Exhibit 10.59


 


BANKNORTH, N.A.


 


LOAN AND SECURITY AGREEMENT


(ALL ASSETS)


 


LOAN AND SECURITY AGREEMENT (ALL ASSETS),
dated as of March
           , 2004,
between and among MFIC Corporation, a Delaware corporation (“MFIC”), and Microfluidics Corporation, a Delaware
corporation (“Microfluidics”)
(MFIC and Microfluidics are hereinafter collectively referred to as the “Borrower”), and Banknorth, N.A., a national
banking association organized and existing under the laws of the United States
of America (the “Bank”).  The parties hereto hereby agree as follows:


 


1.             DEFINITIONS AND
ACCOUNTING TERMS


 


Section 1.01         As used in this
Agreement (if so used), the following terms have the following meanings (terms
defined in the singular to have the same meaning when used in the plural and
vice versa):


 


“Affiliate” shall mean any
Person (i) which directly or indirectly Controls, or is Controlled by or is
under common Control with the Borrower or a subsidiary, (ii) which directly or
indirectly beneficially holds or owns five (5%) percent or more of any class of
voting stock of the Borrower or any subsidiary, or (iii) five (5%) percent or
more of the voting stock of which is directly or indirectly beneficially owned
or held by the Borrower or a subsidiary.


 


“Acts” shall have the meaning
assigned to such term in Section 12.15.


 


“Banking Day” shall mean a
day on which banks are open for business in Boston, Massachusetts, and if the
applicable “Banking Day” relates to a LIBOR Loan, a day on which dealings are
carried on and banks are open for business in the relevant Interbank Market.


 


“Bankruptcy Code”  as used herein shall mean Title 11 of the
United States Code entitled “Bankruptcy”.


 


“Borrowing Base”  as used herein shall mean the sum of the
following:


 


(a)           eighty-five (85%) percent of the unpaid face
amount of Qualified Accounts (as defined below), minus


 


(b)           one hundred (100%) percent of the aggregate
amount then undrawn on all letters of credit and acceptances issued pursuant to
this Agreement for the account of the Borrower.


 


“Borrowing Date” shall
mean any day upon which a LIBOR Loan is made.


 


“Capital Assets”  shall mean assets that, in accordance with
GAAP, are required or permitted to be depreciated or amortized on the
Borrower’s balance sheet.


 


“Capital Expenditures”  shall mean but not be limited to amounts
paid during such year


 

















 


for Capital Assets or Capital Leases and shall include, in the case of
a purchase, the entire purchase price and, in the case of a Capital Lease (but
not an operating lease), the entire rental for the term.


 


“Capital Leases”  shall mean capital leases, conditional
sales contracts and other title retention agreements relating to the purchase
or acquisition of Capital Assets.


 


“CMLTD” shall mean the
current maturity of long term Debt to be paid during the next twelve-month
period, including but not limited to, amounts required to be paid during such
period under Capital Leases.


 


“Collateral” shall have
the meaning assigned to such term in Section 5.


 


“Control”  shall mean the possession, directly or
indirectly, of the power to direct  or
cause the direction of the management and policies of any Person, whether
through the ownership of voting securities, by contract or otherwise.


 


“Credit Limit” means an
amount equal to One Million ($1,000,000.00) Dollars.


 


“Debt” means (a)
indebtedness or liability for borrowed money; (b) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (c) obligations for the
deferred purchase price of property or services (including trade obligations);
(d) obligations as lessee under Capital Leases; (e) current liabilities in
respect of unfunded vested benefits under plans covered by ERISA; (f)
obligations under letters of credit; (g) obligations under acceptance
facilities; (h) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest in any
Person or otherwise to assure a creditor against loss; and (i) obligations
secured by any Liens, whether or not the obligations have been assumed.


 


“Debt Service Coverage Ratio”
shall mean, during the applicable period, that quotient equal to (a) the
aggregate of (i) Net Income, plus (ii) Interest, plus (iii) depreciation and amortization,
minus (iv) Distributions, divided by (b) Fixed Charges, that is,


 


Net Income + Interest + depreciation and
amortization - Distributions


Fixed Charges


 


“Distributions”  shall mean all payment or distributions to
Owners in cash or in property other than reasonable salaries, bonuses and
expense reimbursements.


 


“Dollars” or “$” shall mean currency of the United States
of America.


 


“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended.


 


“Equipment” shall have the
meaning assigned to such term in Section 5.


 


“Eurodollars” shall
mean Dollars acquired by Bank through the purchase or other acquisition of
deposits denominated in Dollars and made with any bank or branch


 


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of a bank (including any branch of the Bank) located outside the United
States of America.


 


“Eurodollars Liabilities”
shall have the meaning assigned to that term in Regulation D of the Board of
Governors of the Federal Reserve System, as in effect from time to time.


 


“Event of Default” shall
have the meaning assigned to such term in Section 14.01.


 


“Fixed Charges”  shall mean Interest plus CMLTD.


 


“GAAP” shall mean
generally accepted accounting principles.


 


“Interbank Market” shall
mean, with respect to any LIBOR Loan, any recognized interbank Eurodollar
market chosen in good faith by Bank.


 


“Interest”  shall mean, for the applicable period, all
interest paid or payable, including, but not limited to, interest paid or
payable on Debt and on Capital Leases, determined in accordance with GAAP.


 


“Interest Period” shall
mean, with respect to each LIBOR Loan, a period commencing on the Borrowing
Date of such loan, and ending on the numerically corresponding day in the
first, second or third calendar month thereafter, as determined in accordance
with the provisions of this Agreement, provided that any Interest Period which
would otherwise end on a day which is not a Banking Day, shall end and the next
Interest Period shall commence on the next preceding or the next succeeding day
which is a Banking Day as determined in good faith by the Bank in accordance
with the then current bank practices in the relevant Interbank Market.


 


“Inventory” shall have the
meaning assigned to such term in Section 5.


 


“Letters of Credit”shall
have the meaning assigned to such term in Section 2.05.


 


“LIBOR” shall mean, with
respect to a LIBOR Loan, the rate per annum (rounded upward, if necessary, to
the nearest one-eighth (1/8th) of one (1%) percent) at which deposits in
Dollars are offered to Bank or Bank’s representative or agent for delivery on
the Borrowing Date for such LIBOR Loan, in the relevant Interbank Market at
11:00 a.m., local time, two Banking Days prior to such Borrowing Date for a
period equal to the Interest Period chosen by Borrower with respect to such
LIBOR Loan and in an amount substantially equal to the principal amount of such
LIBOR Loan.  The Bank shall give prompt
notice to the Borrower of the LIBOR determined for each LIBOR Loan and such
notice shall be conclusive and binding, absent manifest error, for all
purposes.


 


“LIBOR Interest Rate”
shall mean an interest rate per annum (rounded upward, if necessary, to the
nearest one-eighth (1/8th) of one (1%) percent) determined by Bank pursuant to
the following formula:


 


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  LIBOR Interest Rate

  	
  =

  	
   

  	
  LIBOR

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1.00 * Reserve Rate

  	
   

  
								






 


“LIBOR Loan(s)” shall
mean, when used in the singular, any loan on which the interest rate is
calculated by reference to LIBOR and, when used in the plural, shall mean all
such loans.


 


“Lien” means any mortgage,
deed of trust, pledge, security interest, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority,
or other security agreement or preferential arrangement, charge, or encumbrance
of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the UCC or comparable law of any jurisdiction
to evidence any of the foregoing).


 


“Loans” shall mean all
Revolving Loans and the Term Loan.


 


“Margin” shall mean two
and three-quarters (2.75%) percent (i.e., 275 basis points).


 


“Maturity Date” shall mean
the date on which an Interest Period expires.


 


“Net Income” shall mean
the amount by which total income exceeds operating expenses plus income taxes,
all as determined in accordance with GAAP.


 


“Obligations”  shall have the meaning assigned to such
term in Section 6.


 


“Organizational Documents”
means (a) with respect to a corporation, its certificate or articles of
incorporation and by-laws; (b) with respect to a partnership, its partnership
certificate and partnership agreement; (c) with respect to a limited liability
company, its articles or certificate of formation and its operating or
management agreement; and (d) with respect to a trust, the declaration of
trust; and, with respect to any of them, any other document required to be
filed with public authorities to evidence or establish authority to conduct
business.


 


“Owner” means with respect
to Borrower, any Person having legal or beneficial title to an ownership
interest in Borrower or a right to acquire such an interest.


 


“Permitted Protests”  means the right of the Borrower to protest
any Lien (other than a Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a federal or state tax lien) or
rental payment, provided that (x) a reserve with respect to such liability is
established on the books of the Borrower in an amount that is reasonably
satisfactory to the Bank (or said lien is bonded over by Borrower), (y) any
such protest is instituted and diligently prosecuted by the Borrower in good
faith, and (z) the Bank is satisfied that, while such protest is pending, there
will be no impairment of the enforceability, validity or priority of any of the
Liens of the Bank in and to the Collateral.


 


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“Person” means an
individual, partnership, corporation, limited liability company, limited
liability partnership, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority, or other
entity of whatever nature.


 


“Plan” means any employee
plan subject to Title IV of ERISA maintained for employees of Borrower, any
subsidiary of Borrower or any other trade or business under common control with
Borrower within the meaning of Section 414(c) of the Internal Revenue Code of
1986 or any regulations thereunder.


 


“Prime Rate” shall mean
shall mean the Prime Rate as published from time to time in the “Money Rates”
section of The  Wall Street Journal or any successor publication,
or in the event that such rate is no longer published in The Wall Street
Journal, a comparable index or reference selected by Bank.


 


“Prime Rate Loan(s)” shall
mean, when used in the singular, any loans on which the interest rate is
calculated by reference to the Prime Rate and, when used in the plural, shall
mean all such loans.


 


“Qualified  Account”, as used herein, means an Account
owing to Borrower which met the following specifications at the time it came
into existence and continues to meet the same until it is collected in full:


 


(a)           The Account is not more than ninety (90)
days from the date of the invoice thereof.


 


(b)           The Account arose from the performance of
services or an outright sale of goods by Borrower, such goods have been shipped
to the account debtor, and Borrower has possession of, or has delivered to
Bank, shipping and delivery receipts evidencing such shipment.


 


(c)           The Account is not subject to any prior
assignment, claim, lien, or security interest, and Borrower will not make any
further assignment thereof or create any further security interest therein, nor
permit Borrower’s rights therein to be reached by attachment, levy, garnishment
or other judicial process.


 


(d)           The Account is not subject to set!off,
credit, allowance or adjustment by the account debtor, except discount allowed
for prompt payment and the account debtor has not complained as to his
liability thereon and has not returned any of the goods from the sale of which
the Account arose.


 


(e)           The Account arose in the ordinary course of
Borrower’s business and did not arise from the performance of services or a
sale of goods to a supplier or employee of the Borrower.


 


(f)            The
Account is not owed by any unit of government, whether foreign or domestic
(provided, however, there shall be included in Qualified Accounts that portion
of Accounts owed by the United States of America if


 


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Borrower has
assigned such Account to Bank in compliance with the Federal Assignment of
Claims Act or, if owed by a unit of government other than the United States of
America, Borrower has provided Bank with evidence satisfactory to Bank that (i)
Bank has a first priority perfected security interest in such Account, and (ii)
such Account may be enforced by Bank directly against such unit of government
under all applicable laws).


 


(g)           No notice of bankruptcy or insolvency of the
account debtor has been received by or is known to the Borrower.


 


(h)           The Account is not owed by an account debtor
whose principal place of business is outside the United States of America,
unless such Accounts are insured by an entity on terms and conditions
satisfactory to Bank, in Bank’s sole discretion, and the policy for such credit
insurance names Bank as a co-insured. The foregoing notwithstanding, Borrower
shall have a period of sixty (60) days in which to change the name of the
co-insured from its existing secured lender to Bank.


 


(i)            The Account is not owed by an entity which
is a parent, brother/sister, subsidiary or Affiliate.


 


(j)            The account debtor is not located in the
State of New Jersey or in the State of Minnesota (or any other state that
requires a creditor to file a business activity report or similar document in
order to bring suit or otherwise enforce its remedies against such account
debtor in the courts or through any judicial process of such state), unless
Borrower has qualified to do business in such state, or has filed a notice of
business activities report with the applicable division of taxation, the
department of revenue or with such other state offices, as appropriate, for the
then current year, or is exempt from such requirement.


 


(k)           The Account when aggregated with all of the
Accounts of that account debtor does not exceed fifty (50%) percent of the then
aggregate of Qualified Accounts.


 


(l)            The Account is not evidenced by a
promissory note.


 


(m)          The Account did not arise out of any sale
made on dating, delayed shipment or bill and hold basis unless, in the case of
an Account that arose out of a sale made on a bill and hold basis, (i) title
has been transferred to the account debtor, (ii) the equipment being sold has
been completed, and (iii) the account debtor has acknowledged in writing that
the equipment being sold has been completed.


 


(n)           The Account did not arise as a result of a
progress billing or from a project on which the Account Debtor has a payment or
performance bond.


 


(o)           The Account is not for retainage.


 


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(p)           Bank has not deemed the Account to be
unacceptable for any reason.


 


PROVIDED THAT if at any time fifty (50%)
percent or more of the aggregate amount of the Accounts due from any account
debtor are unpaid in whole or in part more than ninety (90) days from the
respective dates of invoice, from and after such time none of the Accounts
(then existing or hereafter arising) due from such account debtor shall be
deemed to be Qualified Accounts until such time as all Accounts due from such
account debtor are (as a result of actual payments received thereon) no more
than ninety (90) days from the respective dates of invoice; Accounts payable by
Borrower to an account debtor shall be netted against Accounts due from such
account debtor and the difference (if positive) shall constitute Qualified
Accounts from such account debtor for purposes of determining the Borrowing
Base (notwithstanding paragraph (d) above); 
characterization of any Account due from an account debtor as a
Qualified Account shall not be deemed a determination by Bank as to its actual
value nor in any way obligate Bank to accept any Account subsequently arising
from such account debtor to be, or to continue to deem such Account to be, a
Qualified Account; it is Borrower’s responsibility to determine the
creditworthiness of account debtors and all risks concerning the same and
collection of Accounts are with Borrower; and all Accounts whether or not
Qualified Accounts constitute Collateral.


