leverage Ratio as
of March 31, 2005, the EBITDA for the Fiscal Quarter ending on March 31, 2005
would be multiplied by four and in determining the Leverage Ratio as of June 30,
2005, the EBITDA for the two Fiscal Quarters ending on June 30, 2005 would be
multiplied by two).

 

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“Unfinanced Capital Expenditures” shall mean Capital Expenditures not financed
by the incurrence of purchase money Indebtedness or capitalized leases permitted
to be incurred pursuant to Section 7.9.

 

8.2. Fixed Charge Coverage Ratio. Borrowers shall maintain as of the end of each
Fiscal Quarter or Fiscal Month specified in the table below, a Fixed Charge
Coverage Ratio of not less than 1.25 to 1.00 for the period set forth opposite
such Fiscal Quarter or Fiscal Month in such table.

 

Fiscal Quarter of the Borrowers

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

  

Period

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

Quarter ended March 31, 2005   

Three (3) Fiscal Months ended

on such date

Quarter ended June 30, 2005   

Six (6) Fiscal Months ended

on such date

Quarter ended September 30, 2005   

Nine (9) Fiscal Months ended

on such date

Quarter ender December 31, 2005    Twelve (12) Fiscal Months ended on such date

Fiscal Month ended January 31, 2006

and each Fiscal Month ended thereafter

  

Twelve (12) Fiscal Months

ended on such date

 

8.3. Leverage Ratio. Borrowers shall not permit the Leverage Ratio, determined
at the end of each Fiscal Quarter or Fiscal Month specified in the table below,
to be greater than 2.25 to 1.0 for the period set forth opposite such Fiscal
Quarter or Fiscal Month in such table

 

Fiscal Quarter of the Borrowers

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

  

Period

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

Quarter ended March 31, 2005

  

Three (3) Fiscal Months ended

on such date

Quarter ended June 30, 2005

  

Six (6) Fiscal Months ended

on such date

Quarter ended September 30, 2005

  

Nine (9) Fiscal Months ended

on such date

Quarter ender December 31, 2005

  

Twelve (12) Fiscal Months

ended on such date

Fiscal Month ended January 31, 2006

and each Fiscal Month ended thereafter

  

Twelve (12) Fiscal Months

ended on such date

 

8.4. Minimum Cash and Excess Availability. Until such time as Term Loan B is
paid in full in cash, for the period commencing on the Closing Date until the
first anniversary thereof, (a) the Borrowers shall at all times maintain an
aggregate amount of cash on deposit at the Bank subject to a first priority,
perfected security interest granted to the Lender as collateral security

 

37

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for the Obligations pursuant to security documents in form and substance
satisfactory to the Lender (“Acceptable Cash”) of not be less than $1,500,000,
and (b) the Borrowers shall at all times maintain Excess Availability of not
less than (i) $3,500,000 minus (ii) the amount of Acceptable Cash. Until such
time as Term Loan B is paid in full in cash, for the period commencing on the
first anniversary of the Closing Date and at all times thereafter, the Borrowers
shall at all times maintain Acceptable Cash in an amount equal to 125% of the
from time to time outstanding principal of Term Loan B.

 

IX. CONDITIONS PRECEDENT.

 

9.1. Conditions to the Initial Advance. The agreement of Lender to make the
Initial Advance requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lender, immediately prior to or concurrently with the
making of such Advance, of the following conditions precedent (in addition to,
and cumulative with, any such conditions precedent set forth and described in
the Commitment Letter relative hereto):

 

(a) Notes. Lender shall have received the Notes duly executed and delivered by a
Designated Officer of each Borrower;

 

(b) Filings, Registrations, Recordings and Searches. (i) Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any Other Document, under applicable law or
otherwise as reasonably requested by the Lender to be filed, registered or
recorded in order to create, in favor of Lender, a perfected security interest
in or lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and Lender shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto; (ii) the Lender shall also have
received UCC, tax and judgment lien searches with respect to each Borrower in
such jurisdictions as Lender shall require, and the results of such searches
shall be satisfactory to Lender; and (iii) Lender shall have received from
Borrowing Representative, for each Borrower, a perfection certificate, the form
of which shall be supplied by Lender to Borrowing Representative prior to the
Closing Date;

 

(c) Secretary’s Certificates. Lender shall have received a certificate of the
Secretary (or Assistant Secretary) of each Borrower, dated the Closing Date, to
be in form and substance satisfactory to Lender, certifying as to (i) the
incumbency and signature of the officers (or other representatives) of each
Borrower executing this Agreement and any Other Documents, and (ii) the
authorizations by the board of directors (or other governing body) of such
Borrower to such officers or other representatives to enter into and carry out
such transactions as are contemplated pursuant to this Agreement and the Other
Documents; and including therewith copies of the Organic Documents of such
Borrower as in effect on the Signing Date;

 

(d) Good Standing Certificates. Lender shall have received good standing
certificates for each Borrower dated not more than thirty (30) days prior to the
Signing Date, issued by the secretary of state or other appropriate official of
each Borrower’s jurisdiction of

 

38

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organization and each jurisdiction where the conduct of each Borrower’s business
activities or the ownership of its properties necessitates qualification;

 

(e) Legal Opinion. Lender shall have received the executed legal opinion of
legal counsel to the Borrowers and the Guarantor, to be in form and substance
satisfactory to Lender, which shall cover such matters incident to the
transactions contemplated by this Agreement, the Notes and all Other Documents
such as Lender may reasonably require, and each Borrower hereby authorizes and
directs such counsel to deliver such opinions to Lender;

 

(f) No Litigation. Except as set forth in Schedule 5.8, (i) no litigation,
investigation or proceeding before or by any arbitrator or Governmental Body
shall be continuing or threatened against any Borrower or against the officers
or directors of any Borrower (A) in connection with the Other Documents or any
of the transactions contemplated thereby and which, in the reasonable opinion of
Lender, is deemed material or (B) which could, in the reasonable opinion of
Lender, have a Material Adverse Effect; and (ii) no injunction, writ,
restraining order or other order of any nature materially adverse to any
Borrower or the conduct of its business or inconsistent with the due
consummation of the Transactions shall have been issued by any Governmental
Body;

 

(g) Material Agreements. Lender shall have reviewed all Material Agreements and
been satisfied therewith, in its sole credit judgment;

 

(h) Collateral Examination. Lender shall have completed Collateral examinations
and received appraisals, the results of which shall be satisfactory in form and
substance to Lender, of the Receivables, Inventory, General Intangibles, Real
Property, Leasehold Interest, and Equipment of each Borrower and all books and
records in connection therewith;

 

(i) Fees. Lender shall have received all fees and expenses payable to Lender on
or prior to the Closing Date pursuant hereto or under any Other Document;

 

(j) Financial Statements. Lender shall have received copies of the Projections
and copies of the Historical Financial Statements, each of which shall be
satisfactory in all respects to Lender;

 

(k) Insurance. Lender shall have received in form and substance satisfactory to
Lender, certified copies of Borrowers’ casualty insurance policies, together
with loss payable endorsements naming Lender as loss payee, to be in form and
substance satisfactory to Lender, and certified copies of Borrowers’ liability
insurance policies, together with endorsements naming Lender as a co-insured;

 

(l) Lock-Box Accounts. Lender shall have received duly executed agreements
establishing the Lock-Box Accounts, the Concentration Account and any Blocked
Accounts to the extent required under Section 4.14 to be delivered on the
Closing Date;

 

(m) Consents. Lender shall have received any and all Consents necessary to
permit the effectuation of the transactions contemplated by this Agreement and
the Other Documents; and, Lender shall have received such Consents and waivers
of such third parties as

 

39

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might assert claims with respect to the Collateral, as Lender and its counsel
shall deem necessary;

 

(n) No Adverse Material Change. Since the end of Borrowers’ most recently
completed Fiscal Year for which audited financial statements have been reported
(or, if none, then since the date of the Lender’s Commitment Letter in respect
of the transactions contemplated herein, there shall not have occurred any
event, condition or state of facts which could reasonably be expected to have a
Material Adverse Effect and no representations made or information supplied to
Lender shall have been proven to be inaccurate or misleading in any material
respect;

 

(o) Landlord’s Agreements, Etc. Unless Lender otherwise has agreed to waive such
requirement in one or more instances (and impose reserves with the Borrowing
Base in regard thereto), Lender shall have received waivers or related
agreements satisfactory to Lender with respect to all premises leased by,
licensed to or otherwise used by Borrowers at which Inventory or Equipment is
located or in which Inventory is otherwise being processed, finished or stored,
such waivers or related agreements to be in form and substance satisfactory to
Lender;

 

(p) Subsidiary Pledge Agreement. Lender shall have received a pledge agreement
from each Borrower in respect of the Equity Interests of each Subsidiary owned
by it (limited, in the case of Foreign Subsidiaries, to sixty-five percent (65%)
of such Equity Interests), in form and substance satisfactory to Lender (the
“Subsidiary Pledge Agreement”);

 

(q) Intellectual Property. To the extent any Borrower owns any trademarks or
patents (or applications therefor) which are registered with the United States
Patent and Trademark Office, or any copyrights (or applications therefore) which
are registered with the United States Copyright Office, such Borrower shall have
executed in favor of Lender, as appropriate, a patent security agreement, a
trademark security agreement, and/or a copyright security agreement, in regard
thereto, to be in form and substance satisfactory to Lender;

 

(r) Closing Certificate. If the Signing Date precedes the Closing Date, Lender
shall have received a closing certificate signed by a Designated Officer of each
Borrower dated the Closing Date, in form and substance satisfactory to Lender,
stating that (i) all representations and warranties set forth in this Agreement
and the Other Documents are true and correct on and as of such date, (ii)
Borrowers are on such date in compliance with all the terms and provisions set
forth in this Agreement and the Other Documents and (iii) on such date, no
Default or Event of Default has occurred or is continuing;

 

(s) Subordinated Debt. Lender shall have received evidence satisfactory to it
that the Borrowers have obtained not less than $5,000,000 of new subordinated
debt from Brookside Pecks Capital Partners, L.P. and Ironbridge Mezzanine Fund,
L.P., such subordinated debt to be on terms satisfactory to Lender;

 

(t) Existing Loans. The Existing Lender shall have issued a pay-off letter in
respect of the Existing Loans, to be in form and substance satisfactory to
Lender, pursuant to

 

40

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which it shall have agreed to release all Existing Lender Liens upon receipt of
full payment of the Existing Loan on the Closing Date;

 

(v) Subordination Agreement. Lender shall have received a Subordination
Agreement from each Affiliate to which any Borrower is indebted on the Closing
Date or is expected to become indebted thereafter, to be in form and substance
satisfactory to Lender;

 

(w) Guaranty. Lender shall have received from the Guarantor a Guaranty, in form
and substance satisfactory to Lender;

 

(x) Security Agreement. Lender shall have received from the Guarantor, a
security agreement, in form and substance satisfactory to Lender;

 

(y) Subordination and Intercreditor Agreement. Lender shall have received a
Subordination and Intercreditor Agreement from Brookside Pecks Capital Partners,
L.P. and Ironridge Mezzanine Fund, L.P., in form and substance satisfactory to
Lender (as same may be amended, supplemented, or otherwise modified or replaced
from time to time in accordance with the terms thereof, the “Subordination and
Intercreditor Agreement”);

 

(z) Acquisition Documents. Lender shall have received copies of all documents to
be executed and delivered in connection with the acquisition of substantially
all of the assets of Putnam Plastics, Inc., such documents to be in form and
substance satisfactory to Lender and such acquisition shall have been
consummated in accordance with the terms thereof;

 

(aa) Solvency Certificates. Lender shall have received letters from the chief
financial officers of the Borrower and the Guarantor attesting to the solvency
of the Borrowers and the Guarantor, in each case individually and together with
all Subsidiaries, taken as a whole, immediately before and immediately after
giving effect to the financial arrangement contemplated hereunder and the
acquisition of Putnam Plastics, Inc.

 

(ab) All Other Matters. Lender shall have received all Other Documents which
Lender determines to be necessary to consummate the transactions contemplated to
occur on or after the Closing Date pursuant to this Agreement, and all corporate
and other proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated herein shall be satisfactory in
form and substance to Lender and its legal counsel.

 

9.2. Conditions to Each Advance. The agreement of Lender to make any Advance
requested to be made on any date (including, without limitation, the Initial
Advance), is subject to the satisfaction of the following conditions precedent
as of the date such Advance is made:

 

(a) Representations and Warranties. Each of the representations and warranties
made by any Borrower in or pursuant to this Agreement and any Other Document to
which it is a party, and each of the representations and warranties contained in
any certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or any related agreement shall be
true and correct in all material respects on and as of such date as if made on
and as of such date (except to the extent of changes resulting from transactions
contemplated or permitted by the terms hereof and changes occurring in the
ordinary

 

41

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course of business that singly or in the aggregate are not materially adverse,
and to the extent that such representations and warranties related expressly to
an earlier date);

 

(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date and, in the case of the initial Advance,
after giving effect to the consummation of the transactions contemplated hereby;
provided, however that Lender, in its sole and absolute discretion, may continue
to make Advances notwithstanding the existence of an Event of Default or Default
and that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default;

 

(c) Maximum Revolving Advances. In the case of any Revolving Advance or Letter
of Credit requested to be made, after giving effect thereto, the aggregate
amount of all Revolving Advances and Letters of Credit shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof; and

 

(d) Maximum Letters of Credit. In the case of any Letters of Credit requested to
be made, after giving effect thereto, the aggregate face amount and
reimbursement obligations outstanding in respect of Letters of Credit, when
aggregated with all then outstanding Revolving Advances, shall not exceed the
Maximum Revolving Advance Amount.

 

Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

 

X. INFORMATION AS TO BORROWERS.

 

Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

 

10.1. Disclosure of Material Matters. Immediately upon learning thereof, report
to Lender all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower’s reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.

 

10.2. Schedules. Deliver to Lender on or before the fifteenth (15th) day of each
Fiscal Month as and for the prior Fiscal Month (a) Receivables agings, (b)
accounts payable agings and (c) Inventory reports. In addition, each Borrower
will deliver to Lender at such intervals as Lender may require: (i) confirmatory
assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or
information regarding the Collateral as Lender, in its sole credit judgment, may
require including, without limitation, trial balances and test verifications.
Lender shall also have the right to confirm and verify all Receivables by any
manner and through any medium it considers commercially advisable and do
whatever it may deem commercially necessary to protect its interests hereunder.
The items to be provided under this Section shall be in form satisfactory to
Lender and executed by the Borrowing Representative and delivered to Lender from
time to time

 

42

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solely for Lender’s convenience in maintaining records of the Collateral, and
any failure to deliver any of such items to Lender shall not affect, terminate,
modify or otherwise limit Lender’s Lien with respect to the Collateral.

 

10.3. Environmental Compliance Certificate. Furnish Lender, at its request from
time to time, with a certificate signed by a Designated Officer of Borrowing
Representative stating, to the best of his knowledge, that each Borrower is in
compliance in all material respects with all federal, state and local laws
relating to environmental protection and control and occupational safety and
health. To the extent any Borrower is not in compliance with the foregoing laws,
the certificate shall set forth with specificity all areas of non-compliance and
the proposed action Borrower will implement in order to achieve full compliance.

 

10.4. Litigation. Promptly notify Lender in writing of any litigation, suit or
administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect on any
Borrower.

 

10.5. Material Occurrences. Promptly notify Lender in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Lender fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower in respect of any Indebtedness which, individually or
when aggregated, exceeds the Materiality Threshold which could reasonably be
expected to result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
(e) the termination (or receipt of notice of pending termination) of any
Material Agreement; and (f) any other development in the business or affairs of
any Borrower which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action that Borrowers
propose to take with respect thereto.

 

10.6. Government Receivables. Notify Lender immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them,
exceeding the Materiality Threshold.

 

10.7. Annual Financial Statements. Furnish Lender within ninety (90) days after
the end of each Fiscal Year of Borrowers, financial statements of Borrowers on a
consolidating and consolidated basis including, but not limited to, statements
of income and stockholders’ equity and cash flow from the beginning of the
current Fiscal Year to the end of such Fiscal Year and the balance sheet as at
the end of such Fiscal Year, all prepared in accordance with GAAP applied on a
basis consistent with prior practices, and in reasonable detail and reported
upon without qualification by an independent certified public accounting firm
selected by Borrowers and satisfactory to Lender (the “Accountants”). In
addition, the reports shall be accompanied by

 

43

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a certificate of a Designated Officer of the Borrowing Representative which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrowers with
respect to such event, and such certificate shall have appended thereto
calculations which set forth Borrowers’ compliance with the requirements or
restrictions imposed by the Financial Covenants.

 

10.8. Intentionally omitted.

 

10.9. Monthly Financial Statements. Furnish Lender within thirty (30) days after
the end of each Fiscal Month, an unaudited balance sheet of Borrowers on a
consolidated and consolidating basis and unaudited statements of income and
stockholders’ equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
Fiscal Year to the end of such month and for such month, prepared on a basis
consistent with prior practices but in accordance with GAAP and complete and
correct in all material respects, subject to normal year end adjustments
(together with comparative reports for the corresponding period(s) in the prior
Fiscal Year and for the projected reports for the current Fiscal Year required
under Section 10.13). The reports shall be accompanied by a certificate of a
Designated Officer of the Borrowing Representative, likewise substantially in
the form of Exhibit 10.9 (the “Compliance Certificate”), which shall state that,
based on an examination sufficient to permit him to make an informed statement,
no Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrowers with respect to such event
and, such certificate shall have appended thereto calculations which set forth
Borrowers’ compliance with the requirements or restrictions imposed by the
Financial Covenants.

 

10.10. Borrowing Base Certificate. Deliver to Lender a certificate of a
Designated Officer of Borrowing Representative in such form as may be required
or approved by Lender from time to time, (a “Borrowing Base Certificate”) in the
form of Exhibit 10.10 hereto which shall state Borrower’s Borrowing Base as of
the date thereof (including a calculation of such Borrowing Base). At such time
(i) that the aggregate principal amount of Revolving Advances and Letters of
Credit then outstanding exceeds $1,750,000, this Borrowing Base Certificate
shall be delivered weekly, by the third Business Day of each calendar week, as
of the last Business Day of the preceding calendar week, and (ii) that the
aggregated principal amount of Revolving Advances and Letters of Credit then
outstanding is less that $1,750,000, this Borrower Base Certificate shall be
delivered monthly, by the third Business Day of each calendar month, and, in the
case of the delivery of a weekly Borrowing Base Certificate, to be supplemented
by a reconciliation of the Borrowing Base Certificate delivered closest to (but
within) each Fiscal Month, to (a) the Inventory reports for such Fiscal Month
delivered pursuant to Section 10.2 and (b) the financial statements of Borrowers
for such Fiscal Month delivered pursuant to Section 10.9, with each such
reconciliation to be delivered coincident with the delivery of such financial
statements pursuant to said Section 10.9, and to be in form satisfactory to
Lender, which shall include a reconciliation and “roll forward” from the prior
month’s reporting thereof pursuant to Section 10.2.

 

44

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10.11. Other Reports. Furnish Lender as soon as available, but in any event
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as each Borrower shall send to the owners of its
Equity Interests generally

 

10.12. Additional Information. Furnish Lender with such additional information
as Lender shall reasonably request in order to enable Lender to determine
whether the terms, covenants, provisions and conditions of this Agreement and
the Notes have been complied with by Borrowers including, without limitation and
without the necessity of any request by Lender, (a) copies of all environmental
audits and reviews, (b) at least thirty (30) days prior thereto, notice of any
Borrower’s opening or establishing of any new Collateral Location or any
Borrower’s closing of any existing Collateral Location, and (c) promptly upon
any Borrower’s learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.

 

10.13. Projected Operating Budget. Furnish Lender, no later than thirty (30)
days prior to the beginning of each Borrower’s Fiscal Years, commencing with its
first Fiscal Year ending after the Closing Date, the following projections, on a
month-to-month basis for such Fiscal Year, for borrower and its Subsidiaries, on
a consolidated and consolidating basis, to-wit operating budget, balance sheet,
income statement, statement of cash flow, Financial Covenant compliance
(including projected amounts of all financial components used in determining
compliance) and borrowing availability, such projections to be accompanied by a
certificate signed by a Designated Officer of the Borrowing Representative to
the effect that such projections have been prepared on the basis of sound
financial planning practice consistent with past budgets and financial
statements and that such officer deems any material assumptions on which such
projections were prepared as reasonable.

 

10.14. Variances From Operating Budget. Furnish Lender, concurrently with the
delivery of the financial statements referred to in Section 10.9, summarizing
all material variances from budgets submitted by Borrowers pursuant to Section
10.13.

 

10.15. Notice of Suits, Adverse Events. Furnish Lender with prompt notice of (i)
any lapse or other termination of any Consent issued to any Borrower by any
Governmental Body or any other Person that is material to the operation of any
Borrower’s business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.

 

10.16. ERISA Notices and Requests. Furnish Lender with immediate written notice
in the event that (i) any Borrower or any member of the Controlled Group knows
or has reason to know that a Termination Event has occurred, together with a
written statement describing such Termination Event and the action, if any,
which such Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect

 

45

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thereto, (ii) any Borrower or any member of the Controlled Group knows or has
reason to know that a material non-exempt prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred together with a written
statement describing such transaction and the action which such Borrower or any
member of the Controlled Group has taken, is taking or proposes to take with
respect thereto, (iii) a funding waiver request has been filed with respect to
any Plan together with all communications received by any Borrower or any member
of the Controlled Group with respect to such request, (iv) any material increase
in the benefits of any existing Plan or the establishment of any new Plan or the
commencement of contributions to any Plan to which any Borrower or any member of
the Controlled Group was not previously contributing shall occur, (v) any
Borrower or any member of the Controlled Group shall receive from the PBGC a
notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) any Borrower
or any member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) any Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) any Borrower or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment; (ix) any Borrower or any member of the Controlled
Group knows that (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.

 

10.17. Intellectual Property. Notify Lender promptly if, subsequent to the
Closing Date, any Borrower applies for, or acquires, any patent, trademark or
copyright registered under the federal law, and execute and deliver to Lender,
upon request, such documents and agreements in respect of patents, trademarks,
and/or copyrights, respectively) as Lender may request to evidence, confirm or
perfect Lender’s Lien on and security interest in such Collateral.

 

10.18. Public Reports. Furnish Lender, promptly after the same become publicly
available, with copies of all periodic and other reports, proxy statements and
other materials filed by any Borrower with the Securities and Exchange
Commission, or any Governmental Body succeeding to any or all of the functions
of said Commission, or with any national securities exchange, or distributed to
the owners of Borrowers’ Equity Interests generally or to the holders of its
Indebtedness pursuant to the terms of the documentation governing such
Indebtedness (or any trustee, agent or other representative therefor), as the
case may be.

 

10.19. Additional Documents. Execute and deliver to Lender, upon request, such
documents and agreements as Lender may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.

 

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XI. EVENTS OF DEFAULT.

