Document:

DiaSys Corporation - Exhibit 10.30

EXHIBIT 10.30

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD
OR OFFERED FOR SALE UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION IN REASONABLY
ACCEPTABLE FORM AND SCOPE TO THE COMPANY OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED
UNDER ANY SUCH LAWS OR THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THE OFFERING OF THIS WARRANT HAS NOT BEEN REVIEWED OR APPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION, OR BY ANY STATE'S SECURITIES ADMINISTRATOR.
THIS WARRANT IS ALSO SUBJECT TO CERTAIN ADDITIONAL TRANSFER RESTRICTIONS PROVIDED
FOR HEREIN. 

DIASYS CORPORATION 

  

  Common Stock Purchase Warrant 

  

  75,000 Shares 

  

  Void after February 3, 2009

 
	1 	Holder's Right to Purchase. 

 

                      
DIASYS CORPORATION, a Delaware corporation (the "Company"), hereby certifies that
for value received, JEFFREY B. AARONSON or his assigns (the "Holder"), is entitled,
subject to the terms and conditions set forth in this Common Stock Purchase Warrant
(the "Warrant"), to purchase from the Company up to seventy five thousand (75,000)
fully paid and non-assessable shares of Common Stock, $.001 par value, of the
Company (the "Common Stock") at a purchase price of Sixty-Six Cents ($.66) per
share, at any time or from time to time before 4:00 p.m., Eastern Time, on February
3, 2009. This right to purchase shares of Common Stock of the Company may be exercised
in whole or in part and is further subject to the terms and provisions set forth
herein. 

 

 

                       
 

                       This
Warrant is issued as partial consideration for a $50,000 loan from the Holder
to the Company, evidenced by a Promissory Note of the Company made on or about
the date hereof.

	2. 	Exercise of Warrant. 

                      
2.1     Manner of Exercise. To exercise this Warrant
in whole or in part, the Holder shall deliver on any Business Day to the Company
at its principal place of business (a) this Warrant, (b) a written notice in substantially
the form of the Subscription Notice attached hereto, of the Holder's election
to exercise this Warrant, which notice shall specify the number of shares to be
purchased (which shall be a whole number of Shares if for less than all the Shares
then issuable hereunder), and (c) payment of the Exercise Price with respect to
such Shares. Such payment may be made, at the option of the Holder, either (a)
by cash, certified or bank cashier's check or wire transfer in an amount equal
to the product of (i) the Exercise Price times (ii) the number of Warrant Interests
as to which this Warrant is being exercised or (b) by a "cashless exercise" of
this Warrant, in which event the Holder shall receive from the Company the number
of Warrant Interests equal to (i) the number of Warrant Interests as to which
this Warrant is being exercised minus (ii) the number of Warrant Interests having
an aggregate value (determined by reference to the Market Value of shares of Common
Stock on the Business Day immediately prior to the date of such exercise), equal
to the product of (x) the Exercise Price times (y) the number of Warrant Interests
as to which this Warrant is being exercised. As used herein, the term "Market
Value" shall mean the closing price of the Company's Common Stock on the American
Stock Exchange (or such other market on which the Company's shares may hereafter
be traded). 

                      
The Company shall, as promptly as practicable and in any event within seven days
after receipt of such notice and payment, execute and deliver or cause to be executed
and delivered, in accordance with such notice, a certificate or certificates representing
the aggregate number of a share of Common Stock specified in said notice together
with cash in lieu of any fractions of a share of Common Stock as provided in Section
1.3. The certificate or certificates so delivered shall be in such denominations
as may be specified in such notice, and shall be issued in the name of the Holder
or such other name or names as shall be designated in such notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates shall
be deemed to have been issued, and such Holder or any other Person so designated
to be named therein shall be deemed for all purposes to have become a holder of
record of Warrant Shares, as of the date the aforementioned notice and payment
is received by the Company. If this Warrant shall have been exercised only in
part, the Company shall, at the time of delivery of such certificate or certificates,
deliver to the Holder a new Warrant evidencing the right to purchase the remaining
shares of Common Stock called for by this Warrant, which new Warrant shall, in
all other respects be identical with this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant which shall then be returned
to the Holder. The Company shall pay all expenses, stamp, documentary and similar
taxes and other charges payable in connection with the preparation, issuance and
delivery of share certificates and new Warrants under this provision. 

 

                      
2.2     When Exercise Effective. The exercise of this
Warrant shall be deemed to have been effected immediately prior to the close of
business on the business day on which the Company shall have received a completed
subscription and payment has hereinabove provided, and at such time the person
in whose name any certificate for shares of Common Stock shall be issuable upon
such exercise, as provided in Section 3.3, shall be deemed to have become the
Holder of record of such Common Stock.

                      
2.3     Company to Reaffirm Obligations. The Company
will, at the time of exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing its continuing obligation to afford to such Holder
all rights (including, without limitation, any right to registration) pursuant
to which such Holder shall continue to be entitled after such exercise in accordance
with the terms of this Warrant; provided that if the Holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing obligation
of the Company to afford such rights to such Holder.

                      
2.4     Shares to Be Fully Paid and Nonassessable.
All shares of Common Stock issued upon the exercise of this Warrant shall be validly
issued, fully paid and nonassessable and, if such Common Stock is then quoted
on NASDAQ or listed on any national securities exchange (as defined in the Exchange
Act), such Common Stock shall, to the extent permitted under the applicable rules
of such exchange or NASDAQ), be duly quoted or listed thereon, as the case may
be. 

                      
2.5     No Fractional Shares Required to Be Issued.
The Company shall not be required to issue fractional shares of Common Stock upon
exercise of this Warrant. If any fraction of a share of Common Stock would, but
for this Section 1.3, be issuable upon final exercise of this Warrant, in lieu
of such fractional share of Common Stock, the Company shall pay to the Holder
in cash an amount equal to the same fraction of the Fair Market Value of the Company
per share of Common Stock outstanding on the Business Day immediately prior to
the date of such exercise.

3.                   Reservation
of Stock, Etc. The Company will at all times reserve and keep available, solely
for issuance and delivery upon the exercise of the Warrant, all shares of Common
Stock issuable upon the exercise of the Warrant, All shares of Common Stock issued
upon the exercise of the Warrant shall be duly authorized, validly issued, fully
paid and non-assessable. 

