**Exhibit 10.(d)(xi)**

 

**LOAN AND SECURITY AGREEMENT**

 

**This LOANAND SECURITY AGREEMENT**(this“Agreement”) dated as of August 11, 2003, between  **SILICON VALLEY BANK**, a California chartered bank, with itsprincipal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loanproduction office located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts02462, doing business under the name “Silicon Valley East” (“Bank”) and  **AMERICAN SCIENCE ANDENGINEERING, INC**., aMassachusetts corporation with offices at 829 Middlesex Turnpike, Billerica, Massachusetts 01821(“Borrower”), provides the terms on which Bank shall lend to Borrower and  Borrowershall repay Bank. The parties agree as follows: 

 

**1****                                         ACCOUNTINGAND OTHER TERMS**

 

Accounting terms not definedin this Agreement shall be construed following GAAP.  Calculations anddeterminations 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. Capitalizedterms in this Agreement shall have the meanings set forth in Section 13.

 

**2****                                        ****LOAN AND TERMS OF PAYMENT**

 

**2.1****                              ****Promise to Pay****. **Borrower herebyunconditionally promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on theunpaid 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 notexceeding (i) the lesser of (A) the Revolving Line or (B) the Borrowing Base minus (ii) the amount of all outstandingLetters 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 borrowedunder this Section may be repaid and reborrowed during the term of this Agreement.

 

(b)                                 Borrowing Procedure.  Toobtain an Advance, Borrower must notify Bank by facsimile or telephone by 3:00 p.m. Eastern time on theBusiness Day the Advance is to be made. If such notification is by telephone,  Borrowermust promptly confirm the notification by delivering to Bank a completedPayment/Advance Form in the form attached as **Exhibit B**. Bank shall credit Advancesto Borrower’s deposit account. Bank may make Advances under this  Agreementbased on instructions from a Responsible Officer or his or her designee orwithout instructions if the  Advances are necessary to meet Obligationswhich have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a ResponsibleOfficer or designee. Borrower shall indemnify Bank for any loss Bank suffers due to such reliance.

 

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

 

**2.1.2****                    ****Letters of Credit Sublimit****.**

 

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

 

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and substance, acceptable toBank in its sole discretion and shall be subject to the terms and conditions ofBank’s formof standardApplication and Letter of Credit Agreement. Borrower agrees to execute anyfurther documentation in connectionwith the Letters of Credit as Bank may reasonably request.

 

(b)                                 The obligation of Borrower to immediatelyreimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, and shall beperformed strictly in accordance with the terms of this Agreement and such Letters of Credit, under all circumstanceswhatsoever.  Borrower shall indemnify,defend, protect, and hold Bankharmless from any loss, cost, expense or liability, including, withoutlimitation, reasonable attorneys’fees, arising out of or in connection with any Letters of Credit, except to theextent resulting from Bank’s gross  negligence or willfulmisconduct.

 

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

 

(d)                                 Upon the issuance of any letter of creditpayable 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 anamount equal to ten percent (10%) of the face amount of such letter of credit. The amount of such reserve may beamended by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds underthe Revolving Line shall be reduced by the amount of such reserve for so long as such letter of credit remainsoutstanding.

 

**2.1.3****                    ****Foreign Exchange Sublimit****.**  Ifthere is availability under the Revolving Line and the Borrowing Base, then Borrower may enter in foreign exchangeforward contracts with the Bank under which Borrower commits to purchase from or sell to Bank a set amount offoreign currency more than one business day after the contract date (the“FX Forward Contract”). Bank shallsubtract 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 ofthe FX Reserve. Bank may terminate the FX Forward Contracts if an Event of Default occurs.

 

**2.1.4****                    ****Cash Management ServicesSublimit****.**  Borrower may use up to $5,000,000.00 for theBank’s Cash Management Services,which may include merchant services, direct deposit of payroll, business creditcard, and check cashing servicesidentified in the various cash management services agreements related to suchCash Management Services (the“Cash Management Services”). Such aggregate amounts utilized under the CashManagement Services Sublimitshall at all times reduce the amount otherwise available for Credit Extensionsunder the Revolving Line. Any amountsBank pays on behalf of Borrower or any amounts that are not paid by Borrowerfor any Cash Management Serviceswill be treated as Advances under the Revolving Line and will accrue interestat the interest rate applicable to Advances.

 

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

 

**2.2****                              ****Overadvances****. **If Borrower’sObligations 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.  Theprincipal 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,

 

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Obligations shall bearinterest at three percent (3.0%) above the rate effective immediately beforethe Event of Default.Theapplicable interest rate hereunder shall increase or decrease when the PrimeRate 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 firstday of each month. Payments received after 12:00 noon Eastern time are considered received at the openingof business on the next Business Day. When a payment is due on a day that is not a Business Day, the paymentis due the next Business Day and additional fees or interest, as applicable,  shallcontinue to accrue.

 

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

 

**2.4****                              ****Fees****. **Borrower shallpay to Bank:

 

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

 

(b)                                 Unused Line Fee.  In the event, in any calendarquarter, 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  linefee 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 CreditExtensions outstanding during the quarter, which unused line fee shall becomputed and paid quarterly, inarrears, on the first day of the following quarter.