 


“Receivables”
shall have the meaning assigned to such term in Section 5.


 


“Reserve
Rate” shall mean the rate (expressed as a decimal) at which Bank
would be required to maintain reserves under REGULATION D of the Board of
Governors of the Federal Reserve System against Eurodollar Liabilities if such
Liabilities were outstanding.  The LIBOR
Interest Rate shall be adjusted automatically as of the effective date of any
change in the Reserve Rate.


 


“Revolving
Loan” shall have the meaning assigned to such term in Section 2.02.


 


“Senior
Debt” shall mean any Debt which is not Subordinated Debt.


 


“Subordinated
Debt” shall mean Debt which is expressly stated to be subordinated
or junior in right of payment to Borrower’s Obligations to Bank in a manner and
in a form which is satisfactory to Bank.


 


“Tangible
Capital Base” shall mean Borrower’s Tangible Net Worth plus its Subordinated
Debt.


 


“Tangible
Net Worth” shall mean the sum of Borrower’s Owner’s equity, subtracting
therefrom (i) intangibles (as determined in accordance with such
principles so applied), and (ii) Debt owing to Borrower from any employee,
parent, subsidiary or Affiliate.


 


“Term Loan”
shall have the meaning assigned to such term in Section 2.01.


 


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“UCC”
shall mean the Massachusetts Uniform Commercial Code as in effect from time to
time.


 


Section 1.02         All accounting terms
not specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the financial statements
referred to in Section 8.05, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.


 


Section 1.03         Unless otherwise defined
in this Agreement, capitalized words shall have the meanings set forth in the
UCC.


 


2.             LOANS
AND OTHER FINANCIAL ACCOMMODATIONS.


 


Section 2.01         Subject to the terms and
provisions of this Agreement, Bank has agreed to extend to Borrower a term
loan, evidenced by a Term Note in the form of Exhibit 1 annexed hereto, in the
original principal amount of One Million ($1,000,000.00) Dollars (the “Term Loan”).  The Term Loan shall mature and bear interest as provided in the
Term Note and shall otherwise be subject to the terms and conditions of the
Term Note and this Agreement.


 


Section 2.02         Subject to the terms and
provisions of this Agreement, Bank hereby establishes a discretionary revolving
line of credit in Borrower’s favor in the amount of the Credit Limit, as
determined by Bank from time to time hereafter.  Bank may make such loans, advances and grant credit
accommodations to Borrower, based upon such facts and circumstances existing at
the time of the request, as from time to time Bank elects to make which are
secured by Borrower’s Inventory, Accounts and all other Collateral and the
proceeds thereof (the “Revolving Loan”).  Without limiting the discretionary nature of
Bank’s obligation to make Revolving Loans hereunder, or the demand feature of
any Revolving Loans Bank does make hereunder, Borrower agrees that the
aggregate unpaid principal of all Revolving Loans outstanding at any one time
shall not exceed the Borrowing Base.


 


In order to facilitate the borrowing
procedures hereunder, MFIC and Microfluidics hereby appoint Microfluidics as
such corporation’s duly authorized agent to request, receive and distribute
loans hereunder and to communicate with Bank with respect hereto, and
Microfluidics does hereby accept such appointment.


 


Section 2.03         All such Revolving Loans
shall bear interest and at the option of Bank shall be evidenced by a Revolving
Line of Credit Note(s) in the form of Exhibit 2 annexed hereto, but in all
events shall be conclusively evidenced by the Bank’s record of disbursements
and repayments and shall be payable ON DEMAND.


 


Interest, net of those loans (if any) which
bear interest calculated by reference to LIBOR (as defined below), will be
charged to Borrower at a fluctuating rate which is the daily equivalent to a
rate equal to the Prime Rate, or at such other rate agreed on from time to time
by the parties, upon any balance owing to Bank at the close of each day and
shall be payable on the first day of each month in arrears until the Bank makes
demand.  The rate of interest payable by
Borrower shall be changed effective as of that date in which a change in the
Prime Rate becomes effective.  Interest
shall be computed on the basis of the actual number of days elapsed over a year
of three


 


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hundred sixty
(360) days. Interest shall be payable in lawful money of the United States of
America to Bank, or as Bank shall direct, without set-off, deduction or counterclaim
monthly, in arrears, on the first day of each month, commencing on the first
day of the month next succeeding the date hereof.


 


Interest, net of those loans (if any) which
bear interest calculated by reference to the Prime Rate, will be charged to
Borrower at a rate which is the equivalent to the LIBOR Interest Rate plus
Margin and shall be calculated and payable in the manner set forth in  Section 2.11  below.


 


The foregoing notwithstanding, absent the
occurrence of an Event of Default which is continuing, a demand for payment
shall not be effective for one hundred twenty (120) days after the date demand
is made.


 


Section 2.04         Borrower hereby
authorizes and directs Bank, in Bank’s sole discretion (provided, however, Bank
shall have no obligation to do so): (i) to pay accrued interest as the same
becomes due and payable pursuant to this Agreement or pursuant to any note or
other agreement between Borrower and Bank, and to treat the same as a Revolving
Loan to Borrower, which shall be added to Borrower’s loan balance pursuant to
this Agreement; (ii) to charge any of Borrower’s accounts under the control of
Bank; or (iii) apply the proceeds of Collateral, including, without limitation,
payments on Accounts and other payments from sales or lease of Inventory and
any other funds to the payment of such items. 
Bank shall promptly notify Borrower of any such charges or applications.


 


Section 2.05         At the request of the
Borrower, and upon the execution of letter of credit documentation satisfactory
to Bank, Bank, within the limits of the Borrowing Base, as then computed and
also within the limits of the Credit Limit as then computed, may issue letters
of credit from time to time for the account of the Borrower (hereinafter
collectively “Letter(s) of Credit”).  The Letters of Credit shall be on terms
mutually acceptable to Bank and the Borrower. 
A Revolving Loan in an amount equal to any amount paid by Bank under a
Letter of Credit shall be deemed made to Borrower, without request therefor,
immediately upon any payment by Bank on such Letter of Credit.  In connection with the issuance of any
Letter of Credit, Borrower shall pay to Bank the fee and commissions relating
to any such Letter of Credit at such rate as Lender may from time to time
establish, plus transaction fees at Bank’s customary rates, and all other
normal and customary fees charged by Bank. Borrower hereby authorizes and
directs Bank, in Bank’s sole discretion (provided, however, Bank shall have no
obligation to do so) to pay all such fees and costs as the same become due and
payable and to treat the same as a Revolving Loan to Borrower, which shall be
added to Borrower’s loan balance pursuant to this Agreement.  For purposes of computing the Credit Limit,
all Letters of Credit and acceptances shall be deemed to be Revolving Loans and
in no event shall the sum of all Revolving Loans plus the sum of the aggregate
amount undrawn on all letters of credit and acceptances be in excess of the
Credit Limit.


 


Section 2.06         The Borrowing Base is
intended solely for monitoring purposes. 
The making of Revolving Loans, advances, and credits by Bank to the
Borrower in excess of the Borrowing Base is for the benefit of the Borrower and
does not affect the Obligations of Borrower hereunder; all such Revolving Loans
constitute Obligations and must be repaid by Borrower in accordance with the
terms of this Agreement.


 


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Section 2.07         It is the intention of
the parties hereto to comply strictly with applicable usury laws, if any;
accordingly, notwithstanding any provisions to the contrary in this Agreement
or any other documents or instruments executed in connection herewith, in no
event shall this Agreement or such documents or instruments require or permit
the payment, taking, reserving, receiving, collecting or charging of any sums
constituting interest under applicable laws which exceed the maximum amount
permitted by such laws.  If any such
excess interest is called for, contracted for, charged, paid, taken, reserved,
collected or received in connection with the Obligations or in any
communication by Bank or any other Person to the Borrower or any other Person,
or in the event all or part of the principal of the Obligations or interest
thereon shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount of interest
contracted for, charged, taken, collected, reserved, or received on the amount
of principal actually outstanding from time to time under this Agreement shall
exceed the maximum amount of interest permitted by applicable usury laws, if
any, then in any such event it is agreed as follows: (i) the provisions of this
paragraph shall govern and control, (ii) neither the Borrower nor any other
Person now or hereafter liable for the payment of the Obligations shall be
obligated to pay the amount of such interest to the extent such interest is in
excess of the maximum amount of interest permitted by applicable usury laws, if
any, (iii) any such excess which is or has been received notwithstanding this
paragraph shall be credited against the then unpaid principal balance hereof
or, if the Obligations have been or would be paid in full by such credit,
refunded to the Borrower, and (iv) the provisions of this Agreement and the
other documents or instruments executed in connection herewith, and any
communication to the Borrower, shall immediately be deemed reformed and such
excess interest reduced, without the necessity of executing any other document,
to the maximum lawful rate allowed under applicable laws as now or hereafter
construed by courts having jurisdiction hereof or thereof.  Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, collected,
reserved, or received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of the Obligations, including
all prior and subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, collected, reserved or received.  The terms of this paragraph shall be deemed
to be incorporated in every document and communication relating to the
Obligations.


 


Section 2.08         Bank shall not be
required to make a LIBOR Loan unless Bank shall have received from the Borrower
a request for such LIBOR Loan, in the form of Exhibit 3 annexed hereto (herein
a “Notice of Borrowing”), which
request complies with the requirements of this section.  Each Notice of Borrowing shall designate (i)
the Borrowing Date for the requested LIBOR Loan; (ii) the amount of the LIBOR
Loan (which amount shall not be less than One Hundred Thousand ($100,000.00)
Dollars; and (iii) the Interest Period. 
Each Notice of Borrowing must be received by Bank not less than three
(3) Banking Days prior to the Borrowing Date. 
A Notice of Borrowing may be transmitted by telecopier, cable or mail, but
may not be transmitted by telephone.  If
a Notice of Borrowing is transmitted by telecopier or cable, the Borrower shall
immediately mail to Bank written confirmation thereof.


 


Section 2.09         After receipt from the
Borrower of any Notice of Borrowing which requests a LIBOR Loan, Bank shall
determine if it is able to make such LIBOR Loan (or if it is unable to do so
for reasons described in this section only) and will notify the Borrower upon
confirmation of its ability to do so. 
If Bank determines in good faith that, by reason of


 


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circumstances
affecting the Interbank Market, adequate and reasonable methods do not exist
for ascertaining the LIBOR which would otherwise be applicable to such LIBOR
Loan, then Bank shall so notify the Borrower on or before 4:00 p.m. on the
Banking Day prior to the Borrowing Date specified in the Notice of Borrowing,
and in such event, Bank shall not be obligated to make such LIBOR Loan and the
Notice of Borrowing shall be deemed to have been withdrawn by the Borrower with
Bank’s consent and substituted with a request for a Prime Rate Loan in an
amount equal to the requested LIBOR Loan.


 


Section 2.10         Except as otherwise
provided in Section 2.09  above, any Notice of Borrowing which
requests a LIBOR Loan shall be irrevocable and binding upon the Borrower.  In the event the Borrower fails to borrow
the LIBOR Loan requested on the Borrowing Date specified in such Notice of
Borrowing, the Borrower shall indemnify Bank against any and all losses and
expenses incurred by Bank by reason of such failure including, without limiting
the generality of the foregoing, all losses and expenses incurred by reason of
the liquidation, disposition or reemployment of deposits or other funds acquired
by Bank to fund such LIBOR Loan.


 


Section 2.11         The Borrower shall pay
interest on the aggregate unpaid principal balance of each LIBOR Loan from the
Borrowing Date for such LIBOR Loan through and including the Maturity Date
chosen by the Borrower with respect to such LIBOR Loan at a per annum fixed
rate equal to the aggregate of the LIBOR Interest Rate plus Margin, and shall
pay all interest accrued but unpaid under this section on the sooner to occur
of: (i)  the first day of each month; or
(ii) such Maturity Date.


 


Section 2.12         If a LIBOR Loan is not
repaid in full on its Maturity Date, then such LIBOR Loan shall bear interest
at the rate which is calculated by reference to the Prime Rate as described in
Section 2.03 above from and after such Maturity Date.


 


Section 2.13         Each LIBOR Loan which
constitutes a loan pursuant to this Agreement shall be repaid in full on its
Maturity Date.


 


Section 2.14         Any LIBOR Loan may be
repaid with the proceeds of another Loan, subject to the terms of Section
2.02  above.


 


Section 2.15         Except as otherwise
provided herein with respect to Bank’s rights following the occurrence of an
Event of Default, no LIBOR Loan may be repaid prior to its Maturity Date and
all monies received by Bank for application to a LIBOR Loan prior to the
Maturity Date of such LIBOR Loan shall be held by Bank in a non-interest
bearing cash collateral account as security for all Obligations.


 


Section 2.16         Notwithstanding any other
provision of this Agreement, (a) if the introduction of or any change in any
law or regulation (or change in the interpretation thereof) applicable to Bank
or any foreign branch, agent or correspondent thereof shall make it unlawful,
or (b) if any central bank or other governmental authority having jurisdiction
over Bank or any such branch, agent or correspondent, shall assert that it is
unlawful, for Bank to perform its obligations hereunder or for any such branch,
agent or correspondent to act on behalf of Bank to make LIBOR Loans to the
Borrower or to continue to fund or maintain LIBOR Loans to the Borrower
hereunder, or (c) if Bank determines after making all reasonable efforts, that
deposits of the relevant amount and for the relevant LIBOR Loan to the Borrower
are not available to Bank


 


11

















 


in the
Interbank Market, then, on notice thereof by Bank to the Borrower, the
obligation of the Bank to the Borrower to make future LIBOR Loans shall
terminate.  If, as a result of any of
the foregoing described events, Bank is prohibited from maintaining LIBOR
Loans, the Bank shall, upon the happening of such event, notify the Borrower
and the Borrower shall, in the case of each LIBOR Loan, on the Maturity Date of
such LIBOR Loan (or, in any event, if the Bank so requests, on such earlier date
as may be required by the relevant law, regulation or interpretation), either
prepay such LIBOR Loan or convert such LIBOR Loan into a Prime Rate Loan.


