Document:

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                                                                   EXHIBIT 10.54

SALEM FIVE CENTS SAVINGS BANK                             COMMERCIAL REAL ESTATE
                                                                 PROMISSORY NOTE
--------------------------------------------------------------------------------
$5,600,000.00                                              Boston, Massachusetts
                                                         Date: December 23, 2003

     FOR VALUE RECEIVED, the undersigned (also referred to herein as the
"Borrower") jointly and severally promises to pay to the order of

                          Salem Five Cents Savings Bank
              (hereinafter, with any subsequent holder, the "Bank")

at an office of the Bank, the sum of FIVE MILLION SIX HUNDRED THOUSAND DOLLARS
($5,600,000.00), or so much thereof as may have been advanced, with interest on
the unpaid principal balance of the within Note (based upon a three hundred and
sixty (360) day year and actual day months) at a fixed rate to be determined as
follows: commencing as of the date hereof until the Initial Maturity Date (as
defined below), the interest rate shall be five and 42/100 percent (5.42%) per
annum. In the event the Borrower properly extends the term of this Note as
provided below, on the Initial Maturity Date, the interest rate will be adjusted
to a per annum rate which shall be fixed for the next three (3) years of this
Note, equal to the aggregate of the Federal Home Loan Bank Rate for three (3)
year maturities quoted as of the Initial Maturity Date plus two hundred fifty
(250) basis points. Interest will be calculated on the basis of a 360 day
banking year and charged for the actual number of calendar days elapsed.

     Principal and interest on this Note shall be repaid as follows:

          (a)  Commencing January 23, 2004 and on the same date of each calendar
     month thereafter, the Borrower shall make consecutive monthly payments of
     principal and interest. Each monthly payment shall be in the amount of
     Thirty Eight Thousand Two Hundred Sixty Nine and 10/100 ($38,269.10).

          (b)  In all events and under all circumstances, unless sooner paid,
     and unless properly extended as set forth below, the entire outstanding
     principal balance hereof, and all accrued and unpaid interest hereon shall
     be due and payable on December 23, 2006 (the "Initial Maturity Date").

     The undersigned may elect to extend the maturity of this Note for an
additional three (3) year period (the "Extension Period") by furnishing the Bank
with written notice of such election at least thirty (30) but not more than
ninety (90) days prior to the Initial Maturity Date, but such extension shall be
allowed only if (i) no Event of Default (as defined below) has occurred both as
of the date the extension notice is given and as of the Initial Maturity Date,
(ii) as of the date the extension notice is given and as of the Initial Maturity
Date the Borrower is in compliance with all of the terms and conditions of (a)
the Loan Documents (as defined below), and (b) any other loan facility then in
place with the Bank or any other lender, subject in both events to any
applicable grace and cure periods, and (iii) on the date the extension notice is
given the Borrower pays to the Bank a nonrefundable extension fee in an amount
equal to one-quarter of one percent

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(.25%) of the then principal balance of this Note. During the Extension Period
the Borrower shall pay interest on this Note at the rate as provided above.

               In the event the term of this Note is properly extended as set
          forth above, during the Extension Period principal and interest on
          this Note shall be repaid as follows:

               (c)  Commencing December 23, 2006 and on the same date of each
          calendar month thereafter, the Borrower shall make consecutive monthly
          payments of principal and interest, each in an amount based upon (x)
          the principal amount of this Note as of the Initial Maturity Date, (y)
          the fixed rate of interest then in effect, and (z) a seventeen (17)
          year mortgage-style amortization schedule.

               (d)  In all events and under all circumstances, unless sooner
          paid, the entire outstanding principal balance hereof, and all accrued
          and unpaid interest hereon shall be due and payable on December 23,
          2009 (the "Extension Maturity Date").

     Hereinafter, the then applicable from among the Initial Maturity Date and
the Extension Maturity Date may be referred to as the "Maturity Date."

     The Borrower shall pay a late charge equal to three (3%) percent of any
amount not paid within ten (10) days of when due. Following any Event of Default
and until paid in full, outstanding principal shall bear interest at the greater
of (i) five percent (5%) above the interest rate in effect as of the occurrence
of such default, and (ii) eighteen percent (18%) per annum.

     The Borrower shall pay a prepayment premium equal to three percent (3.00%)
of any principal amount prepaid on this Note during the first year of this Note,
two percent (2.00%) of any principal amount prepaid on this Note during the
second year of this Note, and one percent (1.00%) of any principal amount
prepaid on this Note during the third year of this Note, provided, however,
notwithstanding the foregoing, there shall be no prepayment penalty (i) if this
Note is prepaid between September 23, 2006 and the Initial Maturity Date, or
between September 23, 2009 and the Extension Maturity Date, or (ii) if such
prepayment is made as required pursuant to Section 4-25 of that certain
Mortgage, Security Agreement and Assignment of even date by and among the
Borrower and the Bank.

     Any payment received by the Bank on account of this Note (which may, at the
discretion of the undersigned, be made by ACH wire transfer) prior to demand or
acceleration shall be applied first, to any costs, expenses, or charges then
owed the Bank by the undersigned, second, to accrued and unpaid interest, and
third, to the unpaid principal balance hereof. Any payments so received after
demand or acceleration shall be applied in such manner as the Bank may
determine. The undersigned hereby authorizes the Bank to charge any deposit
account which the undersigned may maintain with the Bank for any payment
required hereunder.

     The undersigned represents to the Bank that the proceeds of this Note will
not be used for personal, family, or household purposes.

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     The Bank, at its option, may declare the entire unpaid principal balance of
this Note and accrued unpaid interest thereon to be immediately due and payable
without demand, notice or protest (which are hereby waived) upon the occurrence
of any one or more of the following events (herein, "Events of Default"):

     (a)  The failure by the undersigned to pay any amount due under this Note
within ten (10) days of when due; (b) The failure by the undersigned to pay
within ten (10) days of when due, any of the undersigned's liabilities,
obligations, and indebtedness to the Bank (herein, the "Liabilities"); (c) The
failure by the undersigned to promptly, punctually, and faithfully perform,
discharge, or comply with any of the undersigned's nonmonetary Liabilities
within thirty (30) days of notice thereof, and if not susceptible of cure within
thirty (30) days, such longer period as may be required, but in no event to
exceed ninety (90) days; (d) Any representation or warranty heretofore, now, or
hereafter made by the undersigned to the Bank, in any document, instrument,
agreement, or paper was not true or accurate in any material respect when given;
(e) The occurrence of any event such that any indebtedness of the undersigned to
any lender other than the Bank could be accelerated, notwithstanding that such
acceleration has not taken place ; (f) The occurrence of any event of default
(continuing beyond the expiration of applicable grace and/or cure periods, if
any) under any agreement between the Bank and the undersigned, or instrument or
paper given the Bank by the undersigned, whether such agreement, instrument, or
paper now exists or hereafter arises (notwithstanding that the Bank may not have
exercised its rights upon default under any such other agreement, instrument or
paper); (g) Any act by, against, or relating to the undersigned, or its property
or assets, which act constitutes the application for, consent to, or sufferance
of the appointment of a receiver, trustee, or other person, pursuant to court
action or otherwise, over all, or any part of the undersigned's property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of the undersigned, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for the undersigned; the
failure by the undersigned to generally pay the debts of the undersigned as they
mature; adjudication of bankruptcy or insolvency relative to the undersigned;
the entry of an order for relief or similar order with respect to the
undersigned in any proceeding pursuant to the Title 11, United States Code
(commonly referred to as the Bankruptcy Code) or any other federal bankruptcy
law; the filing of any complaint, application, or petition by or against the
undersigned initiating any matter in which the undersigned is or may be granted
any relief from the debts of the undersigned pursuant to the Bankruptcy Code or
to any other insolvency statute or procedure; provided, it shall not be an Event
of Default hereunder if such complaint, application or petition is filed against
the undersigned, whereby such complaint, application or petition is being
diligently contested until the earlier of (x) the entry of an Order For Relief
against the undersigned, or (y) the expiration of forty five (45) days without
dismissal of such complaint, application or petition); the offering by, or
entering into by, the undersigned of any composition, extension or any other
arrangement seeking relief or extension for the debts of the undersigned, or the
initiation of any other judicial or non-judicial proceeding or agreement by,
against, or including the undersigned which seeks or intends to accomplish a
re-organization or arrangement with creditors; (h) The entry of any judgment
against the undersigned, which judgment is not satisfied or appealed from (with
execution or similar process stayed) within thirty (30) days of its entry; (i)
The termination of existence, dissolution, winding

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up, or liquidation of the undersigned; (j) The occurrence of any of the
foregoing Events of Default with respect to any beneficiary or partner of the
undersigned or any guarantor, endorser, or surety to the Bank of the
Liabilities, as if such beneficiary, partner, guarantor, endorser, or surety
were the "undersigned" described therein; (k) The termination of any guaranty by
any guarantor of the Liabilities.

     In addition, at the Bank's option and without demand, notice or protest,
the occurrence of any such Event of Default shall also constitute a default
under all other agreements between the Bank and the undersigned and under all
other instruments and papers given the Bank by the undersigned.

     Any and all deposits or other sums at any time credited by, or due to the
undersigned from, the Bank or any of its banking or lending affiliates or any
bank acting as a participant under any loan arrangement between the Bank and the
undersigned, and any cash, securities, instruments, or other property of the
undersigned in the possession of the Bank, or any of its banking or lending
affiliates, or any bank acting as a participant under any loan arrangement
between the Bank and the undersigned, whether for safekeeping, or otherwise, or
in transit to or from the Bank or any of its banking or lending affiliates or
any such participant, or in the possession of any third party acting on the
Bank's behalf (regardless of the reason the Bank had received same or whether
the Bank has conditionally released the same) shall at all times constitute
security for any and all Liabilities, and may be applied or set off against such
Liabilities at any time whether or not other collateral is available to the
Bank.

     No delay or omission by the Bank in exercising or enforcing any of the
Bank's powers, rights, privileges, remedies, or discretions hereunder shall
operate as a waiver thereof on that occasion nor on any other occasion. No
waiver of any default hereunder shall operate as a waiver of any other default
hereunder, nor as a continuing waiver.

     But for claims in which it is finally determined by a court of competent
jurisdiction that the Bank has acted with gross negligence and/or willful
misconduct the undersigned, and each endorser and guarantor of this Note, shall
indemnify, defend, and hold the Bank harmless against any claim brought or
threatened against the Bank by the undersigned, by any endorser or guarantor, or
by any other person (as well as from attorneys' reasonable fees and expenses in
connection therewith) on account of the Bank's relationship with the undersigned
or any endorser or guarantor hereof (each of which may be defended, compromised,
settled, or pursued by the Bank with counsel of the Bank's selection, but at the
expense of the undersigned and any endorser and/or guarantor).

     The undersigned will pay on demand all attorneys' reasonable fees and
out-of-pocket expenses incurred by the Bank in the administration of all
Liabilities of the undersigned to the Bank, including, without limitation, costs
and expenses associated with travel on behalf of the Bank. The undersigned will
also pay on demand, all attorneys' reasonable fees, out-of-pocket expenses
incurred by the Bank's attorneys and all costs incurred by the Bank, including,
without limitation, costs and expenses associated with travel on behalf of the
Bank, which costs and expenses are directly or indirectly related to the
preservation, protection, collection or

                                      -4-
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enforcement of any of the Bank's rights against the undersigned or any such
endorser or guarantor and against any collateral given the Bank to secure this
Note or any other Liabilities of the undersigned or such endorser and guarantor
to the Bank (whether or not suit is instituted by or against the Bank).

     The undersigned, and each endorser and guarantor of this Note, respectively
waives presentment, demand, notice, and protest, and also waives any delay on
the part of the holder hereof. Each assents to any extension or other indulgence
(including, without limitation, the release or substitution of collateral)
permitted the undersigned or any endorser or guarantor by the Bank with respect
to this Note and/or any collateral given to secure this Note or any extension or
other indulgence, as described above, with respect to any other liability or any
collateral given to secure any other liability of the undersigned or any
endorser or guarantor to the Bank.

     This Note shall be binding upon the undersigned and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns, and
representatives, and shall inure to the benefit of the Bank and its successors,
endorsees, and assigns.

     The liabilities of the undersigned and any endorser or guarantor of this
Note are joint and several; provided, however, the release by the Bank of the
undersigned or any one or more endorser or guarantor shall not release any other
person obligated on account of this Note. Each reference in this Note to the
undersigned, any endorser, and any guarantor, is to such person individually and
also to any such persons jointly. No person obligated on account of this Note
may seek contribution from any other person also obligated unless and until all
liabilities, obligations and indebtedness to the Bank of the person from whom
contribution is sought have been satisfied in full.

     The undersigned makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Bank, in the establishment and
maintenance of the Bank's relationship with the Borrower contemplated by the
within Note, is relying thereon. THE UNDERSIGNED AND THE BANK, TO THE EXTENT
ENTITLED THERETO, EACH HEREBY WAIVE ANY PRESENT OR FUTURE RIGHT OF THE BANK, THE
UNDERSIGNED, OR OF ANY GUARANTOR OR ENDORSER OF THE UNDERSIGNED OR OF ANY OTHER
PERSON LIABLE TO THE BANK ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES, TO A
TRIAL BY JURY IN ANY CASE OR CONTROVERSY IN WHICH THE BANK IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE BANK OR IN
WHICH THE BANK IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST OR BETWEEN THE
UNDERSIGNED, ANY SUCH PERSON, AND THE BANK.

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     This Note is delivered to the Bank at one of its offices in Massachusetts,
shall be governed by the laws of the Commonwealth of Massachusetts, and shall
take effect as a sealed instrument. The undersigned and each endorser and
guarantor of this Note each submits to the jurisdiction of the courts of The
Commonwealth of Massachusetts for all purposes with respect to this Note, any
collateral given to secure their respective liabilities, obligations and
indebtedness to the Bank, and their respective relationships with the Bank.

WITNESS                                 MAKER ("the undersigned")

Signed in my Presence                   BTU International, Inc.

                                        By:
----------------------------                -----------------------------------
                                            Name: Thomas P. Kealy
                                            Title: Vice President

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SALEM FIVE CENTS SAVINGS BANK                       MORTGAGE, SECURITY AGREEMENT
                                                                  AND ASSIGNMENT
--------------------------------------------------------- ----------------------

       THIS MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT is granted this 23rd day
of December, 2003 to

       Salem Five Cents Savings Bank (hereinafter, the "Mortgagee"), a
       Massachusetts savings bank with a principal place of business at 210
       Essex Street, Salem, Massachusetts 01970

       by

       BTU International, Inc., a Delaware corporation (hereinafter, the
       "Mortgagor") with a principal place of business at 23 Esquire Road, North
       Billerica, Massachusetts 01862.

In consideration of the mutual covenants contained herein and benefits derived
herefrom, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Mortgagor agrees to the following terms
and conditions:

ARTICLE 1 - GRANT OF MORTGAGE INTEREST
--------------------------------------

       1-1    Mortgage Interest. To secure the Mortgagor's prompt, punctual, and
faithful payment and performance of all and each of the Mortgagor's present and
future Liabilities (as that term is defined in Section 3-1 herein) to the
Mortgagee, including, without limitation, those arising under a certain
Commercial Real Estate Promissory Note dated December 23, 2003 in the original
principal amount of $5,600,000.00 and any extensions, renewals, substitutions,
modifications, or replacements thereof (hereinafter, the "Note"), the Mortgagor
hereby grants, mortgages, assigns, and transfers to the Mortgagee with MORTGAGE
COVENANTS, the Collateral (as that term is defined in Section 3-3 herein). The
Mortgagor intends to convey and hereby does convey to the Mortgagee with
MORTGAGE COVENANTS (to be included within the Collateral), the premises
described (a) in those certain deeds to the Mortgagor recorded with the
Middlesex North District Registry of Deeds in Book 2413, Page 273, and Book
2194, Page 104, and (b) in Certificate of Title #28534 filed with Middlesex
North Registry District of the Land Court in Book 145, Page 267.

ARTICLE 2 - GRANT OF SECURITY INTEREST AND ASSIGNMENT
-----------------------------------------------------

       2-1    Security Interest. To secure the Mortgagor's prompt, punctual, and
faithful payment and performance of all and each of the present and future
Liabilities to the Mortgagee, including, without limitation, those arising under
the Note, the Mortgagor hereby grants to the Mortgagee a continuing security
interest in and to, and assigns to the Mortgagee, the Collateral (as that term
is defined in Section 3-3 herein).

