Document:

Prepared by R.R. Donnelley Financial -- EXHIBIT 10.3

  
 EXHIBIT NUMBER 10.3 
 AMENDMENT NO. 3 
 TO 
 NOTE
PURCHASE AGREEMENT 
  
 AMENDMENT NO. 3, dated as of July 8, 2002, among MCG Master Trust (the
“Issuer”), MCG Capital Corporation (f/k/a MCG Credit Corporation) (the “Servicer”), Variable Funding Capital Corporation (the “Purchaser”), Wachovia Securities, Inc. (f/k/a First Union Securities, Inc.) (the “VFCC
Deal Agent” and the “Administrative Agent”) and Wachovia Bank, National Association (f/k/a First Union National Bank) (“Wachovia”), to that certain Note Purchase Agreement dated as of June 1, 2000 (as amended by Amendment
No. 1, the Omnibus Amendment thereto and Amendment No. 2, the “Note Purchase Agreement”) among the Issuer, the Servicer, the Purchaser and the VFCC Deal Agent. 
  
 WHEREAS, the Issuer, the Servicer, the Purchaser and the VFCC Deal Agent entered into the Note Purchase Agreement in connection with the issuance by the Issuer of the MCG
Master Trust Notes; and 
  
 WHEREAS, Section 9.1 of the Note Purchase Agreement permits the Note Purchase Agreement
to be amended from time to time pursuant to the conditions set forth therein; and 
  
 WHEREAS, the parties hereto
wish to amend the Note Purchase Agreement as set forth herein; 
  
 NOW THEREFORE, in consideration of the above
premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 1. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in Appendix A to the Sale and Servicing Agreement (as defined in Section 1.1(a) of the Note Purchase
Agreement). 
  
 2. The definition of “Facility Termination Date” is hereby amended in its entirety to read
as follows: 
  
 Facility Termination Date: July 7, 2005, or such other date to which the Facility
Termination Date may be modified in accordance with the terms of Section 2.1. 
  
 3. Except as otherwise set forth
herein, the Note Purchase Agreement shall continue in full force and effect in accordance with its terms. 
  
 4. This
Amendment No. 3 may be executed in one or more counterparts, each of which, when so executed, shall be deemed an original; such counterparts, together, shall constitute one and the same agreement. 
 

 I-1 

  
 IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be executed
by their respective officers thereunto duly authorized, as of the date first above written. 
  
 
	 THE ISSUER:
 	  	 MCG MASTER TRUST
 
	  	  	 By:
 	 	 MCG CAPITAL CORPORATION
(f/k/a MCG Credit Corporation)
 
	 
	  	  	  	 	 By    /s/ STEVEN F. TUNNEY
 
       Name:  Steven F. Tunney
        Title:    President and Chief Operating Officer  
 
	 
	 THE SERVICER:
 	  	 MCG CAPITAL CORPORATION
(f/k/a MCG Credit Corporation)
 
	 
	  	  	  	 	 By    /s/ STEVEN F. TUNNEY
 
       Name:  Steven F. Tunney
       Title:    President and Chief Operating Officer
 
	 
	 THE PURCHASERS:
 	  	 VARIABLE FUNDING CAPITAL
 
	 Commitment: $200,000,000
 

 	  	 CORPORATION, a Delaware corporation
  
 By: WACHOVIA SECURITIES, INC.
(f/k/a First Union Securities, Inc.), as
 Attorney-in-fact
 
	 
	  	  	  	 	 By:     /s/ DOUGLAS R. WILSON, SR.
 

	  	  	  	 	 Name:  Douglas R. Wilson, Sr.
 
	  	  	  	 	 Title:   Vice President
 
	 
	  	  	 Variable Funding Capital Corporation
 c/o Wachovia Securities,
Inc.
 One Wachovia Center, TW9
 Attention: Conduit Administration
 Facsimile Number (704) 374-2520
 Telephone Number: (704) 383-6036
 

 
 

 I-2 

  
 
	 THE DEAL AGENTS
 	  	 WACHOVIA SECURITIES, INC.
(f/k/a First Union Securities Inc.)
 
	 (“VFCC Deal Agent”) and THE
 ADMINISTRATIVE AGENT:
 	  	  
	  	  	                     By:    /s/ MARY KATHERINE JETT

	  	  	 

	  	  	                     Name:  Mary  Katherine  Jett
 
	  	  	                     Title:  Vice President
 
	  	  	  
	  	  	 Wachovia Securities, Inc.
 One Wachovia Center, TW9
 Charlotte, North Carolina 28288
 Attention: Conduit Administration
 Facsimile Number: (704) 374-2520
 Telephone Number: (704) 383-6036
 
	 
	  	  	 WACHOVIA BANK, NATIONAL ASSOCIATION
(f/k/a First Union National Bank)
 
	 
	  	  	                     By:   /s/
RAJ SHAH
 
	  	  	 

	  	  	                     Name: Raj Shah
 
	  	  	                     Title:
  Director
 

 
 

 I-3Prepared by R.R. Donnelley Financial -- EXHIBIT 10.10

 EXHIBIT NUMBER 10.10 
  
 AMENDMENT NO. 3 
 TO 
 SERIES
2000-1 TERMS SUPPLEMENT 
  
 AMENDMENT NO. 3, dated as of July 8, 2002, between MCG Master Trust (the
“Issuer”) and Wells Fargo Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National Association), as Indenture Trustee (the “Indenture Trustee”). 
  
 WHEREAS, the Issuer and the Indenture Trustee entered into the Indenture dated as of June 1, 2000 (as amended, the “Indenture”) and the Series 2000-1 Terms
Supplement to the Indenture dated as of June 1, 2000 (as amended, the “Series 2000-1 Terms Supplement”) in connection with the issuance by the Issuer of the MCG Master Trust Notes, Series 2000-1 (the “Notes”); and 

 
 WHEREAS, Section 9.02 of the Indenture and Section 5.5 of the Series 2000-1 Terms Supplement permit the Series 2000-1 Terms
Supplement to be amended from time to time pursuant to the conditions set forth therein; and 
  
 WHEREAS, the parties
hereto wish to amend the Series 2000-1 Terms Supplement as set forth herein; 
  
 NOW THEREFORE, in consideration of
the above premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agrees as follows: 
  
 1.    Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Series 2000-1 Terms Supplement and in
Appendix A to the Sale and Servicing Agreement dated as of June 1, 2000, as amended, among the Issuer, MCG Finance II, LLC (f/k/a MCG Finance Corporation II) and MCG Capital Corporation (f/k/a MCG Credit Corporation). 
  
 2.    In clause (vii) of the definition “TERMINATION EVENT” the percentage “2.25%” is hereby
replaced with the percentage “3.00%.” 
  
 3.    Except as otherwise set forth herein,
the Series 2000-1 Terms Supplement shall continue in full force and effect in accordance with its terms. 
  
 4.    This Amendment No. 3 may be executed in one or more counterparts, each of which, when so executed, shall be deemed an original; such counterparts, together, shall constitute one and the same agreement.

 

  
 IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 3 to Series
2001-1 Terms Supplement as of the day and year first above written. 
  
 
	 MCG MASTER TRUST:
 

 
 
	 
	         By:
 	 	 MCG CAPITAL CORPORATION
(f/k/a MCG Credit
Corporation)        
 

 
  
 
	 
	         By:
 	 	             /s/ STEVEN F. TUNNEY
 

	  	 	                 Name:  Steven F. Tunney

                Title:    President and Chief Operating Officer
 

 
  
 
	 WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION (f/k/a
Norwest Bank Minnesota, National Association), not in its individual capacity but solely as Indenture Trustee
 
	 
	         By:
 	 	             /s/ TIMOTHY MATYi
 

	  	 	                 Name:  Timothy Matyi
                 Title:    Assistant Vice President
 

 
  
 CONSENTED TO: 
  
 WACHOVIA SECURITIES, INC. 
 (f/k/a First Union Securities, Inc.), 

as Administrative Agent 
  
 
	 
	 By:
 	 	 /s/ MARY KATHERINE JETT        
 

	  	 	 Name:  Mary Katherine Jett
 Title:    Vice
President
 

 
  
 VARIABLE FUNDING CAPITAL
CORPORATION, 
 as Sole Noteholder 
  
 
	 
	 By:
 	 	     WACHOVIA SECURITIES, INC.
     (f/k/a First Union Securities,
Inc.),
    as attorney-in-fact        
 

 
  
 
	 
	 By:
 	 	 /s/ DOUGLAS R. WILSON, SR.         
 

	  	 	 Name:  Douglas R. Wilson, Sr.
 Title:    Vice
PresidentEXHIBIT 10.1

                                CREDIT AGREEMENT
                                ================

     This  Agreement,  dated  as of May  17,  2002,  is made  between  BioSphere
Medical,  Inc., a Delaware corporation,  with its chief executive office at 1050
Hingham Street, Rockland,  Massachusetts 02370 as borrower (the "Borrower"), and
Brown Brothers Harriman & Co., a New York general partnership, with an office at
40 Water Street, Boston, Massachusetts 02109 as lender (the "Lender").

