Document:

Credit Agreement

 Exhibit 10.12 
 CREDIT AGREEMENT 
  
 among

  
 FLOW INTERNATIONAL CORPORATION 
  
 as Borrower, 
  
 and 
  
 BANK OF AMERICA, N.A. 
 and 

U.S. BANK NATIONAL ASSOCIATION 
  
 as Lenders, 
  
 and 
  
 BANK OF AMERICA, N.A. 
  
 as Agent for Lenders

  

  
 April 28, 2005 
  

 
  

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page

	 ARTICLE 1 DEFINITIONS
	  	1
			
	 Section 1.1
	  	 Certain Defined Terms
	  	1
	 Section 1.2
	  	 General Principles Applicable to Definitions
	  	12
	 Section 1.3
	  	 Accounting Terms
	  	12
		
	 ARTICLE 2 THE LOANS
	  	12
			
	 Section 2.1
	  	 Amounts and Terms of Commitments
	  	12
	 (a)
	  	 The Revolving Credit
	  	12
	 (b)
	  	 Reductions in Total Revolving Commitment
	  	13
	 (c)
	  	 Overdrafts
	  	13
	 Section 2.2
	  	 Manner of Borrowing
	  	14
	 (a)
	  	 Revolving Loans
	  	14
	 (b)
	  	 Overdrafts
	  	15
	 Section 2.3
	  	 Agent’s Right to Fund Loans
	  	15
	 Section 2.4
	  	 Repayment of Principal
	  	15
	 Section 2.5
	  	 Interest on Loans
	  	16
	 Section 2.6
	  	 Prepayments
	  	17
	 Section 2.7
	  	 Notes
	  	17
	 Section 2.8
	  	 Manner of Payments
	  	17
	 Section 2.9
	  	 Fees
	  	18
	 Section 2.10
	  	 Sharing of Payments, Etc.
	  	18
	 Section 2.11
	  	 Application of Payments
	  	18
	 Section 2.12
	  	 Additional LIBOR Rate Provisions
	  	19
		
	 ARTICLE 3 LETTERS OF CREDIT
	  	20
			
	 Section 3.1
	  	 Letters of Credit
	  	20
	 Section 3.2
	  	 Manner of Requesting Letters of Credit
	  	20
	 Section 3.3
	  	 Indemnification; Increased Costs
	  	22
	 Section 3.4
	  	 Payment by Borrower
	  	22
	 Section 3.5
	  	 Cash Collateralize
	  	23
		
	 ARTICLE 4 CONDITIONS
	  	23
			
	 Section 4.1
	  	 Conditions to Effectiveness of Agreement
	  	23
	 (a)
	  	 Loan Documents
	  	23
	 (b)
	  	 Borrower Authority
	  	23
	 (c)
	  	 Guarantor Authority
	  	24
	 (d)
	  	 Opinion of Counsel
	  	24

  

 i 

					
	 (e)
	  	 Guarantor Consent
	  	24
	 (f)
	  	 Simultaneous Events
	  	24
	 Section 4.2
	  	 Conditions to All Loans and Issuances of Letters of Credit
	  	24
	 (a)
	  	 Prior Conditions
	  	24
	 (b)
	  	 Notice of Borrowing
	  	25
	 (c)
	  	 No Default
	  	25
	 (d)
	  	 Guarantors
	  	25
	 (e)
	  	 Other Information
	  	25
	 Section 4.3
	  	 Post-Effective Date Conditions
	  	25
		
	 ARTICLE 5 REPRESENTATIONS AND WARRANTIES
	  	26
			
	 Section 5.1
	  	 Corporate Existence and Power
	  	26
	 Section 5.2
	  	 Corporate Authorization
	  	26
	 Section 5.3
	  	 Government Approvals, Etc.
	  	27
	 Section 5.4
	  	 Binding Obligations, Etc.
	  	27
	 Section 5.5
	  	 Litigation
	  	27
	 Section 5.6
	  	 Lien Priority
	  	27
	 Section 5.7
	  	 Financial Condition
	  	27
	 Section 5.8
	  	 Title and Liens
	  	27
	 Section 5.9
	  	 Taxes
	  	28
	 Section 5.10
	  	 Laws, Orders, Other Agreements
	  	28
	 Section 5.11
	  	 Federal Reserve Regulations
	  	28
	 Section 5.12
	  	 ERISA.
	  	28
	 Section 5.13
	  	 Security Offerings
	  	29
	 Section 5.14
	  	 Investment Company; Public Utility Holding Company
	  	29
	 Section 5.15
	  	 Environmental Compliance
	  	29
	 Section 5.16
	  	 Insurance
	  	30
	 Section 5.17
	  	 Disclosure
	  	30
	 Section 5.18
	  	 Intellectual Property, Licenses, Etc.
	  	30
	 Section 5.19
	  	 PIPE Proceeds
	  	30
	 Section 5.20
	  	 Representations as a Whole
	  	30
		
	 ARTICLE 6 AFFIRMATIVE COVENANTS
	  	31
			
	 Section 6.1
	  	 Use of Proceeds
	  	31
	 Section 6.2
	  	 Preservation of Corporate Existence, Etc.
	  	31
	 Section 6.3
	  	 Visitation Rights
	  	31
	 Section 6.4
	  	 Keeping of Books and Records
	  	31
	 Section 6.5
	  	 Maintenance of Property, Etc.
	  	31
	 Section 6.6
	  	 Compliance with Laws, Etc.
	  	31
	 Section 6.7
	  	 Other Obligations
	  	31
	 Section 6.8
	  	 Insurance
	  	32
	 Section 6.9
	  	 Financial Information
	  	32
	 (a)
	  	 Annual Audited Financial Statements
	  	32
	 (b)
	  	 Quarterly Unaudited Financial Statements
	  	32

  

 ii 

					
	 (c)
	  	 Annual Financial Projections
	  	33
	 (d)
	  	 Accounts Receivable Summary
	  	33
	 (e)
	  	 SEC Filings
	  	33
	 (f)
	  	 Compliance Certificates
	  	33
	 (g)
	  	 Monthly Reporting
	  	33
	 (h)
	  	 Other
	  	33
	 Section 6.10
	  	 Notification
	  	33
	 Section 6.11
	  	 Additional Payments; Additional Acts
	  	34
	 Section 6.12
	  	 EBITDA
	  	35
	 Section 6.13
	  	 Minimum Collateral Requirements
	  	36
	 Section 6.14
	  	 Loan Documents from Domestic Subsidiaries
	  	36
	 Section 6.15
	  	 Update of Collateral
	  	36
	 Section 6.16
	  	 Security Interest in Foreign Guarantor Collateral
	  	37
	 Section 6.17
	  	 Deposit Accounts
	  	37
	 Section 6.18
	  	 Lease and Landlord Consents
	  	37
	 Section 6.19
	  	 Delivery of Information Regarding Omax Case
	  	37
		
	 ARTICLE 7 NEGATIVE COVENANTS
	  	38
			
	 Section 7.1
	  	 Dividends, Purchase of Stock, Etc.
	  	38
	 Section 7.2
	  	 Liquidation, Merger, Sale of Assets
	  	38
	 Section 7.3
	  	 Indebtedness
	  	38
	 Section 7.4
	  	 Guaranties, Etc.
	  	39
	 Section 7.5
	  	 Liens
	  	39
	 Section 7.6
	  	 Investments
	  	40
	 Section 7.7
	  	 Operations
	  	40
	 Section 7.8
	  	 ERISA Compliance
	  	40
	 Section 7.9
	  	 Capital Expenditures
	  	40
	 Section 7.10
	  	 New Product Development Expenditures
	  	40
	 Section 7.11
	  	 Transactions with Affiliates
	  	41
	 Section 7.12
	  	 Burdensome Agreements
	  	41
	 Section 7.13
	  	 Margin Stock
	  	41
		
	 ARTICLE 8 EVENTS OF DEFAULT
	  	41
			
	 Section 8.1
	  	 Events of Default
	  	41
	 (a)
	  	 Payment Default
	  	41
	 (b)
	  	 Breach of Warranty
	  	41
	 (c)
	  	 Breach of Certain Covenants
	  	41
	 (d)
	  	 Breach of Other Covenant
	  	42
	 (e)
	  	 Cross-default
	  	42
	 (f)
	  	 Voluntary Bankruptcy, Etc.
	  	42
	 (g)
	  	 Involuntary Bankruptcy, Etc.
	  	42
	 (h)
	  	 Insolvency, Etc.
	  	43
	 (i)
	  	 Judgment
	  	43
	 (j)
	  	 Government Approvals
	  	43

  

 iii 

					
	 (k)
	  	 Other Government Action
	  	43
	 (l)
	  	 ERISA
	  	43
	 (m)
	  	 Going Concern Qualification
	  	44
	 (n)
	  	 Failure to Issue Financials
	  	44
	 (o)
	  	 Guarantor Default; Invalidity of Guaranty
	  	44
	 (p)
	  	 Impairment of Security
	  	44
	 (q)
	  	 Change of Control
	  	44
	 (r)
	  	 Material Adverse Change
	  	44
	 (s)
	  	 Invalidity of Loan Documents
	  	44
	 Section 8.2
	  	 Consequences of Default
	  	45
		
	 ARTICLE 9 AGENT
	  	45
			
	 Section 9.1
	  	 Appointment and Authorization of Agent
	  	45
	 Section 9.2
	  	 Delegation of Duties
	  	46
	 Section 9.3
	  	 Liability of Agent
	  	46
	 Section 9.4
	  	 Reliance by Agent
	  	46
	 Section 9.5
	  	 Notice of Default
	  	47
	 Section 9.6
	  	 Credit Decision; Disclosure of Information by Agent.
	  	47
	 Section 9.7
	  	 Indemnification of Agent
	  	48
	 Section 9.8
	  	 Agent in its Individual Capacity
	  	48
	 Section 9.9
	  	 Successor Agent
	  	48
	 Section 9.10
	  	 Agent May File Proofs of Claim
	  	49
		
	 ARTICLE 10 LETTER OF CREDIT RISK PARTICIPATIONS
	  	50
			
	 Section 10.1
	  	 Sale of Risk Participations
	  	50
	 Section 10.2
	  	 Notice to Lenders
	  	50
	 Section 10.3
	  	 Payment Obligations
	  	50
	 (a)
	  	 Reimbursements to Agent
	  	50
	 (b)
	  	 Payments to Lenders
	  	51
	 (c)
	  	 Reimbursements to Lenders
	  	51
		
	 ARTICLE 11 MISCELLANEOUS
	  	51
			
	 Section 11.1
	  	 No Waiver; Remedies Cumulative
	  	51
	 Section 11.2
	  	 Governing Law
	  	51
	 Section 11.3
	  	 Mandatory Arbitration
	  	51
	 Section 11.4
	  	 Consent to Jurisdiction; Waiver of Immunities
	  	52
	 Section 11.5
	  	 Notices
	  	52
	 Section 11.6
	  	 Assignment and Participations
	  	53
	 Section 11.7
	  	 Severability
	  	53
	 Section 11.8
	  	 Survival
	  	53
	 Section 11.9
	  	 Executed in Counterparts
	  	53
	 Section 11.10
	  	 Entire Agreement; Amendment, Etc.
	  	53
	 Section 11.11
	  	 Headings
	  	53

  

 iv 

					
	 Section 11.12
	  	 Oral Agreements Not Enforceable
	  	53
	 Section 11.13
	  	 Attorney Costs, Expenses and Taxes
	  	54
	 Section 11.14
	  	 Indemnification by the Borrower
	  	54
	 Section 11.15
	  	 Payments Set Aside
	  	55
	 Section 11.16
	  	 Set-off
	  	55
	 Section 11.17
	  	 Interest Rate Limitations
	  	55
	 Section 11.18
	  	 Waiver of Right to Trial by Jury
	  	56
	 Section 11.19
	  	 Confidential Information
	  	56
	 Section 11.20
	  	 USA Patriot Act Notice
	  	57

  

	
	 SCHEDULES

	
	 Schedule 5.5 – Litigation

	 Schedule 5.6 – Lien Priority

	 Schedule 6.14 – Subsidiaries

	 Schedule 7.5 – Liens

	
	 EXHIBITS

	
	 Exhibit A – Form of Revolving Note

	 Exhibit B – Form of Compliance Certificate

	 Exhibit C – Form of Legal Opinion

  

 v 

 CREDIT AGREEMENT 
  
 THIS CREDIT AGREEMENT (the “Agreement”) is made as of the 28th day of April, 2005, by and among BANK OF
AMERICA, N.A., a national banking association, and U.S. Bank National Association, a national banking association (“U.S. Bank”) (each individually a “Lender” and collectively the “Lenders”), BANK OF
AMERICA, N.A., a national banking association, as agent for Lenders (the “Agent”) and FLOW INTERNATIONAL CORPORATION, a Washington corporation (the “Borrower”). 
  
 WHEREAS, Borrower has requested that Agent and Lenders enter into this
Agreement, which Agent and Lenders are willing to do, subject to the terms and conditions contained herein; 
  
 NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: 
  
 ARTICLE 1 
 DEFINITIONS 
  
 Section 1.1 Certain Defined Terms. As used in this Agreement, the following terms have the following meanings: 
  
 “Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto. 
  
 “Agent” means Bank of America, N.A. and any successor agent selected pursuant to Section 9.9 hereof.

  
 “Agent-Related Persons” means the Agent,
together with its Affiliates and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. 
  
 “Applicable Interest Period” means, with respect to any Revolving Loan, the period commencing on the date such Revolving Loan was made or
converted or continued pursuant to Section 2.2(a) and ending (a) at maturity in the case of a Base Rate Loan; or (b) one (1) or two (2) months thereafter in the case of a LIBOR Loan as specified in the Notice of Borrowing given by Borrower in
respect of such Loan; provided, however, that no Applicable Interest Period may end later than the Revolving Maturity Date. 
  
 “Applicable Interest Rate” means, for the Revolving Loan or a portion thereof, the Base Rate or the LIBOR Rate; provided,
however, the Borrower’s ability to select a LIBOR Rate as the Applicable Interest Rate shall be subject to the number and dollar amount limitations set forth in Section 2.2(a)(ii). 
  

 1 

 “Asset Sale Net Proceeds” shall mean the gross proceeds attributable to the sale of any
assets (other than the sale of assets in the ordinary course of business) owned by Borrower or any Guarantor minus (i) the expenses associated with such sale including, without limitation, investment banking, legal, accounting and any other broker
fees associated with the sale of such asset, (ii) the satisfaction of any encumbrances secured by a lien senior to that of the Agent and Lenders, (iii) the satisfaction of any other contractual or legal liability required to be satisfied as a result
of such sale, and (iv) a reserve for estimated taxes due associated with the sale of such asset. 
  
 “ATAB” means Avure Technologies AB, a limited liability company organized under the laws of Sweden, and an indirect subsidiary of
Borrower. 
  
 “Attorney Costs” means and includes
all reasonable fees, expenses and disbursements of any law firm or other external counsel and, without duplication, the reasonable allocated cost of internal legal services and all expenses and disbursements of internal counsel. 
  
 “Bank of America” means Bank of America, N.A., a national
banking association, in its capacity as Lender, and any Successor. 
  
 “Base Rate” means the sum of (i) the Prime Rate, plus (ii) 0.50% (50 basis points). 
  
 “Base Rate Loan” means any portion of the Revolving Loans bearing interest at the Base Rate. 
  
 “Borrower” means Flow International Corporation, a
Washington corporation, and any Successor. 
  
 “Borrower
Accounts” means any and all checking accounts held by Borrower at Bank of America. 
  
 “Business Day” means any day other than Saturday, Sunday or another day on which commercial banks are authorized or obligated to close in Seattle, Washington. 
  
 “Change of Control” means, with respect to any Person, an
event or series of events by which: 
  
 (a) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed
to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time),
directly or indirectly, of 40% or more of the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of 

  

 2 

 
such Person on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option
right); or 
  
 (b) during any period of 12
consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such
period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent
governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority
of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result
of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of
directors). 
  
 “Chiao Tung Loans” has the
meaning given that term in Section 7.3. 
  
 “Code” means the Internal Revenue Code of 1986, as amended from time to time. 
  
 “Collateral” means all personal or real property in which any of the Loan Documents now or hereafter create or purport to create a Lien.

  
 “Collateral Differential” means, as of any
Collateral Measurement Date, the amount (if any) by which the Minimum Collateral Amount as of such date exceeds the net book value of the Collateral. 
  
 “Collateral Measurement Date” means the applicable date designated as a Collateral Measurement Date in Section 6.13. 

 
 “Commitment” shall mean (a) with respect to each Lender,
(i) its obligation to extend Revolving Loans under this Agreement, or (ii) its obligation to purchase Letter of Credit Risk Participations pursuant to Article 10 hereof; and (b) with respect to Agent, its obligation to issue Letters of Credit
under this Agreement. 
  
 “Contractual
Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. 
  
 “Controlled Group” means all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under common control which, together with Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code. 
  

 3 

 “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to
time in effect and affecting the rights of creditors generally. 
  
 “Default” means any event which but for the passage of time or the giving of notice or both would be an Event of Default. 
  
 “Default Rate” means a per annum rate equal to the then-current Base Rate plus three percent (3%). 
  
 “Dollars”, “dollars” and
“$” each mean lawful money of the United States. 
  
 “Domestic Guarantors” means Avure Technologies, Inc., CIS Acquisition Corp. and Flow Waterjet Florida Corporation and any other Subsidiary that from time to time executes and delivers a supplement in the form attached to,
or otherwise becomes bound by, the Domestic Guaranty. 
  
 “Domestic Guarantor Security Agreement” means that certain Security Agreement dated as of the date hereof, executed by the Domestic Guarantors in favor of Agent, and all additions, supplements, renewals or amendments
thereto. 
  
 “Domestic Guaranty” means that
certain Guaranty Agreement dated as of the date hereof executed by the Domestic Guarantors in favor of Agent and Lenders, and any additions, supplements, renewals or amendments thereto. 
  
 “Domestic Subsidiary” means a Subsidiary of Borrower incorporated and organized under the laws of any state
of the United States and the District of Columbia. 
  