 


Section 2.17         If, due to payments made
by the Borrower pursuant to this Agreement or due to the acceleration of the
Obligations or due to any other reason or because the Borrowing Base has been
exceeded, Bank receives payments of principal of any LIBOR Loan prior to the
Maturity Date for such LIBOR Loan, the Borrower shall, upon demand by Bank, pay
to Bank any amounts required to compensate Bank for any additional losses,
costs or expenses which it may reasonably incur as a result of such payment,
including, without limitation, any loss, costs or expenses incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by Bank
to fund or maintain such LIBOR Loans.


 


Section 2.18         Calculation of the LIBOR
Interest Rate, as well as all other fees and charges payable with respect to
each LIBOR Loan shall be made and paid as though Bank had actually funded the
relevant LIBOR Loan through the purchase of a Eurodollar deposit at LIBOR in an
amount equal to the amount of the LIBOR Loan and having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore agent or office of Bank to a domestic office of Bank
in the United States of America, provided, however, that Bank may fund each
LIBOR Loan in any manner it sees fit and the foregoing assumptions shall be
nevertheless used for the calculation of the LIBOR Interest Rate and such other
fees and charges.


 


Section 2.19         Notwithstanding anything
to the contrary contained herein, Bank and Borrower agree that after the
occurrence of an Event of Default which is continuing, Borrower shall not
request and Bank will not make LIBOR Loans.


 


Section 2.20         At no time shall there be
outstanding more than five (5) LIBOR Loans.


 


3.             BANK’S
REPORTS.


 


After the end of each month, Bank will render
to Borrower a statement of Borrower’s loan account with Bank hereunder, showing
all applicable credits and debits.  Each
statement shall be considered correct and to have been accepted by Borrower
and, absent manifest error, shall be conclusively binding upon Borrower in respect
of all charges, debits and credits of whatsoever nature contained therein under
or pursuant to this Agreement, and the closing balance shown therein, unless
Borrower notifies Bank in writing of any discrepancy within twenty (20) days
from the mailing by Bank to Borrower of any such monthly statement.


 


4.             CAPITAL
ADEQUACY AND CONDITIONS OF LENDING.


 


Section 4.01         If after the date hereof,
Bank determines that (a) the adoption of any applicable law, rule, or
regulation regarding capital requirements for banks or bank holding companies
or the subsidiaries thereof, (b) any change in the interpretation or
administration of any


 


12

















 


such law, rule
or regulation by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or (c) compliance by
Bank or its holding company with any request or directive of any such
governmental authority, central bank or comparable agency regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the return on Bank’s capital to a level below that which Bank could have
achieved (taking into consideration Bank’s and its holding company’s policies
with respect to capital adequacy immediately before such adoption, change, or compliance
and assuming that Bank’s capital was fully utilized prior to such adoption,
change, or compliance) but for such adoption, change, or compliance as a
consequence of Bank’s commitment to make advances pursuant hereto by any amount
deemed by Bank to be material:


 


(a)           Bank shall promptly, after Bank’s
determination of such occurrence, give notice thereof to Borrower; and


 


(b)           Borrower shall pay to Bank as an additional
fee from time to time, on demand, such reasonable amount as Bank certified to
be the amount that will compensate Bank for such reduction.


 


A certificate of Bank claiming entitlement to
compensation as set forth above will be conclusive in the absence of manifest
error.  Such certificate will set forth
the nature of the occurrence giving rise to such compensation, the additional
amount or amounts to be paid to Bank and the method by which such amounts were
determined.  In determining such amount,
Bank may use any reasonable averaging and attribution method.


 


Section 4.02         The willingness of Bank
to consider making the Term Loan and the initial Revolving Loan or issuing or
causing to be issued any Letter of Credit hereunder shall be subject to the
condition precedent that Bank shall have received all of the following, each in
form and substance satisfactory to Bank:


 


(a)           This Agreement, properly executed on behalf
of Borrower.


 


(b)           The Term Note and the Revolving Line of
Credit Note drawn to the order of Bank.


 


(c)           Current searches of appropriate filing
offices showing that (i) no state or federal tax liens have been filed and
remain in effect against Borrower, (ii) no financing statements have been
filed and remain in effect against Borrower, except those financing statements
relating to liens set forth on Schedule “B”, the liens of the secured lender to
be paid with the proceeds of the initial loan and those financing statements
filed by Bank, and (iii) Bank has duly filed all financing statements
necessary to perfect the security interests granted hereunder, to the extent
the security interests are capable of being perfected by filing.


 


(d)           A certificate of the Clerk/Secretary or an
Assistant Clerk/Secretary of Borrower, certifying as to (i) the
resolutions of the directors and, if required, the shareholders of Borrower,
authorizing the execution, delivery and performance of this Agreement and
related documents, (ii) the Articles of Organization and By-Laws of Borrower,
and (iii) the signatures of the officers or agents of Borrower authorized
to execute and deliver this Agreement and other instruments, agreements and
certificates, including loan requests, on behalf of Borrower.


 


13

















 


(e)           A current certificate issued by the
Secretary of State of the state of Borrower’s incorporation, certifying that Borrower
is in compliance with all corporate organizational requirements of such state.


 


(f)            Evidence that Borrower is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary.


 


(g)           An opinion of counsel to Borrower, addressed
to Bank.


 


(h)           Certificates of the insurance required
hereunder, with all hazard insurance containing a lender’s loss payable endorsement
in favor of Bank.


 


(i)            A subordination agreement, properly
executed by each of the subordinating creditors, if any, in form and substance
satisfactory to Bank.


 


(j)            Payment of the fees due through the date of
the initial loan and expenses incurred by Bank through such date required to be
paid by Borrower pursuant to this Agreement.


 


(k)           Such other documents, instruments and
agreements as Bank in its sole discretion may require.


 


Section 4.03         Bank will not consider a
request for any loan or the issuance of any Letter of Credit unless on the date
thereof:


 


(a)           the representations and warranties contained
in Sections 7 and 8 hereof are correct on and as of the date of such loan or
the issuance of a Letter of Credit, as the case may be, as though made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date; and


 


(b)           no event has occurred and is continuing, or
would result from such loan or issuance of such Letter of Credit, as the case
may be, which constitutes an Event of Default or which, with notice or the
passage of time or both, would constitute an Event of Default.


 


5.             SECURITY
INTEREST.


 


Borrower, for valuable consideration, receipt
whereof is hereby acknowledged, hereby grants to Bank a continuing security
interest in and to, and assigns to Bank, all assets of the Borrower, wherever
located and whether now owned or hereafter acquired, including, without
limitation, the following:


 


(a)           all inventory, including all goods,
merchandise, raw materials, goods and work in process, finished goods, and
other tangible personal property now owned or hereafter acquired and held for
sale or lease or furnished or to be furnished under contracts of service or
used or consumed in Borrower’s business (all hereinafter called the “Inventory”);


 


(b)           all Accounts, contracts, contract rights,
notes, bills, drafts, acceptances,


 


14

















 


General
Intangibles (including without limitation registered and unregistered tradenames,
copyrights, customer lists, goodwill, computer programs, computer records,
computer software, computer data, trade secrets, trademarks, patents, ledger
sheets, files, records, data processing records relating to any Accounts and
all tax refunds of every kind and nature to which Borrower is now or hereafter
may become entitled to, no matter how arising), Instruments, Documents, Chattel
Paper (whether tangible or electronic), Deposit Accounts, Letter of Credit
Rights (whether or not the Letter of Credit is evidenced by a writing),
Securities, Security Entitlements, Security Accounts, Investment Property,
Supporting Obligations, choses in action, Commercial Tort Claims, and all other
debts, obligations and liabilities in whatever form, owing to Borrower from any
Person, whether now existing or hereafter arising, now or hereafter received by
or belonging or owing to Borrower, for goods sold by it or for services
rendered by it, or however otherwise same may have been established or created,
all guarantees and securities therefor, all right, title and interest of
Borrower in the merchandise or services which gave rise thereto, including the
rights of reclamation and stoppage in transit, all rights to replevy goods, and
all rights of an unpaid seller of merchandise or services (all hereinafter
called the “Receivables”);


 


(c)           all machinery, Equipment, Fixtures and other
Goods whether now owned or hereafter acquired by the Borrower and wherever
located, all replacements and substitutions therefor or accessions thereto and
all proceeds thereof (all hereinafter called the “Equipment”); and


 


(d)           all proceeds and products of all of the
foregoing in any form, including, without limitation, all proceeds of credit,
fire or other insurance, and also including, without limitation, rents and
profits resulting from the temporary use of any of the foregoing (which, with
Inventory, Receivables and Equipment are all hereinafter called “Collateral”).


 


6.             OBLIGATIONS
SECURED.


 


The security interest granted hereby is to
secure payment and performance of all debts, liabilities and obligations of
Borrower to Bank hereunder and also any and all other debts, liabilities and
obligations of Borrower to Bank of every kind and description, direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising, whether or not such obligations are related
to the transactions described in this Agreement, by class, or kind, or whether
or not contemplated by the parties at the time of the granting of this security
interest, regardless of how they arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, and
includes obligations to perform acts and refrain from taking action as well as
obligations to pay money including, without limitation, all interest, fees,
charges, expenses and overdrafts, and also including, without limitation, all
obligations and liabilities which Bank may incur or become liable for, on
account of, or as a result of, any transactions between Bank and Borrower
including any which may arise out of any letter of credit, acceptance or
similar instrument or obligation issued or caused to be issued for the account
of Borrower and also including obligations arising out of any foreign exchange
contracts, interest rate swap, cap, floor or hedging agreements and all
obligations of Borrower to Bank arising out of or in connection with any
Automated Clearing House (“ACH”)
agreements relating to the processing of ACH transactions, together with the
fees, expenses, charges and other amounts owing or chargeable to Borrower under
the ACH agreements (all hereinafter called “Obligations”).


 


15

















 


7.             BORROWER’S PLACES OF BUSINESS, INVENTORY LOCATIONS AND
RETURNS POLICY.


 


Section 7.01         Borrower warrants that
Borrower has no places of business other than that shown at the end of this
Agreement, unless other places of business are listed on Schedule “A”, annexed
hereto, in which event Borrower represents that it has additional places of
business at those locations set forth on Schedule “A”.


 


Section 7.02         Borrower’s principal
executive office and the office where Borrower keeps its records concerning its
accounts, contract rights and other property, is that shown at the end of this
Agreement.  All Inventory presently
owned by Borrower is stored at the locations set forth on Schedule “A”.


 


Section 7.03         Borrower will promptly
notify Bank in writing of any change in the location of any place of business
or the location of any Inventory or the establishment of any new place of
business or location of Inventory or office where its records are kept which
would be shown in this Agreement if it were executed after such change.


 


Section 7.04         Borrower represents and
warrants that it has described its returns policy in writing to Bank and that
it does now, and will continue to, apply such policy consistently in the
conduct of its business and agrees that it shall notify Bank in writing before
changing its policy or the application thereof.


 


8.             BORROWER’S
ADDITIONAL  REPRESENTATIONS  AND  WARRANTIES.


 


Borrower represents and warrants that:


 


Section 8.01         Borrower is duly
organized, validly existing and in good standing under the laws of Delaware as
a corporation and shall hereafter remain in good standing in that state, and is
duly qualified and in good standing in every other state in which it is doing
business, and shall hereafter remain duly qualified and in good standing in
every other state in which the failure to qualify or become licensed could have
a material adverse effect on the financial condition, business or operations of
the Borrower.


 


Section 8.02         Borrower’s exact legal
name is as set forth in this Agreement and Borrower will not undertake or
commit to undertake any act which will result in a change of Borrower’s legal
name, without giving Bank at least thirty (30) days’ prior written notice of
the same.  The organizational
identification number of Borrower is as set forth on Schedule “A” annexed
hereto.


 


Section 8.03         The execution, delivery
and performance of this Agreement, and any other document executed in
connection herewith, are within the Borrower’s powers, have been duly
authorized, are not in contravention of law or the terms of the Borrower’s Organization
Documents, or of any indenture, agreement or undertaking to which the Borrower
is a party or by which it or any of its properties may be bound.


 


Section 8.04         All Organization
Documents and all amendments thereto of Borrower have been duly filed and are
in proper order.  All ownership interest
of Borrower outstanding was and


 


16

















 


is properly
issued and all books and records of Borrower, including but not limited to its
minute books, Organization Documents and books of account, are accurate and up
to date and will be so maintained.


 


Section 8.05         Reserved


 


Section 8.06         Borrower owns all of the
assets reflected in the most recent of Borrower’s financial statements provided
to Bank, except assets sold or otherwise disposed of in the ordinary course of
business since the date thereof, and such assets together with any assets
acquired since such date, including without limitation the Collateral, are free
and clear of any Lien, except (a) the security interests and other encumbrances
(if any) listed on Schedule “B” annexed hereto, (b) those leases set forth on
Schedule “C” annexed hereto, (c) those liens permitted pursuant to Section
13.12 of this Agreement, or (d) Liens in favor of Bank.


 


Section 8.07         Borrower has made or
filed all tax returns, reports and declarations relating to any material tax
liability required by any jurisdiction to which it is subject (any tax
liability which may result in a lien on any Collateral being hereby deemed
material); has paid all taxes shown or determined to be due thereon except
those being contested in good faith and which Borrower has, prior to the date
of such contest, identified in writing to Bank as being contested; and has made
adequate provision for the payment of all taxes so contested, so that no lien
will encumber any Collateral, and in respect of subsequent periods.


 


Section 8.08         Borrower (a) is not
subject to any restrictions in its Organization Documents or other legal
restriction, or any judgment, award, decree, order, governmental rule or
regulation or contractual restriction which could have a material adverse
effect on its financial condition, business or prospects, and (b) is in
compliance with its Organization Documents, all contractual requirements by
which it or any of its properties may be bound and all applicable laws, rules
and regulations (including without limitation those relating to environmental
protection) other than laws, rules or regulations the validity or applicability
of which it is contesting in good faith or provisions of any of the foregoing
the failure to comply with which cannot reasonably be expected to materially
adversely affect its financial condition, business or prospects or the value of
any Collateral.