 

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

 

11.1. Obligations. Failure by any Borrower to pay any Obligations when due,
whether at maturity or by reason of acceleration pursuant to the terms of this
Agreement or by notice of intention to prepay, or by required prepayment or
failure to pay any other liabilities or make any other payment, fee or charge
provided for herein when due or in any Other Document;

 

11.2. Misrepresentations. Any representation or warranty of any material fact,
circumstance or condition made or deemed made by any Borrower in this Agreement
or any related agreement or in any certificate, document or financial or other
statement furnished at any time in connection herewith or therewith shall prove
to have been misleading in any material respect on the date when made or deemed
to have been made;

 

11.3. Financial Information. Failure by any Borrower to (i) furnish financial
information when due or when requested pursuant hereto which is unremedied for a
period of three (3) Business Days, or (ii) permit the inspection of its books or
records by Lender when requested pursuant hereto;

 

11.4. Liens. Issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower’s property (except for
Permitted Encumbrances) which is not stayed or lifted within thirty (30) days
(but not later than its being executed, however);

 

11.5. Covenants. Either (i) except as otherwise provided in Section 11.3(i)
above or clauses (ii) or (iii) below of this Section 11.5, failure or neglect of
any Borrower to perform, keep or observe any term, provision, condition,
covenant herein contained, or contained in any Other Document, now or hereafter
entered into between any Borrower and Lender (without any cure or grace period);
(ii) a failure or neglect of Borrowers to perform, keep or observe any term,
provision, condition or covenant, contained in Sections 4.2, 4.6, 4.7, 4.9,
4.11, 4.12, 4.13, 4.16, 4.20, 6.2, 6.3, 6.4, 10.4 or 10.6 hereof which is not
cured within twenty (20) days from the earlier of (A) knowledge thereof by the
Borrowers and (B) notice thereof from the Lender; or (iii) a failure or neglect
of Borrowers to perform, keep or observe any term, provision, condition or
covenant, contained in Section 4.19 hereof which is not cured within five (5)
days from the earlier of (A) knowledge thereof by the Borrowers and (b) notice
to the Borrowers from the Lender;

 

11.6. Judgments. Any judgment or judgments are rendered or judgment liens filed
against any Borrower, excluding the portion thereof (if any) covered by
insurance issued by a financially responsible insurance company that has not
denied coverage, for an aggregate amount in excess of the Materiality Threshold
which within thirty (30) days of such rendering or filing (but not later than
its being executed, however) is not either satisfied, stayed or discharged of
record;

 

11.7. Voluntary Bankruptcy. Any Borrower, any Subsidiary of any Borrower or any
Guarantor shall (i) apply for, consent to or suffer the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of creditors, (iii) commence a voluntary case
under any state or federal bankruptcy laws (as now or hereafter in effect), (iv)
be adjudicated a bankrupt or insolvent, (v) apply for, consent to or suffer the
appointment of, or the

 

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taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (vi) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (vii) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
or (viii) take any action for the purpose of effecting any of the foregoing;

 

11.8. Insolvency. Any Borrower shall admit in writing its inability, or be
generally unable, to pay its Indebtedness as it becomes due or shall cease
operations of its present business;

 

11.9. Involuntary Bankruptcy. Any Borrower, any Subsidiary of a Borrower or any
Guarantor shall acquiesce in, or fail to have dismissed, within thirty (30)
days, any petition filed against it in any involuntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), or take any action for
the purpose of effecting any of the foregoing;

 

11.10. Material Adverse Changes. Any change in any Borrower’s condition or
affairs (financial or otherwise) which in Lender’s opinion has a Material
Adverse Effect unless such Borrower remedies to Lender’s satisfaction within
thirty (30) days after the Borrowing Representative receives written notice
thereof from Lender;

 

11.11. Lender’s Liens. Any Lien on any asset having a value of more than
$25,000.00 or assets, whose value in the aggregate exceeds the Materiality
Threshold created hereunder or provided for hereby or under any Other Document
for any reason ceases to be or is not a valid and perfected Lien having a first
priority interest (except purchase money liens or capitalized leases expressly
permitted hereunder);

 

11.12. Subordinated Debt. An Event of Default shall occur under or in respect of
any Subordinated Debt which causes the acceleration of, or entitles the holder
thereof to cause the acceleration of, any Subordinated Debt, or any payment is
made or received in respect of any Subordinated Debt in violation of the
Subordination Agreement made with respect thereto or in violation of the
Subordination and Intercreditor Agreement.

 

11.13. Cross Default. A default (after the passage of any applicable grace
period) of the obligations of any Borrower under any agreement or instrument
evidencing, securing or otherwise with respect to any Indebtedness (other than
the Indebtedness under this Agreement) shall occur which involves a monetary
obligation in excess of the Materiality Threshold, whether individually or in
the aggregate, or the occurrence of any other event under any such agreement or
instrument which permits the holder of such Indebtedness to accelerate the
payment thereof prior to maturity;

 

11.14. Guaranty. Termination (other than by reason of a merger of such Guarantor
expressly permitted hereunder) or breach of any Guaranty (or any provisions
therein) or similar agreement executed and delivered to Lender in connection
with the Obligations of any Borrower, or if any Guarantor attempts to terminate,
challenges the validity of, or its liability under, any such Guaranty or similar
agreement;

 

11.15. Change of Ownership. Any Change of Control shall occur;

 

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11.16. [Intentionally Omitted];

 

11.17. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on any Borrower,
or any Borrower shall so claim in writing to Lender;

 

11.18. Takings. Any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or trade name of any
Borrower, the continuation of which is material to the continuation of any
Borrower’s business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, trade name or patent
and such proceedings shall not be dismissed or discharged within sixty (60)
days, or (C) schedule or conduct a hearing on the renewal of any license,
permit, trademark, trade name or patent necessary for the continuation of any
Borrower’s business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, trade name or patent;

 

11.19. Seizures. Any material portion of the Collateral shall be seized or taken
by a Governmental Body, or any Borrower or the title and rights of any Borrower
shall have become the subject matter of litigation which could reasonably be
expected, in the opinion of Lender, upon final determination, to result in
impairment or loss of any security provided by this Agreement or the Other
Documents;

 

11.20. Cessation of Operations. The operations of any Borrower are interrupted
at any time for more than five (5) Business Days during any period of thirty
(30) consecutive days, unless such Borrower shall (i) be entitled to receive for
such period of interruption, proceeds of business interruption insurance
sufficient to assure that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive three month period
immediately preceding the initial date of interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty
(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if such Borrower
shall be receiving the proceeds of business interruption insurance for a period
of thirty (30) consecutive days; or

 

11.21. Plans. An event or condition specified in Sections 7.16 or 10.16 hereof
shall occur or exist with respect to any Plan or Benefit Plan (as applicable)
and, as a result of such event or condition, together with all other such events
or conditions, any Borrower or any member of the Controlled Group shall incur,
or in the opinion of Lender be reasonably likely to incur, a liability to a Plan
or the PBGC (or both) which would reasonably be expected to have a Material
Adverse Effect on any Borrower.

 

11.22. Criminal Charges. Any Borrower, or the President, Chief Executive Officer
or Chief Financial Officer of the Borrower shall become the subject of a
criminal indictment or investigation in respect of or pertaining to, the
operation or conduct of a Borrower’s business, its reporting of any financial
data, its application for, or receipt of, any credit, its “laundering” of any
funds or its non-payment (or underpayment) of any taxes or any other Charges, or
shall

 

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admit its guilt or complicity in respect of any of the foregoing, or shall pay
any fine or suffer any penalty in respect thereof (including as part of any plea
bargain or arrangement).

 

XII. LENDER’S RIGHTS AND REMEDIES AFTER DEFAULT.

 

12.1. Rights and Remedies. Upon and after the occurrence of an Event of Default
pursuant to Sections 11.7, 11.8, 11.9 or 11.20, all Obligations shall be
immediately due and payable and this Agreement and all Commitments of Lender
shall be deemed terminated. Upon the occurrence of any other Event of Default
not specified in the preceding sentence, and at any time thereafter during the
continuation of such Event of Default, at Lender’s option, all Obligations shall
be immediately due and payable and Lender shall have the right to terminate this
Agreement and to terminate the Commitments of Lender to make Advances. Upon and
after the occurrence of any Event of Default, and during its continuation,
Lender shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. At such time, Lender may enter any
Borrower’s premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Lender may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Lender may deem advisable and
Lender may require Borrowers to make the Collateral available to Lender at a
convenient place. With or without having the Collateral at the time or place of
sale, Lender may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Lender may
elect. Except as to that part of the Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market, Lender shall give Borrowers reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrowers at
least five (5) Business Days prior to such sale or sales is reasonable
notification. At any such public sale Lender may bid for and become the
purchaser, and Lender, or any other purchaser at any such sale thereafter shall
hold the Collateral sold absolutely free from any claim or right of whatsoever
kind, including any equity of redemption and such right and equity are hereby
expressly waived and released by each Borrower. In connection with the exercise
of the foregoing remedies, Lender is granted permission to use all of each
Borrower’s trademarks, trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used in connection
with (a) Inventory for the purpose of disposing of such Inventory and (b)
Equipment for the purpose of completing the manufacture of unfinished goods.

 

12.2. Application of Proceeds. The proceeds realized by Lender from the sale or
other disposition by Lender of any Collateral subsequent to an Event of Default
occurring and during its continuation, shall be applied as follows: first, to
the reasonable costs, expenses and attorneys’ fees and expenses incurred by
Lender for collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the Collateral; secondly, to interest due upon any
of the Obligations; thirdly, to fees payable in connection with this Agreement;
fourthly, to furnish to Lender cash Collateral in an amount not less than one
hundred ten percent (110%) of

 

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the aggregate undrawn amount of all Letters of Credit, such cash collateral
arrangements to be in form and substance satisfactory to Lender; and, lastly, to
the principal of the Obligations; provided, however, that Lender reserves the
right to adjust the foregoing allocations as it sees fit from time to time, in
its sole discretion, and apply (or re-apply, as the case may be) such proceeds
to the Obligations in a different manner or order. If any deficiency shall
arise, Borrowers shall remain liable to Lender therefor. If any surplusage
exists, such surplusage shall be held as cash Collateral pending full payment
and satisfaction of all Obligations and termination of this Agreement, after
which any remainder shall be returned to the Borrowing Representative unless
Lender is then otherwise required to remit such remainder under applicable law.

 

12.3. Lender’s Discretion. Upon the occurrence and during the continuance of an
Event of Default, Lender shall have the right in its sole discretion to
determine which rights, Liens, security interests or remedies Lender may at any
time pursue, relinquish, subordinate, or modify or to take any other action with
respect thereto and such determination will not in any way modify or affect any
of Lender’s rights hereunder.

 

12.4. Setoff. In addition to any other rights which any Lender Party may have
under applicable law, upon the occurrence and during the continuance of an Event
of Default hereunder, each Lender Party shall have a right to apply any
Borrower’s property held by it to reduce the Obligations.

 

12.5. Rights and Remedies not Exclusive. The enumeration of the foregoing rights
and remedies is not intended to be exhaustive and the exercise of any right or
remedy shall not preclude the exercise of any other right or remedies provided
for herein or in any Other Document or otherwise provided by law, all of which
shall be cumulative and not alternative.

 

XIII. WAIVERS AND JUDICIAL PROCEEDINGS.

 

13.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment of any
of the Receivables, demand, presentment, protest and notice thereof with respect
to any and all instruments, notice of acceptance hereof, notice of loans or
advances made, credit extended, Collateral received or delivered, or any other
action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.

 

13.2. Delay. No delay or omission on Lender’s part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy or
option or of any default.

 

13.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY RELATED
TRANSACTIONS, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR

 

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CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

XIV. EFFECTIVE DATE AND TERMINATION.

 

14.1. Term; Early Termination Fee. This Agreement, which shall inure to the
benefit of and shall be binding upon, the respective successors and permitted
assigns of each Borrower and Lender, shall become effective on the Signing Date
and shall continue in full force and effect until that date which is the fifth
(5th) anniversary of the Signing Date (the “Term”) unless sooner terminated as
herein provided. Borrowers may terminate this Agreement at any time upon five
(5) Business Days’ prior written notice (which notice shall be revocable) upon
payment in full of the Obligations. In the event the Obligations are prepaid in
full prior to the last day of the Term in connection with any such early
termination and all commitments to lend hereunder are terminated (the date of
such prepayment and termination hereinafter referred to as the “Early
Termination Date”), Borrowers shall pay to Lender an early termination fee (the
“Early Termination Fee”), for the loss of its bargain (and not as a penalty) in
an amount equal to the product of (i) the aggregate amount of the Commitments
made to Borrowers on the Closing Date (or any higher amount to which such
Commitments may be increased hereafter by written agreement of Lender) less the
aggregate amount of scheduled payments (actually made) prior to such Early
Termination Date of the Term Loans and the Capital Expenditure Loan and
prepayments actually made under Section 2.10(b), times, (ii) either (A) two and
one-half of one percent (2.5%), if the Early Termination Date occurs on or after
the Closing Date to and including the date immediately preceding the first
anniversary of the Closing Date, (B) one percent (1%), if the Early Termination
Date occurs on or after the first anniversary of the Closing Date but on or
before the second anniversary of the Closing Date, and (C) one half of one
percent (.50%), if the Early Termination Date occurs on or after the second
anniversary of the Closing Date but on or before the third anniversary of the
Closing Date; provided, however, that no such Early Termination Fee shall be
owed if such prepayment and termination is the result of a refinancing with the
Lender or any of its Affiliates or a casualty event with respect to the Borrower
or any of its Subsidiaries.

 

14.2. Termination. The termination of the Agreement shall not affect any
Borrower’s, Lender’s or any other Lender Party’s rights, or any of the
Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Lender, for the benefit of the Lender Parties,
hereunder and the financing statements filed hereunder shall continue in full
force and effect, notwithstanding the termination of this Agreement or the fact
that Borrowers’ Account may from time to time be temporarily in a zero or credit
position, until all of the Obligations (other than contingent indemnity type
obligations) of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Lender, for the
benefit of the Lender Parties, with an indemnification satisfactory to such
parties with respect thereto and an unconditional release from any liabilities
hereunder. Accordingly, each Borrower waives any rights which it may have

 

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under the applicable provisions of the Uniform Commercial Code to demand the
filing of termination statements with respect to the Collateral, and Lender
shall not be required to send such termination statements to each Borrower, or
to file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations (other than
contingent indemnity type obligations) paid in full in immediately available
funds. All representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof until all Obligations are paid
or performed in full.

 

XV. MULTIPLE BORROWERS.

 

15.1. Borrowing Agency Provisions. If and to the extent that at any time or from
time to time there are multiple Borrowers, then:

 

(a) Each Borrower acknowledges that it, together with each other Borrower, make
up a related organization of various entities constituting a single economic and
business enterprise and sharing a substantial identity of interests such that,
without limitation, Borrowers render services to or for the benefit of each
other, purchase or sell and supply goods to or from or for the benefit of each
other, make loans, advances and provide other financial accommodations to or for
the benefit of each other (including the payment of creditors and guarantees of
Indebtedness), provide administrative, marketing, payroll and management
services to or for the benefit of each other; have centralized accounting,
common officers and directors; and are in certain circumstances are identified
to creditors as a single economic and business enterprise. Accordingly, and
without limitation, any credit or other financial accommodation extended to any
one Borrower pursuant hereto will result in direct and substantial economic
benefit to each other Borrower, and each Borrower will likewise benefit from the
economies of scale associated with the Borrowers, as a group, applying for
credit or other financial accommodations pursuant hereto on a collective basis.

 

(b) Each Borrower hereby irrevocably designates Borrowing Representative to be
its attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, collectively, and hereby authorizes Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing
Representative.

 

(c) The handling of this credit facility as a co-borrowing facility with a
Borrowing Representative in the manner set forth in this Agreement is solely as
an accommodation to Borrowers and at their request. None of the Lender Parties
shall incur any liability to Borrowers as a result thereof. To induce the Lender
Parties to do so and in consideration thereof, each Borrower hereby indemnifies
the Lender Parties and holds the Lender Parties harmless from and against any
and all liabilities, expenses, losses, damages and claims of damage or injury
asserted against the Lender Parties by any Person arising from or incurred by
reason of the handling of the financing arrangements of Borrowers as provided
herein, reliance by any of the Lender Parties on any request or instruction from
Borrowing Representative or any other action taken by any of the Lender Parties
with respect to this Section except due to willful misconduct or gross (not
mere) negligence by the indemnified party.

 

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(d) All Obligations shall be joint and several, and each Borrower shall make
payment upon the maturity of the Obligations, whether by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted by
Lender to any Borrower, failure of Lender to give any Borrower notice of
borrowing or any other notice, any failure of Lender to pursue or preserve its
rights against any Borrower, the release by Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to
pay upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by Lender to the other Borrowers or any Collateral for such
Borrower’s Obligations or the lack thereof.

 

15.2. Waiver of Subrogation. Each Borrower expressly waives any and all rights
of subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Borrower may now or hereafter have against the other Borrowers
or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrowers’ property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until termination of this
Agreement and repayment in full of the Obligations.

 

XVI. MISCELLANEOUS.

 

16.1. GOVERNING LAW. PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATION LAW, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLIED TO CONTRACTS TO BE PERFORMED
WHOLLY WITHIN THE STATE OF NEW YORK. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST ANY BORROWER WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS AGREEMENT OR
ANY OTHER DOCUMENT OR RELATED TRANSACTION MAY BE BROUGHT IN ANY COURT OF
COMPETENT JURISDICTION IN THE CITY AND STATE OF NEW YORK, UNITED STATES OF
AMERICA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT
OR ANY OTHER DOCUMENT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWING REPRESENTATIVE
AT ITS ADDRESS SET FORTH IN SECTION 16.6 AND SERVICE SO MADE SHALL BE DEEMED
COMPLETED FIVE (5) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN
THE MAILS OF THE UNITED STATES OF AMERICA, OR, AT THE LENDER’S OPTION, BY
SERVICE UPON CSC THE UNITED STATES CORPORATION COMPANY (OR ANY SUCCESSOR
REPLACEMENT PERSON, AS SELECTED BY LENDER) WHICH EACH BORROWER IRREVOCABLY
APPOINTS AS SUCH BORROWER’S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE WITHIN
THE STATE OF NEW YORK. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING
PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF

 

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ANY OTHER JURISDICTION. EACH BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND
VENUE OF ANY ACTION INSTITUTED HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED
ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS. ANY
JUDICIAL PROCEEDING BY ANY BORROWER AGAINST LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT OR ANY OTHER DOCUMENT, SHALL BE BROUGHT ONLY IN A
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK, STATE OF NEW YORK.

 

16.2. Entire Understanding. This Agreement and the Other Documents executed
concurrently herewith contain the entire understanding between each Borrower and
Lender and supersedes all prior agreements and understandings, if any, relating
to the subject matter hereof. Any promises, representations, warranties or
guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, signed by the respective officers of the party making
such promises, representations, warranties, or guarantees. Neither this
Agreement nor any Other Document nor any portion or provisions hereof or thereof
may be changed, modified, amended, waived, supplemented, discharged, cancelled
or terminated orally or by any course of dealing, or in any manner other than by
an agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and the Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement or any Other Document.

 

16.3. Successors and Assigns; Participations; New Lender.

 

(a) This Agreement shall be binding upon and inure to the benefit of Borrowers
and Lender and all future holders of the Obligations and their respective
successors and assigns, except that no Borrower may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Lender. The Lender shall not sell or otherwise transfer participations in or
assign or transfer its interests or commitments in this Agreement or the Other
Documents except in accordance with the terms and provisions of this Section
16.3.

 

(b) Each Borrower acknowledges that in the regular course of commercial banking
business Lender may at any time and from time to time sell participating
interests in the Advances to one or more Participants that are not Competitors.
Each Participant may exercise all rights of payment (including without
limitation rights of set-off) with respect to the portion of such Advances held
by it or other Obligations payable hereunder as fully as if such Participant
were the direct holder thereof provided that Borrowers shall not be required to
pay to any Participant more than the amount which it would have been required to
pay to Lender which granted an interest in its Advances or other Obligations
payable hereunder to such Participant had Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrowers be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Participant. Each Borrower hereby grants to any

 

55

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Participant a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Participant as security for the
Participant’s interest in the Advances.

 

(c) Lender may sell, assign or transfer its rights and/or commitments under this
Agreement and the Other Documents to one or more additional banks or financial
institutions and one or more additional banks or financial institutions may
commit to make Advances hereunder (each a “Purchasing Lender”). Borrowers shall
execute and deliver such further documents and do such further acts and things
as Lender or Purchasing Lender may reasonably request in order to effectuate the
foregoing. Lender agrees that it will not sell, assign or otherwise transfer any
of its rights and/or commitments hereunder to any Competitor.

 

(d) Nothing contained herein, however, shall limit in any way the right of
Lender to assign all or a portion of the Advances owing to it from time to time
to any Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
any Operating Circular issued by such Federal Reserve Bank, but no such
assignment shall release the assigning Lender from its obligations hereunder.

 

(e) Borrowers authorize Lender to disclose to any Transferee or Purchasing
Lender and any prospective Transferee or Purchasing Lender any and all financial
information in such Lender’s possession concerning Borrowers which has been
delivered to Lender by or on behalf of Borrowers pursuant to this Agreement or
any other Document or in connection with Lender’s credit evaluation of
Borrowers.

 

16.4. Application of Payments. Lender shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Borrower
makes a payment or Lender receives any payment or proceeds of the Collateral for
any Borrower’s benefit, which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.

 

16.5. Indemnity. Each Borrower shall indemnify each Lender Party, and each of
its respective officers, directors, Affiliates, employees from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against Lender, Bank, such
Issuer in any litigation, proceeding or investigation instituted or conducted by
any governmental agency or instrumentality or any other Person with respect to
any aspect of, or any transaction contemplated by, or referred to in, or any
matter related to, this Agreement or the Other Documents, whether or not such
Lender Party is a party thereto, except to the extent that any of the foregoing
arises out of the willful misconduct or gross negligence of the party being
indemnified.

 

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16.6. Notice. Any notice or request hereunder may be given to any Borrower or to
Lender at their respective addresses set forth below or at such other address as
may hereafter be specified in a notice designated as a notice of change of
address under this Section. Any notice or request hereunder shall be given by
(a) hand delivery, (b) overnight courier, (c) registered or certified mail,
return receipt requested, (d) telex or telegram, subsequently confirmed by
registered or certified mail, or (e) telecopy to the number set out below (or
such other number as may hereafter be specified in a notice designated as a
notice of change of address) with electronic confirmation of its receipt. Any
notice or other communication required or permitted pursuant to this Agreement
shall be deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, (b) on the earlier of actual receipt thereof or five
(5) Business Days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:

 

(A)

   If to Lender at:    Webster Business Credit Corporation           One State
Street           New York, New York 10004           Attention: Account Executive
– Memry           Telecopier:   (212) 806-4530      with a copy to:    Bingham
McCutchen LLP           One State Street           Hartford, Connecticut 06103  
        Attention:     Bruce C. Silvers, Esq.           Telecopier:   (860)
240-2800

(B)

  

If to Borrowing Representative

or any Borrower, at:

   Memry Corporation           3 Berkshire Boulevard           Bethel,
Connecticut 06801           Attention:     Mr. James G. Binch          
Telecopier:   (203) 798-6207      with a copy to:    Finn Dixon & Herling LLP  
        One Landmark Square           Suite 1400           Stamford, Connecticut
06901           Attention:     David Albin, Esq.           Telecopier:   (203)
325-5031

 

16.7. Survival. The obligations of Borrowers under Sections 2.2(e), 2.2(f),
4.18(h), 16.5 and 16.9 shall survive any termination of this Agreement and the
Other Documents and payment in full of the Obligations.

 

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16.8. Severability. If any part of this Agreement is contrary to, prohibited by,
or deemed invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

 

16.9. Expenses. All costs and expenses including, without limitation, reasonable
attorneys’ fees and disbursements incurred by Lender (a) in all efforts made to
enforce payment of any Obligation or effect collection of any Collateral, or (b)
in connection with the entering into, modification, amendment, administration
and enforcement of this Agreement and the Other Documents or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Lender’s
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Lender’s transactions with any
Borrower, or (e) in connection with any advice given to Lender with respect to
its rights and obligations under this Agreement and all related agreements, may
be charged to Borrowers’ Account and shall be part of the Obligations.

 

16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lender and, therefore, Lender, if Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

 

16.11. Consequential Damages. No Lender Party, nor any agent or attorney for any
of them, shall be liable to any Borrower for consequential damages arising from
any breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations or any related transaction.

 

16.12. Captions. The captions at various places in this Agreement and any Other
Document are intended for convenience only and do not constitute and shall not
be interpreted as part of this Agreement or any Other Document.

 

16.13. Counterparts; Telecopied Signatures; Seal. This Agreement and the Other
Documents may be executed in any number of separate counterparts and by
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute one and the same agreement. Any signature delivered by a party by
facsimile transmission shall be deemed to be an original signature hereto. If
this Agreement or any Other Document provides for imposition of a seal by any
party thereto, the word “seal” placed adjacent to the party’s name shall be a
sufficient indication thereof.

 

16.14. Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and each Other Document and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement and
each Other Document or any amendments, schedules or exhibits thereto.

 

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16.15. Confidentiality. Lender and each Transferee shall hold all non-public
information obtained by Lender, or any Lender Party pursuant to the requirements
of this Agreement and each Other Document in accordance with each Lender Party’s
customary procedures for handling confidential information of this nature;
provided, however, each Lender Party may disclose such confidential information
(a) to its examiners, affiliates, outside auditors, counsel and other
professional advisors, (b) to any other prospective Transferees or Purchasing
Lender, and (c) as required or requested by any Governmental Body or
representative thereof or pursuant to legal process; provided, further that (i)
unless specifically prohibited by applicable law or court order, each Lender
Party shall use its best efforts prior to disclosure thereof, to notify the
Borrowing Representative of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Lender Party by such Governmental Body) or (B) pursuant to
legal process and (ii) in no event shall any Lender Party, be obligated to
return any materials furnished by any Borrower other than those documents and
instruments in possession of Lender in order to perfect its Lien on the
Collateral once the Obligations have been paid in full and this Agreement has
been terminated.

 

16.16. Publicity. Each Borrower hereby authorizes each Lender Party to make
appropriate announcements of the financial arrangement contemplated hereunder,
including, without limitation, announcements which are commonly known as
“tombstones”, in such publications and to such selected parties as each Lender
Party shall in its sole and absolute discretion deem appropriate. Without
limiting the foregoing Borrowers authorize each Lender Party to utilize any logo
or other distinctive symbol associated with the Borrowers in connection with any
such announcement or any other promotion, advertising or marketing undertaken by
each Lender Party. In no event, however, shall any Borrower use the name of each
Lender Party, or any logo or distinctive symbol associated with any of them,
unless, as appropriate, such Lender Party has given its prior written consent
thereto. References herein or in any Other Document to any actions being taken
(or omitted to be taken) by any Lender Party after a Default shall be presumed
to mean, unless otherwise expressly provided, while such Default or Event of
Default is continuing.