 “EBITDA” means operating income, plus the sum of (i) depreciation expense, (ii) depletion expense, (iii) amortization expense, (iv) restructuring expenses not to exceed $1,500,000 in fiscal year 2005, (v) fees paid to legal
and financial advisors associated with Borrower’s refinancing efforts and negotiations with its existing creditors, (vi) one-time, non-cash charges related to write-downs of intangibles or goodwill, and (vii) non-cash compensation. 

 
 “EBITDA Measurement Period” has the meaning given in
Section 6.12. 
  
 “Environmental Laws”
means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental, health, safety and land use matters; including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), the Clean Air Act, the Federal
Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances 

  

 4 

 
Control Act, the Emergency Planning and Community Right-to-Know Act, and any applicable state law. 
  
 “Environmental Liability” means any liability, contingent or
otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Guarantor or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. 
  
 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

  
 “ERISA Affiliate” means any trade or business
(whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). 
  
 “Event of Default” has the meaning given in Section
8.1. 
  
 “Existing Letters of Credit” means
the following standby letters of credit issued by Bank of America pursuant to the Prior Credit Agreement: 
  
 (1) Irrevocable Standby Letter of Credit Number 3064768 dated August 4, 2004 naming International Advanced Research Centre for Powder,
Metallurgy and New Materials as beneficiary and Flow Autoclave Systems, Inc. as applicant in a face amount not to exceed $706,817.10; 
  
 (2) Irrevocable Standby Letter of Credit Number 3073456 dated February 16, 2005 naming International Advanced Research Centre for Powder,
Metallurgy and New Materials as beneficiary and Flow Autoclave Systems, Inc. as applicant in a face amount not to exceed $706,817.10; 
  
 (3) Irrevocable Standby Letter of Credit Number 3072934 dated January 20, 2005 naming Itochu Mechatronics Corp. as beneficiary and Flow
International Corporation as applicant in a face amount not to exceed $1,818,150; 
  
 (4) Irrevocable Standby Letter of Credit Number 3066311 dated October 22, 2004 naming Itochu Mechatronics Corp. as beneficiary and Flow
International Corporation as applicant in a face amount not to exceed $500,000; and 
  
 (5) Irrevocable Standby Letter of Credit Number 3066310 dated October 22, 2004 naming Itochu Mechatronics Corp. as beneficiary and Flow
International Corporation 

  

 5 

 
as applicant, as amended on December 20, 2004, in a face amount not to exceed $3,852,489 (as amended). 
  
 “FAC” means Flow Asia Corporation, a corporation formed
under the laws of Taiwan, and a wholly-owned subsidiary of Borrower. 
  
 “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on transactions received by Agent from three federal funds brokers of recognized standing selected by Agent. 
  
 “Financial Transactions Obligations” means all indebtedness, liabilities and obligations of Borrower to
Bank of America or any Affiliate of Bank of America now or hereafter existing, whether joint or several, direct or indirect, absolute or contingent or due or to become due, arising under or in connection with any agreement (including all schedules
thereto, confirmations of transactions thereunder, and documents, definitions, and agreements incorporated therein by reference or relating thereto) pursuant to which Bank of America has agreed to permit daylight overdrafts to occur on accounts
maintained by Borrower with Bank of America, provide remote disbursement services for Borrower, process automated clearing house (ACH) transactions for the account of Borrower or extend credit to Borrower, in the form of credit card accounts,
including, without limitation, any interest due thereon, all fees, costs, and expenses incurred by Bank of America in connection therewith, and termination payments and indemnifications relating thereto. 
  
 “First Commercial Loans” has the meaning given in Section
7.3(h). 
  
 “Flow Europe” means Flow Europe
GmbH, a corporation organized under the laws of Germany and a wholly-owned subsidiary of Borrower. 
  
 “Foreign Guarantors” means FAC, Flow Europe, ATAB, Flow International FPS AB and Flow Holdings Sagl, and any other Subsidiary that from
time to time executes and delivers a supplement in the form attached to, or otherwise becomes bound by, the Foreign Guaranty, and “Foreign Guarantor” means any one of them. 
  
 “Foreign Guarantor Security Agreement” means that certain
Security Agreement dated as of the date hereof, executed by the Foreign Guarantors in favor of Agent, and all additions, supplements, renewals or amendments thereto. 
  
 “Foreign Guaranty” means that certain Guaranty Agreement dated as of the date hereof, executed by the
Foreign Guarantors in favor of Agent and Lenders, and any additions, supplements, renewals or amendments thereto. 
  
 “GAAP” has the meaning given in Section 1.3. 
  

 6 

 “Government Approval” means an approval, permit, license, authorization, certificate, or
consent of any Governmental Authority. 
  
 “Governmental
Authority” means the government of the United States or any State or any foreign country or any political subdivision of any thereof or any branch, department, agency, instrumentality, court, tribunal or regulatory authority which
constitutes a part or exercises any sovereign power of any of the foregoing. 
  
 “Guarantors” means the Domestic Guarantors, the Foreign Guarantors, and any other Subsidiary that from time to time executes and delivers a supplement in the form attached to, or otherwise becomes
bound by, the Domestic Guaranty or Foreign Guaranty, and “Guarantor” means any one of them. 
  
 “Handelsbanken Loans” has the meaning given that term in Section 7.3. 
  
 “Hazardous Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and
all other substances or wastes of any nature regulated pursuant to any Environmental Law. 
  
 “Indebtedness” means for any person (a) all items of indebtedness or liability (except capital, surplus, deferred credits and reserves, as such) which would be included in determining total
liabilities as shown on the liability side of a balance sheet as of the date as of which indebtedness is determined, (b) indebtedness secured by any Lien, whether or not such indebtedness shall have been assumed, (c) any other indebtedness or
liability for borrowed money or for the deferred purchase price of property or services for which such person is directly or contingently liable as obligor, guarantor, or otherwise, or in respect of which such person otherwise assures a creditor
against loss, (d) any other obligations of such person under leases which shall have been or should be recorded as capital leases, and (e) guarantees or other contingent obligations. 
  
 “Indemnified Liabilities” has the meaning given to it in Section 11.14. 
  
 “Letter of Credit” means any standby letter of credit issued
by Agent pursuant to the terms of Article 3 hereof together with the Existing Letters of Credit. 
  
 “Letter of Credit Risk Participation” means, with respect to each Lender, a risk participation purchased by such Lender pursuant to
Article 10 hereof with respect to a Letter of Credit, including, without limitation, the Existing Letters of Credit (including risk participations deemed purchased from Agent by Bank of America in its capacity as Lender). 
  
 “Letter of Credit Usage” means, as of any date of
determination, the sum of (i) the aggregate face amount of all outstanding unmatured Letters of Credit, plus (ii) the aggregate amount of all payments made by Agent under Letters of Credit, no longer outstanding, but not yet reimbursed by Borrower
pursuant to Section 3.4. 
  

 7 

 “LIBOR Loan” means any portion of the Revolving Loans bearing interest at the LIBOR
Rate. 
  
 “LIBOR Rate” means for any Applicable
Interest Period with respect to a LIBOR Loan, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the sum of (i) 2.50% (250 basis points), and (ii) the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Agent from time to time) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the commencement
of such Applicable Interest Period, for United States Dollar deposits (for delivery on the first day of such Applicable Interest Period) with a term equivalent to such Applicable Interest Period. If such rate is not available at such time for any
reason, then the “LIBOR Rate” for such Applicable Interest Period shall be the rate per annum determined by the Agent to be the rate at which deposits in Dollars for delivery on the first day of such Applicable Interest Period in same day
funds in the approximate amount of the LIBOR Loan being made, continued or converted by the Agent and with a term equivalent to such Applicable Interest Period would be offered by the Lender’s London Branch to major banks in the London
interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two (2) Business Days prior to the commencement of such Applicable Interest Period. 
  
 “Lien” means, for any person, any security interest, pledge, mortgage, charge, assignment, hypothecation,
encumbrance, attachment, garnishment, execution or other voluntary or involuntary lien upon or affecting the revenues of such person or any real or personal property in which such person has or hereafter acquires any interest, except (a) liens for
Taxes which are not delinquent or which remain payable without penalty or the validity or amount of which is being contested in good faith by appropriate proceedings upon stay of execution of the enforcement thereof; (b) liens imposed by law (such
as mechanics’ liens) incurred in good faith in the ordinary course of business which are not delinquent or which remain payable without penalty or the validity or amount of which is being contested in good faith by appropriate proceedings upon
stay of execution of the enforcement thereof with, in the case of liens on property of Borrower, provision having been made to the satisfaction of Agent for the payment thereof in the event the contest is determined adversely to Borrower; and (c)
deposits or pledges under worker’s compensation, unemployment insurance, social security or other similar laws or made to secure the performance of bids, tenders, contracts (except for repayment of borrowed money), or leases, or to secure
statutory obligations or surety or appeal bonds or to secure indemnity, performance, customs or other similar bonds given in the ordinary course of business. 
  
 “Loan Documents” means this Agreement, the Notes, the Domestic Guaranty, the Foreign Guaranty, the Security Agreement, the Pledge
Agreement, the Domestic Guarantor Security Agreement, the Foreign Guarantor Security Agreement, any Reimbursement Agreements relating to Letters of Credit and Existing Letters of Credit, letter of credit applications relating to the Letters of
Credit and the Existing Letters of Credit, any deposit account control agreements, mortgages, deeds of trust, environmental indemnity agreements, and all other agreements, documents, instruments, powers of attorney, resolutions, certificates,
financing statements, financing statement amendments, stock powers or notices executed by or on behalf of Borrower or its Affiliates or any Guarantor in connection with this Agreement or 

  

 8 

 
any Loan Document, the transactions contemplated hereby, or otherwise in favor of Agent or any Lender, in any case, either prior to or after the date hereof
or thereof, in each case, as the same may be amended, restated, extended, supplemented or otherwise modified from time to time.  
  
 “Loans” means the Revolving Loans and overdraft advances pursuant to Section 2.1(b) and includes Base Rate Loans and LIBOR Loans.

  
 “LTM” means last twelve months. 

 
 “Majority Lenders” means all Lenders. 
  
 “Mandatory Reductions” has the meaning given in Section
2.1(b)(i). 
  
 “Material Adverse Effect”
means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower or the Borrower and its Subsidiaries taken as a
whole; (b) a material impairment of the ability of Borrower or any Guarantor to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability
against Borrower or any Guarantor of any Loan Document to which it is a party. 
  
 “Minimum Collateral Amount” means the applicable amount designated as a Minimum Collateral Amount in Section 6.13. 
  
 “Minimum EBITDA Amount” has the meaning given in Section 6.12. 
  
 “Notes” has the meaning given in Section 2.7.

  
 “Notice of Borrowing” means a written or oral
request for a Loan from Borrower delivered to Agent in the manner, at the time, and containing the information required under Section 2.2. 
  
 “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of Borrower or any Guarantor arising under
any Loan Document or otherwise with respect to any Loan, Letter of Credit or Financial Transactions Obligations, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after the commencement by or against Borrower or any Guarantor or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding,
regardless of whether such interest and fees are allowed claims in such proceeding. 
  
 “Officer’s Certificate” means a certificate executed and delivered on behalf of Borrower by its Chairman, President or Chief Financial Officer. 
  
 “Optional Reductions” has the meaning given in Section
2.1(b)(ii). 
  

 9 

 “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or
all of its functions under ERISA. 
  
 “Pension
Plan” means an “employee pension benefit plan” (as such term is defined in ERISA) from time to time maintained by Borrower or a member of the Controlled Group. 
  
 “Performance Premium” has the meaning given in Section 6.12. 
  
 “Person” or “person” means any natural
person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. 
  
 “Plan” means, at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (a) maintained by Borrower or any member of the Controlled Group for employees of Borrower or any member of the Controlled Group or (b) maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes contributions and to which Borrower or any member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five (5) plan years
made contributions. 
  
 “Pledge Agreement” means
that certain Pledge Agreement dated as of the date hereof, executed by the Borrower in favor of Agent, and all additions, supplements, renewals or amendments thereto. 
  
 “Prime Rate” means the rate publicly announced from time to time by Bank of America at its “prime
rate.” The prime rate is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate. Any change in the prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. 
  
 “Prior Credit Agreement” means that certain Second Amended
and Restated Credit Agreement by and between Bank of America, N.A. and General Electric Capital Corporation, as lenders, and Bank of America, N.A. as administrative agent, dated as of July 28, 2003, as amended from time to time. 
  
 “Pro Rata Share” means a fraction whose numerator (a) with
respect to Bank of America, is Bank of America’s Commitment, and (b) with respect to U.S. Bank, is U.S. Bank’s Commitment, and whose denominator is the sum of all Lenders’ Commitments, as set forth in Section 2.1(a).

  
 “Reimbursement Agreements” has the meaning
given in Section 3.2(d). 
  
 “Restricted
Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other equity interest of the 

  

 10 

 
Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other equity interest or of any option (other than options under the Borrower’s stock option plan), warrant or other right to acquire any
such capital stock or other equity interest. 
  
 “Revolving Commitment Period” has the meaning given in Section 2.1(a). 
  
 “Revolving Commitment” has the meaning given in Section 2.1(a). 
  
 “Revolving Loans” has the meaning given in Section 2.1(a) and includes Base Rate Loans and LIBOR Loans.

  
 “Revolving Maturity Date” means August 1,
2005. 
  
 “Security Agreement” means that certain
Security Agreement dated as of the date hereof, executed by the Borrower in favor of Agent, and all additions, supplements, renewals or amendments thereto. 
  
 “Stock Sale Net Proceeds” shall mean the gross cash proceeds attributable to any public or private offering by the Borrower or other sale
by Borrower after the date of this Agreement of its common or preferred stock or warrants, options, rights or other equity interests minus all fees and expenses associated with such sale including, without limitation, investment banking, legal,
accounting, printing, transfer agent and broker fees associated with such sale. 
  
 “Subordinated Note Purchase Agreement” means, collectively, the agreements providing for the purchase of an aggregate original principal amount of $35,000,000 of the Borrower’s 13% Subordinated
Notes due April 30, 2008 and Warrants to Purchase Common Stock between Borrower and the “Purchasers” identified therein, as amended from time to time. 
  

“Subordinated Notes” means the notes issued in connection with, and as defined in, the Subordinated Note Purchase Agreement.

  
 “Subsidiary” shall mean any person,
corporation, association or other business entity directly or indirectly controlled by Borrower. For the purposes of this definition, “controlled by” shall mean the possession, directly or indirectly of the power to direct or cause the
direction of the management and policies of such Subsidiary, whether through the ownership of voting securities, by contract or otherwise. 
  
 “Successor” means, for any corporation or banking association, any successor by merger or consolidation, or by acquisition of
substantially all of the assets of the predecessor. 
  
 “Tax” means, for any person, any tax, assessment, duty, levy, impost or other charge imposed by any Governmental Authority on such person or on any property, revenue, income, or franchise of such person and any interest or
penalty with respect to any of the foregoing. 
  
 “Total
Revolving Commitment” means Thirty Million Dollars ($30,000,000). 
  

 11 

 “Total Utilization” means, as of any date of determination, the sum of (i) the aggregate
principal amount of all outstanding Revolving Loans, (ii) any amounts outstanding under Section 2.1(c), and (iii) the Letter of Credit Usage. 
  
 “Unfunded Vested Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (a) the present value of all
vested nonforfeitable benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent evaluation date for such Plan, but only to the extent that such excess
represents a potential liability of Borrower or any member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. 
  
 Section 1.2 General Principles Applicable to Definitions. Definitions given herein shall be equally applicable to both singular and plural forms of
the terms therein defined and references herein to “he” or “it” shall be applicable to persons whether masculine, feminine or neuter. References herein to any document including, but without limitation, this Agreement shall be
deemed a reference to such document as it now exists, and as, from time to time hereafter, the same may be amended. References herein to any section, subsection, schedule or exhibit shall, unless otherwise indicated, be deemed a reference to
sections and subsections within and schedules and exhibits to this Agreement. 
  
 Section 1.3 Accounting Terms. Except as otherwise provided herein, accounting terms not specifically defined shall be construed, and all accounting procedures shall be performed, in accordance with generally
accepted United States accounting principles consistently applied (“GAAP”) and as in effect on the date of application. 
  
 ARTICLE 2 
 THE LOANS 

 
 Section 2.1 Amounts and Terms of Commitments. 
  
 (a) The Revolving Credit. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make loans (“Revolving Loans”) to Borrower from time to time on Business Days until the Revolving Maturity Date (the “Revolving Commitment Period”) in
amounts equal to such Lender’s Pro Rata Share (as set forth below) of each requested Loan; provided that, after giving effect to any requested Loan (i) the aggregate of all Revolving Loans from such Lender will not exceed at any
one time outstanding the Total Revolving Commitment, multiplied by such Lender’s Pro Rata Share (such Lender’s “Revolving Commitment”), and (ii) the Total Utilization will not exceed the Total Revolving Commitment. Each
Lender’s Revolving Commitment is set forth opposite its name below. The Revolving Loans described in this Section 2.1(a) constitute a revolving credit and within the amount and time specified, Borrower may pay, prepay and reborrow.

  

							
	 Lender

	  	Revolving
Commitment

	  	Pro Rata Share

	 
	 Bank of America, N.A.
	  	$	17,000,000.00	  	56.66666	%
	 U.S. Bank National Association
	  	$	13,000,000.00	  	43.33334	%
	 Total Revolving Commitment
	  	$	30,000,000.00	  	100.0000000	%

  

 12 

 (b) Reductions in Total Revolving Commitment. 
  
 (i) Mandatory Reductions. The Total Revolving
Commitment shall be permanently reduced on the following dates and in the following amounts: 
  
 (A) on any date when Borrower receives (or becomes entitled immediately to receive) any Asset Sale Net Proceeds, the Total Revolving
Commitment shall be permanently reduced by an amount equal to one hundred percent (100%) of such Asset Sale Net Proceeds; 
  
 (B) on any date when Borrower receives (or becomes entitled to receive) any Stock Sale Net Proceeds, the Total Revolving Commitment shall
be permanently reduced by an amount equal to thirty percent (30%) of such Stock Sale Net Proceeds; and 
  
 (C) if there is a Collateral Differential on any Collateral Measurement Date, the Total Revolving Commitment shall be permanently reduced
by the amount of such Collateral Differential in accordance with Section 6.13. 
  
 Any reduction in the Total Revolving Commitment under this Section 2.1(b)(i) shall be referred to as a “Mandatory Reduction” and shall be in addition to any Optional Reduction. 
  
