Exhibit 10.(d)(xi)


 


LOAN AND SECURITY AGREEMENT


 


This LOAN
AND SECURITY AGREEMENT (this
“Agreement”) dated as of August 11, 2003, 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  AMERICAN SCIENCE AND
ENGINEERING, INC., a
Massachusetts corporation with offices at 829 Middlesex Turnpike, Billerica, Massachusetts 01821
(“Borrower”), provides the terms on which Bank shall lend to Borrower and  Borrower
shall repay Bank. The parties agree as follows: 


 


1                                         ACCOUNTING
AND OTHER TERMS


 


Accounting terms not defined
in this Agreement shall be construed following GAAP.  Calculations and  determinations must be made following GAAP.  The term “financial statements” includes the notes and schedules.
The  terms “including” and “includes” always mean “including (or includes)
without limitation,” in this or any Loan  Document. Capitalized
terms in this Agreement shall have the meanings set forth in Section 13.


 


2                                         LOAN AND TERMS OF PAYMENT


 


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


 


2.1.1                     Revolving Advances.


 


(a)                                  Availability.  Bank shall make Advances not
exceeding (i) the lesser of (A) the Revolving Line or (B) the Borrowing Base minus (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), minus (iii) the FX Reserve, and minus
(iv) the aggregate outstanding Advances hereunder (including any Cash Management Services). Amounts borrowed
under this Section may be repaid and reborrowed during the term of this Agreement.


 


(b)                                 Borrowing Procedure.  To
obtain an Advance, Borrower must notify Bank by facsimile or telephone by 3:00 p.m. Eastern time on the
Business Day the Advance is to be made. If such notification is by telephone,  Borrower
must promptly confirm the notification by delivering to Bank a completed
Payment/Advance Form in the form 
attached as Exhibit B. Bank shall credit Advances
to Borrower’s deposit account. Bank may make Advances under this  Agreement
based on instructions from a Responsible Officer or his or her designee or
without instructions if the  Advances are necessary to meet Obligations
which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible
Officer or designee. Borrower shall indemnify Bank for any loss Bank suffers due to such reliance.


 


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


 


2.1.2                     Letters of Credit Sublimit.


 


(a)                                  Bank shall issue or have issued Letters of
Credit for Borrower’s account not exceeding (i) the lesser of the Revolving Line or the Borrowing Base minus (ii) the
outstanding principal balance of any Advances (including any Cash Management Services), minus (iii) the amount of all
Letters of Credit (including drawn but unreimbursed Letters of Credit), plus an amount equal to any Letter of
Credit Reserves. The face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit
and any Letter of Credit Reserve) may not exceed $5,000,000.00. Each Letter of Credit shall have an expiry date no later
than 180 days after the Revolving Maturity Date provided Borrower’s Letter of Credit reimbursement obligation shall be
secured by cash on terms acceptable to Bank on and after (i) the Revolving Maturity Date of the Revolving Line if
the Revolving Maturity Date of the Revolving Line is not extended by Bank, or (ii) the
occurrence of an Event of Default hereunder. All Letters of Credit shall be, in
form


 

















 


and substance, acceptable to
Bank in its sole discretion and shall be subject to the terms and conditions of
Bank’s form  of standard
Application and Letter of Credit Agreement. Borrower agrees to execute any
further documentation in connection
with the Letters of Credit as Bank may reasonably request.


 


(b)                                 The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement and such Letters of Credit, under all circumstances
whatsoever.  Borrower shall indemnify,
defend, protect, and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys’
fees, arising out of or in connection with any Letters of Credit, except to the
extent resulting from Bank’s gross  negligence or willful
misconduct.


 


(c)                                  Borrower may request that Bank issue a Letter
of Credit payable in a currency other than United States Dollars. If a demand for payment is made under any such
Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the equivalent of the amount thereof (plus
cable charges) in United States currency at the then prevailing rate of exchange in San Francisco, California, for sales
of that other currency for cable transfer to the country of which it is the currency.


 


(d)                                 Upon the issuance of any letter of credit
payable in a currency other than United States Dollars, Bank shall create a reserve (the “Letter of Credit Reserve”)
under the Revolving Line for letters of credit against fluctuations in currency exchange rates, in an
amount equal to ten percent (10%) of the face amount of such letter of credit. The amount of such reserve may be
amended by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under
the Revolving Line shall be reduced by the amount of such reserve for so long as such letter of credit remains
outstanding.


 


2.1.3                     Foreign Exchange Sublimit.  If
there is availability under the Revolving Line and the Borrowing Base, then Borrower may enter in foreign exchange
forward contracts with the Bank under which Borrower commits to purchase from or sell to Bank a set amount of
foreign currency more than one business day after the contract date (the“FX Forward Contract”). Bank shall
subtract 10% of each outstanding FX Forward Contract from the foreign exchangesublimit, which sublimit is a maximum of
$5,000,000.00 (the “FX Reserve”). The total FX Forward Contracts at any one time may not exceed 10 times the amount of
the FX Reserve. Bank may terminate the FX Forward Contracts if an Event of Default occurs.


 


2.1.4                     Cash Management Services
Sublimit.  Borrower may use up to $5,000,000.00 for the
Bank’s Cash Management Services,
which may include merchant services, direct deposit of payroll, business credit
card, and check cashing services
identified in the various cash management services agreements related to such
Cash Management Services (the
“Cash Management Services”). Such aggregate amounts utilized under the Cash
Management Services Sublimit
shall at all times reduce the amount otherwise available for Credit Extensions
under the Revolving Line. Any amounts
Bank pays on behalf of Borrower or any amounts that are not paid by Borrower
for any Cash Management Services
will be treated as Advances under the Revolving Line and will accrue interest
at the interest rate applicable to Advances.


 


2.1.5                     Undisbursed Credit Extensions.  The
Bank’s obligation to lend the undisbursed portion of the Obligations shall terminate if, in Bank’s
reasonable discretion, there has been a Material Adverse Change, or there hasbeen any material adverse deviation by
Borrower from the most recent business plan of Borrower presented to andaccepted by Bank prior to the execution
of this Agreement.


 


2.2                               Overadvances.  If Borrower’s
Obligations under Section 2.1.1, 2.1.2, 2.13 and 2.1.4 exceed the lesserof either (i) the Revolving Line or (ii)
the Borrowing Base, Borrower must immediately pay in cash to Bank the excess.


 


2.3                               Interest Rate; Payments.


 


(a)                                  Interest Rate.  The
principal amounts outstanding under hereunder shall accrue interest at aper annum rate equal to the Prime Rate.
After the occurrence and during the continuance of an Event of Default,


 


2

















 


Obligations shall bear
interest at three percent (3.0%) above the rate effective immediately before
the Event of Default.  The
applicable interest rate hereunder shall increase or decrease when the Prime
Rate changes. Interest is computed on the basis of a 360 day year for the actual number of days elapsed.


 


(b)                                 Payments.  Interest is payable on first
day of each month. Payments received after 12:00 noon Eastern time are considered received at the opening
of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment
is due the next Business Day and additional fees or interest, as applicable,  shall
continue to accrue.