 

(c)                                  Letter of Credit Fee.  TheBorrower 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  amountof each Letter of Credit issued, upon the issuance or renewal of such Letter ofCredit by the Bank; and

 

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

 

**3****                                        ****CONDITIONS OF LOANS**

 

**3.1****                              ****Conditions Precedent toInitial Credit Extension****.**The Bank’sobligation to make the initial Credit Extension is subject to the condition precedent that Bank shall havereceived, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Agreement;

 

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

 

(c)                                  a certificate of the Secretary of Borrowerwith 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 andGuarantor;

 

(g)                                 landlord’s waiver;

 

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

 

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(i)                                     guaranties and security agreements by theGuarantor(s);

 

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

 

(k)                                  Account Control Agreement/ Investment AccountControl Agreement

 

(l)                                     insurance certificate;

 

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

 

(n)                                 Certificate of Foreign Qualification (ifapplicable);

 

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

 

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

 

**3.2****                              ****Conditions Precedent to allCredit Extensions****. **Bank’s obligations to make each CreditExtension, including the initialCredit Extension, is subject to the following:  

 

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

 

(b)                                 the representations and warranties in Section5 shall be materially true on the date of the Payment/Advance Form and on the effective date of each Credit Extensionand no Event of Default shall have occurred and be continuing, or result from the Credit Extension. Each CreditExtension is Borrower’s representation and warranty on that date that the representations andwarranties in Section 5 remain true.

 

**4****                                        ****CREATION OF SECURITY INTEREST**

 

**4.1****                              ****Grant of Security Interest****. **Borrower herebygrants Bank, to secure the payment and performance in full of all of the Obligations and theperformance of each of Borrower’s duties under the Loan Documents, a continuing security interest in, and pledgesand assigns to the Bank, the Collateral, wherever located, whether now ownedor hereafter acquired or arising, andall proceeds and products thereof. Borrower warrants and represents that thesecurity interest granted herein shallbe a first priority security interest in the Collateral. The Collateral is alsosubject to Permitted Liens. Upon theoccurrence and during the continuance of an Event of Default, Bank may place a“hold” on any deposit accountpledged as Collateral.

 

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

 

Notwithstandingthe foregoing, it is expressly acknowledged and agreed that the securityinterest created in thisAgreementonly with respect to Foreign Accounts, Foreign Inventory, Retainage AccountsReceivable, any cash at Bank specificallypledged to Bank to secure any Warranty Letters of Credit (as such terms aredefined in the Exim Agreement), andIntellectual Property is subject to and subordinate to the security interestgranted to the Bank in the Exim Agreement with respect to such Foreign Accounts, Foreign Inventory, RetainageAccounts Receivable, any cash at Bank specifically

 

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pledged to Bank to secure any Warranty Letters of Credit (as such termsare defined in the Exim Agreement), andIntellectual Property.

 

If the Agreement isterminated, Bank’s lien and security interest in the Collateral shall continueuntil Borrower fullysatisfiesits Obligations. If Borrower shall at any time, acquire a commercial tortclaim, Borrower shall promptly notify Bank in a writing signed by Borrower of the brief details thereof andgrant to Bank in such writing a security interest therein and in the proceeds thereof, all uponthe terms of this Agreement, with such writing to be in form and substance  satisfactoryto Bank.

 

**4.2****                              ****Authorization to FileFinancing Statements****. **Borrower hereby authorizes Bank to filefinancing statements, withoutnotice to Borrower, with all appropriate jurisdictions in order to perfect orprotect Bank’s interest  or rights hereunder, including a notice thatany disposition of the Collateral, by either the Borrower or any other Person,shall be deemed to violate the rights ofthe Bank under the Code.

 

**5****                                        ****REPRESENTATIONS ANDWARRANTIES**

 

Borrower represents andwarrants as follows:

 

**5.1****                              ****Due Organization andAuthorization****. **Borrower and each Subsidiary is duly existingand in good standing in its stateof formation and qualified and licensed to do business in, and in good standingin, any state in which theconduct of its business or its ownership of property requires that it bequalified except where the failure to do so could not reasonably be expected to cause a MaterialAdverse Change. In connection with this Agreement, the Borrower delivered to the Bank a certificate signed bythe Borrower and entitled “Perfection Certificate”. The Borrower represents  andwarrants to the Bank that: (a) the Borrower’s exact legal name is thatindicated on the Perfection Certificate and on the signature page hereof; and (b) the Borrower is an organization ofthe 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 accuratelystates that the Borrower has none; and (d) the Perfection Certificateaccurately sets forth theBorrower’s place of business, or, if more than one, its chief executive officeas well as the Borrower’s mailing address if different, and (e) allother information set forth on the Perfection Certificate pertaining to theBorrower is accurate andcomplete. If the Borrower does not now have an organizational identificationnumber, but later obtains one, Borrowershall forthwith notify the Bank of such organizational identification number.

 

The execution, delivery andperformance of the Loan Documents have been duly authorized, and do notconflictwith Borrower’sorganizational documents, nor constitute an event of default under any materialagreement by which Borrower isbound. Borrower is not in default under any agreement to which or by which itis bound in which the default couldreasonably be expected to cause a Material Adverse Change.

