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Exhibit 10.15
HSBC
LOAN AND SECURITY AGREEMENT
 
This LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into as of July
22, 2011, between Chembio Diagnostic Systems Inc., a Delaware corporation, with
its chief executive office located at 3661 Horseblock Rd, Medford, New York11763
(the "Borrower") and HSBC Bank USA, National Association, a bank organized under
the laws of the United States of America, with an address of One HSBC Center,
18th Floor, Buffalo, New York  14203 (the "Bank").
 
FOR VALUE RECEIVED, and in consideration of the granting by the Bank of
financial accommodations to or for the benefit of the Borrower, including
without limitation respecting the Obligations (as hereinafter defined), the
Borrower represents to and agrees with the Bank, as of the date hereof and as of
the date of each loan, credit and/or other financial accommodation, as follows:
 
1.           THE LOAN
 
1.1 Loan(s).  Bank agrees, from time to time, in its sole discretion, to make
loans (collectively, the "Loans") to or for the account of Borrower, upon
Borrower's request therefor, in such amounts as shall be mutually agreed upon,
subject to the terms and conditions set forth herein.  Loans shall be evidenced
by one or more notes issued by the Borrower in favor of the Bank (collectively,
and each a "Note").  This Agreement, each Note any security agreements or
guaranties and any and all other documents, amendments or renewals executed and
delivered to the Bank are collectively hereinafter referred to as the "Loan
Documents".
 
1.2 Revolving Loans.  Bank agrees, in its sole discretion, to make revolving
loans (the "Revolving Loans") to or for the account of Borrower, upon Borrower's
request therefor, in such amounts as may from time to time be established by
Bank, provided there is no continuing uncured Event of Default (as hereinafter
defined) and subject to the terms and conditions set forth herein.
 
1.3 Revolving Loan Account.  An account shall be opened on the books of Bank in
which account a record will be kept of all Revolving Loans, and all payments
thereon and other appropriate debits and credits as provided by this
Agreement.  No failure by the Bank to make and no error by the Bank in making,
any entry in such books will affect the Borrower’s obligation to repay the full
principal amount advanced by the Bank to or for the account of the Borrower, or
the Borrower’s obligation to pay interest thereon at the agreed upon rate.
 
1.4 Interest.  Interest respecting the Revolving Loans will be charged to
Borrower on the principal amount from time to time outstanding at the interest
rate specified in the Revolving Note in accordance with the terms of the
Revolving Note.
 
1.5 Repayment.  All loans and advances made respecting the Revolving Loans shall
be payable to Bank on or before the maturity date of the Revolving Note.
 
1.6 Overadvances.  Any Revolving Loans that may be made, at the Bank’s sole
discretion, in excess of the Revolving Loan Amount shall not limit the
obligations of Borrower or any of the Bank’s rights or remedies hereunder or
under the Loan Documents or otherwise; all such Revolving Loans shall be secured
by the Collateral, as hereinafter defined, and shall be due and payable to the
Bank in accordance with the terms of the Revolving Note, and shall bear interest
at the rate set forth in the Revolving Note.  All checks or other items paid by
Bank which cause an overdraft in any deposit account maintained by Borrower with
Bank shall, at the option of the Bank, constitute an advance to Borrower
pursuant to this Agreement respecting the Revolving Loans, repayable on demand,
and shall be secured by all Collateral.
 
1.7 Authorized Persons; Advances.  Any person duly authorized by a general
borrowing resolution of the Borrower, or in the absence of such a resolution,
the President, Treasurer or any Vice President of the Borrower, or any person
otherwise authorized in this paragraph, may request discretionary loans
hereunder, either orally or otherwise, but the Bank at its option may require
that all requests for loans hereunder shall be in writing.  The Bank shall incur
no liability to Borrower in acting upon any request referred to herein which the
Bank believes in good faith to have been made by an authorized person or
persons.  Each loan hereunder may be credited by Bank to any deposit account of
Borrower with Bank or with any other Bank with which Borrower maintains a
deposit account, or may be paid to Borrower (or as Borrower instructs) or may be
applied to any Obligations, as Bank may in each instance elect.
 
1.8 Monthly Statement.  At the option of the Bank, after the end of each month,
Bank will render to Borrower a statement of the Revolving Loan account, showing
all applicable credits and debits.  Each statement shall be considered correct
and to have been accepted by Borrower and shall be conclusively binding upon
Borrower in respect of all charges, debits and credits of whatsoever nature
contained therein respecting the Revolving Loans, and the closing balance shown
therein, unless Borrower notifies Bank in writing of any discrepancy within
Twenty (20) days from the mailing by Bank to Borrower of any such monthly
statement.
 
2.           GRANT OF SECURITY INTEREST
 
2.1 Grant of Security Interest.  In consideration of the Bank’s extending credit
and other financial accommodations to or for the benefit of the Borrower, the
Borrower hereby grants to the Bank a security interest in, a lien on and pledge
and assignment of the Collateral (as hereinafter defined).  The security
interest granted by this Agreement is given to and shall be held by the Bank as
security for the payment and performance of all Obligations, including, without
limitation, all amounts outstanding pursuant to the Loan Documents.
 
2.2 Definitions.  The following definitions shall apply:
 
(a)  
"Bank Affiliate" shall mean any "Affiliate" of the Bank or any lender acting as
a participant under any loan arrangement between the Bank and the
Borrower(s).  The term "Affiliate" shall mean with respect to any person, (a)
any person which, directly or indirectly through one or more intermediaries
controls, or 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) any person described in clause (a)
above.  For purposes of this definition, control of a person shall mean the
power, direct or indirect, (x) to vote 5% or more of the Capital Stock having
ordinary voting power for the election of directors (or comparable equivalent)
of such person, or (y) to direct or cause the direction of the management and
policies of such person whether by contract or otherwise.  Control may be by
ownership, contract, or otherwise.

 
(b)  
"Code" shall mean the New York Uniform Commercial Code as amended from time to
time.

 
(c)  
"Collateral" shall mean all of the Borrower's present and future right, title
and interest in and to any and all of the following personal property of the
Borrower whether such property is now existing or hereafter created, acquired or
arising and wherever located from time to time, including without limitation:

 
(i) accounts;
(ii) chattel paper;
(iii) goods;
(iv) inventory;
(v) equipment;
(vi) farm products;
(vii) instruments;
(viii) investment property;
(ix) documents;
(x) commercial tort claims;
(xi) deposit accounts;
(xii) letter-of-credit rights;
(xiii) general intangibles;
(xiv) supporting obligations;
(xv) All proceeds of collateral of every kind and nature in whatever form,
including, without limitation, both cash and noncash proceeds resulting or
arising from the sale or other disposition by the Borrower of the collateral;
and
(xvi) All records and products of and accessions to any of the collateral.
 
(d)  
"Debtors" shall mean the Borrower's customers who are indebted to the Borrower.