 


(c)                                  Debit of Accounts.  Bank
may debit any of Borrower’s deposit accounts including Account Number               
for principal and interest payments or any amounts Borrower owes
Bank. Bank shall promptly notify
Borrower when it debits Borrower’s accounts. These debits are not a set-off.


 


2.4                               Fees.  Borrower shall
pay to Bank:


 


(a)                                  Facility Fee.  A fully earned, non-refundable facility fee of $25,000.00
has been earned by Bank as of the
date hereof and is due and payable on the Closing Date.


 


(b)                                 Unused Line Fee.  In the event, in any calendar
quarter, the average daily principal balance of the Credit Extensions outstanding during the quarter is less than
$5,000,000.00, Borrower shall pay Bank an unused  line
fee in an amount equal to 0.50% per annum on the difference between
$5,000,000.00 and the average daily principal  balance of the Credit
Extensions outstanding during the quarter, which unused line fee shall be
computed and paid quarterly, in
arrears, on the first day of the following quarter.


 


(c)                                  Letter of Credit Fee.  The
Borrower shall pay the Bank’s customary fees and expenses for the issuance of Letters of Credit, including,
without limitation, a Letter of Credit Fee of .85% per annum of the face  amount
of each Letter of Credit issued, upon the issuance or renewal of such Letter of
Credit by the Bank; and


 


(d)                                 Bank Expenses.  All
Bank Expenses (including reasonable attorneys’ fees and expenses incurred through and after the Closing Date)
when due.


 


3                                         CONDITIONS OF LOANS


 


3.1                               Conditions Precedent to
Initial Credit Extension. The Bank’s
obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:


 


(a)                                  this Agreement;


 


(b)                                 the Exim Agreement, along all documents
referenced therein or related thereto;


 


(c)                                  a certificate of the Secretary of Borrower
with respect to articles, bylaws, incumbency and resolutions authorizing the execution and delivery of this Agreement;


 


(d)                                 an Intellectual Property Security Agreement;


 


(e)                                  subordination agreements by certain Persons;


 


(f)                                    Perfection Certificate(s) by Borrower and
Guarantor;


 


(g)                                 landlord’s waiver;


 


(h)                                 a legal opinion of Borrower’s counsel, in form
and substance acceptable to Bank;


 


3

















 


(i)                                     guaranties and security agreements by the
Guarantor(s);


 


(j)                                     financing statements (Forms UCC-1);


 


(k)                                  Account Control Agreement/ Investment Account
Control Agreement


 


(l)                                     insurance certificate;


 


(m)                               payment of the fees and Bank Expenses then due
specified in Section 2.4 hereof;


 


(n)                                 Certificate of Foreign Qualification (if
applicable);


 


(o)                                 Certificate of Good Standing/Legal Existence;
and


 


(p)                                 such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.


 


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


 


(a)                                  timely receipt of any Payment/Advance Form;
and


 


(b)                                 the representations and warranties in Section
5 shall be materially true on the date of the Payment/Advance Form and on the effective date of each Credit Extension
and no Event of Default shall have occurred and be continuing, or result from the Credit Extension. Each Credit
Extension is Borrower’s representation and warranty on that date that the representations and
warranties in Section 5 remain true.


 


4                                         CREATION OF SECURITY INTEREST


 


4.1                               Grant of Security Interest.  Borrower hereby
grants Bank, to secure the payment and performance in full of all of the Obligations and the
performance of each of Borrower’s duties under the Loan Documents, a continuing security interest in, and pledges
and assigns to the Bank, the Collateral, wherever located, whether now ownedor hereafter acquired or arising, and
all proceeds and products thereof. Borrower warrants and represents that thesecurity interest granted herein shall
be a first priority security interest in the Collateral. The Collateral is also
subject to Permitted Liens. Upon the
occurrence and during the continuance of an Event of Default, Bank may place a
“hold” on any deposit account
pledged as Collateral.


 


Except as noted on the
Perfection Certificate, Borrower is not a party to, nor is bound by, any
material license or other  agreement
with respect to which the Borrower is the licensee that prohibits or otherwise
restricts Borrower from granting a
security interest in Borrower’s interest in such license or agreement or any
other property. Without prior consent from Bank, Borrower shall not enter into, or become bound by, any such
license or agreement which is reasonably likely to have a material impact on Borrower’s business
or financial condition. Borrower shall take such steps as Bank resaonably
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for all such licenses or contract rights to be deemed “Collateral” and for Bank to have a
security interest in it that might otherwise be restricted or prohibited by law or by the terms of any
such license or agreement, whether now existing or entered into in the future.


 


Notwithstanding
the foregoing, it is expressly acknowledged and agreed that the security
interest created in this  Agreement
only with respect to Foreign Accounts, Foreign Inventory, Retainage Accounts
Receivable, any cash at Bank specifically
pledged to Bank to secure any Warranty Letters of Credit (as such terms are
defined in the Exim Agreement), and
Intellectual Property is subject to and subordinate to the security interest
granted to the Bank in the Exim Agreement with respect to such Foreign Accounts, Foreign Inventory, Retainage
Accounts Receivable, any cash at Bank specifically


 


4

















 


pledged to Bank to secure any Warranty Letters of Credit (as such terms
are defined in the Exim Agreement), and  Intellectual Property.


 


If the Agreement is
terminated, Bank’s lien and security interest in the Collateral shall continue
until Borrower fully  satisfies
its Obligations. If Borrower shall at any time, acquire a commercial tort
claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the brief details thereof and
grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance  satisfactory
to Bank.


 


4.2                               Authorization to File
Financing Statements.  Borrower hereby authorizes Bank to file
financing statements, without
notice to Borrower, with all appropriate jurisdictions in order to perfect or
protect Bank’s interest  or rights hereunder, including a notice that
any disposition of the Collateral, by either the Borrower or any other Person,shall be deemed to violate the rights of
the Bank under the Code.


 


5                                         REPRESENTATIONS AND
WARRANTIES


 


Borrower represents and
warrants as follows:


 


5.1                               Due Organization and
Authorization.  Borrower and each Subsidiary is duly existing
and in good standing in its state
of formation and qualified and licensed to do business in, and in good standing
in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to cause a Material
Adverse Change. In connection with this Agreement, the Borrower delivered to the Bank a certificate signed by
the Borrower and entitled “Perfection Certificate”. The Borrower represents  and
warrants to the Bank that: (a) the Borrower’s exact legal name is that
indicated on the Perfection Certificate and on the signature page hereof; and (b) the Borrower is an organization of
the type, and is organized in the jurisdiction, set forth in the Perfection Certificate; and (c)
the Perfection Certificate accurately sets forth the Borrower’s organizationalidentification number or accurately
states that the Borrower has none; and (d) the Perfection Certificate
accurately sets forth the
Borrower’s place of business, or, if more than one, its chief executive office
as well as the Borrower’s mailing 
address if different, and (e) all
other information set forth on the Perfection Certificate pertaining to the
Borrower is accurate and
complete. If the Borrower does not now have an organizational identification
number, but later obtains one, Borrower
shall forthwith notify the Bank of such organizational identification number.