 

**5.2****                              ****Collateral****. **Borrower has goodtitle to the Collateral, free of Liens except Permitted Liens. Borrower has no deposit account, other than the depositaccounts with Bank and deposit accounts described in the Perfection Certificate delivered to the Bank inconnection herewith. The Accounts are bona fide, existing obligations, and theservice or property has been performedor delivered to the account debtor or its agent for immediate shipment to andunconditional acceptance by the accountdebtor. 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 byBorrower, none of the components of the Collateral, in excess of FiftyThousand Dollars ($50,000.00) shall be maintained at locations other than as providedin  the Perfection Certificate. In the event that Borrower, after the datehereof, intends to store or otherwise deliver any  portionof the Collateral, in excess of Fifty Thousand Dollars ($50,000.00) to abailee, then Borrower will first receive the written consent of Bank and such bailee must acknowledge in writingthat the bailee is holding such Collateral for the benefit of Bank. Borrower has no knowledge of any actual or imminentInsolvency Proceeding of any account debtor whose accounts are an Eligible Account in any Borrowing BaseCertificate. All Inventory is in all material respects of good and marketable quality, free frommaterial defects. Borrower is the sole owner of the Intellectual Property,except for non-exclusive licensesgranted to its customers in the ordinary course of business. Each Patent isvalid and enforceable and no partof the Intellectual Property has been judged invalid or unenforceable, in wholeor in part, and

 

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

 

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

 

**5.4****                              ****No Material Deviation inFinancial Statements****. **All consolidated financial statements forBorrower and any Subsidiarydelivered to Bank fairly present in all material respects Borrower’sconsolidated financial condition  and Borrower’s consolidatedresults of operations. There has not been any material deterioration inBorrower’s consolidated financialcondition since the date of the most recent financial statements submitted toBank.

 

**5.5****                              ****Solvency****. **Borrower isable to pay its debts (including trade debts) as they mature.

 

**5.6****                              ****Regulatory Compliance****. **Borrower is notan “investment company” or a company “controlled” by an “investment company” under the InvestmentCompany Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (underRegulations T and U of the Federal Reserve Board of Governors). Borrowerhas complied in all material respectswith the Federal Fair Labor Standards Act. Borrower has not violated any laws,ordinances or rules, the violation ofwhich could reasonably be expected to cause a Material Adverse Change. None of  Borrower’sor any Subsidiary’s properties or assets has been used by Borrower or anySubsidiary or, to the best of Borrower’sknowledge, by previous Persons, in disposing, producing, storing, treating, ortransporting any hazardous substanceother than legally. Borrower and each Subsidiary has timely filed all requiredtax returns and paid, or made adequateprovision to pay, all material taxes, except those being contested in goodfaith with adequate reserves under GAAP. Borrower and eachSubsidiary has obtained all consents, approvals and authorizations of, made alldeclarations or filings with, andgiven all notices to, all government authorities that are necessary to continueits business as currently conductedexcept where the failure to make such declarations, notices or filings wouldnot reasonably be expected to  cause a Material Adverse Change.

 

**5.7****                              ****Subsidiaries****. **Borrower doesnot own any stock, partnership interest or other equity securities exceptfor Permitted Investments.

 

**5.8****                              ****Full Disclosure****. **No writtenrepresentation, warranty or other statement of Borrower in any certificateor written statement given to Bankcontains any untrue statement of a material fact or omits to state a materialfact necessary to make thestatements contained in the certificates or statements not misleading (it beingrecognized by Bank that theprojections and forecasts provided by Borrower in good faith and based uponreasonable assumptions are not viewedas facts and that actual results during the period or periods covered by suchprojections and forecasts may differ from the projected or forecastedresults).

 

**6****                                        ****AFFIRMATIVE COVENANTS**

 

Borrower shall do all of thefollowing:

 

**6.1****                               GovernmentCompliance. **Borrower shallmaintain its and all Subsidiaries’ legal existence and good standing in itsjurisdiction of formation and maintain qualification in each jurisdiction inwhich the failure to so qualify would reasonably be expected to have a materialadverse effect on Borrower’s business or operations. Borrower shall comply, andhave each Subsidiary comply, with all laws, ordinances and regulations to whichit is subject, noncompliance with which could have a material adverse effect onBorrower’s business or operations or would reasonably be expected to cause aMaterial Adverse Change.

 

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**6.2****                              ****Financial Statements,Reports, Certificates****.**

 

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

 

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

 

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

 

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

 

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

 

Notwithstanding the abovefinancial reporting requirements, in the event that Borrower has no Advances orCredit Extensions in an amountequal to or greater than Five Hundred Thousand Dollars ($500,000.00)outstanding during any month, themonthly financial reporting requirements set forth in subsections (a), (b), (c)and (d) above shall be deliveredon a quarterly basis, within forty five (45) days after the end of each fiscalquarter of Borrower.

 

**6.3****                              ****Inventory; Returns****. **Borrower shallkeep all Inventory in good and marketable condition, free from material defects. Returns and allowancesbetween Borrower and its account debtors shall follow Borrower’s customarypractices as they exist at the ClosingDate. Borrower must promptly notify Bank of all returns, recoveries, disputesand claims that involve more thanOne Hundred Thousand Dollars ($100,000.00).

 

**6.4****                              ****Taxes****. **Borrower shallmake, 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 inaccordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to such payments.