                                   BACKGROUND

     The Borrower  wishes to  establish  with the Lender a $5,000,000 - two year
term credit  facility (the "Credit  Facility")  for working  capital and general
corporate  purposes.  The Credit Facility will be available on a revolving basis
through multiple draw borrowings.  Amounts outstanding under the Credit Facility
are to be based at a percentage  of Eligible  Accounts,  as defined  below.  The
Lender is  willing  to extend  such  credit to the  Borrower  upon the terms and
conditions hereinafter set forth.

                                   DEFINITIONS

     Certain  terms are defined in the text of the  Agreement  and the  meanings
assigned to such defined terms are referenced at Section IX below.

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

                            SECTION 1 - THE FINANCING

     1.1  Credit  Facility  - Credit  Availability.  Subject  to the  terms  and
conditions  hereof,  Borrower  may until the  earlier  to occur of May 17,  2004
("Maturity") or an Event of Default, as hereinafter  defined,  borrow, repay and
reborrow funds from the Lender,  as set forth below;  provided  however that the
aggregate principal amount of all advances outstanding at any one time under the
Credit  Facility,  shall not in the aggregate  exceed (a) the Borrowing Base, as
defined below, or (b) $5,000,000, whichever is less (the "Credit Availability");
and provided further, however, that notwithstanding anything contained herein to
the  contrary,  in no event  shall  Borrower  have the  right to borrow or shall
Lender have the obligation to make any advance under the Credit  Facility at any
time that a condition  which,  with the giving of notice or the passage of time,
or both, would constitute an Event of Default hereunder, shall exist.

     1.2 Advances. All advances by the Lender under the Credit Facility shall be
funded by the Lender to the  Borrower  by  depositing  the amount  thereof in an
account of the  Borrower  designated  by the Borrower  and  maintained  with the
Lender.

     1.3 The Note.  Advances  under the Credit  Facility shall be evidenced by a
promissory note of the Borrower substantially in the form of Annex A hereto (the
"Note")  payable to the order of the  Lender.  The Note shall bear  interest  as
provided below.

<PAGE>

     1.4      Interest on Advances.

          (a) Interest Rate.  Each advance under the Credit  Facility shall bear
     interest at a per annum rate that the  Borrower  may select  equal to (i) a
     variable  rate (the  "Floating  Rate") equal to the Base Rate plus the Base
     Rate  Spread  (herein  a  "Floating  Rate  Advance")  or  (ii) a rate  (the
     "Eurodollar  Rate")  equal to the LIBOR Rate plus the LIBOR Rate Spread for
     Interest  Periods  of 30,  60, 90 or 180 days  (herein a  "Eurodollar  Rate
     Advance"). The Floating Rate shall change simultaneously and automatically,
     without further  notice,  upon the Lender's  determination  and designation
     from time to time of the Base Rate,  and shall also  change  simultaneously
     and  automatically,  without further  notice,  upon each change in the Base
     Rate  Spread.  The  Eurodollar  Rate for an Interest  Period  shall  change
     simultaneously  and  automatically  during such  Interest  Period,  without
     further  notice,  upon each  change in the LIBOR Rate Spread and shall also
     change simultaneously and automatically,  without further notice, upon each
     change in the Libor Rate Reserve Percentage.

          (b) Interest  Period.  Each Interest Period shall commence on the date
     on which such advance is made and shall end on the date as the Borrower may
     elect as set forth in Paragraph 1.4(a) above;  provided,  however:  (i) any
     Interest  Period that would  otherwise  end on a day which is not a Banking
     Day shall be extended to the next Banking Day unless such  extension  would
     carry  such  Interest  Period  into the next  month,  in which  event  such
     Interest  Period shall end on the preceding  Banking Day; (ii) any Interest
     Period  that begins on the last  Banking  Day of a calendar  month (or on a
     date for which there is no  numerically  corresponding  day in the calendar
     month  during  which such  Interest  Period is to end),  shall  (subject to
     clause (i) above) end on the last Banking Day of such calendar  month;  and
     (iii) any Interest Period that would otherwise extend beyond Maturity shall
     end at Maturity.

          (c) Conversion.  Provided that no Event of Default shall have occurred
     and continued beyond the expiration of any applicable grace or cure period,
     if any, and no condition  which,  with the passage of time or the giving of
     notice,  or both,  would  constitute an Event of Default  shall exist,  the
     Borrower may convert any outstanding  Floating Rate Advance to a Eurodollar
     Rate Advance in the same aggregate  principal amount on any Banking Day and
     may convert a Eurodollar  Rate  Advance to a Floating  Rate Advance only on
     the last Banking Day of the then current Interest Period applicable to such
     Eurodollar  Rate  Advance.  If Borrower  desires to convert an advance,  it
     shall give the Lender three (3) Banking Days written notice, specifying the
     date of such  conversion,  the amount to be converted and if the conversion
     is from a Floating Rate Advance to a Eurodollar Rate Advance,  the duration
     of the Interest Period therefor.

          (d) Extension.  Subject to all of the terms and conditions  applicable
     to a request that a new advance be a Eurodollar  Rate Advance or a Floating
     Rate Advance and provided  that no Event of Default shall have occurred and
     continued beyond the expiration of any applicable grace or cure period,  if
     any,  and no  condition  which,  with the  passage of time or the giving of
     notice,  or both,  would  constitute an Event of Default  shall exist,  the
     Borrower  may extend a  Eurodollar  Rate  Advance as of the last day of the
     applicable  Interest  Period  to a new  Eurodollar  Rate  Advance.  If  the
     Borrower  fails  to  notify  the  Lender  of the  Interest  Period  for the
     extension  of a  Eurodollar  Rate  Advance at least three (3) Banking  Days
     prior to the last day of the then current applicable  Interest Period then,
     at Lender's  discretion,  such  outstanding  Eurodollar  Rate Advance shall
     become a Floating  Rate Advance at the end of the current  Interest  Period
     for such  outstanding  Eurodollar Rate Advance and shall accrue interest in
     accordance with the provisions  regarding  Floating Rate Advances described
     above.

          (e) Definitions. As used herein,

               (i) "Banking Day" shall mean: any day which is neither a Saturday
          or Sunday nor a legal holiday on which commercial banks are authorized
          or  required to close in  Massachusetts  and, if such day relates to a
          determination  of interest  on an advance or a notice by the  Borrower
          with respect to any such borrowing, a day which is also a day on which
          dealings in dollar  deposits  are carried out in the London  interbank
          market.

               (ii) "Base  Rate"  shall  mean:  the  variable  per annum rate of
          interest so  designated  from time to time by Lender as its Base Rate.
          The Base Rate is a reference rate and does not  necessarily  represent
          the lowest or best rate being charged to any customer.

               (iii) "Base Rate Spread" shall mean:  (i) 100 basis points at all
          times that  Borrower  shall have an  aggregate  amount of cash or cash
          equivalents  in  the  Pledged   Account  (as   hereinafter   defined),
          determined by Lender in its sole  discretion,  of at least one and one
          half (1 1/2) times the then outstanding principal balance of the Note,
          but not more than  $9,999,999;  (ii) 50 basis points at all times that
          Borrower shall have an aggregate amount of cash or cash equivalents in
          the Pledged Account,  determined by Lender in its sole discretion,  of
          at least $10,000,000,  but not more than $12,499,000 and (iii) 0 basis
          points at all times that  Borrower  shall have an aggregate  amount of
          cash or cash equivalents in the Pledged Account,  determined by Lender
          in its sole discretion, of at least $12,500,000.

