Exhibit 10.1

                     SEVENTH LOAN MODIFICATION AGREEMENT

      This Seventh Loan Modification Agreement  (this "Loan Modification
Agreement') is entered into as of December 22, 2004, by and between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of
business at 3003 Tasman Drive, Santa Clara, California 95054 and with a
loan production office located at One Newton Executive Park, Suite 200,
2221 Washington Street, Newton, Massachusetts 02462, doing business under
the name "Silicon Valley East" ("Bank") and PARLEX CORPORATION, a
Massachusetts corporation, with offices at One Parlex Place, Methuen,
Massachusetts, 01844, PARLEX DYNAFLEX CORPORATION, a California
corporation, with offices at One Parlex Place, Methuen, Massachusetts
01844, and POLY-FLEX CIRCUITS, INC., a Rhode Island corporation, with
offices at 28 Kenney Drive, Cranston, Rhode Island 02920 (jointly and
severally, individually and collectively, "Borrower").

      1.    DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among
other indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of
June 11, 2003, evidenced by, among other documents,  a certain Loan and
Security Agreement dated as of June 11, 2003 between Borrower and Bank, as
amended from time to time (as amended, the "Loan Agreement").  Capitalized
terms used but not otherwise defined herein shall have the same meaning as
in the Loan Agreement.

      2.    DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement and certain
Intellectual Property Security Agreements each dated June 11, 2003 (the "IP
Agreements")  (together with any other collateral security granted to Bank,
the "Security Documents").

      Hereinafter, the Security Documents, together with all other
documents evidencing or securing the Obligations shall be referred to as
the "Existing Loan Documents".

      3.    DESCRIPTION OF CHANGE IN TERMS.

            Modification to Loan Agreement.
            -------------------------------

            A.    Section 8 of the Loan Agreement is hereby amended by
                  adding the following definition after the definition of
                  "Deposit Account" set forth therein:

                  ""Eligible Inventory" means Borrower's raw materials and
                  finished goods Inventory located in the United States at
                  a location of Borrower listed on the Perfection
                  Certificate or another location in the United States of
                  which Borrower gives Silicon notice pursuant to this
                  Agreement which Silicon, in its commercially reasonable
                  business judgment, shall deem eligible for borrowing
                  pursuant to the terms of this Agreement, but does not
                  include, in any event, (i) used, returned, obsolete,
                  consigned, demonstrative or custom Inventory, or
                  supplies, or (ii) any raw materials or finished goods not
                  subject to a perfected security interest in favor of
                  Silicon, or (iii) any of Borrower's raw materials or
                  finished goods not in Borrower's possession (unless such
                  finished goods are at a warehouse location listed on the
                  Perfection Certificate or another location in the United
                  States of which Borrower gives Silicon notice pursuant to
                  this Agreement and such warehouseman has executed a
                  waiver agreement reasonably satisfactory to Silicon)."

            B.    Section 1 of the Schedule to the Loan Agreement is hereby
                  amended by deleting same in its entirety and substituting
                  the following therefor:

                  "1.  CREDIT LIMIT

                  (Section 1.1):  An amount not to exceed the lesser of (A)
                  or (B), below:


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                  (A)

                        (i)   $12,000,000.00 (the "Maximum Credit Limit");
                        minus

                        (ii)  the aggregate amounts of all Loans (including
                        Cash Management Services), then undrawn
                        outstanding Letters of Credit, the FX Reserve, or
                        any other accommodations issued or incurred, or
                        caused to be issued or incurred by Silicon for the
                        account and/or benefit of the Borrower.

                  (B)

                        (i)   80.0% of the amount of  Borrower's Eligible
                        Receivables (as defined in Section 8 above); plus

                        (ii)  the lesser of (a) 20% of Borrower's Eligible
                        Inventory (valued at the lower of actual cost or
                        fair market value) or (b) $1,000,000.00; provided,
                        however, in no event shall advances based upon
                        Borrower's Eligible Inventory exceed 20% of the
                        amount of Borrower's Eligible Receivables or the
                        forced liquidation value of such Eligible Inventory
                        (as determined by Silicon based upon such
                        appraisals as may be required by Silicon from time
                        to time, in each instance at Borrower's expense);
                        minus

                        (iii) the aggregate amounts of all Loans (including
                        Cash Management Services), then undrawn
                        outstanding Letters of Credit, the FX Reserve, or
                        any other accommodations issued or incurred, or
                        caused to be issued or incurred by Silicon for the
                        account and/or benefit of Borrower.