       2-2    Financing Statement. This Agreement is intended to take effect as
a security agreement and is to be filed with the above described Registry of
Deeds and Registry District of the Land Court in lieu of a financing statement
pursuant to the Massachusetts General Laws, Chapter 106, Section 9-502
(hereinafter, the "UCC").

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       2-3    Power of Attorney. The Mortgagor hereby irrevocably constitutes
and appoints the Mortgagee as the Mortgagor's true and lawful attorney for the
purpose of signing and filing or recording on behalf of the Mortgagor any
financing or other statement in order to establish, perfect or protect the
Mortgagee's interest in the Collateral.

ARTICLE 3 - CERTAIN DEFINITIONS
-------------------------------

       As used herein, the following terms shall have the following meanings:

       3-1    Liabilities. "Liabilities" includes, without limitation, any and
all liabilities, debts, and obligations of the Mortgagor to the Mortgagee, now
or hereafter, each of every kind, nature and description related to that certain
loan arrangement of even date by and among the Mortgagor and the Mortgagee and
evidenced by the Note (the "Loan Arrangement"). "Liabilities" also includes,
without limitation, each obligation to repay all loans, advances, indebtedness,
notes, obligations, and amounts now or hereafter at any time owing by the
Mortgagor to the Mortgagee pursuant to the Loan Arrangement (including all
future advances or the like whether or not given pursuant to a commitment by the
Mortgagee), whether or not any of such are liquidated, unliquidated, secured,
unsecured, direct, indirect, absolute, contingent, or of any other type, nature,
or description, or by reason of any cause of action which the Mortgagee now or
hereafter may hold against the Mortgagor pursuant to the Loan Arrangement.
"Liabilities" also includes, without limitation, all notes and other obligations
of the Mortgagor now or hereafter assigned to or held by the Mortgagee pursuant
to the Loan Arrangement, each of every kind, nature, and description.
"Liabilities" also includes, without limitation, all interest and other amounts
which may be charged to the Mortgagor and/or which may be due from the Mortgagor
to the Mortgagee from time to time pursuant to the Loan Arrangement and all
costs and expenses now or hereafter incurred or paid by the Mortgagee in respect
of this and any other agreement between the Mortgagor and the Mortgagee or
instrument furnished by the Mortgagor to the Mortgagee pursuant to the Loan
Arrangement (including, without limitation, Costs of Collection, attorneys'
reasonable fees, and all court and litigation costs and expenses). "Liabilities"
also includes, without limitation, any and all obligations of the Mortgagor to
act or to refrain from acting in accordance with the terms, provisions, and
covenants of the within Agreement and of any other agreement between the
Mortgagor and the Mortgagee or instrument now or hereafter furnished by the
Mortgagor to the Mortgagee pursuant to the Loan Arrangement. As used herein, the
term "indirect" includes, without limitation, all obligations and liabilities
which the Mortgagee may now or hereafter incur or become liable for on account
of or as a result of the Loan Arrangement, and any which might arise out of any
action brought or threatened against the Mortgagee, any guarantor or endorser of
the Liabilities of the Mortgagor or any other person in connection with the Loan
Arrangement. The Mortgagee's books and records shall be prima facie evidence of
the Mortgagor's indebtedness to the Mortgagee.

       3-2    Costs of Collection. "Costs of Collection" includes, without
limitation, all reasonable attorneys' fees, and all out-of-pocket expenses
incurred by the Mortgagee's attorneys, and all costs incurred by the Mortgagee
in the administration of the Liabilities, this Agreement, and all other
documents, instruments, and agreements executed in connection with or relating
to the Liabilities, including, without limitation, costs and expenses associated
with travel on behalf of the Mortgagee. "Costs of Collection" also includes,
without limitation, all attorneys'

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<PAGE>

reasonable fees, out of pocket expenses incurred by the Mortgagee's attorneys,
and all costs incurred by the Mortgagee, including, without limitation, costs
and expenses associated with travel on behalf of the Mortgagee, which costs and
expenses are directly or indirectly related to or in respect of the Mortgagee's
efforts to collect or enforce any of the Liabilities and/or to exercise or
enforce any of the Mortgagee's rights, remedies, or powers against or in respect
of the Mortgagor and/or any other guarantor or person liable in respect of the
Liabilities (whether or not suit is instituted in connection with such efforts).
The Costs of Collection shall be added to the Liabilities of the Mortgagor to
the Mortgagee, as if such had been lent, advanced, and credited by the Mortgagee
to, or for the benefit of, the Mortgagor, and shall accrue interest at the
highest rate of interest charged relative to any of the Liabilities.

       3-3    Collateral. "Collateral" shall include all and each of the
Mortgagor's interest in the following, whether singly or collectively, whether
real property, personal property, or a combination thereof, whether now owned or
now due or now existing, or in which the Mortgagor has an interest, or
hereafter, at any time in the future, acquired, arising, or to become due, or in
which the Mortgagor obtains an interest, and all proceeds, products,
substitutions and accessions of or to any of the following:

              (a)    the land with buildings and improvements whether now
existing or hereafter constructed or located thereon, situated in Billerica,
Massachusetts and known as 23 Esquire Road, Billerica, Massachusetts (the
"Premises") as such premises are described in Exhibit A annexed hereto;

              (b)    all furnaces, ranges, heaters, plumbing goods, gas and
electric fixtures, screens, screen doors, mantels, shades, storm doors and
windows, awnings, oil burners and tanks or other equipment, gas or electric
refrigerators and refrigerating systems, ventilating and air conditioning
apparatus and equipment, door bell and alarm systems, sprinkler and fire
extinguishing systems, portable or sectional buildings, and all other fixtures
of whatever kind or nature owned by the Mortgagor, now or in the future
contained in or on the Mortgaged Premises, and any and all similar fixtures
hereinafter installed in the Mortgaged Premises in any manner which renders such
articles usable in connection therewith;

              (c)    all easements, covenants, agreements and rights which are
appurtenant to or benefit the Mortgaged Premises;

              (d)    all machinery, equipment, furniture, inventory, building
supplies, and appliances, owned by the Mortgagor, used or useful in the
construction, operation, maintenance, or occupation of the Mortgaged Premises or
any portion or unit thereof;

              (e)    all leases, contracts or agreements entered into, for the
lease, rental, hire or use by the Mortgagor of any property of the same nature
as the foregoing Subparagraphs (b) and (d) in connection with the construction,
operation, maintenance or occupation of the Mortgaged Premises;

              (f)    all leases, tenancies, and occupancies, whether written or
not, regarding all or any portion of the foregoing (a through e) (hereinafter,
the "Leases"), all guarantees and security relating thereto, together with all
income and profit arising therefrom or from any of the

                                      -3-
<PAGE>

foregoing Subparagraphs (a) through (e), and all payments due or to become due
thereunder (hereinafter, the "Rental Payments"), including, without limitation,
all rent, additional rent, damages, insurance payments, taxes, insurance
proceeds, condemnation awards, or any payments with respect to options contained
therein (including any purchase option);

              (g)    all contracts and agreements (together with the easements,
covenants, agreements and rights referred to in Section 3-3(c), above, and the
leases, contracts and agreements referred to in Section 3-3(e), above,
hereinafter the "Contracts") licenses, permits and approvals (hereinafter, the
"Licenses") and warranties and representations, relative to the use, operation,
management, construction, repair or service of any of the foregoing
Subparagraphs (a) through (f);

              (h)    all of the Mortgagor's right, title and interest arising
out of any agreement to buy or sell a portion or portions of the Mortgaged
Premises;

              (i)    any other property of the Mortgagor in which the Mortgagee
may in the future be granted an interest;

              (j)    all funds held by the Mortgagee as tax or insurance escrow
payments;

              (k)    all proceeds received from the sale, exchange, collection
or other disposition of any of the foregoing Subparagraphs (a) through (j),
including, without limitation, equipment, inventory, goods, documents,
securities, accounts, chattel paper, and general intangibles (as each of those
terms is defined in the UCC); all insurance proceeds relating to all or any
portion of the foregoing Subparagraphs (a) through (j); and all awards, damages,
proceeds, or refunds from any state, local, federal or other takings of, and all
municipal tax abatements relating to, all or any portion of the foregoing
Subparagraphs (a) through (j); and

              (l)    all rights, remedies, representations, warranties, and
privileges pertaining to any of the foregoing Subparagraphs (a) through (k).

       3-4    Mortgaged Premises. "Mortgaged Premises" shall mean and refer to
that portion of the Collateral described in Sections 3-3(a) and 3-3(c) herein.

       3-5    Personal Property. "Personal Property" shall mean and refer to all
of the Collateral other than that portion of the Collateral which is included
within the definition of Mortgaged Premises.

       3-6    Receivables Collateral. "Receivables Collateral" shall mean and
refer to all Rental Payments and all rights to payment now held, or in which the
Mortgagor has an interest or hereafter acquired by the Mortgagor, or in which
the Mortgagor obtains an interest, arising out of, constituting a part of, or
relating to all or a portion of the Collateral.

                                      -4-
<PAGE>

ARTICLE 4 - REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------

       4-1    Existence and Authority. The execution and delivery of this
Agreement, and of any other instrument executed and delivered in connection
herewith, constitutes representations by the Mortgagor and the individual(s)
signing this Agreement and said instruments that such execution and delivery is
made in accordance with the terms and provisions of the Mortgager's Articles of
Incorporation and By-laws with the authorization of, to the extent required, the
directors and officers of the Mortgagor, and that it does bind the Mortgagor.

       4-2    Insurance. The Mortgagor hereby covenants and agrees to maintain
public liability insurance, flood hazard insurance, all risk insurance,
builder's risk insurance, and such other insurance against such casualties or
contingencies as may be required by the Mortgagee in sums and in companies
satisfactory to the Mortgagee; provided, the property insurance on the
Collateral shall be for no less than 100% of full replacement value thereof
(meeting all co-insurance requirements). All policies shall contain a provision
requiring at least thirty (30) days advance notice to the Mortgagee before any
cancellation or modification. All insurance on the Collateral shall be for the
benefit of and deposited with the Mortgagee, shall be first payable to the
Mortgagee, and shall include such endorsement in favor of the Mortgagee as the
Mortgagee may specify. The endorsement shall provide that the insurance, to the
extent of the Mortgagee's interest therein, shall not be impaired or
invalidated, in whole or in part, by reason of any act or neglect of the
Mortgagor, or failure by the Mortgagor to comply with any warranty or condition
of the policies. The Mortgagor shall advise the Mortgagee of each claim made by
the Mortgagor under any policy of insurance which covers all or any portion of
the Collateral and, at the Mortgagee's option in each instance, will permit the
Mortgagee, to the exclusion of the Mortgagor, to conduct the adjustment of each
such claim. The Mortgagor hereby appoints the Mortgagee as the Mortgagor's
attorney in fact to obtain, adjust, settle, and cancel any insurance described
in this section and to endorse in favor of the Mortgagee any and all drafts and
other instruments with respect to such insurance. The within appointment, being
coupled with an interest, is irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Mortgagee. The
Mortgagee shall not be liable for any loss sustained on account of any exercise
pursuant to said power unless such loss is caused by the willful misconduct and
actual bad faith of the Mortgagee. If any insurance proceeds are equal to or
less than $50,000.00, the Mortgagee shall make such proceeds available to the
Mortgagor to repair or reconstruct the improvements, and the Mortgagor shall
certify completion of such repair or reconstruction within ninety (90) days of
receipt of such insurance proceeds. If such proceeds are greater than
$50,000.00, the Mortgagee shall make such proceeds available to the Mortgagor to
repair or reconstruct the Mortgaged Premises provided (i) the repair and
reconstruction is in accordance with plans approved by the Mortgagee; (ii) the
Mortgagor delivers to the Mortgagee for disbursement any funds in excess of such
proceeds deemed necessary by the Mortgagee for such repair or reconstruction;
(iii) each holder of a mortgage on the Mortgaged Premises consents to the
arrangement provided for herein; and (iv) such proceeds and funds are subject to
disbursement for such repair or reconstruction by the Mortgagee pursuant to such
reasonable disbursement requirements as may be established by the Mortgagee;
provided, however, if such conditions for the use of the insurance proceeds are
not satisfied or, after the occurrence of an Event of Default not cured within
any applicable grace period, the Mortgagee may apply any of

                                      -5-
<PAGE>

the proceeds of such insurance against the obligations of the Mortgagor to the
Mortgagee, whether or not such have matured, in such manner as the Mortgagee
shall, in its sole discretion, determine.

       4-3    Statutory Compliance. The Mortgagor shall comply with, shall not
use any of the Collateral in violation of, and shall cause the Collateral to be
in compliance with, each and every License, statute, regulation, ordinance,
decision, directive, order, by-law, or rule of any federal, state, municipal,
and other governmental authority which has or claims jurisdiction over the
Mortgagor or any of the Collateral. The Mortgagor has obtained, and will
maintain in full force and effect, the Licenses and all licenses, permits and
approvals necessary for the use, maintenance, construction and operation of the
Collateral, and at the option of the Mortgagee, will do all things and execute
all such documents as the Mortgagee may request to assign the Mortgagor's rights
therein to the Mortgagee.

       4-4    Title to Collateral. The Mortgagor is, and shall hereafter remain,
the owner of the Collateral free and clear of all voluntary or involuntary
liens, encumbrances, attachments, security interests, purchase money security
interests, assignments, mortgages, charges or other liens or encumbrances of any
nature whatsoever, with the exceptions of (a) the mortgage and security interest
created herein, (b) inchoate liens or liens for real estate taxes in either case
not yet due and payable, and (c) those exceptions listed on the lender's policy
of title insurance accepted by the Mortgagee in connection with the Loan
Arrangement.

       4-5    Condition of Collateral. The Collateral is, and shall hereafter
remain, in good repair, well maintained and in good working order. The Mortgagor
shall make all necessary repairs, replacements, additions and improvements to
maintain the Collateral in good order and condition. The Mortgagor shall not
cause or permit to be suffered any waste, destruction or loss (whether or not
such loss is insured against) to the Collateral or any part thereof, or use any
of the Collateral in violation of any applicable statute, regulation, ordinance,
decision, directive, order, by-law, or rule, or any policy of insurance thereon.

       4-6    Inspection of Collateral. From time to time as the Mortgagee and
the Mortgagee's representatives may request, upon reasonable prior notice the
Mortgagor shall accord the Mortgagee and such representatives access to the
Collateral and all books and records relating to the use, operation,
construction, or management thereof, and in connection with such access, will
permit the Mortgagee and such representatives to inspect the Collateral, verify
any information contained therein or relating thereto, and verify the
Mortgagor's compliance with the provisions of this Agreement or of any other
agreement between the Mortgagor and the Mortgagee and any instrument to be
furnished by the Mortgagor to the Mortgagee.

       4-7    Taxes and other Costs. To the extent payment is not provided for
in Section 4-9 herein, the Mortgagor shall pay when due all real and personal
property taxes, assessments, charges, franchises, income, unemployment, old age
benefits, withholding, sales, and other taxes assessed against it, condominium
assessments, if any, and all insurance premiums relative to the Collateral. The
Mortgagor shall deliver to the Mortgagee, upon request of Mortgagee, evidence of
the payment by the Mortgagor of all such items. The Mortgagor agrees that the
Mortgagee may, at its option, and from time to time, pay any taxes, condominium
assessments, if any, or insurance premiums, the payment of which is then due,
discharge any liens or encumbrances on any of the Collateral, or take any other
action that the Mortgagee may deem proper to repair, insure,

                                      -6-
<PAGE>

maintain, or preserve any of the Collateral or the Mortgagee's rights therein.
The Mortgagor will pay to the Mortgagee on demand all amounts so paid or
incurred by the Mortgagee. The obligation of the Mortgagor to pay such amounts
shall be included in the Liabilities of the Mortgagor to the Mortgagee and shall
accrue interest at the highest rate of interest charged relative to any of the
Liabilities.

       4-8    Property of Third Parties. The Mortgagor shall not suffer or
permit any item of property owned by a third party to be affixed, attached, or
installed on, upon or within, or be located at, the Mortgaged Premises, or any
portion or unit thereof, which may be subject to any security interest, lien,
encumbrance or charge which is prior or superior to the interest granted herein.