 


The execution, delivery and
performance of the Loan Documents have been duly authorized, and do not
conflict  with Borrower’s
organizational documents, nor constitute an event of default under any material
agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it
is bound in which the default could
reasonably be expected to cause a Material Adverse Change.


 


5.2                               Collateral.  Borrower has good
title to the Collateral, free of Liens except Permitted Liens. Borrower has no deposit account, other than the deposit
accounts with Bank and deposit accounts described in the Perfection Certificate delivered to the Bank in
connection herewith. The Accounts are bona fide, existing obligations, and theservice or property has been performed
or delivered to the account debtor or its agent for immediate shipment to andunconditional acceptance by the account
debtor. The Collateral is not in the possession of any third party bailee (such
 as a warehouse). Except as hereafter disclosed to the Bank in writing by
Borrower, none of the components of the 
Collateral, in excess of Fifty
Thousand Dollars ($50,000.00) shall be maintained at locations other than as provided
in  the Perfection Certificate. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any  portion
of the Collateral, in excess of Fifty Thousand Dollars ($50,000.00) to a
bailee, then Borrower will first receive the written consent of Bank and such bailee must acknowledge in writing
that the bailee is holding such Collateral for the benefit of Bank. Borrower has no knowledge of any actual or imminent
Insolvency Proceeding of any account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All Inventory is in all material respects of good and marketable quality, free from
material defects. Borrower is the sole owner of the Intellectual Property,
except for non-exclusive licenses
granted to its customers in the ordinary course of business. Each Patent is
valid and enforceable and no part
of the Intellectual Property has been judged invalid or unenforceable, in whole
or in part, and


 


5

















 


no claim has been made that
any part of the Intellectual Property violates the rights of any third party,
except to the extent  such
claim could not reasonably be expected to cause a Material Adverse Change.


 


5.3                               Litigation.  Except as shown
in the Perfection Certificate, there are no actions or proceedings pendingor, to the knowledge of Borrower’s
Responsible Officers or legal counsel, threatened by or against Borrower or anySubsidiary in which an adverse decision
could reasonably be expected to cause a Material Adverse Change.


 


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


 


5.5                               Solvency.  Borrower is
able to pay its debts (including trade debts) as they mature.


 


5.6                               Regulatory Compliance.  Borrower is not
an “investment company” or a company “controlled” by an “investment company” under the Investment
Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrowerhas complied in all material respects
with the Federal Fair Labor Standards Act. Borrower has not violated any laws,ordinances or rules, the violation of
which could reasonably be expected to cause a Material Adverse Change. None of  Borrower’s
or any Subsidiary’s properties or assets has been used by Borrower or any
Subsidiary or, to the best of Borrower’s
knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in good
faith with adequate reserves under 
GAAP. Borrower and each
Subsidiary has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
its business as currently conducted
except where the failure to make such declarations, notices or filings would
not reasonably be expected to  cause a Material Adverse Change.


 


5.7                               Subsidiaries.  Borrower does
not own any stock, partnership interest or other equity securities exceptfor Permitted Investments.


 


5.8                               Full Disclosure.  No written
representation, warranty or other statement of Borrower in any certificateor written statement given to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the
statements contained in the certificates or statements not misleading (it being
recognized by Bank that the
projections and forecasts provided by Borrower in good faith and based upon
reasonable assumptions are not viewed
as facts and that actual results during the period or periods covered by such
projections and forecasts may differ 
from the projected or forecasted
results).


 


6                                         AFFIRMATIVE COVENANTS


 


Borrower shall do all of the
following:


 


6.1                               Government
Compliance.  Borrower shall
maintain its and all Subsidiaries’ legal existence and good standing in its
jurisdiction of formation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to have a material
adverse effect on Borrower’s business or operations. Borrower shall comply, and
have each Subsidiary comply, with all laws, ordinances and regulations to which
it is subject, noncompliance with which could have a material adverse effect on
Borrower’s business or operations or would reasonably be expected to cause a
Material Adverse Change.


 


6

















 


6.2                               Financial Statements,
Reports, Certificates.


 


(a)                                  Borrower shall deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower’s consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to Bank; (ii) assoon as available, but no later than
ninety (90) days after the last day of Borrower’s fiscal year, audited
consolidated  financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financialstatements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) within five (5)
days of filing, copies of all
statements, reports and notices made available to Borrower’s security holders
or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission; (iv) a
prompt report of any legal actions pending or threatened against Borrower or
any Subsidiary that is reasonably likely
to result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000.00) or more;
(v) prompt notice of any material change in the composition of the Intellectual
Property, or the registration of any copyright, including any subsequent ownership right of Borrower in or to
any Copyright, Patent or Trademark not shown in any intellectual property security agreement between Borrower and
Bank or knowledge of an event that materially  adversely affects the
value of the Intellectual Property; and (vi) budgets, sales projections,
operating plans or other financial
information reasonably requested by Bank.


 


(b)                                 Within thirty (30) days after the last day of
each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form
of Exhibit C, with aged
listings of accounts receivable
(by invoice date).


 


(c)                                  Within thirty (30) days after the last day of
each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit
D.


 


(d)                                 Within thirty (30) days after the last day of
each month, Borrower shall deliver to Bank Deferred Revenue Schedules.


 


(e)                                  Allow Bank to audit Borrower’s Collateral at
Borrower’s expense. Such audits shall be conducted no more often than once every six (6) months unless an Event
of Default has occurred and is continuing. Notwithstanding the foregoing, no Credit Extensions shall be made prior
to the completion of the initial audit (the “Initial Audit”).


 


Notwithstanding the above
financial reporting requirements, in the event that Borrower has no Advances or
Credit Extensions in an amount
equal to or greater than Five Hundred Thousand Dollars ($500,000.00)
outstanding during any month, the
monthly financial reporting requirements set forth in subsections (a), (b), (c)
and (d) above shall be delivered
on a quarterly basis, within forty five (45) days after the end of each fiscal
quarter of Borrower.


 


6.3                               Inventory; Returns.  Borrower shall
keep all Inventory in good and marketable condition, free from material defects. Returns and allowances
between Borrower and its account debtors shall follow Borrower’s customarypractices as they exist at the Closing
Date. Borrower must promptly notify Bank of all returns, recoveries, disputes
and claims that involve more than
One Hundred Thousand Dollars ($100,000.00).


 


6.4                               Taxes.  Borrower shall
make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in
accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to such payments.