 

**6.5****                              ****Insurance****. **Borrower shallkeep 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. Allproperty policies shall have a lender’s loss payable endorsement showing Bankas an additional loss payee andall liability policies shall show the Bank as an additional insured and allpolicies shall  provide that the insurer must give Bank atleast twenty (20) days notice before canceling its policy. At Bank’s request,

 

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Borrower shall delivercertified copies of policies and evidence of all premium payments. Proceedspayable under any policy shall, at Bank’s option, be payable to Bank on accountof the Obligations. Notwithstanding the foregoing, so long as no Event ofDefault has occurred and is continuing, Borrower shall have the option ofapplying the proceeds of any casualty policy up to $100,000.00, in theaggregate, toward the replacement or repair of destroyed or damaged property;provided that (i) any such replaced or repaired property (a) shall be of equalor like value as the replaced or repaired Collateral and (b) shall be deemedCollateral in which Bank has been granted a first priority security interestand (ii) after the occurrence and during the continuation of an Event ofDefault all proceeds payable under such casualty policy shall, at the option ofthe Bank, be payable to Bank on account of the Obligations. If Borrower failsto obtain insurance as required under Section 6.5 or to pay any amount orfurnish any required proof of payment to third persons and the Bank, Bank maymake all or part of such payment or obtain such insurance policies required inSection 6.5, and take any action under the policies Bank deems prudent.

 

**6.6****                              ****Accounts****. **In order topermit the Bank to monitor the Borrower’s financial performance and condition,Borrower, and all Borrower’sSubsidiaries, shall maintain all of Borrower’s, and such Subsidiaries’,depository, operating accountsand securities accounts with Bank. Borrower may maintain up to Three HundredThousand Dollars ($300,000.00) inthe aggregate, at any time, in a non-United States account with anotherfinancial institution, for use in the ordinary course of Borrower’sbusiness. The Borrower may also maintain a payroll account at Fleet Bank forthe Borrower’s current payrollrequirements.

 

**6.7****                              ****Financial Covenants****.**

 

Borrower shall maintain atall times, to be tested as of the last day of each month, unless otherwisenoted:

 

(a)  **Adjusted Quick Ratio**.  A ratio of Quick Assets to CurrentLiabilities minus Deferred Revenueand customer deposits of at least 2.0 to 1.0.

 

(b)  **Minimum EBIT. **Borrowershall have minimum quarterly EBIT of:

 

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

(ii)                                  ($500,000) for the quarter ending September30, 2003

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

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

 

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

 

**7****                                        ****NEGATIVE COVENANTS**

 

Borrower shall not do any ofthe 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, allor any part of its business or property, except for Transfers (i) of Inventoryin the ordinary course ofbusiness; (ii) of non-exclusive licenses and similar arrangements for the useof the property of Borrower orits Subsidiaries in the ordinary course of business; (iii) of worn-out orobsolete Equipment, or (iv) other assetsnot 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 orpermit any of its Subsidiaries toengage in any business other than the businesses currently engaged in byBorrower or reasonably  related thereto, or have a material change inits ownership (other than by the sale of Borrower’s equity securities in apublic offering or to venture capitalinvestors so long as Borrower identifies to Bank the venture capital investorsprior to the closing of theinvestment), or management. Borrower shall not, without at least thirty (30)days prior written notice

 

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to Bank: (i) relocate its chiefexecutive office, or add any new offices or business locations, includingwarehouses (unless such new offices or business locations contain less thanFive Thousand Dollars ($5,000.00) in Borrower’s assets or property), or (ii)change its jurisdiction of organization, or (iii) change its organizationalstructure or type, or (iv) change its legal name, or (v) change anyorganizational number (if any) assigned by its jurisdiction of organization.

 

**7.3****                              ****Mergers or Acquisitions****. **Merge orconsolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, oracquire, or permit any of its Subsidiaries to acquire, all or substantially allof the capital stock or propertyof another Person. A Subsidiary may merge or consolidate into anotherSubsidiary 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 anyAccounts, or permit any of its Subsidiaries to do so, except for PermittedLiens, or permit any Collateral not tobe subject to the first priority security interest granted herein. TheCollateral may also be subject toPermitted Liens.

 

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

 

**7.7****                              ****Transactions with Affiliates****. **Directly orindirectly 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 areno 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 permitany payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend anyprovision 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 of1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use theproceeds of any Credit Extension for that purpose; fail to meet the minimumfunding requirements of ERISA, permit aReportable Event or Prohibited Transaction, as defined in ERISA, to occur;fail to comply with the Federal FairLabor Standards Act or violate any other law or regulation, if the violationcould reasonably be expected tohave a material adverse effect on Borrower’s business or operations or wouldreasonably be expected to cause aMaterial Adverse Change, or permit any of its Subsidiaries to do so.

 

**8****                                        ****EVENTS OF DEFAULT**

 

Any one of the following isan Event of Default:

 

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

 

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

 

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Borrower and Bank and as to anydefault under such other material term, provision, condition, covenant oragreement that can be cured, has failed to cure the default within ten (10)days after the occurrence thereof; provided, however, that if the defaultcannot by its nature be cured within the ten (10) day period or cannot afterdiligent attempts by Borrower be cured within such ten (10) day period, and suchdefault is likely to be cured within a reasonable time, then Borrower shallhave 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 thefailure to cure the default shall not be deemed an Event of Default (but noCredit Extensions shall be made during such cure period). Grace periodsprovided under this section shall not apply, to financial covenants or anyother covenants that are required to be satisfied, completed or tested by adate certain.