 

16.17. Survival of Representations and Warranties. All representations and
warranties of each Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower’s execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.

 

16.18. Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Lender is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.

 

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16.19. Destruction of Invoices. Borrowing Representative hereby authorizes and
directs Lender in accordance with its standard document retention policies in
such regards to destroy all invoices, agings, inventory reports, financial
statements and other data provided from time to time by Borrowers to Lender
pursuant hereto.

 

16.20. Time. Time is of the essence in this Agreement and each Other Document.
Unless otherwise expressly provided, all references herein and in any Other
Documents to time shall mean and refer to New York time.

 

16.21. Patriot Act. Federal law presently requires Lender to obtain, verify and
record information that identifies each Person that opens an account or applies
for a loan or lease. Borrowers agree to cooperate with Lender in maintaining
compliance with such law on an ongoing basis.

 

[Signature pages follow]

 

60

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Each of the parties has signed this Agreement as of the day and year first above
written.

 

“BORROWER”

MEMRY CORPORATION

By:  

/s/ Robert P. Belcher

   

Name:

 

Robert P. Belcher

   

Title:

 

Senior Vice President and Chief

       

Financial Officer

STATE OF CONNECTICUT

                                         ) ss: HARTFORD

 

COUNTY OF HARTFORD

 

November 9, 2004, before me personally came Robert P. Belcher, to me known, who,
being by me duly sworn, did depose and say that he is the Senior Vice President
and Chief Financial Officer of Memry Corporation, the corporation described in
and which executed the foregoing instrument as a “Borrower”; and that he signed
his name thereto by order of the board of directors of said corporation.

 

/s/ Susan B. Moran

NOTARY PUBLIC

 

61

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“LENDER”

WEBSTER BUSINESS CREDIT

CORPORATION

By:

 

/s/ Matthew Murphy

   

Name:

 

Matthew Murphy

   

Title:

 

Vice President

 

62

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ANNEX ONE — GENERAL DEFINITIONS

 

This Annex One is incorporated by reference into, and constitutes an integral
part of, the Credit and Security Agreement, dated as of November 9, 2004, made
between Memry Corporation, a Delaware corporation, as “Borrower,” and WEBSTER
BUSINESS CREDIT CORPORATION, as “Lender” (as it may be amended or modified from
time to time, the “Credit Agreement”). The following terms shall have the
following meanings as and when used in the Credit Agreement and the Other
Documents. References in such defined terms to “this Agreement,” “hereof,”
“hereto” or the like, shall mean and refer to the Credit Agreement.

 

“Accountants” shall have the meaning set forth in Section 10.7 hereof.

 

“Advances” shall mean and include any loans, advances or other financial
accommodations made under, pursuant to or in connection with this Agreement or
any Other Document, but including, particularly, the Revolving Advances, any
Letters of Credit, the Term Loans and the Capital Expenditure Loan.

 

“Affiliate” of any Person shall mean (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person, or (b) any Person who is a director or officer
(i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. As used hereinabove, “control” of a Person shall
mean the power, direct or indirect, (x) to vote ten percent (10%) or more of the
Equity Interests having ordinary voting power for the election of the directors,
partners or managers of such Person, or (y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.

 

“Agreement” shall have the meaning set forth in the preamble to this Agreement.

 

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
higher of (i) the Base Rate in effect on such day and (ii) the Federal Funds
Rate in effect on such day plus one-half of one percent (1/2%).

 

“Alternative Tax Distributions” shall have the meaning given to such term in
Section 7.7.

 

“Annex One” shall mean this Annex One.

 

“Annex Two” shall mean Annex Two attached to this Agreement.

 

“Applicable Advance Rate” - see “Borrowing Base” definition.

 

“Application Date” shall have the meaning given to such term in Section 4.14(g).

 

“Automated Letter of Credit Agreement” shall have the meaning given to such term
in Annex Two.

 

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“Availability Reserves”—see “Borrowing Base” definition.

 

“Bank” shall mean Webster Bank, National Association, together with its
successors and assigns.

 

“Bank Products” shall mean, collectively, (i) any cash management service,
including through the use of any Lockbox Account, (ii) any Hedge Contract, (iii)
any derivative product or (iv) any, similar (or dissimilar) bank product or
service offered by the Bank or any Affiliate of the Bank (including Lender) to
any Borrower from time to time.

 

“Base Rate” shall mean the base commercial lending rate of the Bank as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by the Bank as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers of
the Bank.

 

“Benefit Plan” shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained for employees of Borrowers or any member of the
Controlled Group or any such Benefit Plan to which any Borrower or any member of
the Controlled Group is required to contribute on behalf of any of its
employees.

 

“Biomer Technology Investment” shall mean (i) the $400,000 of 2% Unsecured
Convertible Loan Notes 2005 issued by Biomer Technology Limited to the Borrower,
and any equity debt, equity or combined debt and equity securities received by
the Borrower upon the conversion thereof, and (ii) any other securities issued
by Biomer Technology Limited to the Borrower, directly or indirectly, pursuant
to Borrower’s existing obligations to make a further investment in Biomer
Technology Limited under certain specified circumstances.

 

“Biomer Post-Closing Payments” means the Borrower’s existing obligation to make
a further investment in the securities of Biomer Technology Limited under
certain specified circumstances.

 

“Borrower” or “Borrowers” shall have the meaning set forth in the preamble to
this Agreement; and shall extend to all permitted successors and assigns of such
Persons.

 

“Borrowers on a consolidated basis” shall mean, as appropriate, the
consolidation in accordance with GAAP of the accounts or other items of
Borrowers and their respective Subsidiaries (if any).

 

“Borrowers’ Account” shall have the meaning set forth in Section 2.7.

 

“Borrowing Base” shall mean the sum of the following: (i) the product of the
Applicable Advance Rate times the Value of all Eligible Receivables; plus (ii)
the lesser of (A)

 

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the Eligible Inventory Sublimit, or (B) the product of the Applicable Advance
Rate times the Value of all Eligible Inventory; minus (iii) the Availability
Reserves. Where:

 

“Applicable Advance Rate” shall mean: (i) eighty-five percent (85%), in respect
of Eligible Receivables, and (ii) fifty-five percent (55%) in respect of
Eligible Inventory; or, in each case, such higher or lower percentage amount as
Lender, in its sole credit judgment, may elect from time to time.

 

“Availability Reserves” shall mean such reserves as Lender, in its sole credit
judgment, may elect to impose from time to time in respect of borrowing
availability, including, without limitation, if the Lender elects in its
discretion in writing and notifies the Borrower of such election, after the
expiration of the ninety (90) day period set forth in clause (i) of the
definition of Eligible Inventory below, an amount with respect to each location
set forth in such clause equal to the amount of ninety (90) days of rent, fees
and equivalent amounts that are payable by the Borrowers and the Guarantor in
respect thereof.

 

“Eligible Inventory” shall mean and include, with respect to each Borrower and
MPAV, Inventory consisting of Raw Materials and Finished Goods owned by and in
the possession of a Borrower or MPAV and located in the United States of
America, which Lender, in its sole credit judgment, shall determine to be
Eligible Inventory, based on such considerations as Lender may from time to time
deem appropriate. Without limitation, Inventory shall not be deemed Eligible
Inventory unless such Inventory is subject to Lender’s first priority perfected
security interest and no other Lien (other than Permitted Encumbrances). In
addition, no Inventory shall be Eligible Inventory if: (a) it does not conform
to all standards imposed by any governmental agency, division or department
which has regulatory authority over such Inventory or its use, sale or
distribution, including the Department of Labor; (b) it consists of
work-in-process, showroom samples, “seconds,” packaging, shipping materials,
supplies or catalysts; (c) it constitutes Inventory in-transit to or from a
Borrower (while in-transit); (d) it is subject to any licensing or similar
contractual arrangement limiting the resale thereof by a Borrower or by Lender
as its attorney-in-fact; (e) any covenant, representation or warranty contained
herein with respect to such Inventory has been breached; (f) it is obsolete,
unsaleable, shop-worn, damaged, defective, slow-moving or unmerchantable; (g) it
has been consigned to a Borrower or to any third party for sale; (h) it is not
subject to a perpetual inventory reporting system acceptable to Lender; (i) it
is in the possession or control of any processor, finisher or other third party
besides a Borrower or is otherwise situated at any public or private warehouse
or upon any leased property, unless such processor, finisher, warehouse
operator, landlord or other third party has waived any lien or claim thereon, in
a manner satisfactory to Lender, or Lender, in its sole credit judgment has
elected to impose reserves against the value of such inventory in lieu thereof
(the amounts and duration of which shall be in Lender’s sole credit judgment);
provided, however, that with respect to leased locations, Borrowers shall be
permitted ninety (90) days from the Closing Date to obtain waivers reasonably
acceptable to the Lender for all of such leased locations during which time all
property located thereon will be deemed “Eligible Inventory” for purposes of
this clause (i) (and

 

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not otherwise excluded pursuant to the terms hereof) and after such 90 day
period the Inventory on such leased locations shall remain Eligible Inventory
(assuming all other conditions to eligibility are satisfied) notwithstanding the
absence of a waiver, but the Lender shall have the right to impose Availability
Reserves for same in accordance with the definition of Availability Reserves;
(j) consists of Hazardous Substances; (k) such Inventory is not covered by
casualty insurance maintained as required under Section 4.11; or (1) such
Inventory is not otherwise satisfactory to Lender in the exercise of its sole
credit judgment.

 

“Eligible Inventory Sublimit” shall mean Three Million Dollars ($3,000,000).

 

“Eligible Receivables” shall mean and include, with respect to each Borrower and
MPAV, each Receivable of such Borrower or MPAV arising in the ordinary course of
MPAV’s or such Borrower’s business which Lender, in its sole credit judgment,
shall determine to be an Eligible Receivable, based on such considerations as
Lender may from time to time deem appropriate. Without limitation, a Receivable
shall not be deemed eligible unless such Receivable is subject to Lender’s first
priority perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to Lender. In addition, no Receivable shall be an Eligible
Receivable if: (a) it arises out of a sale made by any Borrower to an Affiliate
of any Borrower or to a Person controlled by an Affiliate of any Borrower; (b)
it is due or unpaid more than sixty (60) days after the original due date, or
more than ninety (90) days from the original invoice date; (c) fifty percent
(50%) or more of the Receivables from such Customer are not deemed Eligible
Receivables hereunder by application thereto of clause (b) above; (d) any
covenant, representation or warranty contained in this Agreement with respect to
such Receivable has been breached; in any material respect; (e) the Customer
shall (i) apply for, suffer, or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or call a meeting of its creditors, (ii)
admit in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, any petition which is filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing; (f) the sale is to a Customer outside
the continental United States of America (but excluding any Customer in (i)
Puerto Rico and (ii) Canada), unless and except to the extent that either (i)
the sale is on letter of credit, guaranty or acceptance terms, or (ii) payment
of such Receivable is insured under a foreign credit insurance policy; in each
case, acceptable to Lender in its sole credit judgment; (g) the sale to the
Customer is on a “bill-and-hold”, “guaranteed sale”, “sale-and-return”, “sale on
approval”, “consignment” or any other repurchase or return basis or is in
respect of a “COD” or “CBD” sale, or is evidenced by an instrument or chattel
paper; (h) Lender believes, in its sole credit judgment, that collection of such
Receivable

 

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is insecure or that such Receivable may not be paid by reason of the Customer’s
financial inability to pay; (i) the Customer is the United States of America,
any state or any department, agency or instrumentality of any of them, unless
Borrower assigns its right to payment of such Receivable to Lender pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727 et seq.
and 41 U.S.C. Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances; (j) the goods giving rise to such Receivable
have not been shipped and delivered to and accepted by the Customer or the
services giving rise to such Receivable have not been performed by the
applicable Borrower and accepted by the Customer or the Receivable otherwise
does not represent a final sale (subject to returns in the ordinary course of
business); (k) the Receivables of the Customer exceed a credit limit determined
by Lender, in its sole credit judgment, to the extent such Receivable exceeds
such limit; (l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of a
Borrower or the Receivable is contingent in any respect or for any reason; (m)
the applicable Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto; (n) any return, rejection or repossession of the merchandise
giving rise to such Receivable has occurred; (o) such Receivable is not payable
to a Borrower; (p) such Receivable is owed by a Customer located in the states
of New Jersey, Minnesota, or West Virginia (or any other state that requires a
creditor to file a business activity report or similar document in order to
bring suit), unless Borrower has qualified to do business in such state or has
filed a business activity report or such other similar required document; (q)
the Receivable is payable in any currency other than Dollars; (r) the Receivable
is issued in respect of partial payment, including “debit memos” and “charge
backs”; or (s) such Receivable is not otherwise satisfactory to Lender in the
exercise of its sole credit judgment.

 

“Value” shall mean, as determined by Lender in its sole credit judgment, (a)
with respect to Eligible Receivables, the gross face amount of Eligible
Receivables less the sum of (i) sales, excise or similar taxes included in the
amount thereof and (ii) returns, discounts, claims, credits, charges and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto; and (b) with respect to Eligible
Inventory, the lower of (i) its cost computed on a first-in first-out (FIFO)
basis in accordance with GAAP or (ii) its market value.

 

it being understood and agreed by Borrowers in connection with the foregoing
that any decrease in Applicable Advance Rates, any imposition (or increase) in
any Availability Reserves or any change in the composition of Eligible Inventory
or Eligible Receivables instituted by Lender in its sole credit judgment
pursuant hereto from time to time may limit or restrict the amount of Advances
available to Borrowers hereunder.

 

“Borrowing Representative” shall mean the Initial Borrower, if there is only one
Borrower, but, otherwise, shall mean such Person among the Borrowers as the
Borrowers, collectively between or among themselves, may elect as their
representative hereunder from time

 

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to time pursuant to Article XV, subject to Lender’s prior approval. On the
Closing Date, the Borrowing Representative is the Initial Borrower.

 

“Borrowing Base Certificate” shall have the meaning set forth in Section 10.10.

 

“Business Day” shall mean with respect to Eurodollar Rate Loans, any day on
which commercial banks are open for domestic and international business,
including dealings in Dollar deposits in London, England and New York, New York
and with respect to all other matters, any day other than a day on which
commercial banks in New York and Connecticut are authorized or required by law
to close.

 

“Capital Expenditure Loan” shall mean the capital expenditure loan, made
available to the Borrowers in the principal amount not to exceed One Million
Dollars ($1,000,000) by the Lender pursuant to Section 2.1(d).

 

“Capital Expenditure Loan Borrowing Base” shall mean an amount equal to the
lesser of: (i) One Million Dollars ($1,000,000); or (ii) eighty percent (80%) of
the face amount of net invoices for Eligible Equipment. For purposes of this
calculation, costs of installation, maintenance and other “soft costs” shall not
be included in such determination.

 

“Capital Expenditure Loan Conversion Date” November 9, 2005.

 

“Capital Expenditure Loan Note” shall mean the promissory note referred to in
Section 2.1(d) evidencing the Indebtedness of Borrowers to Lender arising from
the making of the Capital Expenditure Loan.

 

“Capital Expenditure Loan Period” see Section 2.1(d)

 

“Capital Expenditure Loan Rate” shall mean an interest rate per annum equal to:
(i) the sum of the Alternate Base Rate plus one quarter of one percent (.25%),
with respect to Domestic Rate Loans, and (ii) the sum of the Eurodollar Rate
plus two and three-quarters of one percent (2.75%), with respect to Eurodollar
Rate Loans.

 

“Capital Expenditures” - see Section 8.1.

 

“Capitalized Leases” shall mean leases under which the Borrowers or any of their
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

 

“Change of Control” means the occurrence of one or more of the following events
(whether or not approved by the Board of Directors of the Borrower): (a) an
event or series of events by which any Person (other than any Permitted Holder)
or group of persons or

 

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other entities (excluding Permitted Holders) acting in concert as determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), whether or not applicable (a “Group of Persons”), together
with its or their Affiliates shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases, merger or otherwise
(including pursuant to receipt of revocable proxies) (A) be or become, directly
or indirectly, the beneficial owner (within the meaning of Rule 13d-3 and Rule
13d-5 under the Exchange Act, whether or not applicable, except that a Person
shall be deemed to have “beneficial ownership” of all securities that such
Person as the right to acquire, whether such right is exercisable immediately or
only after the passage of time) of more than forty percent (40%) of the combined
voting power of the then outstanding Voting Stock of the Borrwer or (B)
otherwise has the ability, directly or indirectly, to elect, directly or
indirectly, a majority of the members of the Board of Directors of the Borrower
or other equivalent governing body thereof, (b) individuals who at the beginning
of any period of two consecutive calendar years (starting with the year
commencing January 1, 2005) constituted the Board of Directors of the Borrower
(together with any new directors (i) elected by the Permitted Holders or (ii)
whose election to the Board of Directors of the Borrower, or whose nomination
for election by the Borrower shareholders, was approved by a vote of at least
two-thirds of the members of the Board of Directors of the Borrower then still
in office who either were members of the Board of Directors of the Borrower at
the beginning of such period of whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors of the Borrower then in office or (c) the
Borrower consolidates with or merges into another Person (excluding any merger
permitted under this Agreement) or the Borrower or any of its Subsidiaries,
directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise
disposes of, in one transaction or a series of related transactions, all or
substantially all of the property or assets of the Borrower and its Subsidiaries
to any Person, or any Person consolidates with, merges with or into, the
Borrower, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Borrower is converted into or exchanged for cash, securities
or other property, other than such transaction where the Voting Stock of the
Borrower outstanding immediately prior to such corporation representing more
than fifty percent (50%) of the combined voting power of the then outstanding
Voting Stock of the surviving or transferee corporation and immediately after
such transaction no “person” or “group” (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act), excluding Permitted Holders, is the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have beneficial ownership of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than fifty percent (50%) of the combined voting power of the then outstanding
Voting Stock of the surviving or transferee corporation.

 

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts, imposed by any taxing or other authority, domestic or foreign
(including, without limitation, the Pension

 

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Benefit Guaranty Corporation or any environmental agency or superfund), upon any
Collateral, any Borrower or any of its Affiliates.

 

“Closing Date” shall mean the date on which the Initial Advance is made, which
date may be on the Signing Date but, unless otherwise approved by Lender, in its
credit judgment, shall not be later than ten (10) days after the Signing Date.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time and the regulations promulgated thereunder.

 

“Collateral” shall mean and include all assets of each Borrower (subject to the
limitation on Subsidiary Stock set forth in subsection (f) below), including,
without limitation, all of the following assets:

 

(a) all Receivables;

 

(b) all Equipment;

 

(c) all General Intangibles;

 

(d) all Inventory;

 

(e) all Contract Rights;

 

(f) all Subsidiary Stock of each Domestic Subsidiary, and sixty-five percent
(65%) of the Subsidiary Stock of each Foreign Subsidiary;

 

(g) all Securities;

 

(h) all Leasehold Interests;

 

(i) all Commercial Tort Claims;

 

(j) all of each Borrower’s right, title and interest in and to: (i) its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Borrower’s rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of each Borrower’s contract rights,
rights of payment which have been earned under a contract right, instruments,
investment property, documents, chattel paper, warehouse receipts, deposit
accounts, money and securities; (vi) if and when obtained by any Borrower, all
real and personal property of third parties in which such Borrower has been
granted a lien or security interest as security for the payment or enforcement
of Receivables; (vii) all supporting obligations that secure payment or
performance of any account, chattel paper, document, general intangible,

 

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instrument or investment property; and (viii) any other goods, personal property
or real property now owned or hereafter acquired in which any Borrower has
expressly granted a security interest or may in the future grant a security
interest to Lender hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Lender and any Borrower;

 

(k) all of each Borrower’s ledger sheets, ledger cards, files, correspondence,
records, books of account, business papers, computers, computer software (owned
by any Borrower or in which it has an interest), computer programs, tapes, disks
and documents relating to clauses (a) through (j) of this definition; and

 

(l) all proceeds and products of clauses (a) through (k) of this definition, in
whatever form, including, but not limited to: cash, Deposit Accounts (whether or
not comprised solely of proceeds), certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.

 

“Collateral Locations” shall have the meaning assigned to such term in Section
4.5.

 

“Commercial Tort Claims” shall have the meaning given to such term in the UCC.

 

“Commitment” shall mean the aggregate amount of the total commitments of the
Lender to make Advances under this Agreement as in effect on the Closing Date;
namely, Eleven Million Nine Hundred Thousand Dollars ($11,900,000).

 

“Commitment Letter” shall mean any commitment letter heretofore issued by Lender
to Borrowers, or Borrowing Representative on their behalf, relative to the
undertakings contemplated hereby.

 

“Competitor” shall mean any Person who directly or indirectly provides products
or services that are the same as or substantially similar to the products or
services provided by, and that constitute a material part of the business of,
the Borrowers and their Subsidiaries as of the date of determination.

 

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, (i) necessary to carry on any
Borrower’s business, including, without limitation, any consents required under
all applicable federal, state or other applicable law, and (ii) required to
effectuate the transactions and agreements contemplated in this Agreement and
the Other Documents.

 

“Contract Rate” shall mean, as applicable, the Revolving Interest Rate, the Term
Loan A Rate, the Term Loan B Rate or the Capital Expenditure Loan Rate.

 

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“Contract Rights” shall mean all rights of each Borrower arising under or in
connection with any contract (including, without limitation, to the extent that
such Borrower may grant a security interest in such rights under such contract,
all license agreements to which it is party as licensor or licensee and all
letter of credit rights of each Borrower).

 

“Controlled Group” shall mean all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with any Borrower, are treated as a single employer under
Section 414 of the Code.

 

“Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.

 

“Default” shall mean an event which, with the giving of notice or passage of
time or both, would constitute an Event of Default.

 

“Default Rate” shall have the meaning set forth in Section 3.1 hereof.

 

“Deposit Account” shall mean any checking account, savings account, time deposit
account, certificate of deposit, investment account or other account (howsoever
denominated), in which from time to time any cash of any Borrower is or may be
deposited.

 

“Designated Officer” shall mean the chief executive officer, chief financial
officer or chief operating officer of a Borrower (regardless of title), or such
other officer, lender or representative of a Borrower which Lender may, at such
Borrower’s request, permit to be a “Designated Officer” from time to time.

 

“Dollar” and the sign “$” shall mean lawful money of the United States of
America.

 

“Domestic Rate Loan” shall mean any Advance that bears interest based upon the
Alternate Base Rate.

 

“Domestic Subsidiary” shall mean a Subsidiary organized under the laws of the
United States or any political subsidiary thereof.

 

“Early Termination Date” shall have the meaning set forth in Section 14.1
hereof.

 

“Early Termination Fee” shall have the meaning set forth in Section 14.1 hereof.

 

“EBITDA” - see Section 8.1.

 

“Eligible Equipment” shall mean new equipment to be purchased by the Borrower
for its business.

 

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“Eligible Inventory” - see “Borrowing Base” definition.

 

“Eligible Receivables” - see “Borrowing Base” definition.

 

“Environmental Complaint” shall have the meaning set forth in Section 4.18(d)
hereof.

 

“Environmental Laws” shall mean all federal, state and local environmental, land
use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.

 

“Equipment” shall mean and include as to each Borrower all of such Borrower’s
goods (other than Inventory) whether now owned or hereafter acquired and
wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.

 

“Equity Interests” shall mean: (i) in the case of a corporation, its capital
stock, including its common stock and any preferred stock; (ii) in the case of a
partnership, all partnership interests therein, including special, limited and
general interests; (iii) in the case of a limited liability company, all
membership interests therein; and (iv) in the case of any other entity, all
interests evidencing equity ownership therein.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

 

“Eurodollar Rate” shall mean, for any Eurodollar Rate Loan, for the then current
Interest Period relating thereto, the rate per annum (such Eurodollar Rate to be
adjusted to the next higher 1/100th of one percent (.01%)) equal to the quotient
of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate of the
rates (expressed as a decimal) of reserve requirements current on the date that
is two (2) Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
over the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to “Eurocurrency liabilities” under Regulation D of the Board of
Governors of the Federal Reserve System.

 

“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.

 

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“Event of Default” shall mean the occurrence and continuance of any of the
events set forth in Article XI hereof.

 

“Excess Availability” shall mean the difference between (a) the amount permitted
to be outstanding pursuant to the definition of “Borrowing Base” and (b) the
aggregate amount of Revolving Advances and Letters of Credit outstanding.

 

“Existing Lender” shall mean Webster Bank, National Association.