 


6.5                               Insurance.  Borrower shall
keep its business and the Collateral insured for risks and in amounts, andas Bank may reasonably request.
Insurance policies shall be in a form, with companies, and in amounts that arereasonably satisfactory to Bank. All
property policies shall have a lender’s loss payable endorsement showing Bank
as an additional loss payee and
all liability policies shall show the Bank as an additional insured and all
policies shall  provide that the insurer must give Bank at
least twenty (20) days notice before canceling its policy. At Bank’s request,


 


7

















 


Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Bank’s option, be payable to Bank on account
of the Obligations. Notwithstanding the foregoing, so long as no Event of
Default has occurred and is continuing, Borrower shall have the option of
applying the proceeds of any casualty policy up to $100,000.00, in the
aggregate, toward the replacement or repair of destroyed or damaged property;
provided that (i) any such replaced or repaired property (a) shall be of equal
or like value as the replaced or repaired Collateral and (b) shall be deemed
Collateral in which Bank has been granted a first priority security interest
and (ii) after the occurrence and during the continuation of an Event of
Default all proceeds payable under such casualty policy shall, at the option of
the Bank, be payable to Bank on account of the Obligations. If Borrower fails
to obtain insurance as required under Section 6.5 or to pay any amount or
furnish any required proof of payment to third persons and the Bank, Bank may
make all or part of such payment or obtain such insurance policies required in
Section 6.5, and take any action under the policies Bank deems prudent.


 


6.6                               Accounts.  In order to
permit the Bank to monitor the Borrower’s financial performance and condition,Borrower, and all Borrower’s
Subsidiaries, shall maintain all of Borrower’s, and such Subsidiaries’,
depository, operating accounts
and securities accounts with Bank. Borrower may maintain up to Three Hundred
Thousand Dollars ($300,000.00) in
the aggregate, at any time, in a non-United States account with another
financial institution, for use in 
the ordinary course of Borrower’s
business. The Borrower may also maintain a payroll account at Fleet Bank for
the Borrower’s current payroll
requirements.


 


6.7                               Financial Covenants.


 


Borrower shall maintain at
all times, to be tested as of the last day of each month, unless otherwise
noted:


 


(a)  Adjusted Quick Ratio.  A ratio of Quick Assets to Current
Liabilities minus Deferred Revenue  and customer deposits of at least 2.0 to 1.0.


 


(b)  Minimum EBIT.  Borrower
shall have minimum quarterly EBIT of:


 


(i)                                     ($1,000,000) for the quarter ended June 30,
2003


(ii)                                  ($500,000) for the quarter ending September
30, 2003


(iii)                               ($500,000) for the quarter ending December 31,
2003


(iv)                              $1.00 for the quarter ending March 31, 2004
and each quarter thereafter


 


6.8                               Further Assurances.  Borrower shall
execute any further instruments and take further action as Bank reasonably requests to perfect or continue
Bank’s security interest in the Collateral or to effect the purposes of thisAgreement.


 


7                                         NEGATIVE COVENANTS


 


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


 


7.1                               Dispositions.  Convey, sell,
lease, transfer or otherwise dispose of (collectively a “Transfer”), or permitany of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the ordinary course of
business; (ii) of non-exclusive licenses and similar arrangements for the use
of the property of Borrower or
its Subsidiaries in the ordinary course of business; (iii) of worn-out or
obsolete Equipment, or (iv) other assets
not exceeding One Hundred Thousand Dollars ($100,000.00), in the aggregate,
during any fiscal year.


 


7.2                               Changes in Business,
Ownership, Management or Business Locations.  Engage in or
permit any of its Subsidiaries to
engage in any business other than the businesses currently engaged in by
Borrower or reasonably  related thereto, or have a material change in
its ownership (other than by the sale of Borrower’s equity securities in apublic offering or to venture capital
investors so long as Borrower identifies to Bank the venture capital investors
prior to the closing of the
investment), or management. Borrower shall not, without at least thirty (30)
days prior written notice


 


8

















 


to Bank: (i) relocate its chief
executive office, or add any new offices or business locations, including
warehouses (unless such new offices or business locations contain less than
Five Thousand Dollars ($5,000.00) in Borrower’s assets or property), or (ii)
change its jurisdiction of organization, or (iii) change its organizational
structure or type, or (iv) change its legal name, or (v) change any
organizational number (if any) assigned by its jurisdiction of organization.


 


7.3                               Mergers or Acquisitions.  Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property
of another Person. A Subsidiary may merge or consolidate into another
Subsidiary or into the Borrower.


 


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


 


7.5                               Encumbrance.  Create, incur,
or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for PermittedLiens, or permit any Collateral not to
be subject to the first priority security interest granted herein. The
Collateral may also be subject to
Permitted Liens.


 


7.6                               Distributions; Investments.  (i) Directly or
indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay anydividends or make any distribution or
payment or redeem, retire or purchase any capital stock, except for repurchasesof stock from former employees or
directors of Borrower under the terms of applicable repurchase agreements in anaggregate amount not to exceed One
Hundred Thousand Dollars ($100,000.00) in the aggregate in any fiscal year,provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases.


 


7.7                               Transactions with Affiliates.  Directly or
indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower,
except for transactions that are in the ordinary course of Borrower’s business,upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.


 


7.8                               Subordinated Debt.  Make or permit
any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any
provision in any document relating to the Subordinated Debt, without Bank’sprior written consent.


 


7.9                               Compliance.  Become an
“investment company” or a company controlled by an “investment company”, under the Investment Company Act of
1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the
proceeds of any Credit Extension for that purpose; fail to meet the minimumfunding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur;fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to
have a material adverse effect on Borrower’s business or operations or would
reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.


 


8                                         EVENTS OF DEFAULT


 


Any one of the following is
an Event of Default:


 


8.1                               Payment Default.  Borrower fails
to pay any of the Obligations within three (3) days after their due date. During such three (3) day period the
failure to cure the default shall not constitute an Event of Default (but noCredit Extension shall be made during
such period);


 


8.2                               Covenant Default. 
Borrower fails or neglects to perform any obligation in Section 6 or
violates any  covenant in Section 7 or fails or neglects to
perform, keep, or observe any other material term, provision, condition,covenant or agreement contained in this
Agreement, any Loan Documents, or in any present or future agreement between


 


9

















 


Borrower and Bank and as to any
default under such other material term, provision, condition, covenant or
agreement that can be cured, has failed to cure the default within ten (10)
days after the occurrence thereof; provided, however, that if the default
cannot by its nature be cured within the ten (10) day period or cannot after
diligent attempts by Borrower be cured within such ten (10) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall
have an additional period (which shall not in any case exceed thirty (30) days)
to attempt to cure such default, and within such reasonable time period the
failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods
provided under this section shall not apply, to financial covenants or any
other covenants that are required to be satisfied, completed or tested by a
date certain.


 


8.3                               Material
Adverse Change.  A Material
Adverse Change occurs;


 


8.4                               Attachment.  (i) Any
material portion of Borrower’s assets is attached, seized, levied on, or comesinto possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) the
service of process upon the
Borrower seeking to attach, by trustee or similar process, any funds of the
Borrower on deposit with the
Bank, or any entity under control of Bank (including a subsidiary); (iii)
Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business; (iv) a
judgment or other claim becomes a Lien on a material portion of Borrower’s assets; or (v) a notice of lien, levy, or
assessment is filed against any of Borrower’s assets by any government agency and not paid within
ten (10) days after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted
pending contest by Borrower (but no Credit Extensions shall be made during the  cure
period);


 


8.5                               Insolvency.  (i) Borrower
becomes insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii)an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within thirty (30) days (but no
Credit Extensions shall be made
before any Insolvency Proceeding is dismissed);


 


8.6                               Other Agreements.  If there is a
default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity ofany Indebtedness in an amount in excess
of One Hundred Thousand Dollars ($100,000) or that could result in a MaterialAdverse Change;


 


8.7                               Judgments.  If a
judgment or judgments for the payment of money in an amount, individually or inthe aggregate, of at least Two Hundred
Thousand Dollars ($200,000) shall be rendered against Borrower and shall  remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such judgment);


 


8.8                               Misrepresentations.  If Borrower or
any Person acting for Borrower makes any material misrepresentation or material misstatement now
or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to
enter this Agreement or any Loan Document.