	4. 	Adjustments 

                        4.1
    Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In case the Company, after the date hereof, (a) shall
effect a capital reorganization or reclassification of any or all of its capital
stock, or (b) shall consolidate with or merge into any other organization, company,
corporation, partnership, trust, business organization, individual, or group of
individuals (a "Person") and shall not be the continuing or surviving corporation
of such  

 

consolidation or merger, or (c) shall permit any other Person to consolidate with
or merge into the Company, and the Company shall be the continuing or surviving
Person but, in connection with such consolidation or merger, the Common Stock
shall be changed into or exchanged for stock or the securities or property of
any other Person, or (d) shall transfer all or substantially all of its properties
and assets to any other Person; then proper provision shall be made so that the
Holder of this Warrant, upon the exercise hereof at any time after the consummation
of such consolidation, merger, transfer, reorganization or reclassification, shall
be entitled to receive the stock and other securities and property to which such
Holder would have been entitled to, as if such Holder had so exercised this Warrant
immediately prior to the consummation of any such transaction. 

                       4.2
    Adjustments for Stock Dividends; Combinations.
In the event that the Company, at any time or from time to time hereafter, shall
(i) declare or pay any dividend on its capital stock payable in Common Stock;
(ii) effect a subdivision of its outstanding shares into a greater number of shares
of Common Stock or any equity securities convertible into Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock); or (iii) combine
or consolidate its outstanding shares of Common Stock, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then, upon the exercise
hereof, at any time after the occurrence of any event described above, the Holder
shall be entitled to receive the Common Stock to which such Holder would have
been entitled if such Holder had exercised this Warrant immediately prior to the
occurrence of such event. 

  

5.                   No
Impairment. The Company will not, by any means, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant. Without limiting
the foregoing, the Company (a) will not permit the par value, if any, of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount payable
therefore upon such exercise, (b) will take such action as may be necessary in
order that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon the exercise of this Warrant, and (c) will not (i)
transfer all or substantially all of its assets to any other Person, or (ii) consolidate
with or merge into any other Person where the Company is not the surviving Person,
unless the other Person acquiring such properties and assets or surviving after
such consolidation or merger shall expressly assume in writing all the terms of
this Warrant. 

6.                  
Transfer Without Registration. Neither this Warrant nor the shares of Common
Stock issuable hereunder have been registered under the Securities Act of 1933,
as amended (the "1933 Act"), or any state securities laws. Until such time, if
any, as such shares shall have been so registered neither this Warrant nor any
shares of Common Stock issued upon the exercise of this Warrant shall be transferred,
sold or assigned, except upon delivery of (a) an opinion (in form and substance
satisfactory to the Company) of counsel satisfactory to the Company to the effect
that such registration is not required or (b) such information as, in the reasonable
opinion of the Company, is necessary in order to establish that such transfer
may be made without registration. Each certificate for shares of Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such shares
are registered under the 1933 Act, shall bear a legend to such effect. Any certificate
issued at any time in exchange or substitution for any certificate bearing such
legend (except a new certificate issued upon completion of a public offering pursuant
to a 

registration statement under the 1933 Act) shall also bear such
legend unless, in the opinion of counsel selected by the Holder of such certificate
(who may be an employee of such Holder) and reasonably acceptable to the Company,
the securities represented thereby need no longer be subject to restrictions on
resale under the Securities Act.

	7. 	Registration. 

                       
7.1     Incidental Registration. If at any time the
Company proposes to register under the 1933 Act (on a form on which inclusion
of the Company's Common Stock owned beneficially by a Shareholder is generally
permissible) any of its securities for sale to the public or pursuant to a request
made hereunder by another Shareholder, the Company will give each Shareholder
at least thirty (30) calendar days prior notice of the proposed filing of such
registration statement and will, if requested by any Shareholder, include in such
registration statement such number of shares of the Company's Common Stock issued
or to be issued hereunder as may be specified in such request; provided, however,
that the Company shall not be required to so include in any such registration
statement any such shares if, and only if, the Company and the underwriters with
respect to such offering determine reasonably and in good faith that such inclusion
of such shares would materially interfere with or adversely affect the offering
by the Company pursuant to such registration statement, Upon the effectiveness
of such registration statement, the Company shall use its best efforts to cause
the same to remain in effect for ninety (90) days or for such longer period as
shall be consistent with the purposes of such registration statement, Any such
Shareholder shall pay all of its expenses reasonably attributable to inclusion
of such shares in such registration statement and reasonably attributable to inclusion
of such shares in connection with all appropriate blue sky or other state securities
law qualifications as provided for below. 

                       7.2
    Blue Sky. In connection with any such offering,
the Company shall use its best efforts to effect all appropriate qualifications
(including qualifications requested by a Shareholder) under applicable blue sky
or other state securities laws and (when requested) appropriate compliance with
exemptive regulations issued under such laws or under any other governmental requirements
or regulation, except to the extent that such qualification or compliance would
cause the Company to become subject to the general jurisdiction of any state or
territory. 

                       7.3
    Indemnification. (a) With respect to the registration
under the 1933 Act of the Company's Common Stock pursuant hereto, the Company
will indemnify and hold harmless each Shareholder and its officers and directors,
each underwriter of the securities sold pursuant to this Section, and each person
controlling each such underwriter from and against any losses (excluding underwriters'
commissions), claims, damages or expenses (including legal or other expenses reasonably
incurred in connection with investigation, settling or defending any such claim,
loss, damage or liability) to which any of them may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereto) arise out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any preliminary prospectus,
registration statement or prospectus, or any 

  

amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, which statement
or omission was based on information furnished to the Company. 

                       (b)
With respect to the registration under the 1933 Act of the Company's Common Stock
pursuant hereto, each Shareholder will indemnify and hold harmless the Company
(or any person controlling the Company) and its officers and directors, each underwriter
of the securities sold pursuant to this Section, and each person controlling each
such underwriter from and against any loss, claim, damage, liability or expense
(including legal or other expenses reasonably incurred in connection with investigation,
settling or defending any such claim, loss, damage or liability), to which any
of them may become subject under the 1933 Act or otherwise, insofar as such loss,
claim, damage, liability or expense (or actions in respect thereto) arises out
of, or is based upon, any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, registration statement or prospectus
or any amendment or supplement thereto, or arises out of, or is based upon, the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
which statement or omission was made in reliance upon information furnished to
the Company by such Shareholder for inclusion therein. 

                       (c)
Promptly after receipt by an indemnified party under this Section of notice of
the commencement of any action covered thereby, such indemnified party shall notify
the indemnifying party, Whether or not the indemnifying party is a party to such
action, the indemnifying party may, if it chooses, assume the defense of such
action or it may notify the indemnified party that it shall have the right to
choose counsel to represent it, subject to the approval of the indemnifying party,
which approval shall not be unreasonably withheld, The reasonable fees and expenses
of such counsel, as well as all other reasonable expenses incurred by the indemnified
party in connection with the investigation, defense and/or settlement of such
action, shall be paid by the indemnifying party. No settlement of any such action
shall be made without the written consent of the indemnifying party. Notwithstanding
the above, the indemnifying party shall only be obligated to pay the fees and
expenses for one such counsel with respect to each action described in this Section
regardless of the number of parties so indemnified. 