               (iv)  "LIBOR  Rate"  shall  mean:  with  respect to any  Interest
          Period,  the quotient of (i) the per annum  interest rate equal to the
          simple average, rounded upwards, if necessary, to the next 1/32 of 1%,
          of the rates shown on the display  referred to as the  "Telerate  Page
          3750," or any display substituted  therefor, of the Dow Jones Telerate
          Service,  or, if fewer than two such rates  appear on such  display on
          the day of any determination  thereof,  the rates shown on the Reuters
          Screen LIBOR Page, as being the respective  rates at which deposits in
          U.S.  Dollars would be offered by the principal London offices of each
          of the lenders named thereon to major lenders in the London  interbank
          market at  approximately  11:00 A.M.,  London time,  two Business Days
          prior to the Business Day on which such Interest Period begins,  in an
          amount  approximately equal to the principal amount of such Eurodollar
          Rate Advance,  for a period of time equal to such Interest Period, and
          (ii) a number  equal to the number  one minus the Libor  Rate  Reserve
          Percentage.  In the event that such rate is not available at such time
          for any reason,  then the "LIBOR Rate" for such Interest  Period shall
          be  quotient  of (i) the per annum  interest  rate equal to the simple
          average, rounded upwards, if necessary, to the next 1/32 of 1%, of the
          rates at which  deposits in U.S.  Dollars are offered by the principal
          London offices of any three major banks in the London interbank market
          (as selected by the Lender) at approximately  11:00 A.M., London time,
          two Business  Days prior to the  Business  Day on which such  Interest
          Period begins,  in an amount  approximately  equal to such  Eurodollar
          Rate Advance,  for a period of time equal to such Interest Period, and
          (ii) a number  equal to the number  one minus the Libor  Rate  Reserve
          Percentage.  The "Libor Rate  Reserve  Percentage"  applicable  to any
          Interest  Period  means the maximum  effective  rate  (expressed  as a
          decimal) of the statutory reserve requirements  (without  duplication,
          but including, without limitation,  basic, supplemental,  marginal and
          emergency  reserves)  applicable  to the Lender  during such  Interest
          Period  under  regulations  of the Board of  Governors  of the Federal
          Reserve  System  (or  any  successor),  including  without  limitation
          Regulation D or any other  regulation  dealing  with  maximum  reserve
          requirements  which are  applicable  to the Lender with respect to its
          "Eurocurrency  Liabilities,"  as that term may be defined from time to
          time by the Board of Governors of the Federal  Reserve  System (or any
          successor)  or which in any other  respect  relate to the  funding  of
          loans bearing  interest at a rate calculated with reference to a LIBOR
          Rate.

               (v) "LIBOR Rate Spread" shall mean: 350 basis points at all times
          that  Borrower  shall  have  an  aggregate  amount  of  cash  or  cash
          equivalents in the Pledged  Account,  determined by Lender in its sole
          discretion,  of at  least  one and one  half (1 1/2)  times  the  then
          outstanding   principal  balance  of  the  Note,  but  not  more  than
          $9,999,999;  (ii) 325 basis  points at all times that  Borrower  shall
          have an aggregate  amount of cash or cash  equivalents  in the Pledged
          Account,  determined  by  Lender in its sole  discretion,  of at least
          $10,000,000,  but not more than $12,499,000 and (iii) 200 basis points
          at all times that Borrower  shall have an aggregate  amount of cash or
          cash equivalents in the Pledged  Account,  determined by Lender in its
          sole discretion, of at least $12,500,000.

               (vi) "Interest Period" shall mean, with respect to any Eurodollar
          Rate  Advance,  the 30,  60,  90 or 180 days  period  selected  by the
          Borrower pursuant to Section 1.4 or Section 1.5 hereof.

     1.5 Requests For Advances.  Requests for advances under the Credit Facility
may be made to the Lender on any  Banking  Day in writing  or by  telephone  and
confirmed in writing. Each request shall constitute a confirmation to the Lender
by the Borrower that all representations and warranties contained in Section III
remain  materially  true and correct as though made at the time of the  proposed
borrowing  (except  to the  extent  such  representation  and  warranty  related
specifically  to an earlier  date) and the Lender may, at its option,  require a
certificate  to such effect signed by the chief  financial  officer or corporate
controller  of  Borrower  or by a  designee  of the chief  financial  officer or
corporate  controller.  Each request for an advance  shall be  accompanied  by a
certificate of the Borrower setting forth the use of such advance and such other
matters as the Lender may reasonably  require.  The Borrower agrees to indemnify
and hold the Lender  harmless for any action,  loss or expense taken or incurred
by the Lender in good faith in  reliance  upon any request for an advance by the
Borrower under this Agreement.

     Each request  shall be  irrevocable  and shall be made before 11:00 a.m. on
the day on which such  advance is to be made if such advance is to be a Floating
Rate  Advance,  and shall be made before 11:00 a.m. (3) three Banking Days prior
to the date such  advance is to be made if such  advance  is to be a  Eurodollar
Rate Advance.  Each request shall specify the aggregate  amount of such advance,
the date such advance is to be made, the type of borrowing  (i.e.,  whether such
advance is to be a Floating Rate Advance or a Eurodollar Rate Advance),  and the
duration of the first Interest Period  therefor.  If the Lender does not receive
timely  notice of a requested  Eurodollar  Rate Advance,  the Borrower  shall be
deemed to have selected a Floating Rate  Advance.  Eurodollar  Rate Advances may
only be requested in  multiples of $100,000,  no more than three (3)  Eurodollar
Rate  Advances  may be  outstanding  at any one time and no advance may be made,
continued or extended as a Eurodollar  Rate Advance if an Event of Default shall
have occurred and continued  beyond the  expiration of any  applicable  grace or
cure period,  if any or if any condition which, with the giving of notice or the
passage of time, or both,  would  constitute an Event of Default shall exist. If
any  advance is made,  the Lender  shall  record on the books and records of the
Lender an  appropriate  notation  evidencing  such  advance,  each  repayment on
account of the  principal  thereof  and the  amount of  interest  paid;  and the
Borrower  authorizes  the Lender to maintain such records or make such notations
and agrees that the amount  shown on the books and records as  outstanding  from
time to time of the Lender  shall  constitute  the amount owing to the Lender in
connection with the Credit Facility, absent manifest error.

     1.6 Payments on the Credit Facility. Interest on all Floating Rate Advances
shall be  payable  monthly  beginning  on the first  Banking  Day of each  month
following the date hereof,  and  continuing  thereafter on the first day of each
succeeding month until the principal balance shall be paid in full.  Interest on
all Eurodollar  Rate Advances shall be payable in arrears,  on the first Banking
Day  following the  expiration of the  applicable  Interest  Period.  Subject to
approval of the Lender,  amounts  outstanding  under the Credit  Facility may be
prepaid in whole or in part prior to the end of an Interest Period, but any such
prepayment  shall be subject to the  indemnification  provisions of Section 1.7.
Unless  payment is accelerated  under Section 7.1 prior  thereto,  each Floating
Rate Advance,  together with all accrued but unpaid interest  thereon,  shall be
due and payable at Maturity, and each Eurodollar Rate Advance, together with all
accrued  but  unpaid  interest  thereon,  shall be due and  payable  on the last
Banking Day of the Interest Period applicable thereto. All payments of principal
and interest shall be paid in immediately available funds to the Lender.

     1.7  Indemnification  for Losses.  The Borrower shall  indemnify the Lender
against any actual  losses,  costs or expenses  which the Lender may at any time
incur as a  consequence  of (a) the failure of the Borrower to borrow the amount
requested on the date specified in a request for an advance,  (b) the failure of
the Borrower to pay, punctually on the due date thereof any amount payable under
the Credit Facility,  (c) the accelerated  payment of any obligations  under the
Credit  Facility  of the  Borrower  as a  result  of an Event  of  Default  that
continues beyond the expiration of any applicable grace or cure period,  if any,
or (d) the  repayment  or  prepayment  of  principal  amounts  under the  Credit
Facility on a date other than the last date of an Interest Period.  Such losses,
costs or  expenses  shall  include  but  shall not be  limited  to (x) any costs
incurred  by Lender in  carrying  funds  which were to have been  borrowed or in
carrying funds to cover the amount of any overdue  principal or overdue interest
on amounts  under the Credit  Facility,  (y) any  interest  payable by Lender to
lenders of the funds  borrowed by Lender in order to carry the funds referred to
in the immediately preceding subclause, and (z) any losses incurred by Lender in
liquidating  or  re-employing  funds  acquired  from third  parties to effect or
maintain all or any part of the amounts outstanding under the Credit Facility or
portion thereof.

     1.8 The Borrowing Base. The borrowing base  ("Borrowing  Base") shall equal
80% of Eligible Accounts.  "Eligible Accounts" shall mean Accounts (as such term
is  defined  in the  Uniform  Commercial  Code in force in the  Commonwealth  of
Massachusetts) which are acceptable to Lender in its sole discretion,  but which
at least are continuously in compliance with all of the following:

          (a) The Account is an account of Borrower  which arose in the ordinary
     course of the business of Borrower from or in connection with the bona fide
     sale of goods or  rendition of services,  performed in  accordance  with an
     order or contract,  oral or written,  wherein all  obligations  of Borrower
     regarding  the  shipment or delivery of such goods to a customer  have been
     satisfied or the services have been performed for a customer;

          (b) The  Account  did not arise from or in  connection  with a sale of
     goods by Borrower on  consignment  or with a sale of goods by Borrower that
     had been consigned to Borrower;

          (c)  The  Account is not  evidenced  by a  promissory  note or chattel
               paper;

          (d)  The rights of Borrower  in and to the  Account  and the  proceeds
               thereof are not subject to any assignment,  claim, lien, security
               interest or other encumbrance except in favor of Lender;

          (e)  The  financial  condition of the customer is acceptable to Lender
               in its sole discretion;

          (f)  The  Account  is not  disputed  nor  subject  to  offset,  credit
               allowance,  contra  account or adjustment  by a customer,  except
               discounts for prompt payment disclosed to Lender;

          (g)  The  Account  has  remained  unpaid for not more than ninety (90)
               days past its invoice date;

          (h)  The Account is not owed by any  creditor,  employee,  supplier or
               affiliate  of  Borrower.  The term  "affiliate"  means any person
               which,  directly  or  indirectly,  controls or is  controlled  by
               Borrower,  or is under common control with Borrower as determined
               by Lender;

          (i)  [Intentionally Omitted]; and

          (j)  The  customer has its  principal  place of business in the United
               States of America or, so long as such invoices are  designated in
               U.S. Dollars, in Canada;

provided, however, that no Account shall be considered to be an Eligible Account
if owed to Borrower by a person or entity at least twenty percent (20%) of whose
aggregate accounts receivable to Borrower have been outstanding for more than
ninety (90) days past their invoice dates.