 
(e)  
"Obligation(s)" shall mean, without limitation, all loans, advances,
indebtedness, notes, liabilities, rate swap transactions, basis swaps, forward
rate transactions, commodity swaps, commodity options, equity or equity index
swaps, equity or equity index options, bond options, interest rate options,
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, forward transactions, currency swap transactions, cross-currency
rate swap transactions, currency options and amounts, liquidated or
unliquidated, owing by the Borrower to the Bank or any Bank Affiliate at any
time, of each and every kind, nature and description, whether arising under this
Agreement or otherwise, and whether secured or unsecured, direct or indirect
(that is, whether the same are due directly by the Borrower to the Bank or any
Bank Affiliate; or are due indirectly by the Borrower to the Bank or any Bank
Affiliate as endorser, guarantor or other surety, or as borrower of obligations
due third persons which have been endorsed or assigned to the Bank or any Bank
Affiliate, or otherwise), absolute or contingent, due or to become due, now
existing or hereafter arising or contracted, including, without limitation,
payment when due of all amounts outstanding respecting any of the Loan
Documents.  Said term shall also include all interest and other charges
chargeable to the Borrower or due from the Borrower to the Bank or any Bank
Affiliate from time to time and all costs and expenses referred to in this
Agreement.

 
(f)  
"Person" or "party" shall mean individuals, partnerships, corporations, limited
liability companies and all other entities.

 
All words and terms used in this Agreement other than those specifically defined
herein shall have the meanings accorded to them in the Code.
 
2.3 Ordinary Course of Business.  The Bank hereby authorizes and permits the
Borrower to hold, process, sell, use or consume in the manufacture or processing
of finished goods, or otherwise dispose of inventory for fair consideration, all
in the ordinary course of the Borrower's business, excluding, without
limitation, sales to creditors or in bulk or sales or other dispositions
occurring under circumstances which would or could create any lien or interest
adverse to the Bank’s security interest or other right hereunder in the proceeds
resulting therefrom.  The Bank also hereby authorizes and permits the Borrower
to receive from the Debtors all amounts due as proceeds of the Collateral at the
Borrower's own cost and expense, and also liability, if any, subject to the
direction and control of the Bank at all times; and the Bank may at any time,
without cause or notice, and whether or not an Event of Default has occurred or
demand has been made, terminate all or any part of the authority and permission
herein or elsewhere in this Agreement granted to the Borrower with reference to
the Collateral, and notify Debtors to make all payments due as proceeds of the
Collateral to the Bank.  Until Bank shall otherwise notify Borrower, all
proceeds of and collections of Collateral shall be retained by Borrower and used
solely for the ordinary and usual operation of Borrower's business.  From and
after notice by Bank to Borrower, all proceeds of and collections of the
Collateral shall be held in trust by Borrower for Bank and shall not be
commingled with Borrower's other funds or deposited in any Bank account of
Borrower; and Borrower agrees to deliver to Bank on the dates of receipt thereof
by Borrower, duly endorsed to Bank or to bearer, or assigned to Bank, as may be
appropriate, all proceeds of the Collateral in the identical form received by
Borrower.
 
2.4 Allowances.  Absent an Event of Default the Borrower may grant such
allowances or other adjustments to Debtors (exclusive of extending the time for
payment of any item which shall not be done without first obtaining the Bank’s
written consent in each instance) as the Borrower may reasonably deem to accord
with sound business practice, including, without limiting the generality of the
foregoing, accepting the return of all or any part of the inventory (subject to
the provisions set forth in this Agreement with reference to returned
inventory).
 
2.5 Records.  The Borrower shall hold its books and records relating to the
Collateral segregated from all the Borrower's other books and records in a
manner satisfactory to the Bank; and shall deliver to the Bank from time to time
promptly at its request all invoices, original documents of title, contracts,
chattel paper, instruments and any other writings relating thereto, and other
evidence of performance of contracts, or evidence of shipment or delivery of the
merchandise or of the rendering of services; and the Borrower will deliver to
the Bank promptly at the Bank’s request from time to time additional copies of
any or all of such papers or writings, and such other information with respect
to any of the Collateral and such schedules of inventory, schedules of accounts
and such other writings as the Bank may in its sole discretion deem to be
necessary or effectual to evidence any loan hereunder or the Bank’s security
interest in the Collateral.
 
2.6 Legends.  The Borrower shall promptly make, stamp or record such entries or
legends on the Borrower's books and records or on any of the Collateral
(including, without limitation, chattel paper) as Bank shall request from time
to time, to indicate and disclose that Bank has a security interest in such
Collateral.
 
2.7 Inspection.  The Bank, or its representatives, at any time and from time to
time, shall have the right at the sole cost and expense of Borrower, and the
Borrower will permit the Bank and/or its representatives: (a) to examine, check,
make copies of or extracts from any of the Borrower's books, records and files
(including, without limitation, orders and original correspondence); (b) to
perform field exams or otherwise inspect and examine the Collateral and to
check, test or appraise the same as to quality, quantity, value and condition;
and (c) to verify the Collateral or any portion or portions thereof or the
Borrower's compliance with the provisions of this Agreement.
 
2.8 Purchase Money Security Interests.  To the extent the Borrower uses proceeds
of any loans to purchase Collateral, the repayment of such loans shall be on a
“first-in-first-out” basis so that the portion of the loan used to purchase a
particular item of Collateral shall be repaid in the order in which Borrower
purchased such item of Collateral.
 
2.9 Search Reports.  Bank shall receive prior to the date of this Agreement UCC
search results under all names used by the Borrower during the prior five (5)
years, from each jurisdiction where any Collateral is located, from the State,
if any, where the Borrower is organized and registered (as such terms are used
in the Code), and the State where the Borrower’s chief executive office is
located.  The search results shall confirm that the security interest in the
Collateral granted Bank hereunder is prior to all other security interests in
favor of any other person.
 
3.           REPRESENTATIONS AND WARRANTIES
 
3.1 Organization and Qualification.  Borrower is a duly organized and validly
existing corporation under the laws of the State of its incorporation with the
exact legal name set forth in the first paragraph of this Agreement.  Borrower
is in good standing under the laws of said State, has the power to own its
property and conduct its business as now conducted and as currently proposed to
be conducted, and is duly qualified to do business under the laws of each state
where the nature of the business done or property owned requires such
qualification.
 
3.2 Subsidiaries.  Borrower has no subsidiaries other than as previously
specifically consented to in writing by the Bank, if any, and the Borrower has
never consolidated, merged or acquired substantially all of the assets of any
other entity or person other than as previously specifically consented to in
writing by the Bank, if any.
 
3.3 Corporate Records.  Borrower's corporate charter, articles or certificate of
organization or incorporation and all amendments thereto have been duly filed
and are in proper order.  All outstanding capital stock issued by the Borrower
was and is properly issued and all books and records of the Borrower, including
but not limited to its minute books, bylaws and books of account, are accurate
and up to date and will be so maintained.
 
