**Exhibit 10.1**

 

**Conformed Copy**

 

**AMENDED ANDRESTATED LOAN AND SECURITY AGREEMENT**

** **

**THIS AMENDED AND RESTATED LOAN AND SECURITYAGREEMENT** (this “**Agreement**”)dated as of the Effective Date between **SILICON VALLEY BANK**,a California corporation, with its principal place of business at 3003 TasmanDrive, Santa Clara, California 95054 and with a loan production office locatedat One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,Massachusetts 02462 (“**Bank**”), and **AXCELIS TECHNOLOGIES, INC.** and **AXCELISTECHNOLOGIES CCS CORPORATION**, each a Delaware corporation withoffices located at 108 Cherry Hill Drive, Beverly, Massachusetts 01915(individually and collectively, jointly and severally “**Borrower**”),provides the terms on which Bank shall lend to Borrower and Borrower shallrepay Bank.  This Agreement amends andrestates in its entirety that certain Loan and Security Agreement dated as of April 23,2008 by and among Borrower and Bank. The parties agree as follows:

 

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

# ** **

Accounting terms not defined in this Agreement shallbe construed following GAAP. Calculations and determinations must be made following GAAP.  Capitalized terms not otherwise defined inthis Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement,unless otherwise indicated, shall have the meaning provided by the Code to theextent such terms are defined therein.

 

**2****             ****LOANAND TERMS OF PAYMENT**

# ** **

## **2.1****          Promise to Pay**.  Borrower hereby unconditionally promises topay Bank the outstanding principal amount of all Credit Extensions and accruedand unpaid interest thereon as and when due in accordance with this Agreement.

##  

### **2.1.1****       Revolving Advances**.

###  

#### (a)           Availability.  Subject to the terms and conditions of thisAgreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount.  Amounts borrowed under the RevolvingLine may be repaid and, prior to the Revolving Line Maturity Date, reborrowed,subject to the applicable terms and conditions precedent herein.

####  

#### (b)           Termination;Repayment.  The Revolving Lineterminates on the Revolving Line Maturity Date, when the principal amount ofall Advances, the unpaid interest thereon, and all other Obligations relatingto the Revolving Line shall be immediately due and payable.

####  

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

###  

#### (a)           As part of theRevolving Line and subject to the deduction of Reserves, Bank shall issueLetters of Credit for Borrower’s account. Such aggregate amounts utilized hereunder shall at all times reduce theamount otherwise available for Advances under the Revolving Line; provided,however, Letters of Credit issued by the Bank for Borrower’s account prior tothe Effective Date, including any amounts drawn from time to time thereunder,shall not reduce the amount available for Advances under the Revolving Line norbe deemed Letters of Credit for purposes of this Agreement.  The face amount of outstanding Letters ofCredit (including drawn but unreimbursed Letters of Credit and any Letter ofCredit Reserve) may not exceed Two Million Five Hundred Thousand Dollars($2,500,000.00) minus the aggregate amount of all Credit Extensionsoutstanding from time to time under Sections 2.1.3 and 2.1.4 hereof.  If, on the Revolving Line Maturity Date (orthe effective date of any termination of this Agreement), there are anyoutstanding Letters of Credit, then on such date Borrower shall provide to Bankcash collateral in an amount equal to 105% of the face amount of all suchLetters of Credit plus all interest, fees, and costs due or to become due inconnection therewith (as estimated by Bank in its good faith businessjudgment), to secure all of the Obligations relating to said Letters ofCredit.  All Letters of Credit shall bein form and substance acceptable to Bank in its sole discretion and shall besubject to the terms and conditions of Bank’s standard Application and Letterof Credit Agreement (the “**Letter of CreditApplication**”).  Borrower 

 

----

 

#### agrees to execute any further documentation inconnection with the Letters of Credit as Bank may reasonably request.  Borrowerfurther agrees to be bound by the regulations and interpretations of the issuerof any Letters of Credit guarantied by Bank and opened for Borrower’s accountor by Bank’s interpretations of any Letter of Credit issued by Bank forBorrower’s account, and Borrower understands and agrees except in the case ofgross negligence or willful misconduct by Bank that Bank shall not be liablefor any error, negligence, or mistake, whether of omission or commission, infollowing Borrower’s instructions or those contained in the Letters of Creditor any modifications, amendments, or supplements thereto.

####  

#### (b)           The obligation ofBorrower to immediately reimburse Bank for drawings made under Letters ofCredit shall be absolute, unconditional, and irrevocable, and shall beperformed strictly in accordance with the terms of this Agreement, such Lettersof Credit, and the Letter of Credit Application.

####  

#### (c)           Borrower may requestthat Bank issue a Letter of Credit payable in a Foreign Currency.  If a demand for payment is made under anysuch Letter of Credit, Bank shall treat such demand as an Advance to Borrowerof the equivalent of the amount thereof (plus fees and charges in connectiontherewith such as wire, cable, SWIFT or similar charges) in Dollars at thethen-prevailing rate of exchange in San Francisco, California, for sales of theForeign Currency for transfer to the country issuing such Foreign Currency.

####  

#### (d)           To guard againstfluctuations in currency exchange rates, upon the issuance of any Letter ofCredit payable in a Foreign Currency, Bank shall create a reserve (the “**Letter of Credit Reserve**”) under the Revolving Line in anamount equal to ten percent (10%) of the face amount of such Letter ofCredit.  The amount of the Letter ofCredit Reserve may be adjusted by Bank from time to time to account forfluctuations in the exchange rate.  Theavailability of funds under the Revolving Line shall be reduced by the amountof such Letter of Credit Reserve for as long as such Letter of Credit remainsoutstanding.

####  

### **2.1.3****       Foreign Exchange Sublimit**.  As part of the Revolving Line and subject tothe deduction of Reserves, Borrower may enter into foreign exchange contractswith Bank under which Borrower commits to purchase from or sell to Bank aspecific amount of Foreign Currency (each, a “**FX ForwardContract**”) on a specified date (the “**SettlementDate**”).  FX Forward Contractsshall have a Settlement Date of at least one (1) FX Business Day after thecontract date and shall be subject to a reserve of ten percent (10%) of eachoutstanding FX Forward Contract in a maximum aggregate amount equal to TwoHundred Fifty Thousand Dollars ($250,000.00) (the “**FX Reserve**”).The aggregate amount of FX Forward Contracts at any one time shall not exceedten (10) times the amount of the FX Reserve minus the aggregateamount of all Credit Extensions outstanding from time to time under Sections2.1.2 and 2.1.4 hereof.  Any amountsneeded to fully reimburse Bank will be treated as Advances under the RevolvingLine and will accrue interest at the interest rate applicable to Advances.

###  

### **2.1.4****       Cash Management ServicesSublimit**.  Borrower may use up to TwoMillion Five Hundred Thousand Dollars ($2,500,000.00) of the Revolving Line minusthe aggregate amount of all Credit Extensions outstanding from time to timeunder Sections 2.1.2 and 2.1.3 hereof, for Bank’s cash management serviceswhich may include merchant services, direct deposit of payroll, business creditcard, and check cashing services identified in Bank’s various cash managementservices agreements (collectively, the “**Cash Management Services**”).  Any amounts Bank pays on behalf of Borrowerfor any Cash Management Services and not immediately reimbursed will be treatedas Advances under the Revolving Line and will accrue interest at the interestrate applicable to Advances.

###  

## **2.2****          Overadvances.** If, at any time, (i) thesum of (a) the outstanding principal amount of any Advances (including anyamounts used for Cash Management Services), plus (b) the faceamount of any outstanding Letters of Credit (including drawn but unreimbursedLetters of Credit and any Letter of Credit Reserve), plus (c) theaggregate amount of any outstanding FX Forward Contracts exceeds (ii) thelesser of either the Revolving Line or the Borrowing Base (the amount by which (i) exceeds(ii) being an “**Overadvance**”),Borrower shall immediately pay to Bank in cash such Overadvance.  Without limiting Borrower’s obligation torepay Bank any amount of the Overadvance, Borrower agrees to pay Bank intereston the outstanding amount of any Overadvance, on demand, at the Default Rate.

 

2

----

 

## **2.3****          Payment of Interest onthe Credit Extensions**.

####  

#### (a)           Interest Rate; Advances.  Subject to Section 2.3(b), the principalamount outstanding under the Revolving Line shall accrue interest at a floatingper annum rate equal to the Prime Rate plus two percent (2.00%), whichinterest shall be payable monthly, in arrears, in accordance with Section 2.3(f).

####  

#### (b)           Default Rate.  Immediately upon the occurrence and duringthe continuance of an Event of Default, Obligations shall bear interest at arate per annum which is three and one-half of one percent (3.50%) above therate that is otherwise applicable thereto (the **“DefaultRate**”).  Fees and expenseswhich are required to be paid by Borrower pursuant to the Loan Documents(including, without limitation, Bank Expenses) but are not paid when due shallbear interest until paid at a rate equal to the highest rate applicable to theObligations; provided, however, no interest shall accrue on such fees andexpenses to the extent funds are available to be deducted by the Bank fromBorrower’s accounts if such deduction is not timely made by Bank at no fault ofBorrower.  Payment or acceptance of theincreased interest rate provided in this Section 2.3(b) is not apermitted alternative to timely payment and shall not constitute a waiver ofany Event of Default or otherwise prejudice or limit any rights or remedies ofBank.

####  

#### (c)           Adjustments toInterest Rate.  Changes to theinterest rate of any Credit Extension based on changes to the Prime Rate shallbe effective on the effective date of any change to the Prime Rate and to theextent of any such change.  Bank shalluse its best efforts to give Borrower prompt notice of any such change in thePrime Rate; provided, however, that any failure by Bank to provide Borrowerwith notice hereunder shall not affect Bank’s right to make changes in theinterest rate based on changes in the Prime Rate.

####  

#### (d)           Computation ofInterest.  Interest on the CreditExtensions and all fees payable hereunder shall be computed on the basis of a360-day year and the actual number of days elapsed in the period during whichsuch interest accrues.  In computinginterest on any Credit Extension, the date of the making of such CreditExtension shall be included and the date of payment shall be excluded;provided, however, that if any Credit Extension is repaid on the same day onwhich it is made, such day shall be included in computing interest on suchCredit Extension.

####  

#### (e)           Debit of Accounts.  Bank may debit any of Borrower’s depositaccounts, including the Designated Deposit Account, for principal and interestpayments or any other amounts Borrower owes Bank when due.  These debits shall not constitute a set-off.The provisions of the previous sentence shall not apply to deposit accountsdesignated as, and exclusively used for, payroll, payroll taxes and otheremployee wage and benefit payments to or for the benefit of Borrower’semployees.

####  

#### (f)            Interest PaymentDate.  Interest is payable monthly,in arrears, on the last calendar day of each month.  All accrued but unpaid interest on theAdvances shall be due and payable on the Revolving Line Maturity Date.

####  

#### (g)           Payments. Allpayments (including prepayments) to be made by Borrower under any Loan Documentshall be made in immediately available funds in U.S. Dollars, without setoff orcounterclaim, before 12:00 p.m. Eastern time on the date when due.  Payments of principal and/or interestreceived after 12:00 p.m. Eastern time are considered received at theopening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the paymentshall be due the next Business Day, and additional fees or interest, asapplicable, shall continue to accrue until paid.

####  

## **2.4****          Fees**.  Borrower shall pay to Bank:

##  

#### (a)           Commitment Fee.  A fully earned, non refundable commitment feeof $250,000.00 on the Effective Date; and

####  

#### (b)           Letter of Credit Fees.  Bank’s customary fees and expenses for theissuance, modification or renewal of Letters of Credit, including, withoutlimitation, its customary fees upon the issuance, each anniversary of theissuance, modification and the renewal of such Letter of Credit by Bank; and

####  

#### (c)           Termination Fee.  In accordance with the terms of Section 12.1,a termination fee; and

####  

#### (d)           Unused RevolvingLine Facility Fee.  A fee (the “**Unused Revolving Line Facility Fee**”), payable monthly, inarrears, on a calendar year basis, in an amount per annum equal to the UnusedLine Fee Percentage of 

 

3

----

 

#### the average unused portion of the Revolving Line, asreasonably determined by Bank.  The unused portion of the Revolving Line, forthe purposes of this calculation, shall include amounts reserved under the CashManagement Services Sublimit for products provided and under the ForeignExchange Sublimit for FX Forward Contracts. Borrower shall not be entitled to any credit, rebate or repaymentof any Unused Revolving Line Facility Fee previously earned by Bank pursuant tothis Section notwithstanding any termination of the Agreement, orsuspension or termination of Bank’s obligation to make loans and advanceshereunder; and

####  

#### (e)           Bank Expenses.  All Bank Expenses (including reasonableattorneys’ fees and expenses, plus expenses, for documentation and negotiationof this Agreement) incurred through and after the Effective Date, when due.

####  

## **2.5****          Withholding**.  Payments received by Bank from Borrower hereunderwill be made free and clear of any withholding taxes.  Specifically, however, if at any time anygovernmental authority, applicable law, regulation or international agreementrequires Borrower to make any such withholding or deduction from any such  payment or other sum payment hereunder toBank, Borrower hereby covenants and agrees that the amount due from Borrowerwith respect to such payment or other sum payable hereunder will be increasedto the extent necessary to ensure that, after the making of such requiredwithholding or deduction, Bank receives a net sum equal to the sum which itwould have received had no withholding or deduction been required and Borrowershall pay the full amount withheld or deducted to the relevant governmentalauthority.  Borrower will, upon request,furnish Bank with proof satisfactory to Bank indicating that Borrower has madesuch withholding payment provided, however, that Borrower need not make anywithholding payment if the amount or validity of such withholding payment iscontested in good faith by appropriate and timely proceedings and as to whichpayment in full is bonded or reserved against by Borrower.  The agreements and obligations of Borrowercontained in this Section 2.5 shall survive the termination of thisAgreement.

##  

**3****             ****CONDITIONSOF LOANS**

# ** **

## **3.1****          Conditions Precedent toInitial Credit Extension**.  Bank’sobligation to make the initial Credit Extension is subject to the conditionprecedent that Borrower shall consent to or have delivered, in form and substancesatisfactory to Bank, such documents, and completion of such other matters, asBank may reasonably deem necessary or appropriate, including, withoutlimitation:

##  

#### (a)           duly executed originalsignatures to the Loan Documents to which it is a party;

####  

#### (b)           its Operating Documentsand a good standing certificate of Borrower certified by the Secretary of Stateof the State of Delaware as of a date no earlier than thirty (30) days prior tothe Effective Date;

####  

#### (c)           completed BorrowingResolutions for Borrower;

####  

#### (d)           certified copies, datedas of a recent date, of financing statement searches, as Bank shall request,accompanied by written evidence (including any UCC termination statements) thatthe Liens indicated in any such financing statements either constitute PermittedLiens or have been or, in connection with the initial Credit Extension, will beterminated or released;

####  

#### (e)           the PerfectionCertificates executed by Borrower and each Guarantor;

####  

#### (f)            [intentionallyomitted];

####  

#### (g)           a legal opinion ofBorrower’s counsel dated as of the Effective Date together with the dulyexecuted original signatures thereto;

####  

#### (h)           the duly executedoriginal signatures to each Guaranty, each Guarantor Security Agreement,and  the Pledge Agreements, together withthe completed Borrowing Resolutions for Guarantor;

####  

#### (i)            evidence satisfactoryto Bank that the insurance policies required by Section 6.7 hereof are infull force and effect, together with appropriate evidence showing loss payableand/or additional insured clauses or endorsements in favor of Bank; and

 

4

----

 

#### (j)            payment of the feesand Bank Expenses then due as specified in Section 2.4 hereof.

####  

## **3.2****          Conditions Precedent toall Credit Extensions**.  Bank’sobligations to make each Credit Extension, including the initial CreditExtension, is subject to the following:

##  

#### (a)           timely receipt of acompleted and executed Transaction Report; and

####  

#### (b)           the representations andwarranties in Section 5 shall be true, accurate and complete in allmaterial respects on the date of the Transaction Report and on the Funding Dateof each Credit Extension; provided, however, that such materiality qualifiershall not be applicable to any representations and warranties that already arequalified or modified by materiality in the text thereof; and provided, furtherthat those representations and warranties expressly referring to a specificdate shall be true, accurate and complete in all material respects as of suchdate, and no Default or Event of Default shall have occurred and be continuingor result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on thatdate that the representations and warranties in Section 5 remain true,accurate and complete in all material respects; provided, however, that suchmateriality qualifier shall not be applicable to any representations andwarranties that already are qualified or modified by materiality in the textthereof; and provided, further that those representations and warranties expresslyreferring to a specific date shall be true, accurate and complete in allmaterial respects as of such date; and

####  

#### (c)           as determined in Bank’sreasonable business judgment, there has not been a Material Adverse Change.

####  

## **3.3****          Covenant to Deliver**.  Borrower agrees to deliver to Bank each itemrequired to be delivered to Bank under this Agreement as a condition to anyCredit Extension.  Borrower expresslyagrees that a Credit Extension made prior to the receipt by Bank of any suchitem shall not constitute a waiver by Bank of Borrower’s obligation to deliversuch item, and any such Credit Extension in the absence of a required itemshall be made in Bank’s sole discretion.