       4-9    Tax and Insurance Escrow. In addition to other payments herein
required, the Mortgagor shall, at the Mortgagee's option, exercisable at any
time or from time to time, now or in the future, pay to the Mortgagee monthly on
the first of each month, or such other day of the month as may be designated by
the Mortgagee during the term hereof, and for so long as the Liabilities secured
by this Agreement shall remain unpaid, an amount equal to one-twelfth (1/12th)
of the municipal taxes and assessments which the Mortgagee estimates will become
payable on account of the Mortgaged Premises for the year next succeeding any
period for which such taxes and assessments have been paid or escrowed
hereunder, and/or one-twelfth (1/12th) of the insurance premiums which the
Mortgagee estimates will become payable on account of the Collateral for the
year next succeeding any period for which such premiums have been paid or
escrowed hereunder, sufficient to enable Mortgagee to accumulate at least thirty
(30) days prior to the dates upon which such municipal taxes and assessments or
insurance premiums are payable the amounts then due and payable. Further, the
Mortgagor shall pay to the Mortgagee on demand the amount of any deficiency of
the funds so collected when the actual amount of such taxes and assessments or
insurance premiums become known. The Mortgagee shall maintain such funds in a
non-interest bearing account which may be commingled with other funds of the
Mortgagee. The Mortgagee shall apply said funds to the payment of municipal
taxes and assessments or insurance premiums, as applicable, to the extent such
amounts are determined by the Mortgagee to be due and payable. In the event the
Mortgagee collects such tax or insurance payments hereunder, the Mortgagor shall
deliver to the Mortgagee the bills representing any such amounts within five (5)
days of the receipt thereof by the Mortgagor. Notwithstanding the provisions of
this Section 4-9, upon an occurrence of an event which is, or, solely with the
passage of time, would be, an Event of Default hereunder, the Mortgagee shall
not be required to apply such funds as provided above, and may set off such
funds against the Liabilities and apply any such funds towards the Liabilities
in accordance with Section 9-6, hereunder.

       4-10   Litigation. There is no suit, action, proceeding, or investigation
presently pending or threatened against the Mortgagor, or any of the Collateral,
which, if determined adversely, would have a material adverse effect upon the
Mortgagor or the Collateral.

       4-11   Future Action. The Mortgagor shall do all such things and execute
all such documents from time to time hereafter as the Mortgagee may reasonably
request in order to carry into effect the provisions and intent of this
Agreement and to protect, perfect, and maintain the Mortgagee's interest in and
to the Collateral.

                                      -7-
<PAGE>

       4-12   Additional Information. The Mortgagor shall furnish the Mortgagee
with such financial information or other information pertaining to the operation
of the Mortgagor and the Collateral as the Mortgagee may from time to time
reasonably request. Without limiting the foregoing, annually, within one hundred
twenty (120) days of the end of the calendar year, the Mortgagor shall furnish
the Mortgagee (a) a complete original signed counterpart of the Mortgagor's
current financial statement audited by the Mortgagor's certified public
accountants (who shall be satisfactory to the Mortgagee, it being understood
that the Mortgagor's current certified public accountants are acceptable to the
Mortgagee), and (b) annually, within fifteen (15) days of the filing thereof,
copies of the Mortgagor's signed federal and state income tax returns as filed
with the United States Internal Revenue Service and applicable state taxing
authorities for the prior calendar year; and, (c) quarterly, within forty five
(45) days following each quarter end reporting period (March 31, June 30,
September 30 and December 31) the Mortgagor shall furnish the Mortgagee with
copies of the Mortgagor's management prepared interim financial statements which
shall be in form satisfactory to the Mortgagee. The Mortgagor further agrees
that after the occurrence of an Event of Default the Mortgagee may contact any
third party, including, without limitation, any lienholders on the Collateral,
any insurance company insuring the Collateral, and any financial institution
with which the Mortgagor maintains a loan or depository relationship, to obtain
information relating to the Receivables Collateral and the ownership, use,
operation, maintenance or construction of the Collateral. The Mortgagor hereby
authorizes each such third party to release such information to the Mortgagee
and agrees to execute any documents requested by the Mortgagee to enable the
Mortgagee to obtain such information.

       4-13   Hazardous Waste. (a) The Mortgagor represents that to the best of
its knowledge and belief and except as otherwise disclosed in the Phase I
Environmental Site Assessment Report obtained by the Mortgagee in connection
with the Loan Arrangement (the "Report") neither the Mortgagor nor any person
for whose conduct the Mortgagor is responsible ever:

                     (i)    owned, occupied, or operated a site or vessel on
     which any hazardous material or oil was or is stored (except if such
     storage was or is in compliance with all laws, ordinances, and regulations
     pertaining thereto) transported, or disposed of (the terms site, vessel,
     and hazardous material respectively being used in this Section with the
     meaning given those terms in Massachusetts General Laws, Chapter 21E, as
     amended);

                     (ii)   directly or indirectly transported, or arranged for
     the transport, of any hazardous material or oil (except if such
     transportation was or is in compliance with all laws, ordinances and
     regulations pertaining thereto);

                     (iii)  caused or was legally responsible for any release,
     or threat of release, of any hazardous material or oil;

                     (iv)   received notification from any federal, state, or
     other governmental authority of: any potential, known, or threat of release
     of any hazardous material or oil on or from the Mortgaged Premises or any
     other site or vessel owned, occupied, or operated either by the Mortgagor
     or any person for whose conduct the Mortgagor is responsible or whose
     liability may result in a lien on the Mortgaged Premises; or the incurrence
     of any expense or loss by such governmental authority, or by any other

                                      -8-
<PAGE>

     person, in connection with the assessment, containment, or removal of any
     release, or threat of release, of any hazardous material or oil from the
     Mortgaged Premises or any such site or vessel.

              (b)    The Mortgagor represents and warrants that to the best of
its knowledge and belief and except as otherwise disclosed in the Report, no
hazardous material or oil was ever, or is now, stored on (except in compliance
with all laws, ordinances, and regulations pertaining thereto), transported, or
disposed of on the Mortgaged Premises.

              (c)    The Mortgagor shall:

                     (i)    not store or dispose of any hazardous material or
     oil on the Mortgaged Premises, or on any other site or vessel owned,
     occupied, or operated either by the Mortgagor, or by any person for whose
     conduct the Mortgagor is responsible (except in the ordinary course of
     business and compliance with all laws, ordinances, and regulations
     pertaining thereto);

                     (ii)   neither directly nor indirectly transport or arrange
     for the transport of any hazardous material or oil (except in the ordinary
     course of business and compliance with all laws, ordinances, and
     regulations pertaining thereto);

                     (iii)  take all such action, including, without limitation,
     the conducting of engineering tests (at the sole expense of the Mortgagor)
     as may be reasonably requested by the Mortgagee (x) to assess, contain, and
     remove any such hazardous material or oil on the Mortgaged Premises, it
     being specifically understood and agreed that there is uncertainty
     surrounding the removal of an underground storage tank at the Mortgaged
     Premises, and the Mortgagor may be required by the Mortgagee to address
     this uncertainty through additional testing and/or remediation activities,
     and (y) to qualify for any insurance program or safe harbor which may be
     available under said Chapter 21E, as amended; and

                     (iv)   provide the Mortgagee with written notice: (x) upon
     the Mortgagor's obtaining knowledge of any potential or known release, or
     threat of release, of any hazardous material or oil at or from the
     Mortgaged Premises, or any other site or vessel owned, occupied, or
     operated by the Mortgagor or by any person for whose conduct the Mortgagor
     is responsible or whose liability may result in a lien on the Mortgaged
     Premises; (y) upon the Mortgagor's receipt of any notice to such effect
     from any federal, state, or other governmental authority; and (z) upon the
     Mortgagor's obtaining knowledge of any incurrence of any expense or loss by
     such governmental authority in connection with the assessment, containment,
     or removal of any hazardous material or oil for which expense or loss the
     Mortgagor may be liable or for which expense a lien may be imposed on the
     Mortgaged Premises.

              (d)    The Mortgagor shall indemnify, defend, and hold the
Mortgagee harmless of and from any claim brought or threatened against the
Mortgagee by the Mortgagor, any guarantor or endorser of the Liabilities, or any
governmental agency or authority or any other person (as well as from attorneys'
reasonable fees and expenses in connection therewith) on

                                      -9-
<PAGE>

account of the presence of hazardous material or oil on the Mortgaged Premises,
or the failure by the Mortgagor to comply with the terms and provisions hereof
(each of which may be defended, compromised, settled, or pursued by the
Mortgagee with the counsel of the Mortgagee's selection, but at the expense of
Mortgagor). The within indemnification shall survive payment of the Liabilities
and/or termination, release, or discharge executed by the Mortgagee in favor of
the Mortgagor.

       4-14   Mortgage Conditions. This Mortgage, Security Agreement and
Assignment is upon the STATUTORY CONDITION, upon breach of which, the Mortgagee
shall have the STATUTORY POWER OF SALE.

       4-15   Compliance with Leases and Contracts. The Mortgagor is not in
default under any terms and conditions of any Lease or Contract and shall,
during the term of this Agreement, perform all of the obligations of the
Mortgagor under any such Lease or Contract within the period that such
performance is required. The Mortgagor has entered into, and will maintain in
full force and effect, all Contracts necessary for the use, maintenance,
construction, and operation of the Collateral, and at the option of the
Mortgagee, will do all things and execute all such documents as the Mortgagee
may request to assign the Mortgagor's rights therein to the Mortgagee.

       4-16   Collection of Rents. The Mortgagor agrees not to collect or accept
the payment of any Rental Payments, or other income or profit from, or on
account of, any Lease or the use or occupation of the Collateral more than one
(1) month in advance (other than so-called "last months rents" and "security
deposits"), unless such amount is delivered to the Mortgagee to be applied
toward the Liabilities in accordance with Section 9-6 hereof.

       4-17   Modification of Lease and Contract. The Mortgagor will not modify
or consent to the modification of any provision of, or cancel, terminate or
accept the early cancellation or termination, of any Lease or Contract, without
the prior written consent of the Mortgagee.

       4-18   Leases. The Mortgagor shall not enter into any Lease without the
prior written consent of the Mortgagee. The Mortgagor shall furnish the
Mortgagee, upon the request of the Mortgagee, with copies of each and every
Lease and any other information relative to each such Lease and the tenant
thereunder. The Mortgagor will take all action as may be requested by the
Mortgagee in furtherance of the rights of the Mortgagee hereunder, including,
without limitation, obtaining agreements (in form satisfactory to the Mortgagee)
from each tenant subordinating the Lease to the lien of this Agreement, and
taking all appropriate action to lease any portions of the Mortgaged Premises
not occupied by the Mortgagor.

       4-19   Eminent Domain. The Mortgagor shall advise the Mortgagee of any
proposed taking by any State, Federal or Local authority of all or a portion of
the Collateral. The Mortgagor shall cooperate with the Mortgagee in connection
with the negotiation of any such taking and any awards or damages payable to the
Mortgagor in connection therewith and shall take any action relating thereto
requested by the Mortgagee. The Mortgagor will permit the Mortgagee, at the
Mortgagee's option in each instance, to the exclusion of the Mortgagor, to
conduct the adjustment of each such damage or award claim. The Mortgagor hereby
appoints the Mortgagee as the Mortgagor's attorney in fact to obtain, adjust and
settle, each such damage or award claim and to

                                      -10-
<PAGE>

endorse in favor of the Mortgagee any and all drafts and other instruments with
respect thereto. The within appointment, being coupled with an interest, is
irrevocable until this Agreement is terminated by a written instrument executed
by a duly authorized officer of the Mortgagee. The Mortgagee shall not be liable
for any loss sustained on account of any exercise pursuant to said power unless
such loss is caused by the willful misconduct and actual bad faith of the
Mortgagee. The Mortgagee may apply any proceeds of such taking against the
Liabilities, whether or not such have matured, in accordance with Section 9-6
herein.

       4-20   Abatement. The Mortgagor will notify the Mortgagee of any action
which the Mortgagor intends to take with respect to the abatement of any
municipal taxes or assessments and shall initiate any such abatement action at
the request of the Mortgagee. The Mortgagor will advise the Mortgagee as to the
status of any such action and will not compromise or settle any such action
without the prior written consent of the Mortgagee. The Mortgagor hereby
appoints the Mortgagee as the Mortgagor's attorney in fact, effective after the
occurrence of any event which is, or solely with the passage of time would be,
an Event of Default hereunder, to initiate, prosecute, obtain, adjust, and
settle, any such abatement action and to endorse in favor of the Mortgagee any
and all drafts and other instruments with respect thereto. The within
appointment, being coupled with an interest, is irrevocable until this Agreement
is terminated by a written instrument executed by a duly authorized officer of
the Mortgagee. The Mortgagee shall not be liable for any loss sustained on
account of any exercise pursuant to said power unless such loss is caused by the
willful misconduct and actual bad faith of the Mortgagee. After the occurrence
of any event which is, or solely with the passage of time would be, an Event of
Default hereunder, the Mortgagee may apply any proceeds of such abatement action
against the Liabilities, whether or not such have matured, in accordance with
Section 9-6 herein.

       4-21   Superior Mortgage. The Mortgagor does hereby covenant and agree to
faithfully and fully comply with and abide by each and every term, covenant, and
condition of any superior mortgage or mortgages on the Mortgaged Premises. The
Mortgagee is hereby expressly authorized, permitted, and directed, in its sole
discretion, and at its option, to advance all sums necessary to cure any default
under any such mortgage. The Mortgagor further covenants and agrees not to
modify, change, alter, or extend any of the terms or conditions of any such
prior mortgage, and not to request, accept, or allow the disbursement hereafter
of any advances which are to be secured by any such mortgage.

       4-22   Material Occurrence. The Mortgagor shall promptly notify the
Mortgagee of the occurrence of any event of which an officer of the Mortgagor
has actual knowledge and which may have a material adverse effect on the
Collateral or the Mortgagor.

       4-23   Compliance with Covenants. The Mortgagor shall not indirectly do
or cause to be done, any act which, if done directly by the Mortgagor, would
breach any covenant contained herein, or in any other agreement between the
Mortgagor and the Mortgagee.

       4-24   Deposit Accounts. At all times while any Liabilities remain
outstanding, the Mortgagor shall maintain all operating accounts with respect to
the Mortgaged Premises with the Mortgagee.

                                      -11-
<PAGE>

       4-25   Loan to Value Covenant. If at any one or more time(s) during the
term of the Note the then outstanding principal amount of the Note, plus accrued
interest and fees thereon, is greater than sixty percent (60%) of the value of
the Mortgaged Premises, as determined by the Mortgagee based upon the
Mortgagee's review of any appraisal and such other factors as the Mortgagee may
deem appropriate, then Mortgagor shall within thirty (30) days following a
request by the Mortgagee pay down the Note by an amount sufficient to cause the
then outstanding principal amount of the Note, plus accrued interest and fees
thereon, to be reduced to an amount equal to or less than sixty percent (60%) of
the value of the Mortgaged Premises. The failure of the Mortgagor to reduce the
principal balance of the Note within thirty (30) days following written request
by the Mortgagee shall be, at the Mortgagee's option, an Event of Default
hereunder.

       4-26   Appraisal. The Mortgagor shall from time to time (but prior to the
occurrence of an Event of Default not more than once per calendar year), at the
Mortgagee's option, assist the Mortgagee in obtaining a current appraisal of the
Mortgaged Premises by an appraiser or appraisers satisfactory to the Mortgagee.
Such appraisal(s) shall be in form and substance satisfactory to the Mortgagee
and the costs of such appraisals shall be borne by the Mortgagor.

       4-27   Other Representations. The representations, covenants, and
warranties herein are in addition to any others, previously, presently, or
hereafter made by the Mortgagor to or with the Mortgagee in any other
instrument.

ARTICLE 5 - MORTGAGOR'S USE OF COLLATERAL
-----------------------------------------

       Unless and until the occurrence of any event which is, or solely with the
passage of time would be, an Event of Default hereunder, the Mortgagor shall be
authorized to occupy, operate, manage, hold, or otherwise use the Collateral in
the ordinary and reasonable course of the Mortgagor's business and collect, when
due, the Receivables Collateral, subject, however, to the terms and provisions
hereof.

ARTICLE 6 - EVENTS OF DEFAULT
-----------------------------

       Upon the occurrence of any one or more of the following that have not
previously been cured to the Mortgagee's satisfaction (hereinafter, the "Events
of Default"), any and all Liabilities of the Mortgagor to the Mortgagee shall
become immediately due and payable, without notice or demand, at the option of
the Mortgagee. The occurrence of any such Event of Default shall also
constitute, without notice or demand, a default under all other agreements
between the Mortgagee and the Mortgagor or instruments and papers given the
Mortgagee by the Mortgagor, whether now existing or hereafter arising.

