**Exhibit 10.8**

 

** **
|                     | Private Client Group         |
|--------------------------|------------------------------|
|                     |                         |
|                     | **Merrill  Lynch Business**  |
|                     | **Financial  Services Inc.** |
| 222 North LaSalle Street |
| 17th Floor               |
| Chicago, Illinois 60601  |
| (312) 499-3056           |
|                     | FAX: (312) 499-3256          |
|                     |                         |
|                     | April 9, 2002                |

 

 

 

StockerYale,Inc.

32Hampshire Road

Salem,NH 03079

 

**Re:****WCMA Line of Credit Increase andExtension**

 

Ladies & Gentlemen:

 

This Letter Agreement will serve to confirmcertain agreements of Merrill Lynch Business Financial Services Inc.("MLBFS") and StockerYale, Inc. ("Customer") with respectto: (i) that certain **WCMA LOAN AND SECURITY AGREEMENT NO. 794–07E49**betweenMLBFS and Customer (including any previous amendments and extensions thereof),and (ii) all other agreements between MLBFS and Customer in connectiontherewith (collectively, the "Loan Documents"). Capitalized termsused herein and not defined herein shall have the meaning set forth in the LoanDocuments.

 

Subject to the terms hereof, effective as ofthe "Effective Date" (as defined below) the Loan Documents are herebyamended as follows:

 

(a) The "Maturity Date" of the WCMALine of Credit is hereby extended to August 31, 2002.

 

(b) The "Maximum WCMA Line ofCredit" is hereby increased to $3,500,000.00.

 

(c) The "Line Fee" for the periodending August 31, 2002, shall be $10,416.67. Customer hereby authorizes anddirects MLBFS to charge said fee to WCMA Account No. 794–07E49 on or atany time after the Effective Date. Subject to any further change in the WCMALine of Credit and/or other amendment of terms, if the WCMA Line of Credit isrenewed beyond the current Maturity Date, the annual Line Fee during therenewal period shall be $35,000.00.

 

Except as expressly amended hereby, the LoanDocuments shall continue in full force and effect upon all of their terms andconditions.

 

Customer acknowledges, warrants and agrees,as a primary inducement to MLBFS to enter into this Agreement, that: (a) noDefault or Event of Default has occurred and is continuing under the LoanDocuments; (b) each of the warranties of Customer in the Loan Documents aretrue and correct as of the date hereof and shall be deemed remade as of thedate hereof; (c) Customer does not have any claim against MLBFS or any of itsaffiliates arising out of or in connection with the Loan Documents or any othermatter whatsoever; and (d) Customer does not have any defense to payment of anyamounts owing, or any right of counterclaim for any reason under, the LoanDocuments.

 

 

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**The obligations of MLBFS under this Letter Agreement aresubject to its receipt (where applicable) and satisfaction with the following:**

 

**Annual 2001 Fiscal Year End 10–Kstatement.**

 

Provided that no Event of Default, or eventwhich with the giving of notice, passage of time, or both, would constitute anEvent of Default, shall then have occurred and be continuing under the terms ofthe Loan Documents, and the condition specified above shall have been met toour satisfaction, the amendments and agreements in this Letter Agreement willbecome effective on the date (the "Effective Date") upon which: (a)Customer shall have executed and returned the duplicate copy of this LetterAgreement enclosed herewith; and (b) an officer of MLBFS shall have reviewedand approved this Letter Agreement as being consistent in all respects with theoriginal internal authorization hereof.

 

Notwithstanding the foregoing, if Customerdoes not execute and return the duplicate copy of this Letter Agreement within14 days from the date hereof, or if for any other reason (other than the solefault of MLBFS) the Effective Date shall not occur within said 14-day period,then all of said amendments and agreements will, at the sole option of MLBFS,be void.

 

Verytruly yours,

 

**Merrill Lynch Business Financial Services Inc.**

 

 
| By:    | /s/ Jessica Schultz          |
|--------|------------------------------|
|   | Jessica Schultz              |
|   | Senior Relationship  Manager |

 

*Accepted:*

 

**STOCKERYALE, INC.**

 
| By:           | /s/ Francis J. O'Brien                 |
|---------------|----------------------------------------|
| Printed Name: | Francis J. O'Brien                     |
| Title:        | Chief Financial Officer  and Treasurer |
|               |                                        |  |  |

 

 

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|                         | Private Client Group |
|------------------------------|----------------------|
|                         |
| **Merrill  Lynch Business**  |
| **Financial  Services Inc.** |
| 222 North LaSalle Street     |
| 17th Floor                   |
| Chicago, Illinois 60601      |
| (312) 269-1348               |
| FAX: (312) 201-0210          |
|                         |
| May 16, 2001                 |

 

 

 

StockerYale, Inc. f/k/a Stocker & Yale,Inc.

32 Hampshire Road

Salem, NH 03079

 

**Re:  Amendment to LoanDocuments**

** **

Ladies & Gentlemen:

 

This Letter Agreement will serve to confirmcertain agreements of Merrill Lynch Business Financial Services Inc.("MLBFS") and StockerYale, Inc. f/k/a Stocker & Yale, Inc.("Customer") with respect to: (i) that certain **WCMA REDUCING REVOLVER LOAN AND SECURITY AGREEMENT NO.794-07E50** between MLBFS and Customer (including any previousamendments and extensions thereof), and (ii) all other agreements between MLBFSand Customer in connection therewith (collectively, the "Loan Documents").  Capitalized terms used herein and notdefined herein shall have the meaning set forth in the Loan Documents.

 

Subject to the terms hereof, effective as ofthe "Effective Date" (as defined below), the Loan Documents arehereby amended as follows:

 

(a) The term "Interest Rate" shall mean a variable per annum rateof interest equal to the sum of 2.50% and the One-Month LIBOR.  "One-Month LIBOR" shall mean, asof the date of any determination, the interest rate then most recentlypublished in the "Money Rates" section of *The Wall Street Journal* as the one-month London InterbankOffered Rate.  The Interest Rate willchange as of the date of publication in *TheWall Street Journal* of a One-Month LIBOR that is different from thatpublished on the preceding Business Day. In the event that *The Wall StreetJournal* shall, for any reason, fail or cease to publish theOne-Month LIBOR, MLBFS will choose a reasonably comparable index or source touse as the basis for the Interest Rate.

 

Except as expressly amended hereby, the LoanDocuments shall continue in full force and effect upon all of their terms andconditions.

 

Customer acknowledges, warrants and agrees,as a primary inducement to MLBFS to enter into this Agreement, that: (a) noDefault or Event of Default has occurred and is continuing under the LoanDocuments; (b) each of the warranties of Customer in the Loan Documents aretrue and correct as of the date hereof and shall be deemed remade as of thedate hereof; (c) Customer does not have any claim against MLBFS or any of itsaffiliates arising out of or in connection with the Loan Documents or any othermatter whatsoever; and (d) Customer does not have any defense to payment of anyamounts owing, or any right of counterclaim for any reason under, the LoanDocuments.

 

 

 

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Provided that no Event of Default, or eventwhich with the giving of notice, passage of time, or both, would constitute anEvent of Default, shall then have occurred and be continuing under the terms ofthe Loan Documents, the amendments and agreements in this Letter Agreement willbecome effective on the date (the "Effective Date") upon which: (a)Customer shall have executed and returned the duplicate copy of this Letter Agreementand the other document enclosed herewith; and (b) an officer of MLBFS shallhave reviewed and approved this Letter Agreement and said other document asbeing consistent in all respects with the original internal authorizationhereof.

 

Notwithstanding the foregoing, if Customerdoes not execute and return the duplicate copy of this Letter Agreement andsaid other document within 14 days from the date hereof, or if for any otherreason (other than the sole fault of the MLBFS) the Effective Date shall notoccur within said 14-day period, then all of said amendments and agreementswill, at the sole option of MLBFS, be void.

 

Very truly yours,

 

**MerrillLynch Business Financial Services, Inc.**

 

 
| By:    | /s/ Stephanie Sparks          |
|--------|-------------------------------|
|   | Stephanie Sparks              |
|   | Senior Documentation  Manager |

 

*Accepted:*

 

**StockerYale,Inc. f/k/a Stocker & Yale, Inc.**

 

 
| By:           | /s/ Gary B. Godin                  |
|---------------|------------------------------------|
|          |                               |
| Printed Name: | Gary B. Godin                      |
|          |                               |
| Title:        | EVP & Chief Financial  Officer |
|               |                                    |  |  |

 

 

 

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|  | **WCMA® REDUCING REVOLVER**-**LOAN AND SECURITY AGREEMENT** |
|--|------------------------------------------------------------------|

 

**WCMA REDUCING REVOLVERSM LOAN AND SECURITYAGREEMENT NO. 794–07E5O**(“Loan Agreement’) dated asof May 3, 2001, between **STOCKERYALE, INC.****F/K/ASTOCKER & YALE, INC.,**a corporation organized and existing underthe laws of the State of Massachusetts having its principal office at 32Hampshire Road, Salem, NH 03079 ("Customer"), and **MERRILLLYNCH BUSINESS FINANCIAL SERVICES INC.,**a corporation organized andexisting under the laws of the State of Delaware having its principal office at222 North LaSalle Street, Chicago, IL 60601 (“MLBFS”).