 


8.9                               Guaranty.  (i) Any
guaranty of any Obligations terminates or ceases for any reason to be in full
force; or (ii) any Guarantor does
not perform any obligation under any guaranty of the Obligations; or (iii) any
material misrepresentation or
material misstatement exists now or later in any warranty or representation in
any guaranty of the Obligations
or in any certificate delivered to Bank in connection with the guaranty; or
(iv) any circumstance described  in Section 7, or Sections 8.4, 8.5 or 8.7
occurs to any Guarantor, or (v) the liquidation, winding up, termination of  existence,
or insolvency of any Guarantor.


 


8.10                        Exim Agreement.  The occurrence
of any default or Event of Default under the Exim Agreement or any other agreement or instrument executed in
connection therewith.


 


9                                         BANK’S RIGHTS AND REMEDIES


 


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


 


10

















 


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


 


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


 


(c)                                  Settle or adjust disputes and claims directly
with account debtors for amounts, on terms and in any order that Bank considers advisable and notify any Person owing
Borrower money of Bank’s security interest
in such funds and verify the amount of such account. Borrower shall collect all
payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor,
with proper endorsements for deposit;


 


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


 


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


 


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


 


(g)                                 Dispose of the Collateral according to the
Code; and


 


(h)                                 Provide a Notice of Exclusive Control, as set
forth in the Securities Account Control Agreement, of even date herewith.


 


9.2                               Power of Attorney.  Borrower hereby
irrevocably appoints Bank as its lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower’s name on any checks or other forms of payment or
security; (ii) sign Borrower’s name on any invoice or bill of lading for anyAccount or drafts against account
debtors; (iii) settle and adjust disputes and claims about the Accounts
directly with account debtors,
for amounts and on terms Bank determines reasonable; (iv) make, settle, and
adjust all claims under Borrower’s
insurance policies; and (v) transfer the Collateral into the name of Bank or a
third party as the Code permits. Borrower
hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on
any documents necessary to perfect
or continue the perfection of any security interest regardless of whether an
Event of Default has occurred until 
all Obligations have been
satisfied in full and Bank is under no further obligation to make Credit
Extensions hereunder. Bank’s
foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights
and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit
Extensions terminates.


 


9.3                               Accounts
Notification/Collection.  In the event that an Event of Default occurs
and is continuing, Bank may
notify any Person owing Borrower money of Bank’s security interest in the funds
and verify and/or collect the amount
of the Account. After the occurrence and during the continuance of an Event of
Default, any amounts received


 


11

















 


by Borrower shall be held in
trust by Borrower for Bank, and, if requested by Bank, Borrower shall
immediately deliver such receipts to Bank in the form received from the account
debtor, with proper endorsements for deposit.


 


9.4                               Bank Expenses.  Any amounts
paid by Bank as provided herein are Bank Expenses and are immediately due and payable, and shall bear
interest at the then applicable rate and be secured by the Collateral. Nopayments by Bank shall be deemed an
agreement to make similar payments in the future or Bank’s waiver of any Eventof Default.


 


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


 


9.6                               Remedies Cumulative. 
Bank’s rights and remedies under this Agreement, the Loan Documents, and  all
other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. 
Bank’s exercise of one right or
remedy is not an election, and Bank’s waiver of any Event of Default is not a
continuing waiver. Bank’s delay
is not a waiver, election, or acquiescence. No waiver hereunder shall be
effective unless signed by Bank
and then is only effective for the specific instance and purpose for which it
was given.


 


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


 


10                                  NOTICES


 


All notices or demands by any
party to this Agreement or any other related agreement must be in writing and
be personally delivered or sent
by an overnight delivery service, by certified mail, postage prepaid, return
receipt requested, or by
telefacsimile at the addresses listed below. Either Bank or Borrower may change
its notice address by giving the
other party written notice.


 


	
  If to Borrower:

  	
  American Science and
  Engineering, Inc.

  
	
   

  	
  829 Middlesex Turnpike

  Billerica, Massachusetts 01821

  
	
   

  	
  Attn: Chief Financial
  Officer

  
	
   

  	
  FAX: (978) 262-8804

  
	
   

  	
   

  
	
  If to Bank:

  	
  Silicon Valley Bank

  
	
   

  	
  One Newton Executive Park,
  Suite 200

  2221 Washington Street

  Newton, Massachusetts 02462

  
	
   

  	
  Attn: Mr. Mark Gallagher

  
	
   

  	
  Fax: (617) 969-4395

  
	
   

  	
   

  
	
  with a copy to:

  	
  Riemer & Braunstein LLP

  
	
   

  	
  Three Center Plaza

  Boston, Massachusetts 02108

  
	
   

  	
  Attn: David A. Ephraim,
  Esquire

  
	
   

  	
  FAX:
  (617) 880-3456

  



 


12

















 


11                                  CHOICE OF LAW, VENUE AND JURY
TRIAL WAIVER


 


Massachusetts law governs the
Loan Documents without regard to principles of conflicts of law. Borrower and
Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Massachusetts; provided,
however, that if for any reason
Bank cannot avail itself of such courts in the Commonwealth of Massachusetts,
Borrower accepts jurisdiction of
the courts and venue in Santa Clara County, California. NOTWITHSTANDING THE
FOREGOING, THE BANK SHALL HAVE
THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION WHICH THE BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINST
THE BORROWER OR ITS PROPERTY.  


 


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


 


12                                  GENERAL PROVISIONS


 


12.1                        Successors and Assigns.  This Agreement
binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or Obligations under it without Bank’s priorwritten consent which may be granted or
withheld in Bank’s discretion. Bank has the right, without the consent of ornotice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights and
benefits under this Agreement, the Loan Documents or any related agreement.


 


12.2                        Indemnification.  Borrower hereby
indemnifies, defends and holds the Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other partyin connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from,
following, or consequential to transactions between Bank and Borrower
(including reasonable attorneys’
fees and expenses), except for losses caused by Bank’s gross negligence or
willful misconduct.


 


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


 


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


 


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


 


12.6                        Amendments in Writing;
Integration.  All amendments to this Agreement must be in
writing signed by both Bank and
Borrower. This Agreement and the Loan Documents represent the entire agreement
about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Agreement
and the Loan Documents merge into
this Agreement and the Loan Documents.


 


13

















 


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


 


12.8                        Survival.  All covenants,
representations and warranties made in this Agreement continue in full forcewhile any Obligations remain
outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall
survive until the statute of
limitations with respect to such claim or cause of action shall have run.