     1.9  Borrowing  Base  Reports.  Borrower  shall  deliver to Lender not less
frequently  than monthly from the date hereof  through and including May 1, 2003
and quarterly  thereafter,  a report of Eligible Accounts as of a specified date
("Borrowing Base Report"), in form reasonably satisfactory to the Lender, signed
by the chief financial officer,  chief executive officer or corporate controller
of Borrower:

     1.10  Mandatory  Prepayment.  If at any  time  when  the  aggregate  unpaid
principal  amounts  outstanding  under the Credit  Facility exceed the Borrowing
Base the Lender  gives  notice of a mandatory  prepayment,  the  Borrower  shall
promptly  make a payment on the Note in an amount equal to such excess,  and the
Lender  may,  without  prior  notice to the  Borrower,  charge  accounts  of the
Borrower with the Lender to effect such payment.

     1.11 Interest Calculations.  Interest shall be computed on the basis of the
actual number of days elapsed over a 360 day year.

     1.12 Overdue  Principal and Interest.  Overdue principal and, to the extent
permitted  by law,  overdue  interest  on amounts  outstanding  under the Credit
Facility, shall bear interest at a rate which at all times shall be equal to the
lower of the Floating  Rate plus 4% or the highest rate  permitted by applicable
law and shall be payable on demand.

     1.13 Yield Protection, Etc.

          (a)  Additional  Costs.  If  any  present  or  future  applicable  law
     ("Applicable  Law"),  which  expression as used herein  includes  statutes,
     rules  and  regulations  thereunder  and  interpretations  thereof  by  any
     competent court or by any governmental or other regulatory body or official
     charged with the administration or the interpretation thereof and requests,
     directives,  instructions  and  notices  at any  time or from  time to time
     hereafter  made upon or  otherwise  issued to Lender by any central bank or
     other fiscal,  monetary or other authority (whether or not having the force
     of law),  including without limitation any change according to a prescribed
     schedule of increasing  requirements,  whether or not known or in effect as
     of the date hereof, shall with respect to any amounts outstanding under the
     Credit Facility, or undertakings of the Lender under this Agreement

               (i) subject the Lender to any tax, levy,  impost,  duty,  charge,
          fee,  deduction  or  withholding  of any nature  with  respect to this
          Agreement or  undertakings  of the Lender  hereunder or the payment to
          the Lender of any amounts due to it hereunder, or

               (ii)  materially  change the basis of taxation of payments to the
          Lender of the  principal of or interest on any amounts  payable to the
          Lender hereunder, or

               (iii)  impose or  increase  or render  applicable  any special or
          supplemental  deposit or reserve or similar requirements or assessment
          against  assets  held by, or deposits in or for the account of, or any
          liabilities   of,  or  advances  by  the  Lender  in  respect  of  the
          transactions contemplated herein, or

               (iv) impose on the Lender any other condition or requirement with
          respect to this Agreement, the Credit Facility or advances thereunder,
          and the result of any of the foregoing is

                    (A) to increase the cost to the Lender of making, funding or
               maintaining  all or any part of the Credit  Facility  or advances
               thereunder, or

                    (B) to reduce the  amount of  principal,  interest  or other
               amount payable to the Lender hereunder, or

                    (C) to require  the Lender to make any  payment or to forego
               any interest or other sum payable hereunder,  the amount of which
               payment  or  foregone  interest  or other  sum is  calculated  by
               reference  to the gross  amount of any sum  receivable  or deemed
               received by the Lender from the Borrower hereunder,

               then, and in each such case not otherwise provided for hereunder,
          the Borrower will upon demand  promptly  following  Lender's notice to
          the Borrower and the Lender pertaining to such matters  accompanied by
          calculations  thereof in  reasonable  detail,  pay to the Lender  such
          additional  amounts as will be  sufficient  to  compensate it for such
          additional cost, reduction, payment or foregone interest or other sum;
          provided  that the foregoing  provisions  of this  sentence  shall not
          apply  in the  case of any  additional  cost,  reduction,  payment  or
          foregone  interest or other sum resulting  from any taxes charged upon
          or by  reference  to the overall  net income,  profits or gains of the
          Lender.

               (b) Capital  Adequacy.  If, after the date  hereof,  Lender shall
          have determined that any Applicable Law regarding capital requirements
          for banks or bank holding companies  generally,  or any change therein
          or in the interpretation or administration thereof by any governmental
          authority,   central  bank  or  comparable  agency  charged  with  the
          interpretation or administration thereof, or compliance by Lender with
          any of the  foregoing,  either  imposes a  requirement  upon Lender to
          allocate   additional   capital   resources  or   increases   Lender's
          requirement to allocate capital  resources or its undertaking to make,
          or to its maintenance of, the Credit Facility or advances  thereunder,
          which has or would have the effect of reducing  the return on Lender's
          capital to a level  below that  which it could have  achieved  (taking
          into  consideration its then existing policies with respect to capital
          adequacy and assuming  full  utilization  of its capital) but for such
          applicability,  change, interpretation,  administration or compliance,
          by any amount deemed by Lender to be material,  Lender shall  promptly
          after its  determination of such occurrence give notice thereof to the
          Borrower. In such event commencing on the date of such notice (but not
          earlier than the  effective  date of any such  applicability,  change,
          interpretation,   administration  or  compliance),  the  fees  payable
          hereunder  shall  increase  by  an  amount  which  will,  in  Lender's
          reasonable  determination,  evidenced by  calculations  in  reasonable
          detail  furnished  to the  Borrower,  compensate  the  Lender for such
          reduction,  its  determination  of such  amount to be  conclusive  and
          binding upon the Borrower,  absent manifest error. In determining such
          amount, Lender may use any reasonable methods of averaging, allocating
          or attributing such reduction among its customers.

     1.14 Inability to Quote Eurodollar Rates;  Illegality.  If the Lender shall
for any reason  beyond its  reasonable  control be unable to quote a  Eurodollar
Rate with respect to a proposed Interest Period or if the Lender shall determine
that a change in Applicable Law makes it unlawful to fund advances in the London
interbank  market,  the  Lender  shall  notify  the  Borrower  and  all  amounts
outstanding  under  the  Credit  Facility  shall at the end of the then  current
Interest Period be converted to advances  bearing interest at the Floating Rate,
such rate to be  adjusted  concurrent  with each change in the Base Rate and the
Base Rate Spread.

     1.15 Commitment  Fee. The Borrower shall pay to the Lender,  on or prior to
the  date  hereof,  a  non-refundable  loan  commitment  fee  in the  amount  of
$7,500.00.

     1.16 Usury. All agreements between Borrower and Lender are hereby expressly
limited  so that in no  contingency  or event  whatsoever,  whether by reason of
acceleration of maturity of the indebtedness evidenced by the Note or otherwise,
shall  the  amount  paid  or  agreed  to be paid  to  Lender  for the use or the
forbearance  of the  indebtedness  evidenced  by the  Note  exceed  the  maximum
permissible  under  applicable law. As used herein,  the term  "applicable  law"
shall mean the law in effect as of the date hereof  provided,  however,  that in
the event  there is a change in the law which  results  in a higher  permissible
rate of interest, then this Agreement and the Note shall be governed by such new
law as of its effective date. In this regard,  it is expressly agreed that it is
the intent of the Borrower and Lender in the execution,  delivery and acceptance
of this Agreement and of the Note to contract in strict compliance with the laws
of the Commonwealth of Massachusetts  from time to time in effect.  If, under or
from any circumstances whatsoever, fulfillment of any provision hereof or of the
Note at the time of performance  of such  provision  shall be due, shall involve
transcending  the limit of such validity  prescribed by applicable law, then the
obligation to be fulfilled shall  automatically be reduced to the limits of such
validity,  and if under or from any circumstances  whatsoever Lender should ever
receive as interest an amount which would exceed the highest  lawful rate,  such
amount which would be excessive  interest  shall be applied to the  reduction of
the principal  balance evidenced by the Note and not to the payment of interest.
This provision shall control every other provision of all agreements between the
Borrower and Lender.