 

In accordance with that certain **WORKINGCAPITAL MANAGEMENT®ACCOUNT AGREEMENT NO. 794–07E50**(“WCMA Agreement”) betweenCustomer and MLBFS’ affiliate, **MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED**(“MLPF&S”), Customer has subscribed to the WCMA Programdescribed in the WCMA Agreement. The WCMA Agreement is by this referenceincorporated as a part hereof. In conjunction therewith, Customer has requestedthat MLBFS make a WCMA Reducing Revolver Loan (a "Reducing Revolver")to Customer in the amount and upon the terms hereafter specified, and, subjectto the terms and conditions hereafter set forth, MLBFS has agreed to provide aReducing Revolver for Customer.

 

A Reducing Revolver is a term creditfacility, similar to a conventional term loan, but funded out of a line ofcredit under the WCMA Program ("WCMA Line of Credit") in the amountof the initial loan. With a Reducing Revolver: (i) interest will generally becharged each month to Customer's WCMA account, and, so long as the WCMA Line ofCredit is in effect, paid with an additional loan under the WCMA Line of Credit(i.e., added to the loan balance), (ii) after an initial interest only period,the maximum WCMA Line of Credit will be reduced each month by the amount thatwould be payable on account of principal if the Reducing Revolver were aconventional term loan amortized over the same term and in the same manner asthe Reducing Revolver, and (iii) Customer will be required to make sufficientpayments on account of the Reducing Revolver to assure that the outstandingbalance of the Reducing Revolver does not at any time exceed the Maximum WCMALine of Credit, as reduced each month.

 

Absent a prepayment by Customer, thisstructure results in required monthly payments for the Reducing Revolver thatare substantially the same as the required monthly payments for a conventionalterm loan with the same term and amortization. However, unlike mostconventional term loans, because it is funded out of a line of credit, theReducing Revolver permits both a prepayment in whole or in part at any time,and, subject to certain conditions, the re–borrowing on a revolving basis ofany such prepaid amounts up to the Maximum WCMA Line of Credit, as reduced eachmonth. The structure therefore will enable Customer at its option to use anyexcess or temporary cash balances that it may have from time to time to prepaythe Reducing Revolver and thereby effectively reduce interest expense on theReducing Revolver without impairing its working capital,

 

Accordingly,and in consideration of the premises and of the mutual covenants of the partieshereto. Customer and MLBFS hereby agree as follows:

 

**Article I. DEFINITIONS**

 

1.1  **Specific Terms.**  In addition to terms defined elsewhere in this Loan Agreement,when used herein the following terms shall have the following meanings:

 

(a)"Account Debtor" shall mean any party who is or may become obligatedwith respect to an Account or Chattel Paper.

 

(b) "Additional Agreements" shallmean all agreements, instruments, documents and opinions other than this LoanAgreement, whether with or from Customer or any other party, which arecontemplated hereby or otherwise reasonably required by MLBFS in connectionherewith, or which evidence the creation, guaranty or collateralization of anyof the Obligations or the granting or perfection of liens or security interestsupon the Collateral or any other collateral for the Obligations.

 

(c) "Bankruptcy Event" shall meanany of the following: (i) a proceeding under any bankruptcy, reorganization,arrangement, insolvency, readjustment of debt or receivership law or statuteshall be filed or consented to by Customer; or (ii) any such proceeding shallbe filed against Customer and shall not be dismissed or withdrawn within sixty(60) days after filing; or (iii) Customer shall make a general assignment forthe benefit of creditors; or (iv) Customer shall generally fail to pay or admitin writing its inability to pay its debts as they become due; or (v) Customershall be adjudicated a bankrupt or insolvent.

 

(d) "Business Day" shall mean anyday other than a Saturday, Sunday, federal holiday or other day on which theNew York Stock Exchange is regularly closed.

 

(e) "Closing Date" shall mean thedate upon which all conditions precedent to MLBFS’ obligation to make the Loanshall have been met to the satisfaction of MLBFS.

 

(f) "Collateral" shall mean allAccounts, Chattel Paper, Contract Rights, Inventory, Equipment, Fixtures,General Intangibles, Deposit Accounts, Documents, Instruments, InvestmentProperty and Financial Assets of Customer, howsoever arising, whether now ownedor existing or hereafter acquired or arising, and wherever located; togetherwith all parts thereof (including spare parts), all accessories and accessionsthereto, all books and records (including computer records) directly relatedthereto, all proceeds thereof (including, without limitation, proceeds in theform of Accounts and insurance proceeds), and the additional collateraldescribed in Section 4.6 (b) hereof.

 

(g) "Commitment Expiration Date"shall mean June 2, 2001.

 

(h) "Commitment Fee" shall mean afee of $43,750.00 due to MLBFS in connection with this Loan Agreement.

 

 

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(i) "Default" shall mean either an"Event of Default" as defined in Section 4.5 hereof, or an eventwhich with the giving of notice, passage of time, or both, would constitutesuch an Event of Default.

 

(j) "General Funding Conditions"shall mean each of the following conditions precedent to the obligation ofMLBFS to make the Loan or any Subsequent WCMA Loan hereunder: (i) Customershall have validly subscribed to and continued to maintain the WCMA Accountwith MLPF&S, and the WCMA Account shall then be reflected as an active "Commercial"WCMA Account (i.e., one with line of credit capabilities) on MLPF&S’ WCMAcomputer system; (ii) no Default shall have occurred and be continuing or wouldresult from the making of the Loan or such Subsequent WCMA Loan by MLBFS; (iii)there shall not have occurred and be continuing any material adverse change inthe business or financial condition of Customer; (iv) all representations andwarranties of Customer herein or in any Additional Agreements shall then betrue and correct in all material respects; (v) MLBFS shall have received thisLoan Agreement and all Additional Agreements, duly executed and filed orrecorded where applicable, all of which shall be in form and substancereasonably satisfactory to MLBFS; (vi) the Commitment Fee shall have been paidin full; (vii) MLBFS shall have received, as and to the extent applicable,copies of invoices, bills of sale, loan payoff letters and/or other evidencereasonably satisfactory to it that the proceeds of the Loan will satisfy theLoan Purpose; (viii) MLBFS shall have received evidence reasonably satisfactoryto it as to the ownership of the Collateral and the perfection and priority ofMLBFS' liens and security interests thereon, as well as the ownership of andthe perfection and priority of MLBFS’ liens and security interests on any othercollateral for the Obligations furnished pursuant to any of the AdditionalAgreements; (ix) MLBFS shall have received evidence reasonably satisfactory toit of the insurance required hereby or by any of the Additional Agreements; and(x) any additional conditions specified in the "WCMA Reducing RevolverLoan Approval" letter executed by MLBFS with respect to the transactionscontemplated hereby shall have been met to the reasonable satisfaction of MLBFS.

 

(k)"Interest Due Date" shall mean the last Business Day of each calendarmonth during the term hereof (or, if Customer makes special arrangements withMLPF&S, on the last Friday of each calendar month during the term hereof).

 

(1) "Interest Rate" shall mean a variable per annum rateequal to the sum of (i) 2.50% per annum, and (ii) the interest rate from timeto time published in the "Money Rates" section of *The Wall Street Journal* as the"LIBOR" rate for 30-day high-grade unsecured notes sold throughdealers by major corporations (the "Rate"). The Interest Rate willchange as of the date of publication in *TheWall Street Journal* of a Rate that is different from that publishedon the preceding Business Day. In the event that *The Wall Street Journal* shall, for any reason, fail or ceaseto publish the Rate, MLBFS will choose a reasonably comparable index or sourceto use as the basis for the Interest Rate.

 

(m) "Loan" shall mean the specificReducing Revolver by MLBFS to Customer pursuant to this Agreement for the LoanPurpose and in the Loan Amount.

 

(n) "Loan Amount" shall mean anamount equal to the lesser of: (i) 100% of the amount required by Customer tosatisfy or fulfill the Loan Purpose, (ii) the aggregate amount which Customershall request be advanced by MLBFS on account of the Loan Purpose on theClosing Date, or (iii) $3,500,000.00.

 

(o) "Loan Purpose" shall mean thepurpose for which the proceeds of the Loan will be used; to wit: to refinancethe existing term note at Wells Fargo Bank and to purchase additionalequipment.