                       7.4
    Termination of Registration Rights. If, pursuant
to Section 7.1 hereof, (i) the Company shall have offered an unconditional (but
for the mutual undertaking contained herein) opportunity, either unilaterally
or upon demand, to register and sell any shares under a registration statement,
and (ii) a Shareholder shall have declined to (x) register such shares, or (y)
having registered, shall fail to sell such shares; then, and only then, such registration
rights, and the Company's obligations hereunder, shall cease as to any and all
shares so covered by such a registration statement. 

8.                  
 Notices of Record Date, Etc. In the event of (a) any taking by
the Company of a record of the Holders of Common Stock for the purpose of determining
who is entitled to receive any dividend or other contribution, or any right to
subscribe for shares of Common Stock or property, 

 

or to receive any other right, or (b) any capital reorganization,
reclassification or recapitalization of the Company, or any transfer of all or
substantially all the assets of the Company to any other person, or any consolidation
or merger involving the Company and any other person, or (c) any voluntary or
involuntary dissolution, liquidation or winding-up of the Company. The Company
will mail to the Holder of the Warrant, a notice specifying the date or expected
date on which any such action is to be taken with regard to any of the events
specified above, Such notice shall be mailed at least twenty (20) calendar days
prior to the date therein specified. 

9.                  
 Transfer of Warrant. Subject to the provisions of Section 7 hereof,
this Warrant may be transferred, sold or assigned, in whole or in part, at any
time. Upon notice of any proposed partial transfer, the Company will execute,
issue and deliver new warrants in the denomination to be transferred and in the
denomination to be retained by Holder (the "Subsequent Warrants"). 

10.                 
Replacement of Warrants. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant or
any Subsequent Warrant, and receipt of an indemnity reasonably satisfactory to
the Company, the Company at its expense, will execute and deliver a new Warrant
of like tenor. 

11.                 
Remedies. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or
by an injunction against a violation of any of the terms hereof. 

12.                 
Ownership of Warrant. Until this Warrant or any Subsequent Warrant is transferred
on the books of the Company, the Company may treat the person in whose name such
Warrant is issued as the absolute owner hereof for all purposes notwithstanding
any notice to the contrary, except that if and when this Warrant or any Subsequent
Warrant is properly assigned in blank, the Company may (but shall not be obligated
to) treat the bearer hereof as the absolute owner of such Warrant for all purposes,
notwithstanding any notice to the contrary. The Warrant, if properly assigned,
may be exercised by a new Holder without first having a new Warrant issued. 

13.                 
Notices, Etc. All Notices and other communications of the Company to the
Holder of this Warrant shall be mailed by first-class, registered mail, postage
prepaid, at such address as may have been furnished to the Company in writing
by such Holder, or, until an address is so furnished, to and at the address of
the last known Holder of this Warrant. 

 

  14.                  Miscellaneous.
All of the terms and conditions hereof shall be binding upon and inure to the
benefit of any Holder of this Warrant or any Subsequent Warrant. This Warrant
and any term hereof may be changed, waived, discharged or terminated only by an
instrument in writing, signed by the party against which enforcement of such change,
waiver, discharge or termination is sought. This Warrant is being delivered in
the State of Connecticut and shall be construed and enforced in accordance with
and governed by the laws of such State. The headings in this Warrant are for purposed
of reference only and shall not limit or otherwise affect the meaning hereof.

15.                  Expiration.
The right to exercise this Warrant shall expire at 5:00 p.m., Eastern Time, on
February 3, 2009. 

	 	DIASYS CORPORATION 

	 	 	  
	 	 	 
	 	By:	S/ GREGORY WITCHEL 
	 		Gregory Witchel, Chief Executive Officer
	 	 	 
	 	 	 

 

FORM OF CASH SUBSCRIPTION

  

  [To Be Signed Only Upon Exercise of Warrant]

	To:	DiaSys Corporation 
	 	81 West Main Street 
	 	Waterbury, CT 06702 

 

                      
The undersigned, the Holder of the within Warrant, hereby irrevocable elects to
exercise the purchase right represented by such Warrant for, and to purchase thereunder,
shares of Common Stock of DiaSys Corporation and herewith makes payment of $__________
therefore, and requests that the certificate for such shares be issued in the
name of, and delivered to, _____________________, whose address is ________________________________________________________________.

Dated: 

	 	(Signature must conform in all 

      respects to name of Holder as 

      specified on the face of the Warrant)   
	 	 
	 	 
	 	 
	 	Address 
	 	 ___________________________________ 

      ___________________________________

      ___________________________________ 

      
	 	 
	 	Social Security Number
	 	 
	 	 ____________________________________ 

 

  

FORM OF CASH SUBSCRIPTION

  

  [To Be Signed Only Upon Cashless Exercise of Warrant]

	To:	DiaSys Corporation 
	 	81 West Main Street 
	 	Waterbury, CT 06702 

 

                      
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to
exercise the purchase right represented by such Warrant for, and to purchase thereunder,
_______ shares of Common Stock of DiaSys Corporation by surrendering Warrant shares
in payment of the exercise price of the Warrants and requests that the certificate
for such shares be issued in the name of, and delivered to, _____________________________,
whose address is _____________________________________________________________.

	 	Number of Warrants Exercised 	____________ 
	 		
	 	Market Value of Shares 	____________ 
	 		
	 	Number of Shares Surrendered 	____________ 
	 		
	 	Net Number of Shares to be Received 	____________
	 		

 

Dated: 

	 	(Signature must conform in all 

      respects to name of Holder as 

      specified on the face of the Warrant)  
	 	 
	 	 
	 	 
	 	Address 
	 	 ___________________________________ 

      ___________________________________ 

      ___________________________________ 

      
	 	 
	 	Social Security Number
	 	 
	 	 ____________________________________ 

 

FORM OF ASSIGNMENT

  

  [To Be Signed Only Upon Transfer of Warrant]

 

                      
For value received, the undersigned hereby sells, assigns and transfers unto the
right represented by the within Warrant to purchase shares of Common Stock of
DiaSys Corporation to which the within Warrant relates. 