                              SECTION II - SECURITY

     The Note and all other  obligations  of the Borrower to the Lender  whether
direct or indirect,  absolute or contingent,  due or to become due, now existing
or hereafter arising  (collectively,  the  "Obligations")  shall be secured by a
security  interest in all of the  Borrower's  assets,  now existing or hereafter
arising, other than as specifically set forth in that certain Security Agreement
by and between  Borrower  and Lender of even date  herewith,  as the same may be
amended and/or restated from time to time (the "Collateral").

                  SECTION III - REPRESENTATIONS AND WARRANTIES

     The Borrower  makes the  following  representations  and  warranties to the
Lender:

     3.1  Organization  and  Qualification.  The Borrower is a corporation  duly
organized, validly existing and in good standing under the laws of Delaware. The
Borrower  is duly  qualified  or  licensed  and in good  standing  as a  foreign
corporation  in each other  jurisdiction  where the ownership of property or the
conduct of its activities  requires  qualification and the failure to so qualify
would have a material adverse effect on Borrower. The Borrower has all necessary
power and  authority  to own its  assets and to conduct  its  activities  as now
conducted and as presently contemplated.

     3.2  Corporate  Authority;  No  Violation  of  Law  or  Default,  Etc.  The
execution, delivery and performance by the Borrower of this Agreement, the Note,
the Security Agreement and the transactions contemplated thereunder,  are within
the  corporate  authority  of the  Borrower,  have been duly  authorized  by all
necessary  corporate  action and will not  contravene  any provision of federal,
state or municipal law or regulation,  the charter or by-laws of the Borrower or
create a default or result in the acceleration of indebtedness or the imposition
of a lien on assets of the Borrower under any material agreement,  bond, note or
indenture to which the  Borrower is a party or by which it is bound,  other than
consents of certain parties whose consent has been obtained.

     3.3 Governmental Approvals. The execution, delivery and performance of this
Agreement,   the  Note,  and  the  Security   Agreement  and  the   transactions
contemplated  thereby do not require any approval or consent of, or filing with,
any federal,  state or municipal  authority  other than filings with the Uniform
Commercial Code records in connection with the Security Agreement.

     3.4 Valid Obligations. This Agreement, the Note and the Security Agreement,
constitute, the legal, valid and binding obligations of the Borrower enforceable
in accordance with their respective terms.

     3.5  Financial  Statements.  The Borrower  has  furnished to the Lender its
quarterly  financial  statements  as of March 31, 2002 audited by Ernst & Young,
independent certified public accountants. The quarterly financial statements and
the notes thereto were prepared in accordance with generally accepted accounting
principles  applied on a consistent  basis  throughout the period  specified and
present  fairly the financial  position of the Borrower as of the date specified
and the results of operations and changes in financial  position of the Borrower
for the fiscal year then ended.

     3.6  Changes.  Since March 31, 2002 there has been no change in the assets,
liabilities,  financial condition or business of the Borrower other than changes
in the ordinary course of business, the effects of which individually,  or taken
as a whole,  have not been  materially  adverse to the  financial  condition  or
business of the Borrower.

     3.7 Title to  Properties;  Absence  of  Liens.  The  Borrower  has good and
marketable  title to all its  properties,  assets and rights of every nature now
owned by it, including all assets  reflected on the latest  financial  statement
described  above  (except for assets  disposed of for fair value in the ordinary
course of business  since the date thereof),  free from all security  interests,
mortgages,  capitalized  leases,  liens,  charges and  encumbrances  whatsoever,
except for any of the same existing at the date hereof,  all of which are listed
in Schedule I hereto.  The  Borrower  enjoys quiet  possession  under all leases
under which it leases, any personal or real property, and all of such leases are
valid, subsisting and in full force and effect.

     3.8 Absence of Undisclosed  Liabilities.  Except as disclosed on the latest
financial  statement  described above, in the note thereto,  the Borrower has no
liabilities  of a material  nature  individually  or in the  aggregate,  whether
accrued,  absolute,   contingent  or  otherwise  except  liabilities  stated  or
adequately  reserved against in such financial  statement or liabilities arising
in the ordinary course of business since the date of such balance sheet.

     3.9  Litigation.  Except as  disclosed  on  Schedule  II,  there is not now
pending  against  the  Borrower,  nor is there  overtly  threatened  against the
Borrower,  any  litigation,  investigation  or any  proceeding  by or before any
tribunal or governmental  agency,  the outcome of which,  individually or in the
aggregate, if adversely determined,  would have a material adverse effect on the
financial condition, business or continued operations of the Borrower.

     3.10 Taxes.  The Borrower  has filed all tax returns  which are required to
have been filed (whether  informational  returns or not) and has paid all taxes,
if any,  as shown on said  returns and all  assessments  to the extent that such
taxes have become due. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the knowledge of the Borrower,  threatening to
assert  against the Borrower any  deficiency  or claim for  additional  taxes or
interest thereon or penalties in connection therewith.

     3.11 Compliance with Laws; Permits. The Borrower is in full compliance with
all laws and  regulations  which apply to its  activities and the conduct of its
business,  the breach or violation of which,  individually  or in the aggregate,
could have a material  adverse effect on the Borrower's  operations or financial
condition,  including,  without limitation, all laws and regulations relating to
environmental  protection,  release or disposition  of hazardous  substances and
occupational  health and  safety.  The  Borrower  holds all  material  licenses,
permits and franchises which are required to permit it to conduct its activities
and businesses as presently  conducted or  contemplated,  and all such licenses,
permits and franchises are in full force and effect.

     3.12 Pension Plans. No event which is a reportable event under Section 4043
of the Employee  Retirement  Income  Security Act of 1974 ("ERISA") has occurred
with respect to any pension plan  maintained  for  employees of the Borrower (or
for the employees of any person who is under "common  control" with the Borrower
as that term is defined in Section  4001(a)(14) of ERISA (an "ERISA Affiliate"))
and  covered by Title IV of ERISA  ("Pension  Plan").  The  market  value of the
assets of each Pension Plan as of the last  valuation date for such Pension Plan
equals or exceeds  the  present  value of benefit  liabilities  as of the latest
actuarial  valuation date for such Pension Plan,  determined in accordance  with
the  actuarial  assumptions  used by the Pension  Benefit  Guaranty  Corporation
("PBGC") in single-employer plan terminations. All required contributions due to
each Pension Plan have been made by the Borrower or an ERISA  Affiliate,  as the
case may be; and,  with respect to each Pension  Plan,  there is no  accumulated
funding  deficiency  within the meaning of ERISA and the  Borrower and any ERISA
Affiliates are in full compliance with Section 412 of the Internal  Revenue Code
of 1986, as amended.  Neither the Borrower nor any ERISA  Affiliate has issued a
notice of intent to  terminate  any  Pension  Plan or received a notice from the
PBGC of its intent to initiate  proceedings  to terminate,  or appoint a trustee
with  respect to, any Pension  Plan;  and  neither  the  Borrower  nor any ERISA
Affiliate has incurred any liability to the Pension Benefit Guaranty Corporation
or to any Pension Plan in connection  with the  termination of any Pension Plan.
No event or condition has occurred or exists that could result in the imposition
of  liability  under  Sections  4063,  4069  or,  to the best  knowledge  of the
Borrower,  4201 of ERISA, the imposition of a lien under Section 412 of the Code
or Section 302 of ERISA,  or the  requirement to provide  security under Section
401(a)(29) of the Code.

     3.13 Regulation U. None of the proceeds of the Credit Facility will be used
to purchase or carry margin securities within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System.

     3.14 Subsidiaries.  The Borrower does not own, directly or indirectly, more
than 5% of any other corporation,  business trust, partnership or other business
entity  except as set  forth in  Schedule  III  hereto.  Each of the  Borrower's
subsidiaries  has  been  duly  organized  and is  validly  existing  and in good
standing in its  jurisdiction of organization and is duly qualified and licensed
and in good standing as a foreign  entity in each other  jurisdiction  where the
ownership of property or the conduct of its  activities  requires  qualification
and the failure to so qualify would have a material adverse effect on it.

     3.15 No Default. No event has occurred and is continuing which, with notice
or lapse of time or both, would constitute an Event of Default hereunder.

     3.16 Investment Company. The Borrower is not an "investment  company", or a
company  "controlled" by an "investment  company",  as such terms are defined in
the Investment Company act of 1940, as amended.