##  

## **3.4****          Procedures for Borrowing**.  Subject to the prior satisfaction of allother applicable conditions to the making of an Advance set forth in thisAgreement, to obtain an Advance (other than Advances under Sections 2.1.2 or2.1.4), Borrower shall notify Bank (which notice shall be irrevocable) byelectronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on theFunding Date of the Advance.  Togetherwith such notification, Borrower must promptly deliver to Bank by electronicmail or facsimile a completed Transaction Report executed by a Responsible Officeror his or her designee.  Bank shallcredit Advances to the Designated Deposit Account.  Bank may make Advances under this Agreementbased on instructions from a Responsible Officer or his or her designee orwithout instructions if the Advances are necessary to meet Obligations whichhave become due.  Bank may rely on anytelephone notice given by a person whom Bank believes is a Responsible Officeror designee.

##  

**4****             ****CREATIONOF SECURITY INTEREST**

# ** **

## **4.1****          Grant of SecurityInterest**.  Borrower hereby grantsBank, to secure the payment and performance in full of all of the Obligations,a continuing security interest in, and pledges to Bank, the Collateral,wherever located, whether now owned or hereafter acquired or arising, and allproceeds and products thereof.  Borrowerrepresents, warrants, and covenants that the security interest granted hereinis and shall at all times continue to be a first priority perfected securityinterest in the Collateral (subject only to Permitted Liens that may havesuperior priority to Bank’s Lien under this Agreement or the Export-ImportAgreement).  If Borrower shall acquire acommercial tort claim, Borrower shall promptly notify Bank in a writing signedby Borrower of the general details thereof and upon request of Bank grant toBank in such writing a security interest therein and in the proceeds thereof,all upon the terms of this Agreement, with such writing to be in form andsubstance reasonably satisfactory to Bank.

##  

Bank’s lien andsecurity interest in the Collateral shall continue until Borrower fully satisfiesits Obligations in cash.  Upon payment infull in cash of the Obligations (except for contingent indemnificationobligations for which no claim has been made) and at such time as Bank’s obligation to make CreditExtensions has terminated, Bank shall, at Borrower’s sole cost and expense,release its Liens in the Collateral and all rights therein shall revert toBorrower.

 

5

----

 

Notwithstanding the foregoing, it is expresslyacknowledged and agreed that the security interest created in this Agreementonly with respect to Export-Related Accounts Receivable, Export-RelatedInventory and Export-Related General Intangibles (as such terms are defined inthe Export-Import Agreement) is subject to and subordinate to the securityinterest granted to Bank in the Export-Import Agreement with respect to suchExport-Related Accounts Receivable, Export-Related Inventory and Export-RelatedGeneral Intangibles.

 

## **4.2****          Authorization to FileFinancing Statements**.  Borrower herebyauthorizes Bank to file financing statements, without notice to Borrower, withall appropriate jurisdictions to perfect or protect Bank’s interest or rightshereunder, including a notice that any disposition of the Collateral except aspermitted by the terms of this Agreement, by either Borrower or any otherPerson, shall be deemed to violate the rights of Bank under the Code.  Such financing statements may indicate theCollateral as “all assets of the Debtor” or words of similar effect, or asbeing of an equal or lesser scope, or with greater detail, all in Bank’sdiscretion, provided that such financing statements shall acknowledge therights of SEN under the SEN License.

##  

**5****             ****REPRESENTATIONSAND WARRANTIES**

# ** **

Borrowerrepresents and warrants as follows:

 

## **5.1****          Due Organization,Authorization; Power and Authority**. Borrower and each of its Domestic Subsidiaries is validly existing andin good standing as a Registered Organization in its jurisdiction of formationand is qualified and licensed to do business and is in good standing in anyjurisdiction in which the conduct of its business or its ownership of propertyrequires that it be qualified except where the failure to do so could notreasonably be expected to have a material adverse effect on Borrower’s business.  In connection with this Agreement, Borrowerhas delivered to Bank completed certificates each signed by Borrower andGuarantor, respectively, entitled “Perfection Certificate”.  Borrower represents and warrants to Bank that(a) Borrower’s exact legal name is that indicated on the PerfectionCertificate and on the signature page hereof; (b) Borrower is anorganization of the type and is organized in the jurisdiction set forth in thePerfection Certificate; (c) the Perfection Certificate accurately setsforth Borrower’s organizational identification number or accurately states thatBorrower has none; (d) the Perfection Certificate accurately sets forthBorrower’s place of business, or, if more than one, its chief executive officeas well as Borrower’s mailing address (if different than its chief executiveoffice); (e) Borrower (and each of its predecessors) has not, in the pastfive (5) years, changed its jurisdiction of formation, organizationalstructure or type, or any organizational number assigned by its jurisdiction;and (f) all other information set forth on the Perfection Certificatepertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrowermay from time to time update certain information in the Perfection Certificateafter the Effective Date to the extent permitted by one or more specificprovisions in this Agreement).  IfBorrower is not now a Registered Organization but later becomes one, Borrowershall promptly notify Bank of such occurrence and provide Bank with Borrower’sorganizational identification number.

##  

The execution, deliveryand performance by Borrower of the Loan Documents to which it is a party havebeen duly authorized, and do not (i) conflict with any of Borrower’s organizationaldocuments, (ii) contravene, conflict with, constitute a default under orviolate any material Requirement of Law, (iii) contravene, conflict orviolate any applicable order, writ, judgment, injunction, decree, determinationor award of any Governmental Authority by which Borrower or any itsSubsidiaries or any of their property or assets may be bound or affected, (iv) requireany action by, filing, registration, or qualification with, or GovernmentalApproval from, any Governmental Authority (except such Governmental Approvalswhich have already been obtained and are in full force and effect or (v) constitutean event of default under any material agreement by which Borrower isbound.  Borrower is not in default underany agreement to which it is a party or by which it is bound in which thedefault could reasonably be expected to have a material adverse effect onBorrower’s business.

 

## **5.2****          Collateral**.  Borrower has good title to, has rights in,and the power to transfer each item of the Collateral upon which it purports togrant a Lien hereunder, free and clear of any and all Liens except PermittedLiens.  Borrower has no deposit accountsother than the deposit accounts with Bank, the deposit accounts, if any,described in the Perfection Certificate delivered to Bank in connectionherewith, or of which Borrower has given Bank notice and taken such actions asare necessary to give Bank a perfected security interest therein.  The Accounts are bona fide, existingobligations of the Account Debtors.

 

6

----

 

## The Collateral is not in the possession of any thirdparty bailee (such as a warehouse) except as otherwise provided in thePerfection Certificate.  None of thecomponents of the Collateral shall be maintained at locations other than asprovided in the Perfection Certificate or as permitted pursuant to Section 7.2.  Borrower shall at all times during the termof this Agreement maintain at least two-thirds of its Inventory (based upon thefair market value of all Inventory) at Borrower’s 108 Cherry Hill Drive,Beverly, Massachusetts location and at other locations of the Borrower forwhich Bank has received a landlord’s waiver in form and substance reasonablysatisfactory to Bank.

##  

## All Inventory is in all material respects of good andmarketable quality, free from material defects.

##  

## Axcelis Technologies, Inc. and AxcelisTechnologies CCS Corporation, either individually or jointly, are the soleowners of the intellectual property which Borrower owns or purports to own,including, without limitation, the intellectual property set forth on thePerfection Certificate, except for non-exclusive licenses granted to itscustomers in the ordinary course of business. Each patent which Borrower owns or purports to own is valid andenforceable and no part of the intellectual property has been judged invalid orunenforceable, in whole or in part, and to the best of Borrower’s knowledge, noclaim has been made that any part of the intellectual property violates therights of any third party.

##  

Except as noted on the Perfection Certificate,Borrower is not a party to, nor is it bound by, any Restricted License.

 

## **5.3****          Accounts Receivable;Inventory**.

##  

#### (a)           For each Account withrespect to which Advances are requested, on the date each Advance is requestedand made, such Account shall be an Eligible Account.

####  

#### (b)           All statements made andall unpaid balances appearing in all invoices, instruments and other documentsevidencing the Eligible Accounts are and shall be true and correct and all suchinvoices, instruments and other documents, and all of Borrower’s Books aregenuine and in all respects what they purport to be.  Whether or not an Event of Default hasoccurred and is continuing, Bank may notify any Account Debtor owing Borrowermoney of Bank’s security interest in such funds.  All sales and other transactions underlyingor giving rise to each Eligible Account shall comply in all material respectswith all applicable laws and governmental rules and regulations.  Borrower has no knowledge of any actual orimminent Insolvency Proceeding of any Account Debtor whose accounts areEligible Accounts in any Transaction Report. To the best of Borrower’s knowledge, all signatures and endorsements onall documents, instruments, and agreements relating to all Eligible Accountsare genuine, and all such documents, instruments and agreements are legallyenforceable in accordance with their terms.

####  

#### (c)           For any item ofInventory, such Inventory (i) meets all applicable governmental standards;(ii) has been manufactured in compliance with the Fair Labor StandardsAct; (iii) is not subject to any Liens, except the first priority Liensgranted in favor of Bank under this Agreement or any of the other LoanDocuments or Permitted Liens; and (iv) is located at (A) theHeadquarters Location which is (1) prior to the Real Estate Financing,owned by Borrower or (2) after the Real Estate Financing, either owned byBorrower or owned by the Special Subsidiary provided that Bank has received alandlord’s waiver in form and substance reasonably satisfactory to Bank or (B) Borrower’s33 Cherry Hill Drive, Beverly, Massachusetts or 54 Cherry Hill Drive, Beverly,Massachusetts locations provided that Bank has received a landlord waiver forthe respective location in form and substance reasonably satisfactory to Bank.

####  

## **5.4****          Litigation**.  There are no actions or proceedings pendingor, to the knowledge of the Responsible Officers, threatened in writing by oragainst Borrower or any of its Subsidiaries involving more than, individuallyor in the aggregate, One Million Dollars ($1,000,000) or that would reasonablybe expected to have a material adverse effect on Borrower’s business.

##  

## **5.5****          No Material Deviation inFinancial Statements**.  Allconsolidated financial statements for Borrower and any of its Subsidiariesdelivered to Bank fairly present in all material respects Borrower’sconsolidated financial condition and Borrower’s consolidated results ofoperations.  There has not been anymaterial deterioration in Borrower’s consolidated financial condition since thedate of the most recent financial statements submitted to Bank.

 

7

----

 

## **5.6****          Solvency**.  The fair salable value of Borrower’s assets(including goodwill minus disposition costs) exceeds the fair value of itsliabilities; Borrower is not left with unreasonably small capital after thetransactions in this Agreement; and Borrower is able to pay its debts(including trade debts) as they mature.

##  

## **5.7****          Regulatory Compliance**.  Borrower is not an “investment company” or acompany “controlled” by an “investment company” under the Investment CompanyAct of 1940, as amended.  Borrower is notengaged as one of its important activities in extending credit for margin stock(under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower has complied in all materialrespects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its Subsidiariesis a “holding company” or an “affiliate” of a “holding company” or a “subsidiarycompany” of a “holding company” as each term is defined and used in the PublicUtility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violationof which could reasonably be expected to have a material adverse effect on itsbusiness.  None of Borrower’s or any ofits Subsidiaries’ properties or assets has been used by Borrower or anySubsidiary or, to the best of Borrower’s knowledge, by previous Persons, indisposing, producing, storing, treating, or transporting any hazardoussubstance other than legally.  Borrowerand each of its Subsidiaries have obtained all consents, approvals andauthorizations of, made all declarations or filings with, and given all noticesto, all Government Authorities that are necessary to continue their respectivebusinesses as currently conducted except where the failure to make suchdeclarations, notices or filings could not reasonably be expected to have amaterial adverse effect on Borrower’s business.

##  

## **5.8****          Subsidiaries;Investments**.  Borrower does not ownany stock, partnership interest or other equity securities except for PermittedInvestments.

##  

## **5.9****          Tax Returns andPayments; Pension Contributions**. Borrower and its Subsidiaries have timely filed all required tax returnsand reports, and have timely paid all foreign, federal, state and local taxes,assessments, deposits and contributions owed by Borrower or suchSubsidiary.  Borrower may defer paymentof any contested taxes, provided that Borrower (a) in good faith contestsits obligation to pay the taxes by appropriate proceedings promptly anddiligently instituted and conducted, (b) notifies Bank in writing of thecommencement of, and any material development in, the proceedings, and (c) postsbonds or takes any other steps required to prevent the governmental authoritylevying such contested taxes from obtaining a Lien upon any of the Collateralthat is other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any ofBorrower’s prior tax years which could result in additional taxes becoming dueand payable by Borrower.  Borrower haspaid all amounts necessary to fund all present pension, profit sharing anddeferred compensation plans in accordance with their terms, and Borrower hasnot withdrawn from participation in, and has not permitted partial or completetermination of, or permitted the occurrence of any other event with respect to,any such plan which could reasonably be expected to result in any liability ofBorrower, including any liability to the Pension Benefit Guaranty Corporationor its successors or any other governmental agency.

##  

## **5.10****        Use of Proceeds**.  Borrower shall use the proceeds of the CreditExtensions solely as working capital and to fund its general business requirementsand not for personal, family, household or agricultural purposes.

##  

## **5.11****        Full Disclosure**.  No written representation, warranty or otherstatement of Borrower in any certificate or written statement given to Bank, asof the date such representation, warranty, or other statement was made, takentogether with all such written certificates and written statements given toBank, contains any untrue statement of a material fact or omits to state amaterial fact necessary to make the statements contained in the certificates orstatements not misleading (it being recognized by Bank that the projections andforecasts provided by Borrower in good faith and based upon reasonableassumptions are not viewed as facts and that actual results during the periodor periods covered by such projections and forecasts may differ from theprojected or forecasted results).

##  

## **5.12****        Designation of Obligationsas Designated Senior Indebtedness. **AllObligations, including all principal, interest (including all interest accruingafter the commencement of any bankruptcy or similar proceeding, whether or nota claim for post-petition interest is allowable as a claim in any suchproceeding), and all fees, costs, expenses and other amounts accrued or dueunder this Agreement and otherwise shall at all times constitute “DesignatedSenior Indebtedness” or a similar concept thereof for purposes of anyIndebtedness of the Borrower.

 

8

----

 

**6****             ****AFFIRMATIVECOVENANTS**

 

Borrower shall do all ofthe following:

 

## **6.1****          Government Compliance**.

##  

#### (a)           Subject to Sections 7.2and 7.3, maintain its and all its Subsidiaries’ legal existence and goodstanding in their respective jurisdictions of formation and maintainqualification in each jurisdiction in which the failure to so qualify wouldreasonably be expected to have a material adverse effect on Borrower’sbusiness.  Borrower shall comply, andhave each Subsidiary comply, with all laws, ordinances and regulations to whichit is subject, noncompliance with which could have a material adverse effect onBorrower’s business.

####  

#### (b)           Obtain all of theGovernmental Approvals necessary for the performance by Borrower of itsobligations under the Loan Documents to which it is a party and the grant of asecurity interest to Bank in all of its property.  Borrower shall promptly provide copies of anysuch obtained Governmental Approvals to Bank.