3.4 Title to Properties;  Absence of Liens.  Borrower has good and clear record
and marketable title to all of its properties and assets, and all of its
properties and assets including the Collateral are free and clear of all
mortgages, liens, pledges, charges, encumbrances and setoffs, other than the
security interest therein granted to the Bank and those mortgages, deeds of
trust, leases of personal property and security interests previously
specifically consented to in writing by the Bank.
 
3.5 Places of Business.  Borrower's chief executive office is correctly stated
in the preamble to this Agreement, and Borrower shall, during the term of this
Agreement, keep the Bank currently and accurately informed in writing of each of
its other places of business, and shall not change the location of such chief
executive office or open or close, move or change any existing or new place of
business without giving the Bank at least thirty (30) days prior written notice
thereof.
 
3.6 Valid Obligations.  The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary corporate action and each
represents a legal, valid and binding obligation of Borrower and is fully
enforceable according to its terms, except as limited by laws relating to the
enforcement of creditors' rights.
 
3.7 Conflicts.  There is no provision in Borrower's organizational or charter
documents, if any, or in any indenture, contract or agreement to which Borrower
is a party which prohibits, limits or restricts the execution, delivery or
performance of the Loan Documents.
 
3.8 Governmental Approvals.  The execution, delivery and performance of the Loan
Documents does not require any approval of or filing with any governmental
agency or authority.
 
3.9 Litigation, etc.  There are no actions, claims or proceedings pending or to
the knowledge of Borrower threatened against Borrower which might materially
adversely affect the ability of Borrower to conduct its business or to pay or
perform the Obligations.
 
3.10 Accounts and Contract Rights.  All accounts arise out of legally
enforceable and existing contracts, and represent unconditional and undisputed
bona fide indebtedness by a Debtor, and are not and will not be subject to any
discount (except such cash or trade discount as may be shown on any invoice,
contract or other writing delivered to the Bank).  No contract right, account,
general intangible or chattel paper is or will be represented by any note or
other instrument, and no contract right, account or general intangible is, or
will be represented by any conditional or installment sales obligation or other
chattel paper, except such instruments or chattel paper as have been or
immediately upon receipt by the Borrower will be delivered to the Bank (duly
endorsed or assigned), such delivery, in the case of chattel paper, to include
all executed copies except those in the possession of the installment buyer and
any security for or guaranty of any of the Collateral shall be delivered to the
Bank immediately upon receipt thereof by the Borrower, with such assignments and
endorsements thereof as the Bank may request.
 
3.11 Title to Collateral.  At the date hereof the Borrower is (and as to
Collateral that the Borrower may acquire after the date hereof, will be) the
lawful owner of the Collateral, and the Collateral and each item thereof is,
will be and shall continue to be free of all restrictions, liens, encumbrances
or other rights, title or interests (other than the security interest therein
granted to the Bank), credits, defenses, recoupments, set-offs or counterclaims
whatsoever.  The Borrower has and will have full power and authority to grant to
the Bank a security interest in the Collateral and the Borrower has not
transferred, assigned, sold, pledged, encumbered, subjected to lien or granted
any security interest in, and will not transfer, assign, sell (except sales or
other dispositions in the ordinary course of business in respect to inventory as
expressly permitted in this Agreement), pledge, encumber, subject to lien or
grant any security interest in any of the Collateral (or any of the Borrower's
right, title or interest therein), to any person other than the Bank.  The
Collateral is and will be valid and genuine in all respects.  The Borrower will
warrant and defend the Bank’s right to and interest in the Collateral against
all claims and demands of all persons whatsoever.
 
3.12 Location of Collateral.  Except for sale, processing, use, consumption or
other disposition in the ordinary course of business, the Borrower will keep all
inventory and equipment only at locations specified in this Agreement or
specified to the Bank in writing.  The Borrower shall, during the term of this
Agreement, keep the Bank currently and accurately informed in writing of each
location where the Borrower's records relating to its accounts and contract
rights, respectively, are kept, and shall not remove such records or any of them
to another location without giving the Bank at least thirty (30) days prior
written notice thereof.
 
3.13 Third Parties.  The Bank shall not be deemed to have assumed any liability
or responsibility to the Borrower or any third person for the correctness,
validity or genuineness of any instruments or documents that may be released or
endorsed to the Borrower by the Bank (which shall automatically be deemed to be
without recourse to the Bank in any event) or for the existence, character,
quantity, quality, condition, value or delivery of any goods purporting to be
represented by any such documents; and the Bank, by accepting such security
interest in the Collateral, or by releasing any Collateral to the Borrower,
shall not be deemed to have assumed any obligation or liability to any supplier
or Debtor or to any other third party, and the Borrower agrees to indemnify and
defend the Bank and hold it harmless in respect to any claim or proceeding
arising out of any matter referred to in this paragraph.
 
3.14 Payment of Accounts.  Each account or other item of Collateral, other than
inventory and equipment, will be paid in full on or before the date shown as its
due date in the schedule of Collateral, in the copy of the invoice(s) relating
to the account or other Collateral or in contracts relating thereto.  Upon any
suspension of business, assignment or trust mortgage for the benefit of
creditors, dissolution, petition in receivership or under any chapter of the
Bankruptcy Code as amended from time to time by or against any Debtor, any
Debtor becoming insolvent or unable to pay its debts as they mature or any other
act of the same or different nature amounting to a business failure, the
Borrower will immediately notify the Bank thereof.
 
3.15 Taxes.  The Borrower has filed all Federal, state and other tax returns
required to be filed (except for such returns for which current and valid
extensions have been filed), and all taxes, assessments and other governmental
charges due from the Borrower have been fully paid.  The Borrower has
established on its books reserves adequate for the payment of all Federal, state
and other tax liabilities (if any).
 
3.16 Use of Proceeds.  No portion of any loan is to be used for (i) the purpose
of purchasing or carrying any "margin security" or "margin stock" as such terms
are used in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. 221 and 224 or (ii) primarily personal, family or household
purposes.  The Collateral is not used or acquired primarily for personal, family
or household purposes.
 
3.17 Environmental. As of the date hereof neither the Borrower nor any of
Borrower's agents, employees or independent contractors (1) have caused or are
aware of a release or threat of release of Hazardous Materials (as defined
herein) on any of the premises or personal property owned or controlled by
Borrower ("Controlled Property") or any property abutting Controlled Property
("Abutting Property"), which could give rise to liability under any
Environmental Law (as defined herein) or any other Federal, state or local law,
rule or regulation; (2) have arranged for the transport of or transported any
Hazardous Materials in a manner as to violate, or result in potential
liabilities under, any Environmental Law; (3) have received any notice, order or
demand from the Environmental Protection Agency or any other Federal, state or
local agency under any Environmental Law; (4) have incurred any liability under
any Environmental Law in connection with the mismanagement, improper disposal or
release of Hazardous Materials; or (5) are aware of any inspection or
investigation of any Controlled Property or Abutting Property by any Federal,
state or local agency for possible violations of any Environmental Law.
 