 

**8.3****                               MaterialAdverse Change.**  A MaterialAdverse Change occurs;

 

**8.4****                              ****Attachment****. **(i) Anymaterial portion of Borrower’s assets is attached, seized, levied on, or comesinto possession of a trustee or receiverand the attachment, seizure or levy is not removed in ten (10) days; (ii) theservice of process upon theBorrower seeking to attach, by trustee or similar process, any funds of theBorrower on deposit with theBank, 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) ajudgment or other claim becomes a Lien on a material portion of Borrower’s assets; or (v) a notice of lien, levy, orassessment is filed against any of Borrower’s assets by any government agency and not paid withinten (10) days after Borrower receives notice. These are not Events of Default if stayed or if a bond is postedpending contest by Borrower (but no Credit Extensions shall be made during the  cureperiod);

 

**8.5****                              ****Insolvency****. **(i) Borrowerbecomes insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii)an Insolvency Proceeding is begunagainst Borrower and not dismissed or stayed within thirty (30) days (but noCredit Extensions shall be madebefore any Insolvency Proceeding is dismissed);

 

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

 

**8.7****                              ****Judgments****.**  If ajudgment or judgments for the payment of money in an amount, individually or inthe aggregate, of at least Two HundredThousand Dollars ($200,000) shall be rendered against Borrower and shall  remainunsatisfied and unstayed for a period of thirty (30) days (provided that noCredit Extensions will be made prior to the satisfaction or stay of such judgment);

 

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

 

**8.9****                              ****Guaranty****. **(i) Anyguaranty of any Obligations terminates or ceases for any reason to be in fullforce; or (ii) any Guarantor doesnot perform any obligation under any guaranty of the Obligations; or (iii) anymaterial misrepresentation ormaterial misstatement exists now or later in any warranty or representation inany guaranty of the Obligationsor 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 8.7occurs to any Guarantor, or (v) the liquidation, winding up, termination of  existence,or insolvency of any Guarantor.

 

**8.10****                       ****Exim Agreement****. **The occurrenceof any default or Event of Default under the Exim Agreement or any other agreement or instrument executed inconnection therewith.

 

**9****                                        ****BANK’S RIGHTS AND REMEDIES**

 

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

 

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(a)                                  Declareall Obligations immediately due and payable (but if an Event of Defaultdescribed in Section 8.5 occurs all Obligations are immediately due and payablewithout any action by Bank);

 

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

 

(c)                                  Settle or adjust disputes and claims directlywith account debtors for amounts, on terms and in any order that Bank considers advisable and notify any Person owingBorrower money of Bank’s security interestin such funds and verify the amount of such account. Borrower shall collect allpayments in trust for Bank and, ifrequested by Bank, immediately deliver the payments to Bank in the formreceived from the account debtor,with proper endorsements for deposit;

 

(d)                                 Make any payments and do any acts it considersnecessary or reasonable to protect its security interest in the Collateral. Borrower shall assemble the Collateral ifBank 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 Lienwhich appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grantsBank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights orremedies;

 

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

 

(f)                                    Ship, reclaim, recover, store, finish,maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted anon-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, andadvertising matter, or any similar property as it pertains to the Collateral,  incompleting production of, advertising for sale, and selling any Collateral and,in connection with Bank’s exerciseof its rights under this Section.  Borrower’srights under all licenses and all franchise agreements inure to Bank’s benefit;

 

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

 

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

 

**9.2****                              ****Power of Attorney****. **Borrower herebyirrevocably appoints Bank as its lawful attorney-in-fact, to be effective upon the occurrence and during thecontinuance of an Event of Default, to: (i) endorse Borrower’s name on any checks or other forms of payment orsecurity; (ii) sign Borrower’s name on any invoice or bill of lading for anyAccount or drafts against accountdebtors; (iii) settle and adjust disputes and claims about the Accountsdirectly with account debtors,for amounts and on terms Bank determines reasonable; (iv) make, settle, andadjust all claims under Borrower’sinsurance policies; and (v) transfer the Collateral into the name of Bank or athird party as the Code permits. Borrowerhereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name onany documents necessary to perfector continue the perfection of any security interest regardless of whether anEvent of Default has occurred until all Obligations have beensatisfied in full and Bank is under no further obligation to make CreditExtensions hereunder. Bank’sforegoing appointment as Borrower’s attorney in fact, and all of Bank’s rightsand powers, coupled with an interest,are irrevocable until all Obligations have been fully repaid and performed andBank’s obligation to provide CreditExtensions terminates.

 

**9.3****                              ****AccountsNotification/Collection****. **In the event that an Event of Default occursand is continuing, Bank maynotify any Person owing Borrower money of Bank’s security interest in the fundsand verify and/or collect the amountof the Account. After the occurrence and during the continuance of an Event ofDefault, any amounts received

 

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by Borrower shall be held intrust by Borrower for Bank, and, if requested by Bank, Borrower shallimmediately deliver such receipts to Bank in the form received from the accountdebtor, with proper endorsements for deposit.

 

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

 

**9.5****                              ****Bank’s Liability forCollateral****. **So long as the Bank complies with reasonablebanking practices regarding thesafekeeping 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 ofthe Collateral; or (d) any act or defaultof any carrier, warehouseman, bailee, or other Person. Borrower bears all riskof loss, damage or destruction of theCollateral.