 


Section 8.09         Except as disclosed in
writing by Borrower to Bank, there is no action, suit, proceeding or
investigation pending or, to Borrower’s knowledge, threatened against or
affecting it or any of its assets before or by any court or other governmental
authority which, if determined adversely to it, would have a material adverse
effect on its financial condition, business or prospects or the value of any
Collateral.


 


                Section 8.10         Borrower is in compliance
with ERISA; no Reportable Event has occurred and is continuing with respect to
any Plan; and it has no unfunded vested liability under any Plan.


 


9.             SALES  OF
INVENTORY


 


So long as Borrower is not in default
hereunder, Borrower shall have the right, in the regular course of business, to
process and sell Borrower’s Inventory. 
A sale in the ordinary course of business shall not include a transfer
in total or partial satisfaction of a debt.


 


17

















 


10.          FINANCING
STATEMENTS.


 


Borrower hereby irrevocably authorizes Bank
at any time and from time to time to file in any UCC jurisdiction any initial
financing statements and amendments thereto that (a) indicate the Collateral
(i) as all assets of Borrower or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of
Article 9 of the UCC of such jurisdiction, or (ii) as being of an equal or
lesser scope or with greater detail, and (b) contain any other information
required by the UCC for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether Borrower is an
organization, the type of organization and any organization identification
number issued to Borrower, and (ii) in the case of a financing statement filed
as a fixture filing or indicating Collateral as as-extracted Collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. Borrower agrees to furnish any such information to Bank
promptly upon request.  Borrower also
ratifies its authorization for Bank to have filed in any UCC jurisdiction any
like initial financing statements or amendments thereto if filed prior to the
date hereof.


 


11.          BORROWER’S
REPORTS.


 


Section 11.01       Within fifteen (15)
calendar days after the end of each month or on such other more frequent basis
as may be reasonably required by Bank from time to time, Borrower shall submit
to Bank an aging report in form satisfactory to Bank showing the amounts due
and owing on all Accounts according to Borrower’s records as of the close of
such month or such shorter period as may be required by Bank from time to time,
together with such other information as Bank may require.  If Borrower’s monthly aging reports are
prepared by an accounting service or other agent, Borrower hereby authorizes
such service or agent to deliver such aging reports and any other related
documents to Bank.


 


Section 11.02       Within fifteen (15)
calendar days after the end of each month or on such other more frequent basis
as may be reasonably required by Bank from time to time, Borrower shall furnish
to Bank a certificate describing all of Borrower’s Inventory by value based on
the lower of cost or market value, listing all Inventory by nature, quantity
and location, together with such other information as Bank may require.


 


Section 11.03       Within fifteen (15)
calendar days after the end of each month or on such other basis as may be
reasonably required by Bank from time to time, Borrower shall submit to Bank an
accounts payable aging report in form satisfactory to Bank showing the amounts
due and owing on all accounts payable according to Borrower’s records as of the
close of such month or such shorter period as may be reasonably required by
Bank from time to time, together with such other information as Bank may require.  If Borrower’s monthly accounts payable aging
reports are prepared by an accounting service or other agent, Borrower hereby
authorizes such service or agent to deliver such accounts payable aging reports
and any other related documents to Bank.


 


Section 11.04       Borrower shall deliver to
Bank all documents, as frequently as indicated below, or at such other times as
Bank may reasonably request, and all other documents and information requested
by Bank:


 


18

















 


	
   

  	
   

  	
  DOCUMENT

  	
   

  	
  FREQUENCY DUE

  
	
  (i)

  	
   

  	
  A Borrowing Base Certificate, including cash receipts, credit memos,
  sales, debit memos, the unpaid Revolving Loan balance, new borrowing requests
  and the adjusted Revolving Loan balance

  	
   

  	
  Monthly, within fifteen (15) calendar days after the end of each
  month

  
	
  (ii)

  	
   

  	
  Projections of Borrower’s balance sheet, statement of profit and loss
  and cash flow for the next succeeding fiscal year broken down on a quarter to
  quarter basis

  	
   

  	
  Annually, at least thirty (30) days before the beginning of each
  fiscal year of Borrower

  
	
  (iii)

  	
   

  	
  Notice of noncompliance with the provisions of this Agreement

  	
   

  	
  Immediately upon learning of such noncompliance, or if any
  representation or warranty contained herein is no longer true or accurate

  
	
  (iv)

  	
   

  	
  Compliance Certificate in the form annexed hereto as Exhibit 4

  	
   

  	
  As soon as available and in any event within one hundred twenty (120)
  days after the close of each fiscal year of Borrower

  



 


Section 11.05       Borrower will furnish Bank
as soon as available, and in any event within twenty (20) days after the close
of each monthly period of its fiscal year, a balance sheet as of the end of
such period, and a statement of income and retained earnings for the period
commencing at the end of the previous fiscal year and ending with the end of
such period, and a statement of cash flows of the Borrower for the portion of
the fiscal year ended with the last day of such period, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the previous fiscal year, and all prepared in
accordance with GAAP, certified by the chief financial officer of the Borrower
(subject to year end adjustment).


 


Section 11.06       Borrower will furnish Bank
with copies of its quarterly 10Q Reports filed with the Securities and Exchange
Commission with fifteen (15) days of completion of such reports.


 


Section 11.07       Borrower will furnish Bank,
annually, as soon as available, and in any event within one hundred twenty
(120) days after the end of each fiscal year of Borrower, audited financial
statements including a balance sheet as of the end of such fiscal year, and a
statement of income and retained earnings for such fiscal year, and a statement
of cash flows for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period
in the prior fiscal year, and all prepared in accordance with GAAP, accompanied
by an unqualified opinion prepared by Brown and Brown, LLP or other independent
public accountants selected by the Borrower and acceptable to Bank.


 


Section 11.08       Borrower will promptly,
upon receipt thereof, deliver to Bank, copies of any reports submitted to the
Borrower by Borrower’s independent public accountants in connection with the
examination of the financial statements of the Borrower made by such


 


19

















 


accountants
(the so-called “Management Letter”).


 


Section 11.09       In addition to the
foregoing, the Borrower promptly shall provide Bank with such other and
additional information concerning the Borrower, the Collateral, the operation
of the Borrower’s business, and the Borrower’s financial condition, including
financial reports and statements, as Bank may from time to time reasonably
request from the Borrower.  All
financial information provided Bank by the Borrower shall be prepared in
accordance with GAAP or generally accepted auditing principles (as applicable)
applied consistently in the preparation thereof and with prior periods to
fairly reflect the financial conditions of the Borrower at the close of, and
its results of operations for, the periods in question.


 


12.          GENERAL
AGREEMENTS  OF  BORROWER.


 


Section 12.01       Borrower agrees to keep all
the Collateral insured with coverage and in amounts not less than that usually
carried by one engaged in a like business and in any event not less than that
required by Bank with loss payable to Bank and Borrower, as their interests may
appear, and after an Event of Default reasonably appointing Bank as attorney
for Borrower in obtaining, adjusting, settling and canceling such insurance and
endorsing any drafts.  As further
assurance for the payment and performance of the Obligations, Borrower hereby
assigns to Bank all sums, including returns of unearned premiums, which may
become payable under any policy of insurance on the Collateral and Borrower
hereby directs each insurance company issuing any such policy to make payment
of such sums directly to Bank.  Absent
the occurrence of an Event of Default which is continuing, all insurance
proceeds received by Bank shall be applied first to repay the Revolving Loans
and shall be applied to the Term Loans only after the Revolving Loans have been
reduced to zero.


 


Section 12.02       Bank or its agents have the
right to inspect the Collateral and all records pertaining thereto at intervals
to be determined by Bank and without hindrance or delay.


 


Section 12.03       Although, as above set
forth, Bank has a continuing security interest in all of Borrower’s Collateral
and in the proceeds thereof, Borrower will at all times maintain as the minimum
security hereunder a Borrowing Base not less than the aggregate unpaid
principal of all Revolving Loans made hereunder plus the aggregate amount
undrawn on all Letters of Credit issued hereunder and if Borrower fails to do
so, Borrower will immediately make the necessary reduction in the unpaid
principal amount of said Revolving Loans so that the sum of the Revolving Loans
outstanding hereunder plus the amount undrawn on Letters of Credit outstanding
hereunder does not in the aggregate exceed the Borrowing Base.


 


Section 12.04       Borrower will at all times
keep accurate and complete records of Borrower’s Inventory, Accounts and other
Collateral, and Bank, or any of its agents, shall have the right to call at
Borrower’s place or places of business at reasonable intervals to be determined
by Bank, and without hindrance or delay, to inspect, audit, check, and make
extracts from any copies of the books, records, journals, orders, receipts,
correspondence which relate to Borrower’s Accounts, and other Collateral or
other transactions, between the parties thereto and the general financial
condition of Borrower and Bank may, at its expense, make copies thereof.
Borrower shall pay to Bank all reasonable audit fees, plus all travel and other
expenses incurred in connection with any such audit.  Borrower shall not have to reimburse Bank for such fees, costs
and expenses to the extent they exceed Ten Thousand ($10,000.00) Dollars in any
twelve (12)


 


20

















 


month period.


 


Section 12.05       Borrower will maintain a
standard and modern system of accounting which enables Borrower to produce
financial statements in accordance with GAAP and maintain records pertaining to
the Collateral that contain information as from time to time may be requested
by Bank.


 


Section 12.06       Borrower will maintain its
existence in good standing and comply with all laws and regulations of the
United States or of any state or states thereof or of any political subdivision
thereof, or of any governmental authority which may be applicable to it or to
its business.


 


Section 12.07       Borrower will pay all real
and personal property taxes, assessments and charges and all franchises, income,
unemployment, old age benefits, withholding, sales and other taxes assessed
against it, or payable by it at such times and in such manner as to prevent any
penalty from accruing or any lien or charge from attaching to its property.


 


Section 12.08       Bank may in its own name or
in the name of others communicate with account debtors in order to verify with
them to Bank’s satisfaction the existence, amount and terms of any Accounts.


 


Section 12.09       If any of Borrower’s
Accounts arise out of contracts with the United States or any department,
agency, or instrumentality thereof, Borrower will immediately notify Bank
thereof in writing and execute any instruments and take any steps required by
Bank in order that all monies due and to become due under such contracts shall
be assigned to Bank and notice thereof given to the Government under the
Federal Assignment of Claims Act.


 


Section 12.10       If any of Borrower’s
Accounts should be evidenced by promissory notes, trade acceptances, or other
instruments for the payment of money, Borrower will immediately deliver same to
Bank, appropriately endorsed to Bank’s order and, regardless of the form of
such endorsement, Borrower hereby waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with respect
thereto.


 


Section 12.11       If any goods are at any
time in the possession of a bailee, Borrower shall promptly notify Bank thereof
and, if requested by Bank, shall promptly obtain an acknowledgment from the
bailee, in form and substance satisfactory to Bank, that the bailee holds such
Collateral for the benefit of Bank and shall act upon the instructions of Bank,
without the further consent of Borrower. 
Bank agrees with Borrower that Bank shall not give any such instructions
unless an Event of Default has occurred and is continuing or would occur after
taking into account any action by Borrower with respect to the bailee.


 


Section 12.12       If Borrower is at any time
a beneficiary under a letter of credit now or hereafter issued in favor of Borrower,
Borrower shall promptly notify Bank thereof and, at the request and option of
Bank, Borrower shall, pursuant to an agreement in form and substance
satisfactory to Bank, either (i) arrange for the issuer and any confirmer of
such letter of credit to consent to an assignment to Bank of the proceeds of
any drawing under the letter of credit, or (ii) arrange for Bank to become the
transferee beneficiary of the letter of credit, with Bank agreeing, in each
case, that the proceeds of any drawing under the letter of credit are to be
applied in the


 


21

















 


same manner as
any other payment on an Account.


 


Section 12.13       If Borrower shall at any
time hold or acquire a commercial tort claim, Borrower shall immediately notify
Bank in a writing signed by Borrower of the brief details thereof and grant to
Bank in such writing a security interest therein, and in the net proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to Bank.


 


Section 12.14       Borrower will promptly pay
when due all taxes and assessments upon the Collateral or for its use or
operation or upon this Agreement, or upon any note or notes evidencing the
Obligations, and will, at the request of Bank, promptly furnish Bank the
receipted bills therefor.  At its
option, after an Event of Default, Bank may discharge taxes, Liens or other
encumbrances at any time levied or placed on the Collateral, may pay for insurance
on the Collateral and may pay for the reasonable maintenance and preservation
of the Collateral.  Borrower agrees to
reimburse Bank on demand for any reasonable payments made, or any expenses
incurred by Bank pursuant to the foregoing authorization, and upon failure of
the Borrower so to reimburse Bank, any such sums paid or advanced by Bank shall
be deemed secured by the Collateral and constitute part of the Obligations.


 


Section 12.15       Borrower will immediately
notify Bank upon receipt of notification of any potential or known release or
threat of release of hazardous materials, hazardous waste, hazardous or toxic
substance or oil from any site operated by Borrower or of the incurrence of any
expense or loss in connection therewith or with the Borrower’s obtaining
knowledge of any investigation, action or the incurrence of any expense or loss
by any governmental authority in connection with the assessment, containment or
removal of any hazardous material or oil for which expense or loss the Borrower
may be liable.  As used herein, the
terms “hazardous waste,” “hazardous or toxic substance,”  “hazardous material” or “oil” shall have the
same meanings as defined and used in any of the following (the “Acts”): the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq.; the Federal Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq.; the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq.; M.G.L.A. c. 21E (Massachusetts Oil and
Hazardous Material Release Prevention Act); M.G.L.A. c. 21C (Massachusetts
Hazardous Waste Management Act); and/or the regulations adopted and
publications promulgated pursuant to any of the Acts, as the same may be
amended from time to time.