 (ii) Optional Reductions. Borrower may, at its
option, reduce the Total Revolving Commitment from time to time upon at least two (2) Business Days’ prior written notice to Agent; provided that each such reduction (an “Optional Reduction”) must be in an amount
not less than $250,000. Each notice of an Optional Reduction shall be irrevocable and shall specify the effective date of such reduction, which date may not be earlier than the next Business Day after receipt by Agent of such notice. 
  
 (c) Overdrafts. Subject to the terms and conditions
of this Agreement, including without limitation, Section 4.2, Bank of America, as part of its Commitment hereunder, hereby severally agrees to make loans, not to exceed the lesser of (i) Total Revolving Commitment minus the Total
Utilization, and (ii) $3,000,000, to cover overdrafts on Borrower Accounts. 
  

 13 

 Section 2.2 Manner of Borrowing. 
  
 (a) Revolving Loans. 
  
 (i) For each requested Revolving Loan, Borrower shall deliver to Agent a Notice of Borrowing. Each Notice of
Borrowing (whether oral or written) shall specify: (A) whether the Borrower is requesting a new Revolving Loan, a conversion of a Revolving Loan from one type to another, or a continuation of a LIBOR Loan, (B) the requested date of the borrowing,
conversion or continuation, as the case may be (which shall be a Business Day), (C) the principal amount of the Revolving Loan to be borrowed, converted or continued, (D) the Applicable Interest Rate for the requested borrowing, and (E) the
Applicable Interest Period, if the requested borrowing is to be a LIBOR Loan. If the Borrower fails to specify a type of loan in the Notice of Borrowing or if the Borrower fails to give a timely notice requesting a conversion or continuation, then
the applicable Revolving Loan shall be made as, or converted to, a Base Rate Loan. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Applicable Interest Period then in effect with respect to the applicable
LIBOR Loan. If the Borrower requests a borrowing of, conversion to, or continuation of a LIBOR Loan in any such Notice of Borrowing, but fails to specify an Applicable Interest Period, it will be deemed to have specified an Applicable Interest
Period of one (1) month. 
  
 (ii) Each such
Notice of Borrowing (whether oral or written) shall be received by the Agent not later than 11:00 a.m. (Seattle time) (A) three (3) Business Days prior to the requested date of any borrowing of, conversion to or continuation of a LIBOR Loan or of
any conversion of LIBOR Loans to Base Rate Loans, and (B) on the requested date of any borrowing of a Base Rate Loan. Any oral Notice of Borrowing must be confirmed promptly by delivery to the Agent of a written Notice of Borrowing, appropriately
completed and signed by an authorized officer of Borrower. Each borrowing of, conversion to or continuation of LIBOR Loans shall be in a principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof. Requests for borrowings,
conversions or continuations of any Revolving Loan shall be irrevocable and shall be deemed to constitute a representation and warranty by Borrower that as of the date of such notice, the statements set forth in Article 5 hereof are true and
correct and that no Default or Event of Default has occurred and is continuing. On receipt of a Notice of Borrowing, Agent shall promptly notify each Lender by telephone, telex or telefax of the date of the requested borrowing and the amount
thereof. Each Lender shall before 1:00 p.m. (Seattle time) on the date of the requested borrowing, pay such Lender’s Pro Rata Share of the aggregate principal amount of the requested borrowing in immediately available funds to Agent at its
Commercial Loan Processing Center, Seattle, Washington. Upon fulfillment to Agent’s satisfaction of the applicable conditions set forth in Article 4, and after receipt by Agent of such funds, Agent will promptly make such funds available
to Borrower by depositing them to the ordinary checking account maintained by Borrower at Agent’s Commercial Accounts Service Center. If no timely notice of a conversion or continuation is provided by the Borrower, the Agent shall notify each
Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. 
  

 14 

 (iii) Except as otherwise provided herein, a LIBOR Loan may be continued or converted
only on the last date of an Applicable Interest Period for such LIBOR Loan. During the existence of a Default, no Loan may be requested as, converted to or continued as LIBOR Loans without the consent of the Majority Lenders. 
  
 (iv) The Agent shall promptly notify the Borrower and
the Lenders of an interest rate applicable to any Applicable Interest Period for LIBOR Loans upon determination of such interest rate. At any time the Base Rate Loans are outstanding, the Agent shall notify the Borrower and the Lenders of any change
in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change. 
  
 (v) After giving effect to all borrowings, all conversion of Revolving Loans from one type to the other and all continuations of Revolving
Loans as the same type, there shall not be more than five (5) Applicable Interest Periods in effect with respect to the Revolving Loans.  
  
 (b) Overdrafts. Bank of America may, at its option, notify Agent that any overdraft covered by Section 2.1(c) shall be
deemed a Notice of Borrowing requesting a Loan. If Bank of America so notifies Agent, then all parties hereto agree that, for all purposes under this Agreement, Borrower will be deemed to have delivered a Notice of Borrowing to Agent pursuant to
Section 2.2(a) requesting a Revolving Loan on the date and in the amount of such overdraft. Any such Revolving Loan made under Section 2.1(c) and this Section 2.2(b) shall accrue interest at the Base Rate only and not at a LIBOR
Rate. Borrower shall, if requested by Agent, provide a written Notice of Borrowing to Agent as additional evidence of its request for such Revolving Loan. 
  
 Section 2.3 Agent’s Right to Fund Loans. Unless Agent shall have received notice from a Lender prior to 12:00 Noon (Seattle time) on the date
of any requested borrowing that such Lender will not make available to Agent its share of the requested borrowing, Agent may assume that such Lender has made such funds available to Agent on the date such Loan is to be made in accordance with
Section 2.2 hereof and Agent may, in reliance upon such assumption, make available to Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such portion available to Agent, such Lender and
Borrower jointly and severally agree to pay to Agent forthwith on demand such corresponding amount, together with interest thereon for each day from the date such amount is made available to Borrower until the date such amount is repaid to Agent, at
(a) in the case of Borrower, the Base Rate and (b) in the case of such Lender, the Federal Funds Rate. Any such repayment by Borrower shall be without prejudice to any rights it may have against Lender that has failed to make available its funds for
any requested borrowing. 
  
 Section 2.4 Repayment of
Principal. 
  
 (a) Borrower shall
repay to Lenders from time to time such amounts of principal as may be necessary to ensure that at all times, the Total Utilization is equal to or less than the Total Revolving Commitment then in effect. 
  

 15 

 (b) On each Business Day that there is an outstanding balance in any of the
Borrower Accounts at 5:00 p.m. (Seattle time), Borrower shall repay to Agent, no later than 10:00 a.m. (Seattle time) on the following Business Day, an amount equal to such balance. 
  
 (c) On any date when Borrower receives (or becomes entitled immediately to receive) any Asset Sale
Net Proceeds, Borrower shall pay to Lenders an amount equal to one hundred percent (100%) of such Asset Sale Net Proceeds. 
  
 (d) On any date when Borrower receives (or becomes entitled immediately to receive) any Stock Sale Net Proceeds, Borrower shall pay
to the Lenders an amount equal to thirty percent (30%) of such Stock Sale Net Proceeds. 
  
 (e) Borrower shall repay the principal amount of the Revolving Loans on or before the Revolving Maturity Date. 
  
 Section 2.5 Interest on Loans. 
  
 (a) General Provisions. The Borrower agrees to pay
interest on the outstanding principal amount of each Loan, including overdrafts made pursuant to Section 2.1(c), from the date of such Loan until the Loan shall be due and payable at a per annum rate equal to the Applicable Interest Rate. If
a default shall occur in the payment when due of any Loan (whether at maturity, upon acceleration or otherwise), interest shall accrue at a per annum rate equal to the Default Rate. Accrued but unpaid interest on each Base Rate Loan shall be paid on
the first day of each calendar month, on any prepayment of the Loan and on the Revolving Maturity Date. Accrued but unpaid interest on each LIBOR Loan shall be paid at the end of each Applicable Interest Period, on any prepayment of the Loan and on
the Revolving Maturity Date. Notwithstanding the foregoing, accrued interest on any Loan shall be payable on demand after the occurrence of an Event of Default. 
  
 (b) Applicable Days for Computation of Interest. Computations of interest described in Section 2.5
shall be made on the basis of a year of 360 days, for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. 
  
 (c) Unavailable LIBOR Rate. In the event, and on each
occasion, that the Agent shall have determined (which determination shall be conclusive and binding) that the LIBOR Rate cannot be ascertained for any reason or the Agent shall determine that, due to a change in any applicable law, rule or
regulation of any Governmental Authority or in the application of such law, rule or regulation to either Lender or due to a change in the financial markets not specifically related to the funding capabilities of either Lender, the LIBOR Rate will
not adequately and fairly reflect the cost to the Lenders of making or maintaining the principal amount of a LIBOR Loan during the Applicable Interest Period for such LIBOR Loan, the Agent shall, as soon as practicable thereafter, give notice of
such determination to Borrower and any request for conversion to or continuation of a LIBOR Loan pursuant to Section 2.2 shall be deemed to be a request for a Base Rate Loan. 
  

 16 

 Section 2.6 Prepayments. 
  
 (a) Any portion of the principal of a Loan may be paid prior to its maturity (herein a
“prepayment”), except that nonmandatory prepayments of LIBOR Loans must occur at the end of an Applicable Interest Period. Any prepayment of principal shall be accompanied by all accrued but unpaid interest on the principal amount
prepaid. Unless otherwise agreed by the Lenders, prepayments shall be applied to the principal installments required to be paid pursuant to Section 2.2 in the inverse order of maturity. 
  
 (b) No fee shall be assessed in connection with the
prepayment of a Base Rate Loan. If a LIBOR Loan is paid prior to the end of the Applicable Interest Period, Borrower shall, on the date of such payment, pay an amount required pursuant to Section 2.12. Such additional amount shall be paid in
all circumstances where principal on a LIBOR Loan is paid prior to the end of the Applicable Interest Period, regardless of whether such payment is voluntary or mandatory or the result of Agent’s collection efforts. Notwithstanding the
foregoing to the contrary, Borrower shall not be required to pay any prepayment fees associated with the prepayment of any LIBOR Loans prior to the end of an Applicable Interest Period if such prepayment is associated with the pay down and
termination of this Agreement and the simultaneous execution and delivery of a new credit agreement with Bank of America, U.S. Bank and any other banks (if any), as lenders, and Bank of America, as administrative agent. 
  
 Section 2.7 Notes. The Loans made by each Lender shall be evidenced by
one or more accounts or records maintained by such Lender and by the Agent in the ordinary course of business. The accounts or records maintained by the Agent and each Lender shall be conclusive proof of the amount of the Loans made by the Lenders
to the Borrower and the principal and interest payments made thereon, absent a showing of manifest error. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Agent in respect of
such matters, the accounts and records of the Agent shall control in the absence of manifest error. Any failure to maintain accounts or records or any error in doing so shall not, however, limit or affect the obligation of the Borrower hereunder to
pay any amount owing with respect to the Obligations. Upon the request of any Lender made through the Agent, the Borrower shall execute one or more notes (the “Notes”) substantially in the form of Exhibit A hereto, as
applicable, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender is hereby authorized to record the date and amount of the Loans it makes and the date and amount of each payment of principal and interest
thereon on a schedule annexed to and constituting part of the appropriate Note, account or record. Any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; provided, however, the
failure to make any such recordation shall not affect the obligations of Borrower hereunder or under the Notes.  
  
 Section 2.8 Manner of Payments. 
  
 (a) All payments and prepayments of principal and interest on any Loan and all other amounts payable hereunder by Borrower to Agent
or any Lender shall be made by paying the same in Dollars and in immediately available funds to Agent at its Commercial Loan 

  

 17 

 
Processing Center, Seattle, Washington not later than 12:00 Noon (Seattle time) on the date on which such payment or prepayment shall become due. 

 
 (b) Borrower hereby authorizes Agent and each
Lender, if and to the extent any payment is not promptly made pursuant to this Agreement or any other Loan Document, to charge from time to time against any or all of the accounts of Borrower with Agent or any Lender or any affiliate of any Lender
any amount due hereunder or under such other Loan Document. 
  
 (c) Whenever any payment hereunder or under any other Loan Document shall be stated to be due would otherwise occur on a day other than a Business Day, such payment shall be made on the next succeeding Business
Day. 
  
 (d) Unless Borrower has notified
Agent prior to the date any payment to be made by it is due, that it does not intend to remit such payment, Agent may, in its sole and absolute discretion, assume that Borrower has timely remitted such payment and may, in its sole and absolute
discretion and in reliance thereon, make available such payment to the Lender entitled thereto. If such payment was not in fact remitted to Agent in immediately available funds, then each Lender shall forthwith on demand repay to Agent the amount of
such assumed payment made available to such Lender, together with interest thereon in respect of each day from and including the date such amount was made available by Agent to such Lender to the date such amount is repaid to Agent at the Federal
Funds Rate. 
  
 Section 2.9 Fees. In addition to certain
fees described in Section 3.2(b), Borrower shall pay to the Agent for the account of the Lenders in accordance with each Lender’s Pro Rata Share, a quarterly commitment fee in an amount equal to the product of (i) 0.50% (50 basis points) and
(ii) the Total Revolving Commitment. Such fee shall be prorated from the closing date of this Agreement and shall be paid on April 30, 2005 and on July 31, 2005. Such fees shall be deemed fully earned when due and non-refundable, in whole or in
part, when paid. For the avoidance of doubt, the commitment fee payable on April 30, 2005 (which shall be charged to Borrower on May 2, 2005) shall be an amount equal to $3,370.79. If this Agreement is terminated by all of the parties hereto and
replaced with another credit facility prior to July 31, 2005, then Borrower acknowledges and agrees that it shall pay to Agent for the benefit of the Lenders the accrued quarterly commitment fee prorated from April 30 through the date of
termination. 
  
 Section 2.10 Sharing of Payments,
Etc. If any Lender shall obtain any payment in respect of Borrower’s obligations under the Loan Documents (whether voluntary or involuntary, through the exercise of any right of setoff or otherwise) in excess of the amount it would
have received if all payments had been made directly to Agent and apportioned in accordance with the terms hereof, such Lender shall hold such excess payment in trust for Agent and Lenders and shall forthwith remit the same to Agent for
Lenders’ accounts as herein provided. 
  
 Section 2.11
Application of Payments. Any payment by Borrower hereunder shall be applied first, against fees, expenses and indemnities due hereunder; second, against interest then due in respect of any Loan; third, against amounts due
under Section 3.4 hereof; fourth, against 

  

 18 

 
any Financial Transaction Obligations; and thereafter, ratably against amounts owing for the Loan principal. After the applicable maturity date for
any Loan, payments to be applied to Loan principal shall be applied first to principal installments then due and thereafter to principal installments in the inverse order of maturity. Agent shall distribute any payment by Borrower in respect of
Revolving Loans in accordance with each Lender’s Pro Rata Share. After any of the Loans become due (by maturity, upon acceleration or otherwise), any amounts recovered from Borrower, including, without limitation, through realization on any
Collateral, shall be applied, and distributed by Agent to Lenders, in accordance with each Lender’s Pro Rata Share. 
  
 Section 2.12 Additional LIBOR Rate Provisions. 
  
 (a) Illegality. If any Lender determines that any law has made it unlawful, or that any Governmental Authority has asserted that it
is unlawful for any Lender or its applicable lending office to make, maintain or fund LIBOR Loans, or to determine or charge interest rates based upon the LIBOR Rate, or any Governmental Authority has imposed material restrictions on the authority
of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, any obligation of such Lender to make or continue LIBOR Loans or to convert
Base Rate Loans to LIBOR Loans shall be suspended until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such
Lender (with a copy to the Agent), prepay or, if applicable, convert all LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the Applicable Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR
Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. 
  
 (b) Inability to Determine Rates. If the Majority
Lenders determine that for any reason in connection with any request for a LIBOR Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable
amount and Applicable Interest Period of such LIBOR Loan, (b) adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Applicable Interest Period with respect to a proposed LIBOR Loan, or (c) the LIBOR Rate for any
requested Applicable Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Agent will promptly so notify the Borrower and each Lender. Thereafter, the
obligation of the Lenders to make or maintain LIBOR Loans shall be suspended until the Agent (upon the instruction of the Majority Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a borrowing
of, conversion to or continuation of LIBOR Loans or, failing that, will be deemed to have converted such request into a request for a borrowing of Base Rate Loans in the amount specified therein. 
  
 (c) Increased Costs Generally. If any change in law
shall (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender, (ii)
subject any Lender to any tax of any kind whatsoever with 

  

 19 

 
respect to this Agreement, or any LIBOR Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof, or (iii) impose on
any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or LIBOR Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining
any LIBOR Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount)
then, upon request of such Lender, the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. 
  
 (d) Compensation for Losses. Upon demand of any
Lender (with a copy to the Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (i) any continuation, conversion, payment or
prepayment of any Loan (other than a Base Rate Loan) on a day other than the last day of the Applicable Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise), or (ii) any failure by the
Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan (other than a Base Rate Loan) on the date or in the amount notified by the Borrower, including any loss of anticipated
profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section, each Lender shall be deemed to have funded each LIBOR Loan made by it at the
LIBOR Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBOR Loan was in fact so funded. 
  
 ARTICLE 3 
 LETTERS OF CREDIT 
  
 Section 3.1 Letters of Credit. Borrower may request that Agent issue letters of credit for Borrower’s account in accordance with the terms and conditions of this Article 3. 
  
 Section 3.2 Manner of Requesting Letters of Credit. 
  
 (a) From time to time, Borrower may request that
Agent issue a standby letter of credit for Borrower’s account or extend or renew any existing Letters of Credit; provided however, the intended beneficiary of the Letter of Credit is a customer of Borrower. Such request will be
made by delivering a written request or making an oral request for the issuance, extension or renewal of such a letter of credit to Agent not later than 9:00 a.m. (Seattle time) on the date a new letter of credit is to be issued or an existing
letter of credit is scheduled to expire, provided that, any request given orally shall be confirmed by Borrower in a writing 

  

 20 

 
delivered to Agent not later than 10:00 a.m. (Seattle time) on the date such oral request is made. Each such request shall be deemed to constitute a
representation and warranty by Borrower that as of the date of such request, statements set forth in Article 5 hereof are true and correct and that no Default or Event of Default has occurred and is continuing. Each such request shall specify
the face amount of the requested Letter of Credit, the proposed date of expiration, the name of the intended beneficiary thereof, and whether such Letter of Credit is a new letter of credit or an extension or renewal thereof. Borrower, Lenders and
Agent acknowledges that the Existing Letters of Credit shall be subject to and governed by the terms of this Agreement and that the Lenders shall, in accordance with Section 4.1(b), pay to Agent at closing their portion of the Letter of
Credit Risk Participation pursuant to the terms of Article 10. 
  