 

“Existing Lender Liens” shall mean Liens on Collateral retained by the Existing
Lender to secure payment of the Existing Loans, to be released on the Closing
Date in conjunction with full payment of the Existing Loans.

 

“Existing Loans” shall mean all Indebtedness owing by Borrowers to the Existing
Lender on the Closing Date, whether secured or unsecured.

 

“Federal Funds Rate” shall mean, for any day, the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such transactions
received by the Bank from three Federal funds brokers of recognized standing
selected by the Bank.

 

“Financial Covenants” shall mean the financial covenants set forth in Article
VIII.

 

“Finished Goods” shall mean finished goods held for sale by a Borrower in the
ordinary course of its business.

 

“Fiscal Year” shall mean Borrowers’ Fiscal Year as in effect on the Signing
Date; and the terms “Fiscal Quarter” and “Fiscal Month” shall have correlative
meanings.

 

“Fixed Charge Coverage Ratio” - see Section 8.1.

 

“Fixed Charges” - see Section 8.1.

 

“Foreign Subsidiary” shall mean any Subsidiary which is not a Domestic
Subsidiary.

 

“Foster Supply Agreement” shall mean the Supply Agreement dated on or about the
Closing Date between MPAV and Foster Corporation, as amended, modified or
restated from time to time.

 

“Funded Indebtedness” - see Section 8.1.

 

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“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time.

 

“General Intangibles” shall mean and include as to each Borrower all of such
Borrower’s general intangibles, whether now owned or hereafter acquired
including, without limitation, all payment intangibles, choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, trade names, service marks, trade secrets,
goodwill, copyrights, design rights, registrations, licenses, license fees,
franchises, customer lists, tax refunds, tax refund claims, pension fund
refunds, pension fund refund claims, overpayments, overpayment claims,
reclamation rights, computer programs, software, all claims under guaranties,
security interests or other security held by or granted to such Borrower to
secure payment of any of the Receivables by a Customer, all rights of
indemnification and all other intangible property of every kind and nature
(other than Receivables).

 

“Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

 

“Guarantor” shall mean any Person (other than a Borrower) who may hereafter
guarantee payment or performance of the whole or any part of the Obligations.
“Guarantors” means collectively all such Persons. On the Closing Date, MPAV is
the only Guarantor.

 

“Guaranty” shall mean any guaranty of the payment or performance of the whole or
any part of the Obligations, in whole or in part, executed at any time by a
Guarantor in favor of Lender for the ratable benefit of Lender.

 

“Hazardous Discharge” shall have the meaning set forth in Section 4.18(d)
hereof.

 

“Hazardous Substance” shall mean any flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products, methane, hazardous materials,
Hazardous Wastes, hazardous or Toxic Substances or related materials as defined
in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, et seq.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.

 

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state law, and any other applicable Federal and state
laws now in force or hereafter enacted relating to hazardous waste disposal.

 

“Hedge Contract” shall mean any “hedge,” “swap,” “collar,” “cap” or similar
agreement between a Borrower and any other financial institution, including, but
not limited to, Bank or any other Affiliate of WBCC, intended to fix the
relative amount of such Borrower’s risk in respect of changes in interest rates
and foreign currency exchange.

 

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“Historical Financial Statements” shall have the meaning set forth in Section
5.4(a) hereof.

 

“Initial Advance” shall mean the initial Advance (or series of initial Advances)
to be made on the Closing Date.

 

“Initial Borrower(s)” shall have the meaning set forth in the preamble to this
Agreement.

 

“Initial Projections” shall have the meaning given to such terms in Section
5.4(b).

 

“Indebtedness” of a Person means, without duplication: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services (other
than (1) trade liabilities and accrued expenses incurred in the ordinary course
of business and payable in accordance with customary practices and (2) any
obligations with respect to the Working Capital Adjustment or Tax Gross-Up
Amount or the JV Payment (as each of such terms are respectively defined in the
Putnam Acquisition Agreement), (b) obligations evidenced by a note, bond,
debenture or similar instrument, (c) obligations under Capitalized Leases, (d)
reimbursement obligations for letters of credit, banker’s acceptances or other
credit accommodations, (e) net liabilities under Hedge Contracts, (f) any
guaranty (or the like) by such Person of the Indebtedness of another Person, and
(g) obligations secured by any Lien on such Person’s property, even if that
Person has not assumed such obligations. Any Indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the Indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

 

“Interest Period” shall mean the period provided for any Eurodollar Rate Loan
pursuant to Section 2.2(b).

 

“Inventory” shall mean and include as to each Borrower and MPAV, or as to any
third party, all of such Borrower’s, MPAV’s or third party’s now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all Raw Materials, Work In Process, Finished Goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in such Borrower’s or MPAV’s business or used in selling or furnishing
such goods, merchandise and other personal property, and all documents of title
or other documents representing them.

 

“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a
draft pursuant to the terms thereof which, in all cases, shall be the Bank,
unless otherwise required by the Bank or approved by Lender.

 

“Leasehold Interests” shall mean all of each Borrower’s right, title and
interest in and to any Real Property owned by a Person other than Borrower,
whether as tenant, lessee, licensee, operator or otherwise, but excluding from
the Collateral those leases, licenses or other agreements with respect to Real
Property, and the interests created thereby, that by their terms

 

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prohibit the assignment thereof without the prior written consent of the
applicable lessor and where such consent has not been obtained.

 

“Lender” shall have the meaning ascribed to such term in the preamble to this
Agreement and shall include each Person which becomes a transferee, successor or
assign of Lender.

 

“Lender Party” shall mean Lender, the Bank, any Issuer (other than the Bank),
any Purchasing Lender and any Participant, together with each other holder from
time to time of any interest in any of the Obligations.

 

“Letter of Credit Fees” shall have the meaning set forth in Annex Two.

 

“Letter of Credit Documents” shall have the meaning set forth in Annex Two.

 

“Letters of Credit” shall have the meaning set forth in Annex Two.

 

“Leverage Ratio” - see Section 8.1.

 

“LIBOR” shall mean for any Eurodollar Rate Loan for the then current Interest
Period relating thereto, the rate per annum quoted by the Lender to Borrowers
two (2) Business Days prior to the first day of such Interest Period as the rate
available to Bank in the interbank market for offshore Dollar deposits in
immediately available funds for a period equal to such Interest Period and in an
amount equal to the amount of such Eurodollar Rate Loan.

 

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise) or
encumbrance, or preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind or nature
whatsoever including, without limitation, any conditional sale or other title
retention agreement, any lease (excluding operating leases) having substantially
the same economic effect as any of the foregoing, and the lawful filing of, or
agreement to give, any financing statement (evidencing a security interest or
consignment) under the Uniform Commercial Code or comparable law of any
jurisdiction.

 

“Loan” means a Domestic Rate Loan or a Eurodollar Rate Loan.

 

“Lock-Box Account” shall have the meaning set forth in Section 4.14(d).

 

“Lock-Box Agreement” shall have the meaning set forth in Section 4.14(d).

 

“Lock-Box Bank” shall have the meaning set forth in Section 4.14(d).

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of the Borrowers and the
Guarantors taken as a whole, (b) Borrowers’ ability to pay the Obligations in
accordance with the terms thereof, (c) the value of the Collateral, or Lender’s
Liens on the Collateral or the priority of any such

 

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Lien or (d) the practical realization of the material benefits of Lender’s and
Lender’s material rights and remedies under this Agreement and the Other
Documents.

 

“Material Agreements” shall mean and include, in the case of each Borrower, the
following: (i) any lease of Real Property, (ii) any lease of personal property
having aggregate annual rentals in excess of the Materiality Threshold, (iii)
any license agreement for the use of any intellectual property necessary for, or
material to, to the operation of its business, (iv) any agreement evidencing,
pertaining to or securing the payment of, any Indebtedness, (v) any labor or
union contract, (vi) any employment contracts with executive officers of
Borrowers, (vii) any long-term purchase or supply contracts, and (viii) any
other contract or agreement the termination of which (without its
contemporaneous replacement) would reasonably be expected to have a Material
Adverse Effect.

 

“Materiality Threshold” shall mean One Hundred Thousand Dollars ($100,000).

 

“Maximum Revolving Amount” shall mean the maximum amount of Revolving Advances
and Letters of Credit which may be outstanding at any one time, determined
without regard to the Borrowing Base, which as of the Closing Date equals Six
Million Five Hundred Thousand Dollars ($6,500,000).

 

“Monthly Advances” shall have the meaning set forth in Section 3.1 hereof.

 

“MPAV” shall mean MPAV Acquisition LLC, a Connecticut limited liability company.

 

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections
3(37) and 4001(a)(3) of ERISA.

 

“Note” shall mean the Term Loan A Note, the Term Loan B Note, the Capital
Expenditure Loan Note and the Revolving Credit Note and any other promissory
note at any time evidencing any other portion of the Obligations. “Notes” shall
refer, collectively, thereto.

 

“Notice of Capital Expenditure Loan Borrowing” - see Section 2.1(d).

 

“Obligations” shall mean and include any and all of each Borrower’s Indebtedness
and/or liabilities to Lender and each other Lender Party, of every kind, nature
and description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated,
regardless of how such indebtedness or liabilities arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement or
instrument, including, but not limited to, any and all of any Borrower’s
Indebtedness and/or liabilities to Lender and each other Lender Party, under
this Agreement, the Other Documents, any Permitted Hedge Contracts, any Bank
Product or under any other agreement between Lender and each other Lender Party,
and any Borrower and all obligations of any Borrower to Lender and each other
Lender Party, to perform acts or refrain from taking any action.

 

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“Organic Documents” shall mean: (i) for a corporation, its articles (or
certificate) of incorporation and bylaws; (ii) for a partnership, its articles
of organization (if any) and partnership agreement; and (iii) for a limited
liability company, its articles (or certificate) of organization and any
operating agreement; together with, for each such entity and any other entity
not described above, such other, similar documents as are integral to its
formation or the conduct of its business operations.

 

“Other Documents” shall mean the Notes, and any and all other agreements,
instruments and documents, including, without limitation, guaranties, pledges,
powers of attorney, consents, and all other writings heretofore, now or
hereafter executed by any Borrower and/or any Guarantor and/or delivered to
Lender or any other Lender Party, in respect of the transactions contemplated by
this Agreement. The term “Other Documents” includes, without limitation, all
those documents to which any Borrower or Guarantor is a party described in
Section 9.1.

 

“Other Existing Liens” shall mean those Liens set forth in Schedule 7.3 attached
hereto and hereby made a part hereof.

 

“Other Existing Subsidiaries” shall mean Wright Machine Corporation, a Delaware
corporation.

 

“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.

 

“Payment Office” shall mean, initially, One State Street, New York, New York
10004; thereafter, such other office of Lender, if any, which it may designate
by notice to Borrowing Representative to be the Payment Office.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation.

 

“Perfection Certificate” shall mean, collectively, the Perfection Certificate
for each Borrower and the responses thereto provided by such Borrower and
delivered to Lender on the Closing Date.

 

“Permitted Encumbrances” shall mean (a) Liens in favor of Lender for the benefit
of itself and each other Lender Party which, in each case, secure Obligations;
(b) Liens for taxes, assessments or other governmental charges not delinquent or
being contested in good faith and by appropriate proceedings and with respect to
which proper reserves have been taken by Borrower; provided, however, that
either (i) the Lien has no effect on the priority of the Liens in favor of
Lender or the value of the assets in which Lender has such a Lien and a stay of
enforcement of any such Lien shall be in effect, or (2) the amount of such
charges, individually or in the aggregate, does not exceed the Materiality
Threshold, or (3) the full amount of such charges (and any penalties thereon)
have been reserved against the Borrowing Base; (c) deposits or pledges to secure
obligations under worker’s compensation, social security or similar laws, or
under unemployment insurance; (d) judgment Liens which do not otherwise
constitute an Event

 

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of Default under Section 11.6, that have been (and remain) stayed or bonded and
are being contested in good faith by the applicable Borrower or Subsidiary,
provided, however, that adequate reserves have been posted therefor to the
extent required by GAAP; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of any Borrower’s business; (f) mechanic’s,
worker’s, materialmen’s or other like Liens arising in the ordinary course of
any Borrower’s business with respect to obligations which are not due or which
are being contested in good faith by the applicable Borrower; (g) Liens to
secure the Subordinated Debt; (h) Liens placed upon fixed assets or capital (and
the proceeds thereof) hereafter acquired to secure a portion of the purchase
price thereof or consisting of a Capitalized Lease, provided that (1) any such
Lien shall not encumber any other property of the Borrowers and (2) the
aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any Fiscal Year shall not exceed the amount provided for
in Section 7.9; (h) Liens in the nature of ownership interests of lessors of
real and personal property, to the extent such leases are not prohibited by this
Agreement; (i) other Liens incidental to the conduct of Borrowers’ business or
the ownership of its property and assets which were not incurred in connection
with the borrowing of money or the obtaining of advances or credit, and which do
not in the aggregate materially detract from Lender’s rights in and to the
Collateral or the value of Borrowers’ property or assets or which do not
materially impair the use thereof in the operation of Borrowers’ business; (j)
the Existing Lender’s Liens, pending full payment of the Existing Loans on the
Closing Date; and (k) Other Existing Liens.

 

“Permitted Hedge Contracts” shall mean any Hedge Contracts entered into in the
ordinary course of, and pursuant to the reasonable requirements of, Borrowers’
business, and not for speculative purposes in any event.

 

“Permitted Holders” shall mean all officers and directors of any Borrower on the
date hereof and James Dandeneau and their respective affiliates.

 

“Permitted Subordinated Debt” shall mean and include such Subordinated Debt as
the Lender may consent to be incurred (or carried) by Borrower at any time or
from time to time and in any event shall include the Subordinated Debt as
defined in the Subordination and Intercreditor Agreement and any refinancings of
such Subordinated Debt (which do not increase the principal thereof) thereof
provided that the Lender has consented in writing to the terms and conditions of
such refinanced debt (such approval to not be unreasonably withheld) and same is
subject to a subordination agreement at least as favorable to the Lender as the
Subordination and Intercreditor Agreement.

 

“Person” shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).

 

“Plan” shall mean any employee pension benefit plan within the meaning of
Section 3(2) of ERISA that is intended to qualify for favorable tax treatment
under Section

 

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401(a) of the Code, maintained for employees of Borrowers or any member of the
Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.

 

“Pledged Account” shall have the meaning given to such term in Section 4.14(e).

 

“Pledged Account Agreement” shall have the meaning given to such term in Section
4.14(e).

 

“Projections” shall mean and include the Initial Projections and the annual
projections made pursuant to Section 10.13.

 

“Purchasing Lender” shall have the meaning set forth in Section 16.3(c) hereof.

 

“Putnam Acquisition Agreement” shall mean that certain Asset Acquisition
Agreement by and among the Borrower, Putnam Plastics Corporation, and James
Dandeneau, as in effect on the date hereof.

 

“Putnam Lease” shall mean that certain Commercial Lease Agreement dated as of
November 9, 2004 between James V. Dandeneau and MPAV, as modified from time to
time.

 

“Putnam Plastics Seller Debt” shall mean the Post-Closing Payments (as defined
in the Putnam Acquisition Agreement.

 

“Raw Materials” shall mean goods held by a Borrower for use in the production of
Finished Goods.

 

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq., as same may be amended from time to time.

 

“Real Property” shall mean all of each Borrower’s right, title and interest in
and to its owned and leased premises, existing on or after the Closing Date,
including, particularly, the real property identified on Schedule 5.25 hereto.

 

“Receivables” shall mean and include, as to each Borrower and MPAV, all of
MPAV’s or such Borrower’s accounts, contract rights, instruments (including
those evidencing indebtedness owed to Borrowers by their respective Affiliates),
documents, chattel paper (including electronic chattel paper), general
intangibles relating to accounts, drafts and acceptances (including payment
intangibles), and all other forms of obligations owing to such Borrower arising
out of or in connection with the sale or lease of Inventory or the rendition of
services, all guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Lender hereunder.

 

“Release” shall have the meaning set forth in Section 5.6(c)(i) hereof.

 

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“Reportable Event” shall mean a reportable event described in Section 4043(b) of
ERISA or the regulations promulgated thereunder.

 

“Revolving Advances” shall mean Advances made other than Letters of Credit, the
Term Loans and the Capital Expenditure Loan.

 

“Revolving Credit Note” shall mean the promissory note referred to in Section
2.1(a) hereof evidencing Indebtedness of Borrowers to Lender arising from the
making of Revolving Advances.

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to: (a)
the sum of the Alternate Base Rate plus zero percent (0%), with respect to
Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus two and one
half percent (2.5%), with respect to Eurodollar Rate Loans.

 

“Securities” shall mean and include, as to each Borrower, all securities and all
other investment property (in each case whether or not marketable) owned by
Borrower, whether now existing or hereafter created, including any held by any
intermediary in any “street” name, pursuant to any custody arrangement or
otherwise.

 

“Specified Joint Venture” shall mean the joint venture (or other substitute
arrangement) with Johnson & Johnson or an affiliate thereof contemplated under
the Putnam Acquisition Agreement.

 

“Subordinated Debt” shall mean Indebtedness which has been subordinated, in
right of payment and claim, to the rights and claims of Lender in respect of the
Obligations, on terms satisfactory to Lender, pursuant to a Subordination
Agreement.

 

“Subordinated Debt Documents” shall have the meaning given that term in the
Subordination and Intercreditor Agreement.

 

“Subordination Agreement” shall mean an agreement, satisfactory in form and
substance to Lender, among (i) Lender, for the benefit of Lender, (ii) a
creditor holding Indebtedness permitted to be incurred hereunder, and (iii) the
Borrowers (whether directly or by consent), setting forth the terms by which
such Indebtedness held by such creditor shall become Permitted Subordinated Debt
hereunder including without limitation the Subordination and Intercreditor
Agreement.

 

“Subordination and Intercreditor Agreement” shall have the meaning set forth in
Section 9.1(y).

 

“Subsidiary” shall mean a corporation or other entity of whose shares or Equity
Interests having ordinary voting power (other than Equity Interests having such
power only by reason of the happening of a contingency) to elect a majority of
the directors of such corporation or other entity, or other Persons performing
similar functions for such corporation or entity, are owned, directly or
indirectly, by such Person. Unless otherwise expressly provided herein,
references herein to a “Subsidiary” or the “Subsidiaries” shall mean and refer
to Subsidiaries of

 

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the Borrowers, including any not in being on the Signing Date in anticipation of
their subsequent creation or acquisition in accordance with the terms hereof.

 

“Subsidiary Pledge Agreement” shall have the meaning given to such term in
Section 9.1(p).

 

“Subsidiary Stock” shall mean with respect to any Subsidiary, any and all
shares, interests, participations or other equivalents (however designated) of
Capital Stock of such Subsidiary (if a corporation), any and all equivalent
ownership interests of any such Subsidiary (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing, including,
without limitation, all membership and ownership interests in MPAV.

 

“Term” shall have the meaning set forth in Section 14.1 hereof.

 

“Term Loan A” shall mean the term loan, in the principal amount of One Million
Nine Hundred Thousand Dollars ($1,900,000) made to Borrowers by the Lender on
the Closing Date pursuant to Section 2.1(b).

 

“Term Loan A Note” shall mean the promissory note referred to in Section 2.1(b)
evidencing the Indebtedness of Borrowers to Lender arising from the making of
the Term Loan A.

 

“Term Loan A Rate” shall mean an interest rate per annum equal to: (i) the sum
of the Alternate Base Rate plus one quarter of one percent (.25%), with respect
to Domestic Rate Loans, and (ii) the sum of the Eurodollar Rate plus two and
three quarter percent (2.75%), with respect to Eurodollar Rate Loans.

 

“Term Loan B” shall mean the term loan, in the principal amount of Two Million
Five Hundred Thousand Dollars ($2,500,000) made pursuant to Section 2.1(c).

 

“Term Loan B Maturity Date” shall mean November 9, 2007.

 

“Term Loan B Note” shall mean the promissory note referred to in Section 2.1(c)
evidencing the Indebtedness of Borrowers to Lender arising from the making of
the Term Loan B.

 

“Term Loan B Rate” shall mean an interest rate per annum equal to: (i) the sum
of the Alternate Base Rate plus one and one quarter of one percent (1.25%), with
respect to Domestic Rate Loans, and (ii) the sum of the Eurodollar Rate plus
three and three quarter percent (3.75%), with respect to Eurodollar Rate Loans.

 

“Term Loans” shall mean, collectively, Term Loan A and Term Loan B.

 

“Termination Event” shall mean: (i) a Reportable Event with respect to any Plan
or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of the
Controlled Group from a Plan or Multiemployer Plan during a plan year in which
such entity was a

 

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“substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the
providing of notice of intent to terminate a Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Plan or Multiemployer Plan; (v) any event or
condition (a) which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any
Borrower or any member of the Controlled Group from a Multiemployer Plan.

 

“Toxic Substance” shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA),
15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic substances.
“Toxic Substance” includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.

 

“Type” As to any Revolving Advances, all or any portion of the Term Loans or all
or any portion of the Capital Expenditure Loan, its nature as a Domestic Rate
Loan or a Eurodollar Rate Loan.

 

“Unfinanced Capital Expenditures” - see Section 8.1.

 

“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as
adopted in the State of New York.

 

“Voting Stock” shall mean, with respect to the Borrower, securities of any class
or classes of capital stock in the Borrower entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of the Borrower.

 

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“WBCC” shall have the meaning set forth in the preamble to this Agreement; and
shall include its successors and assigns.

 

ANNEX ONE, Acknowledged and Agreed:

“Initial Borrower” or “Borrowing Representative”

MEMRY CORPORATION

By:  

/s/ Robert P. Belcher

   

Name:

 

Robert P. Belcher

   

Title:

 

Senior Vice President and Chief

Financial Officer

November 9, 2004

 

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ANNEX TWO - LETTERS OF CREDIT

 

This Annex Two is incorporated by reference into, and constitutes an integral
part of, the Credit and Security Agreement, dated as of November 9, 2004, made
between Memry Corporation as “Borrower,” and WEBSTER BUSINESS CREDIT
CORPORATION, as “Lender” and “Agent” (as it may be amended or modified from time
to time, the “Credit Agreement”). Capitalized terms used in this Annex but not
expressly defined in this Annex, shall have the meanings given to such terms in
the Credit Agreement.

 

1. Letters of Credit. Subject to the terms and conditions hereof, Lender may, in
its sole discretion (without any obligation to do so) issue or cause the
issuance (by a bank) of letters of credit (“Letters of Credit”) by the Issuer on
behalf of any Borrower; provided, however, that Lender will not, in any event,
issue or cause to be issued any Letters of Credit (i) unless Borrowers have
executed in favor of the Issuer: (A) its master letter of credit agreement (the
“Master Letter of Credit Agreement”), in substantially the form of Exhibit ”A”
attached hereto; and (B) its automatic letter of credit agreement (the
“Automatic Letter of Credit Agreement”), in substantially the form of Exhibit
”B” attached hereto (the Master Letter of Credit Agreement and the Automatic
Letter of Credit Agreement, together with the Letter of Credit Documents defined
below, are herein called, collectively, the “Letter of Credit Documents”), (ii)
unless Borrowers have complied with Sections 2 and 3 below in regard to such
issuance, and (iii) to the extent that the face amount of such Letters of Credit
would then cause either (A) outstanding Letters of Credit to exceed any
individual or aggregate dollar limit thereon established by Lender from time to
time, or (B) the sum of (1) the outstanding Revolving Advances plus (2) all
outstanding Letters of Credit to exceed the lesser of the Maximum Revolving
Amount or the Borrowing Base.

 

2. Issuance of Letters of Credit.

 

(a) Borrowing Representative, on behalf of Borrowers, may request Lender to
issue or cause the issuance of a Letter of Credit by delivering to Lender at the
Payment Office, Issuer’s standard form of letter of credit application (a
“Letter of Credit Application”) and any draft, if applicable, completed to the
satisfaction of Lender, together with such other certificates, documents and
other papers and information as Lender or Issuer may reasonably request.
Borrowing Representative, on behalf of Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any Letter of
Credit and the disposition of documents, disposition of any unutilized funds,
and to arrange for the issuance of any amendment, extension or renewal of any
Letter of Credit.

 

(b) Each Letter of Credit shall, among other things, (i) provide for the payment
of sight drafts or acceptances of issuance drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein and (ii) have an expiry date not later than one (1)
year after such Letter of Credit’s date of issuance (but with an “evergreen”
feature if approved by the Lender in its discretion) in the case

 

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of “standby” Letters of Credit, and six (6) months after such Letter of Credit’s
date of issuance, in the case of “trade” Letters of Credit, and in no event
later than thirty (30) days prior to the last day of the Term. Each Letter of
Credit shall be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
and any amendments or revisions thereof adhered to by the Issuer and, to the
extent not inconsistent therewith, the laws of the State of New York.