       6-1    The failure by the Mortgagor to pay within ten (10) days of when
due, any amount then owing by the Mortgagor to the Mortgagee.

       6-2    The failure by the Mortgagor to promptly, punctually, and
faithfully perform, discharge, or comply with any nonmonetary Liability within
thirty (30) days of notice thereof.

                                      -12-
<PAGE>

       6-3    Any financial information, representation, or warranty now or
hereafter provided or made by the Mortgagor to the Mortgagee, whether herein, or
in any other document, instrument, agreement, or paper, was not true or accurate
in any material respect when given.

       6-4    The occurrence of any event such that any indebtedness of the
Mortgagor for borrowed money from any lender other than the Mortgagee could be
accelerated, notwithstanding that such acceleration has not taken place.

       6-5    The occurrence of any event of default (continuing beyond the
expiration of applicable grace and/or cure periods, if any) under any agreement
between the Mortgagee and the Mortgagor, or under any instrument or paper given
the Mortgagee by the Mortgagor, whether such agreement, instrument, or paper now
exists or hereafter arises (notwithstanding that the Mortgagee may not have
exercised its rights upon default under any such other agreement, instrument or
paper).

       6-6    Any act by, against, or relating to the Mortgagor, or its property
or assets, which act constitutes the application for, consent to, or sufferance
of the appointment of a receiver, trustee, or other person (pursuant to court
action or otherwise) over all, or any part of, the Mortgagor's property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of the Mortgagor, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for the Mortgagor; the
admission by the Mortgagor of its inability to pay its debts as they mature;
adjudication of insolvency relative to the Mortgagor; the entry of an order for
relief or similar order with respect to the Mortgagor in any proceeding pursuant
to the Title 11 U.S.C. (as amended) or any other federal statute dealing with
bankruptcy (hereinafter, generally the "Bankruptcy Code"); the filing of any
complaint, application, or petition by or against the Mortgagor initiating any
matter in which the Mortgagor is or may be granted any relief from its debts
pursuant to the Bankruptcy Code or pursuant to any other insolvency statute or
procedure, provided, however, if any such complaint, application, or petition is
filed against the Mortgagor, such event shall not be a default hereunder until
the earlier of (x) the entry of an Order for Relief against the Mortgagor or (y)
forty-five (45) days after the filing thereof without the dismissal of such
complaint, application, or petition; the calling or sufferance of a meeting of
creditors of the Mortgagor; the meeting by the Mortgagor with a formal or
informal creditors' committee; the offering by or entering into by the Mortgagor
of any composition, extension or other arrangement seeking relief or extension
of its debts; or the initiation of any other judicial or non-judicial proceeding
or agreement by, against, or including the Mortgagor which seeks or intends to
accomplish a reorganization or arrangement with creditors.

       6-7    The entry of any judgment against the Mortgagor, which judgment is
not satisfied, appealed from and bonded over or covered by insurance, in each
event to the satisfaction of the Mortgagee (with execution or similar process
stayed) within thirty (30) days of its entry.

       6-8    The imposition of any lien upon any assets of the Mortgagor which
lien is not discharged, satisfied, or dissolved by bonding or in some other
manner satisfactory to the Mortgagee, within fifteen (15) days of its
imposition.

                                      -13-
<PAGE>

       6-9    The service of any process upon the Mortgagee seeking to attach by
mesne or trustee process any funds of the Mortgagor on deposit with the
Mortgagee.

       6-10   The termination of existence, dissolution, winding up, or
liquidation of the Mortgagor.

       6-11   The sale, transfer, assignment, pledge, mortgage or other
disposition or grant of any interest in all or any portion of the Collateral,
except for disposition of equipment in the ordinary course of business.

       6-12   The occurrence of any of the events described in this Article with
respect to any guarantor, endorser, or surety to the Mortgagee of the
Liabilities as if such person were the "Mortgagor" described therein.

       6-13   The occurrence of any material adverse change in the business,
operations, assets, prospects or financial condition or other condition of the
Mortgagor or the Collateral.

       6-14   The breach of the Statutory Condition contained herein, upon which
breach, the Mortgagee shall have the Statutory Power of Sale.

ARTICLE 7 - RIGHTS AND REMEDIES UPON DEFAULT
--------------------------------------------

       7-1    Rights and Remedies Upon Default. Upon the occurrence of any Event
of Default, or at any time thereafter, the Mortgagee shall have all the rights
of a mortgagee and a secured party under the Massachusetts General Laws in
addition to which the Mortgagee shall have all of the following rights and
remedies:

              (a)    with or without taking possession, to collect the
Receivables Collateral;

              (b)    to exercise all of the rights of the Mortgagor under the
Leases, or any other lease;

              (c)    to take possession of all or a portion of the Collateral;

              (d)    with or without taking possession of the Collateral, to
enter into purchase and sale agreements, to sell, lease, or otherwise dispose of
any or all of the Collateral in its then condition or following such preparation
or processing as the Mortgagee deems advisable;

              (e)    with or without taking possession of the Collateral, and
without assuming the obligations of the Mortgagor thereunder, to exercise the
rights of the Mortgagor under, to use, or to benefit from any of the Contracts,
Leases, or Licenses;

              (f)    with or without taking possession of the Collateral and
with or without bringing any action or proceeding, either directly, by agent, or
by the appointment of a receiver, construct improvements on the Mortgaged
Premises and manage, lease, sublease, sell, or operate the Collateral on such
terms as the Mortgagee, in its sole discretion, deems proper or appropriate;

              (g)    to apply all or any portion of the Collateral, or the
proceeds thereof, towards (but not necessarily in complete satisfaction of) the
Liabilities;

                                      -14-
<PAGE>

              (h)    to exercise the Statutory Power of Sale;

              (i)    to foreclose any and all rights of the Mortgagor in and to
the Collateral, whether by sale, entry, or in any other manner provided for
hereunder or under Massachusetts General Laws; and

              (j)    to elect, upon the discretion of the Mortgagee, to treat
any or all of the Leases as superior to the lien of the within Mortgage,
Security Agreement and Assignment.

       7-2    Sale or Other Disposition of Collateral. Any sale or other
disposition of the Collateral may be at public or private sale, to the extent
such private sale is authorized under the Massachusetts General Laws upon such
terms and in such manner as the Mortgagee deems advisable. The Mortgagee may
conduct any such sale or other disposition of the Collateral upon the Mortgaged
Premises, in which event the Mortgagee shall not be liable for any rent or
charge for such use of the Mortgaged Premises. The Mortgagee may purchase the
Collateral, or any portion of it, at any sale held under this Article. With
respect to any Collateral to be sold pursuant to the UCC, the Mortgagee shall
give the Mortgagor at least ten (10) days written notice of the date, time, and
place of any proposed public sale, or such additional notice as may be required
under Massachusetts General Laws and of the date after which any private sale or
other disposition may be made. The Mortgagee may sell any of the Personal
Property as part of the Mortgaged Premises, or any portion or unit thereof, at
the foreclosure sale or sales conducted pursuant hereto. The Mortgagor waives
any right to require the marshalling of any of its assets in connection with any
disposition conducted pursuant hereto. In the event all or part of the
Collateral is included at any foreclosure sale conducted pursuant hereto, a
single total price for the Collateral, or such part thereof as is sold, may be
accepted by the Mortgagee with no obligation to distinguish between the
application of such proceeds amongst the property comprising the Collateral. The
obligation of the Mortgagor to pay such amounts shall be included in the
Liabilities of the Mortgagor to the Mortgagee and shall accrue interest at the
highest rate of interest charged relative to any of the Liabilities.

       7-3    Collection of Receivables Collateral. In connection with the
exercise by the Mortgagee of the rights and remedies provided herein:

              (a)    The Mortgagee may notify any of the Mortgagor's debtors
relating to the Receivables Collateral, either in the name of the Mortgagee or
the Mortgagor, to make payment directly to the Mortgagee or such other address
as may be specified by the Mortgagee, may advise any person of the Mortgagee's
interest in and to the Receivables Collateral, and may collect directly from the
obligors thereon all amounts due on account of the Receivables Collateral;

              (b)    At the Mortgagee's request, the Mortgagor will provide
written notification to any or all of said debtors concerning the Mortgagee's
interest in the Receivables Collateral and will request that such debtors
forward payment thereof directly to the Mortgagee;

              (c)    The Mortgagor shall hold any proceeds and collections of
any of the Receivables Collateral in trust for Mortgagee and shall not commingle
such proceeds or collections with any other funds of the Mortgagor; and

                                      -15-
<PAGE>

              (d)    The Mortgagor shall deliver all such proceeds to the
Mortgagee immediately upon the receipt thereof by the Mortgagor in the identical
form received, but duly endorsed or assigned on behalf of the Mortgagor to the
Mortgagee.

       7-4    Use and Occupation of Mortgaged Premises. In connection with the
Mortgagee's exercise of the Mortgagee's rights under this Article, the Mortgagee
may enter upon, occupy, and use all or any part of the Collateral and may
exclude the Mortgagor from the Mortgaged Premises or any portion thereof as may
have been so entered upon, occupied, or used. The Mortgagee shall not be
required to remove any of the Collateral from the Mortgaged Premises upon the
Mortgagee's taking possession thereof, and may render any Collateral unusable to
the Mortgagor. In the event the Mortgagee manages the Mortgaged Premises in
accordance with Section 7-1(e) herein, the Mortgagor shall pay to the Mortgagee
on demand a reasonable fee for the management thereof in addition to the
Liabilities provided for herein. Further, the Mortgagee may construct such
improvements on the Mortgaged Premises or make such alterations, renovations,
repairs, and replacements to the Collateral, and add additional units and/or
phases to the Condominium, as the Mortgagee, in its reasonable discretion, deems
proper or appropriate. The obligation of the Mortgagor to pay such amounts and
all expenses incurred by the Mortgagee in the exercise of its rights hereunder
shall be included in the Liabilities of the Mortgagor to the Mortgagee and shall
accrue interest at the highest rate of interest charged relative to any of the
Liabilities.

       7-5    Partial Sales. The Mortgagor agrees that, in case the Mortgagee in
the exercise of the Power of Sale contained herein or in the exercise of any
other rights hereunder given, elects to sell in parcels, said sales may be held
from time to time and that the power shall not be exhausted until all of the
Collateral not previously released shall have been sold, notwithstanding that
the proceeds of such sales exceed, or may exceed, the Liabilities then secured
thereby.

       7-6    Assembly of Collateral. Upon the occurrence of any Event of
Default, the Mortgagee may require the Mortgagor to assemble the Personal
Property and make it available to the Mortgagee, at the Mortgagor's sole risk
and expense, at a place or places which are reasonably convenient to both the
Mortgagee and Mortgagor.

       7-7    Power of Attorney. During the continuance of any Event of Default,
the Mortgagor hereby irrevocably constitutes and appoints the Mortgagee as the
Mortgagor's true and lawful attorney, to take any action with respect to the
Collateral to preserve, protect, or realize upon the Mortgagee's interest
therein, each at the sole risk, cost and expense of the Mortgagor, but for the
sole benefit of the Mortgagee. The rights and powers granted the Mortgagee by
the within appointment include, but are not limited to, the right and power to:
(i) prosecute, defend, compromise, settle, or release any action relating to the
Collateral; (ii) endorse the name of the Mortgagor in favor of the Mortgagee
upon any and all checks or other items constituting remittances or proceeds of
Receivables Collateral; (iii) sign and endorse the name of the Mortgagor on, and
to receive as secured party, any of the Collateral; (iv) sign and file or record
on behalf of the Mortgagor any financing or other statement in order to perfect
or protect the Mortgagee's security interest; (v) enter into purchase and sale
agreements, leases or subleases relative to all or a portion of the Mortgaged
Premises; (vi) enter into any contracts or agreements relative to, and to take
all action deemed necessary in connection with, the construction of any
improvements on the Mortgaged Premises; (vii) manage, operate, maintain, sell,
or repair the

                                      -16-
<PAGE>

Mortgaged Premises; and/or (viii) exercise the rights of the Mortgagor under any
Contracts, Leases, or Licenses. The Mortgagee shall not be obligated to perform
any of such acts or to exercise any of such powers, but if the Mortgagee elects
so to perform or exercise, the Mortgagee shall not be accountable for more than
it actually receives as a result of such exercise of power, and shall not be
responsible to Mortgagor except for the Mortgagee's willful misconduct and
actual bad faith. All powers conferred upon the Mortgagee by this Agreement,
being coupled with an interest, shall be irrevocable until terminated by a
written instrument executed by a duly authorized officer of the Mortgagee.

       7-8    Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Mortgagee hereunder (hereinafter the "Mortgagee's Rights and
Remedies"), shall be cumulative and not exclusive of any rights or remedies
which it would otherwise have. No delays or omissions by the Mortgagee in
exercising or enforcing any of the Mortgagee's Rights and Remedies shall operate
as or constitute a waiver thereof. No waiver by the Mortgagee of any default
hereunder or under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
the Mortgagee's Rights or Remedies, and no other agreement or transaction, of
whatever nature entered into between the Mortgagee and the Mortgagor at any
time, whether before, during, or after the date hereof, shall preclude any other
or further exercise of the Mortgagee's Rights and Remedies. No waiver or
modification on the Mortgagee's part on any one occasion shall be deemed a
waiver on any subsequent occasion, nor shall it be deemed a continuing waiver.
All of the Mortgagee's Rights and Remedies under this Agreement or any other
agreement or transaction shall be cumulative, and not alternative or exclusive,
and may be exercised by the Mortgagee at such time or times and in such order of
preference as the Mortgagee in its sole discretion may determine.

ARTICLE 8 - NOTICE
------------------

       All notices, demands and other communications made in respect to this
Agreement shall be made to the following addresses (each of which may be changed
upon seven (7) days written notice to all others) given by hand, by recognized
overnight mail delivery service, or by certified or registered mail, return
receipt requested, as follows:

       If to the Bank:        Salem Five Cents Savings Bank
                              210 Essex Street
                              Salem, Massachusetts 01970
                              Attention: Ms. Lisa M. Greeley, Vice President

       With a copy to:        Seyfarth Shaw
                              World Trade Center East
                              Two Seaport Lane, Suite 300
                              Boston, Massachusetts  02210
                              Attention: Christopher P. Chappell, Esquire

       If to the Borrower:    BTU International, Inc.
                              23 Esquire Road
                              North Billerica, Massachusetts 01862
                              Attention: Mr. Thomas Kealy

                                      -17-
<PAGE>

       With a copy to:        Ropes & Gray LLP
                              One International Place
                              Boston, Massachusetts 02110
                              Attention: Marc D. Lazar, Esquire

       Any such notice shall be deemed received the earlier of (i) two (2) days
after the mailing of such notice in accordance with the terms and conditions and
to the addresses provided above, or (ii) the date of which the notice is
delivered by hand or by recognized overnight mail delivery service to the
address and to the individual provided above.

ARTICLE 9 - MISCELLANEOUS
-------------------------

       9-1    Mortgagor. In the event that the Mortgagor is more than one person
or entity, all representations, covenants, warranties, defaults, rights,
remedies, powers, privileges, and discretions shall be applicable to the
Mortgagors individually, jointly, and severally, with the exception of those
which are made by their terms applicable to a specific Mortgagor.

       9-2    Exhibits. Any and all Exhibits referred to herein shall be deemed
annexed hereto prior to the execution hereof and specifically incorporated by
reference herein.

       9-3    Headings. All section headings included within this Mortgage,
Security Agreement, and Assignment shall be for reference only, and shall not
limit or restrict, in any manner whatsoever, the breadth or nature of the
provisions included within each subject section.

       9-4    Successors and Assigns. In the event the ownership of the
Collateral, or any part thereof, becomes vested in a person other than the
Mortgagor, the Mortgagee may, without notice to the Mortgagor, deal with such
successor or successors in interest with reference to this Agreement and the
Liabilities in the same manner as with the Mortgagor, without in any way waiving
the default occasioned by such transfer of ownership or in any way vitiating or
discharging the Mortgagor's liability hereunder or upon the Liabilities, and no
compromise, settlement, release or sale of the Collateral, no forbearance on the
part of the Mortgagee, and no alteration, amendment, cancellation, waiver or
modification of any term or condition or extension of the time for payment of
the Liabilities given by the Mortgagee shall operate to release, discharge,
modify, change or affect the original liability of the Mortgagor herein, either
in whole or in part, notice of any such action being waived.