 (b) Borrower shall pay to Agent for the account of each Lender in accordance with its Pro Rata Share, a letter of credit fee equal to the maximum amount available to be drawn on the outstanding standby Letters
of Credit multiplied by (i) 2.50% (250 basis points) per annum, which fee shall not be less than Two Hundred Fifty Dollars ($250). Such letter of credit fees shall be computed on a quarterly basis in arrears. Such letter of credit fees shall
be due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Maturity Date and thereafter on
demand. In addition, Borrower shall pay directly to Agent for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of Agent relating to letters of credit as from time to
time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable. 
  
 (c) Each letter of credit requested hereunder: (i) shall be in a face amount such that after issuance of such letter of credit (A)
the Total Utilization will not exceed the Total Revolving Commitment then in effect, and (B) the Letter of Credit Usage would not exceed $13,000,000; and (ii) shall have an expiration date not later than the Revolving Maturity Date. 
  
 (d) At the request of Agent, Borrower shall execute a
letter of credit application and reimbursement agreement, in the standard form then used by Agent, in respect of each Letter of Credit requested hereunder. The letter of credit applications and reimbursement agreements now in effect with respect to
each existing Letter of Credit shall remain in full force and effect except that, if such existing Letter of Credit is extended or renewed, Agent may, at its option, require Borrower to execute a new letter of credit application and reimbursement
agreement (all reimbursement agreements relating to any of the Letters of Credit shall, as such agreements may be amended from time to time, be collectively referred to herein as the “Reimbursement Agreements”). 
  
 (e) Subject to the satisfaction of the conditions
precedent set forth in Article 4 and Borrower’s compliance with the terms of this Section 3.2, Agent shall issue and deliver its letter of credit to Borrower or to the designated beneficiary at such address as Borrower may
specify. New Letters of Credit and extensions or renewals of any existing Letters of Credit shall contain terms and conditions customarily included in Agent’s letters of credit and shall otherwise be in a form acceptable to Agent. 

 

 21 

 In the event of any conflict between the terms of any Reimbursement Agreement and the terms of this
Agreement, the terms of this Agreement shall control, unless Agent has otherwise agreed in a writing. 
  
 Section 3.3 Indemnification; Increased Costs. 
  
 (a) Borrower agrees to indemnify Agent and each Lender on demand for any and all additional costs, expenses, or damages incurred by
Agent or such Lender, directly or indirectly, arising out of the issuance of any Letter of Credit or the purchase of any Letter of Credit Risk Participation, including, without limitation, any costs of maintaining reserves in respect thereof and any
premium rates imposed by the Federal Deposit Insurance Corporation in connection therewith. A certificate as to such additional amounts submitted to Borrower by Agent or such Lender shall be final, conclusive, and binding, absent manifest error.

  
 (b) If at any time after the date
hereof the introduction of or any change in applicable law, rule, or regulation or in the interpretation or the administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by Agent or
Lender with any requests directed by any such Governmental Authority (whether or not having the force of law) shall, with respect to any Letter of Credit or Letter of Credit Risk Participation subject Agent or such Lender to any Tax or impose,
modify, or deem applicable any reserve, special deposit, or similar requirements against assets of, deposits with or for the account of, credit extended by Agent or such Lender or shall impose on Agent or such Lender any other conditions affecting
the Letters of Credit or Letter of Credit Risk Participations and the result of any of the foregoing is to increase the cost to Agent or such Lender of issuing a Letter of Credit or holding a Letter of Credit Risk Participation or to reduce the
amount of any sum received or receivable by Agent or such Lender hereunder with respect to the Letters of Credit or Letter of Credit Risk Participations, then, upon demand by Agent or such Lender, Borrower shall pay to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such increased cost or reduction. A certificate submitted to Borrower by Agent or such Lender setting forth the basis for the determination of such additional amount or amounts
shall be final, conclusive, and binding, absent manifest error. 
  
 (c) Borrower agrees to indemnify and hold Agent and each Lender (an “Indemnitee”) harmless from and against any and all (a) Taxes (exclusive of Taxes measured by net income and gross receipts)
and other fees payable in connection with Letters of Credit, Letter of Credit Risk Participations or the provisions of this Agreement relating thereto, and (b) any and all actions, claims, damages, losses, liabilities, fines, penalties, costs, and
expenses of every nature, including Attorney Costs, suffered or incurred by the Indemnitee otherwise arising out of or relating to this Article 3, any Letter of Credit, or any Letter of Credit Risk Participations; provided,
however, said indemnification shall not apply to the extent that any such action, claim, damage, loss, liability, fine, penalty, cost, or expense arises out of or is based solely upon the Indemnitee’s willful misconduct or negligence.

  
 Section 3.4 Payment by Borrower. Borrower agrees to
fully reimburse Agent for all amounts paid by Agent under any Letter of Credit and to pay interest thereon at the Base Rate from the date Agent makes such payment until the date of any demand for reimbursement by 

  

 22 

 
Agent. Such payment shall be made in immediately available funds at Agent’s Commercial Loan Processing Center not later than 11:00 a.m. (Seattle time)
on the date Borrower is first notified by Agent that Agent has made payment under the Letter of Credit; provided Agent has notified Borrower by 9:00 a.m. on such date and provided further, that, if Agent so elects pursuant to
the terms of Section 8.2, following the occurrence of an Event of Default, the face amount of each Letter of Credit shall become immediately due and payable. If Borrower shall default in its obligations to reimburse Agent or make any other
payment required hereunder, interest shall accrue on the unpaid amount thereof at a per annum rate equal to the Default Rate from the date such amount becomes due and payable until payment in full by Borrower. Interest on such unpaid amounts shall
be calculated on the basis of a year of 360 days and shall be payable on demand. 
  
 Section 3.5 Cash Collateralize. Upon the request of the Agent, (i) upon a Default or an Event of Default, (ii) if the Agent has honored any full or partial drawing request under any Letter of Credit and such
drawing has resulted in a borrowing, or (iii) if, as of the date of expiration of any Letter of Credit, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, in addition to any other remedies the Agent may have
pursuant to this Agreement, any Loan Document or applicable law, Borrower shall immediately Cash Collateralize the then outstanding amount of all Letters of Credit (in an amount equal to such outstanding amount determined as of the date of the
Default, Event of Default, such borrowing or the Letter of Credit expiration date, as the case may be). For purposes hereof, “Cash Collateralize” means to pledge and deposit with or deliver to the Agent as collateral for the Letter
of Credit obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Agent. The Borrower hereby grants to the Agent for the benefit of the Lenders and the Agent, a security interest in all such
cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash collateral shall be maintained in a blocked, non-interest bearing deposit account at Bank of America, N.A. 
  
 ARTICLE 4 
 CONDITIONS 
  
 Section 4.1 Conditions to Effectiveness of Agreement. Upon the fulfillment of all of the following conditions, this Agreement shall be effective when each of the following conditions shall have been satisfied: 
  
 (a) Loan Documents. An authorized officer of Borrower
shall have properly executed and delivered each Loan Document to which it is a party, each in form and substance satisfactory to the Agent and Lenders. An authorized officer of each Guarantor (subject to the delay in delivery permitted for FAC, Flow
Holdings Sagl, ATAB and Flow International FPS AB by Section 4.3) shall have properly executed and delivered each Loan Document to which such Guarantor is a party, each in form and substance satisfactory to the Agent and Lenders. 
  
 (b) Borrower Authority. Agent shall have received the
following, each in form and substance satisfactory to the Agent: (i) such certificates of resolutions or other action, incumbency certificates and/or other certificates of officers of the Borrower as the Agent may 

  

 23 

 
require to establish the identities of and verify the authority and capacity of each officer thereof authorized to act as an officer in connection with this
Agreement and the other Loan Documents to which Borrower is a party; and (ii) such evidence as the Agent may require to verify that the Borrower is duly incorporated or formed, validly existing, in good standing and qualified to engage in business
in each jurisdiction in which it is required to be qualified to engage in business, including certified copies of the articles of incorporation for the Borrower and a certificate of good standing. 
  
 (c) Guarantor Authority. Agent shall have received
the following, each in form and substance satisfactory to the Agent (subject to the delay in delivery permitted for FAC, Flow Holdings Sagl, ATAB and Flow International FPS AB by Section 4.3): (i) such certificates of resolutions or other action,
incumbency certificates and/or other certificates of officers of each Guarantor as the Agent may require to establish the identities of and verify the authority and capacity of each officer thereof authorized to act as an officer in connection with
the Guaranty and the other Loan Documents to which such Guarantor is a party; and (ii) such evidence as the Agent may require to verify that each Guarantor is duly incorporated or formed, validly existing, in good standing and qualified to engage in
business in each jurisdiction in which it is required to be qualified to engage in business, including certified copies of the articles of incorporation (or such other applicable organizational documents) for such Guarantor and a certificate of good
standing. 
  
 (d) Opinion of Counsel.
Agent shall have received a favorable opinion of Preston Gates and Ellis, LLP, counsel to the Borrower and each Domestic Guarantor, addressed to the Agent, as to such matters concerning the Borrower, each Domestic Guarantor and the Loan Documents to
which they are a party, as the Agent may request, substantially in the form attached as Exhibit C. 
  
 (e) Guarantor Consent. Agent shall have received the consent of Guarantors to this Agreement. 
  
 (f) Simultaneous Events. Notwithstanding the preamble
contained in this Section 4.1, simultaneously with the effectiveness of this Agreement, the following events shall occur: (i) Borrower shall pay in full all amounts owing under the Subordinated Notes and any and all obligations under the
Subordinated Notes and the Subordinated Note Purchase Agreement shall be terminated, and (ii) Borrower shall pay in full all amounts owing under the Prior Credit Agreement (except for amounts in respect of the Existing Letters of Credit, which shall
be included within the Total Utilization hereunder) and all obligations under the Prior Credit Agreement shall be terminated. 
  
 Section 4.2 Conditions to All Loans and Issuances of Letters of Credit. The obligation of each Lender to make any Loan hereunder and the obligation
of Agent to issue any Letter of Credit, are subject to fulfillment of the following conditions: 
  
 (a) Prior Conditions. All of the conditions set forth in Section 4.1 shall have been satisfied. 
  

 24 

 (b) Notice of Borrowing. In respect of any Loan, Agent shall have received the
Notice of Borrowing in respect of such Loan; and, in respect of any Letter of Credit, Agent shall have received from Borrower a request therefor complying with the requirements of Section 3.2. 
  
 (c) No Default. At the date of the requested Loan or
issuance of requested Letter of Credit, no Default or Event of Default shall have occurred and be continuing or will have occurred as the result of the making of the Loan or issuing the Letter of Credit; and the representations and warranties of
Borrower in Article 5 shall be true on and as of such date with the same force and effect as if made on and as of such date. 
  
 (d) Guarantors. Neither the Agent nor any Lender shall have received from the Borrower or any Guarantor any notice terminating or
purporting to terminate any Guarantor’s obligations under any Loan Document to which it is a party or claiming that any such Loan Document is not or will in the future not be fully enforceable against each Guarantor in accordance with their
terms. 
  
 (e) Other Information. Agent
and each Lender shall have received such other statements, opinions, certificates, documents and information as it may reasonably request in order to satisfy itself that the foregoing conditions have been fulfilled. 
  
 Section 4.3 Post-Effective Date Conditions. Borrower shall comply with
the following conditions after the effective closing date of this Agreement (the “Effective Date”). Failure to satisfy the conditions set forth below within the specified time period shall be an Event of Default: 
  
 (a) Flow Asia and Flow Switzerland. Agent shall have
received the following from each of FAC and Flow Holdings Sagl within thirty (30) days after the Effective Date: (i) a duly executed Guarantor’s Consent in the form subjoined to this Agreement, (ii) those documents required to be executed and
delivered pursuant to Section 4.1(a) above, including, without limitation, a duly executed Foreign Guaranty and Foreign Guarantor Security Agreement, and (iii) those items required by Section 4.1(c) above, including, without limitation, resolutions,
a secretary and incumbency certificate and a good standing certificate, each in a form acceptable to Agent. 
  
 (b) Flow Sweden. Agent shall have received the following from ATAB and Flow International FPS AB within forty-five (45) days after
the Effective Date: (i) a duly executed Guarantor’s Consent in the form subjoined to this Agreement, (ii) those documents required to be executed and delivered pursuant to Section 4.1(a) above, including, without limitation, a duly executed
Foreign Guaranty and Foreign Guarantor Security Agreement, and (iii) those items required by Section 4.1(c) above, including, without limitation, resolutions, a secretary and incumbency certificate and a good standing certificate, each in a form
acceptable to Agent. 
  

 25 

 ARTICLE 5 
 REPRESENTATIONS AND WARRANTIES 
  
 Borrower represents and warrants to Agent and Lenders as follows: 
  
 Section 5.1 Corporate Existence and Power. 
  
 (a) Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Washington.
Borrower is duly qualified to do business in each other jurisdiction where the nature of its activities or the ownership of its properties requires such qualification, except to the extent that failure to be so qualified does not have a material
adverse effect on its business, operations or financial condition. Borrower has full corporate power, authority and legal right to carry on its business as presently conducted, to own and operate its properties and assets, and to execute, deliver
and perform the Loan Documents to which it is a party. 
  
 (b) Each Guarantor is a business entity duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation. Each Guarantor is duly qualified to do business in each other jurisdiction where the
nature of its activities or the ownership of its properties requires such qualification, except to the extent that failure to be so qualified does not have a material adverse effect on its business, operations or financial condition. Each Guarantor
has full corporate power, authority and legal right to carry on its business as presently conducted, to own and operate its properties and assets, and to execute, deliver and perform the Loan Documents to which it is a party. 
  
 Section 5.2 Corporate Authorization. 
  
 (a) The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party and any borrowing thereunder and the request for the issuance of any Letter of Credit thereunder, have been duly authorized by all necessary corporate action of Borrower, and do not require any
shareholder approval or the approval or consent of any trustee or the holders of any Indebtedness of Borrower except such as have been obtained (certified copies thereof having been delivered to Agent), do not contravene any law, regulation, rule or
order binding on it or its Articles of Incorporation or Bylaws and do not contravene the provisions of or constitute a default under any indenture, mortgage, contract or other agreement or instrument to which Borrower is a party or by which
Borrower, or any of its properties, may be bound or affected. 
  
 (b) The execution, delivery and performance by each Guarantor of the Loan Documents to which it is a party, and the guaranteeing of obligations thereunder, have been duly authorized by all necessary corporate
action of such Guarantor, and do not require any shareholder approval or the approval or consent of any trustee or the holders of any Indebtedness of such Guarantor except such as have been obtained (certified copies thereof having been delivered to
Agent), do not contravene any law, regulation, rule or order binding on it or its Articles of Incorporation, Bylaws or other organizing documents, and do not contravene the provisions of or constitute a default under any indenture, mortgage,
contract or other agreement 

  

 26 

 
or instrument to which such Guarantor is a party or by which such Guarantor, or any of its properties, may be bound or affected. 
  
 Section 5.3 Government Approvals, Etc. No Government Approval
or filing or registration with any Governmental Authority is required for the making and performance by Borrower or any Guarantor of the Loan Documents to which it is a party or in connection with any of the transactions contemplated hereby or
thereby, except such as have been heretofore obtained and are in full force and effect (certified copies thereof having been delivered to Agent). 
  
 Section 5.4 Binding Obligations, Etc. This Agreement has been duly executed and delivered by Borrower and constitutes, and the other Loan Documents
when duly executed and delivered by Borrower or any Guarantor will constitute, the legal, valid and binding obligations of Borrower or Guarantor enforceable against Borrower or Guarantor in accordance with their respective terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by the exercise of judicial discretion in accordance with general principles of equity. 

 
 Section 5.5 Litigation. There are no actions, proceedings,
investigations, or claims against or affecting Borrower or any Guarantor now pending before any court, arbitrator or Governmental Authority (nor to the knowledge of Borrower has any thereof been threatened nor does any basis exist therefor) which
might reasonably be determined adversely to Borrower or such Guarantor and which, if determined adversely, would be likely to have a material adverse effect on the financial condition or operations of Borrower or such Guarantor or to impair
Agent’s lien on the Collateral or Borrower’s or such Guarantor’s rights therein, except as described on Schedule 5.5 hereto. 
  
 Section 5.6 Lien Priority. Except as otherwise provided on Schedule 5.6, on the date any Loan or any Letter of Credit is issued, made or
outstanding hereunder, each Loan Document that creates or perfects a Lien, will constitute a valid and perfected Lien of first priority in and to all the Collateral and will be enforceable against all third parties in all jurisdictions as security
for all obligations which such Loan Document purports to secure. 
  
 Section 5.7 Financial Condition. The consolidated balance sheet of Borrower and its Subsidiaries as of January 31, 2005, and the related statements of income and retained earnings of Borrower and its Subsidiaries for the fiscal year
then ended, copies of which have been furnished to Lenders, fairly present the consolidated financial condition of Borrower and its Subsidiaries as at such date, including all material contingent liabilities, and the consolidated results of
operations of Borrower for the period then ended, all in accordance with GAAP. Neither Borrower nor its Subsidiaries had on such date any material contingent liabilities, unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided for in that balance sheet and in the notes to those financial statements and since that date there has been no material adverse change in the financial condition or
operations of Borrower or its Subsidiaries. 
  
 Section 5.8
Title and Liens. Borrower has good and marketable title to each of the properties and assets reflected in its balance sheet referred to in Section 5.7 hereof (except such 

  

 27 

 
as have been since sold or otherwise disposed of in the ordinary course of business). No assets or revenues of Borrower are subject to any Lien except as
permitted by this Agreement. All properties of Borrower and its use thereof comply in all material respects with applicable zoning and use restrictions and with applicable laws and regulations relating to the environment. 
  