To the best of Borrower's knowledge, neither Borrower, nor any prior owner,
operator or tenant of any Controlled Property, committed or omitted any act
which caused the release of Hazardous Materials on such Controlled Property
which could give rise to a lien thereon by any Federal, state or local
government.  No notice or statement of claim or lien affecting any Controlled
Property has been recorded or filed in any public records by any Federal, state
or local government for costs, penalties, fines or other charges as to such
property.  All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the ownership, operation, or
use of the Controlled Property, including without limitation, the past or
present generation, treatment, storage, disposal or release of any Hazardous
Materials into the environment, have been duly obtained or filed.
 
Borrower agrees to indemnify and hold the Bank and any Bank Affiliate harmless
from all liability, loss, cost, damage and expense, including attorney fees and
costs of litigation, arising from any and all of its violations of any
Environmental Law (including those arising from any lien by any Federal, state
or local government arising from the presence of Hazardous Materials) or from
the presence of Hazardous Materials located on or emanating from any Controlled
Property or Abutting Property whether existing or not existing and whether known
or unknown at the time of the execution hereof and regardless of whether or not
caused by, or within the control of Borrower.  Borrower further agrees to
reimburse Bank upon demand for any costs incurred by Bank in connection with the
foregoing.  Borrower agrees that its obligations hereunder shall be continuous
and shall survive the repayment of all debts to Bank and shall continue so long
as a valid claim may be lawfully asserted against the Bank.
 
The term "Hazardous Materials" includes but is not limited to any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, hazardous wastes, Hazardous Materials, hazardous
materials, extremely hazardous wastes, or words of similar meaning or regulatory
effect under any present or future Environmental Law or that may have a negative
impact on human health or the environment, including but not limited to
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives.
The term "Environmental Law" means any present and future Federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law, relating to protection of human health or the environment, relating
to Hazardous Materials, relating to liability for or costs of remediation or
prevention of releases of Hazardous Materials or relating to liability for or
costs of other actual or threatened danger to human health or the
environment.  The term "Environmental Law" includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues:  the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the
Resource Conservation and Recovery Act (including but not limited to Subtitle I
relating to underground storage tanks); the Solid Waste Disposal Act; the Clean
Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe
Drinking Water Act; the Occupational Safety and Health Act; the Federal Water
Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act;
the Endangered Species Act; the National Environmental Policy Act; the River and
Harbors Appropriation Act; and the New York Environmental Conservation Law,
Chapter 43-B of the New York Consolidated Laws.
 
4.           AFFIRMATIVE COVENANTS
 
 
4.1 Payments and Performance.  Borrower will duly and punctually pay all
Obligations becoming due to the Bank and will duly and punctually perform all
Obligations on its part to be done or performed under this Agreement.
 
4.2 Books and Records; Inspection.  Borrower will at all times keep proper books
of account in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting principles,
consistently applied and which are, in the opinion of a Certified Public
Accountant acceptable to Bank, adequate to determine fairly the financial
condition and the results of operations of Borrower.  Borrower will at all
reasonable times make its books and records available in its offices for
inspection, examination and duplication by the Bank and the Bank’s
representatives and will permit inspection of the Collateral and all of its
properties by the Bank and the Bank’s representatives.  Borrower will from time
to time furnish the Bank with such information and statements as the Bank may
request in its sole discretion with respect to the Obligations or the Bank’s
security interest in the Collateral.  Borrower shall, during the term of this
Agreement, keep the Bank currently and accurately informed in writing of each
location where Borrower's records relating to its accounts and contract rights
are kept, and shall not remove such records to another location without giving
the Bank at least thirty (30) days prior written notice thereof.
 
4.3 Financial Statements.  Borrower will furnish to Bank:
 
(a)  
 Borrower's filed Federal tax returns, including all schedules thereto, for the
prior year within 120 days of the end of Borrower's Fiscal Year each such year
or by such other date approved by the Bank;

 
(b)  
from time to time, such financial data and information about Borrower as Bank
may reasonably request; and

 
(c)  
any financial data and information about any guarantors of the Obligations as
Bank may reasonably request.

 
4.4 Conduct of Business.  The Borrower will maintain its existence in good
standing and comply with all laws and regulations of the United States and of
any state or states thereof and of any political subdivision thereof, and of any
governmental authority which may be applicable to it or to its business;
provided that this covenant shall not apply to any tax, assessment or charge
which is being contested in good faith and with respect to which reserves have
been established and are being maintained.
 
4.5 Notice to Account Debtors.  The Borrower agrees, at the request of the Bank,
to notify all or any of the Debtors in writing of the Bank’s security interest
in the Collateral in whatever manner the Bank requests and, hereby authorizes
the Bank to notify all or any of the Debtors of the Bank’s security interest in
the Borrower's accounts at the Borrower's expense.
 
4.6 Contact with Accountant.  The Borrower hereby authorizes the Bank to
directly contact and communicate with any accountant employed by Borrower in
connection with the review and/or maintenance of Borrower's books and records or
preparation of any financial reports delivered by or at the request of Borrower
to Bank.
 
4.7 Operating and Deposit Accounts.  The Borrower shall maintain with the Bank
its primary operating and deposit accounts.  At the option of the Bank, all loan
payments and fees will automatically be debited from the Borrower’s primary
operating account and all advances will automatically be credited to the
Borrower’s primary operating account.
 
4.8 Taxes.  Borrower will promptly pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, retirement
benefits, withholding, sales and other taxes assessed against it or payable by
it before delinquent; provided that this covenant shall not apply to any tax
assessment or charge which is being contested in good faith and with respect to
which reserves have been established and are being maintained.  The Bank may, at
its option, from time to time, discharge any taxes, liens or encumbrances of any
of the Collateral, and the Borrower will pay to the Bank on demand or the Bank
in its sole discretion may charge to the Borrower all amounts so paid or
incurred by it.
 
4.9 Maintenance. Borrower will keep and maintain the Collateral and its other
properties, if any, in good repair, working order and condition.  Borrower will
immediately notify the Bank of any loss or damage to or any occurrence which
would adversely affect the value of any Collateral.  The Bank may, at its
option, from time to time, take any other action that the Bank may deem proper
to repair, maintain or preserve any of the Collateral, and the Borrower will pay
to the Bank on demand or the Bank in its sole discretion may charge to the
Borrower all amounts so paid or incurred by it.
 