                  Silicon may, from time to time, modify the advance rates
                  set forth herein in its good faith business judgment upon
                  notice to Borrower based on changes in collection
                  experience with respect to the Receivables or other
                  issues or factors relating to the Receivables or the
                  Collateral.

            Letter of Credit/FX Reserve/Cash Management Services Sublimit

            (Section 1.5, 1.6, 1.7):    $1,000,000.00."

            C.    Section 2 of the Schedule to the Loan Agreement is hereby
                  amended by deleting same in its entirety and substituting
                  the following therefor:

                  "Interest Rate (Section 1.2):

                  A rate equal to the Prime Rate (as defined below) plus
                  2.00% per annum.  Interest shall be calculated on the
                  basis of a 360-day year for the actual number of days
                  elapsed. "Prime Rate" is the greater of (i) 4.0% or (ii)
                  the rate announced from time to time by Silicon as its
                  "prime rate;" it is a base rate upon which other rates
                  charged by Silicon are based, and it is not necessarily
                  the best rate available at Silicon.  The interest rate
                  applicable to the Obligations shall change on each date
                  there is a change in the Prime Rate.  Notwithstanding the
                  foregoing, (i) upon Borrower's achievement of two (2)
                  consecutive quarters of positive operating income, the
                  interest rate hereunder shall be reduced to the Prime
                  Rate (as defined above) plus 1.25% per annum, and (ii)
                  upon Borrower's achievement of two (2) consecutive
                  quarters of positive net income, the interest rate
                  hereunder shall be further reduced to the Prime Rate (as
                  defined above) plus  0.50% per annum.  Such reduction in
                  the interest rate shall be effective immediately upon
                  receipt by Silicon of sufficient evidence of such
                  achievement of positive operating


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                  income and/or positive net income, as applicable.
                  Notwithstanding the foregoing, such reduction in the
                  interest rate shall be effective no later than the day
                  upon which Borrower files a second consecutive quarterly
                  statement on Form 10-Q indicating positive operating
                  income or a second consecutive quarterly statement on
                  Form 10-Q indicating positive net income, as applicable."

            D.    Section 3 of the Schedule to the Loan Agreement is hereby
                  amended (i) by deleting the following text appearing
                  therein in its entirety:

                  "Cancellation Fee: If the Obligations are voluntarily or
                  involuntarily prepaid or if this Agreement is otherwise
                  terminated prior to June 10, 2004, the Borrower shall pay
                  to Silicon a termination fee of $100,000.  If the
                  Obligations are voluntarily or involuntarily prepaid or
                  if this Agreement is otherwise terminated after June 10,
                  2004 but prior to the Maturity Date, Borrower shall pay
                  to Silicon a termination fee of $50,000.  Notwithstanding
                  the foregoing, no such termination fee shall be charged
                  if the credit facility hereunder is replaced or
                  transferred to another division of Silicon.  The
                  termination fee shall be due and payable upon prepayment
                  by the Borrower in the case of voluntary prepayments or
                  upon demand by Silicon in the event of  involuntary
                  prepayment, and if not paid immediately shall bear
                  interest at a rate equal to the highest rate applicable
                  to any of the Obligations."

                  and substituting the following text therefor:

                  "Cancellation Fee: If the Obligations are voluntarily or
                  involuntarily prepaid or if this Agreement is otherwise
                  terminated on or prior to December 31, 2005, the Borrower
                  shall pay to Silicon a termination fee of $60,000.  If
                  the Obligations are voluntarily or involuntarily prepaid
                  or if this Agreement is otherwise terminated after
                  December 31, 2005 but prior to the Maturity Date,
                  Borrower shall pay to Silicon a termination fee of
                  $30,000.  Notwithstanding the foregoing, no such
                  termination fee shall be charged if the credit facility
                  hereunder is replaced or transferred to another division
                  of Silicon.  The termination fee shall be due and payable
                  upon prepayment by the Borrower in the case of voluntary
                  prepayments or upon demand by Silicon in the event of
                  involuntary prepayment, and if not paid immediately shall
                  bear interest at a rate equal to the highest rate
                  applicable to any of the Obligations."