 Section 5.9 Taxes. Borrower and each Subsidiary has filed all tax
returns and reports required of it, has paid all Taxes which are shown to be due and payable on such returns and reports, and has provided adequate reserves for payment of any Tax whose payment is being contested. The charges, accruals and reserves
on the books of Borrower or Subsidiary in respect of Taxes for all fiscal periods to date are accurate in all material respects and there are no material questions or disputes between Borrower or any Subsidiary and any Governmental Authority with
respect to any Taxes except as disclosed in the balance sheet referred to in Section 5.7 or otherwise disclosed to Agent in writing prior to the date of this Agreement. 
  
 Section 5.10 Laws, Orders, Other Agreements. Neither Borrower nor any of its Subsidiaries is in violation of or
subject to any contingent liability on account of any laws, statutes, rules, regulations and orders of any Governmental Authority. Neither Borrower or any of its Subsidiaries is in material breach of or default under any material agreement to which
it is a party or which is binding on it or any of its assets. 
  
 Section 5.11 Federal Reserve Regulations. Borrower is not engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of
Federal Reserve Regulation U), and no part of the proceeds of any Loan or Letter of Credit will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for
any other purpose that violates the applicable provisions of any Federal Reserve Regulation. Borrower will furnish to any Lender on request a statement conforming with the requirements of Regulation U. 
  
 Section 5.12 ERISA. 
  
 (a) The present value of all benefits vested under
all Pension Plans did not, as of the most recent valuation date of such Pension Plans, exceed the value of the assets of the Pension Plans allocable to such vested benefits by an amount which would represent a potential material liability of
Borrower or affect materially the ability of Borrower to perform this Agreement or the other Loan Documents. 
  
 (b) No Plan or trust created thereunder, or any trustee or administrator thereof, has engaged in a “prohibited
transaction” (as such term is defined in Section 406 or Section 2003(a) of ERISA) which could subject such Plan or any other Plan, any trust created thereunder, or any trustee or administrator thereof, or any party dealing with any Plan or any
such trust to any material tax or penalty on prohibited transactions imposed by Section 502 or Section 2003(a) of ERISA. 
  

 28 

 (c) No Pension Plan or trust has been terminated, and there have been no
“reportable events” as that term is defined in Section 4043 of ERISA since the effective date of ERISA. 
  
 (d) No Pension Plan or trust created thereunder has incurred any “accumulated funding deficiency” (as such term is
defined in Section 302 of ERISA) whether or not waived, since the effective date of ERISA. 
  
 (e) The required allocations and contributions to Pension Plans will not violate Section 415 of the Code in any material respect.

  
 (f) Each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other federal or state laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the United States Internal
Revenue Service (“IRS”) or an application for such letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such
qualification. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan. There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be
expected to have a Material Adverse Effect. 
  
 Section 5.13
Security Offerings. Neither Borrower nor anyone acting on its behalf has directly or indirectly offered any Note or similar instrument or security for sale to any person or solicited from any person any offer to buy any such instrument or
security or approached or negotiated with any person concerning any such instrument or security in any manner which would violate any applicable state or federal securities laws, including without limitation, the Securities Act of 1933, as amended.

  
 Section 5.14 Investment Company; Public Utility Holding
Company. Borrower is not (a) an “investment company” or a company “controlled” by an investment company within the meaning of the Investment Company Act of 1940, as amended; or (b) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

  
 Section 5.15 Environmental Compliance. The Borrower and
its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses,
operations and properties, and as a result thereof, Borrower has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
  

 29 

 Section 5.16 Insurance. The properties of the Borrower and its Subsidiaries are insured with
financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses owing similar properties in
localities where the Borrower or the applicable Subsidiary operates. 
  
 Section 5.17 Disclosure. The Borrower has disclosed to the Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished (whether in writing or by e-mail) by or on behalf of Borrower or
any Guarantor to the Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information
so furnished) contains any material misstatement of facts or omits to state any material fact necessary to make the statements therein, in light of the circumstance in which they are made, not misleading; provided that, with respect to
projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. 
  
 Section 5.18 Intellectual Property, Licenses, Etc. The Borrower and its Subsidiaries own, or possess the right to
use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights that are reasonably necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any
Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. 
  
 Section 5.19
PIPE Proceeds. The Borrower has received gross proceeds from its PIPE (private investment for public equity) transaction in an amount equal to $64,999,997.75. Borrower has used such proceeds to repay indebtedness owing under the Prior Credit
Agreement and the Subordinated Note Purchase Agreement and for general working capital purposes. Any and all remaining PIPE proceeds are currently on deposit with Bank of America. 
  
 Section 5.20 Representations as a Whole. This Agreement, the other Loan Documents, the financial statements referred
to in Section 5.7, and all other instruments, documents, certificates and statements furnished to Agent and Lenders by Borrower, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements contained herein or therein not misleading. Without limiting the foregoing, each of the representations and warranties made by Borrower in the other Loan Documents is true and correct on and as of the date
when made, as of the date hereof, and on and as of each date this representation is deemed made hereunder with the same force and effect as if made on and as of such dates. 
  

 30 

 ARTICLE 6 
 AFFIRMATIVE COVENANTS 
  
 So long as Agent or any Lender shall have any Commitment hereunder or there shall be any outstanding Letters of Credit and until payment in full of each Loan and performance of all other obligations of Borrower under this Agreement and the
other Loan Documents, Borrower agrees to do all of the following unless Agent shall otherwise consent in writing. 
  
 Section 6.1 Use of Proceeds. Borrower will use solely for working capital purposes and other general corporate purposes of Borrower (which shall
include payment in full of amounts owing under the Subordinated Notes): (i) the proceeds of the Loans and the Letters of Credit (the “Proceeds”) and (ii) any Stock Sale Net Proceeds in excess of the amount payable under Section
2.4(d). 
  
 Section 6.2 Preservation of Corporate
Existence, Etc. Borrower will, and will cause the Subsidiaries to, preserve and maintain their corporate existence, rights, franchises and privileges in the jurisdictions of their incorporation and will, and will cause the Subsidiaries to,
qualify and remain qualified as foreign corporations in each jurisdiction where qualification is necessary or advisable in view of their business and operations or the ownership of their properties. 
  
 Section 6.3 Visitation Rights. At any reasonable time, and from time
to time, Borrower will, and will cause each Subsidiary to, permit Agent and Lenders to examine and make copies of and abstracts from the records and books of account of and to visit the properties of Borrower and to discuss the affairs, finances and
accounts of Borrower with any of its officers or directors. 
  
 Section 6.4 Keeping of Books and Records. Borrower will keep, and cause each Subsidiary to keep, adequate records and books of account in which complete entries will be made, in accordance with GAAP, reflecting all financial
transactions of Borrower or Subsidiary. 
  
 Section 6.5
Maintenance of Property, Etc. Borrower will maintain and preserve and will cause each Subsidiary to maintain and preserve all of their respective properties in reasonably good working order and condition, ordinary wear and tear excepted, and
will from time to time make all needed repairs, renewals and replacements so that the efficiency of such properties shall be fully maintained and preserved. 
  
 Section 6.6 Compliance with Laws, Etc. Borrower will comply and will cause each Subsidiary to comply in all material respects with all laws,
regulations, rules, and orders of Governmental Authorities applicable to Borrower or any Subsidiary or to their respective operations or property, except any thereof whose validity is being contested in good faith by appropriate proceedings upon
stay of execution of the enforcement thereof. 
  
 Section 6.7
Other Obligations. Borrower will pay and discharge and cause each Subsidiary to pay and discharge before the same shall become delinquent all material Indebtedness, Taxes and other obligations for which Borrower or any Subsidiary is liable or to

  

 31 

 
which their income or property is subject and all claims for labor and materials or supplies which, if unpaid, might become by law a Lien upon assets of
Borrower or any Subsidiary, except any thereof whose validity or amount is being contested in good faith by Borrower or the Subsidiary in appropriate proceedings with provision having been made to the satisfaction of Agent for the payment thereof in
the event the contest is determined adversely to Borrower or such Subsidiary. In the event any charge is being contested by Borrower or its Subsidiaries as allowed above, Borrower or its Subsidiaries shall establish adequate reserves against
possible liability therefor. 
  
 Section 6.8 Insurance.
Without limitation on the insurance required by the Loan Documents to be maintained on the Collateral, Borrower will keep in force and will cause each Subsidiary to keep in force upon all of their respective properties and operations policies of
insurance carried with responsible companies in such amounts and covering all such risks as shall be customary in the industry and reasonably satisfactory to Agent. Borrower will on request furnish to Agent certificates of insurance or copies of
policies evidencing such coverage. 
  
 Section 6.9 Financial
Information. Borrower will deliver to Agent in sufficient copies for distribution to Agent and each Lender: 
  
 (a) Annual Audited Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal
year of Borrower, the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated and consolidating statements of income and the consolidated statement of retained
earnings and statement of cash flows of Borrower and its Subsidiaries for such year, accompanied by (i) the audit report thereon by the independent certified public accountants at Pricewaterhouse Coopers (which reports shall be prepared in
accordance with GAAP and shall not be qualified by reason of restricted or limited examination of any material portion of the records of Borrower or any Subsidiary and shall contain no disclaimer of opinion or adverse opinion except such as Agent in
its sole discretion determines to be immaterial) and (ii) an Officer’s Certificate of Borrower certifying that as of the close of such fiscal year no Event of Default or Default had occurred and was continuing; 
  
 (b) Quarterly Unaudited Financial Statements. As soon
as available and in any event within forty-five (45) days after the end of each of the first three fiscal quarters of Borrower, the unaudited consolidated and consolidating balance sheet of Borrower and its Subsidiaries as of the end of such fiscal
quarter and the unaudited consolidated and consolidating statement of income and consolidated statement of cash flows of Borrower and its Subsidiaries for the fiscal year to the end of such fiscal quarter, unless the same has been provided in the
form of Borrower’s Form 10Q; accompanied by an Officer’s Certificate of Borrower certifying that (i) reports have been prepared in accordance with GAAP consistently applied and results of operation of Borrower and its Subsidiaries as at
the end of and for such fiscal quarter and that since the previous fiscal year-end report referred to in Section 6.9(a) there has been no material adverse change in the financial condition of Borrower or in the financial condition of any of
its Subsidiaries and that (ii) as of the close of such fiscal quarter no Event of Default or Default had occurred and was continuing; 
  

 32 

 (c) Annual Financial Projections. As soon as available, but not later than thirty
(30) days before the beginning of each fiscal year, a copy of Borrower’s annual financial projections; 
  
 (d) Accounts Receivable Summary. As soon as available, but not later than forty-five (45) days after the end of each fiscal quarter
an accounts receivable aging summary; 
  
 (e)
SEC Filings. Promptly, copies of all financial statements and reports that Borrower sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that Borrower or
any Subsidiary may make to, or file with, the Securities and Exchange Commission; 
  
 (f) Compliance Certificates. Within ninety (90) days after the close of each fiscal year of Borrower and within forty-five (45)
days after the close of each of Borrower’s fiscal quarters (other than the fourth fiscal quarter), an Officer’s Certificate signed by the chief financial officer of Borrower stating that to the best of the signer’s knowledge and
belief after due inquiry no Default or Event of Default had occurred and was continuing and setting forth calculations evidencing compliance with Section 6.12 and 6.13 hereof substantially in the form attached as Exhibit B
hereto; 
  
 (g) Monthly Reporting. As soon
as available and in any event within fifteen (15) days after the end of each month, monthly updates of (i) consolidated revenues, (ii) consolidated gross margins and operating income, (iii) consolidated domestic and consolidated foreign balances
for, in each case, cash accounts receivable, inventory and accounts payable, (iv) summary of domestic consolidated customer deposits and other prepayments, (v) 13-week rolling cash flow forecast, and (vi) month-end cash balances; and 
  
 (h) Other. All other statements, reports and other
information as Agent or any Lender may reasonably request concerning the Collateral or the financial condition and business affairs of Borrower. 
  
 Borrower agrees to segregate all new product development costs in each financial projection and each financial statement provided pursuant to this Section 6.9 to
facilitate tracking of such costs. 
  
 Section 6.10
Notification. Promptly after learning thereof, Borrower shall notify Agent of (a) any action, proceeding, investigation or claim against or affecting Borrower or any Subsidiaries instituted before any court, arbitrator or Governmental Authority
or, to Borrower’s knowledge, threatened to be instituted, which might reasonably be determined adversely to Borrower and which, if determined adversely, would be likely to have a Material Adverse Effect on the financial condition or operations
of Borrower, or to impair Agent’s or Lenders’ lien on Collateral or Borrower’s rights therein, or to result in a judgment or order against Borrower for more than $500,000 in excess of insurance coverage or, when combined with all
other pending or threatened claims, more than $500,000 in excess of insurance coverage; (b) any substantial dispute between Borrower or any Subsidiaries and any Governmental Authority; (c) any labor controversy which has resulted in or, to
Borrower’s knowledge, threatens to result in a strike which would materially affect the business operations of Borrower or any Subsidiary; (d) if 

  

 33 

 
Borrower or any member of the Controlled Group gives or is required to give notice to the PBGC of any “reportable event” (as defined in subsections
(b)(1),(2),(5) or (6) of Section 4043 of ERISA) with respect to any Plan (or the Internal Revenue Service gives notice to the PBGC of any “reportable event” as defined in subsection (c)(2) of Section 4043 of ERISA and Borrower obtains
knowledge thereof) which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; (e) the occurrence of any Event of Default or Default. In the case of the occurrence of an Event of Default or Default, Borrower will deliver to Agent an Officer’s Certificate
specifying the nature thereof, the period of existence thereof, and what action Borrower proposes to take with respect thereto; (f) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i)
breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between Borrower or any Subsidiary and any Governmental Authority;
or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; and (g) of any material change in the accounting policies
or financial reporting practices by the Borrower or any Subsidiary. 
  
 Section 6.11 Additional Payments; Additional Acts. From time to time, Borrower will (a) pay or reimburse Agent and Lenders on request for all Taxes (other than Taxes imposed on the net or gross income of Agent or Lenders) imposed on
any Loan Document or payment and for all reasonable expenses, including Attorney Costs, incurred by Agent or any Lender in connection with the preparation of the Loan Documents or the making or administration of the Loans, or the issuance of any
Letter of Credit; (b) pay or reimburse Agent and any Lender for all expenses, including legal fees, incurred by Agent or any Lender in connection with the enforcement by judicial proceedings or otherwise of any of the rights of Agent or any Lender
under the Loan Documents (including the enforcement or protection of Agent’s or any Lender’s rights in any bankruptcy or any insolvency proceeding); (c) obtain and promptly furnish to Agent evidence of all such Government Approvals as may
be required to enable Borrower to comply with its obligations under the Loan Documents and to continue in business as conducted without material interruption or interference; and (d) execute and deliver or authorize all such instruments (such as
Uniform Commercial Code continuation statements) and perform all such other acts as Agent or any Lender may reasonably request to carry out the transactions contemplated by the Loan Documents and to maintain the continuous perfection and priority of
Agent’s lien on all Collateral. 
  

 34 

 Section 6.12 EBITDA. 
  
 (a) For each fiscal quarter ending as of the date indicated below (each, an “EBITDA
Measurement Period”), Borrower shall maintain an EBITDA of not less than the corresponding amount set forth below (each a “Minimum EBITDA Amount”). 
  

					
	 Consolidated LTM EBITDA
	  	 	 	 
		
	 April 30, 2005
	  	$	10,000,000	 
	 July 31, 2005
	  	$	11,700,000	 
		
	 Consolidated Quarterly EBITDA
	  	 	 	 
		
	 April 30, 2005
	  	$	3,800,000	 
	 July 31, 2005
	  	$	3,400,000	 
		
	 Domestic LTM EBITDA
	  	 	 	 
		
	 April 30, 2005
	  	 	($500,000	)
	 July 31, 2005
	  	$	500,000	 
		
	 Domestic Quarterly EBITDA
	  	 	 	 
		
	 April 30, 2005
	  	$	600,000	 
	 July 31, 2005
	  	$	100,000	 

  
 (b) EBITDA Performance Premium. Borrower shall pay to Agent for the account of Lenders in accordance with each Lender’s Pro Rata Share, a premium (the “Performance Premium”) for each fiscal quarter in
which any of Consolidated LTM EBITDA, Consolidated Quarterly EBITDA, Domestic LTM EBITDA or Domestic Quarterly EBITDA is less than the corresponding amount set forth below for such period. The Performance Premium owing with respect to any such
fiscal quarter shall equal twenty five (25) basis points (0.25%) times the average Total Utilization during such fiscal quarter. Any such payment, if required, shall be due five (5) Business Days after the earlier of: (i) the date when the financial
statement covering such fiscal quarter is due under Section 6.9 or (ii) the date of the filing of any 10Q or 10K statement with the SEC covering such fiscal quarter. For avoidance of doubt, so long as Borrower pays the Performance Premium
when required hereunder, failure to comply with the EBITDA requirements set forth below shall not, in itself, constitute an Event of Default. 
  

				
	 EBITDA Measurement Period

	  	Minimum EBITDA Amount

	 Consolidated LTM EBITDA:
	  	 	 
	 April 30, 2005
	  	$	11,275,000
	 July 31, 2005
	  	$	12,391,000
		
	 Consolidated Quarterly EBITDA:
	  	 	 
	 April 30, 2005
	  	$	4,366,000
	 July 31, 2005
	  	$	3,851,000
		
	 Domestic LTM EBITDA:
	  	 	 
	 April 30, 2005
	  	$	297,000
	 July 31, 2005
	  	$	919,000
		
	 Domestic Quarterly EBITDA:
	  	 	 
	 April 30, 2005
	  	$	1,302,000
	 July 31, 2005
	  	$	688,000

  

 35 

 Section 6.13 Minimum Collateral Requirements. As of each Collateral Measurement Date indicated
below, Borrower shall maintain domestic (U.S.) accounts receivable and inventory (excluding any accounts receivables and inventory of Flow Autoclave Systems, Inc.) whose net book value equals the amount set opposite such date. The Total Revolving
Commitment shall automatically be reduced by an amount equal to the Collateral Differential within five (5) Business Days after the earlier of (i) the date when the financial statement covering the fiscal quarter ending on the applicable Collateral
Measurement Date is due under Section 6.9 or (ii) the date of the filing of any 10Q or 10K statement with the SEC covering such fiscal quarter. However, any such shortfall shall not, in itself, be an Event of Default so long as Borrower
timely makes any mandatory prepayments required as a result of such Mandatory Reduction. 
  