4.10 Insurance.  Borrower will maintain in force property and casualty insurance
on all Collateral and any other property of the Borrower, if any, against risks
customarily insured against by companies engaged in businesses similar to that
of the Borrower containing such terms and written by such companies as may be
satisfactory to the Bank, such insurance to be payable to the Bank as its
interest may appear in the event of loss and to name the Bank as insured
pursuant to a standard loss payee clause; no loss shall be adjusted thereunder
without the Bank’s approval; and all such policies shall provide that they may
not be canceled without first giving at least Thirty (30) days written notice of
cancellation to the Bank.  In the event that the Borrower fails to provide
evidence of such insurance, the Bank may, at its option, secure such insurance
and charge the cost thereof to the Borrower.  At the option of the Bank, all
insurance proceeds received from any loss or damage to any of the Collateral
shall be applied either to the replacement or repair thereof or as a payment on
account of the Obligations.  From and after the occurrence of an Event of
Default, the Bank is authorized to cancel any insurance maintained hereunder and
apply any returned or unearned premiums, all of which are hereby assigned to the
Bank, as a payment on account of the Obligations.
 
4.11 Notification of Default.  Immediately upon becoming aware of the existence
of any condition or event which constitutes an Event of Default, or any
condition or event which would upon notice or lapse of time, or both, constitute
an Event of Default, Borrower shall give Bank written notice thereof specifying
the nature and duration thereof and the action being or proposed to be taken
with respect thereto.
4.12 Notification of Material Litigation.  Borrower will immediately notify the
Bank in writing of any litigation or of any investigative proceedings of a
governmental agency or authority commenced or threatened against it which would
or might be materially adverse to the financial condition of Borrower or any
guarantor of the Obligations.
 
4.13 Pension Plans.  With respect to any pension or benefit plan maintained by
Borrower, or to which Borrower contributes ("Plan"), the benefits under which
are guarantied, in whole or in part, by the Pension Benefit Guaranty Corporation
created by the Employee Retirement Income Security Act of 1974, P.L. 93-406, as
amended ("ERISA") or any governmental authority succeeding to any or all of the
functions of the Pension Benefit Guaranty Corporation ("Pension Benefit Guaranty
Corporation"), Borrower will (a) fund each Plan as required by the provisions of
Section 412 of the Internal Revenue Code of 1986, as amended; (b) cause each
Plan to pay all benefits when due; (c) furnish Bank (i) promptly with a copy of
any notice of each Plan's termination sent to the Pension Benefit Guaranty
Corporation (ii) no later than the date of submission to the Department of Labor
or to the Internal Revenue Service, as the case may be, a copy of any request
for waiver from the funding standards or extension of the amortization periods
required by Section 412 of the Internal Revenue Code of 1986, as amended and
(iii) notice of any Reportable Event as such term is defined in ERISA; and (d)
subscribe to any contingent liability insurance provided by the Pension Benefit
Guaranty Corporation to protect against employer liability upon termination of a
guarantied pension plan, if available to Borrower.
 
4.14 Lien Law.  If any account or general intangible included in the Collateral
represents money owing pursuant to any contract for the improvement of real
property or for a public improvement for purposes of the Lien Law of the State
of New York (the "Lien Law"), Borrower shall (i) give Bank notice of such fact;
(ii) receive and hold any money advanced by Bank with respect to such account or
general intangible as a trust fund to be first applied to the payment of trust
claims as such term is defined in the Lien Law (Section 71 or otherwise); and
(iii) until such trust claim is paid, not use or permit the use of any such
money for any purpose other than the payment of such trust claims.
 
5.           NEGATIVE COVENANTS
 
5.1 Limitations on Indebtedness.  Borrower shall not issue any evidence of
indebtedness or create, assume, guarantee, become contingently liable for, or
suffer to exist indebtedness in addition to indebtedness to the Bank, except
indebtedness or liabilities of Borrower, other than for money borrowed, incurred
or arising in the ordinary course of business.
 
5.2 Sale of Interest.  There shall not be any sale or transfer of ownership of
any interest in the Borrower without the Bank’s prior written consent unless
such transfer shall not result in change in control of Borrower.
 
5.3 Loans or Advances.  Borrower shall not make any loans or advances to any
individual, partnership, corporation, limited liability company, trust, or other
organization or person, including without limitation its officers and employees;
provided, however, that Borrower may make advances to its employees, including
its officers, with respect to expenses incurred or to be incurred by such
employees in the ordinary course of business which expenses are reimbursable by
Borrower; and provided further, however, that Borrower may extend credit in the
ordinary course of business in accordance with customary trade practices.
 
5.4 Dividends and Distributions.  Borrower shall not, without prior written
consent of the Bank, pay any dividends on or make any distribution on account of
any class of Borrower's capital stock in cash or in property (other than
additional shares of such stock), or redeem, purchase or otherwise acquire,
directly or indirectly, any of such stock, except, so long as Borrower is not in
default hereunder, if Borrower is a Subchapter S corporation, under the
regulations of the Internal Revenue Service of the United States, distributions
to the Shareholders of Borrower in such amounts as are necessary to pay the tax
liability of such Shareholders due as a result of such Shareholders' interest in
the Borrower.
 
5.5 Investments.  The Borrower shall not make investments in, or advances to,
any individual, partnership, corporation, limited liability company, trust or
other organization or person other than as previously specifically consented to
in writing by the Bank.  The Borrower will not purchase or otherwise invest in
or hold securities, nonoperating real estate or other nonoperating assets or
purchase all or substantially all the assets of any entity other than as
previously specifically consented to in writing by the Bank.
 
5.6 Merger.  Borrower shall not merge or consolidate or be merged or
consolidated with or into any other entity.
 
5.7 Capital Expenditures.  The Borrower shall not, directly or indirectly, make
or commit to make capital expenditures by lease, purchase, or otherwise, except
in the ordinary and usual course of business for the purpose of replacing
machinery, equipment or other personal property which, as a consequence of wear,
duplication or obsolescence, is no longer used or necessary in the Borrower's
business.
 
5.8 Sale of Assets.  Borrower shall not sell, lease or otherwise dispose of any
of its assets, except in the ordinary and usual course of business and except
for the purpose of replacing machinery, equipment or other personal property
which, as a consequence of wear, duplication or obsolescence, is no longer used
or necessary in the Borrower's business, provided that fair consideration is
received therefor; provided, however, in no event shall the Borrower sell, lease
or otherwise dispose of any equipment purchased with the proceeds of any loans
made by the Bank.
 
5.9 Restriction on Liens.  Borrower shall not grant any security interest in, or
mortgage of, any of its properties or assets including the Collateral.  Borrower
shall not enter into any agreement with any person other than the Bank that
prohibits the Borrower from granting any security interest in, or mortgage of,
any of its properties or assets including the Collateral.
 
5.10 Other Business.  Borrower shall not engage in any business other than the
business in which it is currently engaged or a business reasonably allied
thereto.
 
5.11 Change of Name, etc.  Borrower shall not change its legal name or the State
or the type of its organization, without giving the Bank at least 30 days prior
written notice thereof.
 