 

(c) Borrowing Representative will not request a Letter of Credit (i) that arises
out of transactions involving the sale of goods by any Borrower not in the
ordinary course of its business, (ii) that involves a sale to an Affiliate of
any Borrower, (iii) that involves any purchase for which Lender, or any Issuer,
as appropriate, has not received all related documents, instruments and forms
requested by Lender or such Issuer, (iv) for which Lender or any Issuer, as
appropriate, is unable to locate a purchaser in the ordinary course of business
on standard terms, or (v) where the relevant drafts are not eligible for
discounting with Federal Reserve Banks pursuant to paragraph 7 of Section 13 of
the Federal Reserve Act, as amended.

 

(d) Subject to the terms and conditions hereof, Lender shall, if applicable,
issue or cause the issuance of air releases and steamship guarantees on behalf
of Borrower. Borrowing Representative may request Lender to issue or cause the
issuance of air releases and steamship guarantees by delivering to Lender at the
Payment Office such certificates, documents and other papers and information as
Lender may request. In addition, for purposes hereof, the definition of “Letters
of Credit” shall include all air releases and steamship guarantees issued or
caused to be issued by Lender.

 

3. Requirements For Issuance of Letters of Credit.

 

(a) In connection with the issuance of any Letter of Credit, Borrowers shall
indemnify, save and hold Lender and each Issuer harmless from any loss, cost,
expense or liability, including, without limitation, payments made by Lender or
any Issuer and expenses and reasonable attorneys’ fees incurred by Lender or any
Issuer arising out of, or in connection with, any Letter of Credit to be issued
for any Borrower. Borrowers shall be bound by Lender’s and Issuer’s regulations
and good faith interpretations of any Letter of Credit issued or created for
Borrowers’ Account, although this interpretation may be different from
Borrowers’ own; and, neither Lender nor any Issuer nor any of their respective
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following any Borrower’s instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Lender’s, any Issuer’s or such correspondents’ willful misconduct or gross
negligence.

 

(b) Borrowing Representative shall authorize and direct any Issuer of a Letter
of Credit to name the applicable Borrower as the “applicant” or “account party”
therein, to deliver to Lender all related payment/acceptance advices, to deliver
to Lender all instruments, documents, and other writings and property received
by the Issuer pursuant to the Letter of Credit and to accept and rely upon
Lender’s instructions and agreements with respect to all matters arising in
connection with the Letter of Credit or the application therefor.

 

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(c) In connection with all Letters of Credit issued or caused to be issued by
Lender under this Agreement, each Borrower hereby appoints Lender, or its
designee, as its attorney, with full power and authority if an Event of Default
shall have occurred or be continuing, (i) to sign and/or endorse such Borrower’s
name upon any warehouse or other receipts, letter of credit applications and
acceptances; (ii) to sign such Borrower’s name on bills of lading; (iii) to
clear Inventory through the United States of America Customs Department
(“Customs”) in the name of such Borrower or Lender or Lender’s designee, and to
sign and deliver to Customs officials powers of attorney in the name of such
Borrower for such purpose; and (iv) to complete in such Borrower’s name or
Lender’s, or in the name of Lender’s designee, any order, sale or transaction,
obtain the necessary documents in connection therewith, and collect the proceeds
thereof. Neither Lender nor its attorneys will be liable for any acts or
omissions nor for any error of judgment or mistakes of fact or law, except for
Lender’s or its attorney’s willful misconduct or gross negligence. This power,
being coupled with an interest, is irrevocable as long as any Letters of Credit
remain outstanding.

 

(d) Each Borrower shall be irrevocably and unconditionally obligated forthwith
without presentment, demand, protest or other formalities of any kind, to
reimburse Lender for any amounts paid by Lender with respect to any Letter of
Credit issued for the account of such Borrower, including all fees, costs and
expenses paid by Lender to any Issuer or correspondence bank that issues or
negotiates Letters of Credit. In connection with the foregoing, Borrower
authorizes and directs Lender to make a Revolving Advance in the amount of any
such reimbursement obligation when it becomes due and to pay or reimburse itself
(or the Issuer or correspondent bank as appropriate) with the proceeds thereof;
but, if at the time such payment becomes due the unpaid balance of Revolving
Advances exceeds or would exceed with the making of such disbursement the
maximum amount permitted under Section 2.1 hereof, then, no such Revolving
Advance shall be made and Borrower shall be obligated to make such payment in
full or be in default of the payment thereof.

 

(e) On demand, during any time that an Event of Default exists, Borrowers will
cause cash to be deposited and maintained in an account with Lender, as cash
Collateral, in an amount equal to one hundred ten percent (110%) of the undrawn
face amount of any outstanding Letters of Credit, and each Borrower hereby
irrevocably authorizes Lender, in its discretion, on such Borrower’s behalf and
in such Borrower’s name, to open such an account and to make and maintain
deposits therein, or in an account opened by such Borrower, in the amounts
required to be made by such Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of such Borrower coming into Lender’s
possession at any time. Lender will invest such cash Collateral (less applicable
reserves) in such short-term money-market items as to which Lender and such
Borrower mutually agree and the net return on such investments shall be credited
to such account and constitute additional cash Collateral. No Borrower may
withdraw amounts credited to any such account except upon payment and
performance in full of all Obligations and termination of this Agreement.

 

4. Letter of Credit Fees. Borrowers shall pay (a) to Lender for its own account
such fees for each Letter of Credit (if any) issued pursuant hereto for the
period from and excluding the date of issuance of same to and including the date
of expiration or termination, at such rates at a rate per annum equal to the
Contract Rate for Domestic Rate Loans constituting Revolving

 

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Advances increasing, in each instance, to the Default Rate applicable to
Revolving Advances from and after the occurrence of, and during the continuation
of, any Event of Default) and (b) to Lender for the benefit of the Issuer any
and all fees and expenses as agreed upon by the Issuer and the Borrowing
Representative in connection with any Letter of Credit, including, without
limitation, in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder and shall reimburse
Lender for any and all fees and expenses, if any, paid by Lender to the Issuer
(all of the foregoing fees, the “Letter of Credit Fees”). Such fees shall be
calculated on the basis of a 360-day year for the actual number of days elapsed
and be payable quarterly in arrears on the first day of each calendar quarter,
beginning with the first such date following the issuance of each Letter of
Credit and on the last day of the Term. All such charges shall be deemed earned
in full on the date when the same are due and payable hereunder and shall not be
subject to rebate or proration upon the termination of this Agreement for any
reason. Any such charge in effect at the time of a particular transaction shall
be the charge for that transaction, notwithstanding any subsequent change in the
Issuer’s prevailing charges for that type of transaction. All Letter of Credit
Fees payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or proration
upon the termination of this Agreement for any reason.

 

ANNEX TWO, Acknowledged and Agreed:

“Initial Borrower” or “Borrowing Representative”

MEMRY CORPORATION

By:  

/s/ Robert P. Belcher

   

Name:

 

Robert P. Belcher

   

Title:

 

Senior Vice President and Chief

Financial Officer

November 9, 2004

 

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EXHIBIT “A”

 

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MASTER LETTER OF CREDIT AGREEMENT

 

This Agreement is being executed in connection and pursuant to that certain
Credit and Security Agreement, dated as of November 9, 2004, made among the
undersigned, as a/the “Borrower” or the “Borrowing Representative” thereunder
(hereinafter called, individually and collectively if more than one, “Obligor”),
and Webster Business Credit Corporation (“Lender”), (hereinafter, as it may be
amended or modified from time to time called the “Credit Agreement”; capitalized
terms used herein, but not expressly defined herein, shall have the meanings
given to such terms in the Credit Agreement), and is the “Letter of Credit
Agreement” referenced therein. In consideration of the issuing by Webster Bank,
National Association (the “Bank”) for the account of the Obligor, pursuant to
the Credit Agreement, its Letters of Credit (“Letters of Credit”) from time to
time in various amounts, the Obligor (jointly and severally if more than one)
acknowledges, confirms agrees:

 

1. At the request of the Obligor, the Bank has agreed to issue certain Letters
of Credit for the account of Obligor and, pursuant to the terms and conditions
of such Letters of Credit, the Bank may incur costs and expenditures and may
also incur payment obligations on behalf of Obligor to third parties, including
the honoring of drafts drawn under any such Letters of Credit.

 

2. At the request of the Obligor, the Bank may also enter into, or has entered
into, certain agreements (the “Advising Bank Agreements”) with an advising bank
(the “Advising Bank”) pursuant to which the Advising Bank may act as the
advising bank on Letters of Credit issued by the Bank for Obligor. Pursuant to
the terms of the Advising Bank Agreements, the Bank may become obligated to
reimburse, indemnify, and repay the Advising Bank’s costs and expenditures made
or incurred by the Advising Bank on behalf of the Bank or Obligor, including,
without limitation, expenditures made by the Bank or the Advising Bank in
connection with any Letter of Credit issued by the Bank on behalf of the Obligor
and including the honoring of drafts drawn under any such Letter of Credit.

 

3. To pay ON DEMAND in United States currency to the Bank, unless and except to
the extent payment thereof is timely made to the Bank by or on behalf of Obligor
with borrowed funds obtained pursuant to the terms of the Credit Agreement:

 

  A) A sum equal to each amount which the Bank incurs or pays to a third-party
or becomes obligated to pay to a third-party, or which the Bank pays to an
Advising Bank, or becomes obligated to pay to an Advising Bank, pursuant to or
in connection with any Letters of Credit issued for the account of Obligor or in
connection with the Advising Bank Agreements. The Obligor agrees that the Bank
is entitled to pay all such sums as are demanded by the Advising Bank or other
third party and shall not be obligated to make inquiry with respect to the
appropriateness of the amount or nature of any such sums being demanded. The
Obligor’s obligation as provided above in this paragraph 3(A) shall be absolute
in the absence of gross negligence or intentional misconduct by the Bank.

 

  B)

Interest on any and all amounts remaining unpaid hereunder at any time shall be
computed on the basis of a 360 day year, with each interest payment based upon
the actual number of days in the period covered by payment, which interest shall

 

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be payable whether before or after maturity, by acceleration or otherwise, and
whether or not judgment is obtained, at a variable rate per annum which is equal
to the rate announced by the Bank from time to time as its Prime Rate (the
“Prime Rate”, which rate is not necessarily tied to any other index or standard
used by the Bank or others) plus five (5) percentage points. Changes in the
interest rate payable hereunder shall take place immediately upon a change in
the Prime Rate without notice or demand of any kind.

 

In the event that demand for payment has not been made, such interest shall be
payable monthly in arrears on the first day of each month.

 

  C) All costs of collection of all amounts which the Bank pays to an Advising
Bank or other third-parties or becomes obligated to pay to Advising Bank or to
other third-parties pursuant to or in connection with the Letters of Credit
issued for the account of Obligor, or the Advising Bank Agreements, including
reasonable attorneys’ fees and court costs.

 

  D) Upon the occurrence and during the continuation of an event of default (as
hereinafter defined), the Obligor shall immediately pay to the Bank, as cash
collateral, such amount, in cash, as the Bank is then or may thereafter become
obligated to pay to an Advising Bank or to third-parties under any Letters of
Credit issued for the account of Obligor, or under or pursuant to the Advising
Bank Agreements, such sum to be determined by the Bank in its sole discretion.
Such sum shall be held by the Bank as cash collateral for the obligations of the
Obligor hereunder.

 

4. To grant, and does hereby grant, to the Bank as security for any and all
obligations hereunder, a security interest in any and all property, including
deposits of the Obligor, now or at any time hereafter in the possession or
control of the Bank (inclusive of such property as may be in transit by mail or
carrier to or from the Bank), or that of any third party acting in behalf of any
Obligor, whether for the express purpose of being used by the Bank as collateral
or for safekeeping or any other or different purpose, a lien being hereby given
the Bank upon any and all such property for the aggregate amount of such
obligations. The Bank is hereby authorized, at its option, upon the occurrence
and during the continuance of an event of default, and without obligation to do
so, to transfer to and/or register in its name or in the name of its nominee all
or any part of the property which may be held by it as security at any time
hereunder, and with or without notice to the Obligor. The Obligor hereby
authorizes the Bank, acting in its discretion at any time and whether or not any
property then held by the Bank as collateral security is deemed by the Bank to
be adequate, to hold as additional collateral security any and all monies now or
hereafter with the Bank on deposit or otherwise to the credit of or belonging to
the Obligor and then or thereafter to apply, in whole or in part, the monies so
held upon all or any of such obligations.

 

5. The Obligor shall furnish information, financial or otherwise, to the Bank
within 45 days of any request, which information shall be in form and detail
satisfactory to the Bank. Such information shall be prepared by a firm of
certified public accountants on an audited or reviewed

 

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basis as the Bank may require. The Obligor acknowledges that the Bank may also
request and obtain information, financial or otherwise, about the Obligor from
WBCC.

 

6. Administration of Credit.

 

  A) Obligor will promptly examine the copy of the Letters of Credit (and any
amendments thereof) sent to Obligor by the Bank or an Advising Bank, as well as
all other instruments and documents delivered to Obligor from time to time, and,
in the event Obligor has any claim of noncompliance with the instructions or of
any discrepancy or other irregularity, Obligor will promptly notify the Bank and
Advising Bank thereof in writing, and Obligor will conclusively be deemed to
have waived any such claim against the Bank, Advising Bank and any of the Bank’s
other correspondents unless such prompt notice is given as aforesaid.

 

  B) The Bank or Advising Bank may (but need not) pay any drafts otherwise in
order which are signed or issued by, or accompanied by required statements or
documents otherwise in order which are signed or issued by, the custodian,
executor, administrator, trustee in bankruptcy, debtor in possession, assignees
for the benefit of creditor, liquidator, receiver or other agent or legal
representative of the beneficiary of the Letters of Credit or other party who is
authorized under the Letter of Credit to draw or issue any drafts, required
statements or other documents.

 

  C) Neither the Bank nor any Advising Bank or any of the Bank’s other
correspondents shall be responsible for, and neither the Bank’s or Advising
Bank’s powers and rights hereunder nor Obligor’s obligations shall be affected
by: (i) any act or omission pursuant to Obligor’s instructions; (ii) any other
act or omission of the Bank, Advising Bank or any of the Bank’s other
correspondents or their respective agents or employees other than any such
arising from its or their gross negligence or willful misconduct; (iii) the
validity, accuracy or genuineness of drafts, documents or required statements,
even if such drafts, documents or statements should in fact prove to be in any
or all respects invalid, inaccurate, fraudulent or forged (and notwithstanding
that Obligor shall have notified Bank, Advising Bank or any of Bank’s other
correspondents thereof); (iv) failure of any draft to bear any reference or
adequate reference to the Letters of Credit; (v) errors, omissions,
interruptions or delays in transmission or delivery of any messages however sent
and whether or not in code or cipher; (vi) any act, default, omission,
insolvency or failure in business of any other person (including any
correspondent) or any consequences arising from causes beyond the Bank’s,
Advising Bank’s or the Bank’s other correspondents’ control; or (vii) any acts
or omissions of any beneficiary of the Letters of Credit or transferee of the
Letters of Credit, if transferable.

 

  D)

Except to this extent this Agreement expressly provides otherwise, this
Agreement, the Letters of Credit and all transactions thereunder are subject to
the “Uniform Customs and Practice for Documentary Credits” of the International
Chamber of Commerce as in effect when the subject Letter of Credit is issued or

 

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renewed. Except as otherwise expressly provided, the Bank, Advising Bank and/or
the Bank’s other correspondents may, to the extent that the Bank, Advising Bank
or the Bank’s other correspondents deem appropriate: (i) consider applicable to
the Letters of Credit and any or all transactions thereunder any laws,
regulations, customs, or usages, foreign or domestic, deemed appropriate and not
inconsistent with said “Uniform Customs and Practice for Documentary Credits”;
and (ii) accept bills of lading not marked notify the account party named in the
Letters of Credit or not indicating the reference number of the subject Letter
of Credit notwithstanding anything herein specified to the contrary.

 

  E) Obligor will cause the property covered by the Letters of Credit to be
adequately insured in amounts, against risks and by companies satisfactory to
the Bank, assign the policies or certificates thereof to the Bank or make loss
payable to the Bank, at its option, and furnish the Bank upon request evidence
of compliance with the foregoing. If the Bank at any time deems such insurance
inadequate for any reason, the Bank may procure such insurance as it deems
necessary, at Obligor’s expense.

 

  F) Obligor will procure promptly necessary import, export or shipping licenses
for the property covered by the Letters of Credit, comply with all governmental
regulations, foreign or domestic (including exchange regulations) with regard
thereto or the financing thereof, and furnish to the Bank, upon request,
certificates evidencing the foregoing, and on demand, pay to the Bank any
amount(s) the Bank may be required to expend in respect thereto.

 

  G) For such Letters of Credit expiring at the Bank’s counters, the Bank is the
nominated bank for payment or acceptance. For such Letters of Credit not
expiring at the Bank’s counters, if Obligor does not nominate a bank to be
available for payment, acceptance or negotiation of the Letters of Credit, then
the Bank may issue the Letters of Credit as negotiable by any bank or the Bank
may nominate any of its branches or affiliates or Advising Bank or any of its
other correspondents of its choice. It is further understood that the Bank may,
in its sole discretion, waive its stipulation of the nominated bank and accept
presentations of documents from a bank not so nominated by Obligor.

 

  H) Without limiting other forms of action, the Bank, Advising Bank and/or the
Bank’s other correspondents may accept and act on telefacsimile, Internet-based,
electronic, digital or other machine-readable instructions and/or documentation
relating to, or in connection with, Letters of Credit.

 

7. Obligor agrees that the Bank may at any time and from time to time, in its
discretion, by agreement with Obligor, and, if this Agreement is executed by two
or more Obligors, each Obligor agrees that the Bank may at any time, and from
time to time, in its discretion, by agreement with one or more Obligors (whether
or not such other Obligor(s) shall have been so appointed in any joint
application agreement): (i) further finance or refinance any transaction under
the Letters of Credit; (ii) renew, extend or change the time of payment or the
manner, place or terms of payment of any of the obligations; (iii) settle or
compromise any of the

 

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obligations or subordinate the payment thereof to the payment of any other debts
of or claims against any Obligor which may at the time be due or owing to the
Bank; or (iv) release any Obligor or any guarantor or any collateral, or modify
the terms under which such collateral is held, or forego any right of setoff, or
modify or amend in any way this Agreement or the Letters of Credit, or give any
waiver or consent under this Agreement; all in such manner and on such terms as
he Bank may deem proper and without notice of further assent from such Obligor.
In any such event, each Obligor shall remain bound by such event and this
Agreement after giving effect to such event, and the obligations under this
Agreement shall be continuing obligations in respect of any transaction so
financed or refinanced.

 

8. If the Bank is now or hereafter becomes subject to any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Bank, or any other condition is imposed
upon the Bank, which imposes a cost upon the Bank, and the result, in the
determination of the Bank, is to increase the cost to the Bank of maintaining
the Letters of Credit or paying or funding the payment of any draft thereunder,
or to reduce the amount of any sum received or receivable by the Bank hereunder,
or reduce the return to the Bank, Obligor will pay to the Bank upon demand such
amount in respect of such increased cost or reduction as the Bank may determine
to be the additional amount or amounts required to compensate the Bank for such
increased cost or reduction. In making the determinations contemplated
hereunder, the Bank may make such estimates, assumptions, allocations and the
like which the Bank in good faith determines to be appropriate, and the Bank’s
selection thereof and the Bank’s determinations based thereon shall be final and
binding and conclusive upon Obligor.

 

9. An event of default shall exist upon the occurrence and during the
continuance of any or any combination of the following: (i) failure by the
Obligor to make a payment when due hereunder; or (ii) failure (after any
applicable grace period) to perform any other obligation of the Obligor to the
Bank under this Agreement or to the Bank, Advising Bank or any other of the
Bank’s correspondents under any other document or agreement with the Bank,
Advising Bank or any of the Bank’s other correspondents; or (iii) an “Event of
Default” occurring under the terms of the Credit Agreement (as that quoted term
is defined therein).

 

10. The Bank’s rights and interests hereunder shall continue unimpaired, and the
Obligor shall be and remain obligated in accordance with the terms and
provisions hereof, notwithstanding the release or substitution of any property
which may be held as security hereunder at any time or the decline or impairment
of the value, saleability or utility of such property, or of any rights or
interest therein or the release of or compromise with any other party who may be
primarily or secondarily liable for the obligations of the Obligor hereunder or
otherwise in connection with this Agreement. No delay, extension of time,
renewal, compromise or other indulgence which may occur or be granted by the
Bank shall impair the Bank’s rights or powers hereunder. The Bank shall not be
deemed to have waived any of its rights hereunder unless the Bank or its
authorized agent shall have signed such waiver in writing. No such waiver,
unless expressly stated therein, shall be effective as to any matter not
expressly referred to therein or which occurs subsequent to the date of such
waiver, nor as to any continuance of a breach after such waiver. All rights
granted to the Bank hereunder shall be cumulative and shall be supplementary of
and in addition to those granted or available to Bank under applicable law and
nothing herein shall be construed as limiting any such other right.

 

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11. Obligor agrees to reimburse the Bank upon demand for and to indemnify and
hold Bank harmless from and against all claims, liabilities, losses, costs and
expenses, including, but not limited to, attorneys’ fees and disbursements,
incurred or suffered by the Bank in connection with the Letters of Credit; such
claims, liabilities, losses, costs and expenses shall include but not be limited
to all such incurred or suffered by the Bank in connection with (a) the Bank’s
exercise of any right or remedy granted to it hereunder, (b) any claim and the
prosecution or defense thereof arising out of or in any way connected with this
Agreement, (c) the collection or enforcement of any obligations owed to the
Bank, (d) the Bank’s, Advising Bank’s or the Bank’s other correspondents’
accepting and acting on telefacsimile, Internet-based, electronic, digital or
other machine-readable instructions and/or documentation (absent gross
negligence or intentional misconduct on the part of the Bank), and (e) any of
the events or circumstances referred to in paragraph 6(c) hereof.

 

12. In no event will the Bank, Advising Bank or any of the Bank’s other
correspondents be responsible for any special, incidental or consequential
damages that Obligor or any other person may incur or experience by reason of
Obligor’s having entered into or relied on this Agreement or arising out of or
in connection with the Letters of Credit even if the Bank, Advising Bank or any
of the Bank’s other correspondents have been advised of the possibility of such
damages. The limitations of liability in this Agreement shall apply regardless
of the form in which such liability is asserted (whether in contract, tort
[including negligence, gross negligence or strict liability] or otherwise), and
regardless of whether the remedies hereunder fail of their essential purpose.

 

13. This Agreement shall become effective upon its receipt by the Bank, shall be
governed by the laws of the State of Connecticut without regard to the laws of
any other state under any rules pertaining to conflict of laws. The law of
Connecticut shall govern in all respects including, without limitation, matters
of title, construction, validity, performance and discharge, and shall be
binding upon the Obligor and its successors, assigns, and legal representatives,
and shall not be waived, altered, modified or amended as to any of its terms or
provisions, except as the Bank may consent thereto in writing duly signed for
and on its behalf.

 

14. No assignment or other transfer of all or any of the rights or obligations
of the Obligor hereunder, whether with regard to any property or otherwise, may
be made without the prior consent in writing of the Bank.

 

15. The execution, delivery and performance of this Agreement and any evidence
of indebtedness have been and will be authorized by requisite action of the
Obligor, contain the requisite number of signatures, and will not violate any
provisions of any law, any order of any court, or any provision of any
indenture, agreement, or other instrument to which the Obligor is a party or by
which it, or any of its property is bound.

 

16. This Agreement shall continue in full force and effect until the expiration
of the last of the Letters of Credit. Notwithstanding any such expiration, this
Agreement shall continue in full force and effect until all obligations then
outstanding (whether absolute or contingent) shall have been paid in full and
all rights of the Bank hereunder shall have been satisfied or other arrangements
for the securing of such rights satisfactory to the Bank’s shall have been made.

 

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17. If this Agreement is executed by two or more Obligors, they shall be jointly
and severally liable hereunder, and without limiting the above, all provisions
hereof regarding collateral shall apply to the obligations and collateral of any
or all of them.

 

18. This Agreement shall be binding upon the heirs, executors, administrators,
assigns and successors of each of the Obligors, and shall inure to the benefit
of and be enforceable by Bank, its successors, transferees and assigns.

 

19. Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

20. “Letter of Credit” as used herein shall refer to any letter of credit issued
by the Bank for the account of Obligor, as such letter of credit may be amended
and supplemented from time to time, and any and all renewals, increases,
extensions and replacements thereof and thereafter.

 

21. The terms of this Agreement are intended by the parties to be cumulative
with, and in addition to, and not in derogation of, the terms of the Credit
Agreement as they relate to the issuance and administration of, and the
reimbursement for drawings under, Letters of Credit. In the event of any
conflict or contradiction between the terms of this Agreement and such terms of
the Credit Agreement, the terms of this Agreement shall govern and control.