Dated: 

	 	(Signature must conform in all 

      respects to name of Holder as 

      specified on the face of the Warrant )   
	 	 
	 	 
	 	 
	 	Address 
	 	 ___________________________________ 

      ___________________________________

      ___________________________________ 

      
	 	 

Signed in the presence of: 

____________________________

____________________________DiaSys Corporation - Exhibit 10.31

EXHIBIT 10.31

 

LOAN AND SECURITY AGREEMENT

 

                      
This Agreement dated as of November 1, 2004 by and between DIASYS CORPORATION,
a Delaware corporation with a principal place of business at 81 West Main Street,
Waterbury, Connecticut 06702 (the "Borrower"), and MORRIS SILVERMAN, an
individual with a place of business at 790 Estate Drive, Suite 100, Deerfield,
Illinois 60015 and GREGORY WITCHEL, an individual with a place of business
at DiaSys Corporation, 81 West Main Street, Waterbury, Connecticut 06702 collectively
("Witchel" and, together with Silverman, collectively, the "Lenders"). 

 
RECITALS

                       
Silverman is the Chairman of the Board of Directors of the Company and Witchel
is the Chief Executive Officer of the Company. 

                      
The Company is in urgent need of working capital. 

                      
The Company has used its best efforts to borrow necessary funds from a commercial
lending institution but has been unable to do so because it lacks the cash flow
and tangible assets necessary to support such borrowing. 

                      
As an accommodation to the Company and to enable it to meet continuing cash requirements,
the Lenders are willing to make personal loans to the Company in the amount of
$100,000 each, for an aggregate of $200,000 (the "Loans"), but only on the terms
and conditions set forth herein. 

 

 
AGREEMENT 

  

  ARTICLE I 

  

  DEFINITIONS

Section1.1-Certain Definitions As used herein, in the Notes
(as herein defined) or in any certificate, document or report delivered pursuant
to this Agreement or any other Financing Agreement (as herein defined), the following
terms shall have the following meanings: 

                      
"Agreement" means this Loans and Security Agreement as the
same may from time to time be amended, supplemented or otherwise modified. 

                      
"Lenders" means Morris Silverman and Gregory Witchel, collectively. 

                       
 

                       "Loans"
means, collectively, the loans provided in Section 2.1 hereof. 

                      
"Business Day" means any day other than a day on which commercial Banks in Waterbury,
Connecticut are required or permitted by law to close. 

                      
"Collateral" means the property of the Borrower described in Section 3.1 hereof.

                      
"Financing Agreement" or "Financing Agreements" means this Agreement, the Notes
and any and all other instruments, agreements and documents executed in connection
herewith or therewith or related hereto or thereto, together with any amendments,
supplements or modifications hereto or thereto. 

                      
"Notes" shall mean the 6% Convertible Promissory Notes of the Company in the principal
amount of $100,000 each payable to the order of Silverman and Witchel. 

                      
"Obligation(s)" means and includes all loans, advances, interest, indebtedness,
liabilities, obligations, guaranties, covenants and duties at any time owing by
the Borrower to the Lenders of every kind and description, whether or not evidenced
by any note or other instrument, whether or not for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including, but not limited to, the Loans and all other indebtedness,
liabilities and obligations arising under this Agreement and the other Financing
Agreements, and all costs, expenses, fees, charges and attorneys' paralegal' and
professional fees incurred in connection with any of the foregoing, or in any
way connected with, involving or relating to the preservation, enforcement, protection
or defense of, or realization under this Agreement, the Notes, any of the other
Financing Agreements, any related agreement, document or instrument, the Collateral
and the rights and remedies hereunder or thereunder. 

                      
"Permitted Liens" shall mean and include: (i) liens for taxes not yet due and
payable, or which are being contested in good faith by appropriate proceedings
so long as the Borrower, to the extent required by GAAP applied on a consistent
basis, maintains adequate reserves with respect thereto, (ii) carriers, workmen,
mechanics, materialmen, repairmen, or other like liens arising in the ordinary
course of business, for indebtedness which is not overdue, or which is being contested
in good faith, and by appropriate proceedings; and (iii) liens in favor of Todd
DeMatteo existing on the date hereof. 

 

 

  
ARTICLE II 

  

  LOANS

                       
Section 2.1-Loans. Subject to the terms and conditions contained in this
Agreement, each of the Lenders agree to make a term loan or loans (collectively,
the "Loans") to the Borrower in the amount of One Hundred Thousand Dollars ($100,000)
for an aggregate of Two Hundred Thousand Dollars ($200,000). The Loans shall be
evidenced by and repayable in accordance with the terms of two 6% Convertible
Promissory Notes payable to the order of the respective Lenders in (the "Notes).

                      
Section 2.2-Use of Proceeds. The Borrower represents that the proceeds
of the Loans shall be used for working capital. 

                      
Section 2.3-Expenses. The Borrower shall pay all out-of-pocket costs incurred
by the Lenders, including reasonable counsel fees and expenses, in connection
with the making of the Loans. 

 

 
ARTICLE III 

  

  COLLATERAL 

  

  

                       
Section 3.1-Grant. To secure the prompt payment and performance
of each and all of the Obligations, the Borrower pledges, assigns, transfers and
grants to the Lenders a continuing, first lien and security interest in all assets
of the Borrower of any and every nature, wherever located, including without limitation,
the assets specifically identified below (herein called the "Collateral"), subject
only to Permitted Liens. 

                      
(a) All accounts and accounts receivable related to or arising
from the sale or lease of inventory or rendition of services by the Borrower in
the ordinary course of its business (collectively, the "Accounts") or however
otherwise arising and all other accounts, bank accounts, contracts, contract rights,
notes, documents, chattel paper, instruments, acceptances, drafts or other forms
of obligations and receivables (collectively, with Accounts, the "Receivables")
, whether or not the same are listed on any schedules, assignments or reports
furnished to from time to time, and whether such Receivables are now existing
or are created at any time hereafter, together with all goods, inventory and merchandise
returned by or reclaimed by or repossessed from customers wherever such goods,
inventory and merchandise are located, and all proceeds thereto including without
limitation, proceeds of insurance thereon and all guaranties, securities, and
liens which the Borrower may hold for the payment of any such Receivables, including
without limitation, all rights of stoppage in transit, replevin and reclamation
and all other rights and remedies of an unpaid vendor or lien or, and any liens
held by the Borrower as a mechanic, contractor, subcontractor, processor, materialman,
machinist, manufacturer, artisan, or otherwise; 

                      
(b) All documents, instruments, documents of title, general
intangibles, policies and certificates of insurance, guaranties, securities, chattel
paper, deposits, tax returns, proceeds of 

 

insurance, proceeds of an eminent domain or condemnation award, cash, liens or
other property, which are now or may hereinafter be in the possession of the Borrower
or as to which the Borrower may now or hereafter control possession by documents
of title or otherwise, including, but not limited to, all property allocable to
unshipped orders relating to Receivables and Inventory (as herein defined); 