6.           DEFAULT
 
6.1 Default.  "Event of Default" shall mean the occurrence of one or more of any
of the following events:
 
(a)  
default of any liability, obligation, covenant or undertaking of the Borrower or
any guarantor of the Obligations to the Bank, hereunder or otherwise, including,
without limitation, failure to pay in full and when due any installment of
principal or interest or default of the Borrower or any guarantor of the
Obligations under any other Loan Document or any other agreement with the Bank
continuing for 15 days with respect to any default (other than with respect to
the payment of money for which there is no grace period);

 
(b)  
failure of the Borrower or any guarantor of the Obligations to maintain
aggregate collateral security value satisfactory to the Bank continuing for 15
days;

 
(c)  
default of any liability, obligation or undertaking of the Borrower or any
guarantor of the Obligations to any other party continuing for 15 days;

 
(d)  
if any statement, representation or warranty heretofore, now or hereafter made
by the Borrower or any guarantor of the Obligations in connection with this
Agreement or in any supporting financial statement of the Borrower or any
guarantor of the Obligations shall be determined by the Bank to have been false
or misleading in any material respect when made;

 
(e)  
if the Borrower or any guarantor of the Obligations is a corporation, trust,
partnership or limited liability company, the liquidation, termination or
dissolution of any such organization, or the merger or consolidation of such
organization into another entity, or its ceasing to carry on actively its
present business or the appointment of a receiver for its property;

 
(f)  
the death or judicial declaration of incompetence of the Borrower or any
guarantor of the Obligations and, if the Borrower or any guarantor of the
Obligations is a partnership or limited liability company, the death or judicial
declaration of incompetence of any partner or member;

 
(g)  
the institution by or against the Borrower or any guarantor of the Obligations
of any proceedings under the Bankruptcy Code 11 USC §101 et seq. or any other
law in which the Borrower or any guarantor of the Obligations is alleged to be
insolvent or unable to pay its debts as they mature, or the making by the
Borrower or any guarantor of the Obligations of an assignment for the benefit of
creditors or the granting by the Borrower or any guarantor of the Obligations of
a trust mortgage for the benefit of creditors (each of the foregoing in this
subclause, an "Insolvency Default");

 
(h)  
the service upon the Bank of a writ in which the Bank is named as trustee of the
Borrower or any guarantor of the Obligations;

 
(i)  
a judgment or judgments for the payment of money shall be rendered against the
Borrower or any guarantor of the Obligations, and any such judgment shall remain
unsatisfied and in effect for any period of thirty (30) consecutive days without
a stay of execution;

 
(j)  
any levy, lien (including mechanics lien), seizure, attachment, execution or
similar process shall be issued or levied on any of the property of the Borrower
or any guarantor of the Obligations;

 
(k)  
the termination or revocation of any guaranty of the Obligations; or

 
(l)  
the occurrence of such a change in the condition or affairs (financial or
otherwise) of the Borrower or any guarantor of the Obligations, or the
occurrence of any other event or circumstance, such that the Bank, in its sole
discretion, deems that it is insecure or that the prospects for timely or full
payment or performance of any obligation of the Borrower or any guarantor of the
Obligations to the Bank has been or may be impaired.

 
6.2 Acceleration.  If an Event of Default shall occur, at the election of the
Bank (but automatically in the case of an Insolvency Default), all Obligations
shall become immediately due and payable without notice or demand, except with
respect to Obligations payable on DEMAND, which shall be due and payable on
DEMAND, whether or not an Event of Default has occurred.
 
The Bank is hereby authorized, at its election, after an Event of Default or
after Demand, without any further demand or notice except to such extent as
notice may be required by applicable law, to take possession and/or sell or
otherwise dispose of all or any of the Collateral at public or private sale; and
the Bank may also exercise any and all other rights and remedies of a secured
party under the Code or which are otherwise accorded to it in equity or at law,
all as Bank may determine, and such exercise of rights in compliance with the
requirements of law will not be considered adversely to affect the commercial
reasonableness of any sale or other disposition of the Collateral.  If notice of
a sale or other action by the Bank is required by applicable law, unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Borrower agrees that ten (10)
days written notice to the Borrower, or the shortest period of written notice
permitted by such law, whichever is smaller, shall be sufficient notice; and
that to the extent permitted by law, the Bank, its officers, attorneys and
agents may bid and become purchasers at any such sale, if public, and may
purchase at any private sale any of the Collateral that is of a type customarily
sold on a recognized market or which is the subject of widely distributed
standard price quotations.  Any sale (public or private) shall be without
warranty and free from any right of redemption, which the Borrower shall waive
and release after default upon the Bank’s request therefor, and may be free of
any warranties as to the Collateral if Bank shall so decide.  No purchaser at
any sale (public or private) shall be responsible for the application of the
purchase money.  Any balance of the net proceeds of sale remaining after paying
all Obligations of the Borrower to the Bank shall be returned to such other
party as may be legally entitled thereto; and if there is a deficiency, the
Borrower shall be responsible for repayment of the same, with interest.  Upon
demand by the Bank, the Borrower shall assemble the Collateral and make it
available to the Bank at a place designated by the Bank which is reasonably
convenient to the Bank and the Borrower.  The Borrower hereby acknowledges that
the Bank has extended credit and other financial accommodations to the Borrower
upon reliance of the Borrower's granting the Bank the rights and remedies
contained in this Agreement including without limitation the right to take
immediate possession of the Collateral upon the occurrence of an Event of
Default or after DEMAND with respect to Obligations payable on DEMAND and the
Borrower hereby acknowledges that the Bank is entitled to equitable and
injunctive relief to enforce any of its rights and remedies hereunder or under
the Code and the Borrower hereby waives any defense to such equitable or
injunctive relief based upon any allegation of the absence of irreparable harm
to the Bank.
 
The Bank shall have the unrestricted right from time to time to apply (or to
change any application already made of) the proceeds of any of the Collateral to
any of the Obligations, as the Bank in its sole discretion may determine.
 
The Bank shall not be required to marshal any present or future security for
(including but not limited to this Agreement and the Collateral subject to the
security interest created hereby), or guarantees of, the Obligations or any of
them, or to resort to such security or guarantees in any particular order; and
all of its rights hereunder and in respect of such securities and guaranties
shall be cumulative and in addition to all other rights, however existing or
arising.  To the extent that it lawfully may do so, the Borrower hereby agrees
that it will not invoke and irrevocably waives the benefits of any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of the Bank’s rights under this Agreement or under any other
instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
guaranteed.  Except as required by applicable law, the Bank shall have no duty
as to the collection or protection of the Collateral or any income thereon, nor
as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the safe custody thereof.
 