 


12.9                        Confidentiality.  In handling any
confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank’s
subsidiaries or affiliates in
connection with their business with Borrower; (ii) to prospective transferees
or purchasers of any interest in
the Credit Extensions (provided, however, Bank shall use commercially
reasonable efforts in obtaining such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (iii) as required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank’s examination or audit; (v) as Bank considers appropriate in exercising remedies under this
Agreement; and (vi) consistent with federal securities laws as to any taxrelated matters. Confidential
information does not include information that either: (a) is in the public
domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain after disclosure
to Bank; or (b) is disclosed to
Bank by a third party, if Bank does not know that the third party is prohibited
from disclosing the information.


 


13                                  DEFINITIONS


 


13.1                        Definitions.  In this
Agreement:


 


“Accounts” are all existing and later arising accounts,
contract rights, and other obligations owed Borrower in connection with its sale or lease of goods
(including licensing software and other technology) or provision of services,  all
credit insurance, guaranties, other security and all merchandise returned or
reclaimed by Borrower and Borrower’s 
Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.


 


“Advance”  or
“Advances” is a loan advance (or
advances) under the Revolving Line.


 


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


 


“Bank
Expenses” are all
audit fees and expenses and reasonable costs or expenses (including reasonableattorneys’ fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan
Documents (including appeals or Insolvency
Proceedings).


 


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


 


“Borrowing Base” is (i) 80.0% (the “Accounts Advance Rate”) of Eligible Accounts, which,
at Bank’s discretion and upon
written notice by Bank shall be net of any Deferred Revenue plus (ii) the
lesser of (A) 10.0% (the “Inventory
Advance Rate”) of the value of Borrower’s Eligible Inventory (valued at the
lower of cost or wholesale fair market
value) or (B) $750,000.00 (the “Inventory Cap”), all as determined by Bank from
Borrower’s most recent Borrowing
Base Certificate; provided, however, after performing an audit of Borrower’s
Collateral, Bank may, in its sole discretion,
(i) lower the Inventory Advance Rate, lower the Inventory Cap or lower the
Accounts Advance Rate if the results
are unsatisfactory to Bank or (ii) increase the Accounts Advance Rate to 85.0%
if the results are satisfactory to Bank.


 


14

















 


“Business
Day” is any day that
is not a Saturday, Sunday or a day on which the Bank is closed.


 


“Closing
Date” is the date of
this Agreement.


 


“Code” is the Uniform Commercial Code as adopted in
Massachusetts, as amended and as may be amended and in effect from time to time.


 


“Collateral” is any and all properties, rights and assets
of the Borrower granted by the Borrower to Bank or arising under the Code, now, or in the future,
in which the Borrower obtains an interest, or the power to transfer rights,  including,
without limitation, the property described on Exhibit A.


 


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


 


“Copyrights”
are all copyright
rights, applications or registrations and like protections in each work orauthorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.


 


“Credit
Extension” is each
Advance, Letter of Credit, F/X Forward Contract, or any other extension of
credit  by Bank for Borrower’s benefit.


 


“Current
Liabilities” are the
aggregate amount of Borrower’s Total Liabilities which mature within one (1)year, which shall include, without
limitation, all obligations and liabilities of Borrower to Bank.


 


“Deferred
Revenue” is all amounts
received in advance of performance under contracts and not yet recognizedas revenue.


 


“Eligible
Accounts” are billed
Accounts in the ordinary course of Borrower’s business that meet all Borrower’s  representations
and warranties in Section 5.2; but Bank may change eligibility standards
by giving Borrower notice. Unless
Bank agrees otherwise in writing, Eligible Accounts shall not include:


 


(a)                                  Accounts that the account debtor has not paid
within one hundred twenty (120) days of invoice date;


 


(b)                                 Accounts for an account debtor, fifty percent
(50%) or more of whose Accounts have not been paid within one hundred twenty (120) days of invoice date;


 


(c)                                  Credit balances over one hundred twenty (120)
days from invoice date;


 


(d)                                 Accounts for an account debtor, including
Affiliates, whose total obligations to Borrower exceed thirty-five (35%) of all Accounts, for the amounts that exceed
that percentage, unless Bank approves in writing;


 


15

















 


(e)                                  Accounts for which the account debtor does not
have its principal place of business in the United States;


 


(f)                                    Accounts for which the account debtor is a
federal, state or local government entity or any department, agency, or instrumentality thereof except for Accounts of
the United States if the payee has assigned
its payment rights to Bank and the assignment has been acknowledged under the
Assignment of Claims Act of 1940
(31 U.S.C. 3727);


 


(g)                                 Accounts for which Borrower owes the account
debtor, but only up to the amount owed (sometimes called “contra” accounts, accounts payable, customer deposits
or credit accounts);


 


(h)                                 Accounts for demonstration or promotional
equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on approval,
bill and hold, or other terms if account debtor’s payment may be conditional;


 


(i)                                     Accounts for which the account debtor is
Borrower’s Affiliate, officer, employee, or agent;


 


(j)                                     Accounts in which the account debtor disputes
liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed
amount), or if the account debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;


 


(k)                                  Accounts for which Bank reasonably determines
collection to be doubtful.


 


“EBIT” is Borrower’s earnings before interest expense
and taxes for the period, excluding any expenses or income related to the market effect of
Borrower’s issued and outstanding warrants.


 


“Eligible
Inventory” is
Borrower’s Inventory, including raw materials, located at its principal place
of business (or any location
permitted under Section 7.2) that complies with representations and warranties
in Section 5.2, but does  not include used, returned, obsolete,
consigned, work in progress, demonstrative or custom inventory, supplies,
packing or shipping materials.


 


“Equipment” is all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.


 


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


 


“Exim
Agreement” is that
certain Export-Import Bank Loan and Security Agreement of even date herewith  by
and between Borrower and Bank and all documents, instruments and agreements
executed in conjunction therewith, 
each as may be amended from time
to time.


 


“GAAP” is generally accepted accounting principles.


 


“Guarantor” is any present or future guarantor of the
Obligations, including AS&E Global, Inc., a  Massachusetts
corporation.


 


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


 


“Initial Audit” is defined in Section 6.2(d).


 


16

















 


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


 


“Intellectual
Property” is


 


(a)                                  Copyrights, Trademarks, Patents, and Mask
Works including amendments, renewals, extensions and all licenses or other rights to use and all license fees
and royalties from the use;


 


(b)                                 Any trade secrets and any Intellectual
Property rights in computer software and computer software products now or later existing,
created, acquired or held;


 


(c)                                  All design rights which may be available to
Borrower now or later created, acquired or held;


 


(d)                                 Any claims for damages (past, present or
future) for infringement of any of the rights above, with the right, but not the obligation, to sue
and collect damages for use or infringement of the intellectual property rights above.


 


All proceeds and products of
the foregoing, including all insurance, indemnity or warranty payments.


 


“Inventory” is
present and future inventory in which Borrower has any interest, including
merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products intended for sale or lease or to be
furnished under a contract of service, of every kind and description now or
later owned by or in the custody or possession, actual or constructive, of
Borrower, including inventory temporarily out of its custody or possession or
in transit and including returns on any accounts or other proceeds (including
insurance proceeds) from the sale or disposition of any of the foregoing and
any documents of title.