                       (c)
All books, records, customer lists, supplier lists, ledgers, evidences of shipping,
invoices, purchase orders, sales orders and all other evidences of the Borrower's
business records, including all cabinets, drawers, etc. that may hold the same;
computer records, lists, software, programs, wherever located, all whether now
existing or hereafter arising or acquired; 

  

                       (d)
All of the Borrower's inventory, whether now owned or hereafter acquired, including
without limitation (collectively herein called the "Inventory") : (i) all goods
manufactured or acquired for sale or lease, and any piece goods, raw materials,
work in process and finished merchandise, findings or component materials, and
all supplies, goods, incidentals, office supplies, packaging materials, and any
and all items including machinery and equipment used or consumed in the operation
of the business of the Borrower or which contribute to the finished product or
to the sale, promotion and shipment thereof, in which the Borrower now or at any
time hereafter may have an interest, whether or not such inventory is listed in
this agreement on any reports furnished to the Lender from time to time; (ii)
all inventory whether or not the same is in transit or in the constructive, actual
or exclusive occupancy or possession of the Borrower or is held by the Borrower
or by others for the Accounts, including without limitation, all goods covered
by purchase orders and contracts with suppliers and all goods billed and held
by suppliers; (iii) all inventory which may be located on premises of the Borrower
or of any carrier, forwarding agents, truckers, warehousemen, vendors, selling
agents or third parties; (iv) all general intangibles relating to or arising out
of inventory; (v) all proceeds and products of the foregoing resulting from the
sale, lease or other disposition of inventory, including cash, accounts receivable,
other non-cash proceeds and trade-ins; and (vi) with respect to after-acquired
inventory, the security interest shall be deemed to be a purchase money security
interest; 

                       (e)
All general intangibles, including without limitation, tax refunds, proceeds of
insurance, eminent domain awards, condemnation proceeds, and patents, copyrights,
trade names, trademarks, applications therefor, and licenses to any patent, copyright,
trademark, or trade name that the Borrower now owns, has the right to use or may
hereafter own or acquire the right to use; 

                       (f)
All equipment, machinery, appliances, and furniture and fixtures, now existing
or hereafter arising, wherever located, and all contracts, contract rights and
chattel paper arising out of any lease of any of the foregoing; 

                       (g)
All Patents and Patent rights and other intellectual property of any and every
nature. 

                       (h)
All other personal property collateral in which the Borrower may hereafter grant
to the Lender a security interest; and 

                        (i)
All renewals, substitutions, replacements, additions, accessions, proceeds, and
products of any and all of the foregoing. 

  
ARTICLE IV 

  

  CONDITIONS TO LENDING 

  

                       
Section 4.1- Conditions. It shall be a condition to the making of the Loans
hereunder that the Lenders shall have received the following: 

                      
(a) Notes. The Borrower shall have executed and delivered the Notes. 

                      
(b) Further Documents. The Lenders shall have received such further documents,
instruments and agreements as the Lenders may request, including without limitation,
evidence that the insurance policies and certificates evidencing adequate insurance
and coverage on the Borrower's assets are currently in full force and effect,
continue to name the Lenders as loss payees, mortgagees or additional insured,
as the case may be, and that the premiums are current. 

                      
(c) Additional Compensation. As additional compensation for the making
of the Loans contemplated hereby, the Borrower shall issue to the Lenders without
further payment or consideration, One (1) share of the Borrower's Common Stock,
$.001 par value, for each Four (4) Dollars principal amount of the Loans. Accordingly,
based on the $100,000 principal amount of each of the Loans, 25,000 shares of
Common Stock are being issued concurrently herewith to each of Silverman and Witchel

                 

 

 
ARTICLE V 

  

  COVENANTS

A. Affirmative Covenants. 

                       The
Borrower covenants and agrees that from the date hereof until payment and performance
in full of all Obligations, and until the termination of this Agreement, unless
the Lenders otherwise consents in writing, the Borrower shall: 

                       Section
5.1-Financial Statements, etc. Deliver or caused to be delivered to the
Lenders: 

                       (a)
within one hundred twenty (120) days after the close of each fiscal year of the
Borrower (i) audited financial statements of the Borrower, including a balance
sheet as of the close of such fiscal year and statements of income and retained
earnings and statement of cash flows, certified by a firm of certified public
accountants reasonably satisfactory to the Lenders as having been prepared in
conformity with generally accepted accounting principles, applied on a basis consistent
with that of the preceding year or containing disclosure of the effect on financial
position or results of operations of any change in the application of accounting
principles during the year, together with a certificate of the president or chief
financial officer of the Borrower that such financial statements are accurate
and present fairly the financial condition and results of operations of the Borrower.

                       (b)
within forty-five (45) days after the end of each calendar quarter of the Borrower,
internally-prepared financial statements of the Borrower, including a balance
sheet as of the close of each preceding calendar quarter and statements of income
and retained earnings for the calendar quarter then ended, certified by the Borrower's
chief financial officer as having been prepared in accordance with the Borrower's
normal accounting practices; 

                       (c)
promptly upon the Lenders' written request, such other information about the financial
condition and operations of the Borrower or the Company Guarantor as the Lenders
may, from time to time, reasonably request; and 

                       Section
5.2-Insurance and Endorsements. Keep its properties insured against fire
and other hazards (so-called "All Risk" coverage) in amounts and with companies
satisfactory to the Lenders to the same extent and covering such risks as is customary
in the same or a similar business; maintain public liability coverage, including
without limitation, products liability coverage, against claims for personal injuries
or death; and maintain all worker's compensation, employment or similar insurance
as may be required by applicable law; and (b) All insurance shall contain such
terms, be in such form, and be for such periods reasonably satisfactory to Lenders,
and be written by such carriers duly licensed by the appropriate states where
any Collateral is located and reasonably satisfactory to the Lenders. Without
limiting the generality of the foregoing, such insurance must provide that it
may not be canceled without thirty (30) days prior written notice to the Lenders,
the Borrower shall cause the Lenders to be endorsed as a loss payee with a long
form Lenders' Loss Payable Clause, in form and substance acceptable to the 

 

Lenders on all such insurance. In the event of failure to
provide and maintain insurance as herein provided, the Lenders may, at its option,
provide such insurance and charge the amount thereof to the Revolving Loans Account.
The Borrower shall furnish to the Lenders certificates or other satisfactory evidence
of compliance with the foregoing insurance provisions. The Borrower hereby irrevocably
appoints the Lenders as its attorney-in-fact, coupled with an interest, to make
proofs of loss and claims for insurance, and to receive payments of the insurance
and execute and endorse all documents, checks and drafts in connection with payment
of the insurance. Any proceeds received by the Lenders shall be applied to the
obligations in such order and manner as the Lender shall determine in its sole
discretion. 