 

(p) "Location of TangibleCollateral" shall mean the address of Customer set forth at the beginningof this Loan Agreement, together with any other address or addresses set forthon an exhibit hereto as being a Location of Tangible Collateral.

 

(q) "Maximum WCMA Line of Credit"shall mean the maximum aggregate line of credit which MLBFS will extend toCustomer subject to the terms and conditions hereof, as the same shall bereduced each month in accordance with the terms hereof. On the Closing Date,the Maximum WCMA Line of Credit will equal the Loan Amount.

 

(r) "Obligations" shall mean allliabilities, indebtedness and other obligations of Customer to MLBFS, howsoevercreated, arising or evidenced, whether now existing or hereafter arising,whether direct or indirect, absolute or contingent, due or to become due,primary or secondary or joint or several, and, without limiting the foregoing,shall include interest accruing after the filing of any petition in bankruptcy,and all present and future liabilities, indebtedness and obligations ofCustomer under this Loan Agreement.

 

(s) "Permitted Liens" shall meanwith respect to the Collateral: (i) liens for current taxes not delinquent,other non-consensual liens arising in the ordinary course of business for sumsnot due, and, if MLBFS’ rights to and interest in the Collateral are notmaterially and adversely affected thereby, any such liens for taxes or othernon-consensual liens arising in the ordinary course of business being contestedin good faith by appropriate proceedings; (ii) liens in favor of MLBFS; (iii)liens which will be discharged with the proceeds of the initial WCMA Loan; and(iv) any other liens expressly permitted in writing by MLBFS.

 

(t) "Subsequent WCMA Loan" shallmean each WCMA Loan other than the Loan, including, without limitation, eachWCMA Loan to pay accrued interest.

 

(u) "Termination Date" shall meanthe first to occur of: (i) the last Business Day of the sixty-third (63rd) fullcalendar month following the Closing Date, or (ii) if earlier, the date oftermination of the WCMA Line of Credit pursuant to the terms hereof.

 

(v)"WCMA Account" shall mean and refer to the Working Capital ManagementAccount of Customer with MLPF&S identified as WCMA Account No. 794–07E50and any successor Working Capital Management Account of Customer withMLPF&S.

 

(w) "WCMA Loan" shall mean eachadvance made by MLBFS pursuant to the WCMA Line of Credit, including the Loanand each Subsequent WCMA Loan.

 

(x) "WCMA Loan Balance" shall mean anamount equal to the aggregate unpaid principal balance of all WCMA Loans.

 

1.2 **Other Terms.**  Except as otherwisedefined herein: (i) all terms used in this Loan Agreement which are defined inthe Uniform Commercial Code of Illinois (“UCC”) shall have the meanings setforth in the UCC, and (ii) capitalized terms used herein which are defined inthe WCMA Agreement (including,

 

 

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without limitation, "MoneyAccounts", "Minimum Money Accounts Balance", "WCMA DirectedReserve Program" and "WCMA Program") shall have the meanings setforth in the WCMA Agreement.

 

**Article II. THE LOAN**

 

2.1 **Commitment.**  Subject to the terms andconditions hereof, MLBFS hereby agrees to make the Loan to Customer, andCustomer hereby agrees to borrow the Loan from MLBFS. Except as otherwiseprovided in Section 3.1 hereof, the entire proceeds of the Loan will bedisbursed by MLBFS out of the WCMA Line of Credit either directly to theapplicable third party or parties on account of the Loan Purpose or toreimburse Customer for amounts directly expended by it for the Loan Purpose;all as directed by Customer in a Closing Certificate to be executed anddelivered to MLBFS prior to the date of funding.

 

2.2 **Conditionsof MLBFS’ Obligation.**  TheClosing Date and MLBFS’ obligations to activate the WCMA Line of Credit, ashereafter set forth, and make the Loan on the Closing Date are subject to theprior fulfillment of each of the following conditions: (a) not less than twoBusiness Days prior to any requested funding date, MLBFS shall have received aClosing Certificate, duly executed by Customer, setting forth, among otherthings, the amount of the Loan and the method of payment and payee(s) of theproceeds thereof; (b) after giving effect to the Loan, the WCMA Loan Balancewill not exceed either the Maximum WCMA Line of Credit or the Loan Amount; (c)the Commitment Expiration Date shall not then have occurred; and (d) each ofthe General Funding Conditions shall then have been met or satisfied to thereasonable satisfaction of MLBFS.

 

2.3 **CommitmentFee.**  In consideration of theagreement by MLBFS to extend the Loan and any Subsequent WCMA Loans to Customerin accordance with and subject to the terms hereof, Customer has paid or shall,on or before the Closing Date pay, the Commitment Fee to MLBFS. Customeracknowledges and agrees that the Commitment Fee has been fully earned by MLBFS,and that it will not under any circumstances be refundable.

 

2.4 **Use ofLoan Proceeds.**  Unlessotherwise agreed by MLBFS in writing, the proceeds of the Loan shall be usedsolely for the Loan Purpose. The Proceeds of each Subsequent WCMA Loaninitiated by Customer shall be used by Customer solely for working capital inthe ordinary course of its business, or, with the prior written consent ofMLBFS, for other lawful business purposes of Customer not prohibitedhereby.  **Customer agrees that under no circumstances will the proceeds of the Loanor any Subsequent WCMA Loan be used: (i) for personal, family or household purposesof any person whatsoever, or (ii) to purchase, carry or trade in securities, orrepay debt incurred to purchase, carry or trade in securities, whether in or inconnection with the WCMA Account, another account of Customer with MLPF&Sor an account of Customer at any other broker or dealer in securities, or (iii)unless otherwise consented to in writing by MLBFS, to pay any amount to MerrillLynch and Co., Inc. or any of its subsidiaries, other than Merrill Lynch BankUSA, Merrill Lynch Bank & Trust Co. or any subsidiary of either of them(including MLBFS and Merrill Lynch Credit Corporation).**

 

**Article III. THE WCMA LINE OF CREDIT**

 

3.1 **Activationof the WCMA Line of Credit.** Subject to the terms and conditions hereof, on the Closing Date MLBFSwill activate a WCMA Line of Credit for Customer in the Loan Amount.  The Loan will be funded out of the WCMA Lineof Credit immediately after such activation (or, if and to the extent otherwiseexpressly contemplated in the definition of Loan Purpose or otherwise directedin the Closing Certificate and hereafter expressly agreed by MLBFS, all or partof the Loan may be made available as a WCMA Line of Credit and funded byCustomer.)

 

3.2 **SubsequentWCMA Loans.**  Subject to theterms and conditions hereof, during the period from and after the Closing Dateto the Termination Date: (a) Customer may repay the WCMA Loan Balance in wholeor in part at any time without premium or penalty (except, as hereafter setforth, upon a refinancing by another lender), and request a re-borrowing ofamounts repaid on a revolving basis, and (b) in addition to Subsequent WCMALoans made automatically to pay accrued interest, as hereafter provided, MLBFSwill make such Subsequent WCMA Loans as Customer may from time to time requestor be deemed to have requested in accordance with the terms hereof. Customermay request Subsequent WCMA Loans by use of WCMA Checks, FTS, Visa® charges,wire transfers, or such other means of access to the WCMA Line of Credit as maybe permitted by MLBFS from time to time; it being understood that so long asthe WCMA Line of Credit shall be in effect, any charge or debit to the WCMAAccount which but for the WCMA Line of Credit would under the terms of the WCMAAgreement result in an overdraft, shall be deemed a request by Customer for aSubsequent WCMA Loan.

 

3.3 **Conditions of Subsequent WCMA Loans. **Notwithstanding the foregoing,MLBFS shall not be obligated to make any Subsequent WCMA Loan, and may withoutnotice refuse to honor any such request by Customer, if at the time of receiptby MLBFS of Customer's request: (a) the making of such Subsequent WCMA Loanwould cause the Maximum WCMA Line of Credit, as reduced pursuant to theprovisions of Section 3.6 hereof, to be exceeded; or (b) the Termination Date shallhave occurred; or (c) an event shall have occurred and be continuing whichshall have caused any of the General Funding Conditions to not then be met orsatisfied to the reasonable satisfaction of MLBFS. The making by MLBFS of anySubsequent WCMA Loan (including, without limitation, the making of a SubsequentWCMA Loan to pay accrued interest or late charges, as hereafter provided) at atime when any one or more of said conditions shall not have been met shall notin any event be construed as a waiver of said condition or conditions or of anyDefault, and shall not prevent MLBFS at any time thereafter while any conditionshall not have been met from refusing to honor any request by Customer for aSubsequent WCMA Loan.