 

**9.6****                              ****Remedies Cumulative****.** Bank’s rights and remedies under this Agreement, the Loan Documents, and  allother agreements are cumulative. Bank has all rights and remedies providedunder the Code, by law, or in equity. Bank’s exercise of one right orremedy is not an election, and Bank’s waiver of any Event of Default is not acontinuing waiver. Bank’s delayis not a waiver, election, or acquiescence. No waiver hereunder shall beeffective unless signed by Bankand then is only effective for the specific instance and purpose for which itwas given.

 

**9.7****                              ****Demand Waiver****. **Borrower waivesdemand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpaymentat maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattelpaper, and guarantees held by Bank on which Borrower is liable.

 

**10****                                 ****NOTICES**

 

All notices or demands by anyparty to this Agreement or any other related agreement must be in writing andbe personally delivered or sentby an overnight delivery service, by certified mail, postage prepaid, returnreceipt requested, or bytelefacsimile at the addresses listed below. Either Bank or Borrower may changeits notice address by giving theother 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                                                                       |

 

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**11****                                 ****CHOICE OF LAW, VENUE AND JURYTRIAL WAIVER**

 

Massachusetts law governs theLoan Documents without regard to principles of conflicts of law. Borrower andBank each submit to the exclusivejurisdiction of the State and Federal courts in Massachusetts; provided,however, that if for any reasonBank cannot avail itself of such courts in the Commonwealth of Massachusetts,Borrower accepts jurisdiction ofthe courts and venue in Santa Clara County, California. NOTWITHSTANDING THEFOREGOING, THE BANK SHALL HAVETHE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANYOTHER JURISDICTION WHICH THE BANK DEEMSNECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINSTTHE BORROWER OR ITS PROPERTY.  

 

**BORROWERAND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTIONARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANYCONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALLOTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTERINTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.**

 

**12****                                 ****GENERAL PROVISIONS**

 

**12.1****                       ****Successors and Assigns****. **This Agreementbinds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assignthis Agreement or any rights or Obligations under it without Bank’s priorwritten consent which may be granted orwithheld 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 andbenefits under this Agreement, the Loan Documents or any related agreement.

 

**12.2****                       ****Indemnification****. **Borrower herebyindemnifies, defends and holds the Bank and its officers, employees and agents harmless against: (a) allobligations, demands, claims, and liabilities asserted by any other partyin connection with the transactionscontemplated by the Loan Documents; and (b) all losses or Bank Expensesincurred, 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 orwillful misconduct.

 

**12.3****                       ****Right of Set-Off.**** **Borrower andany guarantor hereby grant to Bank, a lien, security interest and right of setoff as security for all Obligations toBank, whether now existing or hereafter arising upon and against all deposits,credits, collateral and property, now orhereafter in the possession, custody, safekeeping or control of Bank or anyentity under the control of theBank (including a Bank subsidiary) or in transit to any of them. At any timeafter the occurrence and duringthe continuance of an Event of Default, without demand or notice, Bank may setoff the same or any part thereofand apply the same to any liability or obligation of Borrower and any guarantoreven though unmatured and regardlessof the adequacy of any other collateral securing the Obligations. ANY AND ALLRIGHTS TO REQUIRE BANK TOEXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH  SECURESTHE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCHDEPOSITS, CREDITS OR OTHER PROPERTY OFTHE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

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

 

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

 

**12.6****                       ****Amendments in Writing;Integration****. **All amendments to this Agreement must be inwriting signed by both Bank andBorrower. This Agreement and the Loan Documents represent the entire agreementabout this subject matter, andsupersede prior negotiations or agreements. All prior agreements,understandings, representations, warranties,and negotiations between the parties about the subject matter of this Agreementand the Loan Documents merge intothis Agreement and the Loan Documents.

 

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**12.7****                       ****Counterparts****. **This Agreementmay be executed in any number of counterparts and by different parties on separate counterparts, each ofwhich, 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 remainoutstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shallsurvive until the statute oflimitations with respect to such claim or cause of action shall have run.

 

**12.9****                       ****Confidentiality****. **In handling anyconfidential information, Bank shall exercise the same degree of care that it exercises for its own proprietaryinformation, but disclosure of information may be made: (i) to Bank’ssubsidiaries or affiliates inconnection with their business with Borrower; (ii) to prospective transfereesor purchasers of any interest inthe Credit Extensions (provided, however, Bank shall use commerciallyreasonable efforts in obtaining such prospective transferee’s or purchaser’s agreement to the terms of thisprovision); (iii) as required by law, regulation, subpoena, or other order, (iv) as required inconnection with Bank’s examination or audit; (v) as Bank considers appropriate in exercising remedies under thisAgreement; and (vi) consistent with federal securities laws as to any taxrelated matters. Confidentialinformation does not include information that either: (a) is in the publicdomain or in Bank’s possessionwhen disclosed to Bank, or becomes part of the public domain after disclosureto Bank; or (b) is disclosed toBank by a third party, if Bank does not know that the third party is prohibitedfrom disclosing the information.

 

**13****                                 ****DEFINITIONS**

 

**13.1****                       ****Definitions****. **In thisAgreement:

 

**“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,  allcredit insurance, guaranties, other security and all merchandise returned orreclaimed by Borrower and Borrower’s Books relating to any of theforegoing, as such definition may be amended from time to time according to theCode.

 

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

 

**“Affiliate”** is a Person that owns or controls directly orindirectly the Person, any Person that controls or is controlled by or is under common control withthe Person, and each of that Person’s senior executive officers, directors,  partnersand, for any Person that is a limited liability company, that Person’s managersand members.