                       Section
5.3-Tax and Other Liens. Comply with all statutes and government regulations
and pay all taxes, assessments, governmental charges or levies, or claims for
labor, supplies, rent and other obligations made against it or its property which,
if unpaid, might become a lien or charge against the Borrower or its properties,
except liabilities being contested in good faith and against which, if requested
by the Lenders, the Borrower shall set up reserves in amounts and in form satisfactory
to the Lenders. 

                       Section
5.4-Inspections. Allow the Lenders by or through any of his officers, attorneys,
and/or accountants designated by it, for the purpose of ascertaining whether or
not each and every provision hereof and of any related agreement, instrument and
document is being performed, to enter the offices and plants of the Borrower to
examine or inspect any of the properties, books and records or extracts therefrom,
to make copies of such books and records or extracts therefrom, and to discuss
the affairs, finances and accounts thereof with the Borrower all at such reasonable
times, upon reasonable notice and as often as the Lenders or any representative
of the Lenders may reasonably request. 

                       Section
5.5-Litigation. Within ten (10) days after learning thereof, advise the
Lenders of the commencement or threat of litigation, including arbitration proceedings
and any proceedings before any governmental agency which is instituted against
the Borrower and is reasonably likely to have a materially adverse effect upon
the condition, financial, operating or otherwise, of the Borrower. 

                       Section
5.6-Maintenance of Existence. Maintain its corporate existence and comply
with all valid and applicable statutes, rules and regulations the violation of
which would have a Material Adverse Effect, and maintain its properties in good
repair, working order and operating condition. The Borrower shall immediately
notify the Lenders of any event causing material loss in the value of its assets.

                       Section
5.7-Defaults. Upon the occurrence of any Event of Default or of any event
which, but for giving of notice or passage of time or both, would constitute an
Event of Default, give prompt written notice of such occurrence to the Lenders
signed by the president or chief financial officer of the Borrower describing
such occurrence and the steps, if any, being taken to cure the Event of Default.

 

 

                        Section
5.8-Collateral Duties. Do whatever the Lenders reasonably may request from time
to time by way of obtaining, executing, delivering and filing financing statements,
assignments, landlord's or mortgagee's waivers, warehouse agreements and other
notices and amendments and renewals thereof, and the Borrower will take any and
all steps and observe such formalities as the Lenders may request, in order to
create and maintain a valid and enforceable first lien upon, pledge of, and first
priority security interest in, any and all of the Collateral. The Lenders are
authorized to file financing statements without the signature of the Borrower
and to execute and file such financing statements on behalf of the Borrower as
specified by the Uniform Commercial Code to perfect or maintain its security interest
in all of the Collateral. All reasonable charges, expenses and fees the Lenders
may incur in filing any of the foregoing, together with reasonable costs and expenses
of any lien search required by the Lenders, and any taxes relating thereto, shall,
after notice to the Borrower, be added to the Obligations. 

B. Negative Covenants 

                       The
Borrower covenants and agrees that from the date hereof until payment and performance
in full of all Obligations, and until the termination of this Agreement, unless
the Lenders otherwise consent in writing, the Borrower shall not: 

                       Section
5.9-Merger, Sale or Lease of Assets. Merge with any other entity or sell or lease
(except for sales of inventory in the ordinary course of business consistent with
past practices and on an arms-length basis) or otherwise dispose of any of its
assets. 

                       Section
5.10-Distributions. Pay dividends, redeem stock or otherwise make any capital
distribution to stockholders of the Borrower; provided, however, that the Borrower
may pay annual dividends not in excess amounts required by the individual stockholders
of the Borrower to pay Federal and state income taxes in respect of their allocated
portion of the net income of the Borrower. 

                       Section
5.11-Loans to Officers, Directors and/or Shareholders. Make any loans or
advances (other than salaries and bona fide advances against expenses) or make
any transfers, in any manner, of any cash, property or other assets to or on behalf
of any of its officers, directors or shareholders. 

ARTICLE VI 

  

  EVENTS OF DEFAULT AND REMEDIES

                       Section
6.1-Events of Default. Any and all Obligations including, without limitation,
the Obligations arising pursuant to or in connection with the Loans shall, at
the option of the Lenders with and notwithstanding any time or credit allowed
by any note or agreement, become immediately due and payable without notice if
any one or more of the following events (herein called "Events of Default" and
individually, an "Event of Default") shall occur: 

 

                         (a)
failure of the Borrower to pay principal, interest or any other sum due hereunder
or under Note when due and payable; 

                       (b)
failure of the Borrower to pay or perform when due any other Obligation arising
under this Agreement, the Note or any of the other Financing Agreements; 

                       (c)
failure of the Borrower to maintain insurance as required by Section 5.2 hereof;

                       (d)
failure of the Borrower to observe any other affirmative covenant of the Borrower
set forth herein within twenty (20) business days following demand therefore by
the Lenders; 

                       (e)
breach of any other covenant or agreement contained in this Agreement (other than
Sections 6.1 or 6.3), specifically including without limitation, breach of any
of the financial covenants set forth in Article VI hereof; 

                       (f)
the making by the Borrower of any material misrepresentation of a material fact
to the Lenders; 

                       (g)
material loss, theft, or destruction of Collateral which is not covered by insurance
with Lender's loss payee endorsement as required herein; 

                       (h)
the sale (outside of the ordinary course of business) or other disposition or
encumbrance (other than by Permitted Liens) of any of the Collateral, or the filing,
making or issuance of any levy, seizure, attachment (other than Permitted Liens),
judgment (not bonded or otherwise stayed) or injunction upon or against the Borrower,
the Collateral, or any other property or assets of the Borrower, other than such
items, individually or in the aggregate, as do not have a Material Adverse Effect
on the Borrower; 

                       (i)
insolvency (failure to pay its debts as they mature or where the fair value of
its assets is not in excess of its liabilities) of the Borrower, or business failure,
appointment of a receiver or custodian, or assignment for the benefit of creditors
or the commencement of any proceedings under any bankruptcy or insolvency law
by or against the Borrower; 

                       (j)
calling of a meeting of creditors, appointment of a committee of creditors or
liquidating lenders, or offering of a composition extension to creditors by, for
or against the Borrower; 

                       (k)
the loss, revocation or failure to renew any license and/or permit now held or
hereafter acquired by the Borrower which materially affects the ability of the
Borrower to continue its operations as presently conducted; or 

                       (l)
the occurrence of a default or event of default (howsoever defined) under any
other agreements between the Lenders and the Borrower after given effect to any
notice or cure provisions contained therein. 