                  (ii)  By deleting the following text appearing in the
                  "Collateral Handling Fee" Section:

                  "Notwithstanding the foregoing, if Borrower maintains at
                  least $2,000,000.00 on deposit with Silicon at all times
                  during any month in a separate non-interest bearing
                  account (the "Compensating Balances Account") other than
                  the Borrower's operating account, no Collateral Handling
                  Fee shall be due hereunder, for the prior month."

                  (iii) By deleting the following text appearing in the
                  "Unused Line Fee " Section:

                  "Notwithstanding the foregoing, if Borrower maintains at
                  least $2,000,000.00 on deposit with Silicon at all times
                  in the Compensating Balances Account, no Unused Line Fee
                  shall be due hereunder."

            E.    Section 4 of the Schedule to the Loan Agreement is hereby
                  amended by deleting same in its entirety and substituting
                  the following therefor:

                  "4.  MATURITY DATE

                  (Section 6.1):     July 11, 2006."


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            F.    Section 5a. of the Schedule to the Loan Agreement is
                  hereby amended by deleting same in its entirety and
                  substituting the following therefor:

                  "Borrower shall have EBITDA of no less than (i)
                  $250,000.00, tested on a trailing three month basis, as
                  of the last day of each month until November 30, 2004,
                  (ii) $500,000.00, tested on a trailing three month basis,
                  as of the period ending December 31, 2004 and as of the
                  last day of each month thereafter until May 31, 2005, and
                  (iii) $750,000.00, tested on a trailing three month
                  basis, as of the period ending June 30, 2005 and as of
                  the last day of each month thereafter."

      4.    FEES.  Borrower shall pay to Bank a modification fee equal to
Thirty Five Thousand Dollars ($35,000.00) of which (a) Twenty Thousand
Dollars ($20,000.00) shall be due on the date hereof and shall be deemed
fully earned as of the date hereof, and (b) Fifteen Thousand Dollars
($15,000.00) shall be due and fully earned on July 11, 2005. In addition,
Borrower shall reimburse Bank for all reasonable legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.

      5.    CONSENT AND WAIVER.  Borrower has requested that the Bank
consent to Parlex Corporation and certain of its Asian subsidiaries
entering into a certain joint venture with Infineon Technologies Asia
Pacific Pte Ltd relating to its "smart card" business which is based in
Shanghai, China, as more particularly set forth in a certain Term Sheet
(the "Term Sheet") attached hereto and specifically incorporated by
reference herein.

      Consent. The Borrower has informed the Bank that Borrower intends to
consummate the transaction contemplated by the Term Sheet (the
"Transaction") upon terms substantially similar to those contained in (i)
the Joint Venture Agreement by and between Parlex Asia Pacific Ltd.
("PAPL") and Infineon Technologies Asia Pacific Pte Ltd.  ("Infineon"),
(ii) the Stock Transfer Agreement by and among Parlex Corporation, PAPL and
Infineon, and (iii) the License Agreement by and between Parlex Corporation
and Infineon, each dated as of December 22, 2004 (singly and collectively,
the "Transaction Documents").  In reliance upon the representations of the
Borrower herein and therein, the Bank hereby consents to the consummation
of the Transaction, subject to each of the following terms and conditions:

      a.    No Event of Default shall have occurred and be continuing at
the time of the consummation of the Transaction;

      b.    The Transaction shall be consummated on or before March 31,
2005 upon terms substantially similar to those contained in the Transaction
Documents and without any material amendment or modification thereto (it
being agreed that any amendment or modification to the Transaction
Documents which may be adverse to the interests of the Bank shall be deemed
to be material);

      c.    Borrower shall deliver to the Bank true and complete copies of
all documents, instruments and agreements executed in connection with the
Transaction promptly after consummation of the Transaction; and