                         SECTION IV - CLOSING CONDITIONS

     The  following  conditions  shall be met prior to the making of any advance
under the Credit  Facility:  all  representations  and  warranties  contained in
Section  III shall be true and  accurate  on and as of the time of such  advance
(except to the extent such  representation and warranty related  specifically to
an earlier  date),  no Event of Default  shall have  occurred  hereunder  and no
condition  which,  with the giving of notice or the  passage  of time,  or both,
would  constitute  an Event of Default  shall  exist,  and no change  shall have
occurred  in any  Applicable  Law which in the opinion of counsel for the Lender
would  make it  illegal  for the  Lender  to make  the  advances  hereunder.  In
addition, the Lender shall have received:

          (a)   Certificates  of  the  Secretaries  of  State  of  Delaware  and
     Massachusetts as to the legal existence and good standing of the Borrower;

          (b) a certificate of the Secretary of the Borrower as to (i) a copy of
     charter  documents  and  amendments  of the  Borrower,  (ii) a copy  of the
     by-laws of the Borrower; (iii) a copy of the action taken to authorize this
     Agreement and the  transactions  contemplated by the Agreement;  and (iv) a
     list of the incumbent officers of the Borrower;

          (c) the executed Note;

          (d) the executed Security Agreement;

          (e) confirmation that all Collateral consisting of investment property
     has been  delivered  to the Lender or is held by the  Lender as  securities
     intermediary for the Borrower;

          (f) a Federal Reserve Form U-1;

          (g) a current Borrowing Base Report;

          (h) an  opinion,  satisfactory  in scope,  form and  substance  to the
     Lender,  as to the matters  referred to in Section 3.1 through 3.3 and such
     other  matters as the Lender may  reasonably  request  from  counsel to the
     Borrower.

     All closing documents shall be satisfactory in scope, form and substance to
MacAdams & Wieck Incorporated, special counsel to the Lender.

                        SECTION V - AFFIRMATIVE COVENANTS

     5.1 Financial  Statements and Reports.  Borrower will furnish to the Lender
the  following,  all to be in form and substance  satisfactory  to Lender in its
sole discretion:

          (a) Annual Reports.  As soon as practicable and in any event within 90
     days after the end of each fiscal year,  an annual  financial  statement of
     Borrower  as at  the  end of  such  year,  audited  and  certified  without
     qualification by independent  certified public  accountants  engaged by the
     Borrower and acceptable to the Lender.

          (b) Quarterly Reports.  As soon as practicable and in any event within
     45 days  after  the end of  each  fiscal  quarter,  a  quarterly  financial
     statement  of  Borrower  as  at  the  end  of  such  quarter,  including  a
     consolidated  balance sheet of Borrower,  an income statement and cash flow
     information   certified  by  the  chief  financial   officer  or  corporate
     controller of Borrower.

          (c) Borrowing Base. At the times specified in Section 1.9, the reports
     specified  therein for the period certified by the chief financial  officer
     or corporate controller of Borrower.

          (d) Projections. As soon as practicable and in any event within thirty
     (30) days prior to Borrower's fiscal year end, one (1) year of projections,
     including balance sheets, income statements and assumptions.

          (e)  Additional  Information.  From time to time such other  financial
     data and information as the Lender may reasonably request.

     5.2 Notice of Certain Events.

          (a) Defaults.  The Borrower will,  promptly after obtaining  knowledge
     thereof,  give written notice to the Lender of any matter which constitutes
     or which,  with the giving of notice or the passage of time, or both, would
     constitute, an Event of Default under this Agreement, specifying the nature
     of the same,  the period it has existed and what  action the  Borrower  has
     taken or proposes to take with respect  thereto,  and any matter which,  in
     the judgment of the chief financial  officer of the Borrower,  has resulted
     in or is likely to result in a  material  adverse  change in the  financial
     condition or operations of the Borrower.

          (b)  Judicial  and  Administrative  Proceedings.  The  Borrower  shall
     promptly  notify the Lender of the threat or  commencement of any judicial,
     administrative   or  other   proceeding   looking  toward  the  limitation,
     qualification or revocation of any permit or license required to permit the
     Borrower to conduct its activities and businesses as presently conducted or
     contemplated,  including  licenses  and permits  relating to  environmental
     protection, release or disposition of hazardous substances and occupational
     health and safety or alleging any  violation by the Borrower of any laws or
     regulations relating to environmental protection, release or disposition of
     hazardous  substances  or  occupational  health and safety or the demand or
     request for the  obtaining  of any  additional  licenses or permits of such
     nature.

     5.3 Corporate  Existence,  Etc. The Borrower will take all action necessary
to preserve and maintain its corporate  existence and will maintain and preserve
in full force and effect all material  rights,  licenses,  patents,  trademarks,
copyrights  and  franchises  and  will  comply  with  all  applicable  laws  and
regulations in all jurisdictions necessary for the conduct of its activities and
business.

     5.4 Maintenance of Properties. The Borrower will keep all of the properties
which it deems  useful or  necessary  in its  activities  and  business  in good
working order and condition reasonable wear and tear excepted.

     5.5 Taxes.  The Borrower  shall promptly pay and discharge or make adequate
provision for the payment or discharge of any taxes, assessments or governmental
charges or levies that may be imposed  upon its income or profits or upon any of
its property prior to the date on which penalties  (excluding  interest)  attach
thereto,  and all lawful claims which, if unpaid,  might become a lien or charge
upon its property; provided, however, that this provision shall not be deemed to
require  payment  of any taxes,  assessments,  governmental  charges,  levies or
claims,  the validity of which is being  contested in good faith by  appropriate
proceedings and for which adequate reserves have been maintained.

     5.6  Insurance.  The Borrower  will  maintain  insurance  with  responsible
companies,  in such amounts and against  such risks as is deemed  prudent by the
Borrower, consistent with prevailing practice in Borrower's field.

     5.7 ERISA. The Borrower shall:

          (a) make all required contributions in a timely manner to each Pension
     Plan and fund each  Pension Plan as required by the  provisions  of Section
     412 of the Internal Revenue Code of 1986, as amended;

          (b)  promptly  furnish to the Lender a copy of any notice of a Pension
     Plan  termination  or of a reportable  event with respect to a Pension Plan
     sent to the Pension Benefit Guaranty  Corporation under Sections 4041(a) or
     4043 of ERISA:

          (c)  furnish to the Lender a copy of any  request  for waiver from the
     funding  standards  or extension of the  amortization  periods  required by
     Section 412 of the  Internal  Revenue  Code no later than the date on which
     the request is submitted to the Department of Labor or the Internal Revenue
     Service, as the case may be;

          (d) promptly  furnish the Lender any notice of plan termination by the
     Pension Benefit Guaranty Corporation received by the Borrower;

          (e)  promptly  furnish the Lender any notice of plan  disqualification
     received from the Internal Revenue Service;

          (f)  promptly  furnish the Lender any notice  received by the Borrower
     with  respect  to any  potential  withdrawal  liability  with  respect to a
     Pension Plan or any  reorganization  or proposed  termination  of a Pension
     Plan.

     5.8 Operating Account; Custodial Accounts;  Liquidity Manager. The Borrower
shall  maintain  its  primary  depository  relationship  for its main  operating
account with the Lender,  shall maintain all custody accounts for its investment
portfolio  with the  Lender as  custodian  and,  so long as  Lender is  offering
services  competitive  in the  marketplace,  shall use  Lender as its  liquidity
manager.

     5.9 Further Assurances; Inspection. The Borrower will, at any time and from
time to time, execute and deliver such further instruments and take such further
action as may be reasonably  requested by the Lender in each case to further and
more  perfectly  carry out the purposes of this  Agreement.  The  Borrower  will
permit officers, employees or representatives of the Lender to visit and inspect
any of the  properties  and examine the books and discuss the affairs,  finances
and accounts of the Borrower with its officers; all at such reasonable times and
upon reasonable notice and as often as the Lender may reasonably request.

     5.10 Cash or Cash Equivalents.  Borrower shall maintain at all times in its
account with Lender entitled  BioSphere  Medical,  Inc.,  account number 2430064
(the "Pledged  Account"),  an aggregate amount of cash or cash equivalents of at
least one and one-half (1 1/2) times the then outstanding  principal  balance of
the Note. Lender shall determine, in its sole discretion, which financial assets
in the  Pledged  Account  are "cash or cash  equivalents"  and the value of such
financial assets.

                         SECTION VI - NEGATIVE COVENANTS

     During the term of this Agreement,  and so long as the Note is outstanding,
the Borrower agrees as follows:

     6.1  Consolidation,  Mergers,  Disposition  of Assets,  Acquisitions,  Etc.
Without the prior  written  consent of the Lender  (which  consent  shall not be
unreasonably  withheld),  Borrower  shall  not  become a party  to a  merger  or
consolidation with any other person, corporation, business trust, partnership or
entity  ("Person")  unless  the  Borrower  is the  survivor  of such  merger  or
consolidation  (provided that immediately after the effectiveness of such merger
or consolidation,  no Event of Default shall have occurred and be continuing and
no condition  which,  with the giving of notice or the passage of time, or both,
would constitute an Event of Default,  shall exist), nor will the Borrower sell,
lease or otherwise dispose of any of the Collateral  (except as permitted in the
Security  Agreement)  or all or a substantial  part of its assets,  nor will the
Borrower without the prior written consent of Lender (which consent shall not be
unreasonably withheld),  acquire the stock or substantially all of the assets of
any other  Person.  Notwithstanding  any  provision  of this  Section 6.1 to the
contrary  Lender's  consent shall not be required for the Borrower to enter into
any  transaction,  which would  otherwise  be  prohibited  by this  Section 6.1,
including,  but  not  limited  to,  partnerships,   joint  ventures,   strategic
alliances,   exclusive   licenses   and  similar   arrangements   (collectively,
"Restricted  Transactions"),  so  long as the  aggregate  amount  of  Borrower's
monetary  obligations  (both  paid  and to be  paid)  in  connection  with  such
Restricted   Transactions  (giving  effect  to  the  Restricted  Transaction  in
question) shall not exceed Two Million  ($2,000,000)  Dollars during the term of
this  Agreement  and so long as,  immediately  after the  effectiveness  of such
Restricted  Transaction,  no  Event  of  Default  shall  have  occurred  and  be
continuing and no condition  which,  with the giving of notice or the passage of
time, or both, would constitute an Event of Default, shall exist.