 

**“BankExpenses”** are allaudit fees and expenses and reasonable costs or expenses (including reasonableattorneys’ fees and expenses) forpreparing, negotiating, administering, defending and enforcing the LoanDocuments (including appeals or InsolvencyProceedings).

 

**“Borrower’sBooks”** are allBorrower’s books and records including ledgers, records regarding Borrower’s  assetsor liabilities, the Collateral, business operations or financial condition andall 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 uponwritten notice by Bank shall be net of any Deferred Revenue plus (ii) thelesser of (A) 10.0% (the “InventoryAdvance Rate”) of the value of Borrower’s Eligible Inventory (valued at thelower of cost or wholesale fair marketvalue) or (B) $750,000.00 (the “Inventory Cap”), all as determined by Bank fromBorrower’s most recent BorrowingBase Certificate; provided, however, after performing an audit of Borrower’sCollateral, Bank may, in its sole discretion,(i) lower the Inventory Advance Rate, lower the Inventory Cap or lower theAccounts Advance Rate if the resultsare unsatisfactory to Bank or (ii) increase the Accounts Advance Rate to 85.0%if the results are satisfactory to Bank.

 

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**“BusinessDay”** is any day thatis not a Saturday, Sunday or a day on which the Bank is closed.

 

**“ClosingDate”** is the date ofthis Agreement.

 

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

 

**“Collateral”** is any and all properties, rights and assetsof 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.**

 

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

 

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

 

**“CreditExtension”** is eachAdvance, Letter of Credit, F/X Forward Contract, or any other extension ofcredit  by Bank for Borrower’s benefit.

 

**“CurrentLiabilities”** are theaggregate amount of Borrower’s Total Liabilities which mature within one (1)year, which shall include, withoutlimitation, all obligations and liabilities of Borrower to Bank.

 

**“DeferredRevenue”** is all amountsreceived in advance of performance under contracts and not yet recognizedas revenue.

 

**“EligibleAccounts”** are billedAccounts in the ordinary course of Borrower’s business that meet all Borrower’s  representationsand warranties in Section 5.2; but Bank may change eligibility standardsby giving Borrower notice. UnlessBank agrees otherwise in writing, Eligible Accounts shall not include:

 

(a)                                  Accounts that the account debtor has not paidwithin 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, includingAffiliates, whose total obligations to Borrower exceed thirty-five (35%) of all Accounts, for the amounts that exceedthat percentage, unless Bank approves in writing;

 

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(e)                                  Accounts for which the account debtor does nothave its principal place of business in the United States;

 

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

 

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

 

(h)                                 Accounts for demonstration or promotionalequipment, 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 isBorrower’s Affiliate, officer, employee, or agent;

 

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

 

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

 

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

 

**“EligibleInventory”**isBorrower’s Inventory, including raw materials, located at its principal placeof business (or any locationpermitted under Section 7.2) that complies with representations and warrantiesin 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 Borrowerhas any interest.

 

**“ERISA”** is the Employment Retirement Income SecurityAct of 1974, and its regulations.

 

**“EximAgreement”** is thatcertain Export-Import Bank Loan and Security Agreement of even date herewith  byand between Borrower and Bank and all documents, instruments and agreementsexecuted in conjunction therewith, each as may be amended from timeto time.

 

**“GAAP”** is generally accepted accounting principles.

 

**“Guarantor”**is any present or future guarantor of theObligations, including AS&E Global, Inc., a  Massachusettscorporation.

 

**“Indebtedness”** is (a) indebtedness for borrowed money or thedeferred price of property or services, such as  reimbursementand other obligations for surety bonds and letters of credit, (b) obligationsevidenced by notes, bonds,  debentures or similar instruments, (c) capitallease obligations and (d) Contingent Obligations.

 

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

 

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

 

**“IntellectualProperty”** is

 

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

 

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

 

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

 

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

 

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

 

**“Inventory”** ispresent and future inventory in which Borrower has any interest, includingmerchandise, raw materials, parts, supplies, packing and shipping materials,work in process and finished products intended for sale or lease or to befurnished under a contract of service, of every kind and description now orlater owned by or in the custody or possession, actual or constructive, ofBorrower, including inventory temporarily out of its custody or possession orin transit and including returns on any accounts or other proceeds (includinginsurance proceeds) from the sale or disposition of any of the foregoing andany documents of title.

 

**“Investment”** is any beneficial ownership of (includingstock, partnership interest or other securities) any Person, or any loan, advance or capitalcontribution to any Person.

 

**“IPAgreement”** is acertain Intellectual Property Security Agreement executed and delivered byBorrower to Bank.

 

**“Letter ofCredit”**means a letterof credit or similar undertaking issued by Bank pursuant to Section 2.1.2.

 

**“Letter ofCredit Reserve”**hasthe 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 EximAgreement, the IP Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any otherpresent or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all asamended, extended or restated

 

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

owned or later acquired.

 

**“Material Adverse Change “**is: (i) A material impairment in the perfectionor priority of Bank’s security interestin the Collateral or in the value of such Collateral; (ii) a material adversechange in the business, operations, or condition (financial or otherwise) of the Borrower; or (iii) a materialimpairment of the prospect of repayment of any  portion of theObligations; or (iv) Bank determines, based upon information available to itand in its reasonable  judgment, that there is a substanitallikelihood that Borrower shall fail to comply with one or more of the financial  covenantsin Section 6 during the next succeeding financial reporting period.