       9-5    Set Off. Except for tax and insurance escrow funds which are
provided for in Section 4-9 herein, all deposits or other sums at any time
credited by or due from the Mortgagee to the Mortgagor, and all cash,
securities, instruments, or other property of the Mortgagor in the possession of
the Mortgagee (whether for safekeeping, or otherwise) shall at all times
constitute security for the Liabilities, and may be applied or set off by the
Mortgagee against the Liabilities at any time whether or not the Liabilities are
then due or other collateral is then available to the Mortgagee.

       9-6    Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied toward the Liabilities

                                      -18-
<PAGE>

in such order and manner as the Mortgagee determines in its sole discretion, any
statute, custom, or usage to the contrary notwithstanding. The Mortgagor shall
remain liable to the Mortgagee for any deficiency remaining following such
application.

       9-7    Waiver. (a) The Mortgagor WAIVES notice of nonpayment, demand,
presentment, protest and all forms of demand and notice, both with respect to
the Liabilities and the Collateral.

              (b)    The Mortgagor, if entitled to it, WAIVES the right to
notice and/or hearing prior to the exercise of any of the Mortgagee's Rights and
Remedies (except as otherwise specifically set forth herein).

              (c)    THE MORTGAGOR AND THE MORTGAGEE, TO THE EXTENT ENTITLED
THERETO, EACH HEREBY WAIVES ANY PRESENT OR FUTURE RIGHT OF THE MORTGAGEE, THE
MORTGAGOR, OR OF ANY GUARANTOR OR ENDORSER OF THE MORTGAGOR OR OF ANY OTHER
PERSON LIABLE TO THE MORTGAGEE ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES,
TO A TRIAL BY JURY IN ANY CASE OR CONTROVERSY RELATING TO THE LOAN ARRANGEMENT
IN WHICH THE MORTGAGOR OR THE MORTGAGEE IS OR BECOMES A PARTY (WHETHER SUCH CASE
OR CONTROVERSY IS INITIATED BY OR AGAINST THE MORTGAGOR OR THE MORTGAGEE OR IN
WHICH THE MORTGAGOR OR THE MORTGAGEE IS JOINED AS A PARTY LITIGANT), WHICH CASE
OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST OR
BETWEEN THE MORTGAGOR, ANY SUCH PERSON, AND THE MORTGAGEE.

       9-8    Responsibility of Mortgagee. The Mortgagee shall not be liable for
any loss sustained by the Mortgagor resulting from any action, omission, or
failure to act by the Mortgagee with respect to the exercise or enforcement of
its rights under this Agreement or its relationship with the Mortgagor unless
such loss is caused by the willful misconduct and actual bad faith of the
Mortgagee. This Agreement and the Mortgagee's exercise of its rights hereunder
shall not operate to place any responsibility upon the Mortgagee for the
control, care, management, or repair of the Collateral, nor shall it operate to
place any responsibility upon the Mortgagee to perform the obligations of the
Mortgagor under any Lease, License, or Contract, or to make the Mortgagee
responsible or liable for any waste committed on the Mortgaged Premises, any
damages or defective condition of the Mortgaged Premises, or any negligence in
the management, upkeep, repair, or control of the Mortgaged Premises.

       9-9    Indemnification. But for claims in which it is finally determined
by a court of competent jurisdiction that the Mortgagee has acted with gross
negligence and/or willful misconduct, the Mortgagor shall indemnify, defend, and
hold the Mortgagee harmless of and from any claim brought or threatened against
the Mortgagee by the Mortgagor, any guarantor or endorser of the Liabilities, or
any other person (as well as from attorneys' reasonable fees and expenses in
connection therewith) on account of the Collateral or on account of the
Mortgagee's relationship with the Mortgagor or any other guarantor or endorser
of the Liabilities (each of which may be defended, compromised, settled, or
pursued by the Mortgagee with counsel of the Mortgagee's selection, but at the
expense of the Mortgagor). The within indemnification shall

                                      -19-
<PAGE>

survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Mortgagee in favor of the Mortgagor.

       9-10   Binding on Successors. This Agreement shall be binding upon the
Mortgagor and the Mortgagor's heirs, executors, administrators, representatives,
successors, and assigns and shall inure to the benefit of the Mortgagee and the
Mortgagee's successors and assigns. This provision shall not in any way be
deemed to be a waiver by the Mortgagee of any Event of Default provided for
herein.

       9-11   Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, and
enforceability of such provision in any other instance, nor the validity,
legality, or enforceability of any other provision of this Agreement.

       9-12   Modification. (a) This Agreement and all other instruments
executed in connection herewith incorporate all discussions and negotiations
between the Mortgagor and the Mortgagee concerning the matters included herein
and in such other instruments. No such discussions or negotiations shall limit,
modify, or otherwise affect the provisions hereof. No modification, amendment,
or waiver of any provision of this Agreement, or of any provisions of any other
agreement between the Mortgagor and the Mortgagee, shall be effective unless
executed in writing by the party to be charged with such modification,
amendment, or waiver, and if such party be the Mortgagee, then by a duly
authorized officer thereof.

              (a)    The Mortgagor may take any action herein prohibited, or
omit to perform any act required to be performed by it, if the Mortgagor shall
obtain the prior written consent by a duly authorized officer of the Mortgagee
for each such action, or omission to action.

       9-13   Payment of Costs. The Mortgagor shall pay on demand all Costs of
Collection and all expenses of the Mortgagee in connection with the preparation,
execution, and delivery of this Agreement and of any other documents and
agreements between the Mortgagor and the Mortgagee, including, without
limitation, attorneys' reasonable fees and disbursements, and all expenses which
the Mortgagee may hereafter incur in connection with the collection of the
Liabilities or the protection or enforcement of any of the Mortgagee's rights
against the Mortgagor, any Collateral, and any guarantor or endorser of the
Liabilities. The Mortgagor authorizes the Mortgagee to pay all such expenses and
to charge the same to any account of the Mortgagor with the Mortgagee.

       9-14   Additional Advances. All amounts which the Mortgagee may advance
under any Sections of this Agreement shall be repayable to the Mortgagee with
interest at the highest rate charged relative to any of the Liabilities, on
demand, shall be a Liability, and may be charged by the Mortgagee to any deposit
account which the Mortgagor maintains with the Mortgagee.

       9-15   Governing Law. This Agreement and all rights and obligations
hereunder, including matters or construction, validity and performance, shall be
governed by the laws of The Commonwealth of Massachusetts. The Mortgagor submits
itself to the jurisdiction of the courts of said Commonwealth for all purposes
with respect to this Agreement and the Mortgagor's relationship with the
Mortgagee.

                                      -20-
<PAGE>

       9-16   Termination. This Agreement shall remain in full force and effect
until specifically terminated in writing by a duly authorized officer of the
Mortgagee. No termination pursuant to this Section shall affect the
indemnification provided for in this Article.

       9-17   Specific Performance. The failure by the Mortgagor to perform all
and singular the Mortgagor's obligations hereunder will result in irreparable
harm to the Mortgagee for which the Mortgagee shall have no adequate remedy at
law. Consequently, the Mortgagor agrees that such obligations are and shall be
specifically enforceable by the Mortgagee.

       9-18   Intent. It is intended that:

              (a)    this Agreement take effect as a sealed instrument;

              (b)    with the exception of the Mortgagee's internal costs and
expenses, all costs and expenses incurred by the Mortgagee in connection with
the Mortgagee's relationship(s) with the Mortgagor shall be borne by the
Mortgagor; and

              (c)    the interests created by this Agreement secure all of the
Liabilities of the Mortgagor to the Mortgagee, whether now existing or hereafter
arising.

       9-19   Receipt of Copy. The Mortgagor acknowledges having received a copy
of this Agreement.

       9-20   Reference. This instrument may be referred to herein as the
"Mortgage," "Mortgage, Security Agreement, and Assignment," or "Agreement," but
no such reference shall limit the effectiveness of this instrument for any
Mortgagee hereunder.

                                      -21-
<PAGE>

       IN WITNESS WHEREOF, the Mortgagor has executed this Agreement as a sealed
instrument on the date first above written.

                                        MORTGAGOR

                                        BTU International, Inc.

                                        By:
                                            -----------------------------------
                                            Name: Thomas P. Kealy
                                            Title: Vice President and Treasurer

                          COMMONWEALTH OF MASSACHUSETTS

Suffolk, ss.                                                  December 23, 2003

       Then personally appeared the above-named Thomas P. Kealy, Vice President
and Treasurer of BTU International, Inc. and acknowledged the foregoing to be
the free act and deed of BTU International, Inc., before me.

                                        ---------------------------------------
                                        Notary Public
                                        My Commission Expires:
                                                              -----------------

                                      -22-<PAGE>
                                                                   EXHIBIT 10.55

                        FIRST AMENDMENT TO LOAN AGREEMENT

       This First Amendment to Loan Agreement (hereinafter the "FIRST
AMENDMENT") is dated as of January 28, 2004 and is entered into by and between
SOVEREIGN BANK, with an office at 75 State Street, Boston, Massachusetts
(hereinafter referred to as the "LENDER"), and BTU INTERNATIONAL, INC., a
Delaware corporation with its chief executive office, principal place of
business and mailing address at 23 Esquire Road, North Billerica, Massachusetts
01862 (hereinafter referred to as the "BORROWER").

       WHEREAS, the Bank and Borrower entered into a Loan Agreement dated as of
June 26, 2002 (the "ORIGINAL LOAN AGREEMENT" and together with all amendments,
including this First Amendment, the "LOAN AGREEMENT"), pursuant to which, among
other things, the Bank extended a revolving line of credit (the "REVOLVING
CREDIT") to the Borrower in the amount of $14,000,000.00, evidenced by a
Revolving Credit Note (the "ORIGINAL REVOLVING CREDIT NOTE"); and

       WHEREAS, the Bank and Borrower have agreed, subject to the provisions of
a Loan Modification Agreement of even date herewith and this First Amendment,
among other things: (i) that the Termination Date under the Revolving Credit be
extended for one (1) year to May 31, 2007; (ii) that the definition of
"Borrowing Base" be amended; and (iii) that certain covenants and definitions in
the Loan Agreement be modified and amended;

       NOW, THEREFORE, in consideration of good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:

       1.     The Original Loan Agreement is hereby amended as follows:

       (a)    Section 1.35 of the Original Loan Agreement entitled "Termination
Date" is hereby amended by deleting therefrom the date "May 31, 2006" and
substituting in lieu thereof the date "May 31, 2007", thereby extending the
Termination Date for one (1) year.

       (b)    Section 2.1 of the Original Loan Agreement entitled "Revolving
Loan" is hereby amended by deleting the second paragraph setting forth the
definition of Borrowing Base and substituting the following paragraph in lieu
thereof:

       "For purposes of this Agreement, except as otherwise expressly set forth
       herein, the term "BORROWING Base" shall be deemed to mean a sum equal to:

              Eighty (80%) Percent of the Eligible Receivables; plus

              Thirty-Five (35%) Percent of the Borrower's Eligible Inventory,
              with Inventory advances not to exceed, in any event, Three Million
              Five Hundred Thousand ($3,500,000.00) Dollars;

              LESS

              The aggregate face amount(s) of any Letter of Credit outstanding
              hereunder plus the outstanding amount, if any, of all amounts
              previously drawn under any Letter(s) of Credit which have not been
              reimbursed to Lender by Borrower."

                                       1
<PAGE>

       (c)    Section 2.1 of the Original Loan Agreement entitled "Revolving
Loan" is hereby further amended by deleting from the third paragraph thereof the
language "and the Fixed Assets" to clarify that there is no Fixed Asset
component to the Borrowing Base any longer.

       (d)    Section 2.2 of the Original Loan Agreement entitled "Borrowing
Base Report, Etc." is hereby amended by deleting from the first paragraph
thereof the language "and a Fixed Asset listing (such as a depreciation
schedule)" to eliminate the requirement of providing information concerning
Fixed Asset since there is no longer a Fixed Assets component to the Borrowing
Base, and is further amended by deleting the second paragraph of said
Section 2.2.

       (e)    Section 3 of the Loan Agreement entitled "Security Agreement" is
hereby amended by deleting said Section and substituting the following in lieu
thereof:

              "SECTION 3. SECURITY INTEREST

              Simultaneously, the Borrower shall execute and deliver to the
              Lender a security agreement (the "SECURITY AGREEMENT") in
              substantially the form attached hereto as Exhibit 3.1, granting to
              the Lender a first lien and security interest in all accounts,
              inventory and other assets described in the Security Agreement and
              the Lender is hereby authorized to file UCC financing statements
              to perfect the security interest granted thereby."

       (f)    Section 7 of the Loan Agreement entitled "Events of Default" is
hereby amended by deleting section (i) and substituting the following
section (i):

              (i) If the Borrower shall dissolve or liquidate, or be dissolved
              or liquidated, or cease to legally exist, or, except as permitted
              in Section 6.6 of this Agreement, merge or consolidate, or be
              merged or consolidated with or into any other corporation.

       (g)    Section 7 of the Loan Agreement entitled "Events of Default" is
hereby further amended by deleting section (j) and substituting the following
section (j):

              (j) Except for indebtedness which the Borrower is in good faith
              disputing and for which the Borrower has reserves deemed
              reasonably adequate by the Bank in its reasonable judgment,
              failure by the Borrower to pay any other indebtedness or
              obligation which individually or in the aggregate exceeds
              $50,000.00, or, if any such other indebtedness or obligation shall
              be accelerated, or if there exists any event of default under any
              instrument, document or agreement governing, evidencing or
              securing such other indebtedness or obligation.

       (h)    Section 8.16 of the Loan Agreement is hereby amended by
substituting the following address for Peter H. Dodson, Esquire:

                                       2
<PAGE>

              Peter H. Dodson, Esquire
              Ropes & Gray
              45 Rockefeller Plaza
              New York, NY 10111
              Phone: (646) 840-6823
              Fax: (212) 841-5725

       (h)    Schedule A of the Loan Agreement is hereby amended by amending the
covenant entitled "MINIMUM TANGIBLE NET WORTH" by deleting the figure "Twenty
Million ($20,000,000.00) Dollars" and substituting the figure "Ten Million
($10,000,000.00) Dollars" in lieu thereof and deleting the date "December 31,
2002" and substituting the date "December 31, 2004" in lieu thereof, thereby
reducing the Minimum Tangible Net Worth requirement to "Ten Million
($10,000,000.00) Dollars" plus Fifty (50%) percent of the aggregate after tax
income of the Borrower for each fiscal year commencing with the fiscal year
ending December 31, 2004. Losses in subsequent fiscal years will not serve to
decrease the aforesaid minimum level in effect as of each fiscal year end.

       Additionally, Schedule A is further amended by deleting the second and
third paragraphs after the definition of Minimum Tangible Net Worth, which
second paragraph starts with the clause: "Notwithstanding the foregoing..." and
ends with the words: "during which the acquisition was consummated.", and which
third paragraph starts with the clause: "In the event of an acquisition of a
business,..." and ends with the words "... pursuant to Section 2.1."

       (i)    Schedule A is hereby further amended by adding the following
additional covenant:

              "MINIMUM NET INCOME [PROFITABILITY]". Permit Borrower's net income
              (as determined in accordance with GAAP) to be less than One Dollar
              ($1.00) for any fiscal quarter, commencing with the fiscal quarter
              ending December 31, 2004.

       (j)    Notwithstanding the deletion of the second and third paragraphs
after the definition of Minimum Tangible Net Worth in Schedule A, as described
in section (h) above, the Bank hereby acknowledges that the Leverage Ratio set
forth in Schedule A has been modified to 2.0 to 1.0 in lieu of .75 to 1.0.

       2.     The Borrower hereby represents and warrants that: (a) the
representations and warranties contained in Section 4 of the Loan Agreement
remain true and accurate in all material respects; (b) there has not occurred
any material adverse change in the business, assets, financial condition or
prospects of the business of Borrower since the date of the last financial
statements submitted to the Bank; and (c) the Borrower does not have any
offsets, set-offs or other claims of any kind against the Bank as of the date
hereof, and, to the extent Borrower has any such offsets, set-offs or other
claims, it hereby waives the same.

       3.     The Borrower will pay or reimburse the Bank, on demand, for all
expenses (including, without limitation, reasonable counsel fees and expenses)
incurred or paid by the Bank in connection with the making and administration of
the loans and the enforcement by the Bank of its rights as against the Borrower
or any other person primarily or secondarily liable to the Bank hereunder or
thereunder, including the counsel fees incurred in the preparation hereof.