 


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


 


“IP
Agreement” is a
certain Intellectual Property Security Agreement executed and delivered by
Borrower to Bank.


 


“Letter of
Credit” means a letter
of credit or similar undertaking issued by Bank pursuant to Section 2.1.2.


 


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


 


“Lien” is a mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.


 


“Loan Documents” are, collectively, this Agreement, the Exim
Agreement, the IP Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other
present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as
amended, extended or restated


 


“Mask Works”
are all mask works or
similar rights available for the protection of semiconductor chips, now


owned or later acquired.


 


“Material Adverse Change “ is: (i) A material impairment in the perfection
or priority of Bank’s security interest
in the Collateral or in the value of such Collateral; (ii) a material adverse
change in the business, operations, or condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of repayment of any  portion of the
Obligations; or (iv) Bank determines, based upon information available to it
and in its reasonable  judgment, that there is a substanital
likelihood that Borrower shall fail to comply with one or more of the financial  covenants
in Section 6 during the next succeeding financial reporting period.


 


17

















 


“Obligations” are debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, under this Agreement, under the Exim
Agreement, or under any other documents, instruments and agreements between Borrower and Bank, including letters
of credit, cash management services, and foreign exchange contracts, if any, and including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower  assigned
to Bank.


 


“Patents” are patents, patent applications and like
protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part
of the same.


 


“Permitted
Indebtedness” is:


 


(a)                                  Borrower’s indebtedness to Bank under this
Agreement or the Loan Documents;


 


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


 


(c)                                  Subordinated Debt;


 


(d)                                 Indebtedness to trade creditors and with
respect to surety bonds and similar obligations incurred in the ordinary course of business; and


 


(e)                                  Indebtedness secured by Permitted Liens;


 


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


 


“Permitted
Investments” are:


 


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


 


(b)                                 (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any state maturing within 1 year from its acquisition,
(ii) commercial paper maturing no more than 1 year after its creation and having the highest or second highest
rating from either Standard & Poor’s  Corporation or Moody’s
Investors Service, Inc., (iii) Bank’s certificates of deposit issued maturing
no more than 1 year after issue,
(iv) any other investments administered through the Bank, and (v) any
Investments permitted  by Borrower’s investment policy, as amended
from time to time, provided that such investment policy (and any such amendment thereto) has been approved by
Bank.


 


“Permitted
Liens” are:


 


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


 


(b)                                 Liens for taxes, fees, assessments or other
government charges or levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank’s security
interests;


 


(c)                                  Leases or subleases and non-exclusive licenses
or sublicenses granted in the ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;


 


18

















 


(d)                                 Purchase money Liens or capital leases in an
amount not to exceed Five Hundred Thousand Dollars ($500,000.00), in the aggregate, during any fiscal year: (i) on
Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if 
the Lien  is confined to the property and improvements
and the proceeds of the equipment; and


 


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


 


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


 


“Prime Rate” is the greater of (i) 4.00% or (ii) Bank’s
most recently announced “prime rate,” even if it is not Bank’s lowest rate.


 


“Quick
Assets” is, on any
date, the Borrower’s consolidated, unrestricted cash (less customer deposits),
cash equivalents, net billed
accounts receivable and investments with maturities of fewer than 12 months
determined according to GAAP.


 


“Responsible
Officer” is each of
the Chief Executive Officer, President, Chief Financial Officer and Controller  of
Borrower.


 


“Revolving
Line” is an Advance or
Advances of up to Five Million Dollars ($5,000,000.00).


 


“Revolving
Maturity Date” is
November 30, 2004.


 


“Subordinated
Debt” is debt incurred
by Borrower subordinated to Borrower’s debt to Bank (pursuant to a subordination agreement entered into between
the Bank, the Borrower and the subordinated creditor), on terms acceptable to Bank.


 


“Subsidiary” is any Person, corporation, partnership,
limited liability company, joint venture, or any other business entity of which more than 50% of the
voting stock or other equity interests is owned or controlled, directly or  indirectly,
by the Person or one or more Affiliates of the Person.


 


“Total
Liabilities” is on any
day, obligations that should, under GAAP, be classified as liabilities on
Borrower’s consolidated balance
sheet, including all Indebtedness, and current portion of Subordinated Debt
permitted by Bank to be paid by
Borrower, but excluding all other Subordinated Debt.


 


“Trademarks” are trademark and service mark rights, registered or not, applications
to register and registrations and
like protections, and the entire goodwill of the business of Assignor connected
with the trademarks.


 


19

















 


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


 


	
  BORROWER:

  
	
   

  
	
  AMERICAN SCIENCE AND
  ENGINEERING, INC.

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BANK:

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY BANK, d/b/a

  	
   

  
	
  SILICON VALLEY EAST

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  (Signed
  in Santa Clara County, California)

  
	
   

  	
   

  
	
   

  	
   

  
							



20

















 


EXHIBIT A


 


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


 


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


 


Any copyright rights,
copyright applications, copyright registrations and like protections in each
work of  authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service
marks and applications therefor; trade styles, trade names, any trade secret
rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned
or hereafter acquired; or any claims for damages by way of any past, present
and future infringement of any of the
foregoing; and


 


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


 


21

















 


EXHIBIT B


 


Loan Payment/Advance Request Form


DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.


	
  Fax To: (617) 969-5965 

  	
  Date:                                    

  



 


	
  LOAN
  PAYMENT:

  
	
  Sample
  documents Client Name (Borrower)

  
	
   

  
	
  From Account #
                                                    

  	
  To Account #
                                                       

  
	
  (Deposit Account #)

  	
  (Loan Account #)

  
	
   

  
	
  Principal
  $                                                               and/or
  Interest
  $                                                            

  
	
   

  
	
  All Borrower’s
  representation and warranties in the Loan and Security Agreement are true,
  correct and complete in all  material respects on the date of the telephone transfer request for an
  advance, but those representations and warranties expressly referring to another date shall be
  true, correct and complete in all material respects as of such date:

  
	
   

  
	
  Authorized
  Signature:

  	
   

  	
   

  	
  Phone Number:

  	
   

  	
   

  
	
   

  
	
  LOAN
  ADVANCE:

  
	
  Complete Outgoing Wire Request section below if
  all or a portion of the funds from this loan advance are for
  an outgoing wire.

  
	
   

  
	
  From Account #
                                                    

  	
  To Account #
                                                       

  
	
  (Loan
  Account #) 

  	
  (Deposit
  Account #)

  
	
   

  
	
  Amount of Advance
  $                                          

  
	
   

  
	
  All Borrower’s
  representation and warranties in the Loan and Security Agreement are true,
  correct and complete in all  material respects on the date of the telephone transfer request for an
  advance, but those representations and warranties expressly referring to another date shall be
  true, correct and complete in all material respects as of such date:

  
	
   

  
	
  Authorized
  Signature: 

  	
   

  	
   

  	
  Phone Number:

  	
   

  	
   

  
	
   

  
	
  OUTGOING
  WIRE REQUEST

  
	
  Complete
  only if all or a portion of funds from the loan
  advance above are to be wired.