 

22. THE OBLIGOR ACKNOWLEDGES AND AGREES THAT THE TRANSACTIONS EVIDENCED BY THIS
AGREEMENT CONSTITUTE A COMMERCIAL TRANSACTION AS THAT TERM IS DEFINED IN SECTION
52-278(A) OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED.

 

23. THE OBLIGOR HEREBY WAIVES AND RELINQUISHES ANY RIGHTS WHICH IT MAY HAVE,
PURSUANT TO ANY LAW OR CONSTITUTIONAL PROVISION, INCLUDING, WITHOUT LIMITATION,
SECTION 52-278(A) ET SEQ. OF THE CONNECTICUT GENERAL STATUTES, TO ANY NOTICE OR
HEARING OR THE POSTING OF A BOND PRIOR TO ANY ATTEMPT BY THE BANK TO OBTAIN A
PREJUDGMENT REMEDY AGAINST THE OBLIGOR IN CONNECTION WITH SUCH TRANSACTIONS.

 

24. THE OBLIGOR HEREBY WAIVES TRIAL BY JURY AND ANY OBJECTION TO THE VENUE OF
ANY ACTION BROUGHT IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREIN AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.

 

Dated as of November [    ], 2004.

 

“OBLIGOR”

 

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MEMRY CORPORATION, Individually, and as Borrowing Representative for all
Borrowers under the Credit Agreement By:        

Name:

       

Title:

   

 

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EXHIBIT “B”

 

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AUTOMATED LETTER OF CREDIT AGREEMENT

 

This Agreement is entered into as of November 9, 2004, by the undersigned
individually and collectively (the “Obligor”), to and in favor of WEBSTER BANK,
NATIONAL ASSOCIATION (the “Bank”).

 

RECITALS

 

At the request of the Obligor, the Bank has agreed to issue certain Letters of
Credit for the account of Obligor pursuant to a Master Letter of Credit
Agreement dated of even date herewith between the Bank and the Obligor (as it
may be modified or amended from time to time, the “Master Letter of Credit
Agreement”; capitalized terms used herein, but not expressly defined herein,
shall have the meanings given to such terms in the Master Letter of Credit
Agreement or in the Credit Agreement defined therein).

 

The Bank will provide an Automated Letter of Credit Service (the “Service”) that
facilitates the electronic transmission of data related to the Letters of
Credit. Such Service may be provided to the Bank under license from a
third-party (the “Licensor”) and such Service may include, among other things,
use of certain Licensor Software (the “Licensor Software”). (Any reference in
this Agreement to “Service” shall include, but not be limited to, any Licensor
Software provided to Obligor.) In such case, the Bank will provide such Service
to Obligor by sublicense.

 

NOW THEREFORE, for valuable consideration, the Obligor, intending to be legally
bound, hereby covenants and agrees with the Bank as follows:

 

1. Right to Use Service.

 

(a) Subject to the terms of this Agreement, Bank hereby grants to Obligor a
non-exclusive, non-transferable right, for the term of this Agreement to use the
Service for the sole purpose of exchanging information concerning requests by
Obligor to the Bank to issue Letters of Credit and to exchange information
regarding Letters of Credit issued by Bank (or on its behalf) to Obligor.

 

(b) Any Licensor Software included in the Services shall be provided in object
code format only.

 

2. Maintenance/Modification.

 

(a) The Bank will provide Obligor, in the Bank’s sole discretion, with new
versions of any manuals (“Manuals”) for the Service as such may be issued from
time to time. Such Manuals shall be provided by license or sublicense to Obligor
for use only in connection with the Service hereunder.

 

(b) The Bank will furnish telephone support to Obligor in the use and operation
of the Service during the Bank’s normal business hours which are 9:00 a.m. to
5:00 p.m., Monday thru Friday, exclusive of Bank observed holidays.

 

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(c) The Bank reserves the right to modify the Service at any time, provided that
the Bank will give reasonable advance notice to Obligor of any modification that
will affect the functioning of the Service.

 

(d) Obligor shall immediately notify Bank in writing of any errors, omissions or
interruption in, or delay or unavailability of, any part of the Service
identified by Obligor.

 

3. Disclosure of Obligor Information.

 

(a) Obligor shall make available to the Bank on demand such documentation and
information concerning Obligor as the Bank or any Licensor shall reasonably
require in connection with providing the Service, or compliance with applicable
law, including information and documentation concerning the identity of Obligor,
the nature of the business of Obligor and the nature of transactions for which
Obligor uses or intends to use the Service (“Obligor Information”).

 

(b) THE BANK WILL MAKE AVAILABLE TO ANY LICENSOR, ON DEMAND BY SUCH LICENSOR,
SUCH OBLIGOR INFORMATION AS LICENSOR SHALL REASONABLY REQUIRE IN CONNECTION WITH
PROVIDING THE SERVICE OR COMPLIANCE WITH APPLICABLE LAW.

 

(c) THE BANK SHALL REQUIRE ANY LICENSOR TO MAINTAIN SUCH OBLIGOR INFORMATION IN
CONFIDENCE AND TO LIMIT ITS DISCLOSURE (A) TO ITS OFFICERS, DIRECTORS, AND
EMPLOYEES, AFFILIATES, AUDITORS AND ATTORNEYS WHO HAVE A NEED TO KNOW IN
CONNECTION WITH PROVIDING THE SERVICE IN CONNECTION WITH THIS AGREEMENT; (B) TO
ITS AGENTS AND SUBCONTRACTORS WHO HAVE A NEED TO KNOW IN CONNECTION WITH
PROVIDING THE SERVICE IN CONNECTION WITH THIS AGREEMENT, PROVIDED THAT SUCH
THIRD PARTY HAS AGREED IN WRITING TO MAINTAIN THE CONFIDENTIALITY OF SUCH
INFORMATION ON TERMS NO LESS STRICT THAN THOSE HEREIN; AND (C) TO REGULATORY
OFFICIALS OR AS REQUIRED BY LAW. THE BANK WILL REQUIRE ANY LICENSOR TO USE THE
OBLIGOR INFORMATION ONLY FOR PURPOSES OF PROVIDING THE SERVICE IN CONNECTION
WITH THIS AGREEMENT.

 

(d) THE OBLIGATIONS IMPOSED UNDER SECTION 3.3 ABOVE SHALL NOT APPLY TO OBLIGOR
INFORMATION THAT IS MADE PUBLIC BY OBLIGOR; BECOMES GENERALLY AVAILABLE TO THE
PUBLIC; IS RECEIVED FROM A THIRD-PARTY WITHOUT RESTRICTION, AND WHO IS NOT
SUBJECT TO A DUTY OF CONFIDENTIALITY; IS DEVELOPED INDEPENDENTLY BY THE
RECEIVING PARTY; OR IS DISCLOSED WITH WRITTEN CONSENT OF OBLIGOR.

 

(e) OBLIGOR ACKNOWLEDGES THAT ITS INFORMATION WILL BE DISCLOSED AS PROVIDED
ABOVE IN SECTION 3.3 AND 3.4, AND OBLIGOR HEREBY CONSENTS TO SUCH DISCLOSURE BY
THE BANK TO ANY LICENSOR AND TO THE DISCLOSURE AND USE OF SUCH OBLIGOR
INFORMATION BY THE BANK AND ANY LICENSOR AS PROVIDED IN SECTION 3.3 AND 3.4
ABOVE.

 

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4. Representations and Warranties of Obligor.

 

(a) Obligor represents and warrants to the Bank as follows (and such
representations and warranties shall survive execution of this Agreement):

 

(i) No transaction to be processed through use of these Services is prohibited
by applicable law, regulation or rule;

 

(ii) Obligor is not a national of a designated blocked country or “Specially
Designated National”, “Blocked Entity”, “Specially Designated Terrorist”,
“Specially Designated Narcotics Trafficker” or “Foreign Terrorist Organization”,
as defined by the United States Office of Foreign Assets Control;

 

(iii) This Agreement has been duly authorized, executed and delivered on its
behalf and constitutes the legal, valid and binding obligation of Obligor. The
execution, delivery and performance of this Agreement by Obligor do not and will
not violate any applicable law, rule or regulation and do not require the
consent or approval of any governmental or other regulatory body except for such
consent and approvals as have been obtained and are in full force and effect.

 

(iv) Obligor will comply with all laws, rules and regulations applicable to the
Service.

 

(v) Obligor will not export or transship any Licensor Software in violation of
any United States or other laws or regulations.

 

5. Confidentiality.

 

(a) Obligor acknowledges that any computer, software, Licensor Software,
information and data processes and documentation of the Bank or any Licensor,
including but not limited to the Manuals, in connection with the Service
(collectively the “Material”) are the exclusive and confidential property of the
Bank or any Licensor, as the case may be. Obligor shall hold the Material in
trust and confidence, keep the Material confidential and not disclose the
Material to any persons other than its respective employees who need to know
such information in order for them to use the Service and who have been advised
of the confidential nature of the Material, provided, however, that this
sentence does not apply to information in the public domain other than by reason
of a breach of this Agreement or any written agreement. Obligor assumes full
liability for any breach of this paragraph by its employees.

 

(i) Upon termination of this Agreement for any reason, Obligor shall return to
the Bank all copies of the Material, and any portion thereof, in its possession
or control or certify to the Bank in writing that all such copies of the
Material, and any portion thereof, have been destroyed. The provisions of this
Section 5.1 shall not affect the copyright status of any of the Material that
may be copyrighted and shall apply to all Material whether or not copyrighted.

 

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6. Codes, Passwords and Encryption

 

(a) The Bank may provide authorization codes, passwords and authentication keys
for use by Obligor to gain access to the Service, and may provide Obligor with
the ability to establish its own authorization codes, passwords and
authentication keys. Obligor shall treat all codes, passwords and authentication
keys with extreme care. The Bank may from time to time direct the change or
replacement of codes or passwords, and Obligor shall cause its employees to
implement any such changes in a timely manner. Obligor agrees to indemnify and
hold harmless the Bank and any Licensor from all costs incurred and losses
suffered by either of them arising from or in connection with (a) the
misappropriation of any codes, passwords or authentication keys or (b) any
unauthorized use of the Service by persons gaining access thereto from or
through Obligor.

 

(b) The Bank or any Licensor may provide the Services in encrypted transmission
versions and in an unencrypted transmission version, based on the Bank’s or
Licensor’s understanding of regulatory directives and the business needs of the
Bank and Obligor. Neither the Bank nor any Licensor shall have any liability to
Obligor arising out of the failure to provide an encrypted version of the
Service to Obligor, nor shall Bank or Licensor be liable for any failures,
errors, defects, inadequacies or omissions in the encryption features that may
be provided with the Service. The encryption features of the Service may be
deactivated without notice at any time for maintenance and repair purposes.

 

7. Warranty.

 

(A) THE BANK, ANY LICENSOR AND EITHER OF THEIR MANUFACTURERS AND SUPPLIERS MAKE
NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE
SERVICE, OR ANY OTHER INFORMATION OR MATERIALS PROVIDED HEREUNDER, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. THE SERVICE AND OTHER INFORMATION AND MATERIALS ARE PROVIDED ON AN “AS
IS” BASIS.

 

8. Limitation of Liability.

 

(a) The Bank shall have no liability for any losses, damages, injuries, claims,
costs or expenses incurred by Obligor or any other person arising out of or in
connection with this Agreement or the Service or any Material or information
supplied by the Bank or any Licensor in connection therewith except for money
damages suffered as the direct result of the gross negligence or willful
misconduct of the Bank.

 

(b) Any Licensor, its affiliates, and their respective directors, officers,
employees, agents, suppliers and contractors, shall have no liability for any
losses, damages, injuries, claims, costs or expenses incurred by Obligor or any
other person arising out of or in connection with this Agreement or the Service
or any Materials or information supplied by the Bank or such Licensor in
connection therewith.

 

(c) In no event shall the Bank, any Licensor, their affiliates, or any of their
respective directors, officers, employees, agents, suppliers and contractors, be
responsible for any special,

 

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

incidental or consequential damages that Obligor or any other person may incur
or experience by reason of Obligor’s having entered into or relied on this
Agreement or arising out of or in connection with the Service or Material, even
if the Bank or any Licensor has been advised of the possibility of such damages,
nor shall the Bank or any Licensor be liable for acts of God, machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar causes beyond
such persons’ reasonable control.

 

(d) The limitations of liability in this Agreement shall apply regardless of the
form in which such liability is asserted (whether in contract, tort[ including
negligence, gross negligence or strict liability] or otherwise), and regardless
of whether the remedies available hereunder fail of their essential purpose.

 

9. Modifications to the Service.

 

(a) Obligor agrees not to copy, modify, attempt to modify, decompile or reverse
engineer the Service or Material without the Bank’s prior written consent. In
the event that Bank should decide to permit Obligor to make a copy of any
Licensor Software or Manuals provided, Obligor will reproduce all of Bank’s and
any Licensor’s proprietary notices on such copies.

 

(b) Obligor agrees that any modification to the Service by Obligor, whether with
or without the Bank’s or Licensor’s consent, shall become property of the Bank
or any Licensor as the case may be.

 

(c) Obligor shall install any update or upgrade to the Licensor Software if so
required by the Bank.

 

10. Termination.

 

(a) Except as may be otherwise provided in this Section 10, either party may
terminate this Agreement upon thirty (30) days prior written notice to the
other.

 

(b) The Bank shall have the right to terminate this Agreement immediately if (i)
the contractual relationship between the Bank and any Licensor is terminated for
any reason; (ii) Obligor defaults in a material respect in the performance or
observance of any covenant or agreement required to be performed by it pursuant
to this Agreement and such default shall continue for ten (10) days after the
Bank gives written notice to Obligor specifying the default. The Bank shall also
have the right to terminate the provision of this Service to any Obligor upon
twenty (20) days prior written notice to such Obligor.

 

(c) Upon termination of this Agreement for any reason, the licenses and rights
granted to Obligor under this Agreement shall immediately terminate. The
provisions of Sections 3, 4.1, 5, 6, 7, 8, 9, 10.3, 11, 12, 13, 16 and 17 shall
survive the expiration or termination of this Agreement for any reason.

 

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

11. Ownership of Services and Materials.

 

(a) Obligor acknowledges and agrees that the Service and Material are the sole
property of the Bank or any Licensor, as the case may be,  , and Obligor has no
rights in any of them, or any other property of any Licensor (or its licensors),
other than those rights expressly granted under this Agreement.

 

12. Indemnification.

 

(a) Obligor shall indemnify and hold the Bank, any Licensor and each of their
affiliates, and each of their respective officers, directors, employees, agents,
contractors, licensors and suppliers, harmless from and against any and all
losses, damages, liabilities, claims, judgments, costs or expenses (including,
but not limited to, reasonable fees and expenses of counsel) incurred by any of
them and arising out of or relating in any way to (i) this Agreement, (ii)
Obligor’s breach of this Agreement, and (iii) the Service and Material.

 

13. Notices.

 

All notices required or permitted to be given hereunder shall be in writing and
shall be given by mailing the same, certified mail, return receipt requested,
postage prepaid, and addressed to the party being given the same at such address
as such party may, after the date hereof, have last specified for notices
thereafter given to it, or if such party shall not have so specified any such
address, then at the address for such party set out below:

 

Address for Bank:

 

Webster Bank, National Association

CityPlace II, 185 Asylum Street

Hartford, CT 06103

Attention: Mr. Dana Jositas

 

Address for Obligor:

 

See Signature Page of this Agreement

 

Any notice so mailed shall be deemed given, and shall be effective for all
purposes, two days after the mailing thereof. Any specification by a party of an
address for notices thereafter given to such party shall be made by notice given
hereunder to the other party.

 

14. Assignment.

 

(a) Neither party may assign this Agreement, or any of its rights hereunder, or
(except as contemplated hereby) delegate any of its duties hereunder, without
the prior written consent of the other party, except that the Bank may assign
this Agreement and its rights hereunder and delegate its duties hereunder
without Obligor’s consent to its parent or a subsidiary thereof or an entity
into or with which it may be merged or consolidated or to which substantially
all of its stock or assets may be transferred.

 

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

15. General.

 

(a) The invalidity, illegality or enforceability of any provision of this
Agreement shall in no way affect the validity, legality or enforceability of any
other provision. This Agreement contains the final, complete and exclusive
understanding of, and supersedes all prior or contemporaneous, oral or written,
agreements, understandings, representations and negotiations between the parties
relating to the subject matter of this Agreement except for the Master Letter of
Credit Agreement, which shall remain in effect in accordance with its terms. The
parties further agree that this Agreement may not in any way be explained or
supplemented by a prior or existing course of dealings between the parties, by
any usage of trade or custom, or by any prior performance between the parties
pursuant to this Agreement or otherwise. Notwithstanding the above, the Bank may
add additional terms to this Agreement to the extent requested to do so by any
Licensor as such Licensor deems reasonably necessary to protect its rights and
Obligor agrees to the incorporation of such additional terms. This Agreement
shall become effective upon its receipt by the Bank.

 

16. Jurisdiction: Jury Trial Waiver.

 

(a) All actions and proceedings relating directly or indirectly to this
Agreement shall be litigated in, and only in, courts located in the State of
Connecticut. Notwithstanding the above, if the Service is provided by license or
sublicense from a Licensor pursuant to an agreement between the Bank and such
Licensor governed by New York law, then all actions and proceedings relating
directly or indirectly to this Agreement shall be litigated in, and only in,
courts located in the borough of Manhattan, City of New York, State of New York.
The parties agree that such courts as referred to above are convenient forums
for them and irrevocably submit to the exclusive personal jurisdiction of such
courts. EACH PARTY HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

17. Governing Law.

 

(a) This Agreement shall be governed by, and construed and enforced in
accordance with, the internal substantive laws, and not the choice of law rules,
of the State of Connecticut, United States of America. Notwithstanding the
above, if the Services are provided by license or sublicense from a Licensor
pursuant to an agreement between the Bank and such Licensor that is governed by
New York law, then this Agreement shall be governed by, and construed and
enforced in accordance with, the internal substantive laws, and not the choice
of law rules, of the State of New York.

 

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

IN WITNESS WHEREOF, the Obligor has caused this Agreement to be executed as of
the date first above written.

 

“OBLIGOR” MEMRY CORPORATION, Individually, and as Borrowing Representative for
all Borrowers under the Credit Agreement By:        

Name:

       

Title:

   

Address for Notices:

     

Attn:

   

 

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

 

EXHIBIT 2.1(a)

FORM OF REVOLVING CREDIT NOTE

 

$6,500,000

  November 9, 2004     New York, New York

 

FOR VALUE RECEIVED, the undersigned (jointly and severally, individually and
collectively, “Borrower”), promise to pay to the order of WEBSTER BUSINESS
CREDIT CORPORATION, a New York corporation (“Lender”; Lender, together with any
other holder hereof, sometimes referred to herein as the “Holder”), at the
office of Lender located at One State Street, New York, New York 10004 or at
such other place as Lender may from time to time designate to Borrower in
writing, the principal sum of SIX MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($6,500,000), or such lesser amount as may be outstanding under
Revolving Advances made pursuant to the Credit Agreement (defined below), at
such time or times as are provided in the Credit Agreement (defined below) and,
in any event, on the last day of the Term, subject to acceleration upon the
occurrence and during the continuance of an Event of Default under the Credit
Agreement or earlier termination of the Credit Agreement pursuant to the terms
thereof, together with interest on the unpaid principal balance hereof from the
date hereof until the payment in full of this Note at the rate specified with
respect to the Revolving Advances in the Credit Agreement, payable at the times
and in the manner provided in the Credit Agreement.

 

It is contemplated that the principal sum evidenced hereby may be reduced from
time to time as a result of the repayment of Revolving Advances and that
additional Revolving Advances may be made from time to time but not to exceed
the Maximum Revolving Amount, as provided in the Credit Agreement.

 

This Note is the “Revolving Credit Note” issued to evidence the Revolving
Advances being made available by the Lender to Borrower pursuant to the
provisions of the Credit and Security Agreement, dated of even date herewith
(herein, as at any time amended, restated, modified or supplemented, called the
“Credit Agreement”; capitalized terms used herein and not defined herein having
the meanings assigned to them in the Credit Agreement), between Borrower and
Webster Business Credit Corporation, as Lender to which reference is hereby made
for a statement of the terms, conditions and covenants under which the
indebtedness evidenced hereby was made and is to be repaid, including, but not
limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby, to the maturity of the indebtedness represented
hereby upon the termination of the Credit Agreement and to the interest rate
payable hereunder. In no event, however, shall interest exceed the maximum
interest rate permitted by law. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, interest shall be payable at the
Default Rate.

 

Payment of this Note is secured by the Collateral and Holder is entitled to the
benefit of the Credit Agreement and any Other Document at any time delivered in
connection with the foregoing to secure or guarantee the Obligations, and is
subject to all of the agreements, terms and conditions therein contained.

 

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

If an Event of Default under Sections 11.7, 11.8, 11.9 or 11.20 of the Credit
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with reasonable attorneys’ fees if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof. If any other Event of Default shall occur and be continuing under the
Credit Agreement or any of the Other Documents, which is not cured within any
applicable grace period, then this Note may, as provided in the Credit
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys’ fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.

 

PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THIS NOTE
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

 

Borrower hereby waives presentment, demand for payment, protest and notice of
protest, notice of dishonor and all other notices in connection with this Note
(except for notices expressly provided for in the Credit Agreement or the Other
Documents).

 

WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY AUTHORIZED OFFICER OF
THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.

 

“BORROWER”

MEMRY CORPORATION

By:

       

Robert P. Belcher

   

Its Senior Vice President and Chief Financial

Officer

 

STATE OF CONNECTICUT

  )             )   ss.  

Hartford

COUNTY OF HARTFORD

  )        

 

On November 9, 2004, before me personally came Robert P. Belcher, to me known,
who, being by me duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of each entity described in and which
executed the foregoing instrument as “Borrower”; and that he signed his name
thereto by order of the board of directors (or other governing body) of said
entity.

 

 

NOTARY PUBLIC

 

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

 

EXHIBIT 2.1(b)

FORM OF TERM LOAN A NOTE

 

$1,900,000

  November 9, 2004     New York, New York

 

FOR VALUE RECEIVED, the undersigned (jointly and severally, individually and
collectively, “Borrower”), promises to pay to the order of WEBSTER BUSINESS
CREDIT CORPORATION, a New York corporation (“Lender”; Lender, together with any
other holder hereof, sometimes referred to herein as the “Holder”), at the
office of Lender located at One State Street, New York, New York 10004, or at
such other place as Lender may from time to time designate to Borrower in
writing, the principal sum of ONE MILLION NINE HUNDRED THOUSAND AND NO/100
DOLLARS ($1,900,000), in lawful money of the United States of America, payable
in installments in such amounts and at such times as are provided in the Credit
Agreement (defined below) and, in any event, on the last day of the Term subject
to acceleration upon the occurrence and during the continuance of an Event of
Default under the Credit Agreement or earlier termination of the Credit
Agreement pursuant to the terms thereof, together with interest on the unpaid
principal balance hereof from the date hereof until the payment in full of this
Note at the rate specified with respect to Term Loan A in the Credit Agreement,
payable at the times and in the manner provided in the Credit Agreement.

 

This Note is the Term Loan A Note issued to evidence the Term Loan A made by
Lender to Borrower pursuant to the Credit and Security Agreement, dated of even
date herewith (herein, as it may be amended, restated, modified or supplemented
form time to time, (called the “Credit Agreement”; capitalized terms used herein
and not defined herein have the meanings assigned to them in the Credit
Agreement), between Borrower and Lender, to which reference is hereby made for a
statement of the terms, conditions and covenants under which the indebtedness
evidenced hereby was made and is to be repaid, including, but not limited to,
those related to voluntary or mandatory prepayment of the indebtedness
represented hereby, to the maturity of the indebtedness represented hereby upon
the termination of the Credit Agreement and to the interest rate payable
hereunder. In no event, however, shall interest exceed the maximum interest rate
permitted by law. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, interest shall be payable at the Default Rate.

 

Payment of this Note is secured by the Collateral and Holder is entitled to the
benefit of the Credit Agreement and any Other Document at any time delivered in
connection with the foregoing to secure or guarantee the Obligations, and is
subject to all of the agreements, terms and conditions therein contained.

 

If an Event of Default under Sections 11.7, 11.8, 11.9 or 11.20 of the Credit
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with reasonable attorneys’ fees if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof. If any other Event of Default shall occur and be continuing under the
Credit Agreement or any of the Other Documents, which is not cured within any
applicable grace period, then this Note may, as provided in the Credit
Agreement, be declared to

 

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

be immediately due and payable, without notice, together with reasonable
attorneys’ fees, if the collection hereof is placed in the hands of an attorney
to obtain or enforce payment hereof.