 

3.4**WCMA Note. **Customer hereby promises topay to the order of MLBFS, at the times and in the manner set forth in thisLoan Agreement, or in such other manner and at such place as MLBFS mayhereafter designate in writing: (a) the WCMA Loan Balance; (b) interest at theInterest Rate on the outstanding WCMA Loan Balance (computed for the actualnumber of days elapsed on the basis of a year consisting of 360 days), from andincluding the date on which the Loan is made until the date of payment of allWCMA Loans in full; and (c) on demand, all other sums payable pursuant to thisLoan Agreement, including, but not limited to, any late charges. Except asotherwise expressly set forth herein, Customer hereby waives presentment,demand for payment, protest and notice of protest, notice of dishonor, noticeof acceleration, notice of intent to accelerate and all other notices andformalities in connection with this WCMA Note and this Loan Agreement.

 

 

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3.5 **Interest.**  (a) An amount equal to accrued interest onthe WCMA Loan Balance shall be payable by Customer monthly on each Interest DueDate, commencing with the Interest Due Date occurring in the calendar month inwhich the Closing Date shall occur. Unless otherwise hereafter directed inwriting by MLBFS on or after the Termination Date, such interest will beautomatically charged to the WCMA Account on the applicable Interest Due Date,and, to the extent not paid with free credit balances or the proceeds of salesof any Money Accounts then in the WCMA Account, as hereafter provided, suchinterest will be paid by a Subsequent WCMA Loan and added to the WCMA LoanBalance. All Interest shall be computed for the actual number of days elapsedon the basis of a year consisting of 360 days.

 

(b) Notwithstanding any provision to thecontrary in this Agreement or any of the Additional Agreements, no provision ofthis Agreement or any of the Additional Agreements shall require the payment orpermit the collection of any amount in excess of the maximum amount of interestpermitted to be charged by law ("Excess Interest"). If any ExcessInterest is provided for, or is adjudicated as being provided for, in thisAgreement or any of the Additional Agreements, then: (i) Customer shall not beobligated to pay any Excess Interest; and (ii) any Excess Interest that MLBFSmay have received hereunder or under any of the Additional Agreements shall, atthe option of MLBFS, be either applied as a credit against the then WCMA LoanBalance, or refunded to the payer thereof.

 

3.6 **PeriodicReduction of Maximum WCMA Line of Credit.**  Commencing on the last Business Day of the fourth (4th) fullcalendar month following the Closing Date, and continuing on the last BusinessDay of each calendar month thereafter to and including the last Business Day ofthe sixty-second (62nd) such calendar month, the Maximum WCMA Line of Creditshall be reduced by an amount equal to one-eighty-fourth (1/84th) of the LoanAmount per month. Unless the WCMA Line of Credit shall have been earlierterminated pursuant to the terms hereof, on the last Business Day of thesixty-third (63rd) such calendar month, the WCMA Line of Credit shall, withoutfurther action of either of the parties hereto, be terminated, Customer shallpay to MLBFS the entire WCMA Loan Balance, if any, and all other Obligations,and the WCMA Account, at the option of Customer, will either be converted to aWCMA Cash Account (subject to any requirements of MLPF&S) or terminated. Nofailure or delay on the part of MLBFS in entering into the WCMA computer systemany scheduled reduction in the Maximum WCMA Line of Credit pursuant to thisSection shall have the effect of preventing or delaying such reduction.

 

3.7 **MandatoryPayments.**** CUSTOMERAGREES THAT IT WILL, WITHOUT DEMAND, INVOICING OR THE REQUEST OF MLBFS, FROMTIME TO TIME MAKE SUFFICIENT PAYMENTS ON ACCOUNT OF THE WCMA LOAN BALANCE TOASSURE THAT THE WCMA LOAN BALANCE WILL NOT AT ANY TIME EXCEED THE MAXIMUM WCMALIKE OF CREDIT, AS REDUCED EACH MONTH PURSUANT TO SECTION 3.6 HEREOF.**

 

3.8**Method of Making Payments. **All payments required orpermitted to be made pursuant to this Loan Agreement shall be made in lawfulmoney of the United States. Unless otherwise hereafter directed by MLBFS, suchpayments may be made by the delivery of checks (other than WCMA Checks), or bymeans of FTS or wire transfer of funds (other than funds from the WCMA Line ofCredit) to MLPF&S for credit to the WCMA Account. Payments to MLBFS fromfunds in the WCMA Account shall be deemed to be made by Customer upon the samebasis and schedule as funds are made available for investment in the MoneyAccounts in accordance with the terms of the WCMA Agreement. The acceptance byor on behalf of MLBFS of a check or other payment for a lesser amount thanshall be due from Customer, regardless of any endorsement or statement thereonor transmitted therewith, shall not be deemed an accord and satisfaction oranything other than a payment on account, and MLBFS or anyone acting on behalfof MLBFS may accept such check or other payment without prejudice to the rightsof MLBFS to recover the balance actually due or to pursue any other remedyunder this Loan Agreement or applicable law for such balance. All checksaccepted by or on behalf of MLBFS in connection with this Loan Agreement aresubject to final collection.

 

3.9 **Irrevocable Instructions to MLPF&S. **In order to minimize the WCMALoan Balance, Customer hereby irrevocably authorizes and directs MLPF&S,effective on the Closing Date and continuing thereafter so long as this Agreementshall be in effect: (a) to immediately and prior to application for any otherpurpose pay to MLBFS to the extent of any WCMA Loan Balance or other amountspayable by Customer hereunder all available free credit balances from time totime in the WCMA Account; and (b) if such available free credit balances areinsufficient to pay the WCMA Loan Balance and such other amounts, and there arein the WCMA Account at any time any investments in Money Accounts (other thanany investments constituting any Minimum Money Accounts Balance under the WCMADirected Reserve Program), to immediately liquidate such investments and pay toMLBFS to the extent of any WCMA Loan Balance and such other amounts theavailable proceeds from the liquidation of any such Money Accounts.

 

3.10 **LateCharge.**  Any payment ordeposit required to be made by Customer pursuant to this Loan Agreement or anyof the Additional Agreements not paid or made within ten (10) days of theapplicable due date shall be subject to a late charge in an amount equal to thelesser of: (a) 5% of the overdue amount, or (b) the maximum amount permitted byapplicable law. Such late charge shall be payable on demand, or*,*without demand, may in the solediscretion of MLBFS be paid by a Subsequent WCMA Loan and added to the WCMA Loan Balance in thesame manner as provided herein for accrued interest with respect to the WCMALine of Credit.

 

3.11 **Prepayment.**  Customer may prepay the Loan and anySubsequent WCMA Loan at any time in whole or in part without premium or penalty;provided, however, that any refinancing of the WCMA Loan Balance by anotherfinancial institution shall: (a) if such refinancing shall occur prior to thefirst anniversary of the Closing Date, be accompanied by a premium in an amountequal to 3% of the amount prepaid by such refinancing; (b) if such refinancingshall occur thereafter, but prior to the second anniversary of the ClosingDate, be accompanied by a premium in an amount equal to 2% of the amountprepaid by such refinancing; and (c) if such refinancing shall occur on or atany time after the second anniversary of the Closing Date, be accompanied by apremium in an amount equal to 1% of the amount prepaid by such refinancing.

 

3.12 **Optionof Customer to Terminate.** Customer will have the option to terminate the WCMA Line of Credit atany time upon written notice to MLBFS. Concurrently with any such termination,Customer shall pay to MLBFS the entire WCMA Loan Balance and all otherObligations.

 

3.13 **Limitationof Liability.**  MLBFS shallnot be responsible, and shall have no liability to Customer or any other party,for any delay or failure of MLBFS to honor any request of Customer for a WCMALoan or any other act or omission of MLBFS, MLPF&S or any of theiraffiliates due to or resulting from any system failure, error or delay inposting or other clerical error, loss of power, fire, Act of God or other causebeyond the reasonable control of MLBFS, MLPF&S or any of their affiliatesunless directly arising out of the willful wrongful act or active grossnegligence of MLBFS. In no event shall MLBFS be liable

 

 

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to Customer or any other party for anyincidental or consequential damages arising from any act or omission by MLBFS,MLPF&S or any of their affiliates in connection with the WCMA Line ofCredit or this Loan Agreement.

 

3.14 **Statements.**MLPF&S Y411 include in eachmonthly statement it issues under the WCMA Program information with respect toWCMA Loans and the WCMA Loan Balance. Any questions that Customer may have withrespect to such information or the Loan should be directed to MLBFS; and anyquestions with respect to any other matter in such statements or about oraffecting the WCMA Program should be directed to MLPF&S.

 

**Article IV.GENERAL PROVISIONS**

 

4.1**Representations and Warranties.**

 

Customer represents and warrants to MLBFSthat:

 

(a) **Organization and Existence. **Customer is a corporation, duly organized and validlyexisting in good standing under the laws of the State of Massachusetts and isqualified to do business and in good standing in each other state where thenature of its business or the property owned by it make such qualificationnecessary.