 


Section 12.16       Except for Bank’s gross
negligence or willful misconduct, Borrower will indemnify and save Bank
harmless from all loss, costs, damage, liability or expenses (including,
without limitation, court costs and reasonable attorneys’ fees) that Bank may
sustain or incur by reason of defending or protecting this security interest or
the priority thereof or enforcing the Obligations, or in the prosecution or
defense of any action or proceeding concerning any matter growing out of or in
connection with this Agreement and/or any other documents now or hereafter
executed in connection with this Agreement and/or the Obligations and/or the
Collateral.  This indemnity shall
survive the repayment of the Obligations and the termination of Bank’s
agreement to make Loans available to Borrower and the termination of this
Agreement.


 


Section 12.17       At the option of Bank,
Borrower will furnish to Bank, from time to time, within five (5) days after
the accrual in accordance with applicable law of Borrower’s obligation to


 


22

















 


make deposits
for F.I.C.A. and withholding taxes and/or sales taxes, proof satisfactory to
Bank that such deposits have been made as required.


 


Section 12.18       Should Borrower fail to
make any of such deposits or furnish such proof then Bank may, in its sole and
absolute discretion, (a) make any of such deposits or any part thereof, (b) pay
such taxes, or any part thereof, or (c) set up such reserves as Bank, in its judgment,
shall deem reasonably necessary to satisfy the liability for such taxes.  Each amount so deposited or paid shall
constitute an advance under the terms hereof, repayable on demand with
interest, as provided herein, and secured by all Collateral and any other
property at any time pledged by Borrower with Bank.  Nothing herein shall be deemed to obligate Bank to make any such
deposit or payment or set up such reserve and the making of one or more of such
deposits or payments or the setting up of such reserve shall not constitute (i)
an agreement on Bank’s part to take any further or similar action, or (ii) a
waiver of any default by Borrower under the terms hereof.


 


Section 12.19       All advances by Bank to
Borrower under this Agreement and under any other agreement constitute one
general revolving fluctuating Loan, and all indebtedness of Borrower to Bank
under this and under any other agreement constitute one general
Obligation.  Each advance to Borrower
hereunder or otherwise shall be made upon the security of all of the Collateral
held and to be held by Bank.  It is
distinctly understood and agreed that all of the rights of Bank contained in
this Agreement shall likewise apply, insofar as applicable, to any modification
of or supplement to this Agreement and to any other agreements between Bank and
Borrower.  Any default of this Agreement
by Borrower shall constitute, likewise, a default by Borrower of any other
existing agreement with Bank, and any default by Borrower of any other
agreement with Bank shall constitute a default of this Agreement.  The entire Obligation of Borrower to Bank
shall become due and payable when payments become due and payable hereunder
upon termination of this Agreement.


 


Section 12.20       Borrower will, at its
expense, upon request of Bank promptly and duly execute and deliver such
documents and assurances and take such actions as may be necessary or desirable
or as Bank may request in order to correct any defect, error or omission which
may at any time be discovered or to more effectively carry out the intent and
purpose of this Agreement and to establish, perfect and protect Bank’s security
interest, rights and remedies created or intended to be created hereunder.  Without limiting the generality of the
above, Borrower will join with Bank in executing notices appropriate under
applicable Federal or state law in form satisfactory to Bank and filing the
same in all public offices and jurisdictions wherever and whenever requested by
Bank.


 


Section 12.21       Borrower shall promptly
notify Bank in writing of any litigation, proceeding, or counterclaim against,
or of any investigation of, Borrower if:  (a) the outcome of such
litigation, proceeding, counterclaim, or investigation may materially and
adversely affect the finances or operations of Borrower or title to, or the
value of, any Collateral; or (b) such litigation, proceeding,
counterclaim, or investigation questions the validity of this Agreement or any
action taken, or to be taken, pursuant to this Agreement, Borrower shall furnish
to Bank such information regarding any such litigation, proceeding,
counterclaim, or investigation as Bank shall request.


 


Section 12.22       Reserved


 


23

















 


Section 12.23       Borrower will maintain all
of its bank accounts, including without limitation, its operating and
depository accounts, at Bank.  For each
deposit account that Borrower at any time opens or maintains with a financial
institution other than Bank, which will not be done without first obtaining the
written consent of Bank, Borrower shall, at Bank’s request and option, pursuant
to an agreement in form and substance satisfactory to Bank, either (a) cause
the depositary bank to agree to comply at any time with instructions from Bank
to such depositary bank directing the disposition of funds from time to time
credited to such deposit account, without further consent of Borrower, or (b)
arrange for Bank to become the customer of the depositary bank with respect to
the deposit account, with Borrower being permitted, only with the consent of
Bank, to exercise rights to withdraw funds from such deposit account.  Bank agrees with Borrower that Bank shall
not give any such instructions or withhold any withdrawal rights from Borrower,
unless an Event of Default has occurred and is continuing, or, after giving
effect to any withdrawal not otherwise permitted by this Agreement would
occur.  The provisions of this paragraph
shall not apply to (a) any deposit account for which Borrower, the depositary
bank and Bank have entered into a cash collateral agreement specially
negotiated among Borrower, the depositary bank and Bank for the specific
purpose set forth therein, (b) deposit accounts specially and exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower’s salaried employees. Notwithstanding the
foregoing, Borrower may maintain operating account(s) for the operation of its
European sales/service office located in Lampertheim Germany with local banks,
currently Deutsche Bank.


 


Section 12.24       Subject to any landlords’
rights, Borrower hereby grants to Bank for a term to commence on the date of
this Agreement and continuing thereafter until all debts and Obligations of any
kind or character owing from Borrower to Bank are fully paid and discharged,
the right to use all premises or places of business which Borrower presently
has or may hereafter have and where any of the Collateral may be located, at a
total rental for the entire period of $1.00. 
Bank agrees not to exercise the rights granted in this paragraph unless
and until Bank determines to exercise its rights against the Collateral. In
connection with the Bank’s exercise of the Bank’s rights after the occurrence
of an Event of Default, the Bank may enter upon, occupy and use any premises
owned or occupied by the Borrower, and may exclude the Borrower from such
premises or portion thereof as may have been so entered upon, occupied, or used
by the Bank.  The Bank shall not be
required to remove any of the Collateral from any such premises upon the Bank’s
taking possession thereof, and may render any Collateral unusable to the
Borrower.  In no event shall the Bank be
liable to the Borrower beyond the rental specified above for use or occupancy
by the Bank of any premises pursuant to this Agreement.


 


Section 12.25       Borrower hereby grants to
Bank for a term to commence on the date of this Agreement and continuing
thereafter until all debts and Obligations of any kind or character owed to
Bank are fully paid and discharged, a non!exclusive irrevocable royalty!free
license in connection with Bank’s exercise of its rights hereunder, to use,
apply or affix any trademark, trade name logo or the like and to use any
patents, in which the Borrower now or hereafter has rights, which license may
be used by Bank upon and after the occurrence of any one or more of the Events
of Default, provided, however, that such use by Bank shall be suspended if such
Events of Default are cured.  This license
shall be in addition to, and not in lieu of, the inclusion of all of Borrower’s
trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and
licenses in the Collateral; in addition to the right to use said Collateral as
provided in this paragraph, Bank shall have full right to exercise any and all
of its other rights regarding Collateral


 


24

















 


with respect
to such trademarks, servicemarks, tradenames, logos, goodwill, patents,
franchises and licenses.


 


Section 12.26       Any and all deposits
(whether demand or time deposits) or other sums at any time credited by or due
from Bank to Borrower shall at all times constitute additional security for the
Obligations and may be set!off against any Obligations at any time following
the occurrence of an Event of Default or an event which with notice or the
lapse of time, or both, would constitute an Event of Default whether or not
they are then due or other security held by Bank is considered by Bank to be
adequate.  Any and all instruments, documents,
policies and certificates of insurance, securities, goods, accounts, choses in
action, general intangibles, chattel papers, cash, property and the proceeds
thereof (whether or not the same are Collateral or proceeds thereof hereunder)
owned by Borrower or in which Borrower has an interest, which now or hereafter
are at any time in possession or control of Bank or in transit by mail or
carrier to or from Bank or in the possession of any third party acting in
Bank’s behalf, without regard to whether Bank received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or whether
Bank had conditionally released the same, shall constitute additional security
for the Obligations and may be applied at any time following the occurrence of
an Event of Default or an event which with notice or the lapse of time, or
both, would constitute an Event of Default, to any Obligations which are then
owing, whether due or not due.  Bank
shall be entitled to presume, in the absence of clear and specific written
notice to the contrary hereinafter provided by Borrower to Bank, that any and
all deposits maintained by Borrower with Bank are general accounts as to which
no Person other than Borrower has any legal or equitable interest whatsoever.


 


Section 12.27       Borrower shall pay to Bank
on demand any and all reasonable counsel fees and other expenses incurred by
Bank in connection with the preparation, interpretation, enforcement,
administration or amendment of this Agreement, or of any documents relating
thereto, and any and all expenses, including, but not limited to, a collection
charge on all Accounts collected, all attorneys’ fees and expenses, and all
other expenses of like or unlike nature which may be expended by Bank to obtain
or enforce payment of any Account either as against the account debtor,
Borrower, or any guarantor or surety of Borrower or in the prosecution or
defense of any action or concerning any matter growing out of or connected with
the subject matter of this Agreement, the Obligations or the Collateral or any
of Bank’s rights or interests therein or thereto, including, without limiting
the generality of the foregoing, any counsel fees or expenses incurred in any
bankruptcy or insolvency proceedings and all reasonable costs and expenses
incurred or paid by Bank in connection with the administration, supervision,
protection or realization on any security held by Bank for the debt secured
hereby, whether such security was granted by Borrower or by any other Person
primarily or secondarily liable (with or without recourse) with respect to such
debt, and all reasonable costs and expenses incurred by Bank in connection with
the defense, settlement or satisfaction of any action, claim or demand asserted
against Bank in connection with the debt secured hereby, all of which amounts
shall be considered advances to protect Bank’s security, and shall be secured
hereby.  After an Event of Default, at
its option, and without limiting any other rights or remedies, Bank may at any
time pay or discharge any taxes, liens, security interests or other
encumbrances at any time levied against or placed on any of the Collateral, and
may procure and pay any premiums on any insurance required to be carried by
Borrower, and provide for the maintenance and preservation of any of the
Collateral, and otherwise take any action reasonably deemed necessary to Bank
to protect its security, and all amounts expended by Bank in connection with
any of the foregoing matters, including reasonable


 


25

















 


attorneys’
fees, shall be considered Obligations of Borrower and shall be secured hereby.


 


Section 12.28       Borrower does hereby make,
constitute and appoint any officer or agent of Bank as Borrower’s true and
lawful attorney!in!fact, with power to endorse the name of Borrower or any of
Borrower’s officers or agents upon any notes, checks, drafts, money orders, or
other instruments of payment (including payments payable under any policy of
insurance on the Collateral) or Collateral that may come into possession of
Bank in full or part payment of any amounts owing to Bank; to sign and endorse
the name of Borrower or any of Borrower’s officers or agents upon any invoice,
freight or express bill, bill of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
Accounts, and any instrument or documents relating thereto or to Borrower’s
rights therein; to give written notice to such office and officials of the United
States Post Office to effect such change or changes of address so that all mail
addressed to Borrower may be delivered directly to Bank; granting upon
Borrower’s said attorney full power to do any and all things necessary to be
done in and about the premises as fully and effectually as Borrower might or
could do, and hereby ratifying all that said attorney shall lawfully do or
cause to be done by virtue hereof. 
Neither Bank nor the attorney shall be liable for any acts or omissions
nor for any error of judgment or mistake, except for their gross negligence or
willful misconduct.  This power of
attorney shall be irrevocable for the term of this Agreement and all
transactions hereunder and thereafter as long as Borrower may be indebted to
Bank. With the exception of endorsing items which come into the possession of
Bank, Bank agrees not to exercise the foregoing power of attorney prior to the
occurrence of an Event of Default which is continuing.


 


The foregoing notwithstanding, excluding only
endorsement of checks that come into the possession of Bank, Bank agrees not to
exercise the foregoing power of attorney absent the occurrence of an Event of
Default which is continuing.


 


13.          BORROWER’S
NEGATIVE COVENANTS.  Borrower
will not at any time:


 


Section 13.01       Permit its Senior Debt to
be more than four (4) times the amount of its Tangible Capital Base as at
December 31, 2004 or at any year end thereafter;


 


Section 13.02       Permit, for the
twelve-month period ending on the last day of any fiscal year commencing with
the fiscal year ending December 31, 2004, it Debt Service Coverage Ratio to be
less than 1.20 to 1;


 


Section 13.03       Issue evidence of Debt or
suffer to exist Debt in addition to the Obligations, except (a) Debt or
liabilities of Borrower other than for money borrowed, incurred or arising in
the ordinary course of business, or (b) Debt related to Permitted Liens;


 


Section 13.04       If Borrower is a
“pass-through” tax entity for United States federal income tax purposes, make
distributions to its Owners during any fiscal year of Borrower in an aggregate
amount greater than the amount necessary to pay federal and state income taxes
upon Borrower’s undistributed income for such year;


 


Section 13.05       Sell, assign, exchange or
otherwise dispose of any of the Collateral, other than Inventory consisting of
(a) scrap, waste, defective goods and the like; (b) obsolete goods; (c)
finished goods sold in the ordinary course of business or any interest therein
to any Person; and


 


26

















 


(d) Equipment
which is no longer required or deemed necessary for the conduct of Borrower’s
business, so long as Borrower receives therefor a sum substantially equal to
such Equipment’s fair value;


 


Section 13.06       Create, permit to be
created or suffer to exist any Lien upon any of the Collateral or any other
property of Borrower, now owned or hereafter acquired, except: (a) landlords’,
carriers’, warehousemen’s, mechanics’ and other similar liens arising by
operation of law in the ordinary course of Borrower’s business; (b) arising out
of pledge or deposits under worker’s compensation, unemployment insurance, old
age pension, social security, retirement benefits or other similar legislation;
(c) purchase money Liens arising in the ordinary course of business (so long as
the Debt secured thereby does not exceed the lesser of the cost or fair market
value of the property subject thereto, and such Lien extends to no other
property); (d) Liens for unpaid taxes that are either (i) not yet due and
payable, or (ii) the subject of Permitted Protests; (e) Liens which are the
subject of Permitted Protests; (f) those Liens and encumbrances set forth on
Schedule “B” or Schedule “C” annexed hereto; and (g) in favor of Bank
(hereinafter, collectively, “Permitted Liens”);


 


Section 13.07       Pay or make any
distribution on account of (except, if Borrower is a “pass-through” tax entity
consistent with Section 13.10 above) any class of Borrower’s ownership interest
in cash or in property (other than additional ownership interest), or redeem,
purchase or otherwise acquire, directly or indirectly, any of the ownership
interests;


 


Section 13.08       Make any loans or advances
to any Person, including without limitation Borrower’s directors, officers and
employees, except advances to officers or employees with respect to expenses
incurred by them in the ordinary course of their duties which are properly
reimbursable by Borrower;


 


Section 13.09       Assume, guaranty, endorse
or otherwise become directly or contingently liable in respect of (including
without limitation by way of agreement, contingent or otherwise, to purchase,
provide funds to or otherwise invest in a debtor or otherwise to assure a
creditor against loss), any Debt (except guarantees by endorsement of
instruments for deposit or collection in the ordinary course of business and
guarantees in favor of Bank) of any Person.