####  

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

##  

#### (a)           Borrower shall provideBank with the following:

####  

##### (i)            upon each request fora Credit Extension and, in all events, within thirty (30) days after the end ofeach month a Transaction Report (and any schedules related thereto including,but not limited to, a schedule of any litigation of the type described in Section 5.4which may arise or be threatened from and after the Effective Date);

#####  

##### (ii)           within thirty (30) daysafter the end of each month, (A) monthly accounts receivable agings, agedby invoice date, (B) monthly accounts payable agings, aged by invoicedate, and outstanding or held check registers, if any, (C) monthlyreconciliations of accounts receivable agings for accounts under this Agreementand the Export-Import Agreement (aged by invoice date), transaction reports andgeneral ledger, (D) monthly inventory reports for Inventory valued on afirst-in, first-out basis at the lower of cost or market (in accordance withGAAP), Inventory backlog  reports, orsuch other inventory reports as are requested by Bank in its good faithbusiness judgment and (E) a DRAM (Devices for Random Access Memory) reportas required by EXIM;

#####  

##### (iii)          within forty-five (45)days after the end of each fiscal quarter of Borrower, a Compliance Certificatesigned by a Responsible Officer, certifying that as of the end of such quarter,Borrower was in full compliance with all of the terms and conditions of thisAgreement, and setting forth calculations showing compliance with the financialcovenants set forth in this Agreement and such other information as Bank shallreasonably request, including, without limitation, a statement that at the endof such quarter there were no held checks;

#####  

##### (iv)          as soon as available,and in any event within forty-five (45) days after the end of each fiscalquarter of Borrower, quarterly unaudited financial statements, prepared on a consolidatedand consolidating basis, in a form reasonably satisfactory to Bank;

#####  

##### (v)           within sixty (60) daysafter the end of each fiscal year of Borrower, (A) annual operatingbudgets (including income statements, balance sheets and cash flow statements,by quarter) for the then current fiscal year of Borrower, and (B) annualfinancial projections for the then current fiscal year (on a quarterly basis)as approved by Borrower’s board of directors, together with any relatedbusiness forecasts used in the preparation of such annual financialprojections, all prepared on a consolidated and consolidating  basis in a form reasonably satisfactory toBank;

#####  

##### (vi)          as soon as available,and in any event within one hundred twenty (120) days following the end ofBorrower’s fiscal year, annual financial statements prepared on a consolidatedand consolidating  basis in a formreasonably satisfactory to Bank, certified by, and with an unqualified opinionof, independent certified public accountants acceptable to Bank;

 

9

----

 

 

##### (vii)         withinfive (5) days of delivery, copies of all statements, reports and noticesmade available to Borrower’s security holders or to any holders of SubordinatedDebt (which if filed with the Securities and Exchange Commission may beprovided by a link thereto on Borrower’s or another website on the Internet);

#####  

##### (viii)        promptreport of any legal actions pending or threatened in writing against Borroweror any of its Subsidiaries that could result in damages or costs to Borrower orany of its Subsidiaries of, individually or in the aggregate, One MillionDollars ($1,000,000) or more; and

#####  

##### (ix)           withoutlimiting and in addition to the foregoing, at any time any Credit Extensionsare outstanding, (i) a Transaction Report (and any schedules relatedthereto) bi-weekly on the first Business Day of the related week and (ii) assoon as available, and in any event within forty-five (45) days after the endof each month, monthly unaudited financial statements, prepared on aconsolidated basis, in a form reasonably satisfactory to Bank, together with aCompliance Certificate signed by a Responsible Officer.

#####  

#### (b)           within ten (10) daysafter filing, all reports on Form 10-K, 10-Q and 8-K filed with theSecurities and Exchange Commission or a link thereto on Borrower’s or anotherwebsite on the Internet.

####  

#### (c)           with the monthlyreporting provided pursuant to Section 6.2(a)(ii) above, writtennotice of (i) any material change in the composition of the intellectualproperty, (ii) the registration of any copyright (including any subsequentownership right of Borrower in or to any copyright), patent or trademark notpreviously disclosed to Bank, or (iii) Borrower’s knowledge of an eventthat materially adversely affects the value of the intellectual property.

####  

#### (d)           within ten (10) daysafter the end of each fiscal quarter of Borrower, copies of (i) actualinvoices representing not less than 10% of the quarter-ended accountsreceivable balance and (ii) actual export orders for not less than 10% ofthe quarter-ended balance of Eligible EXIM Inventory (as defined in theExport-Import Agreement).

####  

## **6.3****          Accounts Receivable**.

##  

#### (a)           Schedules andDocuments Relating to Accounts*.* Borrower shall deliver to Bank TransactionReports, as provided in Section 6.2, on Bank’s standard forms; provided,however, that Borrower’s failure to execute and deliver the same shall notaffect or limit Bank’s Lien and other rights in all of Borrower’s Accounts, norshall Bank’s failure to advance or lend against a specific Account affect orlimit Bank’s Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, atBank’s request, originals) of all contracts, orders, invoices, and othersimilar documents, and all shipping instructions, delivery receipts, bills oflading, and other evidence of delivery, for any goods the sale or dispositionof which gave rise to such Accounts.  Inaddition, Borrower shall deliver to Bank, on its request, the originals of allinstruments, chattel paper, security agreements, guarantees and other documentsand property evidencing or securing any Accounts, in the same form as received,with all necessary indorsements, and copies of all credit memos.

####  

#### (b)           Disputes.  Borrower shall promptly notify Bank of alldisputes or claims relating to material Accounts.  Borrower may forgive (completely orpartially), compromise, or settle any Account for less than payment in full, oragree to do any of the foregoing so long as (i) Borrower does so in goodfaith, in a commercially reasonable manner, in the ordinary course of business,in arm’s-length transactions, and reports the same to Bank in the regularreports provided to Bank; (ii) no Default or Event of Default has occurredand is continuing; and (iii) after taking into account all such discounts,settlements and forgiveness, the total outstanding Advances will not exceed theAvailability Amount.

####  

#### (c)           Collection ofAccounts.  Borrower shall have theright to collect all Accounts, unless and until a Default or an Event ofDefault has occurred and is continuing. Whether or not an Event of Default has occurred and is continuing,Borrower shall hold all payments on, and proceeds of, Accounts in trust forBank, and Borrower shall immediately deliver all such payments and proceeds toBank in their original form, duly endorsed, to be applied to the Obligationspursuant to the terms of Section 9.4 hereof.  All payments on, and proceeds of, Accountsshall be deposited directly by the applicable Account Debtor into a lockboxaccount, or such other “blocked account” as

 

10

----

 

#### Bank may specify,pursuant to a blocked account agreement in form and substance reasonablysatisfactory to Bank in its sole discretion.

####  

#### (d)           Returns*.*  Provided no Eventof Default has occurred and is continuing, if any Account Debtor returns anyInventory to Borrower, Borrower shall promptly (i) determine the reasonfor such return, (ii) issue a credit memorandum to the Account Debtor inthe appropriate amount, and (iii) provide a copy of such credit memorandumto Bank, upon request from Bank.  In theevent any attempted return occurs after the occurrence and during thecontinuance of any Event of Default, Borrower shall hold the returned Inventoryin trust for Bank, and immediately notify Bank of the return of theInventory.

####  

#### (e)           Verification*.*  Bank may, from timeto time, verify directly with the respective Account Debtors the validity,amount and other matters relating to the Accounts, either in the name ofBorrower or Bank or such other name as Bank may choose.

####  

#### (f)            No Liability*.*  Bank shall not beresponsible or liable for any shortage or discrepancy in, damage to, or loss ordestruction of, any goods, the sale or other disposition of which gives rise toan Account, or for any error, act, omission, or delay of any kind occurring inthe settlement, failure to settle, collection or failure to collect anyAccount, or for settling any Account in good faith for less than the fullamount thereof, nor shall Bank be deemed to be responsible for any of Borrower’sobligations under any contract or agreement giving rise to an Account.  Nothing herein shall, however, relieve Bankfrom liability for its own gross negligence or willful misconduct.

##  

## **6.4****          Remittance of Proceeds**.  Except as otherwise provided in Section 6.3(c),deliver, in kind, all proceeds arising from the disposition of any Collateralto Bank in the original form in which received by Borrower not later than thefollowing Business Day after receipt by Borrower, to be applied to theObligations pursuant to the terms of Section 9.4 hereof; provided that, ifno Default or Event of Default has occurred and is continuing, Borrower shallnot be obligated to remit to Bank the proceeds of the sale of worn out orobsolete Equipment disposed of by Borrower in good faith in an arm’s lengthtransaction for an aggregate purchase price of One Hundred Thousand Dollars ($100,000.00) or less (for all such transactionsin any fiscal year).  Borrower agreesthat it will not commingle proceeds of Collateral with any of Borrower’s otherfunds or property, but will hold such proceeds separate and apart from suchother funds and property and in an express trust for Bank.  Nothing in this Section 6.4 limits therestrictions on disposition of Collateral set forth elsewhere in thisAgreement.

##  

**6.5****         ****Taxes; Pensions**. Timely file, and require each of its Subsidiaries to timely file, allrequired tax returns and reports and timely pay, and require each of itsSubsidiaries to timely file, all foreign, federal, state and local taxes, assessments,deposits and contributions owed by Borrower and each of its Subsidiaries,except for deferred payment of any taxes contested pursuant to the terms of Section 5.9hereof, and shall deliver to Bank, on demand, appropriate certificatesattesting to such payments, and pay all amounts necessary to fund all presentpension, profit sharing and deferred compensation plans in accordance withtheir terms.

 

## **6.6****          Access to Collateral;Books and Records**.  Upon reasonablenotice (provided no notice is required if an Event of Default has occurred andis continuing), Bank, or its agents, shall have the right, with such frequencyas Bank shall determine necessary in its sole discretion (or at the directionof EXIM Bank), to inspect the Collateral and the right to audit and copyBorrower’s Books.  The foregoinginspections and audits shall be at Borrower’s expense, and the charge thereforshall be $850 per person per day (or such higher amount as shall represent Bank’sthen-current standard charge for the same), plus reasonable out-of-pocketexpenses; provided, however, that Bank shall conduct no more than four (4) suchaudit(s) per fiscal year at Borrower’s expense in the event no Event ofDefault has occurred and is continuing. In the event Borrower and Bank schedule an audit more than ten (10) daysin advance, and Borrower cancels or seeks to reschedules the audit with lessthan ten (10) days written notice to Bank, then (without limiting any ofBank’s rights or remedies), Borrower shall pay Bank a fee of $1,000 plus anyout-of-pocket expenses incurred by Bank to compensate Bank for the anticipatedcosts and expenses of the cancellation or rescheduling.

##  

## **6.7****         ****Insurance**.  Keep its business and the Collateral insuredfor risks and in amounts standard for companies in Borrower’s industry andlocation and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amountsthat are reasonably satisfactory to Bank. All property policies shall have a loss payable endorsement showing Bankas loss payee and waive subrogation against Bank, and all liability policies

 

11

----

 

## shall show, or have endorsements showing, Bank as anadditional insured.  All policies (or theloss payable and additional insured endorsements) shall provide that theinsurer shall endeavor to give Bank at least twenty (20) days notice beforecanceling, amending, or declining to renew its policy.  At Bank’s request, Borrower shall delivercertificates of insurance and/or copies of policies and evidence of all premiumpayments.  Proceeds payable under anyproperty policy shall, at Bank’s option, be payable to Bank on account of theObligations.  Notwithstanding theforegoing, (a)(x) so long as no Event of Default has occurred and is continuing,Borrower shall have the option of applying the proceeds of any casualty policyup to One Hundred Thousand Dollars ($100,000.00) with respect to any loss, butnot exceeding Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate for all losses under all casualtypolicies in any one year, toward the replacement or repair of destroyed ordamaged property; provided that any such replaced or repaired property (i) shallbe of equal or like value as the replaced or repaired Collateral and (ii) shallbe deemed Collateral in which Bank has been granted a first priority securityinterest, and (b) after the occurrence and during the continuance of anEvent of Default, all proceeds payable under such casualty policy shall, at theoption of Bank, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance asrequired under this Section 6.7 or to pay any amount or furnish anyrequired proof of payment to third persons and Bank, Bank may make all or partof such payment or obtain such insurance policies required in this Section 6.7,and take any action under the policies Bank deems prudent.

##  

## **6.8****          Operating Accounts**.

##  

#### (a)           Maintain Borrower’s andits Subsidiaries’ primary operating accounts, disbursement accounts, and otherdeposit accounts and securities accounts in the United States with Bank andBank’s Affiliates, which accounts shall at all times contain at least 60% ofthe dollar value of Borrower’s and its Subsidiaries’ consolidated world-widecash and Cash Equivalents (excluding cash and Cash Equivalents on deposit inthe ABN Amro Pledged Account in an amount not to exceed €4,000,000).

####  

#### (b)           Provide Bank five (5) daysprior written notice before establishing any Collateral Account within theUnited States at or with any bank or financial institution other than Bank orBank’s Affiliates.  For each CollateralAccount located within the United States that Borrower at any time maintains,Borrower shall cause the applicable bank or financial institution (other thanBank) at or with which any such Collateral Account is maintained to execute anddeliver a Control Agreement or other appropriate instrument with respect tosuch Collateral Account to perfect Bank’s Lien in such Collateral Account inaccordance with the terms hereunder which Control Agreement may not beterminated without the prior written consent of Bank.  The provisions of the previous sentence shallnot apply to deposit accounts exclusively used for payroll, payroll taxes andother employee wage and benefit payments to or for the benefit of Borrower’semployees and identified to Bank by Borrower as such, deposit accounts with theBank, or to the Borrower’s pledged depository account held by ABN Amro Bank(the “**ABN Amro Pledged Account**”) to securethe letters of credit andbank guarantees issued in connection with value added tax recovery initiativesof Axcelis Technologies GmbH, or to those Collateral Accountsidentified on Schedule 6.8(b) hereto, provided that (i) theamounts on deposit in the ABN Amro Pledged Account shall not exceed €4,000,000and (ii) the amounts on deposit in such Collateral Accounts shall notexceed the maximum amounts indicated on Schedule 6.8(b).

####  

## **6.9****          Financial Covenants**.

##  

Maintain, to be tested asof the last day of each quarter, unless otherwise noted, on a consolidatedbasis with respect to Borrower and its Subsidiaries:

 

#### (a)           Adjusted Quick Ratio.  Borrower and its Subsidiaries, on aconsolidated basis, shall maintain at all times, a ratio of Quick Assets toCurrent Liabilities minus Deferred Revenue of at least 1.5:1.0.

####  

#### (b)           Maximum QuarterlyNet Losses.   Borrower and itsSubsidiaries, on a consolidated basis, shall not suffer any Net Loss in excessof: (i) $13,000,000 for the fiscal quarter ending March 31, 2010; (ii) $8,500,000for the fiscal quarter ending June 30, 2010; (iii) $8,500,000 for thefiscal quarter ending September 30, 2010; and (iv) $5,000,000 for thefiscal quarter ending December 31, 2010 and each fiscal quarterthereafter.

####  

#### (c)           Liquidity.  Borrower shall maintain at all timesunrestricted cash and Cash Equivalents at Bank plus the Availability Amount ofat least $30,000,000.

 

12

----

 

## **6.10****        Protection andRegistration of Intellectual Property Rights**.

##  

#### (a)           Borrower shall: (i) protect,defend and maintain the validity and enforceability of its materialintellectual property; (ii) promptly advise Bank in writing of materialinfringements of its intellectual property; and (iii) not allow anyintellectual property material to Borrower’s business to be abandoned,forfeited or dedicated to the public without Bank’s written consent.  If Borrower (A) obtains any patent,registered trademark or servicemark, registered copyright, registered maskwork, or any pending application for any of the foregoing, whether as owner,licensee or otherwise, or (B) applies for any patent or the registrationof any trademark or servicemark, then Borrower shall provide written noticethereof to Bank on a quarterly basis upon the delivery of the ComplianceCertificate for such period, and shall execute such intellectual propertysecurity agreements and other documents and take such other actions as Bankshall request in its good faith business judgment to perfect and maintain afirst priority perfected security interest in favor of Bank in suchproperty.  If Borrower decides to registerany copyrights or mask works in the United States Copyright Office, Borrowershall: (x) provide Bank with at least fifteen (15) days prior writtennotice of Borrower’s intent to register such copyrights or mask works togetherwith a copy of the application it intends to file with the United StatesCopyright Office (excluding exhibits thereto); (y) execute an intellectualproperty security agreement and such other documents and take such otheractions as Bank may request in its good faith business judgment to perfect andmaintain a first priority perfected security interest in favor of Bank in thecopyrights or mask works intended to be registered with the United StatesCopyright Office; and (z) record such intellectual property securityagreement with the United States Copyright Office contemporaneously with filingthe copyright or mask work application(s) with the United States CopyrightOffice.  Upon Bank’s request, Borrowershall promptly provide to Bank copies of all applications that it files forpatents or for the registration of trademarks, servicemarks, copyrights or maskworks, together with evidence of the recording of the intellectual propertysecurity agreement necessary for Bank to perfect and maintain a first priorityperfected security interest in such property. Provide written notice to Bankwithin thirty (30) days of entering or becoming bound by any Restricted License(other than over-the-counter software that is commercially available to thepublic).  Borrower shall take such stepsas Bank requests to obtain the consent of, or waiver by, any person whoseconsent or waiver is necessary for (i) any Restricted License to be deemed“Collateral” and for Bank to have a security interest in it that mightotherwise be restricted or prohibited by law or by the terms of any suchRestricted License, whether now existing or entered into in the future, and (ii) Bankto have the ability in the event of a liquidation of any Collateral to disposeof such Collateral in accordance with Bank’s rights and remedies under thisAgreement and the other Loan Documents, including, without limitation the “LoanDocuments” as such term is defined in the Export-Import Agreement.