				
	 Collateral Measurement Date

	  	Minimum Collateral Amount

	 April 30, 2005
	  	$	27,225,000
	 July 31, 2005
	  	$	27,775,000

  
 Section 6.14 Loan
Documents from Domestic Subsidiaries. After any Person becomes a Domestic Subsidiary of Borrower, other than those Subsidiaries listed on Schedule 6.14, and unless Agent and Lenders provide prior written consent to the contrary, such
Domestic Subsidiary shall execute and deliver to Agent, promptly upon Agent’s request: (a) a supplement to the Loan Documents to which Domestic Guarantors are parties, unconditionally guarantying Borrower’s obligations under the Loan
Documents, and granting Agent for its benefit and the ratable benefit of Lenders, a first priority and exclusive security interest in all personal property of such Domestic Subsidiary, (b) a copy of a resolution adopted by the Board of Directors of
such Domestic Subsidiary authorizing the execution, delivery, and performance of the Loan Documents, and (c) such other documents and agreements as Agent may reasonably request. All of the foregoing documents shall be in form and substance
satisfactory to Agent. Each such Domestic Subsidiary shall be considered a Guarantor. 
  
 Section 6.15 Update of Collateral. From time to time, Agent may request that Borrower supplement, or cause Guarantor to supplement, the Loan Documents with the following information: (i) any new patent, patent
applications, trademarks or trademark applications acquired by Borrower, or Guarantor, after the date hereof; and/or (ii) any copyrights in which Borrower or Guarantor then has any interest. Borrower shall, and shall cause Guarantor 

  

 36 

 
to, promptly and fully comply with any such request and, if requested by Agent, Borrower shall, and shall cause Guarantor to sign such new security
agreements or documents, and shall take such other actions, as Agent may reasonably request to create and perfect a security interest in favor of Agent and to establish and ensure the first priority of such security interest. 
  
 Section 6.16 Security Interest in Foreign Guarantor Collateral.
Borrower shall execute and deliver, and shall cause Foreign Guarantors to execute and deliver, to Agent any documents and instruments and take all such action as Agent may from time to time request to perfect, preserve or legitimize Agent’s
security interest in the assets of the Foreign Guarantors, now owned or hereafter acquired, including without limitation, security agreements, pledge agreements, other collateral agreements, financing statements (or other notice filings), patents,
patent applications, trademark and trademark applications registered in the United States and in any foreign country. 
  
 Section 6.17 Deposit Accounts. Borrower shall promptly notify Agent of any deposit accounts, certificate of deposit accounts or securities accounts
opened by Borrower or any Domestic Guarantor for which a control agreement has not been executed and delivered to Agent. Upon Agent’s request, Borrower shall, and shall cause each Domestic Guarantor to, promptly execute and deliver to Agent a
deposit account control agreement in form and substance acceptable to Agent and shall cause the bank or securities intermediary at which such account is held to promptly execute and deliver to Agent such control agreement. 
  
 Section 6.18 Lease and Landlord Consents. Borrower shall, and shall
cause each Guarantor to, promptly notify Agent of any lease agreement, lease amendment or lease extension agreement entered into after the date of this Agreement by Borrower or such Guarantor. At Agent’s request, Borrower shall and shall cause
such Guarantor to promptly execute and deliver to Agent a leasehold deed of trust, security agreement and fixture filing in form and substance acceptable to Agent and shall cause the landlord party to the lease to promptly execute and deliver to
Agent a landlord consent in form and substance acceptable to Agent. 
  
 Section 6.19 Delivery of Information Regarding Omax Case. Borrower agrees to deliver to Agent in sufficient copies for distribution to Agent and each Lender: (a) no later than the first Business Day of each calendar quarter, a
written report in such detail as Agent may reasonably require on the status and recent developments of the case Omax Corporation v. Flow International Corporation (the “Omax Case”) described on Schedule 5.5 attached
hereto; (b) promptly after the occurrence of any material development or event in the Omax Case, a written report in such detail as Agent may reasonably require describing of such development or event; and (c) promptly upon Agent’s request, any
and all information reasonably requested by Agent and Lenders regarding the Omax Case and the merits of such litigation. In addition, Borrower will cooperate with and assist Agent and Lenders, and their respective counsel, in determining the
likelihood of Borrower’s liability and the amount thereof in the Omax Case. Notwithstanding the foregoing, Borrower and its counsel shall have no duty or obligation to provide Agent and/or Lenders with any information that Borrower or its
counsel determines is or may be subject to attorney-client, work product or other privilege. 
  

 37 

 ARTICLE 7 
 NEGATIVE COVENANTS 
  
 So
long as Agent or any Lender shall have any Commitment hereunder or there shall be any outstanding Letters of Credit and until payment in full of each Loan and performance of all other obligations of Borrower under this Agreement and the other Loan
Documents, Borrower agrees that it will not do any of the following unless Agent shall otherwise consent in writing, such consent not to be unreasonably withheld. 
  
 Section 7.1 Dividends, Purchase of Stock, Etc. Borrower shall not, and shall cause each Subsidiary to not, (a)
declare or pay any dividend (except dividends payable in capital stock) on any shares of any class of its capital stock or (b) apply any assets to the redemption or other retirement of, or set aside any sum for the payment of any dividends on or for
the purchase, redemption or other retirement of, or make any other distribution by reduction of capital or otherwise in respect of, shares of any class of capital stock of Borrower; provided, however, that Flow Autoclave Corporation, which is
50% owned by Borrower, is excluded from this restriction until the date on which Borrower owns more than 50% of such company; and provided further dividends from Foreign Subsidiaries to Borrower for the purposes of the payment to Lenders.

  
 Section 7.2 Liquidation, Merger, Sale of Assets.
Neither Borrower nor any Guarantor shall liquidate, dissolve or enter into any consolidation, joint venture, partnership or other combination or sell, lease, or dispose of (including transfers to any Subsidiary that has not executed a guaranty and
security agreement pursuant to Section 6.14 or is not a Foreign Guarantor) all or any substantial portion of its business or assets or of any Collateral (excepting sales of goods in the ordinary course of business). Neither Borrower nor any
Guarantor shall merge with any other person. 
  
 Section 7.3
Indebtedness. Borrower shall not nor shall it allow any Guarantor to create, incur or become liable for any Indebtedness except: 
  
 (a) the Loans and Indebtedness hereunder in respect of the Letters of Credit; 
  
 (b) existing Indebtedness reflected on the balance
sheets referred to in Section 5.7; 
  
 (c) current accounts payable or accrued or other current liabilities incurred by Borrower or Guarantor in the ordinary course of business; 
  
 (d) indebtedness for the deferred purchase price, or for obligations under leases, of real and personal property used by Borrower
or Guarantor in its business; 
  
 (e)
Indebtedness to Foreign Subsidiaries pursuant to Section 7.11(b); 
  
 (f) ATAB has obtained extensions of credit from Handelsbanken (the “Handelsbanken Loans”) which may be secured by liens on and security interests in certain property in Sweden (the
“Swedish Collateral”). Agent and Lenders acknowledge that the liens 

  

 38 

 
and security interest granted Handelsbanken in the Swedish Collateral may be senior to the liens and security interests in the Swedish Collateral granted in
favor of Agent and Lenders. Agent and Lenders further acknowledge that the liens and security interests granted Handelsbanken in the Swedish Collateral as security for the Handelsbanken Loans (together with any amendments, extensions or renewals
thereof and any refinancings there of with Handelsbanken or other lenders) may be prior to the liens and security interests in the Swedish Collateral granted in favor of Agent and Lenders. Agent and Lenders further acknowledge that the Swedish
Collateral may also secure certain pension obligations of ATAB and such security may be prior to the liens and security interest in the Swedish Collateral granted in favor of Agent and Lenders. 
  
 (g) Lenders and Agent acknowledge that FAC has
obtained secured and unsecured extensions of credit from Chiao Tung Bank (the “Chiao Tung Loans”) and the secured Chiao Tung Loans may be secured by real property interests and other property of FAC located in Taiwan (the
“Taiwan Collateral”). Agent and Lenders further acknowledge that any liens and security interests granted in the Taiwan Collateral as security for the Chiao Tung Loans (together with any amendments, extensions or renewals thereof,
and any refinancings thereof with Chiao Tung Bank or other lenders) may be senior to the liens and security interests in the Taiwan Collateral granted in favor of Agent and Lenders; 
  
 (h) Lenders and Agent acknowledge and agree that FAC has obtained unsecured extensions of credit from
First Commercial Bank (the “First Commercial Loans”) (together with any amendments, extensions or renewals thereof, and any refinancings thereof with First Commercial Bank or other lenders); and 
  
 The refinancings described in the previous paragraphs (f) – (h) refer only to those
refinancings that do not exceed the maximum committed amount (plus any accrued but unpaid interest) of the Handelsbanken Loans, the Chiao Tung Loans or the First Commercial Loans, respectively 
  
 Section 7.4 Guaranties, Etc. Except for the Domestic Guaranty and the
Foreign Guaranty, neither Borrower nor any Guarantor shall assume, guaranty, endorse or otherwise become directly or contingently liable for, or obligated to purchase, pay or provide funds for payment of, any obligation or Indebtedness of any other
person, other than by endorsement of negotiable instruments for deposit or collection or by similar transactions in the ordinary course of business. Notwithstanding the immediately preceding sentence, Agent and Lenders further acknowledge that
Borrower and/or any Guarantors may guarantee the Handelsbanken Loans, the First Commercial Loans and/or the Chiao Tung Loans and any amendments, extensions or renewals thereof and any refinancings thereof with other lenders that do not exceed the
maximum committed amount of such extensions of credit (plus any accrued but unpaid interest). 
  
 Section 7.5 Liens. Neither Borrower nor any Guarantor shall create, assume or suffer to exist any Lien except (a) liens pursuant to the Loan Documents, (b) existing Liens reflected in the balance sheet referred
to in Section 5.7, (c) Liens described on Schedule 7.5 hereto, and (d) any liens or security interests authorized under Section 7.3. 
  

 39 

 Section 7.6 Investments. Borrower shall not make any loan or advance to any person or purchase or
otherwise acquire the capital stock, assets or obligations of, or any interest in, any person, except (a) commercial bank time deposits maturing within one year, (b) marketable general obligations of the United States or a State or marketable
obligations fully guaranteed by the United States, or (c) short-term commercial paper with the highest rating of a generally recognized rating service. 
  
 Section 7.7 Operations. Borrower shall not engage in any activity which is substantially different from or unrelated to the present business
activities or products of Borrower. 
  
 Section 7.8 ERISA
Compliance. Neither Borrower nor any member of the Controlled Group nor any Plan will: 
  
 (a) engage in any “prohibited transaction” (as such term is defined in Section 406 or Section 2003(a) of ERISA) which
could result in a material liability to Borrower; 
  
 (b) incur any “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA) whether or not waived which could result in a material liability to Borrower; 
  
 (c) terminate any Pension Plan in a manner which
could result in a material liability to Borrower or could result in the imposition of a material Lien on any property of Borrower or any member of the Controlled Group pursuant to Section 4068 of ERISA; or 
  
 (d) violate state or federal securities laws
applicable to any Plan in any material respect. 
  
 Section 7.9
Capital Expenditures. Borrower shall not, nor shall it allow any Subsidiary to, make or become legally obligated to make any capital expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal
replacements and maintenance which are properly charged to current operations), except for capital expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrower during each time period set forth below, the amount
set forth opposite such time period: 
  

				
	 12 months ending April 30, 2005
	  	$	2,200,000
	 15 months ending July 31, 2005
	  	$	3,000,000

  
 Section 7.10 New
Product Development Expenditures. Borrower shall not, nor shall it allow any Subsidiary to, fund or become legally obligated to fund any new product development costs, including without limitation, research, development and engineering costs, as
indicated in the financial statements provided pursuant to Section 6.9, not exceeding in the aggregate for the Borrower during each time period set forth below, the amount set forth opposite such time period: 
  

				
	 12 months ending April 30, 2005
	  	$	12,700,000
	 15 months ending July 31, 2005
	  	$	16,335,000

  

 40 

 Section 7.11 Transactions with Affiliates. Borrower shall not, nor shall it allow any Subsidiary
to, directly or indirectly, to transfer cash to Borrower or any Affiliate of Borrower, except (a) the sale of inventory in the ordinary course of business in accordance with Borrower’s existing intercompany transactions and transfer pricing
policy in effect as the date hereof, (b) cash transfers from Foreign Subsidiaries to Borrower for the sole and immediate purpose of satisfying Borrower’s obligations under this Agreement, evidenced by promissory notes at fair market value, (c)
payments by Borrower to such Foreign Subsidiary in accordance with the terms of the promissory notes referred to in subclause (b), and (d) dividends from Foreign Subsidiaries to Borrower for the purposes of the payment to Lenders pursuant to
Section 2.4(e).  
  
 Section 7.12 Burdensome
Agreements. Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly, enter into any Contractual Obligation (other than this Agreement or any Loan Document) (a) that limits the ability of (i) any Subsidiary to make
Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create,
incur, assume or suffer to exist Liens on the property of such Person; or (b) that requires the grant of a Lien to secure the obligations of such Person if a Lien is granted to secure another obligation of such Person. 
  
 Section 7.13 Margin Stock. Borrower shall not, nor shall it permit any
Subsidiary to, use the proceeds of any Loan or Letter of Credit, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System of the United States) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose. 
  
 ARTICLE 8 
 EVENTS OF DEFAULT 
  
 Section 8.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” hereunder. 
  
 (a) Payment Default. Borrower shall fail to pay for a period of three (3) Business Days when due any
amount of principal of or interest on any Loan or any other amount payable by it hereunder including, without limitation, amounts due in respect of Letters of Credit; or 
  
 (b) Breach of Warranty. Any representation or warranty made (or deemed made pursuant to Section
2.2 or 3.2 hereof) by Borrower under or in connection with this Agreement or any Loan Document shall prove to have been incorrect in any material respect when made; or 
  
 (c) Breach of Certain Covenants. Borrower shall have failed to comply with Sections 6.2, 6.8,
6.10(e), 6.12, 6.13, any provision of Article 7 of this Agreement, or, to the 

  

 41 

 
extent that it relates to the obtaining and maintaining of insurance or delivery of evidence of same, any such provision in the Loan Documents; or

  
 (d) Breach of Other Covenant. Borrower
shall fail to perform or observe any other material covenant, obligation or term of any Loan Document executed by it and such failure shall remain unremedied for thirty (30) days after written notice thereof shall have been given to Borrower by
Agent; or 
  
 (e) Cross-default. Borrower
shall fail (i) to pay when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any amounts owing under any Indebtedness which in the aggregate exceeds One Hundred Thousand Dollars ($100,000) or any interest or
premium thereon and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, or (ii) to perform any term or covenant on its part to be performed under any
agreement or instrument relating to any such Indebtedness and required to be performed and such failure shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such failure to perform is
to accelerate or to permit the acceleration of the maturity of any obligations of such Indebtedness, or (iii) any amounts owing under such Indebtedness shall be declared to be due and payable or required to be prepaid (other than by regularly
scheduled required prepayment) prior to the stated maturity thereof; provided, that notwithstanding the foregoing, a default under the Handelsbanken Loans, the First Commercial Loans or the Chiao Tung Loans shall not be a default under this
Agreement unless Borrower has failed to cure any such default within 30 days after receipt of written notice from Handelsbanken, First Commercial or Chiao Tung Bank (as applicable) of such default; or 
  
 (f) Voluntary Bankruptcy, Etc. Without the prior
written consent of Agent and Lenders, Borrower or any Subsidiary shall: (i) file a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or file an answer consenting to, admitting the
material allegations of or otherwise not controverting, or fail timely to controvert a petition filed against it seeking relief under Title 11 of the United State Code, as now constituted or hereafter amended; or (ii) file such petition or answer
with respect to relief under the provisions of any other now existing or future applicable bankruptcy, insolvency, or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors; or 
  
 (g) Involuntary Bankruptcy, Etc. An order for relief shall be entered against Borrower or any Subsidiary under Title 11 of the
United States Code, as now constituted or hereafter amended, which order is not stayed; or upon the entry of an order, judgment or decree by operation of law or by a court having jurisdiction in the premises which is not stayed adjudging it a
bankrupt or insolvent under, or ordering relief against it under, or approving as properly filed a petition seeking relief against it under the provisions of any other now existing or future applicable bankruptcy, insolvency or other similar law of
the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or any arrangement, composition, extension or adjustment with creditors; or
appointing a receiver, liquidator, assignee, sequestrator, trustee or 

  

 42 

 
custodian of Borrower, or any Subsidiary or of any substantial part of its or their property, or ordering the reorganization, winding-up or liquidation of
its or their affairs; or upon the expiration of sixty (60) days after the filing of any involuntary petition against it seeking any of the relief specified in Section 8.1(f) or this Section 8.1(g) without the petition being dismissed
prior to that time; or 
  
 (h) Insolvency,
Etc. Borrower or any Subsidiary shall (i) make a general assignment for the benefit of its creditors or (ii) consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, or custodian of all or a substantial
part of the property of Borrower or any Subsidiary, as the case may be, or (iii) admit its insolvency or inability to pay its debts generally as they become due, or (iv) fail generally to pay its debts as they become due, or (v) take any action (or
suffer any action to be taken by its directors or shareholders) looking to the dissolution or liquidation of Borrower or any Subsidiary, as the case may be; or 
  

(i) Judgment. A final judgment or order for the payment of money in excess of Five Hundred Thousand Dollars ($500,000) in excess
of insurance coverage or which impairs the lien on Collateral or rights of Borrower therein in any material respect, shall be rendered against Borrower and such judgment or order shall continue unsatisfied and in effect for a period of ten (10)
consecutive days following entry, or all or substantially all of the assets of Borrower are attached, seized, subject to writ or warrant or are levied on or come into the possession or control of a receiver, trustee, custodian or assignee for the
benefit of creditors; or 
  