 

PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THIS NOTE
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

 

Borrower hereby waives presentment, demand for payment, protest and notice of
protest, notice of dishonor and all other notices in connection with this Note
(except for notices expressly provided for in the Credit Agreement or the Other
Documents).

 

WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY AUTHORIZED OFFICER OF
THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.

 

“BORROWER”

MEMRY CORPORATION

By:

       

Robert P. Belcher

   

Its Senior Vice President and Chief Financial

Officer

 

STATE OF CONNECTICUT

  )             )   ss.  

Hartford

COUNTY OF HARTFORD

  )        

 

On November 9, 2004, before me personally came Robert P. Belcher, to me known,
who, being by me duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of each entity described in and which
executed the foregoing instrument as “Borrower”; and that he signed his name
thereto by order of the board of directors (or other governing body) of said
entity.

 

 

NOTARY PUBLIC

 

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

 

EXHIBIT 2.1(c)

FORM OF TERM LOAN B NOTE

 

$2,500,000

  November 9, 2004     New York, New York

 

FOR VALUE RECEIVED, the undersigned (jointly and severally, individually and
collectively, “Borrower”), promises to pay to the order of WEBSTER BUSINESS
CREDIT CORPORATION, a New York corporation (“Lender”; Lender, together with any
other holder hereof, sometimes referred to herein as the “Holder”), at the
office of Lender located at One State Street, New York, New York 10004, or at
such other place as Lender may from time to time designate to Borrower in
writing, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($2,500,000), in lawful money of the United States of America, payable
in installments in such amounts and at such times as are provided in the Credit
Agreement (defined below) and, in any event, on the Term Loan B Maturity Date
(as defined in the Credit Agreement) subject to acceleration upon the occurrence
and during the continuance of an Event of Default under the Credit Agreement or
earlier termination of the Credit Agreement pursuant to the terms thereof,
together with interest on the unpaid principal balance hereof from the date
hereof until the payment in full of this Note at the rate specified with respect
to Term Loan B in the Credit Agreement, payable at the times and in the manner
provided in the Credit Agreement.

 

This Note is the Term Loan B Note issued to evidence the Term Loan B made by
Lender to Borrower pursuant to the Credit and Security Agreement, dated of even
date herewith (herein, as it may be amended, restated, modified or supplemented
form time to time, (called the “Credit Agreement”; capitalized terms used herein
and not defined herein have the meanings assigned to them in the Credit
Agreement), between Borrower and Lender, to which reference is hereby made for a
statement of the terms, conditions and covenants under which the indebtedness
evidenced hereby was made and is to be repaid, including, but not limited to,
those related to voluntary or mandatory prepayment of the indebtedness
represented hereby, to the maturity of the indebtedness represented hereby upon
the termination of the Credit Agreement and to the interest rate payable
hereunder. In no event, however, shall interest exceed the maximum interest rate
permitted by law. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, interest shall be payable at the Default Rate.

 

Payment of this Note is secured by the Collateral and Holder is entitled to the
benefit of the Credit Agreement and any Other Document at any time delivered in
connection with the foregoing to secure or guarantee the Obligations, and is
subject to all of the agreements, terms and conditions therein contained.

 

If an Event of Default under Sections 11.7, 11.8, 11.9 or 11.20 of the Credit
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with reasonable attorneys’ fees if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof. If any other Event of Default shall occur and be continuing under the
Credit Agreement or any of the Other Documents, which is not cured within any

 

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

applicable grace period, then this Note may, as provided in the Credit
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys’ fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.

 

PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THIS NOTE
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

 

Borrower hereby waives presentment, demand for payment, protest and notice of
protest, notice of dishonor and all other notices in connection with this Note
(except for notices expressly provided for in the Credit Agreement and the Other
Documents).

 

WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY AUTHORIZED OFFICER OF
THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.

 

“BORROWER”

MEMRY CORPORATION

By:

       

Robert P. Belcher

   

Its Senior Vice President and Chief Financial

Officer

 

STATE OF CONNECTICUT

  )             )   ss.  

Hartford

COUNTY OF HARTFORD

  )        

 

On November 9, 2004, before me personally came Richard P. Belcher, to me known,
who, being by me duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of each entity described in and which
executed the foregoing instrument as “Borrower”; and that he signed his name
thereto by order of the board of directors (or other governing body) of said
entity.

 

 

NOTARY PUBLIC

 

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

 

EXHIBIT 2.1(d)

FORM OF CAPITAL EXPENDITURE LOAN NOTE

 

$1,000,000

   November 9, 2004      New York, New York

 

FOR VALUE RECEIVED, the undersigned (jointly and severally, individually and
collectively, “Borrower”), promises to pay to the order of WEBSTER BUSINESS
CREDIT CORPORATION, a New York corporation (“Lender”; Lender, together with any
other holder hereof, sometimes referred to herein as the “Holder”), at the
office of Lender located at One State Street, New York, New York 10004, or at
such other place as Lender may from time to time designate to Borrower in
writing, the principal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000), or,
if less, the outstanding principal amount of the Capital Expenditure Loan, in
lawful money of the United States of America, payable in installments in such
amounts and at such times as are provided in the Credit Agreement (defined
below) and, in any event, on the last day of the Term subject to acceleration
upon the occurrence and during the continuance of an Event of Default under the
Credit Agreement or earlier termination of the Credit Agreement pursuant to the
terms thereof, together with interest on the unpaid principal balance hereof
from the date hereof until the payment in full of this Note at the rate
specified with respect to the Capital Expenditure Loan in the Credit Agreement,
payable at the times and in the manner provided in the Credit Agreement.

 

This Note is the Capital Expenditure Loan Note issued to evidence the Capital
Expenditure Loan made by Lender to Borrower pursuant to the Credit and Security
Agreement, dated of even date herewith (herein, as it may be amended, restated,
modified or supplemented form time to time, (called the “Credit Agreement”;
capitalized terms used herein and not defined herein have the meanings assigned
to them in the Credit Agreement), between Borrower and Lender, to which
reference is hereby made for a statement of the terms, conditions and covenants
under which the indebtedness evidenced hereby was made and is to be repaid,
including, but not limited to, those related to voluntary or mandatory
prepayment of the indebtedness represented hereby, to the maturity of the
indebtedness represented hereby upon the termination of the Credit Agreement and
to the interest rate payable hereunder. In no event, however, shall interest
exceed the maximum interest rate permitted by law. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, interest shall be
payable at the Default Rate.

 

Payment of this Note is secured by the Collateral and Holder is entitled to the
benefit of the Credit Agreement and any Other Document at any time delivered in
connection with the foregoing to secure or guarantee the Obligations, and is
subject to all of the agreements, terms and conditions therein contained.

 

If an Event of Default under Sections 11.7, 11.8, 11.9 or 11.20 of the Credit
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with reasonable attorneys’ fees if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof. If any other Event of Default shall occur and be continuing

 

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

under the Credit Agreement or any of the Other Documents, which is not cured
within any applicable grace period, then this Note may, as provided in the
Credit Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys’ fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.

 

PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THIS NOTE
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

 

Borrower hereby waives presentment, demand for payment, protest and notice of
protest, notice of dishonor and all other notices in connection with this Note
(except for notices expressly provided for in the Credit Agreement or the Other
Documents).

 

WITNESS THE DUE EXECUTION HEREOF BY THE RESPECTIVE DULY AUTHORIZED OFFICER OF
THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.

 

“BORROWER”

MEMRY CORPORATION

By:        

Robert P. Belcher

    Its Senior Vice President and Chief Financial Officer

 

STATE OF CONNECTICUT

   )      )  ss. Hartford

COUNTY OF HARTFORD

   )

 

On November 9, 2004, before me personally came Robert P. Belcher, to me known,
who, being by me duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of each entity described in and which
executed the foregoing instrument as “Borrower”; and that he signed his name
thereto by order of the board of directors (or other governing body) of said
entity.

 

 

NOTARY PUBLIC

 

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

EXHIBIT 2.10(b)

FORM OF EXCESS CASH FLOW CERTIFICATE

 

This certificate is given pursuant to Section 2.10(b) of that certain Credit and
Security Agreement, dated as of November 9, 2004, among MEMRY CORPORATION, as
Borrowing Representative, any other Borrowers party thereto and WEBSTER BUSINESS
CREDIT CORPORATION, as Lender (as such agreement has been, or may be, amended or
otherwise modified from time to time, the “Credit Agreement”). Capitalized terms
used herein without definition shall have the meanings set forth in the Credit
Agreement.

 

The officer of Borrowing Representative executing this certificate is a
Designated Officer of Borrowing Representative having the title inscribed below
and as such is duly authorized to execute and deliver this certificate on behalf
of Borrowing Representative.

 

By executing this certificate, such officer hereby certifies on behalf of the
Borrower to Lender that:

 

  (a) set forth below is a schedule of Excess Cash Flow for the Fiscal Year
ended                         ,              and the calculation of the required
repayment of $                    ;

 

  (b) the schedule set forth below is based on the audited financial statements
which have been delivered to Lender in accordance with subsection 10.7

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate in his (her)
official capacity, and not individually, as of                          ,
200[  ].

 

MEMRY CORPORATION

By:

       

Name:

   

Title:

 

[TO BE USED POST-CLOSING]

 

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

EXCESS CASH FLOW CERTIFICATE

 

Date:                     ,             

 

Excess Cash Flow is calculated as follows for the period consisting of the
Fiscal Year ending                     , 200  :

 

EBITDA:      1.   net income (or loss) of Borrowers on a consolidated basis (as
applicable) for such period (excluding extraordinary gains and losses but
including, for the avoidance of doubt, the net proceeds from business
interruption insurance), plus   

$                    

2.   all interest expense of Borrowers on a consolidated basis for such period,
plus   

$                    

3.   amounts expensed by Borrowers on a consolidated basis for such period for
federal, state and local taxes (including the use of deferred tax assets), plus
  

$                    

4.   depreciation expenses for such period, plus   

$                    

5.   amortization expenses for such period, plus   

$                    

6.   any fees and expenses incurred in connection with the consummation of the
transactions contemplated by the Credit Agreement, the Subordinated Debt
Documents, or the acquisition referred to in Section 9.1(z) of the Credit
Agreement, to the extent same are not capitalized and not exceeding the Maturity
Threshold plus   

$                    

7.   any non-cash charges or expenses as a result of the operation of SFAS 141
or 142 and relating to the impairment of goodwill   

$                    

8.   Sum of items 1 through 7.   

$                    

   

(EBITDA)

     EXCESS CASH FLOW      A.  

EBITDA

  

$                    

Less:  

Unfinanced Capital Expenditures

  

$                    

   

Fixed Charges

  

$                    

    Voluntary Principal Prepayments of the Term Loans and the Capital
Expenditure Loan   

$                    

 

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

Total Deductions   

$                    

EXCESS CASH FLOW   

$                    

Required prepayment percentage   

50%

Required Prepayment Amount   

$                

 

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

EXHIBIT 4.8

FORM OF ACCOUNTANTS’ ACCESS LETTER

 

November 9, 2004

 

Via Certified Mail -        Return Receipt Requested      ______________ ______
     ______________ ______    [NAME AND ADDRESS OF BORROWERS’ CPA]
______________ ______      Attn:  _________ ______     

 

Ladies and Gentlemen:

 

Please be advised that in connection with a Credit and Security Agreement and
related agreements thereto (as amended, modified, restated or supplemented from
time to time, the “Agreements”), each dated as of the date hereof, by and
between ourselves as a Borrower and as Borrowing Representative for all
Borrowers so identified therein, certain Lender as so identified therein, and
Webster Business Credit Corporation, as Lender, we have agreed, among other
things, that the Lender may, from time to time, confer directly with you with
respect to our business and financial affairs and that we would direct you,
which we hereby do, to answer questions with respect to our business and
financial affairs, directly as and when requested. If and when such requests are
made, please advise us of the nature of the request and your response thereto.

 

The instructions given by this letter shall be irrevocable so long as we have
any obligations for money borrowed under the Agreements.

 

Very truly yours,

MEMRY CORPORATION

Borrowing Representative on behalf of all Borrowers

By:        

Robert P. Belcher

    Its Senior Vice President and Chief Financial Officer

 

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

EXHIBIT 4.8(b)

FORM OF ACCOUNTANTS’ RESPONSE LETTER

 

(See attached)

 

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

Exhibit 4.8(b)

to Credit Agreement

 

Dear Sir:

 

We have received your letter dated [date], a copy of which is enclosed. Please
be advised that Deloitte & Touche LLP will comply with applicable professional
standards concerning the disclosure of confidential client information with
respect to any questions regarding financial matters of Blank Company (the
“Company”) directed to us by [name of third party specified] in connection with
our engagement to audit [review] the Company’s financial statements. We do not,
however, deliver to a lender or any third party, a company’s financial
statements, or reports that we may issue to such company. Furthermore, we do not
have, and we specifically disclaim, notwithstanding your authorization and
direction, any obligation to deliver reports or disclose information to [name of
third party specified]. In addition, we will not attend any meeting with [name
of third party specified] or respond to any significant inquiry concerning the
internal affairs of the Company without a representative from the Company’s
management present. Furthermore, we may determine that certain inquiries or
requests that might be directed to us should be directed to the Company’s
management, or that we are not in a position to respond to certain questions or
requests for information. Accordingly, this letter is not an agreement to
respond, nor should the letter be construed as our agreement to respond, to
inquiries from [name of third party specified]. We also wish to emphasize that
our working papers are not the property of the Company and that we have not
agreed to provide [name of third party specified] access to such working papers.
We also wish to emphasize that our “management letters” are, as stated in such
reports, “intended solely for the information and use of the audit committee,
management, and others within the organization” and accordingly, should not be
provided to third parties.

 

Yours truly,

DELOITTE & TOUCHE LLP

 

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

EXHIBIT 10.9

FORM OF COMPLIANCE CERTIFICATE

 

Delivered Pursuant to §10.9 of

the Credit and Security Agreement

dated as of November 9, 2004 (the “Credit Agreement”)

 

The undersigned, the [                    ] of Memry Corporation (“Borrower”),
hereby certifies (on behalf of the Borrower and not in his or her individual
capacity) as follows:

 

FINANCIAL COVENANTS      1.         Fixed Charge Coverage Ratio          (i)  
net income (or loss) of Borrowers on a consolidated basis (as applicable) (after
eliminating extraordinary non-recurring items of income but including business
interruption proceeds) for the period ending                     , 200     

$                    

    (ii)   depreciation and amortization for such period   

$                    

    (iii)   amounts expensed by Borrowers on a consolidated basis for such
period for federal, state and local income taxes (including the use of tax
deferred assets)   

$                    

    (iv)   fees or expenses incurred in connection with the consummation of the
transactions of the transaction contemplated by the Credit Agreement, the
Subordinated Debt Documents or the acquisition referred to in Section 9.1(z) of
the Credit Agreement (to the extent not capitalized and not exceeding the
Materiality Threshold; amounts capitalized being covered by clause (ii) above)
  

$                    

    (v)   interest expense of Borrowers on a consolidated basis for such period
  

$                    

    (vi)   other non cash charges for such period as a result of the operation
of SFAS 141 or 142   

$                    

    (vii)   the sum of (i), (ii), (iii), (iv), (v) and (vi)   

$                    

    (viii)   Capital Expenditures (not financed with purchase money Indebtedness
or capitalized leases) made during such period   

$                    

    (ix)   (vii) minus (viii)   

$                    

    (x)   cash interest required to be paid during such period   

$                    

    (xi)   Scheduled principal payments on Funded Indebtedness during such
period (excluding Revolving Advances)   

$                    

    (xii)   all capitalized lease payment of Borrowers on a consolidated basis
made during such period   

$                    

    (xiii)   Cash income taxes   

$                    

    (xiv)   The sum (without duplication) of (x), (xi), (xii) and (xiii)   

$                    

    (xv)   Ratio (of (ix) : (xiv)) for Period   

           :           

 

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

    (xvi)   Minimum Ratio permitted by the Credit Agreement    1.25 : 1.00 2.  
Leverage Ratio          (i)   Indebtedness for money borrowed, including the
Advances but excluding the Subordinated Debt as at                     , 200  
  

$                    

    (ii)   Indebtedness for the deferred payment for a term of one (1) year or
more for the purchase price of any asset at such date          (iii)  
Indebtedness consisting of capitalized lease obligations at such date         
(iv)   Subordinated Debt outstanding on such date   

$                    

    (v)   the sum (without duplication) of (i), (ii), (iii) and (iv)   

$                    

    (vi)   Cash and cash equivalents at such date   

$                    

    (vii)   (v) minus (vi)   

$                    

    (viii)   net income (or loss) of Borrowers on a consolidated basis (as
applicable) (after eliminating extraordinary non-recurring items of income but
including business interruption proceeds) for the period ending
                       

$                    

    (ix)   depreciation and amortization for such period   

$                    

    (x)   amounts expensed by Borrowers on a consolidated basis for such period
for federal, state and local income taxes (including the use of tax deferred
assets)   

$                    

    (xi)   fees or expenses incurred in connection with the consummation of the
transactions of the transaction contemplated by the Credit Agreement, the
Subordinated Debt Documents or the acquisition referred to in Section 9.1(z) of
the Credit Agreement (to the extent not capitalized and not exceeding the
Materiality Threshold; amounts capitalized being covered by clause (ix) above)
  

$                    

    (xii)   interest expense of Borrowers on a consolidated basis for such
period   

$                    

    (xiii)   other non cash charges for such period as a result of the operation
of SFAS 141 or 142   

    $                

    (xiv)   The sum of (viii), (ix), (x), (xi), (xii), and (xiii) [add the
following if for period ending on any of the first three fiscal quarters in
2005: “multiplied by            ”]          (xv)   Ratio (of (vii) : (xiv)) for
period   

______ :

    (xvi)   Maximum Ratio Permitted by the Credit Agreement   

2.25 : 1.00

 

EVENTS OF DEFAULT

 

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

No Event of Default, or event or condition which with notice on the lapse of
time or both would constitute an Event of Default, has occurred and is
continuing on the date hereof other than                     
                    .

 

MEMRY CORPORATION

By:

       

Its

 

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

EXHIBIT 10.10

FORM OF BORROWING BASE CERTIFICATE

 

(see attached)

 

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

 

MEMRY CORPORATION

BETHEL, CT

BORROWING BASE CERTIFICATE

 

DATE:___________________

   CERTIFICATE    #    204ME-preliminary

 

Pursuant to the Credit and Security Agreement dated as of November 9, 2004 (as
same may be amended, supplemented, restated or otherwise modified from time to
time, the “Agreement” ) between Memry Corporation ( the “Borrower” ) and Webster
Business Credit Corporation (the “Lender” ), the undersigned hereby certifies,
represents and warrants (on behalf of the Borrower and not personally) that the
following Borrowing Base Certificate is a true, correct and complete statement
regarding the status of the collateral and loans of the Borrower as of above
date and that the amounts set forth are in compliance with provisions of the
Agreement.

 

1 (A)    Total of outstanding accounts from line 1.(E) of last certificate     
          $                        

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

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

   (B)    Less: Credits to accounts receivable         $ —                     
  

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

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

          (C)    Adjustments (explain on page 2)         $ —                   
    

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

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

          (D)    Plus: new accounts rising since last certificate         $ —  
                     

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

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

          (E)    Aggregate amount of accounts                                  
      

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

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

   (F)    Less: Ineligible accounts, as per the
Agreement as of (Date)    01/00/00                                       

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

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

          (G)    Net amount of eligible accounts                               
              

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

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

   (H)   

85 % of line 1.(G)

                                                  

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

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

   (I)    Value of eligible inventory as of:    01/00/00    Raw
Finished
WIP                                    

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

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

   (J)    Less: ineligible items per the Agreement (Date:11/09/04)         WIP
Reserves      —                             

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

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

                        —             (K)    Net amount of eligible inventory   
            $ —                        

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

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

   (L)    The lesser of 55 % of line 1.(K) or,                $ —              
              

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

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

     $3,000,000.00                $ —                        

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

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

   (M)    Collateral Base [line 1.(H) + 1.(L)]                $ —              
         

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

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

   (N)   

Less: Availability Reserves, etc.

            $—                        

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

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

          (O)    Borrowing Base [Line                         1. (M) minus 1.
(N)]                $ —                        

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

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

   (P)    Maximum Revolving Amount                $ 6,500,000.00               
      

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

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

   (Q)    [Lesser of Line                         1. (O) or 1. (P)            
   $ —                             

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

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

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

WEBSTER BUSINESS CREDIT CORPORATION

BORROWING BASE CERTIFICATE

 

2 (A)

   The aggregate unpaid principal balance of Revolving Advances and Letters of
Credit is                     $ —                             

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

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

(B)

   Less Deposits:                              A/R Receipts (Date)
Transfer to Checking    01/00/00         $ —               Other deposits (Date)
Explain on reverse    01/00/00          
$ 0
—                             

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

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

      

(C)

   New unpaid credit balance                     $ —                          
  

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

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

(D)

  

Principal amount of additional borrowing

of Revolving Advances or Letters of Credit

this request, if any, is

               —    $
$ —  
—                             

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

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

(E)

   Total Loan [line 2.(C) plus 2. (D)]
which cannot exceed line 1. (P)                $ —                             

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

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

                                                    

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

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

(F)

   Revolver Availability
(Overadvance) [ line1 (Q) minus 2. (E)]                $ —                      
      

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

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

 

    Memry Corporation    

Company Name

 

BY:                                   

                                X:                                      
                                                                               
        

ITS:                                  

        (Duly Authorized)                      

COMMENTS:

adjustments

                  non AR cash rec’d                      

apply payment

clear interco invoices

wire fees

Other

discount

             unapplied payment other cash receipt vendor refund                 
             postage & freight       

—  

                  —              

—  

                  —              

 

page 2 of 2

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

(Definitional Note: For purposes of all of the following Schedules, “Acquisition
Subsidiary” shall mean MPAV Acquisition LLC, a Connecticut limited liability
company (soon to be renamed Putnam Plastics Company LLC)

 

Schedule 4.5 – Equipment and Inventory Locations

 

See Schedule 4.14(c) for chief executive offices.

 

See Schedule 5.25 for leased locations.

 

In addition to the above locations, Borrower and Acquisition Subsidiary from
time to time have inventory at customer and vendor facilities.

 

Borrower also keeps equipment and files not being used, and small amounts of
inventory, at offsite locations in each of Bethel and Menlo Park.

 

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

Schedule 4.14(c) – Chief Executive Office

 

Borrower’s chief executive office is at 3 Berkshire Blvd., Bethel, CT 06801.

 

Acquisition Subsidiary’s chief executive office is at 3 Berkshire Blvd., Bethel,
CT 06801.

 

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

Schedule 5.2 – Organizational Data and Numbers; Qualifications

 

1. Borrower:

 

     a.    State of Organization:    Delaware           Also Qualified in:   
California; Connecticut      b.    Org. ID No.:    0925992      c.   
Subsidiaries:    (1) Acquisition Subsidiary and (2) Wright Machine Corporation
(see below)      d.    Equity: Authorized:    40,000,000 shares of Common, par
value $0.01 100,000 shares of Preferred, par value $100           Issued and
Outstanding:    (publicly held)

 

2. Acquisition Subsidiary:

 

     a.    State of Formation:    Connecticut           Also Qualified in:   
None      b.    Org. ID No.:    0797271      c.    Subsidiaries:    None      d.
   Equity: Authorized:    1,000 units           Issued and Outstanding:    1,000
units to Borrower

 

3. Wright Machine Corporation: (This Subsidiary has no material assets.)

 

     a.    State of Formation:    Delaware           Also Qualified in:    None
     b.    Org. ID No.:    2194920      c.    Subsidiaries:    None      d.   
Equity: Authorized:    3,000 shares of Common, par value $1.00           Issued
and Outstanding:    100 shares of Common to Borrower

 

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

Schedule 5.3 – Federal Tax Identification Numbers

 

Borrower

   -    06-1084424

For Information Only:

         

Acquisition Subsidiary

   -    20-1692483

Wright Machine Corporation

   -    06-1273353

 

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

Schedule 5.5 – Prior Names, etc.

 

1. Borrower:

 

None

 

2. Acquisition Subsidiary:

 

Upon the funding of the Initial Advance, Acquisition Subsidiary is purchasing
substantially all of the assets of Putnam Plastics Corporation under the Putnam
Acquisition Agreement.

 

Immediately following the funding of the Initial Advance, Acquisition Subsidiary
will be renamed Putnam Plastics Company LLC

 

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

Schedule 5.6 – OSHA and Environmental Compliance

 

None.