6.3 Power of Attorney.  The Borrower hereby irrevocably constitutes and appoints
the Bank as the Borrower's true and lawful attorney, with full power of
substitution, at the sole cost and expense of the Borrower but for the sole
benefit of the Bank, upon the occurrence of an Event of Default or after DEMAND
with respect to Obligations payable on DEMAND, to convert the Collateral into
cash, including, without limitation, completing the manufacture or processing of
work in process, and the sale (either public or private) of all or any portion
or portions of the inventory and other Collateral; to enforce collection of the
Collateral, either in its own name or in the name of the Borrower, including,
without limitation, executing releases or waivers, compromising or settling with
any Debtors and prosecuting, defending, compromising or releasing any action
relating to the Collateral; to receive, open and dispose of all mail addressed
to the Borrower and to take therefrom any remittances or proceeds of Collateral
in which the Bank has a security interest; to notify Post Office authorities to
change the address for delivery of mail addressed to the Borrower to such
address as the Bank shall designate; to endorse the name of the Borrower in
favor of the Bank upon any and all checks, drafts, money orders, notes,
acceptances or other instruments of the same or different nature; to sign and
endorse the name of the Borrower on and to receive as secured party any of the
Collateral, any invoices, freight or express receipts, or bills of lading,
storage receipts, warehouse receipts, or other documents of title of the same or
different nature relating to the Collateral; to sign the name of the Borrower on
any notice of the Debtors or on verification of the Collateral; and to sign, if
necessary, and file or record on behalf of the Borrower any financing or other
statement in order to perfect or protect the Bank’s security interest.  The Bank
shall not be obliged to do any of the acts or exercise any of the powers
hereinabove authorized, but if the Bank elects to do any such act or exercise
any such power, it shall not be accountable for more than it actually receives
as a result of such exercise of power, and it shall not be responsible to the
Borrower except for its own gross negligence or willful misconduct.  All powers
conferred upon the Bank by this Agreement, being coupled with an interest, shall
be irrevocable so long as any Obligation of the Borrower or any guarantor or
surety to the Bank shall remain unpaid or the Bank is obligated under this
Agreement to extend any credit to the Borrower.
 
6.4 Nonexclusive Remedies.  All of the Bank’s rights and remedies not only under
the provisions of this Agreement but also under any other agreement or
transaction shall be cumulative and not alternative or exclusive, and may be
exercised by the Bank at such time or times and in such order of preference as
the Bank in its sole discretion may determine.
 
7.           MISCELLANEOUS
 
7.1 Waivers.  The Borrower waives notice of intent to accelerate, notice of
acceleration, notice of nonpayment, demand, presentment, protest or notice of
protest of the Obligations, and all other notices, consents to any renewals or
extensions of time of payment thereof, and generally waives any and all
suretyship defenses and defenses in the nature thereof.
 
7.2 Waiver of Homestead.  To the maximum extent permitted under applicable law,
the Borrower hereby waives and terminates any homestead rights and/or exemptions
respecting any of its property under the provisions of any applicable homestead
laws, including without limitation, Section 5206 of the Civil Practice Law and
Rules of New York.
 
7.3 Deposit Collateral.  The Borrower hereby grants to the Bank a continuing
lien and security interest in any and all deposits or other sums at any time
credited by or due from the Bank or any Bank Affiliate to the Borrower and any
cash, securities, instruments or other property of the Borrower in the
possession of the Bank or any Bank Affiliate, whether for safekeeping or
otherwise, or in transit to or from the Bank or any Bank Affiliate (regardless
of the reason the Bank or Bank Affiliate had received the same or whether the
Bank or Bank Affiliate has conditionally released the same) as security for the
full and punctual payment and performance of all of the liabilities and
obligations of the Borrower to the Bank or any Bank Affiliate and such deposits
and other sums may be applied or set off against such liabilities and
obligations of the Borrower to the Bank or any Bank Affiliate at any time,
whether or not such are then due, whether or not demand has been made and
whether or not other collateral is then available to the Bank or any Bank
Affiliate.
 
7.4 Indemnification.  The Borrower shall indemnify, defend and hold the Bank and
any Bank Affiliate and their directors, officers, employees, agents and
attorneys (each an "Indemnitee") harmless of and from any claim brought or
threatened against any Indemnitee by the Borrower, any guarantor or endorser of
the Obligations, or any other person (as well as from reasonable attorneys' fees
and expenses in connection therewith) on account of the Bank’s relationship with
the Borrower, or any guarantor or endorser of the Obligations (each of which may
be defended, compromised, settled or pursued by the Bank with counsel of the
Bank’s election, but at the expense of the Borrower), except for any claim
arising out of the gross negligence or willful misconduct of the Bank.  The
within indemnification shall survive payment of the Obligations, and/or any
termination, release or discharge executed by the Bank in favor of the Borrower.
 
7.5 Costs and Expenses.  The Borrower shall pay to the Bank on demand any and
all costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements, court costs, litigation and other expenses) incurred or
paid by the Bank in establishing, maintaining, protecting or enforcing any of
the Bank’s rights or the Obligations, including, without limitation, any and all
such costs and expenses incurred or paid by the Bank in defending the Bank’s
security interest in, title or right to the Collateral or in collecting or
attempting to collect or enforcing or attempting to enforce payment of the
Obligations.
 
7.6 Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be an original, but all of which shall constitute but one
agreement.
 
7.7 Severability.  If any provision of this Agreement or portion of such
provision or the application thereof to any person or circumstance shall to any
extent be held invalid or unenforceable, the remainder of this Agreement (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
 
7.8 Complete Agreement.  This Agreement and the other Loan Documents constitute
the entire agreement and understanding between and among the parties hereto
relating to the subject matter hereof, and supersedes all prior proposals,
negotiations, agreements and understandings among the parties hereto with
respect to such subject matter.
 
7.9 Binding Effect of Agreement.  This Agreement shall be binding upon and inure
to the benefit of the respective heirs, executors, administrators, legal
representatives, successors and assigns of the parties hereto, and shall remain
in full force and effect (and the Bank shall be entitled to rely thereon) until
released in writing by the Bank.  The Bank may transfer and assign this
Agreement and deliver the Collateral to the assignee, who shall thereupon have
all of the rights of the Bank; and the Bank shall then be relieved and
discharged of any responsibility or liability with respect to this Agreement and
the Collateral.  The Borrower may not assign or transfer any of its rights or
obligations under this Agreement.  Except as expressly provided herein or in the
other Loan Documents, nothing, expressed or implied, is intended to confer upon
any party, other than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Loan Documents.
 