  
	
  Deadline for same day
  processing is 3:00pm, E.S.T.

  
	
   

  
	
  Beneficiary
  Name:                                             

  	
  Amount of Wire:
  $                                             

  
	
   

  	
   

  
	
  Beneficiary
  Bank:                                               

  	
  Account
  Number:                                               

  
	
   

  
	
  City and
  Sate:                                                 

  
	
   

  
	
  Beneficiary Bank Transit
  (ABA)
  #:                                         

  	
  Beneficiary Bank Code
  (Swift, Sort, Chip, etc.):

  
	
   

  	
   

  
	
   

  	
  (For
  International Wire Only)

  
	
   

  
	
  Intermediary
  Bank:                                                   

  	
  Transit (ABA)
  #:                                                  

  
	
   

  
	
  For Further Credit
  to:                                                                                                                                                                  

  
	
   

  
	
  Special
  Instruction:                                                                                                                                                                      

  
	
   

  
	
  By
  signing below, I (we) acknowledge and agree that my (our) funds transfer
  request shall be processed in  accordance with and subject to the terms and
  conditions set forth in the agreements(s) covering funds transfer  service(s), which
  agreements(s) were previously received and executed by me (us).

  
	
   

  
	
  Authorized Signature: 

  	
   

  	
   

  	
  2nd Signature (If
  Required):

  	
   

  
	
   

  
	
  Print
  Name/Title: 

  	
   

  	
   

  	
  Print
  Name/Title:

  	
   

  
																				



 


	
  Telephone
  # 

  	
   

  	
   

  	
  Telephone
  #

  	
   

  



 


22

















 


EXHIBIT C


BORROWING BASE CERTIFICATE


 


 


	
  Borrower:

  	
  Lender:

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
   

  
	
  Commitment Amount:    $5,000,000

  	
   

  	
   

  
					



 


 


	
  ACCOUNTS RECEIVABLE

  	
   

  
	
  1.

  	
   

  	
  Accounts Receivable Book Value as of
                                    

  	
  $

  	
   

  
	
  2.

  	
   

  	
  Additions (please explain on reverse)

  	
  $

  	
   

  
	
  3.

  	
   

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  
	
  4.

  	
   

  	
  Amounts over 120 days due

  	
  $

  	
   

  
	
  5.

  	
   

  	
  Balance of 50% over 120 day accounts

  	
  $

  	
   

  
	
  6.

  	
   

  	
  Credit balances over 120 days

  	
  $

  	
   

  
	
  7.

  	
   

  	
  Concentration Limits

  	
  $

  	
   

  
	
  8.

  	
   

  	
  Foreign Accounts

  	
  $

  	
   

  
	
  9.

  	
   

  	
  Governmental Accounts

  	
  $

  	
   

  
	
  10.

  	
   

  	
  Contra Accounts

  	
  $

  	
   

  
	
  11.

  	
   

  	
  Promotion or Demo Accounts

  	
  $

  	
   

  
	
  12.

  	
   

  	
  Intercompany/Employee Accounts

  	
  $

  	
   

  
	
  13.

  	
   

  	
  Other (please explain on reverse)

  	
  $

  	
   

  
	
  14.

  	
   

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
  $

  	
   

  
	
  15.

  	
   

  	
  Eligible Accounts (#3 minus #14)

  	
  $

  	
   

  
	
  16.

  	
   

  	
  LOAN VALUE OF ACCOUNTS (80% of #15)

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  INVENTORY

  	
   

  
	
  17.

  	
   

  	
  Inventory Value as of

  	
  $

  	
   

  
	
  18.

  	
   

  	
  LOAN VALUE OF INVENTORY (lesser of 10.0% of #17 or $750,000)

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  
	
  19.

  	
   

  	
  Maximum Loan Amount

  	
  $

  	
   

  
	
  20.

  	
   

  	
  Total Funds Available [Lesser of #19 or (#16 plus #18)]

  	
  $

  	
   

  
	
  21.

  	
   

  	
  Present balance owing on Line of Credit

  	
  $

  	
   

  
	
  22.

  	
   

  	
  Outstanding under Sublimits (letters of credit, FX contracts)

  	
  $

  	
   

  
	
  23.

  	
   

  	
  RESERVE POSITION (#20 minus #21 and #22)

  	
  $

  	
   

  
						



 


	
  The undersigned represents and warrants that this is
  true, complete and correct, and that the information in this Borrowing Base
  Certificate complies with the representations and warranties in the Loan and
  Security Agreement between the undersigned and Silicon Valley Bank.

  	
   

  	
   

  
	
   

  	
  BANK USE
  ONLY

  
	
   

  	
   

  
	
   

  	
  Received by:

  	
   

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  
	
  COMMENTS:

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  Authorized Signer

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
												



 


23

















 


EXHIBIT D


COMPLIANCE
CERTIFICATE


 


	
  TO:

  	
  SILICON VALLEY BANK

  
	
  FROM:

  	
  AMERICAN SCIENCE AND ENGINEERING, INC.

  



 


The undersigned authorized
officer of AMERICAN SCIENCE AND ENGINEERING, INC. certifies that under the
terms and conditions of the Loan and Security Agreement between Borrower and
Bank (the “Agreement”), (i) Borrower is in complete compliance for the period
ending                           
with all required covenants except as noted below and (ii) all representations
and warranties in the Agreement are true and correct in all material respects
on this date.  Attached are the required
documents supporting the certification. 
The Officer certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) consistently applied from one
period to the next except as explained in an accompanying letter or
footnotes.  The Officer acknowledges
that no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.


 


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

  
	
   

  
	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements with CC

  	
   

  	
  Monthly within 30 days*

  	
   

  	
  Yes  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 90 days

  	
   

  	
  Yes  No

  
	
  10-Q , 10-K and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  Yes  No

  
	
  BBC A/R Agings

  	
   

  	
  Monthly within 30 days*

  	
   

  	
  Yes  No

  
	
  Deferred Revenue Schedule

  	
   

  	
  Monthly within 30 days*

  	
   

  	
  Yes  No

  
	
  Audit

  	
   

  	
  Semi-Annual

  	
   

  	
  Yes  No

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Notification of registration of Intellectual Property

  
	
  The following Intellectual Property was registered after the Closing
  Date (if blank, read “None”)

  



 


	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Adjusted Quick
  Ratio

  	
   

  	
  2.0:1.0

  	
   

  	
  :1.0

  	
   

  	
  Yes  No

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a Quarterly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum EBIT

  	
   

  	
  **

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  
								



 












* See Section 6.2 of Agreement (may be quarterly if Advances/Credit
Extensions less than $500,000.00 )


** See Section 6.7 of Agreement


 


	
  Comments Regarding Exceptions:  See
  Attached.

  	
   

  
	
  Sincerely,

  	
  BANK USE
  ONLY

  
	
   

  	
  Received by: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
  SIGNATURE

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  TITLE

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE

  	
  Compliance Status:

  	
  Yes

  	
  No

  
													



 


24