####  

#### (b)           Borrower and Bankhereby:  (i) acknowledge, confirm,and reaffirm that the Consent and Agreement remains in full force and effectand (ii) acknowledge and agree that (A) this Agreement and theExport-Import Agreement, together, shall be deemed to be the “Loan Agreement”under the terms of the Consent and Agreement, (B) the Guarantor SecurityAgreement shall be deemed to be  the “Security Agreement”  under theterms of the Consent and Agreement, (C) the IP Agreement shall be deemedto be the “IP Security Agreement” under the terms of the Consent and Agreementand (D) the Loan Documents shall be deemed to be the “Loan Documents” underthe terms of the Consent and Agreement.

####  

## **6.11****        Litigation Cooperation**.  From the date hereof and continuing throughthe termination of this Agreement, make available to Bank, without expense toBank, Borrower and its officers, employees and agents and Borrower’s books andrecords, to the extent that Bank may deem them reasonably necessary toprosecute or defend any third-party suit or proceeding instituted by or againstBank with respect to any Collateral or relating to Borrower.

##  

## **6.12****        Further Assurances**.  Execute any further instruments and takefurther action as Bank reasonably requests to perfect or continue Bank’s Lienin the Collateral or to effect the purposes of this Agreement.  Deliver to Bank,****withinfive (5) days after the same are sent or received, copies of allcorrespondence, reports, documents and other filings with any GovernmentalAuthority regarding compliance with or maintenance of Governmental Approvals orRequirements of Law or that could reasonably be expected to have a materialeffect on any of the Governmental Approvals or otherwise on the operations ofBorrower or any of its Subsidiaries.

##  

**6**.**13****        DesignatedSenior Indebtedness.**     Borrower shalldesignate all principal of, interest (including all interest accruing after thecommencement of any bankruptcy or similar proceeding, whether or not a claimfor post-petition interest is allowable as a claim in any such proceeding), andall fees, costs, expenses and other amounts

 

13

----

 

accrued or due underthis Agreement as “Designated Senior Indebtedness”, or such similar term, inany future Subordinated Debt incurred by Borrower after the date hereof.

 

**6.14****        Creation/Acquisition ofSubsidiaries.**  Notwithstanding andwithout limiting the negative covenant contained in Section 7.3 hereof, inthe event Borrower or any Subsidiary creates or acquires any Subsidiary,Borrower and such Subsidiary shall promptly notify Bank of the creation oracquisition of such new Subsidiary and, at Bank’s request, in its solediscretion, take all such action as may be reasonably required by Bank to causeeach such Subsidiary (other than the Special Subsidiary) to, in Bank’s solediscretion, become a co-Borrower or Guarantor under the Loan Documents andgrant a continuing pledge and security interest in and to the assets of suchSubsidiary (substantially as described on Exhibit A hereto); and Borrowershall grant and pledge to Bank a perfected security interest in the stock,units or other evidence of ownership of each Subsidiary(other than the SpecialSubsidiary).

 

**7****             ****NEGATIVECOVENANTS**

# ** **

Borrower shall notdo any of the following without Bank’s prior written consent:

 

## **7.1****          Dispositions**.  Convey, sell, lease, transfer or otherwisedispose of (collectively, “**Transfer**”), orpermit any of its Subsidiaries to Transfer, all or any part of its business orproperty, except for Transfers (a) of Inventory in the ordinary course ofbusiness; (b) of worn-out or obsolete Equipment; (c) in connectionwith Permitted Liens and Permitted Investments; (d) of non-exclusivelicenses for the use of the property of Borrower or its Subsidiaries in theordinary course of business and (e) of the Headquarters Location to theSpecial Subsidiary for purposes of effectuating the Real Estate Financing.

##  

## **7.2****             Changes in Business,Management, Ownership, Control, or Business Locations**.  (a) Engage in or permit any of itsSubsidiaries to engage in any business other than the businesses currentlyengaged in by Borrower and such Subsidiary, as applicable, or reasonably relatedthereto; (b) liquidate or dissolve, other than the dissolution of theSubsidiaries identified on Schedule 7.2 attached hereto; or (c) have amaterial change in executive management (provided that Borrower shall haveninety (90) days to retain a replacement reasonably acceptable to Bank) orpermit or suffer any Change in Control. Borrower shall not, without at least thirty (30) days prior writtennotice to Bank: (1) add any new offices or business locations, includingwarehouses (unless such new offices or business locations contain less than OneMillion Dollars ($1,000,000.00) in Borrower’s assets or property or Borrowerobtains a landlord agreement or bailee agreement in form and substancereasonably satisfactory to Bank), (2) change its jurisdiction oforganization, (3) change its organizational structure or type, (4) changeits legal name, or (5) change any organizational number (if any) assignedby its jurisdiction of organization.

##  

## **7.3****          Mergers or Acquisitions**.  Merge or consolidate, or permit any of itsSubsidiaries to merge or consolidate, with any other Person, or acquire, orpermit any of its Subsidiaries to acquire, all or substantially all of thecapital stock or property of another Person. A Subsidiary (other than a Domestic Subsidiary) may merge or consolidateinto another Subsidiary or into Borrower and a Domestic Subsidiary may mergeinto another Domestic Subsidiary or into Borrower.

##  

## **7.4****          Indebtedness**.  Create, incur, assume, or be liable for anyIndebtedness, or permit any Subsidiary to do so, other than PermittedIndebtedness.

##  

## **7.5****          Encumbrance**.  Create, incur, allow, or suffer any Lien onany of its property, or assign or convey any right to receive income, includingthe sale of any Accounts, or permit any of its Subsidiaries to do so, exceptfor Permitted Liens, permit any Collateral not to be subject to the firstpriority security interest granted herein, or enter into any agreement,document, instrument or other arrangement (except with or in favor of Bank)with any Person which directly or indirectly prohibits or has the effect ofprohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging,granting a security interest in or upon, or encumbering any of Borrower’s orany Subsidiary’s intellectual property, except as is otherwise permitted in Section 7.1hereof and the definition of “Permitted Lien” herein.

##  

## **7.6****          Maintenance ofCollateral Accounts**.  Maintain anyCollateral Account except pursuant to the terms of Section 6.8.(b) hereof.

 

14

----

 

## **7.7**          **Distributions;Investments**.  (a) Pay anydividends or make any distribution or payment or redeem, retire or purchase anycapital stock provided that (i) Borrower may convert any of itsconvertible securities into other securities pursuant to the terms of suchconvertible securities or otherwise in exchange thereof, and (ii) Borrowermay pay dividends solely in common stock; or (b) directly or indirectlymake any Investment other than Permitted Investments, or permit any of itsSubsidiaries to do so.

##  

## **7.8****          Transactions withAffiliates**.  Directly or indirectlyenter into or permit to exist any material transaction with any Affiliate ofBorrower, except for (i) the sale or other transfer of the HeadquartersLocation by Borrower to the Special Subsidiary in order to effectuate the RealEstate Financing, (ii) the lease of the Headquarters Location by Borrowerfrom the Special Subsidiary entered into upon such sale, provided that thelease payments payable by Borrower pursuant to such lease shall not exceed theamount necessary to service the Indebtedness incurred by Special Subsidiary inthe Real Estate Financing and to pay the ordinary operating costs of theSpecial Subsidiary and (ii) transactions that are in the ordinary courseof Borrower’s business, upon fair and reasonable terms that are no lessfavorable to Borrower than would be obtained in an arm’s length transactionwith a non-affiliated Person.

##  

## **7.9****          Subordinated Debt**.  Make or permit any payment on anySubordinated Debt, except under the terms of the subordination, intercreditor,or other similar agreement to which such Subordinated Debt is subject, or amendany provision in any document relating to the Subordinated Debt which wouldincrease the amount thereof or adversely affect the subordination thereof toObligations owed to Bank.

##  

## **7.10****        Compliance**.  Become an “investment company” or a companycontrolled by an “investment company”, under the Investment Company Act of1940, as amended, or undertake as one of its important activities extendingcredit to purchase or carry margin stock (as defined in Regulation U of theBoard of Governors of the Federal Reserve System), or use the proceeds of anyCredit Extension for that purpose; fail to meet the minimum fundingrequirements of ERISA, permit a Reportable Event or Prohibited Transaction, asdefined in ERISA, to occur; fail to comply with the Federal Fair LaborStandards Act or violate any other law or regulation, if the violation couldreasonably be expected to have a material adverse effect on Borrower’sbusiness, or permit any of its Subsidiaries to do so; withdraw or permit anySubsidiary to withdraw from participation in, permit partial or completetermination of, or permit the occurrence of any other event with respect to,any present pension, profit sharing and deferred compensation plan which couldreasonably be expected to result in any liability of Borrower, including anyliability to the Pension Benefit Guaranty Corporation or its successors or anyother governmental agency.

##  

**8****             ****EVENTSOF DEFAULT**

# ** **

Any one of thefollowing shall constitute an event of default (an “**Event ofDefault**”) under this Agreement:

 

## **8.1****          Payment Default**.  Borrower fails to (a) make any paymentof principal or interest on any Credit Extension on its due date, or (b) payany other Obligations within three (3) Business Days after suchObligations are due and payable (which three (3) day grace period shallnot apply to payments due on the Revolving Line Maturity Date).  During the cure period, the failure to curethe payment default is not an Event of Default (but no Credit Extension will bemade during the cure period);

##  

## **8.2****          Covenant Default**.

##  

(a) Borrowerfails or neglects to perform any obligation in Sections 6.2, 6.4, 6.7, 6.8,6.9, 6.12 or violates any covenant in Section 7; or

 

## (b) Borrower failsor neglects to perform, keep, or observe any other term, provision, condition,covenant or agreement contained in this Agreement or any Loan Documents, and asto any default (other than those specified in this Section 8) under suchother term, provision, condition, covenant or agreement that can be cured, hasfailed to cure the default within ten (10) days after the occurrencethereof; provided, however, that if the default cannot by its nature be curedwithin the ten (10) day period or cannot after diligent attempts byBorrower be cured within such ten (10) day period, and such default islikely to be cured within a reasonable time, then Borrower shall have anadditional period (which shall not in any case exceed thirty (30) days) toattempt to cure such default, and

 

15

----

 

## within such reasonable time period the failure to curethe default shall not be deemed an Event of Default (but no Credit Extensionsshall be made during such cure period). Grace periods provided under this section shall not apply, among otherthings, to financial covenants or any other covenants set forth in subsection (a) above;

##  

## **8.3****          Material Adverse Change**.  A Material Adverse Change occurs;

##  

## **8.4****          Attachment; Levy;Restraint on Business**.  (a) (i) Theservice of process seeking to attach, by trustee or similar process, any fundsof Borrower or of any entity under the control of Borrower (including aSubsidiary) on deposit with Bank or any Bank Affiliate, or (ii) a noticeof lien, levy, or assessment is filed against any of Borrower’s assets by anygovernment agency, and the same under subclauses (i) and (ii) hereofare not, within ten (10) days after the occurrence thereof, discharged orstayed (whether through the posting of a bond or otherwise); provided, however,no Credit Extensions shall be made during any ten (10) day cure period;and (b) (i) any material portion of Borrower’s assets is attached,seized, levied on, or comes into possession of a trustee or receiver, or (ii) anycourt order enjoins, restrains, or prevents Borrower from conducting anymaterial part of its business;

##  

## **8.5****          Insolvency**.  (a) Borrower is unable to pay its debts(including trade debts) as they become due or otherwise becomes insolvent; (b) Borrowerbegins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begunagainst Borrower and not dismissed or stayed within forty-five (45) days (butno Credit Extensions shall be made while of any of the conditions described inclause (a) exist and/or until any Insolvency Proceeding is dismissed);

##  

## **8.6****          Other Agreements**.  There is a default in any agreement to whichBorrower or any Guarantor is a party with a third party or parties resulting ina right by such third party or parties, whether or not exercised, to acceleratethe maturity of any Indebtedness in an amount in excess of Five HundredThousand Dollars ($500,000.00) or that could have a material adverse effect onBorrower’s or any Guarantor’s business.

##  

## **8.7****          Judgments**.  One or more judgments, orders, or decrees forthe payment of money in an amount, individually or in the aggregate, of atleast Five Hundred Thousand  Dollars($500,000.00) (not covered by independent third-party insurance as to whichliability has been accepted by such insurance carrier) shall be renderedagainst Borrower and shall remain unsatisfied, unvacated, or unstayed for aperiod of ten (10) days after the entry thereof (provided that no CreditExtensions will be made prior to the satisfaction, vacation, or stay of suchjudgment, order, or decree);

##  

## **8.8****          Misrepresentations**.  Borrower or any Person acting for Borrowermakes any representation, warranty, or other statement now or later in thisAgreement, any Loan Document or in any writing delivered to Bank or to induceBank to enter this Agreement or any Loan Document, and such representation,warranty, or other statement is incorrect in any material respect when made;

##  

## **8.9****          Subordinated Debt**.  A default or breach occurs under anyagreement between Borrower and any creditor of Borrower that signed asubordination, intercreditor, or other similar agreement with Bank, or anycreditor that has signed such an agreement with Bank breaches any terms of suchagreement;

##  

## **8.10****        Guaranty; GuarantorDefaults**.  (a) Any Guaranty ofany Obligations terminates or ceases for any reason to be in full force andeffect; (b) any Guarantor does not perform any obligation or covenantunder any Guaranty of the Obligations; (c) any circumstance described inSections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with respect to any Guarantor; (d) theliquidation, winding up, or termination of existence of any Guarantor; (e) theoccurrence of any “Event of Default” under (and as defined in) any GuarantorSecurity Agreement; or (f) the occurrence of any “Event of Default” under(and as defined in) any Pledge Agreement executed and delivered by anyGuarantor;

##  

## **8.11****        EXIM Guarantee. **If the EXIM Guarantee ceases for anyreason to be in full force and effect, or if the EXIM Bank declares the EXIMGuarantee void or revokes any obligations under the EXIM Guarantee;

##  

## **8.12****        EXIM Default. **After the effective date of theExport-Import Agreement, the occurrence of an Event of Default under theExport-Import Agreement or the EXIM Loan Documents.

 

16

----

 

**8.11****        Governmental Approvals**.  Any Governmental Approval shall have been (a) revoked,rescinded, suspended, modified in an adverse manner or not renewed in theordinary course for a full term or (b) subject to any decision by a GovernmentalAuthority that designates a hearing with respect to any applications forrenewal of any of such Governmental Approval or that could result in theGovernmental Authority taking any of the actions described in clause (a) above,and such decision or such revocation, rescission, suspension, modification ornon-renewal (i) has, or could reasonably be expected to have, a MaterialAdverse Change, or (ii) adversely affects the legal qualifications ofBorrower or any of its Subsidiaries to hold such Governmental Approval in anyapplicable jurisdiction and such revocation, rescission, suspension,modification or non-renewal could reasonably be expected to affect the statusof or legal qualifications of Borrower or any of its Subsidiaries to hold anyGovernmental Approval in any other jurisdiction.