                         The
Borrower expressly waives any presentment, demand, protest, notice of protest
or other notice of any kind. The Lenders may proceed to enforce the rights of
the Lenders whether by suit in equity or by action at law, whether for specific
performance of any covenant or agreement contained in this Agreement, the Note
or the other Financing Agreements, or in aid of the exercise of any power granted
in either this Agreement or the Note or any other Financing Agreement, or it may
proceed to obtain judgment or any other relief whatsoever appropriate to the enforcement
of such rights, or proceed to enforce any legal or equitable right which the Lenders
may have by reason of the occurrence of any Event of Default hereunder. 

                       Section
6.2-Remedies. Upon the occurrence of any Event of Default, the Lenders
shall have in any jurisdiction where enforcement hereof is sought, in addition
to all other rights and remedies which the Lenders may have under law and equity,
the following rights and remedies, all of which may be exercised with or without
further notice to the Borrower and without a prior judicial or administrative
hearing or notice, which notice and hearing are expressly waived: to enforce or
foreclose the liens and security interests created under this Agreement or under
any other agreement relating to Collateral by any available judicial procedure
or without judicial process; to enter any premises where any Collateral may be
located for the purpose of taking possession or removing the same; to sell, assign,
lease, or otherwise dispose of Collateral or any part thereof, either at public
or private sale, in lots or in bulk, for cash, on credit or otherwise, with or
without representations or warranties, and upon such terms as shall be acceptable
to the Lenders, all at the Lenders' sole option and as the Lenders in its sole
discretion may deem advisable; to bid or become purchaser at any such sale if
public; and, at the option of the Lenders, to apply or be credited with the amount
of all or any part of the Obligations owing to the Lenders against the purchase
price bid by the Lenders at any such sale. 

                       Section
6.3-Specific Powers. The Lenders may at any time after the occurrence of
an Event of Default, at the Lenders' sole discretion: (i) give notice of assignment
to any Account Debtor; (ii) collect account Receivables directly from account
debtors (iii) settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which the Lenders considers advisable, and credit,
or cause to be credited, with the net amounts received in payment of Receivables;
(vi) exercise all other rights granted in this Agreement and the other Financing
Agreements; (v) receive, open and dispose of all mail addressed to the Borrower
and notify the Post Office authorities to change the address for delivery of the
Borrower's mail to an address designated by the Lenders; (vi) endorse the name
of the Borrower on any checks or other evidence of payment that may come into
possession of the Lenders and on any invoice, freight or express bill, bill of
lading or other document; (vii) in the name of the Borrower or otherwise, demand,
sue for, collect and give acquittance for any and all monies due or to become
due on Receivables; (viii) compromise, prosecute or defend any action, claim or
proceeding concerning Receivables; and (ix) do any and all things necessary and
proper to carry out the purposes contemplated in this Agreement, the other Financing
Agreements and any other agreement between the parties. Neither the Lenders nor
any person acting as its attorney hereunder shall be liable for any acts or omissions
or for any error of judgment or mistake of fact or law, except for bad faith,
gross negligence and willful misconduct. The Borrower agrees that the powers granted
hereunder, being coupled with an interest, shall be irrevocable so long as any
Obligation remains 

  unsatisfied. Notwithstanding the foregoing,
it is understood that the Lenders are under no duty to take any of the foregoing
actions and that after having made demand upon the Account Debtors for payment,
the Lenders shall have no further duty as to the collection or protection of Receivables
or any income therefrom and no further duty to preserve any rights pertaining
thereto, other than the safe custody thereof. 

                       Section
6.4-Duties after Default. The Borrower will, at the Lenders' request, assemble
all Collateral and make it available to the Lenders at the premises of the Borrower
and will make available to the Lenders all premises and facilities of the Borrower
for the purpose of the Lenders taking possession of Collateral or of removing
or putting the Collateral in salable form. In the event any goods called for in
any sales order, contract, invoice or other instrument or agreement evidencing
or purporting to give rise to any Receivable shall not have been delivered or
shall be claimed to be defective by any customer, the Lenders shall have the right
in its discretion to use and deliver to such customer any goods of the Borrower
to fulfill such order, contract or the like so as to make good any such Receivable.
If any Collateral shall require repairing, maintenance, preparation, or the like,
or is in process or other unfinished state, the Lenders shall have the right,
but shall not be obligated, to do such repairing, maintenance, preparation, processing
or completion of manufacturing for the purpose of putting the same in such salable
form as the Lenders shall deem appropriate, but the Lenders shall have the right
to sell or dispose of such Collateral without such processing. The net cash proceeds
resulting from the collection, liquidation, sale, lease or other disposition of
Collateral shall be applied first to the expenses (including all reasonable attorney's
and professional fees) of retaking, holding, storing, processing and preparing
for sale, selling, collecting, liquidating and the like and then to the satisfaction
of all Obligations, application as to particular Obligations or against principal
or interest to be at the Lenders' sole discretion; provided, however, that in
the case of funds to be applied against the principal balance of any Note, the
Borrower shall be entitled to specify application to the Supplemental Term Note
by notice in writing to the Lenders concurrently with such application. The Borrower
shall be liable to the Lenders and shall pay to the Lenders on demand any deficiency
which may remain after such sale, disposition, collection or liquidation of Collateral.

                       Section
6.5-Cumulative Remedies. The enumeration of the Lender's rights and remedies
set forth in this Article is not intended to be exhaustive and the exercise by
the Lenders of any right or remedy shall not preclude the exercise of any other
rights or remedies, all of which shall be cumulative and shall be in addition
to any other right or remedy given hereunder or under any other agreement between
the parties or which may now or hereafter exist in law or at equity or by suit
or otherwise. No delay or failure to take action on the part of the Lenders in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege preclude
other or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any event of default. No course
of dealing between the Borrower and the Lenders or its employees shall be effective
to change, modify or discharge any provision of this Agreement or to constitute
a waiver of any default. 

 

 
ARTICLE VII 

  

  EXPENSES

                       Section
7.1-Expenses. The Borrower agrees to pay all out-of-pocket expenses, costs,
fees, charges, expenses and attorneys' and other professionals' fees and expenses
incurred by the Lenders in connection with any of the foregoing, or in any way
connected with, involving or related to the preservation, enforcement, protection
or defense of this Agreement, the Note, the other Financing Agreements, any related
agreement, document or instrument, the Collateral, and the rights and remedies
hereunder or thereunder. 