 

(b) **Execution, Delivery and Performance. **The execution, delivery andperformance by Customer of this Loan Agreement and such of the AdditionalAgreements to which it is a party: (i) have been duly authorized by allrequisite action, (ii) do not and will not violate or conflict with any law orother governmental requirement, or any of the agreements, instruments ordocuments which formed or govern Customer, and (iii) do not and will not breachor violate any of the provisions of, and will not result in a default byCustomer under, any other agreement, instrument or document to which it is a partyor by which it or its properties are bound.

 

(c) **Notices and Approvals. **Except as may have been given or obtained, no noticeto or consent or approval of any governmental body or authority or other thirdparty whatsoever (including, without limitation, any other creditor) isrequired in connection with the execution, delivery or performance by Customerof such of this Loan Agreement and the Additional Agreements to which it is aparty.

 

(d) **Enforceability. **This Loan Agreement and such of the Additional Agreements towhich Customer is a party are the legal, valid and binding obligations ofCustomer, enforceable against it in accordance with their respective terms,except as enforceability may be limited by bankruptcy and other similar lawsaffecting the rights of creditors generally or by general principles of equity.

 

(e) **Collateral. **Exceptfor any Permitted Liens: (i) Customer has good and marketable title to theCollateral, (ii) none of the Collateral is subject to any lien, encumbrance orsecurity interest, and (iii) upon the filing of all Uniform Commercial Codefinancing statements executed by Customer with respect to the Collateral in theappropriate jurisdiction(s) and/or the completion of any other action requiredby applicable law to perfect its liens and security interests, MLBFS will havevalid and perfected first liens and security interests upon all of theCollateral.

 

(f) **Financial Statements. **Except as expressly set forth in Customer's financialstatements, all financial statements of Customer furnished to MLBFS have beenprepared in conformity with generally accepted accounting principles,consistently applied, are true and correct in all material respects, and fairlypresent the financial condition of it as at such dates and the results of itsoperations for the periods then ended (subject, in the case of interimunaudited financial statements, to normal year-end adjustments); and since themost recent date covered by such financial statements, there has been nomaterial adverse change in any such financial condition or operation.

 

(g) **Litigation. **Nolitigation, arbitration, administrative or governmental proceedings are pendingor, to the knowledge of Customer, threatened against Customer, which would, ifadversely determined, materially and adversely affect the liens and securityinterests of MLBFS hereunder or under any of the Additional Agreements, thefinancial condition of Customer or the continued operations of Customer.

 

(h) **Tax Returns. **Allfederal, state and local tax returns, reports and statements required to befiled by Customer have been filed with the appropriate governmental agenciesand all taxes due and payable by Customer have been timely paid (except to theextent that any such failure to file or pay will not materially and adverselyaffect either the liens and security interests of MLBFS hereunder or under anyof the Additional Agreements, the financial condition of Customer, or thecontinued operations of Customer).

 

(i) **Collateral Location. **All of the tangible Collateral is located at a Location ofTangible Collateral.

 

(j) **No Outside Broker. **Except for employees of MLBFS, MLPF&S or one of theiraffiliates, Customer has not in connection with the transactions contemplatedhereby directly or indirectly engaged or dealt with, and was not introduced orreferred to MLBFS by, any broker or other loan arranger.

 

Each of the foregoing representations andwarranties: (i) has been and will be relied upon as an inducement to MLBFS tomake the Loan and each Subsequent WCMA Loan, and (ii) is continuing and shallbe deemed remade by Customer on the Closing Date, and concurrently with eachrequest by Customer for a Subsequent WCMA Loan.

 

 

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4.2 **Financial and Other Information.**

 

(a) Customer shall furnish or cause to befurnished to MLBFS during the term of this Loan Agreement all of the following:

 

(i) **Annual Financial Statements. **Within 120 days after the close of each fiscal year ofCustomer, a copy of the annualaudited financial statements of Customer, including in reasonable detail, abalance sheet and statement of retained earnings as at the close of such fiscalyear and statements of profit and loss and cash flow for such fiscal year;

 

(ii) **Interim Financial Statements. **Within 45 days after the close ofeach fiscal quarter of**Customer,a copy of the interim financial statements of Customer for such fiscal quarter(including in reasonable detail both a balance sheet as of the close of such fiscal period, and statement of profit andloss for the applicable fiscal period);

 

(iii) **A/RAgings.**  Within 45 days afterthe close of each fiscal quarter of Customer, a copy of the Accounts ReceivableAging of Customer as of the endof such fiscal quarter;

 

(iv) **Inventory Reports. **Within 45 days after the close of each fiscal quarter ofCustomer, a copy of**theInventory Report (as and to the extent applicable, breaking out Inventory bylocation, and separately reporting any work in process) of Customer as of theend of such fiscal quarter; and

 

(v) **OtherInformation.**  Such otherinformation as MLBFS may from time to time reasonably request relating toCustomer or the Collateral.

 

(b) **General Agreements With Respect to FinancialInformation. **Customer agreesthat except as otherwise specified herein or otherwise agreed to in writing byMLBFS: (i) all annual financial statements required to be furnished by Customerto MLBFS hereunder will be prepared by either the current independentaccountants for Customer or other independent accountants reasonably acceptableto MLBFS, and (ii) all other financial information required to be furnished byCustomer to MLBFS hereunder will be certified as correct in all materialrespects by the party who has prepared such information, and, in the case ofinternally prepared information with respect to Customer, certified as correctby its chief financial officer.

 

4.3 **OtherCovenants.**  Customer furthercovenants and agrees during the term of**thisLoan Agreement that:

 

(a) **Financial Records; Inspection. **Customer will: (i) maintain atits principal place of businesscomplete and accurate books and records, and maintain all of**its financial records in a mannerconsistent with the financial statements heretofore furnished to MLBFS, orprepared on such other basis as may be approved in writing by MLBFS; and (ii)permit MLBFS or its duly authorized representatives, upon reasonable notice andat reasonable times, to inspect its properties (both real and personal),operations, books and records.

 

(b) **Taxes.**  Customer will pay when due all taxes,assessments and other governmental charges, howsoever designated, and all otherliabilities and obligations, except to the extent that any such failure to paywill not materially and adversely affect either the liens and security interestsof MLBFS hereunder or under any of**theAdditional Agreements, the financial condition of Customer or the continuedoperations of Customer.

 

(c) **ComplianceWith Laws and Agreements.** Customer will not violate any law, regulation or other governmentalrequirement, any judgment or order of any court or governmental agency orauthority, or any agreement, instrument or document to which it is a party orby which it is bound, if any such violation will materially and adverselyaffect either the liens and security interests of MLBFS hereunder or under any of**the Additional Agreements, or thefinancial condition or the continued operations of Customer.

 

(d) **No Use of Merrill Lynch Name. **Customer will not directly orindirectly publish, disclose or otherwise use in any advertising or promotionalmaterial, or press release or interview, the name, logo or any trademark ofMLBFS, MLPF&S, Merrill Lynch and Co., Incorporated or any of theiraffiliates.

 

(e) **NotificationBy Customer.**  Customer shallprovide MLBFS with prompt written notification of: (i)**any Default; (ii) any materially adversechange in the business, financial condition or operations of Customer; (iii)any information which indicates that any financial statements of Customer failin any material respect to present fairly the financial condition and resultsof operations purported to be presented in such statements; and (iv) any changein Customer's outside accountants. Each notification by Customer pursuanthereto shall specify the event or information causing such notification, and,to the extent applicable, shall specify the steps being taken to rectify orremedy such event or information.

 

(f) **Noticeof Change.**  Customer shallgive MLBFS not less than 30 days prior written notice of any change in the name(including any fictitious name) or principal place of business or residence ofCustomer.

 

(g) **Continuity. **Exceptupon the prior written consent of MLBFS, which consent will not be unreasonablywithheld: (i) Customer shall not be a party to any merger or consolidationwith, or purchase or otherwise acquire all or substantially all of the assetsof, or any material stock, partnership, joint venture or other equity interestin, any person or entity, or sell, transfer or lease all or any substantial partof its assets, if any such action would result in either: (A) a material changein the principal business, ownership or control of Customer, or (B) a materialadverse change in the financial condition or operations of Customer; (ii)Customer shall preserve its existence and good standing in the jurisdiction(s)of establishment and operation; (iii) Customer shall not engage in any materialbusiness substantially different from its business in effect as of the date ofapplication by Customer for credit from MLBFS, or cease operating any suchmaterial business; (iv) Customer shall not cause or permit any other person orentity to assume or succeed to any material business or operations of Customer;and (v) Customer shall not cause or permit any material change in itscontrolling ownership.