      d.    Borrower acknowledges and agrees that from and after March 1,
2005, no Receivables due from Infineon Technologies Asia Pacific Pte Ltd,
Infineon Technologies AG or any of their affiliates (the "Infineon
Receivables") which have not been previously submitted to the Bank for
borrowing shall be deemed eligible for borrowing.  In addition, Borrower
acknowledges and agrees that from and after May 31, 2005, no Infineon
Receivables, including, without limitation, any Infineon Receivables
previously submitted to the Bank for borrowing, shall be deemed eligible
for borrowing  unless and until the Bank receives evidence satisfactory to
the Bank, in its sole discretion, that Borrower has no continuing liability
to Infineon Technologies Asia Pacific Pte Ltd, Infineon Technologies AG or
any of their affiliates which could impact the collectability of the
Infineon Receivables (and provided that the Bank otherwise deems such
Infineon Receivables eligible for borrowing).

      Waiver.  In connection with the consummation of the Transaction, the
Borrower has requested that the Bank waive certain Events of Default which
may arise as a result thereof.  Accordingly, the Bank hereby waives any
default arising under the Credit Agreement arising solely from the
consummation of the Transaction.  The waiver


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herein shall constitute a one-time waiver and shall relate only to the
foregoing specified defaults which may occur as a result of the
consummation of the Transaction, and shall not be deemed to constitute a
waiver of any other Event of Default, whether now existing or hereafter
arising.

      6.    RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENTS.
Borrower hereby ratifies, confirms, and  reaffirms, all and singular, the
terms and conditions of the IP Agreements and acknowledges, confirms and
agrees that the IP Agreements contain an accurate and complete listing of
all Intellectual Property.

      7.    RATIFICATION OF PERFECTION CERTIFICATES.  Borrower hereby
ratifies, confirms, and reaffirms, all and singular, the terms and
disclosures contained in certain Perfection Certificates delivered to the
Bank on or about June 11, 2003, and acknowledges, confirms and agrees the
disclosures and information provided therein has not changed, as of the
date hereof.

      8.    CONSISTENT CHANGES.  The Existing Loan Documents are hereby
amended wherever necessary to reflect the changes described above.

      9.    RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies,
confirms, and reaffirms all terms and conditions of all security or other
collateral granted to the Bank, and confirms that the indebtedness secured
thereby includes, without limitation, the Obligations.

      10.   NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and
agrees that Borrower has no offsets, defenses, claims, or counterclaims
against the Bank with respect to the Obligations, or otherwise, and that if
Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against the Bank, whether known or unknown, at law or in
equity, all of them are hereby expressly WAIVED and Borrower hereby
RELEASES the Bank from any liability thereunder.

      11.   CONTINUING VALIDITY.  Borrower understands and agrees that in
modifying the existing Obligations, Bank is relying upon Borrower's
representations, warranties, and agreements, as set forth in the Existing
Loan Documents.  Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect.  Bank's agreement to modifications
to the existing Obligations pursuant to this  Loan Modification Agreement
in no way shall obligate Bank to make any future modifications to the
Obligations.  Nothing in this Loan Modification Agreement shall constitute
a satisfaction of the Obligations.  It is the intention of Bank and
Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing.  No maker will
be released by virtue of this Loan Modification Agreement.

      12.   COUNTERSIGNATURE.  This Loan Modification Agreement shall
become effective only when it shall have been executed by Borrower and
Bank.


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      This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first
written above.

BORROWER:

PARLEX CORPORATION

By:    /s/ Peter J. Murphy
       ------------------------------
Name:  Peter J. Murphy
Title: Chief Executive Officer

PARLEX DYNAFLEX CORPORATION

By:    /s/ Peter J. Murphy
       ------------------------------
Name:  Peter J. Murphy
Title: Chief Executive Officer

POLY-FLEX CIRCUITS, INC.

By:    /s/ Peter J. Murphy
       ------------------------------
Name:  Peter J. Murphy
Title: Treasurer

BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST

By:    /s/ David E. Rodriguez
       ------------------------------
Name:  David E. Rodriguez
Title: Vice President


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