     6.2 Liens. The Borrower shall not permit to exist any lien upon,  pledge of
or  security  interest in any of its  assets,  nor will it acquire any  personal
property under a capitalized  lease,  conditional sales agreement or other title
retention contract or sell any account, except:

          (a) liens for taxes, assessments or governmental charges or levies the
     payment of which is not at the time  required or which are being  contested
     in good faith by appropriate  proceedings  provided  adequate  reserves are
     established and provided enforcement of such liens have been stayed;

          (b) liens of carriers,  warehousemen,  mechanics and  materialmen  and
     other similar  inchoate liens  incurred in the ordinary  course of business
     for sums  not yet due or  being  contested  in good  faith  by  appropriate
     proceedings;

          (c) liens incurred or deposits made in the ordinary course of business
     in connection with workmen's compensation, unemployment insurance and other
     types  of  social  security,  or to  secure  the  performance  of  tenders,
     statutory obligations,  surety and appeal bonds,  performance and return of
     money bonds and other similar obligations (exclusive of obligations for the
     payment of borrowed money);

          (d) any  attachment  or  judgment  lien,  unless  such  attachment  or
     judgment shall not,  within 60 days after the issue or entry thereof,  have
     been released or discharged or execution  thereof stayed pending appeal, or
     shall not have been  discharged  within 60 days after the expiration of any
     such stay;

          (e) liens in favor of the Lender;

          (f) liens securing permitted  indebtedness  outstanding on the date of
     this Agreement as described on Schedule I;

          (g) liens  securing  indebtedness  incurred  solely for the purpose of
     acquiring any real or personal property, other than inventory;  provided no
     such purchase  money  security  interest shall extend to any property other
     than the  particular  property so acquired  and  provided  further that the
     amount of any such purchase  money  indebtedness  shall not exceed the fair
     value of such property at the time of acquisition.

     6.3 Indebtedness.  The Borrower shall not incur,  assume,  guaranty or have
outstanding  any  indebtedness   whatsoever   (including   without   limitation,
indebtedness under capitalized and non-capitalized leases), except for:

          (a) indebtedness under the Note;

          (b)  indebtedness  to which the  Lender  has  given its prior  written
     consent;

          (c) trade payables incurred in the ordinary course of business;

          (d)  indebtedness  described  on  Schedule  IV existing as of the date
     hereof;

          (e) indebtedness and capitalized  lease  obligations  secured by liens
     permitted  under Section  6.2(g),  not to exceed  $500,000 in the aggregate
     outstanding at any one time; -

          (f) unsecured  indebtedness not to exceed $2,000,000 in the aggregate,
     which amount may include, but not be limited to, letters of credit, foreign
     exchange contracts and security deposits.

                             SECTION VII - DEFAULTS

     If any of the following events ("Events of Default") shall occur:

          (a) the  Borrower  shall fail to pay any  principal or interest on the
     Note within three (3) days after the due date thereof;

          (b) any  representation  or warranty of the  Borrower  herein,  in the
     Security Agreement,  or in any certificate  delivered hereunder shall prove
     to  have  been  false  in any  material  respect  as of the  time  made  or
     furnished;

          (c) the  Borrower  shall  suffer  a  receiver  or  trustee  for all or
     substantially  all of its property to be appointed;  or institute or suffer
     to be  instituted  against it any  proceedings  under any law  relating  to
     bankruptcy, insolvency,  arrangement,  reorganization or relief of debtors;
     provided,  however,  that  Borrower may cure an Event of Default  resulting
     from  the  appointment  of a  receiver  or  trustee  for  Borrower  or  the
     institution of any proceedings  under any law against Borrower  relating to
     bankruptcy, insolvency,  arrangement,  reorganization or relief of debtors,
     commenced by an unrelated  third party without the consent or  acquiescence
     of  Borrower,  if such  receiver  or trustee  shall be  discharged  or such
     proceeding shall be terminated,  as appropriate,  within sixty (60) days of
     the appointment or filing thereof;

          (d) the  Borrower  shall fail to perform any other  term,  covenant or
     agreement  contained  herein,  in the  Security  Agreement  or in any other
     agreement with Lender; provided, however, that:

               (i)  Borrower's  failure to perform  the  covenant  contained  in
          Section 5.10 hereof shall not be an Event of Default  hereunder unless
          such failure  shall  continue for at least two days after Lender sends
          Borrower written notice of such failure;  and

               (ii)  Borrower's  failure to perform the  covenant  contained  in
          Section  6.2  hereof by  permitting  certain  liens to exist  upon its
          assets, shall not be an Event of Default hereunder unless such failure
          shall  continue for at least  thirty days after Lender sends  Borrower
          written  notice of such  failure or unless  such lien is a  consensual
          lien or unless  such lien  covers  the  Pledged  Account or any of the
          assets held  therein or unless the lienor has taken  action to enforce
          such lien or unless Borrower's failure to perform such covenant is not
          otherwise susceptible to a cure.

          (e)  the  Borrower  shall  fail  to pay at  maturity,  or  within  any
     applicable  period of grace,  any  obligation  in  excess of  $100,000  for
     borrowed monies or advances or any capitalized lease obligations or fail to
     observe  or  perform  any term,  covenant  or  agreement  contained  in any
     agreement,  by which it is bound, evidencing or securing borrowed monies or
     advances,  for  such  period  of time as  would,  or would  have  permitted
     (assuming  the  giving of  appropriate  notice if  required)  the holder or
     holders thereof or of any obligations  issued  thereunder to accelerate the
     maturity thereof;

          (f)  substantial  loss,  theft,  damage,  destruction or diminution in
     market value of the  Collateral  taken as a whole that is not fully covered
     by insurance;

          (g) the occurrence of any material  adverse change in the condition of
     Borrower, financial or otherwise.

     then,  and in every such event,  the Lender may terminate  this  Agreement,
     declare  all  amounts  owing  hereunder  or under  the  Note and all  other
     obligations to be, and they shall  forthwith  become,  immediately  due and
     payable without presentment,  demand,  protest or other notice of any kind,
     all of which are hereby expressly waived, provided,  however, that upon the
     occurrence  of an Event of  Default  under  subsection  (c)  above all such
     amounts due under the Note shall  automatically  become immediately due and
     payable without demand or any action on the part of Lender.

                             SECTION VIII - SET-OFF

     Any  deposits or other sums at any time  credited by or due from the Lender
to the  Borrower  and any  securities  or other  property of the Borrower in the
possession  of the  Lender may at all times be held and  treated  as  collateral
security for the payment of the  Obligations.  Regardless of the adequacy of any
Collateral, any deposits or other sums credited by or due from the Lender to the
Borrower may be applied to or set off against the Obligations at any time.

                            SECTION IX - DEFINITIONS

The following terms shall have the meanings set forth below or the meanings as
used or assigned to them in the provisions of this Agreement referred to below:

                  Applicable Law                     see sec.1.13
                  Banking Day                        see sec.1.4
                  Base Rate                          see sec.1.4(c)
                  Base Rate Spread                   see sec.1.4(c)
                  Borrower                           see Preface
                  Borrowing Base                     see sec.1.8
                  Borrowing Base Report              see sec.1.9
                  Collateral                         see sec.2.1
                  Credit Availability                see sec.1.1
                  Credit Facility                    see Background
                  Eligible Accounts                  see sec.1.8
                  ERISA                              see sec.3.12
                  ERISA Affiliate                    see sec.3.12
                  Eurodollar Rate Advance            see sec.1.4(a)
                  Events of Default                  see sec.7.1
                  Floating Rate                      see sec.1.4(a)
                  Floating Rate Advance              see sec.1.4(a)
                  Interest Period                    see sec.1.4(c)
                  Lender                             See Preface
                  LIBOR Rate                         see sec.1.4(c)
                  LIBOR Rate Spread                  see sec.1.4(c)
                  Maturity                           see sec.1.1
                  Note                               see sec.1.3
                  Obligations                        see sec.2.1
                  PBGC                               see sec.3.12
                  Pension Plan                       see sec.3.12
                  Person                             see sec.6.1
                  Pledged Account                    see sec.5.10
                  Restricted Transactions            see sec.6.1
                  Security Agreement                 see sec.2.1

Any term of an accounting  nature not  otherwise  defined shall have the meaning
usually assigned to it under generally accepted accounting principles applied on
a consistent basis.