 

(h) **Minimum Tangible Net Worth. **As of December 31, 2000, Customer's "tangible networth" shall at all times exceed $7,750,000.00. For the purposes hereof,the term "tangible net worth" shall mean Customer's net worth as shownon Customer’s regular financial statements prepared in a manner consistent

 

 

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with the terms hereof, but excluding anamount equal to (i) any assets which are ordinarily classified as"intangible" in accordance with generally accepted accountingprinciples, and (ii) any amounts now or hereafter directly or indirectly owingto Customer by officers, shareholders or affiliates of Customer.

 

4.4**Collateral**

 

(a) **Pledge of Collateral. **To secure payment and performance of the Obligations,Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grantsto MLBFS first liens and security interests in and upon all of the Collateral,subject only to Permitted Liens.

 

(b) **Liens.**  Except upon the prior written consent ofMLBFS, Customer shall not create or permit to exist any lien, encumbrance orsecurity interest upon or with respect to any Collateral now owned or hereafteracquired other than Permitted Liens.

 

(c) **Performance of Obligations. **Customer shall perform all of its obligations owing onaccount of or with respect to the Collateral; it being understood that nothingherein, and no action or inaction by MLBFS, under this Loan Agreement orotherwise, shall be deemed an assumption by MLBFS of any of Customer's saidobligations.

 

(d) **Sales and Collections. **So long as no Event of Default shall have occurred andbe continuing, Customer may in the ordinary course of its business: (i) sellany Inventory normally held by Customer for sale, (ii) use or consume anymaterials and supplies normally held by Customer for use or consumption, and(iii) collect all of its Accounts. Customer shall take such action with respectto protection of its Inventory and the other Collateral and the collection ofits Accounts as MLBFS may from time to time reasonably request.

 

(e) **Account Schedules. **Upon the request of MLBFS, made now or at any reasonable timeor times hereafter, Customer shall deliver to MLBFS, in addition to the otherinformation required hereunder, a schedule identifying, for each Account andall Chattel Paper subject to MLBFS’ security interests hereunder, each AccountDebtor by name and address and amount, invoice or contract number and date ofeach invoice or contract. Customer shall furnish to MLBFS such additionalinformation with respect to the Collateral, and amounts received by Customer asproceeds of any of the Collateral, as MLBFS may from time to time reasonablyrequest.

 

(f) **Alterations and Maintenance. **Except upon the prior written consent of MLBFS,Customer shall not make or permit any material alterations to any tangibleCollateral which might materially reduce or impair its market value or utility.Customer shall at all times keep the tangible Collateral in good condition andrepair, reasonable wear and tear excepted, and shall pay or cause to be paidall obligations arising from the repair and maintenance of such Collateral, aswell as all obligations with respect to each Location of Tangible Collateral,except for any such obligations being contested by Customer in good faith byappropriate proceedings.

 

(g) **Location. **Exceptfor movements required in the ordinary course of Customer's business, Customershall give MLBFS 30 days’ prior written notice of the placing at or movement ofany tangible Collateral to any location other than a Location of TangibleCollateral. In no event shall Customer cause or permit any material tangibleCollateral to be removed from the United States without the express priorwritten consent of MLBFS.

 

(h) **Insurance. **Customershall insure all of the tangible Collateral under a policy or policies ofphysical damage insurance providing that losses will be payable to MLBFS as itsinterests may appear pursuant to a Lender’s Loss Payable Endorsement andcontaining such other provisions as may be reasonably required by MLBFS.Customer shall further provide and maintain a policy or policies ofcomprehensive public liability insurance naming MLBFS as an additional partyinsured. Customer shall maintain such other insurance as may be required by lawor is customarily maintained by companies in a similar business or otherwisereasonably required by MLBFS. All such insurance policies shall provide thatMLBFS will receive not less than 10 days prior written notice of any cancellation,and shall otherwise be in form and amount and with an insurer or insurersreasonably acceptable to MLBFS. Customer shall furnish MLBFS with a copy orcertificate of each such policy or policies and, prior to any expiration orcancellation, each renewal or replacement thereof.

 

(i) **Event of Loss. **Customer shall at its expense promptly repair all repairabledamage to any tangible Collateral. In the event that any tangible Collateral isdamaged beyond repair, lost, totally destroyed or confiscated (an "Eventof Loss") and such Collateral had a value prior to such Event of Loss of$25,000.00 or more, then, on or before the first to occur of (i) 90 days afterthe occurrence of such Event of Loss, or (ii) 10 Business Days after the dateon which either Customer or MLBFS shall receive any proceeds of insurance onaccount of such Event of Loss, or any underwriter of insurance on suchCollateral shall advise either Customer or MLBFS that it disclaims liability inrespect of such Event of Loss, Customer shall, at Customer's option, eitherreplace the Collateral subject to such Event of Loss with comparable Collateralfree of all liens other than Permitted Liens (in which event Customer shall beentitled to utilize the proceeds of insurance on account of such Event of Lossfor such purpose, and may retain any excess proceeds of such insurance), orpermanently prepay the Loan by an amount equal to the actual cash value of suchCollateral as determined by either the insurance company’s payment (plus anyapplicable deductible) or, in absence of insurance company payment, asreasonably determined by MLBFS; it being further understood that any suchpermanent prepayment shall be accompanied by a like permanent reduction in theMaximum WCMA Line of Credit. Notwithstanding the foregoing, if at the time ofoccurrence of such Event of Loss or any time thereafter prior to replacement orline reduction, as aforesaid, an Event of Default shall have occurred and becontinuing hereunder, then MLBFS may at its sole option, exercisable at anytime while such Event of Default shall be continuing, require Customer toeither replace such Collateral or prepay the Loan and reduce the Maximum WCMALine of Credit, as aforesaid.

 

(j) **Notice of Certain Events. **Customer shall give MLBFS immediate notice of anyattachment, lien, judicial process, encumbrance or claim affecting or involving$25,000.00 or more of the Collateral.

 

(k) **Indemnification. **Customer shall indemnify, defend and save MLBFS harmless fromand against any and all claims, liabilities, losses, costs and expenses(including, without limitation, reasonable attorneys’ fees and expenses) of anynature whatsoever which may be asserted against or incurred by MLBFS arisingout of or in any manner occasioned by (i) the ownership, collection,possession, use or operation of any Collateral, or (ii) any failure by Customerto perform any of its obligations hereunder; excluding, however, from saidindemnity any such claims, liabilities, etc. arising directly out of the

 

 

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willful wrongful act or active grossnegligence of MLBFS. This indemnity shall survive the expiration or terminationof this Loan Agreement as to all matters arising or accruing prior to suchexpiration or termination.

 

4.5**Events of Default**

 

The occurrence of any of the following eventsshall constitute an “Event of Default" under this Loan Agreement:

 

(a) **Failure to Pay. **(i) Customer shall fail to deposit into the WCMA Account anamount sufficient to assure that the WCMA Loan Balance does not exceed theMaximum WCMA Line of Credit, as reduced in accordance with the provisionshereof, or (ii) Customer shall fail to pay to MLBFS, or deposit into the WCMAAccount when due any other amount owing or required to be paid or deposited byCustomer under this Loan Agreement, or (iii) Customer shall fail to pay whendue any other Obligations; and any such failure shall continue for more thanfive (5) Business Days after written notice thereof shall have been given byMLBFS to Customer.

 

(b) **Failureto Perform.**  Customer shalldefault in the performance or observance of any covenant or agreement on itspart to be performed or observed under this Loan Agreement or any of theAdditional Agreements (not constituting an Event of Default under any otherclause of this Section), and such default shall continue unremedied for ten(10) Business Days after written notice thereof shall have been given by MLBFSto Customer,

 

(c) **Breach of Warranty. **Any representation or warranty made by Customer or any otherparty providing collateral for the Obligations contained in this Loan Agreementor any of the other Additional Agreements shall at any time prove to have beenincorrect in any material respect when made.

 

(d) **Default Under Other Agreement.  **A default or Event of Default byCustomer shall occur under the terms of any other agreement, instrument ordocument with or intended for the benefit of MLBFS, MLPF&S or any of theiraffiliates, and any required notice shall have been given and required passageof time shall have elapsed.

 

(e) **Bankruptcy Event. **Any Bankruptcy Event shall occur.

 

(f) **Material Impairment. **Any event shall occur which shall reasonably cause MLBFS toin good faith believe that the prospect of full payment or performance by Customerof its liabilities or obligations under this Loan Agreement or any of theAdditional Agreements to which Customer is a party has been materiallyimpaired. The existence of such a material impairment shall be determined in amanner consistent with the intent of Section 1-208 of the UCC.

 

(g) **Acceleration of Debt to Other Creditors. **Any event shall occur whichresults in the acceleration of the maturity of any indebtedness of $100,000.00or more of Customer to another creditor under any indenture, agreement,undertaking, or otherwise.