 

17

----

 

**“Obligations**” are debts, principal, interest, BankExpenses and other amounts Borrower owes Bank now or later, under this Agreement, under the EximAgreement, or under any other documents, instruments and agreements between Borrower and Bank, including lettersof credit, cash management services, and foreign exchange contracts, if any, and including interest accruing afterInsolvency Proceedings begin and debts, liabilities, or obligations of Borrower  assignedto Bank.

 

**“Patents”**are patents, patent applications and likeprotections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-partof the same.

 

**“PermittedIndebtedness”** is:

 

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

 

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

 

(c)                                  Subordinated Debt;

 

(d)                                 Indebtedness to trade creditors and withrespect 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 theprincipal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms uponBorrower or its Subsidiary, as the casemay be.

 

**“PermittedInvestments”** are:

 

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

 

(b)                                 (i) marketable direct obligations issued orunconditionally 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 highestrating from either Standard & Poor’s  Corporation or Moody’sInvestors Service, Inc., (iii) Bank’s certificates of deposit issued maturingno more than 1 year after issue,(iv) any other investments administered through the Bank, and (v) anyInvestments permitted  by Borrower’s investment policy, as amendedfrom time to time, provided that such investment policy (and any such amendment thereto) has been approved byBank.

 

**“PermittedLiens”** are:

 

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

 

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

 

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

 

18

----

 

(d)                                 Purchase money Liens or capital leases in anamount not to exceed Five Hundred Thousand Dollars ($500,000.00), in the aggregate, during any fiscal year: (i) onEquipment 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 improvementsand the proceeds of the equipment; and

 

(d)                                 Liens incurred in the extension, renewal orrefinancing of the indebtedness secured by Liens described in (a) through (d), but any extension, renewal orreplacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of theindebtedness 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, jointstock company, estate, entity orgovernment agency.

 

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

 

**“QuickAssets”** is, on anydate, the Borrower’s consolidated, unrestricted cash (less customer deposits),cash equivalents, net billedaccounts receivable and investments with maturities of fewer than 12 monthsdetermined according to GAAP.

 

**“ResponsibleOfficer”** is each ofthe Chief Executive Officer, President, Chief Financial Officer and Controller  ofBorrower.

 

**“RevolvingLine”** is an Advance orAdvances of up to Five Million Dollars ($5,000,000.00).

 

**“RevolvingMaturity Date”**isNovember 30, 2004.

 

**“SubordinatedDebt”** is debt incurredby Borrower subordinated to Borrower’s debt to Bank (pursuant to a subordination agreement entered into betweenthe 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 thevoting stock or other equity interests is owned or controlled, directly or  indirectly,by the Person or one or more Affiliates of the Person.

 

**“TotalLiabilities”** is on anyday, obligations that should, under GAAP, be classified as liabilities onBorrower’s consolidated balancesheet, including all Indebtedness, and current portion of Subordinated Debtpermitted by Bank to be paid byBorrower, but excluding all other Subordinated Debt.

 

**“Trademarks”**are trademark and service mark rights, registered or not, applicationsto register and registrations andlike protections, and the entire goodwill of the business of Assignor connectedwith the trademarks.

 

19

----

 

IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be executed as asealed instrument under the laws of the Commonwealth of Massachusetts as of thedate 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 ofall 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, licenseagreements,franchiseagreements, 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 letterof credit is evidenced by a writing), commercial tort claims, securities, and all other investmentproperty, supporting obligations, and financial assets, whether now owned  orhereafter acquired, wherever located; and

 

Any copyright rights,copyright applications, copyright registrations and like protections in eachwork ofauthorship andderivative work, whether published or unpublished, now owned or later acquired;any patents, trademarks, servicemarks and applications therefor; trade styles, trade names, any trade secretrights, including any rights to unpatentedinventions, know-how, operating manuals, license rights and agreements andconfidential information, now ownedor hereafter acquired; or any claims for damages by way of any past, presentand future infringement of any of theforegoing; and

 

All Borrower’s books relatingto the foregoing and any and all claims, rights and interests in any of theaboveand allsubstitutions for, additions, attachments, accessories, accessions andimprovements 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 allmaterial 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  ADVANC****E:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **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 allmaterial 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**

**COMPLIANCECERTIFICATE**

 
| TO:   | SILICON VALLEY BANK                    |
|-------|----------------------------------------|
| FROM: | AMERICAN SCIENCE AND ENGINEERING, INC. |

 

The undersigned authorizedofficer of AMERICAN SCIENCE AND ENGINEERING, INC. certifies that under theterms and conditions of the Loan and Security Agreement between Borrower andBank (the “Agreement”), (i) Borrower is in complete compliance for the periodending                           with all required covenants except as noted below and (ii) all representationsand warranties in the Agreement are true and correct in all material respectson this date.  Attached are the requireddocuments supporting the certification. The Officer certifies that these are prepared in accordance withGenerally Accepted Accounting Principles (GAAP) consistently applied from oneperiod to the next except as explained in an accompanying letter orfootnotes.  The Officer acknowledgesthat no borrowings may be requested at any time or date of determination thatBorrower is not in compliance with any of the terms of the Agreement, and thatcompliance 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/CreditExtensions 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

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