 

**9****             ****BANK’SRIGHTS AND REMEDIES**

# ** **

## **9.1****          Rights and Remedies**.  While an Event of Default occurs andcontinues Bank may, without notice or demand, do any or all of the following:

##  

#### (a)           declare all Obligationsimmediately due and payable (but if an Event of Default described in Section 8.5occurs all Obligations are immediately due and payable without any action byBank);

####  

#### (b)           stop advancing money orextending credit for Borrower’s benefit under this Agreement or under any otheragreement between Borrower and Bank;

####  

#### (c)           demand that Borrower (i) depositscash with Bank in an amount equal to the aggregate amount of any Letters ofCredit remaining undrawn, as collateral security for the repayment of anyfuture drawings under such Letters of Credit, and Borrower shall forthwithdeposit and pay such amounts, and (ii) pay in advance all Letter of Creditfees scheduled to be paid or payable over the remaining term of any Letters ofCredit; provided, however, if an Event of Default described in Section 8.5occurs, the obligation of Borrower to cash collateralize all Letters of Creditremaining undrawn shall automatically become effective without any action byBank;

####  

#### (d)           terminate any FXForward Contracts;

####  

#### (e)           settle or adjustdisputes and claims directly with Account Debtors for amounts on terms and inany order that Bank considers advisable, notify any Person owing Borrower moneyof Bank’s security interest in such funds, and verify the amount of suchaccount;

####  

#### (f)            make any payments and doany acts it considers necessary or reasonable to protect the Collateral and/orits security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make itavailable as Bank designates.  Bank mayenter premises where the Collateral is located, take and maintain possession ofany part of the Collateral, and pay, purchase, contest, or compromise any Lienwhich appears to be prior or superior to its security interest and pay allexpenses incurred. Borrower grants Bank a license to enter and occupy any ofits premises, without charge, to exercise any of Bank’s rights or remedies;

####  

#### (g)           apply to theObligations any (i) balances and deposits of Borrower it holds, or (ii) anyamount held by Bank owing to or for the credit or the account of Borrower;

####  

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

####  

#### (i)            place a “hold” on anyaccount maintained with Bank and/or deliver a notice of exclusive control, anyentitlement order, or other directions or instructions pursuant to any ControlAgreement or similar agreements providing control of any Collateral;

 

17

----

####  

#### (j)            demand and receivepossession of Borrower’s Books; and

####  

#### (k)           exercise all rights andremedies available to Bank under the Loan Documents or at law or equity,including all remedies provided under the Code (including disposal of theCollateral pursuant to the terms thereof).

####  

## **9.2****          Power of Attorney**.  Borrower hereby irrevocably appoints Bank asits lawful attorney-in-fact, exercisable upon the occurrence and during thecontinuance of an Event of Default, to:  (a) endorseBorrower’s name on any checks or other forms of payment or security; (b) signBorrower’s name on any invoice or bill of lading for any Account or draftsagainst Account Debtors; (c) settle and adjust disputes and claims aboutthe Accounts directly with Account Debtors, for amounts and on terms Bank determinesreasonable; (d) make, settle, and adjust all claims under Borrower’sinsurance policies; (e) pay, contest or settle any Lien, charge,encumbrance, security interest, and adverse claim in or to the Collateral, orany judgment based thereon, or otherwise take any action to terminate ordischarge the same; and (f) transfer the Collateral into the name of Bankor a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to signBorrower’s name on any documents necessary to perfect or continue theperfection of Bank’s security interest in the Collateral regardless of whetheran Event of Default has occurred until all Obligations have been satisfied infull (except for contingent indemnification obligations for which no claim hasbeen made) and Bank is under no further obligation to make Credit Extensionshereunder.  Bank’s foregoing appointmentas Borrower’s attorney in fact, and all of Bank’s rights and powers, coupledwith an interest, are irrevocable until all Obligations have been fully repaidand performed and Bank’s obligation to provide Credit Extensions terminates.

##  

## **9.3****          Protective Payments**.  If Borrower fails to obtain the insurancecalled for by Section 6.7 or fails to pay any premium thereon or fails topay any other amount which Borrower is obligated to pay under this Agreement orany other Loan Document, Bank may obtain such insurance or make such payment,and all amounts so paid by Bank are Bank Expenses and immediately due andpayable, bearing interest at the then highest applicable rate, and secured bythe Collateral.  Bank will makereasonable efforts to provide Borrower with notice of Bank obtaining suchinsurance at the time it is obtained or within a reasonable timethereafter.  No payments by Bank aredeemed an agreement to make similar payments in the future or Bank’s waiver ofany Event of Default.

##  

## **9.4****          Application of Paymentsand Proceeds**.  Borrower shall have noright to specify the order or the accounts to which Bank shall allocate orapply any payments required to be made by Borrower to Bank or otherwisereceived by Bank under this Agreement when any such allocation or applicationis not specified elsewhere in this Agreement. If an Event of Default has occurred and is continuing, Bank may apply anyfunds in its possession, whether from Borrower account balances, payments,proceeds realized as the result of any collection of Accounts or otherdisposition of the Collateral, or otherwise, to the Obligations in such orderas Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower by credit to the DesignatedDeposit Account or to other Persons legally entitled thereto; Borrower shallremain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectlyenters into a deferred payment or other credit transaction with any purchaserat any sale of Collateral, Bank shall have the option, exercisable at any time,of either reducing the Obligations by the principal amount of the purchase priceor deferring the reduction of the Obligations until the actual receipt by Bankof cash therefor.

##  

## **9.5****          Bank’s Liability forCollateral**.  So long as Bank complieswith reasonable banking practices regarding the safekeeping of the Collateralin the possession or under the control of Bank, Bank shall not be liable orresponsible for: (a) the safekeeping of the Collateral; (b) any lossor damage to the Collateral; (c) any diminution in the value of theCollateral; or (d) any act or default of any carrier, warehouseman,bailee, or other Person.  Borrower bearsall risk of loss, damage or destruction of the Collateral.

##  

## **9.6****          No Waiver; RemediesCumulative**.  Bank’s failure, at anytime or times, to require strict performance by Borrower of any provision ofthis Agreement or any other Loan Document shall not waive, affect, or diminishany right of Bank thereafter to demand strict performance and complianceherewith or therewith.  No waiverhereunder shall be effective unless signed by Bank and then is only effective forthe specific instance and purpose for which it is given.  Bank’s rights and remedies under thisAgreement and the other Loan Documents are cumulative.  Bank has all rights and remedies providedunder the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’swaiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is nota waiver, election, or acquiescence.

 

18

----

##  

## **9.7****          Demand Waiver**.  Borrower waives demand, notice of default ordishonor, notice of payment and nonpayment, notice of any default, nonpaymentat maturity, release, compromise, settlement, extension, or renewal ofaccounts, documents, instruments, chattel paper, and guarantees held by Bank onwhich Borrower is liable.

##  

## **9.8****          Borrower Liability.**  Either Borrower may, acting singly, requestCredit Extensions hereunder.  EachBorrower hereby appoints the other as agent for the other for all purposeshereunder, including with respect to requesting Credit Extensionshereunder.  Each Borrower hereunder shallbe jointly and severally obligated to repay all Credit Extensions madehereunder, regardless of which Borrower actually receives said CreditExtension, as if each Borrower hereunder directly received all CreditExtensions.  Each Borrower waives (a) anysuretyship defenses available to it under the Code or any other applicable law,and (b) any right to require Bank to: (i) proceed against anyBorrower or any other person; (ii) proceed against or exhaust anysecurity; or (iii) pursue any other remedy.  Bank may exercise or not exercise any rightor remedy it has against any Borrower or any security it holds (including theright to foreclose by judicial or non-judicial sale) without affecting anyBorrower’s liability.  Notwithstandingany other provision of this Agreement or other related document, each Borrowerirrevocably waives all rights that it may have at law or in equity (including,without limitation, any law subrogating Borrower to the rights of Bank underthis Agreement) to seek contribution, indemnification or any other form ofreimbursement from any other Borrower, or any other Person now or hereafterprimarily or secondarily liable for any of the Obligations, for any paymentmade by Borrower with respect to the Obligations in connection with thisAgreement or otherwise and all rights that it might have to benefit from, or toparticipate in, any security for the Obligations as a result of any paymentmade by Borrower with respect to the Obligations in connection with thisAgreement or otherwise.  Any agreementproviding for indemnification, reimbursement or any other arrangementprohibited under this Section shall be null and void.  If any payment is made to a Borrower incontravention of this Section, such Borrower shall hold such payment in trustfor Bank and such payment shall be promptly delivered to Bank for applicationto the Obligations, whether matured or unmatured.

##  

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

# ** **

All notices,consents, requests, approvals, demands, or other communication (collectively, “Communication”)by any party to this Agreement or any other Loan Document must be in writingand be delivered or sent by facsimile at the addresses or facsimile numberslisted below.  Bank or Borrower maychange its notice address by giving the other party written noticethereof.  Each such Communication shallbe deemed to have been validly served, given, or delivered: (a) upon theearlier of actual receipt and three (3) Business Days after deposit in theU.S. mail, registered or certified mail, return receipt requested, with properpostage prepaid; (b) upon transmission, when sent by facsimiletransmission (with such facsimile promptly confirmed by delivery of a copy bypersonal delivery or United States mail as otherwise provided in this Section 10);(c) one (1) Business Day after deposit with a reputable overnightcourier with all charges prepaid; or (d) when delivered, if hand-deliveredby messenger, all of which shall be addressed to the party to be notified andsent to the address or facsimile number indicated below.  Advance requests made pursuant to Section 3.4must be in writing and may be in the form of electronic mail, delivered to Bankby Borrower at the e-mail address of Bank provided below and shall be deemed tohave been validly served, given, or delivered when sent (with such electronicmail promptly confirmed by delivery of a copy by personal delivery or UnitedStates mail as otherwise provided in this Section 10).  Bank or Borrower may change its address,facsimile number, or electronic mail address by giving the other party writtennotice thereof in accordance with the terms of this Section 10.

 

If to Borrower:                                                                   AxcelisTechnologies, Inc.

108 Cherry Hill Drive

Beverly, Massachusetts 01915

Attn: Stephen G. Bassett, Chief Financial Officer andExecutive Vice President

Fax: 978-787-4090

Email: Stephen.bassett@axcelis.com

 

19

----

 

If to Borrower:                                                                   AxcelisTechnologies, Inc.

108 Cherry Hill Drive

Beverly, Massachusetts 01915

Attn: Lynnette C. Fallon, Executive Vice PresidentHR/Legal, General Counsel and Secretary

Fax: 978-787-4090

Email: lynnette.fallon@axcelis.com

 

With a copy to:                                                             EdwardAngell Palmer and Dodge LLP

111 Huntington Avenue

Boston, Massachusetts 02199

Attn: James I. Rubens, Esquire

Fax: 888-325-9130

Email: jrubens@eapdlaw.com

 

If to Bank:                                                                                         SiliconValley Bank

One Newton Executive Park, Suite 200

2221 Washington Street

Newton, Massachusetts 02462

Attn: Mark Sperling

Fax: 617.969.5478

Email: msperling@svbank.com

 

with a copy to:                                                                 Riemer &Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attn: Charles W. Stavros, Esquire

Fax: 617.880.3456

Email: CStavros@riemerlaw.com

 

**11****          ****CHOICEOF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE**

# ** **

Massachusetts law governsthe Loan Documents without regard to principles of conflicts of law.  Borrower and Bank each submit to theexclusive jurisdiction of the State and Federal courts in Massachusetts; provided,however, that nothing in this Agreement shall be deemed to operate topreclude Bank from bringing suit or taking other legal action in any otherjurisdiction to realize on the Collateral or any other security for theObligations, or to enforce a judgment or other court order in favor of Bank.  Borrower expressly submits and consents inadvance to such jurisdiction in any action or suit commenced in any such court,and Borrower hereby waives any objection that it may have based upon lack ofpersonal jurisdiction, improper venue, or forum non conveniens and herebyconsents to the granting of such legal or equitable relief as is deemedappropriate by such court.  Borrowerhereby waives personal service of the summons, complaints, and other processissued in such action or suit and agrees that service of such summons,complaints, and other process may be made by registered or certified mailaddressed to Borrower at the address set forth in Section 10 of thisAgreement and that service so made shall be deemed completed upon the earlierto occur of Borrower’s actual receipt thereof or three (3) days afterdeposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING ANYTHING TOTHE CONTRARY SET FORTH HEREINABOVE, BANK SHALL SPECIFICALLY HAVE THE RIGHT TOBRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTSOF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TOREALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINSTBORROWER OR ITS PROPERTY.

 

**TO THEFULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIRRIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASEDUPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS AMATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITSCOUNSEL**.

 

20

----

 

**12****          ****GENERALPROVISIONS**

# ** **

## **12.1****        Termination Prior toRevolving Line Maturity Date**.  ThisAgreement may be terminated prior to the Revolving Line Maturity Date byBorrower, effective three (3) Business Days after written notice oftermination is given to Bank. Notwithstanding any such termination, Bank’s lien and security interestin the Collateral shall continue until Borrower fully satisfies its Obligationsin cash (except for contingent indemnification obligations for which no claimhas been made).  If such termination isat Borrower’s election (regardless of whether any Default or Event of Defaultthen exists) or at Bank’s election due to the occurrence and continuance of anEvent of Default (except for, and excluding, an Event of Default caused by anEvent of Default under the Export-Import Agreement), Borrower shall pay toBank, in addition to the payment of any other expenses or fees then-owing, atermination fee in an amount equal to Two Hundred Thousand Dollars($200,000.00) (i.e., one percent (1.00%) of the Revolving Line).

##  

## **12.2****        Right of Set-Off**.  Borrower hereby grants to Bank a Lien and aright of setoff as security for all Obligations to Bank, whether now existingor hereafter arising upon and against all deposits, credits, collateral andproperty, now or hereafter in the possession, custody, safekeeping or controlof Bank or any entity under the control of Bank (including a subsidiary ofBank) or in transit to any of them.  Atany time after the occurrence and during the continuance of an Event of Default,without demand or notice, Bank may setoff the same or any part thereof andapply the same to any liability or Obligation of Borrower even though unmaturedand regardless of the adequacy of any other collateral securing theObligations.  ANY AND ALL RIGHTS TOREQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHERCOLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OFSETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER,ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

##  

## **12.3****        Successors and Assigns**.  This Agreement binds and is for the benefitof the successors and permitted assigns of each party.  Borrower may not assign this Agreement or anyrights or obligations under it without Bank’s prior written consent (which maybe granted or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, tosell, transfer, negotiate, or grant participation in all or any part of, or anyinterest in, Bank’s obligations, rights, and benefits under this Agreement andthe other Loan Documents; provided, however, that prior to the occurrence of anEvent of Default, any such assignment or participation may only be made to anEligible Assignee.

##  

## **12.4****        Indemnification**.  Borrower agrees to indemnify, defend and holdBank and its directors, officers, employees, agents, attorneys, or any otherPerson affiliated with or representing Bank (each, an “**IndemnifiedPerson**”) harmless against:  (a) allobligations, demands, claims, and liabilities (collectively, “**Claims**”) claimed or asserted by any other party inconnection with the transactions contemplated by the Loan Documents; and (b) alllosses or expenses (including Bank Expenses) in any way suffered, incurred, orpaid by such Indemnified Person as a result of, following from, consequentialto, or arising from transactions between Bank and Borrower (includingreasonable attorneys’ fees and expenses), except for Claims and/or lossesdirectly caused by such Indemnified Person’s gross negligence or willfulmisconduct.

##  

## **12.5****        Time of Essence**.  Time is of the essence for the performance ofall Obligations in this Agreement.

##  

## **12.6****        Severability of Provisions**.  Each provision of this Agreement is severablefrom every other provision in determining the enforceability of any provision.

##  

## **12.7****        Correction of LoanDocuments**.  Bank may correct patenterrors and fill in any blanks in this Agreement and the other Loan Documentsconsistent with the agreement of the parties.

##  

## **12.8****        Amendments in Writing;Waiver; Integration.**  No purportedamendment or modification of any Loan Document, or waiver, discharge ortermination of any obligation under any Loan Document, shall be enforceable oradmissible unless, and only to the extent, expressly set forth in a writingsigned by the party against which enforcement or admission is sought.  Without limiting the generality of theforegoing, no oral promise or statement, nor any action, inaction, delay,failure to require performance or course of conduct shall operate as, orevidence, an amendment, supplement or waiver or have any other effect on anyLoan Document.  Any waiver 

 

21

----

##  

## granted shall be limited to the specific circumstanceexpressly described in it, and shall not apply to any subsequent or othercircumstance, whether similar or dissimilar, or give rise to, or evidence, anyobligation or commitment to grant any further waiver.  The Loan Documents represent the entireagreement about this subject matter and supersede prior negotiations oragreements.  All prior agreements,understandings, representations, warranties, and negotiations between theparties about the subject matter of the Loan Documents merge into the LoanDocuments.

##  

## **12.9****        Counterparts**.  This Agreement may be executed in any numberof counterparts and by different parties on separate counterparts, each ofwhich, when executed and delivered, are an original, and all taken together,constitute one Agreement.