 

(h) **Seizure or Abuse of Collateral. **The Collateral, or any materialpart thereof, shall be or become subject to any material abuse or misuse, orany levy, attachment, seizure or confiscation which is not released within ten(10) Business Days.

 

4.6 **Remedies.**

 

(a) **Remedies Upon Default. **Upon the occurrence and during the continuance of anyEvent of Default, MLBFS may at its sole option do any one or more or all of thefollowing, at such time and in such order as MLBFS may in its sole discretionchoose:

 

(i) **Termination.**  MLBFS may without notice terminate itsobligation to make the Loan (if the Loan has not then been funded), terminatethe WCMA Line of Credit, and terminate any obligation to make any SubsequentWCMA Loan (including. without limitation, any Subsequent WCMA Loan to payaccrued interest) or otherwise extend any credit to or for the benefit ofCustomer (it being understood that upon the occurrence of any Bankruptcy Eventthe WCMA Line of Credit and all such obligations shall automatically terminatewithout any action on the part of MLBFS); and upon any such termination MLBFSshall be relieved of all such obligations.

 

(ii) **Acceleration. **MLBFSmay declare the WCMA Loan Balance and all other Obligations to be forthwith dueand payable, whereupon all such amounts shall be immediately due and payable,without presentment, demand for payment, protest and notice of protest, noticeof dishonor, notice of acceleration, notice of intent to accelerate or othernotice or formality of any kind, all of which are hereby expressly waived;provided, however, that upon the occurrence of any Bankruptcy Event the WCMALoan Balance and other Obligations shall automatically become due and payablewithout any action on the part of MLBFS.

 

(iii) **Exercise Other Rights. **MLBFS may exercise any or all of the remedies of asecured party under applicable law, including, but not limited to, the UCC, andany or all of its other rights and remedies under this Loan Agreement and theAdditional Agreements.

 

(iv) **Possession. **MLBFSmay require Customer to make the Collateral and the records pertaining to theCollateral available to MLBFS at a place designated by MLBFS which isreasonably convenient to Customer, or may take possession of the Collateral andthe records pertaining to the Collateral without the use of any judicialprocess and without any prior notice to Customer.

 

(v) **Sale.**  MLBFS may sell any or all of the Collateralat public or private sale upon such terms and conditions as MLBFS mayreasonably deem proper. MLBFS may purchase any Collateral at any such publicsale. The net proceeds of any such public or private sale and all other amountsactually collected or received by MLBFS pursuant hereto, after deducting allcosts and expenses incurred at any time in the collection of the Obligationsand in the protection,

 

 

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collection and sale of the Collateral, willbe applied to the payment of the Obligations, with any remaining proceeds paidto Customer or whoever else may be entitled thereto, and with Customerremaining liable for any amount remaining unpaid after such application.

 

(vi) **Delivery of Cash, Checks, Etc. **MLBFS may require Customer toforthwith upon receipt, transmit and deliver to MLBFS in the form received, allcash, checks, drafts and other instruments for the payment of money (properlyendorsed, where required, so that such items may be collected by MLBFS) whichmay be received by Customer at any time in full or partial payment of anyCollateral, and require that Customer not commingle any such items which may beso received by Customer with any other of its funds or property but insteadhold them separate and apart and in trust for MLBFS until delivery is made toMLBFS.

 

(vii) **Notification of Account Debtors. **MLBFS may notify any AccountDebtor that its Account or Chattel Paper has been assigned to MLBFS and directsuch Account Debtor to make payment directly to MLBFS of all amounts due orbecoming due with respect to such Account or Chattel Paper; and MLBFS mayenforce payment and collect, by legal proceedings or otherwise, such Account orChattel Paper.

 

(viii) **Control of Collateral. **MLBFS may otherwise take control in any lawful mannerof any cash or non–cash items of payment or proceeds of Collateral and ofany rejected, returned, stopped in transit or repossessed goods included in theCollateral and endorse Customer’s name on any item of payment on or proceeds ofthe Collateral.

 

(b) **Set–Off. **MLBFS shall have the further right upon the occurrence andduring the continuance of an Event of Default to set–off, appropriate andapply toward payment of any of the Obligations, in such order of application asMLBFS may from time to time and at any time elect, any cash, credit, deposits,accounts, financial assets, investment property, securities and any otherproperty of Customer which is in transit to or in the possession, custody orcontrol of MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS orMLPF&S.  Customer herebycollaterally assigns and grants to MLBFS a continuing security interest in allsuch property as additional Collateral.

 

(c) **Power of Attorney. **Effective upon the occurrence and during the continuance ofan Event of Default, Customer hereby irrevocably appoints MLBFS as its attorney–in–fact,with full power of substitution, in its place and stead and in its name or inthe name of MLBFS, to from time to time in MLBFS’ sole discretion take anyaction and to execute any instrument which MLBFS may deem necessary oradvisable to accomplish the purposes of this Loan Agreement, including, but notlimited to, to receive, endorse and collect all checks, drafts and otherinstruments for the payment of money made payable to Customer included in theCollateral.

 

(d) **Remedies are Severable and Cumulative. **All rights and remedies of MLBFSherein are severable and cumulative and in addition to all other rights andremedies available in the Additional Agreements, at law or in equity, and anyone or more of such rights and remedies may be exercised simultaneously orsuccessively,

 

(e) **Notices. **Tothe fullest extent permitted by applicable law, Customer hereby irrevocablywaives and releases MLBFS of and from any and all liabilities and penalties forfailure of MLBFS to comply with any statutory or other requirement imposed uponMLBFS relating to notices of sale, holding of sale or reporting of any sale,and Customer waives all rights of redemption or reinstatement from any suchsale. Any notices required under applicable law shall be reasonably andproperly given to Customer if given by any of the methods provided herein atleast 5 Business Days prior to taking action. MLBFS shall have the right topostpone or adjourn any sale or other disposition of Collateral at any time withoutgiving notice of any such postponed or adjourned date. In the event MLBFS seeksto take possession of any or all of the Collateral by court process, Customerfurther irrevocably waives to the fullest extent permitted by law any bonds andany surety or security relating thereto required by any statute, court rule orotherwise as an incident to such possession, and any demand for possessionprior to the commencement of any suit or action.

 

4.7**Miscellaneous.**

 

(a) **Non–Waiver. **No failure or delay on the part of MLBFS in exercising anyright, power or remedy pursuant to this Loan Agreement or any of the AdditionalAgreements shall operate as a waiver thereof, and no single or partial exerciseof any such right, power or remedy shall preclude any other or further exercisethereof, or the exercise of any other right, power or remedy. Neither anywaiver of any provision of this Loan Agreement or any of the AdditionalAgreements, nor any consent to any departure by Customer therefrom, shall beeffective unless the same shall be in writing and signed by MLBFS. Any waiverof any provision of this Loan Agreement or any of the Additional Agreements andany consent to any departure by Customer from the terms thereof shall beeffective only in the specific instance and for the specific purpose for whichgiven. Except as otherwise expressly provided herein, no notice to or demand onCustomer shall in any case entitle Customer to any other or further notice ordemand in similar or other circumstances.

 

(b) **Disclosure. **Customerhereby irrevocably authorizes MLBFS and each of its affiliates, includingwithout limitation MLPF&S to at any time (whether or not an Event ofDefault shall have occurred) obtain from and disclose to each other any and allfinancial and other information about Customer.

 

(c) **Communications. **All notices and other communications required or permittedhereunder or in connection with any of the Additional Agreements shall be inwriting, and shall be either delivered personally, mailed by postage prepaidcertified mail or sent by express overnight courier or by facsimile. Suchnotices and communications shall be deemed to be given on the date of personaldelivery, facsimile transmission or actual delivery of certified mail, or oneBusiness Day after delivery to an express overnight courier. Unless otherwisespecified in a notice sent or delivered in accordance with the terms hereof,notices and other communications in writing shall be given to the partieshereto at their respective addresses set forth at the beginning of this LoanAgreement, or, in the case of facsimile transmission, to the parties at theirrespective regular facsimile telephone number.