       4.     Except as set forth herein, the Borrower hereby acknowledges and
agrees that the

                                       3
<PAGE>

Original Loan Agreement, as amended hereby, and all of the loan documents
previously executed and delivered by the Borrower, or third parties, to the Bank
securing the Obligations remain in full force and effect.

       5.     All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Original Loan Agreement.

       6.     Notwithstanding the existence of any other security interests in
the property described in any security agreement or mortgage or other instrument
or agreement, the Bank shall have the right to determine the order in which any
or all of said property shall be subjected to the remedies provided therein and
the right to determine the order in which any or all portions of the Obligations
are satisfied from the proceeds realized upon the exercise of the remedies
provided therein. The Borrower and any party who consents to the Bank's interest
in the said property and who has actual or constructive notice hereof hereby
waives and shall be deemed to have waived any and all rights to require the
marshaling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.

       IN WITNESS WHEREOF, the parties have executed or caused this First
Amendment to be executed by their respective officers hereunto duly authorized,
as of the day first written above and it and shall take effect as a sealed
instrument.

                                   SOVEREIGN BANK

                                   By:
                                       -----------------------------------------
                                       Michael S. Tager, Senior Vice President
                                       Duly Authorized

                                   BTU INTERNATIONAL, INC.

                                   By:
                                       -----------------------------------------
                                       Thomas P. Kealy
                                       Vice  President, Chief Accounting Officer
                                       and  Corporate Controller
                                       Duly Authorized

                                       4
<PAGE>

                          COMMONWEALTH OF MASSACHUSETTS

Middlesex, ss                                                  January ___, 2004

       Before me personally appeared Thomas P. Kealy as Vice President, Chief
Accounting Officer and Corporate Controller of BTU International, Inc., known by
me to be the person executing the foregoing instrument, and acknowledged said
instrument to be his free act and deed as Vice President, Chief Accounting
Officer and Corporate Controller of BTU International, Inc and the free act and
deed of said BTU International, Inc.

                                                   -----------------------------
                                                   Notary Public:
                                                   My Commission Expires:

                                       5
<PAGE>

                ALLONGE TO AND AMENDMENT OF REVOLVING CREDIT NOTE

       Reference is hereby made to a certain Revolving Credit Note dated June
26, 2002 in the original principal amount of Fourteen Million ($14,000,000.00)
Dollars (the "ORIGINAL NOTE") executed and delivered by BTU INTERNATIONAL, INC
(the "BORROWER") payable to the order of SOVEREIGN BANK (the "BANK");

       WHEREAS, the Bank and Borrower entered into a Loan Agreement (the
"ORIGINAL LOAN AGREEMENT") dated as of June 26, 2002 pursuant to which the Bank
extended a Revolving Credit to the Borrower in the amount of $14,000,000.00 and
the Borrower executed and delivered the Original Note; and

       WHEREAS, the Borrower has requested that the Termination Date of the
Revolving Credit be extended from May 31, 2006 to May 31, 2007 and the Bank has
agreed, subject to the execution and/or delivery of, among other things, this
Allonge;

       NOW, THEREFORE, the parties agree as follows:

       1.     The Original Note is hereby amended by deleting the date "May 31,
2006" from the first paragraph thereof and substituting the date "May 31, 2007"
in lieu thereof, thereby extending the Termination Date to May 31, 2007.

       2.     In all other respects, the Original Note is ratified and confirmed
as being in full force and effect and as being secured by the same collateral,
which secured the Original Note.

       Signed as a sealed instrument as of the 28th day of January, 2004.

                                    SOVEREIGN BANK

                                    By:
                                        ----------------------------------------
                                        Michael S. Tager, Senior Vice President
                                        Duly Authorized

                                    BTU INTERNATIONAL, INC.

                                    By:
                                        ----------------------------------------
                                        Thomas P. Kealy
                                        Vice President, Chief Accounting Officer
                                        and Corporate Controller
                                        Duly Authorized

<PAGE>
                               SECURITY AGREEMENT

       THIS SECURITY AGREEMENT is entered into at Boston, Massachusetts, as of
this 28th day of January, 2004 by and between BTU INTERNATIONAL, INC., a
Delaware corporation with its chief executive office, principal place of
business and mailing address at 23 Esquire Road, North Billerica, Massachusetts
01862 (hereinafter called the "BORROWER") and SOVEREIGN BANK (hereinafter called
the "BANK").

       The tangible Collateral, including the Inventory, which is the subject
matter of this Agreement is and will be kept at: 23 Esquire Road, North
Billerica, Massachusetts 01862 and the other locations, if any, described on
Exhibit A. The Borrower warrants that the Borrower has no places of business
except as set forth in the preceding sentence, except for additional locations
identified on Exhibit A. All records concerning Borrower's accounts, contract
rights and other property are at 23 Esquire Road, North Billerica, Massachusetts
01862.

       1.     In consideration of the Bank's extending credit and other
financial accommodations to the Borrower, the Borrower hereby grants to the Bank
a security interest in (including, without limitation, a lien on and pledge of)
all of the Borrower's Collateral (as hereinafter defined).

       The security interest granted by this Agreement is given to and shall be
held by the Bank as security for the payment and performance of all Obligations
(as hereinafter defined). After the occurrence and during the continuation of an
Event of Default, if the Bank shall have declared the Obligations to be
immediately due and payable pursuant to Section 7.2 of the Loan Agreement, the
Bank shall have the unrestricted right from time to time to apply the proceeds
of any of the Collateral to any of the Obligations, as the Bank in its sole
discretion may determine.

       During the continuance of this Agreement, the Borrower will, at such
intervals as the Bank may request, notify the Bank, upon a form satisfactory to
the Bank, of all Collateral which has come into existence since the date hereof
or the date of the last such notification, including, without limitation, the
delivery of schedules of the Collateral.

       2.     The following definitions shall apply:

              (a)    "COLLATERAL" shall mean all the Borrower's present and
       future right, title and interest in and to any and all of the following
       property, whether such property be now existing or hereafter created,
       acquired or arising or now or hereafter received by or belonging or owing
       to the Borrower:

              (i)    All Inventory;

              (ii)   All accounts (as these terms are defined in the Code, as
       hereafter defined), including, without limiting the generality of the
       foregoing, "Health-Care-Insurance Receivables", accounts receivable, and
       all contract rights, and chattel paper, including without limiting the
       generality of the foregoing, "Electronic Chattel Paper", regardless of
       whether or not any of the foregoing constitute proceeds of other
       Collateral;

              (iii)  All the Borrower's rights (which the Bank may exercise or
       not as it in its sole discretion may determine) to acquire or obtain
       goods and/or services with respect to the manufacture, processing,
       storage, sale, shipment, delivery or installation of any of the

                                       1
<PAGE>

       Borrower's Inventory or other Collateral;

              (iv)   All products and accessions to any of the Collateral;

              (v)    All obligations, debts and liabilities owing to the
       Borrower, from any person, firm or corporation or any other legal entity,
       whether now existing or hereafter arising, now or hereafter received by
       or belonging or owing to Borrower, for goods sold by it or for services
       rendered by it, all guarantees and securities therefore, all right, title
       and interest of Borrower in the merchandise or services which gave rise
       thereto, including the rights of reclamation and stoppage in transit, all
       rights to replevy goods, and all rights of an unpaid seller of
       merchandise or services, and all choses in action relating thereto;

              (vi)   All documents and instruments (whether negotiable or
       nonnegotiable, and regardless of their being attached to chattel paper)
       relating to Inventory or accounts or representing the right to payment
       for goods sold or services rendered, including, without limitation, all
       notes, bills, drafts and acceptances as these terms are defined in the
       Uniform Commercial Code representing the right to payment for goods sold
       or services rendered;

              (vii)  All books and records (including, without limiting the
       generality of the foregoing all electronically recorded data), whether
       now owned or existing or hereafter acquired, created or arising, relating
       to its accounts and/or Inventory;

              (viii) All proceeds of Collateral of every kind and nature and in
       whatever form, including, without limitation, both cash and noncash
       proceeds resulting or arising from the rendering of services by the
       Borrower or the sale or other disposition by the Borrower of the
       Inventory or other Collateral and all insurance proceeds payable under
       insurance policies relating to any items of Collateral and rents and
       profits resulting from the temporary use of Collateral;

"Collateral" shall not include any of the Borrower's interests in real property,
including fixtures, or equipment as defined in the Uniform Commercial Code.

              (b)    "CONTRACT RIGHTS" or "CONTRACT RIGHTS" means the rights of
       the Borrower to payment under contracts relating to goods sold or
       services rendered not yet earned by performance and not evidenced by
       instruments or chattel paper.

              (c)    "INVENTORY" shall have the meaning set forth in the Code,
       including raw materials, work in process, supplies and components, and
       finished goods, whether held by the Borrower for sale or other
       disposition, and also including any returned or repossessed Inventory
       detained from or rejected for entry into the United States by the
       appropriate governmental authorities, all products of and accessions to
       Inventory and including documents of title, whether negotiable or
       nonnegotiable, representing any of the foregoing.

              (d)    "DEBTOR(S)" shall mean the Borrower's customers who are
       indebted to the Borrower, sometimes also referred to as "ACCOUNT
       DEBTORS".

              (e)    "LOAN DOCUMENTS" shall mean any and all agreements,
       instruments, documents, security agreements, mortgages, financing
       statements, and supplements thereto and relating to the Loan Agreement
       dated as of June 26, 2002 between the Bank

                                       2
<PAGE>

       and the Borrower, as amended by a First Amendment to Loan Agreement of
       even date herewith, as the same may be amended, supplemented or restated
       from time to time, (the "LOAN AGREEMENT"), or entered into between the
       Borrower in favor of, or with, the Bank, at any time, for any purpose,
       including, without limitation, the Loan Agreement, any Term Notes, as
       defined in the Loan Agreement, hereafter executed by the Borrower, and
       this Security Agreement.

              (f)    "OBLIGATION(S)" shall include, without limitation, all
       loans, advances, indebtedness, notes, liabilities and amounts, liquidated
       or unliquidated, owing by the Borrower and/or its parent or subsidiaries,
       including without limitation under the Loan Agreement to the Bank at any
       time, each of every kind, nature and description, whether arising under
       this Agreement or otherwise, and whether secured or unsecured, direct or
       indirect (that is, whether the same are due directly by the Borrower to
       the Bank; or are due indirectly by the Borrower to the Bank as endorser
       or guarantor; or as obligor of obligations due to third persons which
       have been endorsed or assigned to the Bank; or otherwise), absolute or
       contingent, due or to become due, now existing or hereafter contracted,
       and all obligations arising under the Loan Documents, and any and all
       overdrafts of Borrower. Said term shall also include all interest and
       other charges chargeable to the Borrower and/or any guarantor or due from
       the Borrower to the Bank from time to time and all costs and expenses
       referred to in Paragraph 7 of this Agreement.

              (g)    "PERSON" or "PARTY" shall include individuals, firms,
       corporations and all other entities.

              (h)    "EVENT OF DEFAULT" shall mean the occurrence of any one or
       more of the Events of Default specified in the Loan Agreement or in the
       event this agreement shall at any time after its execution and delivery
       and for any reason cease (a) to create a valid and perfected first
       priority security interests in and to the property purported to be
       subject hereto or (b) to be in full force and effect or shall be declared
       null and void, or the validity or enforceability thereof shall be
       contested by the Borrower or any subsidiary or guarantor of the Borrower;

       All words and terms used in this Agreement other than those specifically
defined in Paragraph 2, and except as specifically otherwise provided elsewhere
in this Agreement, shall be deemed to have the meanings accorded to them in the
Massachusetts Uniform Commercial Code as amended from time to time (herein the
"CODE").

       3.     After the occurrence and during the continuation of an Event of
Default and after notice by the Bank to the Borrower, all proceeds of and
collections of the Collateral shall be held in trust by the Borrower for the
Bank and shall not be commingled with the Borrower's other funds or deposited in
any bank account of the Borrower; and the Borrower agrees to deliver to the Bank
on the dates of receipt thereof by the Borrower, duly endorsed to the Bank or to
the bearer, or assigned to the Bank, as may be appropriate, all proceeds of the
Collateral in the identical form received by the Borrower.

       4.     After the occurrence and during the continuation of an Event of
Default the Borrower may grant such allowances or other adjustments to Debtor(s)
as the Borrower may reasonably deem to accord with sound business practice,
including, without limiting the generality of the foregoing, accepting the
return of all or any part of the Inventory (subject to the provisions set forth
in this Agreement with reference to returned Inventory), unless the Bank shall

                                       3
<PAGE>

specifically direct otherwise in writing.

       5.     Intentionally omitted.

       6.     Intentionally omitted.

       7.     The Borrower shall pay to the Bank any and all costs and expenses
(including, without limitation, reasonable attorney's fees, court costs,
litigation and other expenses) incurred or paid by the Bank in establishing,
maintaining, protecting or enforcing any of the Bank's rights or the
Obligations, including, without limitation, any and all such costs and expenses
incurred or paid by the Bank in defending the Bank's security interest in, title
or right to the Collateral or in collecting or attempting to collect or
enforcing or attempting to enforce payment of the Collateral.

       8.     From and after notice to the Borrower pursuant to Paragraph 3, at
the expiration of such period of time after receipt by the Bank as the Bank
determines is reasonably sufficient to allow for clearance or payment of any
items, the cash proceeds of the Collateral shall be credited to the Obligations,
it being specifically understood and agreed, however, that an account
receivable, contract right, negotiable or nonnegotiable instrument (other than a
check), or other non-cash proceeds shall not be so credited until actual payment
thereof. All such credits shall, however, be conditional upon final payment to
the Bank of the items giving rise to them and if any item is not so paid, the
amount of any credit given for it shall be charged as a debit in said Borrower's
loan account, if any, or against any deposit account of the Borrower with the
Bank, whether or not the item is returned.

       9.     The Borrower shall hold its books and records relating to the
Collateral in a manner reasonably satisfactory to the Bank; and shall deliver to
the Bank from time to time promptly at its request, all invoices, original
documents of title, contracts, chattel paper, instruments and any other writings
relating thereto that relate to the Collateral, and other evidence of
performance of contracts, or evidence of shipment or delivery of the merchandise
or of the rendering of services; and the Borrower will deliver to the Bank
promptly at the Bank's request from time to time additional copies of any or all
such papers of writings, and such other information with respect to any of the
Collateral and such schedules of Inventory, schedules of accounts and such other
writings as the Bank may in its sole discretion deem to be necessary or
effectual to evidence any loan hereunder or the Bank's security interest in the
Collateral.

       10.    The Borrower shall promptly make, stamp or record such entries or
legends on the Borrower's books and records or on any of the Collateral as the
Bank shall request from time to time to indicate and disclose that the Bank has
a security interest in such Collateral.

       11.    The Bank, or its representatives, at any time and from time to
time on reasonable notice and at reasonable times, shall have the right, and the
Borrower will permit them:

              (a)    to examine, check, make copies of or extracts from any of
       the Borrower's books, records and files (including, without limitation,
       orders, and original correspondence);

              (b)    to inspect and examine the Borrower's Inventory or other
       Collateral; and

              (c)    to verify the Collateral or any portion or portions thereof
       or the Borrower's compliance with the provisions of this Agreement.

                                       4
<PAGE>

       12.    The Borrower will execute and deliver to the Bank any writings and
do all things necessary, effectual or requested by the Bank to carry into effect
the provisions and intent of this Agreement, or to vest more fully in or assure
to the Bank (including, without limitation, all steps to create and perfect) the
security interest in the Collateral granted to the Bank by this Agreement or to
comply with applicable statute or law and to facilitate the collection of the
Collateral, including the furnishing at the Borrower's own cost and expense, at
such intervals as the Bank may establish from time to time, of reports,
financial data and analyses satisfactory to the Bank.

       13.    The Borrower covenants with and warrants to the Bank:

              (a)    That all Inventory in which the Bank is now or hereafter
       given a security interest pursuant to this Agreement will at all times be
       kept and maintained in good order and condition at the sole cost and
       expense of the Borrower.