                            SECTION X - MISCELLANEOUS

     10.1 Expenses,  Taxes. Whether or not the transactions contemplated in this
Agreement are  consummated,  the Borrower will pay the reasonable  out-of-pocket
expenses of the Lender  (including  reasonable fees and disbursements of special
counsel,  if any,  retained by the Lender) in connection  with the  preparation,
administration  and  enforcement  of this  Agreement,  the  Note,  the  Security
Agreement, and the advances made hereunder. The Borrower agrees to indemnify and
hold the Lender harmless  against any taxes,  assessments or charges assessed by
any governmental  authority,  and costs of any litigation or proceedings and any
losses,  claims,  damages  or  expenses  whatsoever,  arising  by  reason of the
execution and delivery of this Agreement,  the Note, and the Security Agreement,
any recordings with respect to the Security Agreement or any use of the proceeds
of the Credit Facility, other than losses, claims, damages or expenses resulting
solely from Lender's gross negligence or willful misconduct.

     10.2  Payment  Dates.  If the due  date for any  payment  of  principal  is
extended by operation of law,  interest shall be payable for such extended time.
If any payment  required by this  Agreement  becomes due on a day which is not a
Banking  Day,  such payment may be made on the next  succeeding  Banking Day and
such extension shall be included in computing  interest or fees, as the case may
be, in connection with such payment.

     10.3 Notices.  Except as otherwise provided, all notices hereunder shall be
in writing and shall be deemed  adequately  given if sent as provided in Section
18 of the Security Agreement.

     10.4 Changes,  Waiver, Etc. Neither this Agreement nor any provision hereof
may be changed,  waived,  discharged  or  terminated  or any consent  thereunder
granted orally,  but only by a statement in writing.  Any waiver or amendment of
any  provision  hereof  may be  granted  or  effected,  with the  consent of the
Borrower,  by a written  instrument signed by the Lender. No failure or delay by
the Lender in exercising any right,  power or privilege  hereunder shall operate
as a waiver thereof;  nor shall any single or partial  exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,  power
or privilege.  The rights and remedies  herein  provided are  cumulative and not
exclusive of any rights or remedies otherwise provided by law.

     10.5  Participations.  The Borrower  understands and agrees that Lender may
grant to other banks or financial institutions  participations in the loans made
hereunder,  the Note and this  Agreement  provided  that in the  event of such a
participation, such Lender shall at all times act as lead participant. All costs
of any such participation shall be borne by Lender, and Borrower may continue to
deal with Lender as if Lender were the sole lender hereunder.

     10.6 Binding Effect of Agreement.  This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Lender and their respective successors
and assigns, provided, however, that the Borrower may not assign or transfer the
rights hereunder without the prior written consent of the Lender.

     10.7 WAIVER OF JURY TRIAL.  THE  BORROWER  AND THE LENDER  MUTUALLY  HEREBY
KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY  WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON,  ARISING OUT OF, UNDER OR IN CONNECTION  WITH
THIS  AGREEMENT,  THE NOTE,  THE  SECURITY  AGREEMENT  OR ANY  OTHER  AGREEMENTS
EXECUTED IN  CONNECTION  HEREWITH OR ANY COURSE OF CONDUCT,  COURSE OF DEALINGS,
STATEMENTS  (WHETHER  VERBAL OR  WRITTEN)  OR ACTIONS  OF ANY PARTY,  INCLUDING,
WITHOUT  LIMITATION,  ANY COURSE OF CONDUCT,  COURSE OF DEALINGS,  STATEMENTS OR
ACTIONS OF THE LENDER RELATING TO THE  ADMINISTRATION  OF THE CREDIT FACILITY OR
ENFORCEMENT OF THIS  AGREEMENT,  THE NOTE OR THE SECURITY  AGREEMENT,  AND AGREE
THAT NO PARTY WILL SEEK TO CONSOLIDATE  ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

     10.8  Massachusetts  Law. This  Agreement  shall be construed in accordance
with and governed by the laws of the Commonwealth of Massachusetts.

<PAGE>

     10.9  Counterparts.  This Agreement may be signed in counterparts  with the
same  effect  as if the  signatures  hereto  and  thereto  were  upon  the  same
instrument.

     10.10   Confidentiality.   In  handling  any  confidential  or  proprietary
information received pursuant to this Agreement or the transactions contemplated
hereby,  Lender,  and all  employees  and agents of Lender,  including,  but not
limited  to,  accountants,  shall  exercise  the same  degree  of care that they
exercise with respect to Lender's own confidential or proprietary information.

     IN WITNESS WHEREOF,  the parties have caused this Agreement to be executed,
under seal, by their respective officers, as of the date first set forth above.

                             BioSphere Medical, Inc.

                             By:  /s/  Robert M. Palladino
                                  ----------------------------------------------
                                  Vice President / CFO

                             Brown Brothers Harriman & Co.

                             By:  /s/  Joseph E. Hall
                                  ----------------------------------------------
                                  Senior Vice President

<PAGE>

                                   Schedule I

                      Security Interests, Mortgages, Liens,
                       Capitalized Leases and Encumbrances

Financing Statements on File on Date Hereof

Filing                Secured         File                     Collateral
Office                Party           No.         Date         Description
------                -----           ---         ----         -----------

Delaware              Waters          20268742    1/3/02       Specified
Secretary             Financial                                Equipment
of State              Services

Capitalized Leases
------------------

o    BioSphere  Medical,  Inc. ("the company") Leases (10) IBM Thinkpads and (1)
     340 Microdrive  Thinkpad  through Heller  Financial  Group. As of March 31,
     2002, the company had $19,244.37 outstanding on a five year lease agreement
     that began in April 2001.

o    The company also leases (1) Dell  Firewall  Server  through Dell  Equipment
     Leasing.  As of March 31, 2002, the company had $933 outstanding on a three
     year lease agreement.

o    The company has leased (1) High Performance Liquid Chromaotography  Machine
     for Research and Development purposes through Waters Financial. As of March
     31, 2002 the company has $20,707 outstanding on a three year lease.

<PAGE>

                                   Schedule II

                   Litigation, Investigations and Proceedings

None.

<PAGE>

                                  Schedule III

                                  Subsidiaries

Company                             Jurisdiction            Percentage Owned
-------                             ------------            ----------------

BioSphere Medical, S.A.             France                        100%

BioSphere Medical Japan, Inc.       Delaware                      100%

BSMD Ventures, Inc.                 Delaware                      100%

<PAGE>

                                   Schedule IV

                              Existing Indebtedness

None other than capitalized leases described on Schedule I.

<PAGE>

                                     ANNEX A

                                 PROMISSORY NOTE

$5,000,000                                                          May 17, 2002
                                                           Boston, Massachusetts

     For value received the  undersigned,  promises to pay to the order of Brown
Brothers  Harriman & Co., a New York general  partnership (the "Lender"),  on or
before May 17, 2004 the principal sum of $5,000,000  or, if less,  the aggregate
unpaid  principal  amount of all  advances  made by the Lender  under the Credit
Agreement referred to below, and outstanding at maturity, together with interest
thereon or on such portion thereof as may be from time to time  outstanding,  at
such rate or rates, and payable at such times and manner, as are provided in the
said Credit  Agreement.  Payments of  principal  and  interest  shall be made to
Lender at its offices at 40 Water Street, Boston, Massachusetts 02109-3661.

     This Note is issued  under the Credit  Agreement  dated as of May 17, 2002,
between the undersigned,  as borrower and the Lender, as lender,  and is subject
to the terms and  conditions  of the Credit  Agreement.  Upon the  occurrence of
certain events, as specified in the Credit Agreement, the principal of this Note
may be declared  due and  payable in the manner and with the effect  provided in
the Credit Agreement.

     The  undersigned  hereby  agrees  to pay on demand  all costs and  expenses
(including,  without limitation,  reasonable  attorneys' fees and disbursements)
paid  or  incurred  by the  holder  in  enforcing  this  Note on  default  or in
connection with any bankruptcy, reorganization, receivership or other insolvency
proceeding involving the undersigned.

     THE UNDERSIGNED HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT  TO A  TRIAL  BY  JURY IN  RESPECT  OF ANY  CLAIM  BASED  ON THIS  NOTE OR
ENFORCEMENT  OF THIS NOTE AND AGREES  THAT IT WILL NOT SEEK TO  CONSOLIDATE  ANY
SUCH  ACTION  WITH ANY OTHER  ACTION IN WHICH A JURY TRIAL  CANNOT BE OR HAS NOT
BEEN WAIVED.

     This Note shall take effect as a sealed  instrument  and be governed by the
laws of the Commonwealth of Massachusetts.

                             BioSphere Medical, Inc.

                             By:  /s/  Robert M. Palladino
                                  ----------------------------------------------

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