##  

## **12.10****      Survival**.  All covenants, representations and warrantiesmade in this Agreement continue in full force until this Agreement hasterminated pursuant to its terms and all Obligations (other than inchoateindemnity obligations and any other obligations which, by their terms, are tosurvive the termination of this Agreement) have been satisfied.  The obligation of Borrower in Section 12.2to indemnify Bank shall survive until the statute of limitations with respectto such claim or cause of action shall have run.

##  

## **12.11****      Confidentiality**.  In handling any confidential information,Bank shall exercise the same degree of care that it exercises for its ownproprietary information, but disclosure of information may be made: (a) toBank’s Subsidiaries or Affiliates; (b) to prospective transferees orpurchasers of any interest in the Credit Extensions (provided, however, Bankshall use commercially reasonable efforts to obtain such prospective transferee’sor purchaser’s agreement to the terms of this provision); (c) as requiredby law, regulation, subpoena, or other order; (d) to Bank’s regulators oras otherwise required in connection with Bank’s examination or audit; (e) asBank considers appropriate in exercising remedies under the Loan Documents; and(f) to third-party service providers of Bank so long as such serviceproviders have executed a confidentiality agreement with Bank with terms noless restrictive than those contained herein. Confidential information does not include information that either: (i) isin the public domain or in Bank’s possession when disclosed to Bank, or becomespart of the public domain after disclosure to Bank; or (ii) is disclosedto Bank by a third party, if Bank does not know that the third party isprohibited from disclosing the information.

##  

## Bank may use confidentialinformation for any purpose, including, without limitation, for the developmentof client databases, reporting purposes, and market analysis, so long as Bankdoes not disclose Borrower’s identity or the identity of any person associatedwith Borrower unless otherwise expressly permitted by this Agreement.  The provisions of the immediately precedingsentence shall survive the termination of this Agreement.

##  

## **12.12****      Electronic Execution ofDocuments.** The words “execution,” “signed,”“signature” and words of like import in any Loan Document shall be deemed toinclude electronic signatures or the keeping of records in electronic form,each of which shall be of the same legal effect, validity and enforceability asa manually executed signature or the use of a paper-based recordkeepingsystems, as the case may be, to the extent and as provided for in anyapplicable law, including, without limitation, any state law based on theUniform Electronic Transactions Act.

##  

## **12.13****      Captions.**  The headings used in this Agreement are forconvenience only and shall not affect the interpretation of this Agreement.

##  

## **12.14****      Construction of Agreement.** The parties mutually acknowledge that they andtheir attorneys have participated in the preparation and negotiation of thisAgreement.  In cases of uncertainty thisAgreement shall be construed without regard to which of the parties caused theuncertainty to exist.

##  

## **12.15****      Relationship.**  The relationship of the parties to thisAgreement is determined solely by the provisions of this Agreement.  The parties do not intend to create anyagency, partnership, joint venture, trust, fiduciary or other relationship withduties or incidents different from those of parties to an arm’s-lengthcontract.

##  

## **12.16****      Third Parties.**  Nothing in this Agreement, whether express orimplied, is intended to: (a) confer any benefits, rights or remedies underor by reason of this Agreement on any persons other than the express parties toit and their respective permitted successors and assigns; (b) relieve ordischarge the obligation or liability of any person not an express party tothis Agreement; or (c) give any person not an express party to thisAgreement any right of subrogation or action against any party to thisAgreement.

 

22

----

##  

## **12.17****      Borrower Agreement;Cross-Collateralization; Cross-Default; Conflicts. **Both this Agreement and the EXIM BorrowerAgreement shall continue in full force and effect, and all rights and remediesunder this Agreement and the EXIM Borrower Agreement are cumulative.  The term “Obligations” as used in thisAgreement and in the EXIM Borrower Agreement shall include without limitationthe obligation to pay when due all loans made pursuant to the EXIM BorrowerAgreement and the Export-Import Agreement (the “**Exim Loans**”)and all interest thereon and the obligation to pay when due all Advances madepursuant to the terms of this Agreement and all interest thereon.  Without limiting the generality of theforegoing, the security interest granted herein covering all “Collateral” asdefined in this Agreement and as defined in the Borrower Agreement shall secureall Exim Loans and all Advances and all interest thereon, and all otherObligations.  Any Event of Default underthis Agreement shall also constitute a default under the EXIM BorrowerAgreement, and any default under the EXIM Borrower Agreement shall alsoconstitute an Event of Default under this Agreement.  In the event Bank assigns its rights under thisAgreement and/or under any note evidencing Exim Loans and/or its rights underthe EXIM Borrower Agreement and/or under any note evidencing Advances, to anythird party, including, without limitation, the Exim Bank, whether before orafter the occurrence of any Event of Default, Bank shall have the right (butnot any obligation), in its sole discretion, to allocate and apportionCollateral to the EXIM Borrower Agreement and/or note assigned and to specifythe priorities of the respective security interests in such Collateral betweenitself and the assignee, all without notice to or consent of theBorrowers.  Should any term of theAgreement conflict with any term of the EXIM Borrower Agreement, the morerestrictive term in either agreement shall govern Borrower.

##  

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

# ** **

## **13.1****        Definitions**.  As used in the Loan Documents, the word “shall”is mandatory, the word “may” is permissive, the word “or” is not exclusive, thewords “includes” and “including” are not limiting, the singular includes theplural, and numbers denoting amounts that are set off in brackets are negative.As used in this Agreement, the following terms have the following meanings:

##  

“**ABN Amro Pledged Account**”is defined in Section 6.8.

 

“**Account**” is any“account” as defined in the Code with such additions to such term as may hereafterbe made, and includes, without limitation, all accounts receivable and othersums owing to Borrower.

 

“**Account Debtor**”is any “account debtor” as defined in the Code with such additions to such termas may hereafter be made.

 

“**Advance**” or “**Advances**” means an advance (or advances) under the RevolvingLine.

 

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

 

“**Agreement**” isdefined in the preamble hereof.

 

“**Availability Amount**”is (a) the lesser of (i) the Revolving Line minus any amountsoutstanding under the Export-Import Agreement or (ii) the amount available underthe Borrowing Base minus (b) theamount of all outstanding Letters of Credit (including drawn but unreimbursedLetters of Credit) plus an amount equal to the Letter of Credit Reserve, minus (c) theFX Reserve, minus (d) any amounts used for Cash Management Services, andminus (e) the outstanding principal balance of any Advances.  The aggregate amount of all Advances(including, without limitation, the Dollar equivalent amount of all outstandingLetters of Credit (including drawn but unreimbursed Letters of Credit plus anamount equal to the Letter of Credit Reserve), any outstanding FX Reserve andany amounts used for Cash Management Services) under this Agreement outstandingat any time together with all Credit Extensions made pursuant to theExport-Import Agreement outstanding at any time shall not exceed Twenty MillionDollars ($20,000,000).

 

“**Bank**” isdefined in the preamble hereof.

 

23

----

 

“**Bank Expenses**”are all audit fees and expenses, costs, and expenses (including reasonableattorneys’ fees and expenses) for preparing, amending, negotiating,administering, defending and enforcing the Loan Documents (including, withoutlimitation, those incurred in connection with appeals or InsolvencyProceedings) or otherwise incurred with respect to Borrower.

 

“**Borrower**”is defined in the preamble hereof

 

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

 

“**Borrowing Base**”is 80% of Eligible Accounts, as determined by Bank from Borrower’s most recentTransaction Report; provided, however, that Bank may, followingany Collateral inspection or audit conducted by or on behalf of Bank, decreasethe foregoing percentage in its good faith business judgment based on events,conditions, contingencies, or risks which, as reasonably determined by Bankafter consultation with Borrower, may adversely affect Collateral.

 

“**Borrowing Resolutions**”are, with respect to any Person, those resolutions adopted by such Person’sBoard of Directors (or other applicable governing body) and delivered by suchPerson to Bank approving the Loan Documents to which such Person is a party andthe transactions contemplated thereby, together with a certificate executed byits secretary on behalf of such Person certifying that (a) such Person hasthe authority to execute, deliver, and perform its obligations under each ofthe Loan Documents to which it is a party, (b) that attached to suchcertificate is a true, correct, and complete copy of the resolutions then infull force and effect authorizing and ratifying the execution, delivery, andperformance by such Person of the Loan Documents to which it is a party, (c) thename(s) of the Person(s) authorized to execute the Loan Documents onbehalf of such Person, together with a sample of the true signature(s) ofsuch Person(s), and (d) that Bank may conclusively rely on suchcertificate unless and until such Person shall have delivered to Bank a furthercertificate canceling or amending such prior certificate.

 

“**Business Day**”is any day other than a Saturday, Sunday or other day on which bankinginstitutions in the Commonwealth of Massachusetts are authorized or required bylaw or other governmental action to close, except that if any determination ofa “Business Day” shall relate to an FX Forward Contract, the term “Business Day”shall mean a day on which dealings are carried on in the country of settlementof the foreign (i.e., non-Dollar) currency. is any day that is not a Saturday,Sunday or a day on which Bank is closed.

 

**“Cash Equivalents”** means (a) marketabledirect obligations issued or unconditionally guaranteed by the United States orany agency or any State thereof having maturities of not more than one (1) yearfrom the date of acquisition; (b) commercial paper maturing no more thanone (1) year after its creation and having the highest rating from eitherStandard & Poor’s Ratings Group or Moody’s Investors Service, Inc.;(c) Bank’s certificates of deposit issued maturing no more than one (1) yearafter issue.

 

**“Cash Management Services”**isdefined in Section 2.1.4.

 

“**Change in Control**” means any event, transaction, or occurrence as a result of which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the “**Exchange Act**”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Borrower, representing twenty-five percent (25%) or more of the combined voting power of Borrower’s then outstanding securities; or (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any new directors whose election by the Board of Directors of Borrower was approved by a vote of at least two-thirds of the directors then still in office who either were directions at the beginning of such period  or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office.

 

“**Code**” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the Commonwealth of Massachusetts; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the 

 

24

----

 

definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the Commonwealth of Massachusetts, the term “**Code**” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes on the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

“**Collateral**” isany and all properties, rights and assets of Borrower described on Exhibit A.

 

“**Collateral Account**”is any Deposit Account, Securities Account, or Commodity Account.

 

“**Commodity Account**”is any “commodity account” as defined in the Code with such additions to suchterm as may hereafter be made.

 

“**Compliance Certificate**”is that certain certificate in the form attached hereto as Exhibit B.

 

“**Consent and Agreement**”means the Consent and Agreement dated as of March 30, 2009 by and amongthe Bank, SEN, Sumitomo Heavy Industries, Ltd. (solely for purposes of Section 2(b) thereunder),the Borrower and certain of Borrower’s Subsidiaries named therein.

 

“**Contingent Obligation**”is, for any Person, any direct or indirect liability, contingent or not, ofthat Person for (a) any indebtedness, lease, dividend, letter of credit orother obligation of another such Person as an obligation directly or indirectlyguaranteed, endorsed, co-made, discounted or sold with recourse by that Person,or for which that Person is directly or indirectly liable; (b) anyobligations for undrawn letters of credit for the account of that Person; and (c) allobligations from any interest rate, currency or commodity swap agreement,interest rate cap or collar agreement, or other agreement or arrangementdesignated to protect a Person against fluctuation in interest rates, currencyexchange rates or commodity prices; but “Contingent Obligation” does notinclude endorsements in the ordinary course of business.  The amount of a Contingent Obligation is thestated or determined amount of the primary obligation for which the ContingentObligation is made or, if not determinable, the maximum reasonably anticipatedliability for it determined by the Person in good faith; but the amount may notexceed the maximum of the obligations under any guarantee or other supportarrangement.

 

“**Control Agreement**”is any control agreement entered into among the depository institution at whichBorrower maintains a Deposit Account or the securities intermediary orcommodity intermediary at which Borrower maintains a Securities Account or aCommodity Account, Borrower, and Bank pursuant to which Bank obtains control(within the meaning of the Code) over such Deposit Account, Securities Account,or Commodity Account.

 

“**Credit Extension**”is any Advance, EXIM Loan, Letter of Credit, FX Forward Contract, amountutilized for Cash Management Services, or any other extension of credit by Bankfor Borrower’s benefit.

 

“**Current Liabilities**”are all obligations and liabilities of Borrower and its Subsidiaries to Bank(other than obligations and liabilities which are 100% cash secured), plus,without duplication, the aggregate amount of Borrower’s and its Subsidiaries’ consolidatedTotal Liabilities that mature within one (1) year.

 

“**Default**”means any event which with notice or passage of time or both, would constitutean Event of Default.

 

“**Default Rate**”is defined in Section 2.3(b).

 

“**Deferred Revenue**”is all amounts received or invoiced by Borrower in advance of services to beperformed under contracts and/or delivery of products and not yet recognized asrevenue.

 

“**DepositAccount**” is any “deposit account” as defined in the Code with suchadditions to such term as may hereafter be made.

 

“**Designated Deposit Account**”is Borrower’s deposit account, account number 330609227, maintained with Bank.

 

25

----

 

“**Dollars***,*”**“**dollars**” and “**$**” each meanlawful money of the United States.

 

“**Domestic Subsidiary**”means a Subsidiary organized under the laws of the United States or any stateor territory thereof or the District of Columbia.

 

“**Effective Date**”is the date Bank executes this Agreement as indicated on the signature page hereof.

 

“**Eligible Accounts**”means Accounts which arise in the ordinary course of Borrower’s business thatmeet all Borrower’s representations and warranties in Section 5.3.  Bank reserves the right at any time after theEffective Date to adjust any of the criteria set forth below and to establishnew criteria in its good faith business judgment.   Without limiting the fact that thedetermination of which Accounts are eligible for borrowing is a matter of Bank’sgood faith judgment, the following (“**Minimum EligibilityRequirements**”) are the minimum requirements for an Account to be anEligible Account and, unless Bank agrees otherwise in writing, EligibleAccounts shall not include:

 

#### (a)           Accounts that theAccount Debtor has not paid within ninety (90) days of invoice date regardlessof invoice payment period terms;

####  

#### (b)           Accounts owing froman Account Debtor, fifty percent (50%) or more of whose Accounts have not beenpaid within ninety (90) days of invoice date;

####  

#### (c)           Accounts billed in theUnited States and owing from an Account Debtor which does not have itsprincipal place of business in the United States or Canada;

####  

#### (d)           Accounts billed andpayable outside of the United States;

####  

#### (e)           Accounts owing from anAccount Debtor to the extent that Borrower is indebted or obligated in anymanner to the Account Debtor (as creditor, lessor, supplier or otherwise -sometimes called “contra” accounts, accounts payable, customer deposits orcredit accounts), with the exception of customary credits, adjustments and/ordiscounts given to an Account Debtor by Borrower in the ordinary course of itsbusiness;

####  

#### (f)            Accounts for which theAccount Debtor is Borrower’s Affiliate (or a company in which Borrower or itsAffiliates have greater than a 20% ownership interest), officer, employee, or agent;

####  

#### (g)           Accounts with creditbalances over ninety (90) days from invoice date;

####  

#### (h)           Accounts owing from anAccount Debtor, including Affiliates, whose total obligations to Borrowerexceed twenty-five (25%) of all Accounts, for the amounts that exceed thatpercentage, unless Bank, on a case-by-case basis and in its sole discretion,otherwise approves any such Account;

####  

#### (i)            Accounts owing from anAccount Debtor which is a United States government entity or any department,agency, or instrumentality thereof unless Borrower has assigned its paymentrights to Bank and the assignment has been acknowledged under the FederalAssignment of Claims Act of 1940, as amended;

####  

#### (j)            Accounts fordemonstration or promotional equipment, or in which goods are consigned, orsold on a “sale guaranteed”, “sale or return”, “sale on approval”, or otherterms if Account Debtor’s payment may be conditional;

####  

#### (k)           Accounts for which anAccount Debtor has not been invoiced or where goods or services have not yetbeen rendered to the Account Debtor (sometimes called memo billings orpre-billings);

####  

#### (l)            Accounts subject tocontractual arrangements between Borrower and an Account Debtor where paymentsshall be scheduled or due according to completion or fulfillment requirementsand where the Account Debtor has a right of offset for damages suffered as aresult of Borrower’s failure to perform in accordance with the contract(sometimes called contracts accounts receivable, progress billings, milestonebillings, or fulfillment contracts);

 

26

----

####  

#### (m)          Accounts owing from anAccount Debtor the amount of which may be subject to withholding based on theAccount Debtor’s satisfaction of Borrower’s complete performance (but only tothe extent of that portion of the amount withheld which exceeds ten percent(10%) of the Account; sometimes called retainage billings);

####  

#### (n)           Accounts subject totrust provisions, subrogation rights of a bonding company, or a statutorytrust;

####  

#### (o)           Accounts owing from anAccount Debtor that have been invoiced for goods that have not been shipped tothe Account Debtor unless Bank, Borrower, and the Account Debtor have enteredinto an agreement acceptable to Bank in its sole discretion wherein the AccountDebtor acknowledges that (i) it has title to and has ownership of thegoods wherever located, (ii) a bona fide sale of the goods has occurred,and (iii) it owes payment for such goods in accordance with invoices fromBorrower (sometimes called “bill and hold” accounts);

####  

#### (p)           Accountsowing from an Account Debtor with respect to which Borrower has receivedDeferred Revenue (but only to the extent of such Deferred Revenue);

####  

#### (q)           Accounts for which theAccount Debtor has not been invoiced;

####  

#### (r)            Accounts thatrepresent non-trade receivables or that are derived by means other than in theordinary course of Borrower’s business;

####  

#### (s)           Accounts for whichBorrower has permitted Account Debtor’s payment to extend beyond 90 days;

####  

#### (t)            Accounts subject tochargebacks or others payment deductions taken by an Account Debtor (but onlyto the extent the chargeback is determined invalid and subsequently collectedby Borrower);

####  

#### (u)           Accounts in which theAccount Debtor disputes liability or makes any claim (but only up to thedisputed or claimed amount), or if the Account Debtor is subject to anInsolvency Proceeding, or becomes insolvent, or goes out of business; and

####  

#### (v)           Accounts for which Bankin its good faith business judgment determines collection to be doubtful orotherwise ineligible.