 


Section 13.10       (a) Use any Loan proceeds
to purchase or carry any “margin stock” (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) or (b) invest in or purchase
any stock or securities of any Person except (i) readily marketable direct
obligations of, or obligations guaranteed by, the United States of America or
any agency thereof, or (ii) time deposits with or certificates of deposit
issued by the Bank;


 


Section 13.11       Enter into any lease or
other transaction with any Owner, officer of Borrower or Affiliate on terms any
less favorable than those which might be obtained at the time from Persons who
(or entities which) are not such a Owner, officer of Borrower or Affiliate;


 


Section 13.12       Sell, transfer or otherwise
dispose of any stock or other ownership interest of any subsidiary of Borrower;
or


 


Section 13.13       Without the prior written
consent of Bank, (a) merge or consolidate with or into any Person, (b) enter
into any joint venture or partnership with any Person; (c) convey,


 


27

















 


lease or sell
all or any material portion of its property or assets or business to any other
Person, except for the sale of Inventory in the ordinary course of its
business; or (d) convey, lease or sell any of its assets to any Person for less
than the fair market value thereof.


 


14.          DEFAULT.


 


Section 14.01       Nothing contained in this
section, or elsewhere in this Agreement, shall affect the demand nature of such
of the Obligations as are by their terms, demand obligations, including,
without limitation, Revolving Loans under this Agreement.  The occurrence of an Event of Default shall
not be a prerequisite for the Bank’s making demand or requiring payment of such
Obligations.


 


Upon the occurrence of any one or more of the
following events (herein, “Events  of  Default”),
any and all Obligations of Borrower to Bank shall become immediately due and
payable, at the option of Bank and without notice or demand.  The occurrence of any such Event of Default
shall also constitute, without notice or demand, a default under all other
agreements between Bank and Borrower and instruments and papers given Bank by
Borrower, whether such agreements, instruments, or papers now exist or
hereafter arise, namely:


 


(a)           The failure by Borrower to pay upon demand
any amount due under this Agreement.


 


(b)           The failure by Borrower to pay upon demand
(or when due, if not payable on demand) any other Obligations.


 


(c)           The failure by Borrower to promptly,
punctually and faithfully perform, or observe any term, covenant or agreement
on its part to be performed or observed pursuant to any of the provisions of
this Agreement.


 


(d)           The determination by Bank that any
representation or warranty heretofore, now or hereafter made by Borrower to
Bank, in any documents, instrument, agreement, or paper was not true or
accurate in any material respect when given.


 


(e)           The occurrence of any event such that any
Debt of Borrower from any lender other than Bank could be accelerated,
notwithstanding that such acceleration has not taken place.


 


(f)            The occurrence of any event which would
cause a lien creditor, as that term is defined in Section 9!102 of the UCC, to
take priority over advances made by Bank.


 


(g)           A filing against or relating to Borrower of
(i) a federal tax lien in favor of the United States of America or any
political subdivision of the United States of America, or (ii) a state tax lien
in favor of any state of the United States of America or any political
subdivision of any such state.


 


(h)           The occurrence of any event of default under
any agreement between Bank and Borrower or instrument or paper given Bank by
Borrower, whether such agreement, instrument, or paper now exists or hereafter
arises (notwithstanding that Bank may not have


 


28

















 


exercised its
rights upon default under any such other agreement, instrument or paper).


 


(i)            Any act by, against, or relating to
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee or other
person, pursuant to court action or otherwise, over all, or any part of
Borrower’s property.


 


(j)            The granting of any trust mortgage or
execution of an assignment for the benefit of the creditors of Borrower, or the
occurrence of any other voluntary or involuntary liquidation or extension of
debt agreement for Borrower; the failure by Borrower to generally pay the debts
of Borrower as they mature; adjudication of bankruptcy or insolvency relative
to Borrower; the entry of an order for relief or similar order with respect to
Borrower in any proceeding pursuant to the Bankruptcy Code or any other federal
bankruptcy law; the filing of any complaint, application, or petition by or
against Borrower initiating any matter in which Borrower is or may be granted
any relief from the debts of Borrower pursuant to the Bankruptcy Code or any
other insolvency statute or procedure; the calling or sufferance of a meeting
of creditors of Borrower; the meeting by Borrower of a formal or informal
creditor’s committee; the offering by or entering into by Borrower of any
composition, extension or any other arrangement seeking relief or extension for
the debts of Borrower, or the initiation of any other judicial or non!judicial
proceeding or agreement by, against or including Borrower which seeks or
intends to accomplish a reorganization or arrangement with creditors.


 


(k)           The entry of any judgment against Borrower,
which judgment is not satisfied or appealed from (with execution or similar
process stayed) or bonded over within thirty (30) days of its entry.


 


(l)            The occurrence of any event or circumstance
with respect to Borrower such that Bank shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the performance by
Borrower under this Agreement or any other agreement between Bank and Borrower
is impaired.


 


(m)          The entry of any court order which enjoins,
restrains or in any way prevents Borrower from conducting all or any part of
its business affairs in the ordinary course of business.


 


(n)           The occurrence of any uninsured loss, theft,
damage or destruction to any material asset(s) of Borrower in excess of Ten
Thousand ($10,000.00) Dollars.


 


(o)           The termination of existence, dissolution,
or liquidation of Borrower or the ceasing to carry on actively any substantial
part of Borrower’s current business.


 


(p)           This Agreement shall, at any time after its
execution and delivery and for any reason, cease (i) to create a valid and
perfected first priority security interest in and to the property purported to
be subject to this Agreement; or (ii) to be in full force and effect or shall
be declared null and void, or the validity or enforceability hereof shall be
contested by Borrower or any guarantor of Borrower denies it has any further
liability or obligation hereunder.


 


(q)           Any of the following events occur or exist
with respect to Borrower or any


 


29

















 


ERISA
affiliate: (i) any “prohibited transaction” (as defined in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code) involving any Plan; (ii) any
“reportable event” (as defined in Section 4043 of ERISA and the regulations
issued under such Section) shall occur with respect to any Plan; (iii) the
filing under Section 4041 of ERISA of a notice of intent to terminate any Plan
or the termination of any Plan; (iv) any event or circumstance exists which
might constitute grounds entitling the Pension Benefit Guaranty Corporation
(PBGC) to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; or (v) partial withdrawal
under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and in
each case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of Bank subject Borrower to any tax,
penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or
otherwise.


 


(r)            The occurrence of any of the foregoing
Events of Default with respect to any guarantor, endorser, or surety to Bank of
the Obligations, as if such guarantor, endorser or surety, were the “Borrower”
described therein.


 


(s)           Any guarantor or Person signing a guaranty
or support agreement in favor of Bank shall repudiate, purport to revoke or
fail to perform his obligations under such guaranty or support agreement in
favor of Bank.


 


15.              RIGHTS AND REMEDIES
UPON DEFAULT; SET-OFF; EXPENSES; POWER OF ATTORNEY.


 


Upon the occurrence of an Event of Default,
after applicable cure periods, or demand by the Bank, the Bank shall have the
following rights and remedies.


 


Section 15.01       Bank may declare any
obligation Bank may have hereunder to be cancelled, declare all Obligations of
Borrower to be due and payable and proceed to enforce payment of the
Obligations and to exercise any and all of the rights and remedies afforded to
Bank by the UCC or under the terms of this Agreement or otherwise.  In addition, upon the occurrence of an Event
of Default, if Bank proceeds to enforce payment of the Obligations, Borrower
shall be obligated to deliver to Bank cash collateral in an amount equal to the
aggregate amounts then undrawn on all outstanding Letters of Credit or
acceptances issued or guaranteed by Bank for the account of Borrower, and Bank
may proceed to enforce payment of the same and to exercise all rights and
remedies afforded to Bank by the UCC or under the terms of this Agreement or
otherwise. Upon the occurrence of, and during the continuance of, an Event of
Default, the Borrower, as additional compensation to the Bank for its increased
credit risk, promises to pay interest on all Obligations (including, without
limitation, principal, whether or not past due, past due interest and any other
amounts past due under this Agreement) at a per annum rate of four (4%) percent
greater than the rate of interest then specified in Section 2 of this
Agreement.


 


Section 15.02       Upon the filing of any
complaint, application, or petition by or against the Borrower initiating any
matter in which the Borrower is or may be granted any relief from the debts of
the Borrower pursuant to the Bankruptcy Code, Bank’s obligation hereunder shall
be canceled immediately, automatically, and without notice, and all Obligations
of the Borrower then outstanding shall become immediately due and payable
without presentation, demand, or notice of


 


30

















 


any kind to
the Borrower.


 


Section 15.03       Any sale or other
disposition of the Collateral may be at public or private sale upon such terms
and in such manner as the Bank deems advisable, having due regard to compliance
with any statute or regulation which might affect, limit or apply to the Bank’s
disposition of the Collateral.  The Bank
may conduct any such sale or other disposition of the Collateral upon the
Borrower’s premises.  Unless the
Collateral is perishable or threatens to decline speedily in value, or is of a
type customarily sold on a recognized market (in which event the Bank shall
provide the Borrower with such notice as may be practicable under the
circumstances), the Bank shall give the Borrower at least the greater of the
minimum notice required by law or seven (7) days prior written notice of the
date, time and place of any proposed public sale, and of the date after which
any private sale or other disposition of the Collateral may be made.  The Bank may purchase the Collateral, or any
portion of it at any such sale.


 


If the Bank sells any of the Collateral on
credit, the Borrower will be credited only with payments actually made by the
purchaser of such Collateral and received by the Bank. If the purchaser fails
to pay for the Collateral, the Bank may re-sell the Collateral and the Borrower
shall be credited with the proceeds of the sale.


 


Section 15.04       The Bank may require the
Borrower to assemble the Collateral and make it available to the Bank at the
Borrower’s sole risk and expense at a place or places which are reasonably
convenient to both the Bank and the Borrower.


 


Section 15.05       In connection with Bank’s
exercise of Bank’s rights under this Agreement, and subject to the rights of
any landlord,  Bank may enter upon,
occupy and use any premises owned or occupied by Borrower, and may exclude
Borrower from such premises or portion thereof as may have been so entered
upon, occupied, or used by Bank.  Bank
shall not be required to remove any of the Collateral from any such premises
upon Bank’s taking possession thereof, and may render any Collateral unusable
to Borrower.  In no event shall Bank be
liable to Borrower for use or occupancy by Bank of any premises pursuant to
this Agreement.


 


Section 15.06       Borrower shall, following
the occurrence of an Event of Default which is continuing, deliver to Bank,
daily, a schedule in form and content satisfactory to Bank describing the
invoices issued by Borrower since the last schedule submitted to Bank.  The schedules to be provided under this
subsection are solely for the convenience of Bank in administering this
Agreement and maintaining records of the Collateral.  Borrower’s failure to provide Bank with any such schedule shall
not affect the security interest of Bank in such Accounts.


 


Section 15.07       From and after the
occurrence of an Event of Default which is continuing, Borrower will
immediately, upon receipt of all checks, drafts, cash and other remittances in
payment of any Inventory sold or in payment or on account of Borrower’s
accounts, contracts, contract rights, notes, bills, drafts, acceptances,
general intangibles, choses in action and all other forms of obligations,
deliver the same to Bank accompanied by a remittance report in form specified
by Bank.  Said proceeds shall be
delivered to Bank in the same form received except for the endorsement of
Borrower where necessary to permit collection of items, which endorsement
Borrower agrees to make.  Bank will
credit (conditional upon final collection) all such payments against the
principal or interest of any Loans secured hereby; provided,


 


31

















 


however, for
the purpose of computing interest, any items requiring clearance or payment
shall not be considered to have been credited against any Loans secured hereby
until three (3) business days after receipt by Bank of any such items.  The order and method of such application
shall be in the sole discretion of Bank and any portion of such funds which
Bank elects not to so apply shall be paid over from time to time by Bank to
Borrower. Bank will at all times have the right to require Borrower (i) to
enter into a lockbox arrangement with Bank for the collection of such
remittances and payments, or (ii) to maintain its deposit accounts at Bank or,
in the alternative, at another financial institution which has agreed to accept
drafts drawn on it by Bank under a written depository transfer agreement with
Bank and to block Borrower’s account and waive its rights as against such
account. Notwithstanding anything contained to the contrary herein, said
proceeds shall not be applied to the principal of any LIBOR Loan(s), until all
Prime Rate Loans have been paid in full.


 


Section 15.08       Bank may at any time, after
the occurrence of an Event of Default or an event which, with notice or the
passage of time or both, would constitute an Event of Default, notify account
debtors that Collateral has been assigned to Bank and that payments shall be
made directly to or as directed by Bank. 
Upon request of Bank at any time, Borrower will so notify such account
debtors and will indicate on all billings to such account debtors that their
Accounts must be paid directly to or as directed by Bank.  Bank shall have full power to collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds thereof in its
own name or in the name of Borrower.