 (j) Government
Approvals. Any Government Approval or registration or filing with any Governmental Authority now or hereafter required in connection with the performance by Borrower of its obligations set forth in the Loan Documents shall be revoked, withdrawn
or withheld or shall fail to remain in full force and effect unless in the reasonable opinion of Agent such revocation, withdrawal or withholding would not be likely to have a material adverse affect on the ability of Borrower to perform its
obligations under the Loan Documents; or 
  
 (k) Other Government Action. Borrower is enjoined or restrained or in any way prevented by order of a court or other Governmental Authority from conducting all or a substantial part of its business affairs or operations; or

  
 (l) ERISA. Borrower or any member of
the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of One Million Dollars ($1,000,000) which it shall have become liable to pay to the PBGC or to a Plan under Section 515 of ERISA or Title IV of ERISA; or
notice of intent to terminate a Plan or Plans (other than a multi-employer plan, as defined in Section 4001(3) of ERISA, having aggregate Unfunded Vested Liabilities in excess of One Million Dollars ($1,000,000) shall be filed under Title IV of
ERISA by Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate any Plan or Plans which could result in any liability of
Borrower in excess of One Million Dollars ($1,000,000); or 
  

 43 

 (m) Going Concern Qualification. Borrower receives a “going concern”
qualification from its external auditors in the annual audited financial statement for the fiscal year ending April 30, 2005; or 
  
 (n) Failure to Issue Financials. Borrower fails to complete and issue (i) its fiscal year 2005 financial statements on or before
July 29, 2005, or (ii) any other of Borrower’s audited financial statements within 90 days after the end of Borrower’s fiscal year or any other of Borrower’s quarterly financial statements within 45 days after the end of any fiscal
quarter of Borrower; provided, however, that any delay permitted by the Securities and Exchange Commission (“SEC”) in the filing of any required reports with the SEC shall not be a default under this section; or

  
 (o) Guarantor Default; Invalidity of
Guaranty. (i) Any Guarantor shall fail to perform or observe any covenant, obligation or term of any Loan Document to which it is a party and such failure shall continue unremedied after the applicable grace period, if any, specified therein;
(ii) any misrepresentation or breach of any warranty by any Guarantor under any Loan Document to which it is a party shall occur; (iii) any of the events or circumstances referred to in Section 8.1(e) through 8.1(n) whose occurrence or
existence would constitute a Default or an Event of Default with respect to Borrower shall occur or exist with respect to any Guarantor; or (iv) any Loan Document shall for any reason be revoked or invalidated, or otherwise cease to be in full force
and effect (except as expressly permitted hereunder) in respect of any Guarantor, or any Guarantor or any other Person shall contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation
thereunder; or 
  
 (p) Impairment of
Security. Any Loan Document that creates and/or perfects a Lien ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or the Agent shall not have
or shall cease to have a valid and perfected Lien of first priority in the Collateral purported to be covered thereby (except by any action or inaction attributable solely to Agent); or 
  
 (q) Change of Control. There occurs any Change of Control with respect to the Borrower; or

  
 (r) Material Adverse Change. If there
shall occur any event that has a Material Adverse Effect, or that materially increases any Lender’s risk that Borrower will not repay the Loans or other Obligations, or materially impairs the Collateral or Agent and each Lender’s first
priority perfected lien on the Collateral; or 
  
 (s) Invalidity of Loan Documents. Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or in satisfaction in full of all of the Obligations, ceases to be in
full force and effect; or Borrower, any Guarantor or any Person contests in any manner the validity or enforceability of any Loan Document; or Borrower or any Guarantor denies that it has any or further liability or obligation under any Loan
Document, or purports to revoke, terminate or rescind any Loan Document. 
  

 44 

 Section 8.2 Consequences of Default. If an Event of Default described in Section 8.1(f) or
8.1(g) shall occur and be continuing, then in any such case, the Total Revolving Commitment shall be immediately terminated and, if any Loans or Letters of Credit shall have been made or issued, the principal of and interest on the Loans, the
face amounts of all issued and outstanding Letters of Credit, and all other sums payable by Borrower under the Loan Documents shall become immediately due and payable all without notice or demand of any kind. 
  
 If any other Event of Default shall occur and be continuing, then in any such
case and at any time thereafter so long as any such Event of Default shall be continuing, (i) Agent shall at the request, or may with the consent, of Lenders immediately terminate the Commitment, and, if any Revolving Loans or Letters of Credit
shall have been made or issued, Agent shall at the request, or may with the consent, of Lenders declare the principal of and the interest on the Revolving Loans, the face amounts of all issued and outstanding Letters of Credit, and all other sums
payable by Borrower under the Loan Documents with respect to such Revolving Loans and Letters of Credit immediately due, whereupon the same shall become immediately due and payable all without protest, presentment, notice or demand, all of which
Borrower expressly waives. 
  
 Regardless of whether
Borrower’s obligations to repay the Loans and Letters of Credit have been accelerated pursuant to the preceding sentences, Agent shall at the request, or may with the consent, of Lenders realize on any or all of the Collateral by exercising any
remedies provided in any Loan Document or otherwise provided by law. Amounts paid or received hereunder in respect of issued and outstanding Letters of Credit which exceed amounts paid by Agent under such Letters of Credit shall be held (and
applied) as cash collateral, pursuant to Section 3.5, to secure the performance of all obligations of Borrower owing to Agent and Lenders hereunder and under the other Loan Documents. Agent and Lenders may exercise or pursue any remedy or
cause of action permitted by this Agreement, the Notes, and any other Loan Document or applicable law. The rights and remedies provided by law, this Agreement, the Notes and the other Loan Documents are cumulative and non exclusive, and the exercise
or partial exercise of any right, power or remedy hereunder shall not preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 
  
 While any Event of Default exists (other than during any period of time in which Agent and Lenders have agreed in writing
not to charge the Default Rate (as defined below)), the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable laws. The Default Rate shall be in effect on the date of the occurrence of the Event of the Default and interest shall accrue at the Default Rate retroactively from such date. 
  
 ARTICLE 9 
 AGENT 
  
 Section 9.1 Appointment and Authorization of Agent. Each Lender hereby irrevocably appoints, designates and authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to
exercise such powers and 

  

 45 

 
perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be
deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist
against Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. All
benefits and immunities provided to Agent in this Article 9 shall apply to Agent as issuer of Letters of Credit with respect to any acts taken or omissions suffered by Agent in connection with Letters of Credit issued by it or proposed to be
issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit, and as additionally provided herein with respect to Agent as issuer of letters of Credit. 
  
 Section 9.2 Delegation of Duties. Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 
  
 Section 9.3 Liability of Agent. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any
manner to any Lender for any recital, statement, representation or warranty made by Borrower or any Guarantor or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred
to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any
failure of Borrower or any Guarantor or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any Guarantor or any Affiliate thereof. 
  
 Section 9.4 Reliance by Agent. 
  
 (a) Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other
document or conversation believed by it to be genuine and correct 

  

 46 

 
and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower or any
Guarantor), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its satisfaction by all Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of Lenders (or such greater number of Lenders as may be expressly required by any instance),
and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders. 
  
 (b) For purposes of determining compliance with the conditions specified in Section 4.1, each Lender that has signed this
Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless Agent shall have
received notice from such Lender prior to the date hereof specifying its objection thereto. 
  
 Section 9.5 Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to
be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default and stating that such notice is a “notice of default.” Agent will
notify Lenders of its receipt of any such notice. Agent shall take such action with respect to such Default as may be directed by Lenders in accordance with Article 9; provided, however, that unless and until Agent has received
any such direction, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable or in the best interest of Lenders. 
  
 Section 9.6 Credit Decision; Disclosure of Information by Agent. Each
Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower or any Guarantor
or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each
Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and creditworthiness of Borrower and Guarantors and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and
made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to
inform itself as to the business, prospects, 

  

 47 

 
operations, property, financial and other condition and creditworthiness of Borrower. Except for notices, reports and other documents expressly required to
be furnished to Lenders by Agent herein, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or
creditworthiness of any of Borrower or Guarantors or any of their respective Affiliates which may come into the possession of any Agent-Related Person. 
  
 Section 9.7 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, Lenders shall indemnify upon demand each
Agent-Related Person (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities
incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of
competent jurisdiction to have been caused primarily by such Agent-Related Person’s own gross negligence or willful misconduct; it being agreed by all Lenders that no action taken in accordance with the directions of Lenders shall be deemed to
constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs
and costs and expenses in connection with the use of IntraLinks, Inc. or other similar information transmission systems in connection with this Agreement) incurred by Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section 9.7 shall survive termination of the Total Revolving Commitment, the payment of all other
Obligations and the resignation of Agent. 
  
 Section 9.8 Agent
in its Individual Capacity. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with Borrower, each Guarantor and their respective Affiliates as though Bank of America were not Agent hereunder and without notice to or consent of Lenders. Lenders acknowledge that, pursuant to such
activities, Bank of America or its Affiliates may receive information regarding Borrower or any Guarantor or any Affiliate (including information that may be subject to confidentiality obligations in favor of Borrower, such Guarantor or such
Affiliate) and acknowledge that Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise such
rights and powers as though it were not Agent, and the terms “Lender” and “Lenders” include Bank of America in its individual capacity. 
  
 Section 9.9 Successor Agent. Agent may resign as Agent upon 30 days’ written notice to Lenders and Borrower; provided that any such
resignation by Bank of America shall also constitute its resignation as Agent in its capacity of issuer of Letters of Credit. If Agent 

  

 48 

 
resigns under this Agreement, Lenders shall appoint from among Lenders a successor Agent for Lenders, which successor Agent shall be consented to by Borrower
at all times other than during the existence of a Default (which consent of Borrower shall not be unreasonably withheld or delayed). If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after
consulting with Lenders and Borrower, a successor Agent from among Lenders. Upon the acceptance of its appointment as successor Agent hereunder, the Person acting as such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent (including those in its capacity as issuer of Letters of Credit) and the term “Agent” shall mean such successor Agent in all such capacities and the retiring Agent’s appointment, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such retiring Agent or any other Lender, other than the obligation of the successor Agent to issue letters of credit in substitution for the Letters of Credit, if any, outstanding
at the time of such succession or to make other arrangements satisfactory to the retiring Agent to effectively assume the obligations of the retiring Agent with respect to such Letters of Credit. After any retiring Agent’s resignation hereunder
as Agent, the provisions of this Article 9 and Sections 11.14 and 11.15 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of Agent
hereunder until such time, if any, as Lenders appoint a successor agent as provided for above. 
  
 Section 9.10 Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding
relative to Borrower or any Guarantor, Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on
Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise: 
  
 (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all
other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders and Agent (including any claim for the reasonable compensation, expenses, disbursements and advances
of Lenders and Agent and their respective agents and counsel and all other amounts due Lenders and Agent under Sections 3.2(b), 2.9 and 11.14) allowed in such judicial proceeding; and 
  
 (b) to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same; 
  
 and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Agent and, in the event that Agent shall consent
to the making of such payments directly to Lenders, to pay to Agent any amount due for the reasonable compensation, expenses, 

  

 49 

 
disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent under Sections 2.9 and 11.14. 
  
 Nothing contained herein shall be deemed to authorize Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Agent to vote in respect of the claim of any Lender in any
such proceeding. 
  
 ARTICLE 10 
 LETTER OF CREDIT RISK PARTICIPATIONS 
  
 Section 10.1 Sale of Risk Participations. Agent agrees to sell to Lenders, and upon issuance of any Letter of Credit hereunder each Lender shall be
deemed to have unconditionally and irrevocably purchased from Agent, an undivided risk participation in such Letter of Credit, including each Existing Letter of Credit, in proportion to such Lender’s Pro Rata Share. 
  
 Section 10.2 Notice to Lenders. Via telephone, telex, or facsimile,
Agent will promptly advise each Lender of each Letter of Credit issued hereunder. Agent shall not have any duty to ascertain or to inquire as to the accuracy of the information furnished by Borrower, or accuracy of the representations and warranties
made by Borrower in any request for the issuance of such Letter of Credit nor shall Agent have any duty to confirm that all conditions precedent to the issuance of such Letter of Credit have been fully satisfied. 
  
 Section 10.3 Payment Obligations. 
  
 (a) Reimbursements to Agent. In the event Borrower
fails to pay any amount due under Section 3.4 by 12:00 noon (Seattle time) on the date Agent shall make demand for payment thereof, Lenders shall each, upon receipt of notice from Agent of such failure, pay to Agent their Pro Rata Share of
such amount, provided, however, if Borrower pays a portion but less than all of the amount due under Section 3.4, Lenders shall each pay Agent only their respective Pro Rata Shares of the difference between the amount due under
Section 3.4 and the amount paid by Borrower on account thereof. Each and every payment to be made by Lenders to Agent under this Section 10.3(a) shall be made by federal wire transfer in immediately available funds. If any Lender
receives notice from Agent by 1:30 p.m. (Seattle time) on any Business Day of its obligation to make payments under this subsection, then such Lender shall make such payment no later than 2:00 p.m. (Seattle time) on the day such notice is received.
If any Lender receives such notice after 1:30 p.m. (Seattle time) on any Business Day, then such Lender shall make such payment by no later than 1:00 p.m. (Seattle time) on the next succeeding Business Day. If any Lender fails to make such payment
by the date and time required, its obligation shall bear interest from and including the date when such payment was due until paid at the per annum rate equal to the Federal Funds Rate. 
  

 50 

 (b) Payments to Lenders. Agent shall immediately remit to Lenders, via federal
wire transfer of funds, such Lender’s Pro Rata Share of: 
  
 (1) the letter of credit fee paid by Borrower pursuant to Section 3.2(b) hereof; and 
  
 (2) any amounts (other than fees and expense reimbursements) received from or for the account of Borrower in respect of any Letter of
Credit, provided, however, Agent shall not remit to any Lender any amounts received from or for the account of Borrower in respect of a Letter of Credit unless, prior to Agent’s receipt of such funds, such Lender has paid its Pro
Rata Share of such amounts pursuant to Section 10.3(a). In the event Agent is required to refund any amount which is paid to it or received by it from or for the account of Borrower, then Lenders agree to repay to Agent their respective Pro
Rata Share of such amount. 
  
 (c)
Reimbursements to Lenders. Borrower agrees to reimburse any Lender for amounts paid by such Lender to Agent pursuant to Section 10.3(a). Any amounts received from or for the account of Borrower by any Lender in respect of the aforesaid
reimbursement obligation shall reduce Borrower’s payment obligation to Agent under Section 3.4. Any amounts received from or for the account of Borrower by Agent in satisfaction of its obligations under Section 3.4 shall reduce
pro tanto Borrower’s reimbursement obligation to Lenders under this Section 10.3(c). 
  
 ARTICLE 11 
 MISCELLANEOUS 
  
 Section 11.1 No Waiver; Remedies Cumulative. No failure by Agent or
any Lender to exercise, and no delay in exercising, any right, power or remedy under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy under this
Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. The exercise of any right, power, or remedy shall in no event constitute a cure or waiver of any Event of
Default this Agreement or any other Loan Document or prejudice the rights of Agent or Lenders in the exercise of any right hereunder or thereunder. The rights and remedies provided herein and therein are cumulative and not exclusive of any right or
remedy provided by law. 
  
 Section 11.2 Governing Law.
This Agreement and the other Loan Documents shall be governed by and construed in accordance with the laws of the State of Washington, U.S.A. 
  
 Section 11.3 Mandatory Arbitration. 
  
 (a) At the written request of either all of Lenders or Borrower, any controversy or claim between Lenders and Borrower, arising
from or relating to this Agreement or any of the other Loan Documents, or arising from an alleged tort, shall be settled by arbitration in Seattle, Washington. The United States Arbitration Act shall apply even though this Agreement is otherwise
governed by Washington law. The proceedings shall be administered by the American Arbitration Association under its commercial rules of arbitration. Any controversy over whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having jurisdiction over the parties. The institution and maintenance of an action for judicial relief or pursuit of an ancillary 

  

 51 

 
or provisional remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration
if such action for judicial relief is contested. For purposes of the application of the statute of limitations, laches or other time bar, the filing of an arbitration pursuant to this subsection is the equivalent of the filing of a lawsuit, and any
claim or controversy which may be arbitrated under this subsection is subject to any applicable statute of limitations, laches or other time bar. The arbitrator(s) will have the authority to decide whether any such claim or controversy is barred by
the statute of limitations, laches or other time bar and, if so, to dismiss the arbitration on that basis. The parties consent to the joinder of any guarantor, hypothecator, or other party having an interest relating to the claim or controversy
being arbitrated in any proceedings under this Section. 
  
 (b) No provision of this subsection shall limit the right of Borrower, Agent or Lenders to exercise self-help remedies such as setoff, foreclosure, retention or sale of any collateral, or obtaining any
ancillary, provisional, or interim remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration proceeding. The exercise of any such remedy does not waive the right of either party to request arbitration.

  
 Section 11.4 Consent to Jurisdiction; Waiver of
Immunities. Borrower, Agent and Lenders hereby irrevocably submit to the nonexclusive jurisdiction of any state or federal court sitting in Seattle, King County, Washington, in any action or proceeding brought to enforce or otherwise arising out
of or relating to any Loan Document and irrevocably waive to the fullest extent permitted by law any objection which they may now or hereafter have to the laying of venue in any such action or proceeding in any such forum, and hereby further
irrevocably waive any claim that any such forum is an inconvenient forum. Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any
other manner provided by law. Nothing in this Section 11.4 shall impair the right of any party to request or demand arbitration under Section 11.3 or the right of Agent or a Lender or the holder of any Note to bring any action or
proceeding against Borrower or its property in the courts of any other jurisdiction, and Borrower irrevocably submits to the nonexclusive jurisdiction of the appropriate courts of the jurisdiction in which Borrower is incorporated or sitting and any
place where property or an office of Borrower is located. 
  
 Section 11.5 Notices. All notices and other communications provided for in any Loan Document shall be in writing or (unless otherwise specified) by telex, telefax or cable and shall be mailed (with first class postage prepaid) or
sent or delivered to each party at the address or telefax number set forth under its name on the signature page hereof, or at such other address as shall be designated by such party in a written notice to each other party. Except as otherwise
specified all notices sent by mail, if duly given, shall be effective three (3) Business Days after deposit into the mails, all notices sent by a nationally recognized overnight courier service, if duly given, shall be effective one (1) Business Day
after delivery to such courier service, and all other notices and communications if duly given or made shall be effective upon receipt. Neither Agent nor any Lender shall incur any liability to Borrower for actions taken in reliance on any
telephonic notice referred to in this Agreement which Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow or give such telephonic notice hereunder on behalf of Borrower. 
  