####  

“**Eligible Assignee**”shall mean any commercial bank, insurance company, investment or mutual fund orother entity that is an “accredited investor” (as defined in Regulation D underthe Securities Act) and which extends credit or buys loans as one of itsbusinesses; provided that any direct competitor of the Borrower shallnot be an Eligible Assignee.

 

“**Eligible EXIM Inventory**”is defined in the Export-Import Agreement.

 

“**Equipment**” isall “equipment” as defined in the Code with such additions to such term as mayhereafter be made, and includes without limitation all machinery, fixtures,goods, vehicles (including motor vehicles and trailers), and any interest inany of the foregoing.

 

“**ERISA**” is theEmployee Retirement Income Security Act of 1974, and its regulations.

 

“**EXIM Loan**” isdefined in Section 12.17.

 

“**EXIM Borrower Agreement**”is that certain Export-Import Bank of the United States Working CapitalGuarantee Program Borrower Agreement, dated as of the date hereof, executed byBorrower and acknowledged by Bank.

 

“**EXIM Loan Documents**”are all documents and agreements executed in connection with the Export-ImportAgreement, including, without limitation, the EXIM Borrower Agreement and theEXIM Promissory Note (as defined in the Export-Import Agreement), as each maybe amended from time to time.

 

27

----

 

“**Export-Import Agreement**”is that certain Export-Import Loan and Security Agreement, dated as of the datehereof, by and between Borrower and Bank.

 

“**Event of Default**”is defined in Section 8.

 

“**Foreign Currency**”means lawful money of a country other than the United States.

 

“**Foreign Subsidiary**”means any Subsidiary which is not a Domestic Subsidiary.

 

“**Funding Date**”is any date on which a Credit Extension is made to or on account of Borrowerwhich shall be a Business Day.

 

“**FX Business Day**”is any day when (a) Bank’s Foreign Exchange Department is conducting itsnormal business and (b) the Foreign Currency being purchased or sold byBorrower is available to Bank from the entity from which Bank shall buy or sellsuch Foreign Currency.

 

“**FX Forward Contract**”****is defined in Section 2.1.3.

 

“**FX Reserve**”****is defined in Section 2.1.3.

 

“**GAAP**” isgenerally accepted accounting principles set forth in the opinions andpronouncements of the Accounting Principles Board of the American Institute ofCertified Public Accountants and statements and pronouncements of the FinancialAccounting Standards Board or in such other statements by such other Person asmay be approved by a significant segment of the accounting profession, whichare applicable to the circumstances as of the date of determination.

 

“**General Intangibles**”is all “general intangibles” as defined in the Code in effect on the datehereof with such additions to such term as may hereafter be made, and includeswithout limitation, all copyright rights, copyright applications, copyrightregistrations and like protections in each work of authorship and derivativework, whether published or unpublished, any patents, trademarks, service marksand, to the extent permitted under applicable law, any applications therefor,whether registered or not, any trade secret rights, including any rights tounpatented inventions, payment intangibles, royalties, contract rights,goodwill, franchise agreements, purchase orders, customer lists, route lists,telephone numbers, domain names, claims, income and other tax refunds, securityand other deposits, options to purchase or sell real or personal property,rights in all litigation presently or hereafter pending (whether in contract,tort or otherwise), insurance policies (including without limitation key man,property damage, and business interruption insurance), payments of insuranceand rights to payment of any kind.

 

“**GovernmentalApproval**” is any consent, authorization, approval, order, license,franchise, permit, certificate, accreditation, registration, filing or notice,of, issued by, from or to, or other act by or in respect of, any GovernmentalAuthority.

 

“**Governmental Authority**”is any nation or government, any state or other political subdivision thereof,any agency, authority, instrumentality, regulatory body, court, central bank orother entity exercising executive, legislative, judicial, taxing, regulatory oradministrative functions of or pertaining to government, any securitiesexchange and any self-regulatory organization.

 

“**Guarantor**”****is any present or future guarantor of the Obligations,including Fusion Technology International, Inc., Fusion Investments, Inc.,High Temperature Engineering Corporation, Axcelis  Technologies (Israel), Inc.and all present or future Domestic Subsidiaries.

 

“**Guarantor SecurityAgreement(s)**”****is eachAmended and Restated Security Agreement executed and delivered by a Guarantorto Bank to secure the Guaranty of such Guarantor.

 

“**Guaranty(ies)**”is any guaranty of the Obligations executed and delivered by a Guarantor toBank.

 

“**Headquarters Location**”is****108 Cherry Hill Drive, Beverly,Massachusetts.

 

28

----

 

“**Indebtedness**”is (a) indebtedness for borrowed money or the deferred price of propertyor services, such as reimbursement and other obligations for surety bonds andletters of credit, (b) obligations evidenced by notes, bonds, debenturesor similar instruments, (c) capital lease obligations, and (d) ContingentObligations.

 

“**Indemnified Person**”is defined in Section 12.4.

 

**“Insolvency Proceeding**” is anyproceeding by or against any Person under the United States Bankruptcy Code, orany other bankruptcy or insolvency law, including assignments for the benefitof creditors, compositions, extensions generally with its creditors, orproceedings seeking reorganization, arrangement, or other relief.

 

“**Inventory**” isall “inventory” as defined in the Code in effect on the date hereof with suchadditions to such term as may hereafter be made, and includes withoutlimitation all merchandise, raw materials, parts, supplies, packing andshipping materials, work in process and finished products, including withoutlimitation such inventory as is temporarily out of Borrower’s custody orpossession or in transit and including any returned goods and any documents oftitle representing any of the above.

 

“**Investment**” isany beneficial ownership interest in any Person (including stock, partnershipinterest or other securities), and any loan, advance or capital contribution toany Person.

 

“**IP Agreement**”is that certain Amended and Restated Intellectual Property Security Agreementexecuted and delivered by Borrower and Guarantors to Bank of even dateherewith.

 

“**Letter of Credit”**means a standby letter of credit issued by Bank or another institution basedupon an application, guarantee, indemnity or similar agreement on the part ofBank as set forth in Section 2.1.2.

 

“**Letter of Credit Application**”is defined in Section 2.1.2(a).

 

“**Letter of Credit Reserve**”has the meaning set forth in Section 2.1.2(d).

 

“**Lien**” is aclaim, mortgage, deed of trust, levy, charge, pledge, security interest orother encumbrance of any kind, whether voluntarily incurred or arising byoperation of law or otherwise against any property.

 

“**Loan Documents**”are, collectively, this Agreement, the Perfection Certificate, the IPAgreement, the Pledge Agreements, the EXIM Loan Documents, the GuarantorSecurity Agreements, each Guaranty, any note, or notes executed by Borrower orany Guarantor, and any other present or future agreement executed or deliveredby Borrower or any Guarantor and/or for the benefit of Bank in connection withthis Agreement, all as amended, restated, or otherwise modified.

 

“**Material Adverse Change**”is (a) a material impairment in the perfection or priority of Bank’s Lienin the Collateral or in the value of such Collateral; (b) a materialadverse change in the business, operations, or condition (financial orotherwise) of Borrower, taken as a whole; or (c) a material impairment ofthe prospect of repayment of any portion of the Obligations or (d) Bankdetermines, based upon information available to it and in its reasonablejudgment, that there is a reasonable likelihood that Borrower shall fail tocomply with one or more of the financial covenants in Section 6 during thenext succeeding financial reporting period.

 

“**Net Loss**”means, as calculated on a consolidated basis for Borrower and its Subsidiariesfor any period as at any date of determination, the net loss, after provisionfor taxes, of Borrower and its Subsidiaries for such period taken as a singleaccounting period as determined in accordance with GAAP.

 

“**Obligations**”are Borrower’s obligation to pay when due any debts, principal, interest, BankExpenses and other amounts Borrower owes Bank now or later, whether under thisAgreement, the EXIM Loan Documents, the Export-Import Agreement, the LoanDocuments, or otherwise, including, without limitation, all obligationsrelating to letters of credit (including reimbursement obligations for drawnand undrawn letters of credit), cash management services, and foreign exchangecontracts, if any, and including interest accruing after Insolvency Proceedingsbegin and debts, liabilities, or obligations of Borrower  assigned to Bank, and the performance ofBorrower’s duties under the Loan Documents.

 

29

----

 

“**Operating Documents**”are, for any Person, such Person’s formation documents, as certified with theSecretary of State of such Person’s state of formation on a date that is noearlier than 30 days prior to the Effective Date, and, (a) if such Personis a corporation, its bylaws in current form, (b) if such Person is alimited liability company, its limited liability company agreement (or similaragreement), and (c) if such Person is a partnership, its partnershipagreement (or similar agreement), each of the foregoing with all currentamendments or modifications thereto.

 

“**Overadvance**” isdefined in Section 2.2.

 

“**Perfection Certificate**”is defined in Section 5.1.

 

“**Permitted Indebtedness**”is:

 

(a)           Borrower’s Indebtednessto Bank under this Agreement and the other Loan Documents, including, withoutlimitation, the Export-Import Agreement;

 

(b)           Indebtedness existingon the Effective Date and shown on the Perfection Certificate;

 

(c)           Subordinated Debt;

 

(d)           unsecured Indebtednessto trade creditors incurredin the ordinary course of business;

 

(e)           unsecured Indebtedness with respect to surety bonds,letters of credit and/or and similar instruments in connection with value addedtax recovery initiatives of Axcelis Technologies GmbH incurred inthe ordinary course of business;

 

(f)            Indebtedness owingfrom (i) one Borrower to another Borrower; (ii) any Borrower to anySubsidiary; and (iii) except for trade indebtedness incurred in theordinary course of business consistent with past practice, any Subsidiary toany Borrower in an aggregate amount of up to $1,000,000, provided that, in eachcase, such Indebtedness is incurred in the ordinary course of business of suchBorrower or Subsidiary and pursuant to an arms-length transaction;

 

(g)           Indebtedness owing byBorrower or the Special Subsidiary pursuant to the Real Estate Financingprovided that (i) such Indebtedness does not exceed $30,000,000 in theaggregate outstanding at any time, (ii) such Indebtedness is subject tothe terms of an intercreditor agreement in form and substance acceptable toBank and (iii) no Event of Default exists immediately prior to theincurrence of such Indebtedness or results after giving effect to theincurrence thereof; and

 

(h)           extensions,refinancings, modifications, amendments and restatements of PermittedIndebtedness referenced in items (a) through (d) and (f) and (g) above,provided that the principal amount thereof is not increased or the termsthereof are not modified to impose more burdensome terms upon Borrower or itsSubsidiary, as the case may be.

 

“**Permitted Investments**”are:

 

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

 

(b)           Cash Equivalents;

 

(c)**          **Investmentsconsisting of the endorsement of negotiable instruments for deposit or collectionor similar transactions in the ordinary course of Borrower;

 

(d)           Investments consistingof deposit accounts maintained with Bank and subject to Bank’s first priorityLien;

 

30

----

 

(e)           Investments of Subsidiariesin or to Borrower or any Guarantor and Investments of one Borrower in or toanother Borrower;

 

(f)            Investments consistingof (i) travel advances and employee relocation loans and other employeeloans and advances in the ordinary course of business, and (ii) loans toemployees, officers or directors relating to the purchase of equity securitiesof Borrower or its Subsidiaries pursuant to employee stock purchase plans oragreements approved by Borrower’s Board of Directors (or other applicable governingbody);

 

(g)           Investments (includingdebt obligations) received in connection with the bankruptcy or reorganizationof customers or suppliers and in settlement of delinquent obligations of, andother disputes with, customers or suppliers arising in the ordinary course ofbusiness;

 

(h)           Investments consistingof notes receivable of, or prepaid royalties and other credit extensions, tocustomers and suppliers who are not Affiliates, in the ordinary course ofbusiness; provided that this paragraph (h) shall not apply to Investmentsof Borrower in any Subsidiary; and

 

(i)            Money market fundsthat (i) comply with the criteria set forth in Rule 2a-7 under theInvestment Company Act of 1940, (ii) are rated AAA by S&P and Aaa byMoody’s and (iii) have portfolio assets of at least $500,000,000.00;

 

(j)            Other equity and debtinvestments that are consistent with the investment policy of the Borrowerdated as of March 2003, a copy of which has been delivered to Bank;

 

(k)           Subject to Section 6.6hereof, Investments of Borrower and its Domestic Subsidiaries consisting ofdeposit accounts held with foreign financial institutions; provided,that the aggregate dollar value of all such deposit accounts does not exceed 5%of the dollar value of all unrestricted cash of Borrower and its DomesticSubsidiaries; and

 

(l)            Investments ofBorrower after the Effective Date (i) in Subsidiaries existing on theEffective Date not to exceed $1,000,000.00 in the aggregate and (ii) inthe Special Subsidiary consisting solely of the ownership of the capital stockof the Special Subsidiary.

 

“**Permitted Liens**”are:

 

(a)           Liens existing on theEffective Date and shown on the Perfection Certificate or arising under thisAgreement and the other Loan Documents;

 

(b)           Liens for taxes, fees,assessments or other government charges or levies, either not delinquent orbeing contested in good faith and for which Borrower maintains adequatereserves on its Books, provided that no notice of any such Lien has beenfiled or recorded under the Internal Revenue Code of 1986, as amended, and theTreasury Regulations adopted thereunder;

 

(c)           purchasemoney Liens (i) on Equipment acquired or held by Borrower incurred forfinancing the acquisition of the Equipment securing no more than $1,000,000 inthe aggregate amount outstanding, or (ii) existing on Equipment whenacquired, if the Lien is confined to the property and improvements andthe proceeds of the Equipment;

 

(d)           Liens incurred in theextension, renewal or refinancing of the indebtedness secured by Liens describedin (a) through (c), but any extension, renewal or replacement Lienmust be limited to the property encumbered by the existing Lien and theprincipal amount of the indebtedness may not increase;

 

(e)           leases or subleases ofreal property granted in the ordinary course of business, and leases,subleases, non-exclusive licenses or sublicenses of property (other than realproperty or intellectual property) granted in the ordinary course of Borrower’sbusiness, if such leases, subleases, licenses and sublicenses do notprohibit granting Bank a security interest;

 

31

----

 

(f)            non-exclusive licenseof intellectual property granted to third parties in the ordinary course ofbusiness;

 

(g)           the SEN License;

 

(h)           Liens securing the RealEstate Financing provided that the Lien is limited to a mortgage Lienencumbering the Headquarters Location and related fixtures; and

 

(i)            Liens arising fromattachments or judgments, orders, or decrees in circumstances not constitutingan Event of Default under Sections 8.4 and 8.7.