 


Section 15.09       Borrower hereby appoints
Bank as its attorney-in-fact, with full authority in the place and stead of
Borrower and in the name of Borrower, Bank, or otherwise, from time to time in
Bank’s discretion, to take any actions and to execute any instruments which
Bank may deem necessary or desirable to obtain, adjust, make claims under, and
otherwise deal with insurance required pursuant hereto and to receive, endorse,
and collect any drafts or other instruments delivered in connection
therewith.  This power of attorney shall
be irrevocable for the term of this Agreement and all transactions hereunder
and thereafter as long as Borrower may be indebted to Bank.  Bank agrees not to exercise the foregoing
power of attorney until the occurrence of an Event of Default which is
continuing.


 


16.              STANDARDS FOR
EXERCISING REMEDIES.


 


To the extent that applicable law imposes
duties on Bank to exercise remedies in a commercially reasonable manner,
Borrower acknowledges and agrees that it is not commercially unreasonable for
Bank (a) to fail to incur expenses reasonably deemed significant by Bank to
prepare Collateral for disposition or otherwise to complete raw material or
work in process into finished goods or other finished products for disposition,
(b) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other Persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (d)
to exercise collection remedies against account debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other Persons, whether or
not in the same business as Borrower, for expressions of interest in acquiring
all or any portion of the Collateral, (g) to hire one or more professional
auctioneers to assist in the


 


32

















 


disposition of
Collateral, whether or not the Collateral is of a specialized nature, (h) to
dispose of the Collateral by utilizing Internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capability of doing so, or that match buyers and sellers of assets,
(i) to dispose of assets in wholesale rather than retail markets, (j) to
disclaim disposition warranties specifically to disclaim any warranties of
title or the like, (k) to purchase insurance or credit enhancements to insure
Bank against risks of loss, collection or disposition of Collateral or to
provide to Bank a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by Bank, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Bank in the collection or disposition of any of the
Collateral. Borrower acknowledges that the purpose of this section is to
provide non-exhaustive indications of what actions or omissions by Bank would
not be commercially unreasonable in Bank’s exercise of remedies against the
Collateral and that other actions or omissions by Bank shall not be deemed
commercially unreasonable solely on account of not being indicated in this
section.  Without limitation upon the
foregoing, nothing contained in this section shall be construed to grant any
rights to Borrower or to impose any duties on Bank that would not have been
granted or imposed by this Agreement or by applicable law in the absence of
this section.


 


17.          WAIVER OF
JURY TRIAL.


 


BORROWER AND BANK EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT.  Borrower hereby
certifies that neither Bank nor any of its representatives, agents or counsel
has represented, expressly or otherwise, that Bank would not, in the event of
any such suit, action or proceeding, seek to enforce this waiver of right to
trial by jury.  Borrower acknowledges
that it has read the provisions of this Agreement and in particular, this
section; has consulted legal counsel; understands the right it is granting in
this Agreement and is waiving in this section in particular; and makes the
above waiver knowingly, voluntarily and intentionally.


 


18.          CONSENT TO
JURISDICTION.


 


Borrower and Bank agree that any action or
proceeding to enforce or arising out of this Agreement may be commenced in any
court of the Commonwealth of Massachusetts sitting in the county of Suffolk,
the County of Middlesex, or in the District Court of the United States for the
District of Massachusetts, and Borrower waives personal service of process and
agrees that a summons and complaint commencing an action or proceeding in any
such court shall be properly served and confer personal jurisdiction if served
by registered or certified mail to Borrower, or as otherwise provided by the
laws of the Commonwealth of Massachusetts or the United States of America.


 


19.          TERMINATION


 


This Agreement may be terminated at any time
by either party giving written notice of termination to the other party;
provided, however, that unless and until all Loans made by the Bank to the
Borrower hereunder and all other Obligations or commitments of the Bank under
which an Obligation could arise, outstanding as of the time of giving or
receipt as the case may


 


33

















 


be, of such
notice by the Bank have been paid in full, such termination shall in no way
affect the security interest or other rights and powers herein granted to the
Bank, and until such payment in full the security interest of the Bank in all
Inventory, Accounts and other Collateral of the Borrower, whether existing as
of the time of such termination or thereafter arising, and all rights and
powers herein granted to the Bank in respect thereof shall remain in full force
and effect.  Until all of the
Obligations of Borrower to Bank have been fully paid and satisfied and all
commitments of the Bank under which an Obligation could arise have expired,
Borrower shall continue to assign Accounts to Bank, turn over all collections
to the Bank in kind and otherwise fully comply with the terms and conditions of
this Agreement as herein provided. 
Prior to such payment in full of all of the Obligations of Borrower to
Bank, this Agreement shall be a continuing agreement in every respect.


 


Absent the occurrence of an Event of Default
which is continuing, Bank will give Borrower one hundred twenty (120) days
prior notice before terminating this Agreement.


 


20.          JOINT AND SEVERAL
LIABILITY.


 


Section 20.01       Each Borrower is
accepting joint and several liability under this Agreement in consideration of
the financial accommodations to be provided by Bank under this Agreement, for
the mutual benefit, directly and indirectly, of each Borrower and in
consideration of the undertakings of each other Borrower to accept joint and
several liability for the Obligations of each Borrower to Bank.


 


Section 20.02       Each Borrower, jointly
and severally, hereby irrevocably and unconditionally accepts, not merely as a
surety but also as a co-debtor, joint and several liability with each other
Borrower, with respect to the payment and performance of all of the Obligations
of each Borrower to Bank under this Agreement (including, without limitation,
any Obligations arising under this section), it being the intention of the
parties hereto that all the Obligations of each Borrower to Bank under this
Agreement shall be the joint and several Obligations of each of the Borrowers
without preferences or distinction among them.


 


Section 20.03       If and to the extent
that any of the Borrowers shall fail to make any payment with respect to any of
the Obligations of each Borrower to Bank under this Agreement,  as and when due or to perform any of such
Obligations in accordance with the terms thereof, then in each such event the
other Borrower, under this Agreement will make such payment with respect to, or
perform, such Obligation.


 


Section 20.04       The Obligations of each
Borrower under the provisions of this section constitute full recourse
Obligations of each Borrower enforceable against each such Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity
or enforceability of this Agreement or any other circumstance whatsoever.


 


Section 20.05       Each Borrower hereby
waives notice of acceptance of its joint and several liability, notice of any
loans made under this Agreement, notice of any action at any time taken or
omitted by Bank under or in respect of any of the Obligations of each Borrower
to Bank under this Agreement, and, generally, to the extent permitted by
applicable law, all demands, notices and other formalities of every kind in
connection with this Agreement.  Each
Borrower hereby assents to, and waives notice of, any extension or postponement
of the time for the


 


34

















 


payment of any
of the Obligations of each Borrower to Bank under this Agreement, the
acceptance of any payment of any of such Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Bank at any time or times in respect of any default by any Borrower in the
performance or satisfaction of any term, covenant, condition or provision of
this Agreement, any and all other indulgences whatsoever by Bank in respect of
any of the Obligations of each Borrower to Bank under this Agreement, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of such Obligations of each Borrower to Bank or
the addition, substitution or release, in whole or in part, of any
Borrower.  Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on Bank’s part with respect to the failure by any
Borrower to comply with any of its respective Obligations, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder,
which might, but for the provisions of this section, afford grounds for
terminating, discharging or relieving any Borrower, in whole or in part, from
any of its Obligations under this section, it being the intention of each
Borrower that, so long as any of the Obligations under this Agreement remain
unsatisfied, the Obligations of such Borrower under this section shall not be
discharged except by performance and then only to the extent of such
performance.  The Obligations of each
Borrower under this section shall not be diminished or rendered unenforceable
by any winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to any other Borrower or Bank.  The joint and several liability of each
Borrower under this Agreement shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any
Borrower or Bank.


 


Section 20.06       The provisions of this
section are made for the benefit of Bank and Bank’s successors and assigns, and
may be enforced by Bank in good faith from time to time against any or all of
the Borrowers as often as occasion therefor may arise and without requirement
on Bank’s part first to marshal any of its claims or to exercise any of its
rights against any Borrower or to exhaust any remedies available to Bank
against any other Borrower or to resort to any other source or means of
obtaining payment of any of the Obligations under this Agreement or to elect
any other remedy.  The provisions of
this section shall remain in effect until all of the Obligations of each
Borrower to Bank under this Agreement shall have been paid in full or otherwise
fully satisfied.  If at any time, any
payment, or any part thereof, made in respect of any of such Obligations of
each Borrower to Bank, is rescinded or must otherwise be restored or returned
by Bank upon the insolvency, bankruptcy or reorganization of any Borrower, or
otherwise, the provisions of this section will forthwith be reinstated in
effect, as though such payment had not been made.


 


Section 20.07       Each Borrower agrees
that it shall not exercise, and hereby expressly waives until full and final
payment of all Obligations to Bank: (i) any right to subrogation or
indemnification, and any other right to payment from or reimbursement by any
other Borrower, in connection with or as a consequence of any payment made by
any Borrower to Bank, (ii) any right to enforce any right or remedy which Bank
may have or may hereafter have against any other Borrower, and (iii) any
benefit of, and any right to participate in (A) any collateral now or hereafter
held by Bank, or (B) any payment to Bank by, or collection by Bank from any
other Borrower.  The provisions of this
paragraph are made for the express benefit of each Borrower as well as Bank,
and may be enforced independently by each Borrower or any successor in interest
to each Borrower.


 


35

















 


21.          MISCELLANEOUS.


 


Section 21.01       No delay or omission on the
part of Bank in exercising any rights shall operate as a waiver of such right
or any other right. Waiver on any one occasion shall not be construed as a bar
to or waiver of any right or remedy on any future occasion.  All Bank’s rights and remedies, whether
evidenced hereby or by any other agreement, instrument or paper, shall be
cumulative and may be exercised singularly or concurrently.


 


Section 21.02       Bank is authorized to make
Loans under the terms of this Agreement upon the request, either written or
oral, in the name of Borrower or any authorized Person whose name appears at
the end of this Agreement or of any of the following named person, or persons,
from time to time, holding the following offices of Borrower: President,
Treasurer and such other officers and authorized signatories as may from time
to time be set forth in separate banking and borrowing resolutions.


 


Section 21.03       This Agreement shall bind
and inure to the benefit of the respective successors and assigns of each of
the parties hereto; provided, however, that Borrower may not
assign this Agreement or any rights or duties hereunder without Bank’s prior
written consent and any prohibited assignment shall be absolutely void.  No consent to an assignment by Bank shall
release Borrower from its Obligations. 
Bank may assign this Agreement and its rights and duties hereunder and
no consent or approval by Borrower is required in connection with any such
assignment.  Bank reserves the right to
sell, assign, transfer, negotiate or grant participations in all or any part
of, or any interest in Bank’s rights and benefits hereunder.  In connection with any assignment or
participation, Bank may disclose all documents and information which Bank now
or hereafter may have relating to Borrower or Borrower’s business.  To the extent that Bank assigns its rights
and obligations hereunder to another party, Bank thereafter shall be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such other party.


 


Section 21.04       Borrower agrees that any
and all Loans made by Bank to Borrower or for its account under this Agreement
shall be conclusively deemed to have been authorized by Borrower and to have
been made pursuant to duly authorized requests therefor on its behalf.


 


Section 21.05       Paragraph and section
headings used in this Agreement are for convenience only, and shall not effect
the construction of this Agreement.  If
one or more provisions of this Agreement (or the application thereof) shall be
invalid, illegal or unenforceable in any respect in any jurisdiction, the same
shall not, invalidate or render illegal or unenforceable such provision (or its
application) in any other jurisdiction or any other provision of this Agreement
(or its application).  This Agreement is
the entire agreement of the parties with respect to the subject matter hereof
and supersedes any prior written or verbal communications or instruments
relating thereto.


 


Section 21.06       Unless otherwise provided
in this Agreement, all notices or demands by any party relating to this
Agreement or any other loan document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested ),
overnight courier, or telecopier to Borrower or to Bank, as


 


36

















 


the case may
be, at its address set forth below:


 




	
  If to Bank:

  	
   

  	
  Banknorth, N.A.

  
	
   

  	
   

  	
  7 New England Executive Park

  
	
   

  	
   

  	
  Burlington, MA 01803

  
	
   

  	
   

  	
  Attn:     Brant A. McDougall, Senior Vice
  President

  
	
   

  	
   

  	
  Telephone:

  	
  781-229-4570, ext. 7101

  
	
   

  	
   

  	
  Telecopier:

  	
  781-221-6988

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to
  Borrower:

  	
   

  	
  Microfluidics Corporation, as Agent

  
	
   

  	
   

  	
  30 Ossipee Road

  
	
   

  	
   

  	
  Newton, Massachusetts 02464-9101

  
	
   

  	
   

  	
  Attn:    Dennis P. Riordan, Controller

  
	
   

  	
   

  	
  Telephone:

  	
  617-969-5452

  
	
   

  	
   

  	
  Telecopier:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  MFIC Corporation

  
	
   

  	
   

  	
  30 Ossipee Road

  
	
   

  	
   

  	
  Newton, Massachusetts 02464-9101

  
	
   

  	
   

  	
  Attn:     Dennis P. Riordan, Controller

  
	
   

  	
   

  	
  Telephone:

  	
  617-969-5452

  
	
   

  	
   

  	
  Telecopier:

  






 


The parties hereto may change the address at
which they are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other. 
All notices or demand sent in accordance with this section shall be
deemed received on the earlier of the date of actual receipt or three (3) days
after the deposit thereof in the mail.


 


Section 21.07  Bank shall have no obligation to maintain any
electronic records or any documents, schedules, invoices, agings or any other
paper delivered to Bank by Borrower in connection with this Agreement or any
other agreement for more than four (4) months after receipt of the same by
Bank.


 


Section 21.08 Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed or
resolved against Bank or Borrower, whether under any rule of construction or
otherwise.  On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.


 


Section 21.09 Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.


 


Section 21.10  This Agreement, together with the other
documents and instruments executed concurrently herewith represent the entire
and final understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by evidence of
any prior, contemporaneous or subsequent other agreement, oral or written,
before the date hereof.