7.10 Further Assurances.  Borrower will from time to time execute and deliver to
Bank such documents, and take or cause to be taken, all such other or further
action, as Bank may request in order to effect and confirm or vest more securely
in Bank all rights contemplated by this Agreement and the other Loan Documents
(including, without limitation, to correct clerical errors) or to vest more
fully in or assure to the Bank the security interest in the Collateral granted
to the Bank by this Agreement or to comply with applicable statute or law and to
facilitate the collection of the Collateral (including, without limitation, the
execution of stock transfer orders and stock powers, endorsement of promissory
notes and instruments and notifications to obligors on the Collateral).  To the
extent permitted by applicable law, Borrower authorizes the Bank to file
financing statements, continuation statements or amendments, and any such
financing statements, continuation statements or amendments may be filed at any
time in any jurisdiction. Bank may at any time and from time to time file
financing statements, continuation statements and amendments thereto which
contain any information required by the Code for the sufficiency or filing
office acceptance of any financing statement, continuation statement or
amendment, including whether Borrower is an organization, the type of
organization and any organization identification number issued to
Borrower.  Borrower agrees to furnish any such information to Bank promptly upon
request.  In addition, Borrower shall at any time and from time to time take
such steps as Bank may reasonably request for Bank (i) to obtain an
acknowledgment, in form and substance satisfactory to Bank, of any bailee having
possession of any of the Collateral that the bailee holds such Collateral for
Bank, (ii) to obtain "control" (as defined in the Code) of any Collateral
comprised of deposit accounts, electronic chattel paper, letter of credit rights
or investment property, with any agreements establishing control to be in form
and substance satisfactory to Bank, and (iii) otherwise to insure the continued
perfection and priority of Bank’s security interest in any of the Collateral and
the preservation of its rights therein.  Borrower hereby constitutes Bank its
attorney-in-fact to execute, if necessary, and file all filings required or so
requested for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; and such power, being coupled with an interest, shall be
irrevocable until this Agreement terminates in accordance with its terms, all
Obligations are irrevocably paid in full and the Collateral is released.
 
7.11 Amendments and Waivers.  This Agreement may be amended and Borrower may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if Borrower shall obtain the Bank’s prior written consent to
each such amendment, action or omission to act.  No course of dealing and no
delay or omission on the part of Bank in exercising any right hereunder shall
operate as a waiver of such right or any other right and waiver on any one or
more occasions shall not be construed as a bar to or waiver of any right or
remedy of Bank on any future occasion.
 
7.12 Terms of Agreement.  This Agreement shall continue in full force and effect
so long as any Obligations or obligation of Borrower to Bank shall be
outstanding, or the Bank shall have any obligation to extend any financial
accommodation hereunder, and is supplementary to each and every other agreement
between Borrower and Bank and shall not be so construed as to limit or otherwise
derogate from any of the rights or remedies of Bank or any of the liabilities,
obligations or undertakings of Borrower under any such agreement, nor shall any
contemporaneous or subsequent agreement between Borrower and the Bank be
construed to limit or otherwise derogate from any of the rights or remedies of
Bank or any of the liabilities, obligations or undertakings of Borrower
hereunder, unless such other agreement specifically refers to this Agreement and
expressly so provides.
 
7.13 Notices.  Any notice under or pursuant to this Agreement shall be a signed
writing or other authenticated record (within the meaning of Article 9 of the
Code).  Any notices under or pursuant to this Agreement shall be deemed duly
received and effective if delivered in hand to any officer or agent of the
Borrower or Bank, or if mailed by registered or certified mail, return receipt
requested, addressed to the Borrower or Bank at the address set forth in this
Agreement or as any party may from time to time designate by written notice to
the other party.
 
7.14 Governing Law.  This Agreement shall be governed by the laws of the State
of New York without giving effect to the conflicts of laws principles thereof.
 
7.15 Reproductions.  This Agreement and all documents which have been or may be
hereinafter furnished by Borrower to the Bank may be reproduced by the Bank by
any photographic, photostatic, microfilm, xerographic or similar process, and
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of
business).
 
7.16 Joint and Several.  If more than one Borrower signs this Agreement, then
the responsibilities hereunder are joint and several.
 
7.17 Completing and Correcting this Agreement.  The Borrower authorizes the Bank
to fill in any blank spaces and to otherwise complete this Agreement and to
correct any patent errors herein.
 
7.18 ADDITIONAL WAIVERS.  IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR
ARISING OUT OF THIS AGREEMENT, BORROWER WAIVES (i) THE RIGHT TO INTERPOSE ANY
SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, (ii) ANY OBJECTION BASED
ON FORUM NON CONVENIENS OR VENUE AND (iii) ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE
OR SPECIAL DAMAGES.
 
7.19 Increased Costs.  If any law, regulation or guideline or any change therein
or interpretation or application thereof by any regulatory body, court,
administrative or governmental authority charged with the interpretation or
administration thereof, or compliance with any request, directive, ruling,
decree, judgment or recommendation of any regulatory body, court administrative
or governmental authority now existing or hereafter adopted (whether or not
having the force of law) imposes, modifies or deems applicable, any capital
adequacy, increased capital adequacy or similar requirement and the result is to
increase the cost of, or reduce the rate of return on, the Bank's  (or Bank
affiliate's or participant's) capital as a consequence of its obligations
hereunder, the Bank shall notify the Borrower of such fact.  The Borrower and
the Bank shall thereafter in good faith negotiate an adjustment to the fees
payable hereunder which, in the reasonable judgment of the Borrower and the
Bank, will adequately compensate the Bank (or Bank affiliate or participant) in
light of these circumstances.  In the event that the Borrower and the Bank are
unable to agree on such adjustment within 30 days after the date on which the
Bank sends such notice to the Borrower, the Borrower shall on the later of such
30th day after notice or the date such increased cost or reduced return takes
effect, unless otherwise agreed to by the Bank (or Bank affiliate or
participant), prepay all loans on the 30th day.
 
7.20 USA Patriot Act.  The Bank is subject to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the "Patriot Act") and hereby notifies Borrower that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Bank to
identify the Borrower in accordance with the Patriot Act.
 
7.21 Sharing of Borrower Financial Information.  The Borrower authorizes the
Bank to share Borrower's financial information to facilitate an appraisal in
connection with any Real Property securing the Obligation(s).
 
7.22 LTV.  LTV 80% on equipment being purchased.
 
7.23 Jurisdiction and Venue.  Borrower irrevocably submits to the nonexclusive
jurisdiction of any Federal or state court sitting in New York, over any suit,
action or proceeding arising out of or relating to this Agreement.  Borrower
irrevocably waives, to the fullest extent it may effectively do so under
applicable law, any objection it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any
claim that the same has been brought in an inconvenient forum.  Borrower hereby
consents to any and all process which may be served in any such suit, action or
proceeding, (i) by mailing a copy thereof by registered and certified mail,
postage prepaid, return receipt requested, to the Borrower's address shown in
this Agreement or as notified to the Bank and (ii) by serving the same upon the
Borrower in any other manner otherwise permitted by law, and agrees that such
service shall in every respect be deemed effective service upon Borrower.
 
7.24 JURY WAIVER.  THE BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, (A) WAIVE
ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION
WITH THIS AGREEMENT, THE OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND (B) AGREE NOT TO SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE, OR HAS NOT BEEN, WAIVED.  THE BORROWER CERTIFIES THAT NEITHER THE BANK NOR
ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE BANK WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
 
 
Executed as of __________, 2011.

 
 

Signature Verified:
Borrower:

 
Chembio Diagnostic Systems Inc.

_________________________
By:
_________________________

 
Name:

 
Title:

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