 

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

 

“**Pledge Agreement(s)**”those certain Pledge Agreements executed and delivered by Borrower and FusionTechnology International, Inc. in favor of Bank.

 

“**Prime Rate**” isthe greater of (i) four percent (4.00%) and (ii) Bank’s most recentlyannounced “prime rate,” even if it is not Bank’s lowest rate.

 

“**Quick Assets**”is, on any date, Borrower’s and its Subsidiaries’ consolidated world-wide cashand Cash Equivalents, Accounts, and investments with Bank with maturities offewer than 12 months determined according to GAAP.

 

“**Real Estate Financing**”is a mortgage loan financing transaction between Borrower or the SpecialSubsidiary and an unaffiliated third-party lender whereby such unaffiliated third-partylender provides real estate financing secured solely by a mortgage Lien on theHeadquarters Location and related fixtures.

 

“**Registered Organization**”is any “registered organization” as defined in the Code with such additions tosuch term as may hereafter be made

 

“**Requirementof Law**” is as to any Person, the organizational or governingdocuments of such Person, and any law (statutory or common), treaty, rule orregulation or determination of an arbitrator or a court or other GovernmentalAuthority, in each case applicable to or binding upon such Person or any of itsproperty or to which such Person or any of its property is subject.

 

“**Reserves**”means, as of any date of determination, upon notice to and after consultationwith Borrower,  such amounts as Bank mayreasonably from time to time establish and revise in its good faith businessjudgment, reducing the amount of Advances and other financial accommodationswhich would otherwise be available to Borrower to reflect events, conditions,contingencies or risks which, as determined by Bank in its good faith businessjudgment, do or may adversely affect in any material way (i) the assets,business or prospects of Borrower or any Guarantor, or (ii) the securityinterests and other rights of Bank in the Collateral (including theenforceability, perfection and priority thereof).

 

“**Responsible Officer**”is any of the Chief Executive Officer, President, Chief Financial Officer andGeneral Counsel.

 

“**Restricted License**”is any material license or other agreement, excluding the SEN License, withrespect to which Borrower is the licensee (a) that prohibits or otherwiserestricts Borrower from granting a security interest in Borrower’s interest insuch license or agreement or any other property, or (b) for which adefault under or termination of could interfere with the Bank’s right to sellany Collateral.

 

“**RevolvingLine**” is an Advance or Advances (including, without limitation,Advances made pursuant to the Export-Import Agreement) in an amount equal toTwenty Million Dollars ($20,000,000).

 

32

----

 

**“Revolving Line Maturity Date”**is March 11, 2011.

 

“**Securities Account**”is any “securities account” as defined in the Code with such additions to suchterm as may hereafter be made.

 

“**SEN**” means SENCorporation, a Japanese company.

 

“**SEN License**”means that certain License Agreement dated March 30, 2009 by and betweenthe Borrower and SEN.

 

“**Settlement Date**”****is defined in Section 2.1.3.

 

“**Special Subsidiary**”is a Subsidiary of Borrower formed and operated as a special purpose entity forthe sole purposes of (i) owning the Headquarters Location, (ii) enteringinto the Real Estate Financing and (iii) leasing the Headquarters Locationto Borrower.

 

“**Subordinated Debt**”is indebtedness incurred by Borrower subordinated to all of Borrower’s now orhereafter indebtedness to Bank (pursuant to a subordination, intercreditor, orother similar agreement in form and substance satisfactory to Bank entered intobetween Bank and the other creditor), on terms acceptable to Bank.

 

“**Subsidiary**”means, with respect to any Person, any Person of which more than 50.0% of thevoting stock or other equity interests (in the case of Persons other thancorporations) is owned or controlled directly or indirectly by such Person orone or more of Affiliates of such Person.

 

“**Total Liabilities**”is on any day, obligations that should, under GAAP, be classified asliabilities on the consolidated balance sheet of Borrower and its Subsidiaries,including all Indebtedness, but excluding all other Subordinated Debt.

 

“**Transaction Report**”is that certain report of transactions and schedule of collections in the formattached hereto as Exhibit C.

 

“**Transfer**” isdefined in Section 7.1.

 

“**Unused Line Fee Percentage**”is one and seven-eighths percent (1.875%).

 

“**Unused Revolving LineFacility Fee”** is defined in Section 2.4(d).

 

[Signature page follows.]

 

33

----

 

**IN WITNESS WHEREOF**, the partieshereto have caused this Agreement to be executed as a sealed instrument underthe laws of the Commonwealth of Massachusetts as of the Effective Date.

 

BORROWER:

 

**AXCELIS TECHNOLOGIES, INC.**

 

 
| By:    | /s/ Mary G. Puma         |   |
|--------|--------------------------|--------|
|   | Mary G. Puma,  President |   |

 

 

**AXCELIS TECHNOLOGIES CCS CORPORATION**

 

 
| By:    | /s/ Mary G. Puma         |   |
|--------|--------------------------|--------|
|   | Mary G. Puma,  President |   |

 

 

BANK:

 

**SILICON VALLEY BANK**

 
| By                    | /s/  Mark Sperling |   |
|-----------------------|--------------------|--------|
| Name:  Mark Sperling  |               |
| Title: Vice President |               |

 

 

Effective Date: March 12,2010

 

1

----

** **

**EXHIBIT A – COLLATERAL DESCRIPTION**

** **

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

 

All goods, Accounts, Equipment, Inventory, contractrights or rights to payment of money, leases, license agreements, franchiseagreements, General Intangibles, commercial tort claims, documents, instruments(including any promissory notes), chattel paper (whether tangible orelectronic), cash, deposit accounts, letters of credit rights (whether or notthe letter of credit is evidenced by a writing), securities, and all otherinvestment property, supporting obligations, and financial assets, whether nowowned or hereafter acquired, wherever located; and

 

all Borrower’s Books relating to the foregoing, andany and all claims, rights and interests in any of the above and allsubstitutions for, additions, attachments, accessories, accessions andimprovements to and replacements, products, proceeds and insurance proceeds ofany or all of the foregoing.

 

Notwithstanding the foregoing,the “Collateral” does not include more than 66% of the presently existing andhereafter arising issued and outstanding shares of capital stock owned byBorrower of any Foreign Subsidiary which shares entitle the holder thereof tovote for directors or any other matter.

 

The security interest granted by Debtor to SecuredParty in the Axcelis Licensed Intellectual Property (as defined in the SENLicense) is subject to the license granted to SEN Corporation pursuant to theterms of the SEN License in accordance with that certain Consent andAgreement dated as of March 30, 2009 among the Debtor, the Secured Party,SEN Corporation and others.

 

1

----

 

**EXHIBIT B - COMPLIANCE CERTIFICATE**

 
| TO:   |   | SILICON VALLEY BANK                                                      | Date:  |   |
|-------|--------|--------------------------------------------------------------------------|--------|--------|
| FROM: |   | Axcelis Technologies, Inc. and Axcelis Technologies CCS Corporation |   |   |

 

The undersigned authorized officer of AxcelisTechnologies, Inc. and Axcelis Technologies CCS Corporation (“Borrower”)certifies that under the terms and conditions of the Loan and SecurityAgreement between, inter alia, Borrower and Bank (the “Agreement”), (1) Borroweris in complete compliance for the period ending                              with all required covenants except as noted below, (2) there are no Eventsof Default, (3) all representations and warranties in the Agreement aretrue and correct in all material respects on this date except as noted below;provided, however, that such materiality qualifier shall not be applicable toany representations and warranties that already are qualified or modified bymateriality in the text thereof; and provided, further that thoserepresentations and warranties expressly referring to a specific date shall be true,accurate and complete in all material respects as of such date, (4) Borrower,and each of its Domestic Subsidiaries, has timely filed all required taxreturns and reports, and Borrower has timely paid all foreign, federal, stateand local taxes, assessments, deposits and contributions owed by Borrowerexcept as otherwise permitted pursuant to the terms of Section 5.9 of theAgreement, and (5) no Liens have been levied or claims made againstBorrower or any of its Domestic Subsidiaries relating to unpaid employeepayroll or benefits of which Borrower has not previously provided writtennotification to Bank.  Attached are therequired documents supporting the certification.  The undersigned certifies that these areprepared in accordance with GAAP consistently applied from one period to thenext except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that noborrowings may be requested at any time or date of determination that Borroweris not in compliance with any of the terms of the Agreement, and thatcompliance is determined not just at the date this certificate isdelivered.  Capitalized terms used butnot otherwise defined herein shall have the meanings given them in the Agreement.

 

**Please indicate compliance statusby circling Yes/No under “Complies” column.**

 
| **Reporting  Covenant**                                                                        | ** ** | **Required**                                     | ** ** | **Complies**       |
|------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------|
| ** **                                                                                     | ** ** | ** **                                       | ** ** | ** **         |
| Quarterly consolidated  and consolidating and financial statements with Compliance Certificate | ** ** | Quarterly within 45  days                        | ** ** | Yes   No |
| Annual financial  statement (CPA Audited) + CC                                                 | ** ** | FYE within 120 days                              | ** ** | Yes   No |
| 10-Q, 10-K and 8-K                                                                             | ** ** | Within 10 days after  filing with SEC            | ** ** | Yes   No |
| A/R & A/P  Agings (including EXIM), Inventory reports                                 | ** ** | Monthly within 30 days                           | ** ** | Yes   No |
| Transaction Report                                                                             | ** ** | Monthly within 30 days  (bi-weekly if borrowing) | ** ** | Yes   No |
| Monthly consolidated  financial statements                                                     | ** ** | Monthly within 45 days  (if borrowing)           | ** ** | Yes   No |

 

The followingIntellectual Property was registered (or a registration application submitted)after the Effective Date (if no registrations, state “None”)

 

 
| **Financial  Covenant**                                              | ** ** | **Required**                                                                                                                                                                                                                                                                                          | ** ** | **Actual**             | ** ** | **Complies**       |
|----------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|--------------------|
| ** **                                                           | ** ** | ** **                                                                                                                                                                                                                                                                                            | ** ** | ** **             | ** ** | ** **         |
| Maintain, tested on a  quarterly (unless otherwise indicated) basis: | ** ** | ** **                                                                                                                                                                                                                                                                                            | ** ** | ** **             | ** ** | ** **         |
| Adjusted Quick Ratio,  at all times (tested quarterly )              |       | 1.5:1.0                                                                                                                                                                                                                                                                                               |       |    :1.0 |       | Yes   No |
| Maximum Net Losses, as  of the last day of each quarter              |       | (i) $13,000,000  for the fiscal quarter ending March 31, 2010; (ii) $8,500,000 for  the fiscal quarter ending June 30, 2010; (iii) $8,500,000 for the  fiscal quarter ending September 30, 2010; and (iv) $5,000,000 for  the fiscal quarter ending December  |       | $                      |       | Yes   No |

 

1

----

 
|                      |   | 31, 2010 and each  fiscal quarter thereafter |   |   |   |               |
|---------------------------|--------|----------------------------------------------|--------|--------|--------|--------------------|
|                      |   |                                         |   |   |   |               |
| Liquidity (at all  times) |   | $30,000,000                                  |   | $      |   | Yes   No |

 

Thefollowing financial covenant analys[is][es] and information set forth inSchedule 1 attached hereto are true and accurate as of the date of thisCertificate.

 

2

----

 

Schedule2 attached hereto sets forth all applications for any patent or theregistration of any trademark or servicemark made by Borrower since the date ofthe last Compliance Certificate delivered to Bank.

 

Thefollowing are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptionsto note.”)

 

 

 
| AXCELIS TECHNOLOGIES, INC.           |   | **BANK  USE ONLY** |
|--------------------------------------|--------|--------------------|
|                                 |   |               |   |
|                                 |   | Received  by:      |   |
| By:                                  |   |               |   | AUTHORIZED SIGNER |
| Name:                                |   |               | Date: |   |
| Title:                               |   |               |   |   |
|                                 |   |               | Verified: |   |
| AXCELIS TECHNOLOGIES CCS CORPORATION |   |               | AUTHORIZED SIGNER |
|                                 |   |               | Date: |   |
|                                 |   |               |   |   |
| By:                                  |   |               | Compliance  Status: | Yes     No |
| Name:                                |   |               |   |   |
| Title:                               |   |               |   |   |
|                                      |        |                    |  |  |  |

 

3

----

 

**Schedule 1 to Compliance Certificate**

 

**Financial Covenants of Borrower**

 

In theevent of a conflict between this Schedule and the Loan Agreement, the terms ofthe Loan Agreement shall govern.

 

Dated:                                   

 

I.              **Adjusted Quick Ratio**(Section 6.9(a))

 
| Required: | 1.5:1.0 |   |   |   |   |   |
|-----------|---------|--------|--------|--------|--------|--------|
|      |    |   |   |   |   |   |
| Actual:   |    |   |   |   |   |   |

 

 
| A.     |   | World-wide consolidated  Unrestricted cash and Cash Equivalents                                                                      |   | $      |   |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|   |   |                                                                                                                                 |   |   |   |
| B.     |   | Accounts                                                                                                                             |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| C.     |   | Investments at Bank                                                                                                                  |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| D.     |   | Quick Assets (line A  plus line B plus line C)                                                                                       |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| E.     |   | Aggregate  value of Obligations to Bank (other than cash secured obligations)                                                        |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| F.     |   | Aggregate  value of liabilities of Borrower and its Subsidiaries (including all  Indebtedness) that matures within one (1) year |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| G.     |   | Deferred  Revenue                                                                                                                    |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| H.     |   | Current  Liabilities (the sum of lines E and F, minus line G)                                                                        |   | $      |   |   |
|   |   |                                                                                                                                 |   |   |   |
| I.     |   | Quick  Ratio (line D divided by line H)                                                                                              |   |   |   |

 

Isline I equal to or greater than 1.50:1:00?

 
|   |   | o No, not in compliance | o Yes, in compliance |   |   |   |
|--------|--------|-------------------------|----------------------|--------|--------|--------|

 

II.            **Maximum Net Losses**(Section 6.9(b))

 
| Required: | $      |   |   |   |   |   |
|-----------|--------|--------|--------|--------|--------|--------|
|      |   |   |   |   |   |   |
| Actual:   |   |   |   |   |   |   |

 
| A. |   | Aggregate value of  Borrower losses |   | $              |   |
|----|--------|-------------------------------------|--------|---------------------------------------------------------------------------------|--------|

 

Is line A less than orequal to $        ?

 
|   |   | o No, not in compliance | o Yes, in compliance |   |   |   |
|--------|--------|-------------------------|----------------------|--------|--------|--------|

 

II.            **Liquidity** (Section 6.9(c))

 
| Required: | $30,000,000 |   |   |   |   |   |
|-----------|-------------|--------|--------|--------|--------|--------|
|      |        |   |   |   |   |   |
| Actual:   | $           |   |   |   |   |   |

 
| A. |   | Aggregate Cash and Cash  Equivalents at Bank |   | $              |   |
|----|--------|----------------------------------------------|--------|---------------------------------------------------------------------------------|--------|

 

4

----

 
| B. |   | Availability Amount                   |   | $              |   |
|----|--------|---------------------------------------|--------|---------------------------------------------------------------------------------|--------|
| C. |   | Liquidity (the sum of  lines A and B) |   | $              |   |

 

Is line C less than orequal to $30,000,000?

 
|   |   | o No, not in compliance | o Yes, in compliance |   |   |   |
|--------|--------|-------------------------|----------------------|--------|--------|--------|

 

5

----

 

**Schedule 2 to Compliance Certificate**

 

**Additional Patents and Trademarks**

 

6

----

 

**EXHIBIT C — TRANSACTION REPORT**

 

7

----

 

**Schedule 6.8(b)**

** **
| **Institution Name**                       | ** ** | **Account Number (if applicable)  / Maximum Amount**                                 |
|--------------------------------------------|------------|--------------------------------------------------------------------------------------|
| ** **                                 | ** ** | ** **                                                                           |
| Beverly  National Bank                     |       | 2-8000171-20;  Amount not to exceed $30,000                                          |
|                                       |       |                                                                                 |
| Bank  of America, N.A.                     |       | 400923.1;  Amount (value) not to exceed $2,000                                       |
|                                       |       |                                                                                 |
| United  States Patent and Trademark Office |       | Amount  not to exceed $85,000 (used solely for the payment of various fees to USPTO) |

 

8

----

 

**Schedule 7.2**

 
| 1. | Matrix Europe, N.V. (Belgium)             |
|----|-------------------------------------------|
| 2. | Axcelis Technologies,  B.V. (Netherlands) |

 

9

----