 

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

Schedule 5.8 – Litigation

 

Memry Corporation vs. Kentucky Oil, NV et al. The referenced action was filed by
Borrower in the U.S. District Court for the Southern District of Texas on May
14, 2004. Borrower filed the action in response to written statements made by
defendants to a third-party known as Schlumberger Technologies (“Schlumberger”)
alleging that Borrower had misappropriated proprietary technology from
defendants and improperly transferred it to Schlumberger. In its complaint,
Borrower alleged that the defendants committed libel, business disparagement,
and engaged in unfair business practices against Borrower as a result of the
statements. In addition, Borrower requested a declaratory judgment that no
misappropriation of technology occurred. Pursuant to a stipulation between the
parties, the civil action was transferred to the Northern District of
California, San Jose Division, on September 13, 2004. Further, as result of the
stipulation, defendants waived their objections to personal jurisdiction and
Borrower withdrew its claims for libel, disparagement, and unfair business
practices, leaving Borrower’s claim for a declaratory judgment as the sole
remaining count. An initial Case Management Conference is currently scheduled
before the California court for January 18, 2005. Defendants have recently added
Schlumberger as an additional defendant to their cross-complaint.

 

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

Schedule 5.9 – Indebtedness

 

1. The Existing Loans, which Existing Loans are being paid off upon Closing.

 

2. Auto financing loan with Chase on a company owned vehicle, with remaining
principal balance of approximately $9,000.

 

3. Capitalized lease buyout with GE Capital, with remaining principal balance of
approximately $24,000.

 

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

Schedule 5.10 – Violations

 

None

 

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

Schedule 5.11 – Plans

 

Borrower’s Benefit Plans:

 

* 401(k) Plan - currently with Merrill Lynch. (This is only “Pension Plan”
listed.)

 

Stock Plan (and some stock option agreements and a de minimus amount of stock
appreciation rights still in effect under a prior Stock Plan)

 

Medical Plan - currently with Anthem B/C and B/S Century Preferred

 

Dental Plan - currently with MetLife.

 

** Section 125 Plan - currently with Guardian Life Insurance

 

* Life Insurance Plan - currently with MetLife

 

Supplemental Life Insurance Plan - currently with Guardian Life Insurance

 

* AD&D Plan - currently with MetLife

 

* Short Term Disability Plan - currently with MetLife

 

* Long Term Disability Plan - currently with MetLife

 

Acquisition Subsidiary’s Benefit Plans (upon the funding of the Initial Advance
and simultaneous closing under the Putnam Acquisition Agreement):

 

Medical Plan - currently with U.S. Healthcare.

 

Dental Plan - currently a self-administered, fixed-dollar benefit program.

 

Supplemental Life Insurance Plan - currently with Hartford Life Insurance Co.

 

Section 125 Plan - currently with Ceridian (through year-end 2004). Starting
January 2005, Acquisition Subsidiary’s employees are expected to join Borrower’s
Section 125 plan, marked with two asterisks (**) above.

 

Others: - See Borrower programs above marked with an asterisk (*), which will
also be offered to Acquisition Subsidiary’s employees.

 

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

Schedule 5.12 – Intellectual Property

 

Patents

 

Borrower: See attached (i) Schedule of Patents, (ii) Schedule of Joint Patents
and (iii) Schedule of Licensed Patents.

 

Acquisition Subsidiary: Upon closing under the Putnam Acquisition Agreement, the
following patent will be assigned to Acquisition Subsidiary: Patent No.
4,888,146 issued 12/19/89 to James V. Dandeneau for method and apparatus of
forming extruded article.

 

Trademarks

 

Borrower: See attached Schedule of Trademarks.

 

Copyrights

 

None.

 

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

 

Schedule of Patents

 

((*) = Lien of record for Connecticut Innovations Incorporated)

 

Patent No.

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

 

Title

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

 

Abstract

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

  App Date

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

  Iss Date

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

  Exp Date

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

 

Foreign Coverage

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

 

Note

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

5807189   High Damping Capacity Metal Striking Face   Uses of shape memory
alloys for golf club face inserts   12/7/1995   9/15/1998   12/7/2015   None    
4778104   Temperature Responsive Line Valve   Original Memrysafe antiscald
safety valve   7/31/1986   10/18/1988   7/3/2006   None   (*) 4848388  
Emergency Valve with Test Capability   Firechek emergency fire safety shut-off
valve   10/19/1987   7/18/1989   10/19/2007   None   (*) 4875623   Valve Control
  Electronic controlled Ultravalve   7/17/1987   10/24/1989   10/24/2007  
Belgium, France, Germany, Italy & Great Britain  

Licensed to Automation Electronics, Inc.

(*)

4969598   Valve Control   Electronic controlled Ultravalve   8/22/1989  
11/13/1990   8/22/2009      

Licensed to Automation Electronics, Inc.;

cip of 4875623 (*)

5259554   Temperature Responsive Pilot Operated Line Valve   Pilot operated
design of Memrysafe antiscald safety valve   5/15/1992   11/9/1993   5/15/2012  
Australia, Canada, Belgium, Swizerland, Germany, France, Italy & Great Britain  
(*) 5397053   Temperature Responsive Pilot Operated Line Valve   Pilot operated
design of Memrysafe antiscald safety valve   11/8/1993   3/14/1995   11/8/2013  
    div of 5259554 5261597   Temperature Responsive Three-Way Line Valve   Hot
fluid flow control diverter valve   5/4/1993   11/16/1993   5/4/2013   None  
(*) 4935068   Methods of Treating a Sample of an Alloy   Warm forming process
for shaping NiTi parts   1/23/1989   1/19/1990   1/23/2009   None     4821147  
Mounting Assembly Comprising an Electronic Component   Electronics mounting
method using shape memory effect   10/5/1987   4/11/1989   10/5/2007   None    

 

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

Patent No.

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

 

Title

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

 

Abstract

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

  App Date

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

  Iss Date

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

  Exp Date

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

 

Foreign Coverage

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

 

Note

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

6053992   Shape Memory Alloy Sealing Components   High pressure sealing sealing
plugs for Disel Tech & Bosch fuel injectors   9/30/1997   4/25/2000   9/30/2017
  patent agreement with Bosch/DTC provides coverages in Europe, and Canada,
pending in Japan     5709021   A Process for the Manufacture of Metal Tubes  
Soft mandrel drawing process for making NiTi tubes   5/11/1994   1/20/1998  
1/20/2015   None     6258182   Pseudoelastic Beta Ti Alloys and Uses Thereof  
Flexium compositions and processing methods   3/5/1999   7/10/2001   3/5/2019  
pending in Europe, Japan and Korea     6419358   Pseudoelastic Beta Ti Eyeglass
Components   Memryflex (Flexium) eyewear applications   11/24/1999   7/16/2002  
11/24/2019       div of 6258182 6375458   Medical Instruments and Devices and
Parts   Ni-rich NiTi and processes for manufacturing medical devices   5/17/1999
  4/23/2002   5/17/2019   pending in Canada and Australia     6799357  
Manufacture of Metal Tubes   Hybrid tube drawing process for making NiTi tubes  
9/5/2002   10/5/2004   9/5/2022   pending in Europe, Canada, Japan and China    
Pending;
Applic. No.
10/287140   Work Hardened Pseudoelastic Guidewire   High stiffness NiTi
guidewire and manufacturing process   11/4/2002           PCT application
pending     Pending;
Applic. No.
10/609003   beta titanium compositions and methods of manufacture thereof  
Expanded Flexium compositions   6/27/2003           PCT application pending    
Pending;
Applic. No.
10/755034   Beta titanium compositions and methods of manufacture thereof (cip
I)   Improved processing methods for Flexium alloys   1/8/2004           PCT
application pending     Pending;
Applic. No.
10/869359   Superelastic B-Ti Eyewear And Eyewear Components (cip II)   Further
improved processing methods for Flexium alloys   6/16/2004           PCT
application pending     Pending;
Applic. No.
03/020081   Method For Manufacturing Superelastic Beta Titanium Articles and the
Articles Derived Therefrom   Manufacturing processes for expanded Flexium
compositions   6/27/2003           PCT application pending     Pending;
Applic. No.
03/024857   Implantable Artificial Pancreas   System integration of sensor and
thin film NiTi insulin pump   8/7/2003           PCT application pending    

 

-2-

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

Patent No.

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

 

Title

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

 

Abstract

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

  App Date

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

  Iss Date

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

  Exp Date

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

 

Foreign Coverage

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

 

Note

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

Pending;
Applic. No.
10/811466   Drug Eluting Stents Of NiTi Alloys   NiTi compositions for drug
eluting stents   3/26/2004           PCT application pending     Pending;
Applic. No.
10/844018   Semi-Reusable Surgical Instrument for Specimen Retrieval  
Improvements of Endocatch spring designs   5/12/2004           PCT application
pending     Provisional;
Applic. No.
60/552277   Finishing Processes for Improving Fatigue Life of Metal Components  
Improvement of NiTi fatigue life by mechnical finishing   3/11/2004            
    Provisional;
Applic. No.
60/577743   Replacement Discs for the Spine (Lumbar Column)   Design concepts of
replacement discs   6/7/2004                 Provisional;
Applic. No.
60/577528   Methods of Attachment of Endografts for Abdominal Aortic Aneurysms  
Design concepts of endograft attachments   6/7/2004                 Provisional;
Applic. No.
60/577680   Methods and Articles for Attaching Objects to the Lumina   Design
concepts for vascular closure devices   6/7/2004                

 

-3-

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

 

Schedule of Joint Patents

 

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68.0210    ANGOLA   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   19/OCT/2001   1845                   HART
Barrie, JOHNSON Craig D., SHETKY L. M. 68.0292    AUSTRALIA   EXPANDABLE CELLS  
16/JAN/2002   10199/02                   HACKWORTH Matthew R., HART Barrie,
JOHNSON Craig D., SCHETKY L. Mcdonald 68.0210    BELGIUM   APPARATUS COMPRISING
EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES  
22/OCT/2001   2001/0680           01/JUN/2004   1014914A5   HART Barrie, JOHNSON
Craig D., SHETKY L. M. 68.0348    BRAZIL   EXPANDABLE DEVICES AND METHODS  
06/AUG/2003   PI0302738-4                   HACKWORTH Matthew R., HART Barrie,
JOHNSON Craig D., SCHETKY L. Mcdonald 68.0292    BRAZIL   EXPANDABLE CELLS  
16/JAN/2002   PI0201817-9                   HACKWORTH Matthew R., HART Barrie,
JOHNSON Craig D., SCHETKY L. Mcdonald 68.0210    BRAZIL   APPARATUS COMPRISING
EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES  
19/OCT/2001   PI0107164-5                   HART Barrie, JOHNSON Craig D.,
SHETKY L. M. 68.0348    CANADA   EXPANDABLE DEVICES AND METHODS   05/AUG/2003  
2436640                   HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D.,
SCHETKY L. Mcdonald 68.0292    CANADA   EXPANDABLE CELLS   15/JAN/2002   2367810
                  HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D., SCHETKY
L. Mcdonald 68.0210    CANADA   APPARATUS COMPRISING EXPANDABLE BISTABLE
TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   17/OCT/2001   2359450        
          HART Barrie, JOHNSON Craig D., SHETKY L. M. 68.0292    EUROPEAN  
EXPANDABLE CELLS   15/JAN/2002   02290106.0   17/JUL/2002   EP 1 223 305        
  HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald
68.0292    GERMANY   EXPANDABLE CELLS   16/JAN/2002   102 01 631.3   28/NOV/2002
  DE 102 01 631           HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D.,
SCHETKY L. Mcdonald

 

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68.0210   INDONESIA   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   19/OCT/2001   P-00200100828                
  HART Barrie, JOHNSON Craig D., SHETKY L. M. 68.0292   ITALY   EXPANDABLE CELLS
  16/JAN/2002   MI2002A
000077                   HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D.,
SCHETKY L. Mcdonald 68.0292   JAPAN   EXPANDABLE CELLS   16/JAN/2002   2002 -
044030                   HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D.,
SCHETKY L. Mcdonald 68.0292   NETHERLANDS   EXPANDABLE CELLS   16/JAN/2002  
1019753           23/JUL/2002   1019753   HACKWORTH Matthew R., HART Barrie,
JOHNSON Craig D., SCHETKY L. Mcdonald 68.0292   NETHERLANDS   EXPANDABLE CELLS  
15/JUL/2002   1021076           14/JAN/2003   1021076   HACKWORTH Matthew R.,
HART Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald 68.0292   NETHERLANDS  
EXPANDABLE CELLS   16/JAN/2002   1022037           27/MAY/2003   1022037  
HACKWORTH Matthew R., HART Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald 68.0210
  NETHERLANDS   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND METHODS
FOR THEIR USE IN WELLBORES   18/OCT/2001   1019192           23/APR/2002  
1019192   HART Barrie, JOHNSON Craig D., SHETKY L. M. 68.0210   NIGERIA  
APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN
WELLBORES   29/OCT/2001   436/2001           29/JAN/2003   RP 14851   HART
Barrie, JOHNSON Craig D., SHETKY L. M. 68.0348   NORWAY   EXPANDABLE DEVICES AND
METHODS   05/AUG/2003   2003 3471                   HACKWORTH Matthew R., HART
Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald 68.0292   NORWAY   EXPANDABLE
CELLS   15/JAN/2002   2002 0225                   HACKWORTH Matthew R., HART
Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald 68.0210   NORWAY   APPARATUS
COMPRISING EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES  
18/OCT/2001   2001 5069                   HART Barrie, JOHNSON Craig D., SHETKY
L. M. 68.0210   RUSSIAN FEDERATION   APPARATUS COMPRISING EXPANDABLE BISTABLE
TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   26/NOV/2003   2003134377      
            HART Barrie, JOHNSON Craig D., SHETKY L. M.

 

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68.0210   RUSSIAN FEDERATION   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS
AND METHODS FOR THEIR USE IN WELLBORES   19/OCT/2001   2001128440   10/MAR/2004
  2225497   10/MAR/2004   2225497   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   SAUDI ARABIA   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   16/JAN/2002   02 22 0629                  
HART Barrie, JOHNSON Craig D., SHETKY L. M. 68.0292   SINGAPORE   EXPANDABLE
CELLS   16/JAN/2002   200200294-7                   HACKWORTH Matthew R., HART
Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald 68.0210   SINGAPORE   APPARATUS
COMPRISING EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES  
19/OCT/2001   200106482-3                   HART Barrie, JOHNSON Craig D.,
SHETKY L. M. 68.0210   TRINIDAD AND TOBAGO   APPARATUS COMPRISING EXPANDABLE
BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   19/OCT/2001  
TT/A/2001/00199                   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0348   UNITED KINGDOM   EXPANDABLE DEVICES AND METHODS   05/AUG/2003  
0318280.5   11/FEB/2004   2391567           HACKWORTH Matthew R., JOHNSON Craig
D. 68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS
AND METHODS FOR THEIR USE IN WELLBORES   04/DEC/2003   0328108.6   19/MAY/2004  
2395214           HART Barrie, JOHNSON Craig D., SHETKY L. M. 68.0292   UNITED
KINGDOM   EXPANDABLE CELLS   15/JAN/2002   0200856.3   17/JUL/2002   2371066  
05/MAR/2003   2371066   HART Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald
68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   18/OCT/2001   0125006.7   24/APR/2002  
GB2368082   21/MAY/2003   2368082   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   05/DEC/2002   0228350.5   19/MAR/2003  
GB2379693   20/AUG/2003   2379693   HART Barrie, JOHNSON Craig D., SHETKY L. M.

 

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68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   05/DEC/2002   0228333.1   19/MAR/2003  
GB2379691   20/AUG/2003   2379691   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   05/DEC/2002   0228349.7   18/JUN/2003  
GB2383058   21/APR/2004   2383058   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   05/DEC/2002   0228386.9   19/MAR/2003  
2379694   18/FEB/2004   2379694   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   05/DEC/2002   0228345.5   19/MAR/2003  
GB2379692   20/AUG/2003   2379692   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED KINGDOM   APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND
METHODS FOR THEIR USE IN WELLBORES   05/DEC/2002   0228329.9   19/MAR/2003  
2379690   08/OCT/2003   2379690   HART Barrie, JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED STATES OF AMERICA   APPARATUS COMPRISING EXPANDABLE BISTABLE
TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   12/MAR/2004   10/799151      
            BIXENMAN Patrick W., HACKWORTH Matthew R., JOHNSON Craig D., SHETKY
L. M. 68.0210   UNITED STATES OF AMERICA   APPARATUS COMPRISING EXPANDABLE
BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   23/MAR/2004  
10/806509                   BIXENMAN Patrick W., HACKWORTH Matthew R., JOHNSON
Craig D., SCHETKY L. Mcdonald 68.0348   UNITED STATES OF AMERICA   EXPANDABLE
DEVICES AND METHODS   02/JUN/2003   10/452322   12/FEB/2004   US-2004-0026079-A1
          HACKWORTH Matthew R., JOHNSON Craig D. 68.0292   UNITED STATES OF
AMERICA   EXPANDABLE CELLS   16/JAN/2002   10/050,468   08/AUG/2002  
US-2002-0107562-A1           HART Barrie, JOHNSON Craig D., SCHETKY L. Mcdonald

 

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68.0210   UNITED STATES OF AMERICA   APPARATUS COMPRISING EXPANDABLE BISTABLE
TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   09/OCT/2001   09/973442  
25/APR/2002   US-2002-0046840-A1           BIXENMAN Patrick W., HACKWORTH
Matthew R., JOHNSON Craig D., SHETKY L. M. 68.0210   UNITED STATES OF AMERICA  
APPARATUS COMPRISING EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN
WELLBORES   10/DEC/2002   10/315569   01/MAY/2003   US-2003-0079885-A1          
BIXENMAN Patrick W., HACKWORTH Matthew R., JOHNSON Craig D., SHETKY L. M.
68.0210   UNITED STATES OF AMERICA   APPARATUS COMPRISING EXPANDABLE BISTABLE
TUBULARS AND METHODS FOR THEIR USE IN WELLBORES   10/DEC/2002   10/315665  
01/MAY/2003   US-2003-0079886-A1   04/MAY/2004   6729403   BIXENMAN Patrick W.,
HACKWORTH Matthew R., JOHNSON Craig D., SHETKY L. M. 68.0348   VENEZUELA  
EXPANDABLE DEVICES AND METHODS   05/AUG/2003   2003-001320                  
HACKWORTH Matthew R., JOHNSON Craig D. 68.0210   VENEZUELA   APPARATUS
COMPRISING EXPANDABLE BISTABLE TUBULARS AND METHODS FOR THEIR USE IN WELLBORES  
18/OCT/2001   2001-002197                   HART Barrie, JOHNSON Craig D.,
SHETKY L. M.

 

-5-

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Schedule of Licensed Patents

 

(All are royalty-free licenses from the Raychem acquisition.)

(It is believed that ownership may have been assigned to Advanced

Metal Components Inc. (AMCI)and then to Aerofit Products Inc.)

 

Patent

No.

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Title

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

   Iss Date

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

   Exp Date

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4770725

License

   NiTiNb Shape Memory Alloy & Article    9/13/1988    9/13/2005

4832382

License

   Coupling device    5/23/1989    1/25/2008

4934743

License

   Assembly for forming a mechanical connection    6/19/1990    2/7/2009

4836586

License

   Composite coupling    6/6/1989    6/6/2006

4874193

License

   Composite coupling    10/17/1989    10/17/2006

4740253

License

   Method for pre-assembling a composite coupling    4/26/1988    10/7/2005

5058936

License

   Method of forming a mechanical connection    10/22/1991    2/23/2009

 

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Schedule of Trademarks

 

((*) = Lien of record for Connecticut Innovations Incorporated)

 

Current:

 

CC Docket

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

   PSC
Docket

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

   Serial No.

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

   Filing Date

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

  

Trademark

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

   Reg. No.

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

   Reg. Date

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

  

Note

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

  

Comments

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MEM-0082-T    T03    74/012224    12/18/1989    FLOW GARD and design   
1,670,156    12/31/1991    Anti-scald safety valve    Renewed 12/20/01, in force
till 12/20/2011 (*) MEM-0083-T    T04    74/011955    12/18/1989    SHOWER GARD
and design    1,648,776    6/25/1991    Anti-scald safety valve    Renewed
6/20/01, in force till 6/20/11 (*) MEM-0084-T    T07    73/690661    10/19/1987
   MEMRYSAFE    1,494,037    6/28/1988    Anti-scald safety valve    Sec 8 & 15
filed, renewable 6/28/08 (*) MEM-0080T    T12    74/732305    9/21/1995   
ULTRAVALVE    2,122,691    12/23/1997    Assigned to Automation Electronics,
Inc. on June 30, 1998      MEM-0095-T         78/290188    8/21/2003    FIRECHEK
   2,858,156    6/29/2004    Fire safety valve    registered MEM-0100-T   
T16 JP    08-039739         ZEEMET    4,076,912    10/31/1997    SME alloy for
sporting goods    Japanese registration MEM-0076T    T18    76/377370   
3/1/2002    M MEMRY and design    2,814,515    2/17/2004    New Memry Logo   
registered MEM-0078T    T20    76/321255    10/4/2001    MEMRY FLEX             
Beta Ti Eyeglass Frames    pending MEM-0077T    T21    76/321445    10/4/2001   
Smart People Smart Metals    2,753,998    8/19/2003    Service mark   
registered MEM-0085T    T25    78/253048    5/22/2003    SIGNAL FLEX          
   NiTi antenna    allowed MEM-0086T    T28    78/253054    5/22/2003    FLEXIUM
             Beta Ti Biomaterial    allowed

 

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Historical/Contemplated (For Information Only):

 

CC Docket

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

   PSC
Docket

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

   Serial No.

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

   Filing Date

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

  

Trademark

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

   Reg. No.

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

   Reg. Date

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

               T01    73/506528    11/1/1984    MEMERYTEC    1,342,355   
6/18/1985    Door opener and actuators    Abandoned      T05    74/012218   
12/12/1989    SHOWERSAFE    1,646,672    6/4/1991    Shower valve actuators   
Abandoned      T06    74/113888    11/9/1990    M MEMRY and design    1,680,708
        SME metals & valves    Abandoned, no suitable specimens      T10   
74/114650    11/13/1990    M MEMRY and design    1,680,708    3/24/1992    R&D
services    abandon on 9/24/02 MEM-0081T    T11    74/592629    10/31/1994   
FIRECHEK    1,931,427    10/31/1995    Fire safety valve    lapsed      T13     
        BATHGARD                   Not filed      T15              MEMRYTEC     
        inadequate specimens    Not filed      T16    75/045408    1/17/1996   
ZEEMET              SME alloy for sporting goods    abandoned      T17   
75/044613    1/17/1996    Z-MET              SME alloy for sporting goods   
abandoned      T19    76/115195    8/23/2000    NIFLEX              AMT NT10
alloy    allowed, abandoned      T22              FLEXIT                  
search conducted, not filed      T23              BETAFLEX                  
search conducted, not filed      T24              TITAFLEX                  
search conducted, not filed      T26              MICROTUBE              Small
dia. NiTi tubing    search conducted, not filed      T27              X-WIRE   
          NiTi Guidewire    search conducted, not filed

 

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Schedule 5.25 – Real Property

 

1. Borrower leases space at:

 

  (i) 3 Berkshire Blvd., Bethel, CT 06801.

 

  (ii) 4065 Campbell Ave., Menlo Park, CA 94025.

 

  (iii) 4020 Campbell Ave., Menlo Park, CA 94025 (This is currently a sublease
of a portion of the building. Borrower is in the process of replacing the
sublease with a direct lease from the master landlord of the entire building,
and of then subleasing a portion of the building to a third party (the buyer of
its former sublandlord’s business).)

 

2. Acquisition Subsidiary, upon the funding of the Initial Advance and the
simultaneous closing under the Putnam Acquisition Agreement, will lease the
entire facility at 130 Louisa Viens Drive, Dayville (Town of Killingly), Windham
County, Connecticut 06241.

 

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Schedule 5.26 – Deposit Accounts

 

Account Name

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   Bank

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

  Account No.

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

 

Use

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

Memry Corporation    Webster Bank   000885825   Operating account - checking
Memry Corporation    Webster Bank   (Treasury sales)   Jumbo CD/Investments
(Purchased through operating account) Memry Corporation    Webster Bank  
0548003578   Money market Memry Corporation    Webster Bank   0008854979  

Cash collateral

(lockbox)

Memry Corporation - Sec 125 Health and Dependent Care    Webster Bank  
0008896805   Checking/health & dependent care Memry Corporation   
Bank of America   0413403561   Checking (local account for West Coast
operations) Putnam Plastics Company LLC    Fleet Bank (soon
to be Bank of
America)   95037 33506   Checking (local account)

 

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Schedule 7.3 – Other Existing Liens

 

1. Vehicle liens securing vehicle Indebtedness disclosed on Schedule 5.9.

 

2. Intellectual property liens for the benefit of Connecticut Innovations
Incorporated as disclosed on Schedule 5.12.

 

3. UCC financing statements evidencing the capitalized lease described in item 3
on Schedule 5.9.

 

4. For Information Only: UCC financing statements evidencing operating leases.