              (b)    That the Borrower will maintain in force one or more
       policies of insurance on all, Inventory and all other tangible Collateral
       against risks of fire (with customary extended coverage), sprinkler
       leakage, theft, loss or damage and other risks customarily insured
       against by companies engaged in businesses similar to that of the
       Borrower in such amounts, containing such terms, in such form, for such
       periods, covering such hazards and written by such companies as may be
       reasonably satisfactory to the Bank, such insurance to be payable to the
       Bank as its interest may appear in the event of loss after the occurrence
       and during the continuation of an Event of Default, and after the
       occurrence and during the continuation of an Event of Default no loss
       shall be adjusted thereunder without the Bank's approval; and all such
       policies shall provide that they may not be canceled without first giving
       at least ten (10) days' written notice of cancellation to the Bank. In
       the event that the Borrower fails to provide evidence of the maintenance
       of such insurance satisfactory to the Bank, the Bank may, at its option,
       secure such insurance and charge the cost thereof to the Borrower and as
       a debit charge in the Borrower's loan account, if any, or any other
       accounts of the Borrower with the Bank. At the option of the Bank, after
       the occurrence and during the continuation of an Event of Default, all
       insurance proceeds received from any loss or damage to any of the
       Collateral shall be applied either to the replacement or repair thereof
       or as a payment on account of the Obligations.

              (c)    That at the date hereof the Borrower is (and as to
       Collateral that the Borrower may acquire after the date hereof, will be)
       the lawful owner of the Collateral or have valid rights thereto, and that
       the Collateral, and each item thereof, is, will be, and shall continue to
       be free of all restrictions, liens, encumbrances, or other right, title
       or interest (other than the security interest therein granted to the Bank
       hereby, or permitted by the Loan Agreement) that the Borrower has and
       will have full power and authority to grant to the Bank a security
       interest in, and will not transfer, assign, sell (except sales or other
       dispositions in the ordinary course of business in respect to Inventory
       as expressly permitted in Paragraph 3 of this Agreement), pledge,
       encumber, subject to lien or grant any security interest in any of the
       Collateral (or any of the Borrower's right, title or interest therein) to
       any person other than the Bank or as permitted by the Loan Agreement; and
       that the Borrower will warrant and defend the Bank's right to and
       interest in the Collateral against all claims and demands of all persons
       whatsoever.

              (d)    That no contract right, account general intangible or
       chattel paper is or will be represented by any note or other instrument
       (negotiable or otherwise), and that no contract right or account is, or
       will be represented by any conditional or installment sales

                                       5
<PAGE>

       obligation or other chattel paper, except such instruments or chattel
       paper as have been or forthwith upon receipt by the Borrower following
       the occurrence and during the continuation of an Event of Default and the
       giving of notice by the Bank as provided in Section 7.2 of the Loan
       Agreement will be delivered to the Bank (duly endorsed or assigned, as
       may be appropriate), such delivery, in the case of chattel paper, to
       include all executed copies except those in the possession of the
       installment buyer (provided, that if the Bank elects to leave chattel
       paper in the possession of the Borrower, such procedure shall be subject
       to the Borrower's compliance with the provisions of Paragraph 10 hereof
       and to the Bank's right to require delivery and endorsement or assignment
       of such chattel paper by the Borrower to the Bank whenever the Bank shall
       so request); and following the occurrence and during the continuation of
       an Event of Default and the giving of notice by the Bank as provided in
       Section 7.2 of the Loan Agreement any security for or guaranty of any of
       the Collateral shall be delivered to the Bank immediately upon receipt
       thereof by the Borrower, with such assignments and endorsements thereof
       as the bank may request.

              (e)    (i)    That, except as the Bank may otherwise approve in
       writing, and except or as permitted by the Loan Agreement for sale,
       processing, use, consumption or other disposition in the ordinary course
       of business, the Borrower will keep all Inventory at one or more of the
       locations specified in the preamble to this Agreement.

                     (ii)   That the Borrower shall, during the term of this
              Agreement, keep the Bank currently and accurately informed in
              writing of each location where the Borrower's records relating to
              its accounts and contract rights, respectively, are kept, and
              shall not remove such records, or any of them, to another state
              without giving the Bank at least thirty (30) days' prior written
              notice thereof.

                     (iii)  That the Borrower's chief executive office is
              correctly stated in the preamble to this Agreement, that the
              Borrower shall, during the term of this Agreement, keep the Bank
              currently and accurately informed in writing of each of its other
              places of business, and that the Borrower shall not change the
              location of such chief office or open any new, or close, move or
              change any existing or new place of business without giving the
              Bank at least thirty (30) days' prior written notice thereof.

              (f)    That the Bank shall not be deemed to have assumed any
       liability or responsibility to the Borrower or any third person for the
       correctness, validity or genuineness of any instruments or documents that
       may be released or endorsed to the Borrower by the Bank (which shall
       automatically be deemed to be without recourse to the Bank in any event),
       or for the existence, character, quantity, quality, condition, value or
       delivery of any goods purporting to be represented by any such documents;
       and that the Bank, by accepting such security interest in the Collateral,
       or by releasing any Collateral to the Borrower, shall not be deemed to
       have assumed any obligation or liability to any supplier or Debtor or to
       any other third party, and the Borrower agrees to indemnify and defend
       the Bank and hold it harmless in respect to any claim or proceeding
       arising out of any matter referred to in this Paragraph 13(f).

              (g)    Intentionally omitted.

              (h)    That the Borrower will immediately notify the Bank of any
       loss or damage to, or material diminution in or any occurrence which
       would materially and

                                       6
<PAGE>

       adversely affect the value of, the Inventory or other Collateral. In the
       event that the Bank, in its sole discretion, shall determine that there
       has been any such material loss, damage or material diminution in the
       value of any of the assets included in the Borrowing Base, then any such
       assets which have been lost, damaged or otherwise diminished in value
       shall be excluded from the calculation of the Borrowing Base, without
       regard as to whether there is insurance coverage therefore. If the
       outstanding Loans exceed the Borrowing Base calculated after the
       exclusion of assets as a result of such casualty, then, at the Bank's
       election, exercised in its sole discretion, within thirty (30) days of
       notice, the Borrower shall pay, to the Bank such amount so that the
       Borrower is in compliance with the Borrowing Base, or, alternatively,
       provide substitute collateral which is satisfactory to the Bank in its
       sole discretion.

              (i)    That the Bank may from time to time in the Bank's
       discretion hold and treat any deposits or other sums at any time credited
       by or due from the Bank to the Borrower and any securities or other
       property of the Borrower in the possession of the Bank, whether for
       safekeeping or otherwise, as collateral security for and apply or set the
       same off against any Obligations after the occurrence and during the
       continuance of an Event of Default.

              (j)    That if any of the Collateral includes a charge for, or if
       any loan by the Bank to the Borrower shall be subject to any tax payable
       to any governmental taxing authority, the Borrower shall pay such tax
       independently when due. The Borrower will indemnify and save the Bank
       harmless from any loss, cost, liability or expense (including, without
       limitation, reasonable attorney's fees), in connection therewith other
       than such as shall be caused by the Bank's willful misconduct, gross
       negligence or acts taken in bad faith.

              (k)    That at any time or times after the occurrence and during
       the continuation of an Event of Default, the Bank may notify any Debtor
       or Debtors of its security interest in the Collateral and collect all
       amounts due thereon; and the Borrower agrees, at the request of the Bank,
       to notify all or any of the Debtors in writing of the Bank's security
       interest in the Collateral in whatever manner the Bank requests, and if
       the Bank so requests, to permit the Bank to mail such notices at the
       Borrower's expense.

              (l)    That the Bank may, at its option, from time to time,
       discharge any taxes, liens or encumbrances on any of the Collateral not
       permitted by the Loan Agreement, or take any other action that the Bank
       may deem proper to maintain or preserve its security interest in the
       Collateral, and the Borrower will pay to the Bank on demand or the Bank
       in its sole discretion may charge to the Borrower all amounts so paid or
       incurred by it or as a debit charge against the Borrower's loan account,
       if any, or any other deposit account of the Borrower with the Bank.

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

              (n)    That all representations now or hereafter made by the
       Borrower to the Bank, whether in this Agreement or in any supporting or
       supplemental reports, statements

                                       7
<PAGE>

       or documentation, including, without limitation, statements relating to
       the Collateral and financial statements, are, and will be, at and as of
       the date when made true and correct in all material respects.

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

       14.    The Borrower hereby irrevocably constitutes and appoints the Bank
as the Borrower's true and lawful attorney, with full power of substitution, at
the sole cost and expense of the Borrower but for the sole benefit of the Bank,
to be exercised only after the occurrence and during the continuation an Event
of Default and the giving of the notice as provided by Section 7.2 of the Loan
Agreement, to convert the Collateral into cash, including without limitation,
the sale (either public or private) of all or any portion or portions of the
Inventory and other Collateral; to enforce collection of the Collateral, either
in its own name or in the name of the Borrower, including, without limitation,
executing releases, compromising or settling with any Debtors and prosecuting,
defending, compromising or releasing any action relating to the Collateral; to
notify Post Office authorities to change the address for delivery of mail
addressed to the Borrower to such address as the Bank shall designate; to
receive, open and dispose of all mail addressed to the Borrower received at such
address and to take therefrom any remittances or proceeds of Collateral in which
the Bank has a security interest; to endorse the name of the Borrower in favor
of the Bank upon any and all checks, drafts, money orders, notes, acceptances or
other instruments of the same or different nature received at such address; to
sign and endorse the name of the Borrower on and to receive as secured party any
of the Collateral, any invoices, schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title of the same or different nature relating to the Collateral;
to sign the name of the Borrower or any notice to the Debtors or on verification
of the Collateral; and to sign and file or record on behalf of the Borrower any
financing or other statement in order to perfect or protect the Bank's security
interest. The Bank shall not be obliged to do any of the acts or exercise any of
the powers hereinabove authorized, but if the Bank elects to do any such act or
exercise any such power, it shall not be accountable for more than it actually
receives as a result of such exercise of power, and it shall not be responsible
to the Borrower except for willful misconduct, gross negligence, or acts taken
in bad faith. All powers conferred upon the Bank by this Agreement, being
coupled with an interest, shall be irrevocable so long as any Obligation of the
Borrower to the Bank shall remain unpaid. Additionally, whether or not there is
an Event of Default, the Borrower hereby authorizes the Bank, at any time, and
from time to time, to file UCC financing statements, amendments and
continuations statements in the name of the Borrower, as debtor, to perfect the
security interests in the Collateral granted hereby in such jurisdictions as the
Bank deems necessary or appropriate without any signature of the Borrower or the
Bank to the extent permitted in such jurisdictions.

                                       8
<PAGE>

       Whenever the Bank deems it desirable that any legal action be instituted
with respect to any Collateral or that any other action be taken in an attempt
to effectuate collection of any Collateral, the Bank may reassign the item in
question to the Borrower (and if the Bank shall execute any such reassignment,
it shall automatically be deemed to be without recourse to the Bank in any
event) and require the Borrower to proceed with such legal or other action at
the Borrower's sole liability, cost and expense, in which event all amounts
collected by the Borrower on such item shall nevertheless be subject to the
provisions of Paragraph 3 of this Agreement.

       15.    The Bank is hereby authorized, at its election, at any time or
times after an Event of Default has occurred and during the continuation
thereof, if the Bank has given the notice as provided by Section 7.2 of the Loan
Agreement, and without any further demand or notice except to such extent as
notice may be required by applicable law, to sell or otherwise dispose of all or
any of the Collateral at public or private sale, and the Bank may also exercise
any and all other rights and remedies of a secured party under the Code or which
are otherwise accorded to it by applicable law, all as the Bank may determine.
If notice of a sale or other action by the Bank is required by applicable law,
the Borrower agrees that ten (10) days' written notice to the Borrower, or the
shortest period of written notice permitted by such law, whichever is larger,
shall be sufficient; and that to the extent permitted by such law, the Bank, its
officers, attorneys and agents may bid and become purchasers at any such sale,
if public, and may purchase at any private sale any of the Collateral that is of
a type customarily sold on a recognized market or which is the subject of widely
distributed standard price quotations, and any sale (public or private) shall be
free from any right of redemption, which the Borrower hereby waives and
releases. No purchaser at any sale (public or private) shall be responsible for
the application of the purchase money other than the Bank. Any balance of the
net proceeds of sale remaining after paying all direct Obligations of the
Borrower to the Bank, and all costs and expenses of manufacturer, processing,
completion or installation of the Inventory; collection, storage, custody, sale
and delivery of the Inventory, and/or the Collateral, including, without
limitation, reasonable attorneys' fees, and after retaining as collateral
security or applying as the Bank may elect (in whole or in part at any time and
from time to time) amounts equal to the aggregate of all other Obligations shall
be returned to the Borrower or to such other party as may be legally entitled
thereto; and if there is a deficiency, the Borrower shall be responsible for the
same, with interest as provided in the Loan Agreement. Upon demand by the Bank,
the Borrower shall assemble the Collateral and make it available to the Bank at
a place designated by the Bank which is reasonably convenient to the Bank and
the Borrower.

       16.    The Borrower waives notice of nonpayment, demand, presentment,
protest or notice of protest of the Collateral, and all other notices, consents
to any renewals or extensions of time of payment thereof, and generally waives
any and all suretyship defenses and defenses in the nature thereof. No delay or
omission of the Bank in exercising or enforcing any of its rights, powers,
privileges, remedies, immunities or discretions (all of which are hereinafter
collectively referred to as the "BANK'S RIGHTS AND REMEDIES") hereunder shall
constitute a waiver thereof; and no waiver by the Bank of any default of the
Borrower hereunder shall operate as a waiver of any other default hereunder. No
term or provision hereof shall be waived, altered or modified except with the
prior written consent of the Bank, which consent makes explicit reference to
this Agreement. Except as provided in the preceding sentence, no other agreement
or transaction, of whatsoever nature, entered into between the Bank and the
Borrower at any time (whether before, during or after the effective date or term
of this Agreement), shall be construed in any particular as a waiver,
modification or limitation of any of the Bank's rights and remedies under this
Agreement (nor shall anything in this Agreement be construed as a waiver,
modification or limitation of any of the Bank's rights and remedies under any
such other agreement or transaction) but all of the Bank's rights and remedies
not only under the provisions of this

                                       9
<PAGE>

Agreement but also under any such other agreement or transaction shall be
cumulative and not alternative or exclusive, and may be exercised by the Bank at
such time or times and in such order of preference as the Bank in its sole
discretion may determine.

       17.    If any provision of this Agreement or portion of such provision or
the application thereof to any person or circumstance shall to any extent be
held invalid or unenforceable, the remainder of this Agreement (or the remainder
of such provision) and the application thereof to other persons or circumstances
shall not be affected thereby.

       18.    This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereto, and shall remain in
full force and effect (and the Bank shall be entitled to rely thereon,
notwithstanding payment of all Obligations of the Borrower to the Bank at any
time or times) until terminated as to future transactions by written notice from
either party to the other party of the termination hereof; provided that any
such termination shall not release or affect any Collateral in which the bank
already has a security interest or any Obligations incurred or rights accrued
hereunder prior to the effective date of such notice (as hereinafter defined) of
such termination. Notwithstanding any such termination, the Bank shall have a
security interest in all Collateral to secure the payment and performance of
Obligations arising after such termination as a result of commitments or
undertakings made or entered into by the Bank prior to such termination. Upon
the later to occur of the effective date of any such termination and the date on
which all Obligations are paid in full, the Bank shall terminate its security
interests in the Collateral and the Bank shall deliver to Borrower termination
statements with respect thereto. The Bank may transfer and assign this Agreement
and deliver the Collateral to the assignee, who shall thereupon have all of the
rights and obligations of the Bank; and the Bank shall then be relieved and
discharged of any responsibility or liability with respect to this Agreement and
the Collateral.

       19.    This Agreement is intended to take effect as a sealed instrument
and has been executed or completed and is to be performed in Massachusetts, and
it and all transactions thereunder or pursuant thereto shall be governed as to
interpretation, validity, effect, rights, duties and remedies of the parties
thereunder and in all other respects by the domestic laws of The Commonwealth of
Massachusetts.

       20.    Notwithstanding the existence of any other security interests in
the Collateral described in this Agreement held by the Bank or by any other
party, or the existence of any other mortgage or security interest in any other
property or collateral of the Borrower or of any co-obligor, guarantor or
endorser held by the Bank or any other party, the Bank shall have the right to
determine the order in which any or all of said collateral and property,
including the Collateral, shall be subjected to the remedies provided herein and
in any other security agreement or mortgage granted by the Borrower or any other
party and the right to determine the order in which any or all portions of the
Obligations secured hereby are satisfied from the proceeds realized upon the
exercise of the remedies provided herein or therein. The Borrower and any party
who consents to this interest in the said Collateral and other property and who
has actual or constructive notice hereof hereby waives and shall be deemed to
have waived any and all rights to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.