 

(d) **Fees, Expenses and Taxes. **Customer shall pay or reimburse MLBFS for: (i) allUniform Commercial Code filing and search fees and expenses incurred by MLBFSin connection with the verification, perfection or preservation of MLBFS’rights hereunder or in the Collateral or any other collateral for theObligations; (ii) any and all stamp, transfer and other taxes and fees payableor determined to be payable in connection with the execution, delivery and/or

 

 

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recording of this Loan Agreement or any ofthe Additional Agreements; and (iii) all reasonable fees and out-of-pocketexpenses (including, but not limited to, reasonable fees and expenses ofoutside counsel) incurred by MLBFS in connection with the collection of any sumpayable hereunder or under any of the Additional Agreements not paid when due,the enforcement of this Loan Agreement or any of the Additional Agreements andthe protection of MLBFS’ rights hereunder or thereunder, excluding, however,salaries and normal overhead attributable to MLBFS’ employees. Customer herebyauthorizes MLBFS, at its option, to either cause any and all such fees,expenses and taxes to be paid with a WCMA Loan, or invoice Customer therefor(in which event Customer shall pay all such fees, expenses and taxes within 5Business Days after receipt of such invoice). The obligations of Customer underthis paragraph shall survive the expiration or termination of this LoanAgreement and the discharge of the other Obligations.

 

(e) **Right to Perform Obligations. **If Customer shall fall to do anyact or thing which it has covenanted to do under this Loan Agreement or anyrepresentation or warranty on the part of Customer contained in this LoanAgreement shall be breached, MLBFS may, in its sole discretion, after 5Business Days written notice is sent to Customer (or such lesser notice,including no notice, as is reasonable under the circumstances), do the same orcause it to be done or remedy any such breach, and may expend its funds forsuch purpose. Any and all reasonable amounts so expended by MLBFS shall berepayable to MLBFS by Customer upon demand, with interest at the Interest Rateduring the period from and including the date funds are so expended by MLBFS tothe date of repayment, and all such amounts shall be additional Obligations.The payment or performance by MLBFS of any of Customer’s obligations hereundershall not relieve Customer of said obligations or of the consequences of havingfailed to pay or perform the same, and shall not waive or be deemed a cure ofany Default.

 

(f) **Further Assurances. **Customer agrees to do such further acts and things and toexecute and deliver to MLBFS such additional agreements, instruments anddocuments as MLBFS may reasonably require or deem advisable to effectuate thepurposes of this Loan Agreement or any of the Additional Agreements, or toestablish, perfect and maintain MLBFS’ security interests and liens upon theCollateral, including, but not limited to: (i) executing financing statementsor amendments thereto when and as reasonably requested by MLBFS; and (ii) if inthe reasonable judgment of MLBFS it is required by local law, causing theowners and/or mortgagees of the real property on which any Collateral may belocated to execute and deliver to MLBFS waivers or subordinations reasonablysatisfactory to MLBFS with respect to any rights in such Collateral.

 

(g) **Binding Effect. **This Loan Agreement and the Additional Agreements shall bebinding upon. and shall inure to the benefit of MLBFS, Customer and theirrespective successors and assigns. Customer shall not assign any of its rights or delegate any of itsobligations under this Loan Agreement or any of the Additional Agreementswithout the prior written consent of MLBFS. Unless otherwise expressly agreedto in a writing signed by MLBFS, no such consent shall in any event relieve Customerof any of its obligations under this Loan Agreement or any of the AdditionalAgreements.

 

(h) **Headings. **Captionsand section and paragraph headings in this Loan Agreement are inserted only asa matter of convenience, and shall not affect the interpretation hereof.

 

(i) **Governing Law. **This Loan Agreement and, unless otherwise expressly providedtherein, each of the Additional Agreements, shall be governed in all respectsby the laws of the State of Illinois.

 

(j) **Severability of Provisions. **Whenever possible, each provision of this LoanAgreement and the Additional Agreements shall be interpreted in such manner asto be effective and valid under applicable law. Any provision of this LoanAgreement or any of the Additional Agreements which is prohibited orunenforceable in any jurisdiction shall, as to such jurisdiction, beineffective only to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions of this Loan Agreement and the AdditionalAgreements or affecting the validity or enforceability of such provision in anyother jurisdiction.

 

(k) **Term.**  This Loan Agreement shall become effectiveon the date accepted by MLBFS at its office in Chicago, Illinois, and, subjectto the terms hereof, shall continue in effect so long thereafter as: (i) MLBFSshall be obligated to make the Loan, (ii) the WCMA Line of Credit shall be ineffect, (iii) there shall be any moneys outstanding under this Loan Agreement,or (iv) there shall be any other Obligations outstanding.

 

(1) **Counterparts. **ThisLoan Agreement may be executed in one or more counterparts which, when takentogether, constitute one and the same agreement.

 

(m) **Jurisdiction; Waiver. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS BEING ACCEPTED BYMLBFS IN PARTIAL CONSIDERATION OF MLBFS’ RIGHT AND OPTION, IN ITS SOLEDISCRETION, TO ENFORCE THIS LOAN AGREEMENT AND THE ADDITIONAL AGREEMENTS INEITHER THE STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE CUSTOMER OR ANYCOLLATERAL FOR THE OBLIGATIONS MAY BE LOCATED. CUSTOMER IRREVOCABLY SUBMITSITSELF TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY STATE ORFEDERAL COURT IN THE COUNTY OF COOK FOR SUCH PURPOSES, AND CUSTOMER WAIVES ANYAND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE AND THE CONVENIENCE OFANY SUCH FORUM AND ANY AND ALL RIGHTS TO REMOVE SUCH ACTION FROM STATE TOFEDERAL COURT. CUSTOMER FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY ACTIONAGAINST MLBFS IN ANY JURISDICTION EXCEPT IN THE COUNTY OF COOK AND STATE OFILLINOIS. MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TOA TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OFTHE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO,ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LOAN, THIS LOAN AGREEMENT, ANYADDITIONAL AGREEMENTS AND/OR ANY OF THE TRANSACTIONS WHICH ARE THE SUBJECTMATTER OF THIS LOAN AGREEMENT. CUSTOMER FURTHER WAIVES THE RIGHT TO BRING ANYNON–COMPULSORY COUNTERCLAIMS.**

 

(n) **Integration. THIS LOAN AGREEMENT, TOGETHER WITH THE ADDITIONAL AGREEMENTS,CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND FINALAGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, ANDMAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR,CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOUNWRITTEN ORAL AGREEMENTS OF THE PARTIES. WITHOUT LIMITING THE FOREGOING,CUSTOMER ACKNOWLEDGES THAT: (I) NOPROMISE OR COMMITMENT HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR**

 

 

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**RESPECTIVE EMPLOYEES, AGENTS OR REPRESENTATIVES TO MAKE THELOAN OR ANY SUBSEQUENT WCMA LOAN ON ANY TERMS OTHER THAN AS EXPRESSLY SET FORTHHEREIN, OR TO MAKE ANY OTHER LOAN OR OTHERWISE EXTEND ANY OTHER CREDIT TOCUSTOMER OR ANY OTHER PARTY; AND (II) EXCEPT AS OTHERWISE EXPRESSLY PROVIDEDHEREIN, THIS LOAN AGREEMENT SUPERSEDES AND REPLACES ANY AND ALL PROPOSALS,LETTERS OF INTENT AND APPROVAL AND COMMITMENT LETTERS FROM MLBFS TO CUSTOMER, NONEOF WHICH SHALL BE CONSIDERED AN ADDITIONAL AGREEMENT. NO AMENDMENT ORMODIFICATION OF THIS AGREEMENT OR ANY OF THE ADDITIONAL AGREEMENTS TO WHICHCUSTOMER IS A PARTY SHALL BE EFFECTIVE UNLESS IN A WRITING SIGNED BY BOTH MLBFSAND CUSTOMER.**

 

**IN WITNESS WHEREOF,**this Loan Agreement has beenexecuted as of the day and year first above written.

 

**STOCKERYALE, INC. F/K/A STOCKER & YALE, INC.**

 
| By:    | /s/ Mark W. Blodgett |   | /s/ Gary B. Godin |
|--------|----------------------|--------|-------------------|
|   | Signature  (1)       |   | Signature (2)     |
|   |                 |   |              |
|   |                 |   |              |
|   | Mark W. Blodgett     |   | Gary B. Godin     |
|   | Printed  Name        |   | Printed Name      |
|   |                 |   |              |
|   |                 |   |              |
|   | CEO                  |   | CFO               |
|   | Title                |   | Title             |
|        |                      |        |                   |  |

 

Accepted at Chicago, Illinois:

 

**MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.**

 
| By: | /s/ Julie Ellman |
|-----|------------------|

 

 

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**EXHIBIT A**

 

**ATTACHED TOAND HEREBY MADE A PART OF WCMA REDUCING REVOLVERSM LOAN AND SECURITYAGREEMENT NO. 794–07E50 BETWEEN MERRILL LYNCH BUSINESS FINANCIAL SERVICESINC. AND STOCKERYALE, INC. F/K/A STOCKER & YALE, INC.**

 

 

**AdditionalLocations of Tangible Collateral:**

 
| 15935 Sturgeon Street |   | **To be  sold**       |
|-----------------------|--------|-----------------------|
| Roseville, Michigan   |   | **by May  31, 2001.** |

 

 

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