 


37

















 


Section 21.11  This Agreement can only be amended by a
writing signed by both Bank and Borrower.


 


Section 21.12  The laws of Massachusetts shall govern the
construction of this Agreement and the rights and duties of the parties
hereto.  This Agreement shall take
effect as a sealed instrument.


 


	
  Witnessed by:

  	
  MFIC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Irwin J. Gruverman, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  30 Ossipee Road

  
	
   

  	
   

  	
  Newton, Massachusetts 02464-9101

  
	
   

  	
   

  
	
   

  	
  MICROFLUIDICS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Irwin J. Gruverman, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  30 Ossipee Road

  
	
   

  	
   

  	
  Newton, Massachusetts 02464-9101

  
	
   

  	
   

  
	
   

  	
  BANKNORTH, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Brant A. McDougall, Senior Vice President

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  7 New England Executive Park

  
	
   

  	
   

  	
  Burlington, Massachusetts 01803

  
						



 


38

















 


SCHEDULES


 


The following Schedules to the within Loan and Security Agreement (All
Assets) are respectively described in the section indicated.  Those Schedules in which no information has
been inserted shall be deemed to read “None”.


 


MFIC CORPORATION


 


SCHEDULE “A”


Borrower’s Places of
Business and Organizational Identification Number (§8.02)


 


	
  Address

  	
   

  	
  Property Located At Such
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


Organizational Identification Number:              2008286


 


SCHEDULE “B”


Other Encumbrances and Liens
(§8.06(a))


 


	
  Secured
  Party or Mortgagee

  	
   

  	
  Description
  of Collateral

  	
   

  	
  Payment
  Terms and Dates of Maturity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


SCHEDULE “C”


Leases (§8.06(b))


 


	
  Lessor

  	
   

  	
  Description
  of Property

  	
   

  	
  Date of
  Lease and Term

  	
   

  	
  Rental
  Payable

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


MICROFLUIDICS CORPORATION


 


SCHEDULE “A”


Borrower’s Places of
Business and Organizational Identification Number (§8.02)


 


	
  Address

  	
   

  	
  Property Located At Such
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


Organizational Identification Number:


 


SCHEDULE “B”


Other Encumbrances and Liens
(§8.06(a))


 


	
  Secured
  Party or Mortgagee

  	
   

  	
  Description
  of Collateral

  	
   

  	
  Payment
  Terms and Dates of Maturity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


39

















 


SCHEDULE “C”


Leases (§8.06(b))


 


	
  Lessor

  	
   

  	
  Description
  of Property

  	
   

  	
  Date of
  Lease and Term

  	
   

  	
  Rental
  Payable

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


40

















 


EXHIBIT
1


 


BANKNORTH,
N.A.


 


TERM
NOTE


 


	
  $1,000,000.00

  	
   

  	
  March
          , 2004

  
	
   

  	
   

  	
  Boston, Massachusetts

  
	
   

  	
   

  	
   

  



 


For value received, the undersigned, which
term whenever used herein shall mean each and all of the signers of this note,
jointly and severally, promises to pay to Banknorth, N.A. (“Bank”), or order, at its office at
Burlington, MA, or at such other place as may be designated in writing by the
holder hereof, the principal sum of One Million ($1,000,000.00) Dollars in
forty-eight (48) installments, as follows: $20,833.00 on April 1, 2004, and the
same amount (except the last installment which shall be the unpaid balance) on
the first day of each month thereafter until this note is fully paid, with
interest from the date hereof on the said principal sum from time to time
outstanding at the rate of five and 67/100 (5.67%) percent per annum.  Such interest shall be payable monthly in
arrears on the first day of each month, commencing on the first of such dates
next succeeding the date hereof. 
Interest shall be calculated on the basis of actual days elapsed and a
360!day year.


 


In all events the entire principal balance,
together with all accrued interest, is to be fully paid on or before February
1, 2008.


 


Whenever any installment of principal and
interest due hereunder shall not be paid within fifteen (15) days of its due
date, the undersigned shall pay, in addition thereto as a late charge, five
percent (5%) percent of the amount of any such installment.


 


The undersigned hereby authorizes Bank to
charge the amount of all monthly interest and principal payments, when due and
payable hereunder, against any of the undersigned’s accounts under the control
of Bank or the undersigned’s loan account created pursuant to a Loan and
Security Agreement (All Assets) dated March          ,
2004 (the “Agreement”).


 


At the option of the holder, this note shall
become immediately due and payable without notice or demand upon the occurrence
at any time of (a) the failure to pay in full and when due any installment of
principal or interest hereunder; (b) one or more Events of Default as defined
in the Agreement; or (c) the termination of the Agreement. Upon the occurrence
of any of the foregoing events, interest on unpaid balances shall thereafter be
payable at an interest rate per annum which is four (4%) percent greater than
the rate of interest specified herein.


 


The undersigned may prepay this note at any
time, provided, however, that at the time of any full or partial pre-payment,
the undersigned shall pay the Bank a fee equal to the greater of at least one
(1%) percent of the principal balance being prepaid or a “Yield Maintenance
Fee” in an amount computed as follows: The Federal Home Loan Bank rate with a
maturity date closest to the remaining term of this note shall be subtracted
from the above stated interest rate, or default rate, if applicable.  If the result is zero or a negative number,
there shall be no Yield Maintenance Fee due and payable.  If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the principal balance
being prepaid.  The resulting amount
shall be


 


41

















 


divided by 360
and multiplied by the number of days remaining in the term of this note.  Said amount shall be reduced to present
value calculated by using the above referenced Federal Home Loan Bank rate and
the number of days remaining in the term of this note.  The resulting amount shall be the yield
maintenance fee due to the Bank upon prepayment of the principal of this
note.  The foregoing notwithstanding,
the undersigned will not be obligated to pay to the Bank a Yield Maintenance
Fee if this note is accelerated as a result of the termination of the Agreement
or a demand by the Bank for payment in full of all obligations under the
Agreement, without the existence of an Event of Default as defined in the
Agreement.


 


The undersigned and any guarantor hereby
grants to Bank a lien, security interest and right of setoff as security for
all liabilities and Obligations to Bank, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now
or hereafter in the possession, custody, safekeeping or control of Bank or any
entity in the control of Bank or in transit to Bank.  At any time, without demand or notice, Bank may set off the same
or any part thereof and apply the same to any liability or obligation of the
undersigned and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing this note.  ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THIS NOTE, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE UNDERSIGNED OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED.


 


The undersigned agrees to pay all costs of
collection including reasonable fees of attorney.


 


No delay or omission on the part of the
holder in exercising any right hereunder shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the same or any
other right on any future occasion. 
Every one of the undersigned and every indorser or guarantor of this
note regardless of the time, order or place of signing waives presentment,
demand, protest and notices of every kind and assents to any one or more
extensions or postponements of the time of payment or any other indulgences, to
any substitutions, exchanges or releases of collateral if at any time there be
available to the holder collateral for this note, and to the additions or
releases of any other parties or persons primarily or secondarily liable.


 


This note is secured pursuant to the terms of
the Agreement.


 


THE UNDERSIGNED AND THE BANK MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.


 


All rights and obligations hereunder shall be
governed by the law of the Commonwealth of Massachusetts and this note shall be
deemed to be under seal.


 


	
  Witness:

  	
  MFIC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Irwin J. Gruverman, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MICROFLUIDICS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Irwin J. Gruverman, Chief Executive Officer

  



 


42

















 


EXHIBIT
2


 


BANKNORTH,
N.A.


 


REVOLVING
LINE OF CREDIT NOTE


 


	
  $1,000,000.00

  	
   

  	
  Boston, Massachusetts

  
	
   

  	
   

  	
  March
          , 2004

  
	
   

  	
   

  	
   

  



 


For value received, the undersigned, MFIC
Corporation and Microfluidics Corporation, both Delaware corporations (each and
together the “Borrower”), hereby
jointly and severally promise to pay ON DEMAND, and if demand is not sooner
made, then as provided in the Loan Agreement (defined below), to the order of
Banknorth, N.A., a national banking association organized and existing under
the laws of the United States of America (the “Bank”), at its main office in Burlington, MA, or at any other
place designated at any time by the holder hereof, in lawful money of the
United States of America and in immediately available funds, the principal sum
of One Million ($1,000,000.00) Dollars or, if less, the aggregate unpaid
principal amount of all Revolving Loans made by Bank to Borrower under the Loan
Agreement, together with interest on the principal amount hereunder remaining
unpaid from time to time, computed on the basis of the actual number of days
elapsed and a 360-day year, from the date hereof until this Note is fully paid
at the rates from time to time in effect under the Loan and Security Agreement
(All Assets) of even date herewith (the “Loan
Agreement”) by and between Bank and Borrower. The principal hereof
and interest accruing thereon shall be due and payable as provided in the Loan
Agreement.


 


This Note may be prepaid at any time without
premium or penalty.


 


This Note is issued pursuant, and is subject,
to the Loan Agreement, which provides, among other things, for acceleration
hereof. This Note is the “Revolving Line of Credit Note” referred to in the
Loan Agreement.


 


This Note is secured, among other things,
pursuant to the Loan Agreement, and may now or hereafter be secured by one or
more other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.


 


Borrower hereby agrees to pay all costs of
collection, including attorneys’ fees and legal expenses in the event this Note
is not paid when due, whether or not legal proceedings are commenced.


 


Presentment or other demand for payment,
notice of dishonor and protest are expressly waived.


 


All rights and obligations hereunder shall be
governed by the laws of the Commonwealth of Massachusetts and this Note shall
be deemed to be under seal.


 


	
  Witness:

  	
  MFIC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Irwin J. Gruverman, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MICROFLUIDICS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Irwin J. Gruverman, Chief Executive Officer

  
					



 


43

















 


EXHIBIT
3


 


NOTICE
OF BORROWING


 


Date:                ,
200    


 


	
  To:

  	
   

  	
  Banknorth, N.A.

  
	
   

  	
   

  	
  7 New England Executive Park

  
	
   

  	
   

  	
  Burlington, Massachusetts 01803

  
	
   

  	
   

  	
   

  



 


Re:          Loan and Security Agreement (All Assets)
dated March        , 2004 (the “Agreement”) between Banknorth, N.A. (the “Bank”) and MFIC Corporation and
Microfluidics Corporation (each and together the “Borrower”)


 


This Notice of Borrowing confirms the
following request for a LIBOR Loan under the Agreement.


 


Date of Request:


 


Date of LIBOR Loan:


 


Amount of LIBOR Loan at LIBOR Rate:
*


 


Interest Period:


 


1, 2 or 3 months


 


The Borrower hereby certifies that all
representations and warranties contained in the Agreement are true and accurate
in all material respects on the date of this Notice of Borrowing as though such
representations and warranties had been made on this date (except to the extent
that such representation or warranty expressly relates to an earlier date).


 


Terms used herein which are defined in the
Agreement are used as so defined.


 


	
   

  	
  MICROFLUIDICS CORPORATION, as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  



 












*              Minimum
of $100,000.00


 


44

















 


EXHIBIT
4


 


COMPLIANCE
CERTIFICATE


 


MFIC Corporation and Microfluidics
Corporation (each and together, the “Borrower”)
hereby certifies to Banknorth, N.A. (“Bank”)
pursuant to the Loan and Security Agreement (All Assets) between Borrower and
Bank dated March       , 2004, as may be amended
from time to time (“Loan Agreement”),
that:


 


A.            General


 


1.             Capitalized terms not defined herein shall
have the meanings set forth in the Loan Agreement.


 


2.             The Borrower has complied with all the
terms, covenants and conditions to be performed or observed by the Borrower
contained in the Loan Agreement and other documents required to be executed by
the Borrower in connection with the Loan Agreement.


 


3.             Neither on the date hereof nor, if
applicable, after giving effect to the loan made on the date hereof, does there
exist an Event of Default or an event which would with notice or the lapse of
time, or both, constitute an Event of Default.


 


4.             The representations and warranties
contained in the Loan Agreement and in any certificate, document or financial
or other statement furnished at any time thereunder are true, correct and
complete in all material respects with the same effect as though such
representations and warranties had been made on the date hereof, except to the
extent that any such representation and warranty relates solely to an earlier
date (in which case such representation and warranty shall be true, correct and
complete on and as of such earlier date).


 


B.            Financial
Covenants


 


As of the date hereof or, for such period as
may be designated below, the computations, ratios and calculations as set forth
below in accordance with Section 13 of the Loan Agreement are true and correct:


 


1              Senior Debt to Tangible Capital Base


 


The Senior Debt of the Borrower as of
                ,
2004 was equal to
              
times the amount of the Borrower’s Tangible Capital Base, computed as follows:


 


	
  A.

  	
   

  	
  Total
  Debt $         

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Subordinated
  Debt  $             

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  A - B = Senior
  Debt $              

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Owner’s Equity $        

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Intangibles $             

  	
   

  	
   

  



 


45

















 


	
  F.

  	
   

  	
  Debt Owing from Employees, Owner and Affiliates
  $        

  
	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  D – E – F = Tangible Net
  Worth $         

  
	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  G + B = Tangible Capital Base $             

  
	
   

  	
   

  	
   

  
	
  Required:

  	
   

  	
  Not more than four (4)
  times $          

  
	
   

  	
   

  	
   

  
	
  C ÷ H =

  	
   

  	
                     times

  



 


2.             Debt Service Coverage Ratio


 


The Debt Service Coverage Ratio of the
Borrower for the twelve (12) month period ending December 31,
200       was
          to 1, computed as
follows:


 


	
  A.

  	
   

  	
  Net Income $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Interest $          

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Depreciation and
  Amortization $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Distributions $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  A + B + C - D $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Interest $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  CMLTD $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  F + G = $        

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  Ratio of E to
  H          to         

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Required:

  	
   

  	
  Not less
  than 1.20 to 1

  	
   

  



 


IN WITNESS WHEREOF, the undersigned, a duly
authorized officer of Borrower, has executed and delivered this Certificate in
the name and on behalf of the Borrower on
                      ,
200      .


 


	
   

  	
  MFIC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MICROFLUIDICS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  



 


 


46