       21.    All notices, requests, demands, claims and other communications
required or permitted to be delivered, given or otherwise provided under this
Agreement must be in writing and must be delivered, given or otherwise provided:

                                       10
<PAGE>
         (a)    by facsimile (in which case, it will be effective upon receipt
         of confirmation of good transmission), with a copy via overnight
         delivery by a nationally recognized courier service; or

         (b)    by overnight delivery by a nationally recognized courier
         service (in which case, it will be effective on the Business Day after
         being deposited with such courier service);

in each case, to the address (or facsimile number) listed below:

         If to the Borrower:
         ------------------

         BTU International, Inc.
         23 Esquire Road
         North Billerica, Massachusetts 01862,
         Attention: President
         Phone: (978) 667-4111
         Fax: (978) 667-3377

         With a copy to:

         Peter H. Dodson, Esquire
         Ropes & Gray
         885 Third Avenue
         Suite 3200
         New York, New York 10022
         Phone: (646) 840-6823
         Fax:(646) 840-6850

         If to the Bank:
         --------------

         Sovereign Bank
         19 Pleasant Street
         Mail Stop: MA1-PLS-0201
         Woburn, Massachusetts 01801
         Attention: Michael S. Tager
         Phone: (781) 935-5819
         Fax: (781) 935-5979

         With a copy to:

         Richard J. Levin, Esquire
         Cumsky & Levin LLP
         6 University Road
         Cambridge, Massachusetts 02139
         Phone: (617) 492-9700
         Fax: (617) 492-9020

                                       11
<PAGE>

       IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                                   SOVEREIGN BANK

                                   By:
                                       ----------------------------------------
                                       Michael S. Tager, Senior Vice President

                                   BTU INTERNATIONAL, INC.

                                   --------------------------------------------
                                   Thomas P. Kealy
                                   Vice President, Chief Accounting Officer
                                   and Corporate Controller

                                       12
<PAGE>

                                    EXHIBIT A

                                 OTHER LOCATIONS

None other than:

BTU International (Headquarters)
23 Esquire Rd
N. Billerica, MA 01862

BTU Europe
14 Armstrong Mall
Southwood Summit Centre
Hants, GU14
ONR
United Kingdom

BTU France/Germany
6 allee Saint Exupery
95230 Soisy-Sous-Montmorency
France

BTU Beijing
Rm 6415, Garden Business Bldg 30
Huayuan Dong Lu, Haidian District
Beijing, 100083
China

BTU Overseas -- Penang
23 Tingkat Bukit Jambul
Bukit Hambul Indah
11950 Penang
Malaysia

BTU Overseas -- Singapore
#01-03 LHK Building
701 Sims Drive
387383
Singapore

BTU Overseas -- Shanghai
Sales & Service Office
Room 2202, Development Mansion
51 Ri Jing Road, Wai Gao Qiao Free Trade Zone
Shanghai 200131
China

BTU Ltd.

                                       13
<PAGE>

BTU Shanghai Mfg.
25 Jiatai Road
Waigaoqiao Free Trade Zone
Shanghai 200131
China

MEP Technologies INC.
3100 Peugeot
Laval, Quebec Canada H7L 5C6

UPS Logistics
1030 Commercial Street
San Jose, CA 95112

UPS Logistics
2230 Outer Loop
Louisville, KY 40219

Inventory In Transit:
---------------------
         Inter-company shipments
         Trade show systems
         Non-FOB terms with customer, i.e. DDP terms
         Supplier FOB terms

BTU product loaned to BTU customers for trial

BTU parts consigned to BTU suppliers

                                       14
<PAGE>

                                   EXHIBIT "A"
                             TO FINANCING STATEMENT
                         DEBTOR: BTU INTERNATIONAL, INC.
                          SECURED PARTY: SOVEREIGN BANK

     The collateral (the "Collateral"), now existing or hereafter arising, in
which the Secured Party does and shall hold a secured interest consists of:

     1)   All inventory (as defined in the UCC), including raw materials, work
          in process, supplies and components, and finished goods, whether held
          by the Debtor for sale or other disposition, and also including any
          returned or repossessed Inventory detained from or rejected for entry
          into the United States by the appropriate governmental authorities,
          all products of and accessions to Inventory and including documents of
          title, whether negotiable or nonnegotiable, representing any of the
          foregoing;

     2)   All accounts (as defined in the UCC), including, without limiting the
          generality of the foregoing, "Health-Care-Insurance Receivables",
          accounts receivable, and all contract rights, and chattel paper,
          including without limiting the generality of the foregoing,
          "Electronic Chattel Paper", regardless of whether or not any of the
          foregoing constitute proceeds of other Collateral;

     3)   All the debtor's rights (which the Secured Party may exercise or not
          as it in its sole discretion may determine) to acquire or obtain goods
          and/or services with respect to the manufacture, processing, storage,
          sale, shipment, delivery or installation of any of the Debtor's
          Inventory or other Collateral;

     4)   All products and accessions to any of the Collateral;

     5)   All obligations, debts and liabilities owing to the Debtor, from any
          person, firm or corporation or any other legal entity, whether now
          existing or hereafter arising, now or hereafter received by or
          belonging or owing to Debtor, for goods sold by it or for services
          rendered by it, all guarantees and securities therefore, all right,
          title and interest of Debtor in the merchandise or services which gave
          rise thereto, including the rights of reclamation and stoppage in
          transit, all rights to replevy goods, and all rights of an unpaid
          seller of merchandise or services, and all choses in action relating
          thereto;

     6)   All documents and instruments (whether negotiable or nonnegotiable,
          and regardless of their being attached to chattel paper) relating to
          Inventory or accounts or representing the right to payment for goods
          sold or services rendered, including, without limitation, all notes,
          bills, drafts and acceptances as these terms are defined in the UCC
          representing the right to payment for goods sold or services rendered;

     7)   All books and records (including, without limiting the generality of
          the foregoing all electronically recorded data), whether now owned or
          existing or hereafter acquired, created or arising, relating to its
          accounts and/or Inventory; and

     8)   All proceeds of Collateral of every kind and nature and in whatever
          form, including, without limitation, both cash and noncash proceeds
          resulting or arising from the rendering of services by the Debtor or
          the sale or other disposition by the Debtor of the Inventory or other
          Collateral and all insurance proceeds payable under insurance policies
          relating to any items of Collateral and rents and profits resulting
          from the temporary use of Collateral.

              All references to the UCC shall refer to the Massachusetts Uniform
Commercial Code as amended from time to time. "Collateral" shall not include any
of the Debtor's interests in real property, including fixtures, or equipment as
defined in the UCC.

<PAGE>
                           LOAN MODIFICATION AGREEMENT

       This Loan Modification Agreement (hereinafter the "AGREEMENT") is dated
as of January 28, 2004 and is entered into by and between SOVEREIGN BANK, with
an office at 75 State Street, Boston, Massachusetts (hereinafter referred to as
the "LENDER") and BTU INTERNATIONAL, INC., a Delaware corporation with its chief
executive office, principal place of business and mailing address at 23 Esquire
Road, North Billerica, Massachusetts 01862 (hereinafter referred to as the
"BORROWER").

       In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which by each party
hereto hereby are acknowledged, the undersigned hereby agree as follows:

       I.     BACKGROUND

       A.     The Credit Facility. The Lender and Borrower have previously
entered into a Loan Agreement dated as of June 26, 2002 (the "ORIGINAL LOAN
AGREEMENT" and together with all amendments, including the First Amendment, the
"LOAN AGREEMENT"), pursuant to which, among other things, the Lender extended a
revolving line of credit (the "REVOLVING CREDIT") to the Borrower in the amount
of $14,000,000.00 (the "CREDIT FACILITY"), evidenced by, among other things, a
Revolving Credit Note (the "ORIGINAL NOTE").

       The Credit Facility has been made and is governed by the following
documents:

       1.     The Original Note;

       2.     The Original Loan Agreement; and

       3.     Various other documents, instruments, and agreements executed in
              connection therewith (collectively, with the Original Note and the
              Original Loan Agreement, the "ORIGINAL LOAN DOCUMENTS").

       Except as otherwise provided herein or in the Closing Documents
(hereinafter defined), the provisions of the Original Loan Documents shall
remain unmodified and in full force and effect.

       As of the date hereof, the sum of zero ($0) Dollars have been advanced
under the Revolving Loan.

       B.     Purpose. The purpose of this Agreement is to set forth the terms,
provisions and conditions upon which certain modifications shall be made by and
among the parties with respect to the Credit Facility and to address certain
other financial accommodations being made to Borrower.

       II.    GENERAL TERMS OF MODIFICATION.

       A.     Revised Terms of the Credit Facility. Lender and the Borrower have
agreed to certain modifications to the terms of the Credit Facility, subject to
the terms and conditions of this Agreement, so as to, among other things:

                                       1
<PAGE>

       (i)    extend the Termination Date of the Credit Facility to May 31,
              2007;

       (ii)   modify the definition of Borrowing Base;

       (iii)  modify the minimum tangible net worth covenant and require
              Borrower to comply with a certain financial covenant regarding
              minimum net profit and confirm the reporting requirements of the
              Borrower to the Lender and other terms; and

       (iv)   grant the Lender a perfected first lien and security interest in
              the Collateral (as defined in the Security Agreement) and
              authorize the filing of a UCC financing statement.

       In connection with the foregoing, the Borrower shall pay to the Lender a
one time transaction fee of Twenty Thousand ($20,000.00) Dollars.

       C.     Additional Documents. Concurrently with the execution hereof, the
Borrower shall execute and/or deliver the following documents, each of which
shall be in form and substance satisfactory to lender ("CLOSING DOCUMENTS"):

       (i)    A First Amendment to Loan Agreement (the "FIRST AMENDMENT");

       (ii)   An Allonge to and Amendment of the Original Note (collectively
              with the Original Note, the "AMENDED NOTE");

       (iii)  A Security Agreement (the "SECURITY AGREEMENT"); and

       (iv)   Such other instruments, documents and certificates as the Lender
              or its counsel may reasonably require.

       III.   GENERAL.

       A.     Ratification. The Borrower hereby ratifies and confirms that each
of the Original Loan Documents, as modified by the First Amendment and the
Closing Documents (collectively the "LOAN DOCUMENTS"), remain in full force and
effect and agrees that the outstanding balance due and payable to Lender under
the Loan Documents is set forth in Section I.A. hereof. The Borrower further
agrees that the advances under the Credit Facility are due and payable in
accordance with the terms of the Loan Documents, without any offset,
counterclaim or other claim against Lender of any nature whatsoever as of the
date hereof. Without limiting the generality of the foregoing, the Borrower
hereby agrees that outstanding advances under the Revolving Loan are due and
payable in accordance with the terms of the Amended Note without any offset,
counterclaim or other claim against the Lender of any nature whatsoever as of
the date hereof.

       B.     Complete Terms. Any and all duties or obligations that Lender may
have to the Borrower are limited to those expressly stated in this Agreement and
the Loan Documents and neither the duties and obligations of Lender nor the
rights of the Borrower shall be expanded beyond the express terms of this
Agreement and the Loan Documents on the basis of any legal or equitable
principle or on any other basis whatsoever.

                                       2
<PAGE>

       C.     No Other Representation. The Borrower acknowledges and agrees that
neither Lender, nor any person, firm, corporation or entity acting on behalf of
Lender has made any representation or promise to the Borrower which is not
expressly set forth herein.

       D.     Events of Default. An "Event of Default" under the Loan Agreement
shall be deemed to have occurred (i) if the Borrower fails fully and timely to
perform all obligations to be performed by it under this Agreement; or (ii) if
any warranty or representation of the Borrower under any of this Agreement or
the Closing Documents proves to have been false or misleading in any material
respect when made.

       E.     Reservation of Rights. Upon the occurrence of an Event of Default
under this Agreement, Lender reserves any and all of its rights that it may have
against the Borrower or any other obligor, maker or guarantor under the Loan
Documents.

       F.     Costs and Expenses. The Borrower agrees to pay to Lender all costs
that Lender incurs in connection with the preparation of this Agreement and the
documents provided for herein and the implementation of the transactions
contemplated herein, including without limitation, reasonable attorneys' fees
and expenses. In the event such costs are not paid in full within ten (10) days
of the date hereof, the Borrower hereby authorizes Lender and acknowledges and
agrees that Lender shall have the right to debit any or all of the deposit or
other accounts maintained with Lender in an aggregate amount equal to the amount
of such costs.

       G.     Amendments. No purported alteration, amendment, change, waiver,
termination or other modification of the Loan Documents shall be binding upon
any party hereto or have any other force or effect in any respect unless the
same shall be in writing and signed, in the case of Lender, by an authorized
officer or agent thereof, and, in the case of the Borrower, by the President,
Treasurer or Chief Accounting Officer of the Borrower.

       H.     Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Massachusetts as the same may
from time to time exist, without giving effect to the principles of conflicts of
law.

       I.     Binding Effect. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.

       J.     Merger. All prior understandings and agreements between the
parties relating to the modification of the obligations of the Borrower to
Lender with respect to the Credit Facility are merged in this Agreement which,
together with the Closing Documents and other Loan Documents fully and
completely express the understanding and agreements among the parties with
respect thereto and which is entered into after full investigation. None of the
parties hereby is relying upon any statement or representation made by any other
party which is not set forth or referred to in this Agreement or the other Loan
Documents.

       K.     Captions. The caption headings in this Agreement are for
convenience and reference only, are not intended to be a part of this Agreement
and shall not be construed to define, modify, alter or describe the scope or
intent of any of the terms, covenants or conditions of this Agreement.

       L.     No Waiver. No failure or delay of any party hereto in the exercise
of any right given to such party under any of the Loan Documents shall be deemed
to be a waiver thereof. No

                                       3
<PAGE>

waiver by any party hereto of any condition hereunder for its benefit (unless
the time specified herein for exercise of such right or satisfaction of such
condition has expired) shall constitute a waiver of any other or further right
nor shall any single or partial exercise of any right preclude other or further
exercise thereof or any other rights. The waiver of any breach shall not be
deemed a waiver of any other or subsequent breach. No extensions of time for the
performance of any obligations shall be deemed or construed as an extension of
time for the performance of any other obligation.

       M.     Further Instruments. Each party shall from time to time execute,
acknowledge and deliver such further instruments and perform such additional
acts as any other party may reasonably request in order to effectuate the intent
of this Agreement. Without limiting the generality of the preceding sentence,
the Borrower shall execute, acknowledge and deliver such instruments as Lender
reasonably may request to further evidence, secure, effectuate or perfect its
obligations to Lender under the Loan Documents or Lender's interest or priority
in the collateral granted to secure such obligations.

       N.     Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the same
instrument.

       O.     Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to such person or circumstance other than those to which it is
held invalid or unenforceable, shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.

       P.     Cumulative Rights. Each right and remedy provided for in this
Agreement shall be cumulative and shall be in addition to every other right or
remedy provided for in this Agreement or now or hereafter existing at law or in
equity or by statute or otherwise and the exercise or beginning of the exercise
by any party hereto of any one or more of the rights and remedies provided for
in this Agreement or now or hereafter existing at law or in equity or by statute
or otherwise shall not preclude the simultaneous or later exercise by such party
of any and all other rights or remedies provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise.

       Q.     Conflicts With Other Documents. In the event of any conflicts
between the terms of this Agreement, the other Loan Documents and the Closing
Documents, the terms of this Agreement shall control.

       R.     WAIVER OF JURY TRIAL. LENDER AND THE BORROWER DO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT WHICH THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED HEREIN. THE
FOREGOING WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS
AGREEMENT.

                            [Signature Page Follows]

                                       4
<PAGE>

       IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as an instrument under seal within the Commonwealth of Massachusetts
effective as of the day and year first above written.

                                    SOVEREIGN BANK

                                    By:
                                        ----------------------------------------
                                        Michael S. Tager, Senior Vice President
                                        Duly Authorized

                                    BTU INTERNATIONAL, INC.

                                    By:
                                        ----------------------------------------
                                        Thomas P. Kealy
                                        Vice President, Chief Accounting Officer
                                        and Corporate Controller
                                        Duly Authorized

                          COMMONWEALTH OF MASSACHUSETTS

Middlesex, ss                                                  January ___, 2004

       Before me personally appeared Thomas P. Kealy as Vice President, Chief
Accounting Officer and Corporate Controller of BTU International, Inc., known by
me to be the person executing the foregoing instrument, and acknowledged said
instrument to be his free act and deed as Vice President, Chief Accounting
Officer and Corporate Controller of BTU International, Inc and the free act and
deed of said BTU International, Inc.

                                                  -----------------------------
                                                  Notary Public:
                                                  My Commission Expires:

                                       5

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