ARTICLE VIII 

  

  MISCELLANEOUS

                       Section
8.1-Covenants to Survive, Binding Agreement. All covenants, agreements,
warranties and representations made herein, in the Notes, in the other Financing
Agreements, and in all certificates or other documents of the Borrower shall survive
the advances of money made by the Lenders to the Borrower hereunder and the delivery
of the Notes, and the other Financing Agreements and all such covenants, agreements,
warranties and representations shall be binding upon and inure to the benefit
of the Lenders and its successors and assigns, whether or not so expressed. 

                       Section
8.2-Amendments and Waivers. Neither this Agreement, the Notes, the other
Financing Agreements, nor any term, covenant or condition hereof or thereof may
be changed, waived, discharged, modified or terminated except by a writing executed
by the parties hereto or thereto. No failure on the part of the Lenders to exercise,
and no delay in exercising, any right, remedy or power hereunder or under the
Notes or the other Financing Agreements shall preclude any other or future exercise
thereof, or the exercise of any other right, remedy or power. 

                       Section
8.3-Notices. All notices, requests, consents, demands and other communications
hereunder shall be in writing and shall be mailed by first class mail to the respective
parties to this Agreement as follows: 

  

	 	(a) 	if to the Borrower: 
	 	 	 
	 	 	DiaSys Corporation 
	 	 	81 West Main Street 
	 	 	Waterbury, CT 06702 
	 	 	Attention: Gregory Witchel, Chief Executive
      Officer 

 

 

	 	 	with a copy to: 
	 	 	 
	 	 	Richard T. Keppelman, Esq. 

      Levy & Droney, P.C. 

      74 Batterson Park Road 

      Farmington, CT 06032 
	 	 	 
	 	(b)	 if to the Lenders: 
	 	 	 
	 	 	Morris Silverman 

      790 Estate Drive 

      Suite 100 

      Deerfield, Illinois 60015 

 
	 	
      and 

    	 

	 	 	Gregory Witchel 

      DiaSys Corporation 

      81 West Main Street 

      Waterbury, CT 06702 

                       Section
8.4-Transfer of Lender's Interest. The Borrower hereby agrees that the
Lenders, in their sole discretion, may freely sell, assign or otherwise transfer
participations, portions, co-lender interests or other interests in all or any
portion of the indebtedness, liabilities or obligations arising in connection
with or in any way related to the financing transactions of which this Agreement
is a part. In the event of any such transfer, the transferee may, in the Lenders'
sole discretion, have and enforce all the rights, remedies and privileges of the
Lenders. The Borrower consents to the release by the Lenders to any potential
transferee of any and all information (including, without limitation, financial
information) pertaining to the Borrower as the Lenders, in their sole discretion,
may deem appropriate. If such transferee so participates with the Lender in making
loans or advances hereunder or under any other agreement between such Lenders
and the Borrower, the Borrower hereby grants to such transferee and such transferee
shall have and is hereby given a continuing lien and security interest in any
money, securities or other property of the Borrower in the custody or possession
of such transferee, including the right of set off under circumstances consistent
with this Agreement, to the extent of such transferee's participation in the Obligations
of the Borrower to the Lenders. 

                       Section
8.5-Waivers. 

                       (a)
Prejudgment Remedy. THE BORROWER ACKNOWLEDGES THAT THE LOANS EVIDENCED
HEREBY ARE COMMERCIAL TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND HEARING
UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED
BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE LENDERS
MAY DESIRE TO USE, and further waives diligence, demand, presentment for payment,
notice of nonpayment, protest and notice of any renewals or extensions. 

 

                        (b)
Jury Waiver. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY
SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY
WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART AND/OR
THE ENFORCEMENT OF ANY OF THE LENDERS' RIGHTS, INCLUDING WITHOUT LIMITATION, TORT
CLAIMS. 

                       (c)
Voluntary Nature of Waivers. THE BORROWER ACKNOWLEDGES THAT IT MAKES THE
FOREGOING WAIVERS IN (A) AND (B) ABOVE, KNOWINGLY, WILLINGLY, WITHOUT DURESS AND
VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS
WITH ITS ATTORNEYS. 

                       Section
8.6-Section Headings, Severability, Entire Agreement. Section and subsection
headings have been inserted herein for convenience-only and shall not be construed
as part of this Agreement. Every provision of this Agreement, the Notes and the
other Financing Agreements are intended to be severable; if any term or provision
of this Agreement, the Note, the other Financing Agreements, or any other document
delivered in connection herewith shall be invalid, illegal or unenforceable for
any reason whatsoever, the validity, legality and enforceability of the remaining
provisions hereof or thereof shall not in any way be affected or impaired thereby.
All Exhibits and Schedules to this Agreement shall be annexed hereto and shall
be deemed to be part of this Agreement. This Agreement, the other Financing Agreements,
and the Exhibits and Schedules attached hereto and thereto embody the entire agreement
and understanding between the Borrower and the Lenders and supersede all prior
agreements and understandings relating to the subject matter hereof unless otherwise
specifically reaffirmed or restated herein. 

                       Section
8.7-Governing Law. This Agreement and the other Financing Agreements, and
all transactions, assignments and transfers hereunder and thereunder, and all
the rights of the parties, shall be governed as to validity, construction, enforcement
and in all other respects by the laws of the State of Connecticut. Notwithstanding
the foregoing, the Borrower also hereby consents to the jurisdiction of any state
or Federal court located within the state of Illinois and waives personal service
of any and all process upon the Borrower, and consents to the fullest extent permitted
by applicable law that all such service of process be made by registered mail
or actual delivery to the Borrower at the address stated at the beginning of this
Agreement and service so made shall be deemed to be completed upon the earlier
of mailing or actual delivery thereof. Without limiting the generality of the
foregoing, the Maker specifically waives any defense of lack of jurisdiction,
improper venue or forum non conveniens. Such submission to jurisdiction shall
not be construed so as to limit in any way the Lenders' right to bring legal proceedings
in Connecticut or any other jurisdiction. 

                       Section
8.8-Payment Set-Aside. To the extent that Borrower makes a payment or payments
to the Lenders (whether hereunder, under the Notes, or under the other Financing
Agreements) or the Lenders enforces their security interests or rights or exercises
its right of set-off, and such payment or payments or the proceeds of such enforcement
or set-off or any part

 

 thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to Borrower, a trustee, receiver or any
other person under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action) in each case in
connection with any bankruptcy or similar proceeding involving Borrower, then
to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or set-off had not occurred.

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

	 	BORROWER: 
	 	DIASYS CORPORATION 

	 	 	  
	 	 	 
	 	By:	S/ JEFFERY B. AARONSON 
	 		Jeffrey B. Aaronson, President

	 	LENDERS: 
	 	 
	 	S/ MORRIS SILVERMAN 
	 	Morris Silverman 
	 	 
	 	S/ GREGORY WITCHEL 
	 	Gregory Witchel

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