 52 

 Section 11.6 Assignment and Participations. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective Successors and assigns, except that Borrower may not assign or otherwise transfer all or any part of its rights or obligations hereunder without the prior written consent of Agent and Lenders, and any such
assignment or transfer purported to be made without such consent shall be ineffective. Lenders may at any time assign or otherwise transfer all or any part of their respective interests under the Loan Documents (including assignments for security
and sales of participations), but only with the prior written consent of Agent (which consent will not be unreasonably withheld), and to the extent of such assignment, the assignee shall have the same rights and benefits against Borrower and
otherwise under the Loan Documents (including the right of setoff) as if such assignee were a Lender. 
  
 Section 11.7 Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction
shall as to such jurisdiction be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect. 
  
 Section 11.8 Survival. The representations, warranties and indemnities of Borrower in favor of Agent and Lenders shall survive indefinitely and,
without limiting the foregoing, shall survive the execution and delivery of this Agreement and the other Loan Documents, the making of any Loans, the issuance of any Letters of Credit the expiration of the Commitment and the repayment of all amounts
due under the Loan Documents. 
  
 Section 11.9 Executed in
Counterparts. The Loan Documents may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute
one and the same agreement. 
  
 Section 11.10 Entire Agreement;
Amendment, Etc. This Agreement together with the schedules and exhibits hereto comprise the entire agreement of the parties and may not be amended or modified except by written agreement of Borrower and Agent executed in conformance with the
terms hereof. No provision of this Agreement may be waived except in writing and then only in the specific instance and for the specific purpose for which given. 
  
 Section 11.11 Headings. The headings of the various provisions of this Agreement are for convenience of reference
only, do not constitute a part hereof, and shall not affect the meaning or construction of any provision hereof. 
  
 Section 11.12 Oral Agreements Not Enforceable. 
  
 ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW. 
  

 53 

 Section 11.13 Attorney Costs, Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the
Agent and each Lender for all reasonable expenses and costs incurred in connection with the development, preparation, negotiation and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification
of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs, and (b)
to pay or reimburse the Agent and each Lender for all reasonable expenses and costs incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents
(including all such costs and expenses incurred during any “workout” or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs. The
foregoing costs and expenses in (a) and (b) shall include all travel, search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Agent and the cost of
independent public accountants and other outside experts retained by the Agent or any Lender. All amounts due under this Section 11.13 shall be payable within ten Business Days after demand therefor. The agreements in this Section shall
survive the termination of the commitment of each Lender to extend credit hereunder and repayment of all other Obligations. 
  
 Section 11.14 Indemnification by the Borrower . Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify
and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered
in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any commitment to extend credit hereunder, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom
(including any refusal by the Agent as the Letter of Credit issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (c)
any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower, any Subsidiary or any Guarantor, or any Environmental Liability related in any way to the Borrower, any
Subsidiary or any Guarantor, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or
defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether
or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties,
claims, demands, actions, 

  

 54 

 
judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information
transmission systems in connection with this Agreement, nor shall any Indemnitee have any liability for any indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection
herewith or therewith (whether before or after the date of this Agreement). All amounts due under this Section 11.14 shall be payable within ten Business Days after demand therefor. The agreements in this Section shall survive the resignation
of the Agent, the replacement of any Lender, the termination of each Lender’s commitment to extend credit hereunder and the repayment, satisfaction or discharge of all the other Obligations. 
  
 Section 11.15 Payments Set Aside. To the extent that any payment by or
on behalf of the Borrower is made to the Agent or any Lender, or the Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief
Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not
occurred, and (b) each Lender severally agrees to pay to the Agent upon demand its applicable share of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate
per annum equal to the Federal Funds Rate from time to time in effect. 
  
 Section 11.16 Set-off. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time,
without prior notice to the Borrower or any Guarantor, any such notice being waived by the Borrower (on its own behalf and on behalf of each Guarantor) to the fullest extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the Borrower or a Guarantor, as applicable, against any and all Obligations owing to
such Lender hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not the Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be
contingent or unmatured or denominated in a currency different from that of the applicable deposit or indebtedness. Each Lender agrees promptly to notify the Borrower and the Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 
  
 Section 11.17 Interest Rate Limitations. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be
paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Agent or any Lender shall receive interest in an amount that 

  

 55 

 
exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the
Borrower. In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as
an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of
the Obligations hereunder. 
  
 Section 11.18 Waiver of Right to
Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 
  
 Section 11.19 Confidential Information. Each of Agent and Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information
and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this
Agreement; (e) in connection with the exercise of any remedies hereunder or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or under any other
Loan Document; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this
Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional advisor) to any credit derivative transaction relating to
obligations of a Loan Party; (g) with the consent of Borrower; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to Agent or any Lender on a nonconfidential
basis from a source other than Borrower; or (i) to the National Association of Insurance Commissioners or any other similar organization. In addition, Agent and Lenders may disclose the existence of this Agreement and information about this
Agreement to market data collectors, similar service providers to the lending industry, 

  

 56 

 
and service providers to Agent and Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitment,
and the Letters of Credit. For the purposes of this Section, “Information” means all information received from Borrower or any Subsidiary relating to Borrower or any Subsidiary or its business, other than any such information that
is available to Agent or any Lender on a nonconfidential basis prior to disclosure by Borrower or any Subsidiary; provided that, in the case of information received from Borrower or any Subsidiary after the date hereof, such information is
clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person
has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. In addition, Agent may disclose to any agency or organization that assigns standard
identification numbers to loan facilities such basic information describing the facilities provided hereunder as is necessary to assign unique identifiers (and, if requested, supply a copy of this Agreement), it being understood that the Person to
whom such disclosure is made will be informed of the confidential nature of such Information and instructed to make available to the public only such Information as such person normally makes available in the course of its business of assigning
identification numbers. Notwithstanding anything herein to the contrary, “Information” shall not include, and Agent and each Lender may disclose to any and all Persons, without limitation of any kind, any information with respect to
the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses)
that are provided to Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of
the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Loans, Letters of Credit and transactions contemplated hereby.

  
 Section 11.20 USA Patriot Act Notice. Each Lender that
is subject to the Act (as hereinafter defined) and Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower and each Guarantor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower and each Guarantor, which information includes the name and address of the Borrower, each Guarantor and other
information that will allow such Lender or Agent, as applicable, to identify the Borrower and each Guarantor in accordance with the Act. 
  

 57 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective
officers or agents thereunto duly authorized as of the date first above written. 
  
  

									
	BORROWER:	 	 	 	 FLOW INTERNATIONAL CORPORATION

				
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 __________________, ______________________

					
	 	 	 	 	 	 	 Address:
	 	 23500 64th Avenue South
 Kent, WA 98032
 Attn:____________________
 ____________________________

	 	 	 	 	 	 	 Telefax:
	 	 (253) 813-3311

			
	LENDERS:	 	 	 	 BANK OF AMERICA, N.A.

				
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Gordon H. Gray, Senior Vice President
					
	 	 	 	 	 	 	 Address:
	 	 WA1-501-35-01
 800 Fifth Avenue, Floor 35
 Seattle, WA 98104
 Attn: Gordon H. Gray
 Senior Vice President

	 	 	 	 	 	 	 Telefax:
	 	 (206) 358-3971

  

 58 

							
	 	 	 U.S. BANK NATIONAL ASSOCIATION

			
	 	 	 	 	 
	 	 	 	 	 By
	 	 
	 	 	 	 	 Its
	 	 
				
	 	 	 	 	 Address:
	 	 10800 NE 8th Street, Suite 1000
 Bellevue, WA 98004
 Attn: Alan Forney,
 ____________________

	 	 	 	 	 Telefax:
	 	 (425) 450-5709

  

									
			
	AGENT:	 	 	 	 BANK OF AMERICA, N.A.

				
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Ken Puro, Vice President
					
	 	 	 	 	 	 	 Address:
	 	 Agency Management
 WA1-501-37-20
 800 Fifth Avenue, Floor 37
 Seattle, WA 98104
 Attn: Ken Puro,
 Vice President

	 	 	 	 	 	 	 Telefax:
	 	 (206) 358-0971

  

 59 

 GUARANTORS’ CONSENT 
  
 Each undersigned guarantor (each a “Guarantor”) is a guarantor of the indebtedness, liabilities and
obligations of Flow International Corporation, a Washington corporation (the “Borrower”) under that certain Credit Agreement dated as of April             , 2005 (as
amended from time to time, the “Credit Agreement”) and the other Loan Documents referenced therein. Each Guarantor hereby acknowledges that it has received a copy of the Credit Agreement and hereby consents to its contents and the
other Loan Documents described therein (notwithstanding that such consent is not required). All capitalized terms not defined herein have the meanings given in the Credit Agreement. 
  
 GUARANTORS: 
  

									
	 AVURE TECHNOLOGIES, INC.
	 	 	 	 CIS ACQUISITION CORP.

					
	 By:
	 	 	 	 	 	 By:
	 	 
	 Name:
	 	 	 	 	 	 Name:
	 	 
	 Title:
	 	 	 	 	 	 Title:
	 	 
			
	FLOW WATER JET FLORIDA CORPORATION	 	 	 	 FLOW ASIA CORPORATION

					
	 By:
	 	 	 	 	 	 By:
	 	 
	 Name:
	 	 	 	 	 	 Name:
	 	 
	 Title:
	 	 	 	 	 	 Title:
	 	 
			
	FLOW EUROPE GmbH	 	 	 	AVURE TECHNOLOGIES AB
					
	 By:
	 	 	 	 	 	 By:
	 	 
	 Name:
	 	 	 	 	 	 Name:
	 	 
	 Title:
	 	 	 	 	 	 Title:
	 	 
			
	FLOW HOLDINGS SAGL	 	 	 	FLOW INTERNATIONAL FPS AB
					
	 By:
	 	 	 	 	 	 By:
	 	 
	 Name:
	 	 	 	 	 	 Name:
	 	 
	 Title:
	 	 	 	 	 	 Title:
	 	 

  

 60Eighth Amendment to Agreement

 Exhibit 10.85 
  
 REDACTED – OMITTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION 
 AND IS DENOTED HEREIN BY ***** 
  
 EIGHTH AMENDMENT TO AGREEMENT 
  
 THIS EIGHTH AMENDMENT TO AGREEMENT (this “Amendment”) is entered into as of the last date entered on the signature page of this Amendment by and among Charles
& Colvard, Ltd. (Formally C3, Inc.) a North Carolina corporation and John M. Bachman, Inc. (“JMB”). 
  
 Statement of Purpose 
  
 Charles & Colvard, Ltd. and JMB entered into an Agreement dated September 24, 1997 (the “Agreement”) to formalize the terms upon which JMB will cut moissanite gemstones for Charles & Colvard, a First Amendment to the
Agreement dated March 23, 1998 (the “First Amendment”), a Second Amendment to the Agreement dated September 28, 1998 (the “Second Amendment”), and a Third Amendment to the Agreement dated June 16, 1999 (the “Third
Amendment”), a Fourth Amendment to the Agreement dated October 5, 1999 (the “Fourth Amendment”), a Fifth Amendment to the Agreement dated December 29, 2000 (the “Fifth Amendment”), a Sixth Amendment to the Agreement dated
April 9, 2002 (the “Sixth Amendment”), a Seventh Amendment to the Agreement dated March 7, 2005 (the “Seventh Amendment”). 
  
 In consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows: 
  

	1.	Faceting Machines. 

  
 JMB currently stores 200 excess custom faceting machines (individually a “Machine” and collectively the “Machines”) which Charles
& Colvard, Ltd. owned as described in the Sixth Amendment to Agreement dated April 9, 2002. JMB agreed to repurchase the Machines from Charles & Colvard, Ltd., as referenced in the Seventh Amendment to the Agreement, beginning January 1,
2005 as long as Charles & Colvard, Ltd. monthly production stayed above ***** pieces (excluding the melee program). The original agreed purchase price is $300 per Machine or $60,000 in total as referenced in Section 1 of the Seventh Amendment to
the Agreement. The current outstanding balance for the complete purchase of the Machines by JMB as of May 15, 2005 is $39,646.45, as referenced on Exhibit A of this Amendment. 
  

	2.	Additional Expansion Funds. 

  
 Within 3 business days after the date of this Amendment, Charles & Colvard, Ltd. will advance to JMB by wire transfer per the bank instructions
provided by JMB, additional 

 REDACTED – OMITTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION 
 AND IS DENOTED HEREIN BY ***** 
  
 expansion funds in the amount of $135,000 (the “Expansion Funds”), which will be utilized by JMB solely to expand its affiliate’s
production facility and procure additional equipment and labor as needed to enable JMB and it’s affiliate to satisfy the requested production volumes set out in Section 5 of this Amendment. The entire amount of the Expansion Funds will be
advanced against production charges payable by Charles & Colvard, Ltd. and shall be credited against production charges pursuant to Section 3b of this Amendment. 
  

	3.	Cutting Charges. 

  

	 	a.	Purchase of Machines. 

  
 Charles & Colvard, Ltd. will pay JMB for moissanite gemstone cutting services at rates set forth on Exhibit A of the Seventh Amendment to the
Agreement. For cutting services provided by JMB, the amount payable to JMB by Charles & Colvard, Ltd. reflected on “each invoice” will continue to be reduced by 5% until the aggregate amount of such reductions equals the outstanding
balance on the purchase of Machines as of May 15, 2005 of $39,646.45 and Charles & Colvard, Ltd. has received full credit against production charges for the amount of the purchased Machines. As indicated in Section 1, Seventh Amendment of the
Agreement, for every $300 that the $60,000 (total cost) is reduced, title to one of the Machines will transfer from Charles & Colvard, Ltd. to JMB and upon full payment Charles & Colvard, Ltd. will retain no ownership interest in the
Machines. Upon full payment, Charles & Colvard, Ltd. shall execute such further documents as JMB may request to confirm the transfer of title and ownership of the Machines. In all other respects the current payment procedures are hereby
confirmed. 
  

	 	b.	Expansion Funds. 

  
 Upon full credit received by Charles & Colvard, Ltd. against JMB production charges for the purchase of the Machines as provided in Section 3a of this
Amendment, the 5% reduction will continue on “each invoice” and will be applied to the repayment of the Expansion Funds as agreed in Section 2 of this Amendment. Such 5% reduction shall continue until the aggregate amount of such credit
against production charges equals the Expansion Funds. In all other respects the ongoing payment procedures are hereby confirmed. 
  

	4.	Extension of Term. 

  
 The initial term of the Agreement will be extended from the date first set forth in the Agreement through June 30, 2007, however, Charles & Colvard,
Ltd. may terminate the Agreement at any time with 90 days prior written notice. 

 REDACTED – OMITTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION 
 AND IS DENOTED HEREIN BY ***** 
  

	5.	Production Procedures and Standards. 

  

	 	a.	Provided each inbound shipment of rough to JMB represents a mix of purchase orders at a ratio of ***** the monthly production volumes (finished pieces) “returned” to
Charles & Colvard, Ltd, shall be as follows: 

  

				
	 June 2005
	  	*	****
	 July 2005
	  	*	****
	 August 2005
	  	*	****
	 September 2005
	  	*	****
	 October 2005
	  	*	****
	 November 2005
	  	*	****
	 December 2005
	  	*	****

  
 If the production
schedule as noted above is interrupted and scheduled volumes to be delivered cannot be met, JMB agrees to contact Charles & Colvard, Ltd. via fax, to discuss a plan of action to recoup loss production time. Likewise, if the flow of raw material
to JMB is interrupted leading to loss production time such that the production schedule (above) cannot be met, Charles & Colvard, Ltd. will contact JMB, via fax, to discuss an alternative plan to recoup loss production time. 
  

	 	b.	The monthly melee production volume (finished pieces) shall be maintained at a rate of ***** pieces per month, if possible, in addition to the monthly production volumes as outlined
in Section 5a of this Amendment. Unless prior agreement exists between both parties, JMB agrees to contact Charles & Colvard, Ltd., via fax, if melee production falls below ***** pieces for 2 consecutive months, to discuss the future of the
melee program. 

  

	 	c.	In all other respects the production procedures and standards in the Agreement, as amended, are hereby confirmed. 

  

	6.	Confirmation of Agreement. 

  
 In all other respects the parties hereto confirm the terms of the Agreement, First Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth
Amendment, Sixth Amendment and Seventh Amendment. JMB will obtain in writing, and provide to Charles & Colvard, Ltd. the consent of its affiliate to be bound by the terms of this Amendment. 

 REDACTED – OMITTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION 
 AND IS DENOTED HEREIN BY ***** 
  
 IN WITNESS WHEREOF, each of the parties has executed and delivered this amendment by its duly authorized officer, as of the date first above written.

  

			
	Charles & Colvard, Ltd.
		
	By:	 	 /s/ Earl Hines

	Name:	 	Earl Hines
	Title:	 	Senior VP of Manufacturing
	
	Date: 5/18/05
	
	John M. Bachman, Inc.
		
	By:	 	 /s/ John M. Bachman

	Name:	 	John M. Bachman
	Title:	 	President
	
	Date: 5/18/05

 REDACTED – OMITTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION 
 AND IS DENOTED HEREIN BY ***** 
  
 Exhibit A 
  
 ***** purchase of Faceting Machines 2005 
 Statement 
 Machine Reduction 
  

										
	Date Invoice

	 	Invoice No

	 	5% deduction

	 	 	$60,000.00

	1/7/2005	 	172	 	$	(3,206.04	)	 	$	56,793.96
	1/20/2005	 	173	 	$	(2,147.51	)	 	$	54,646.45
	2/8/2005	 	174	 	$	(2,500.00	)	 	$	52,146.45
	2/22/2005	 	175	 	$	(2,500.00	)	 	$	49,646.45
	3/4/2005	 	176	 	$	(2,500.00	)	 	$	47,146.45
	3/22/2005	 	177	 	$	(2,500.00	)	 	$	44,646.45
	4/5/2005	 	178	 	 	NIL	 	 	$	44,646.45
	4/20/2005	 	179	 	$	(2,500.00	)	 	$	42,146.45
	5/6/2005	 	180	 	$	(2,500.00	)	 	$	39,646.45

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}]]