Document:

Exhibit 10.9

 

THIS SECOND
AMENDED AND RESTATED LOAN AGREEMENT (“this Agreement”) dated as
of September 4, 2009 by and between BANK OF AMERICA, N.A. AS SUCCESSOR TO
Fleet National Bank (f/k/a BankBoston, N.A. and The First National Bank of
Boston) (the “Bank”) with its principal address at 100 Federal Street, Boston,
Massachusetts 02110 (the “Bank”); and CHASE
CORPORATION, a Massachusetts corporation with its principal address
at 26 Summer Street, Bridgewater, Massachusetts 02324-2626 (the “Borrower”).  Certain capitalized terms used herein without
definition in the text where utilized are defined in Article 12 hereof.

 

RECITALS

 

A.            The Bank and the Borrower
entered into a Loan and Security Agreement dated on or about April 11,
1991, which was thereafter amended, and as of October 31, 2001 entered
into a First Amended and Restated Loan Agreement (as amended through the date
hereof, the “First Restated Agreement”).

 

B.            The Borrower desires to
obtain a $10,000,000 term loan from the Bank.

 

C.            The Borrower and the Bank
wish to amend and restate the First Restated Agreement to evidence such
additional loan and to consolidate prior changes to the First Restated
Agreement.

 

D.            The Bank is willing to
provide such term loan as contemplated above, subject to the terms and
conditions of this Agreement.

 

NOW
THEREFORE, the parties hereto, intending to be legally bound,
and in consideration of the foregoing and the mutual covenants contained
herein, hereby agree that the First Restated Agreement be, and it hereby is,
amended and restated to read in its entirety (but retaining references to the
foregoing Recitals as follows:

 

SECOND AMENDED AND RESTATED LOAN AGREEMENT

 

This Agreement dated as of September 4,
2009 is among Bank of America, N.A. (the “Bank”) and Chase Corporation, a
Massachusetts corporation (the “Borrower”).

 

1.             FACILITY NO. 1 
LINE OF CREDIT AMOUNT AND TERMS

 

1.1           Line of Credit Amount.

 

(a)           During the availability period described below, the
Bank will provide a line of credit to the Borrower.  The amount of the line of credit (the “Facility
No. 1 Commitment”) is Ten Million Dollars ($10,000,000).  The Facility No. 1 Commitment evidences
an Existing line of credit pursuant to a First Amended and Restated Loan
Agreement dated as of October 31, 2001, as amended by various amendments,
the most recent of which is dated February 29, 2008 (collectively, the “2001
Line of Credit Agreement”).

 

1

 

(b)          This is a revolving line of credit.  During the availability period, the Borrower
may repay principal amounts and reborrow them.

 

1.2           Availability Period.

 

The line of credit is
available between the date of this Agreement and March 31, 2011, or such
earlier date as the availability may terminate as provided in this Agreement
(the “Facility No. 1 Expiration Date”).

 

The availability period for
this line of credit will be considered renewed if and only if the Bank has sent
to the Borrower a written notice of renewal for the line of credit (the “Renewal
Notice”).  If this line of credit is
renewed, it will continue to be subject to all the terms and conditions set
forth in this Agreement except as modified by the Renewal Notice.  If this line of credit is renewed, the term “Expiration
Date” shall mean the date set forth in the Renewal Notice as the Expiration
Date and the same process for renewal will apply to any subsequent renewal of
this line of credit.

 

1.3           Repayment
Terms.

 

(a)           The Borrower will pay interest on August 31,
2009, and then on the last day of each month thereafter until payment in full
of any principal outstanding under this facility.  Any interest period for an optional interest
rate (as described below) shall expire no later than the Facility No. 1
Expiration Date.

 

(b)           The Borrower will repay in full any principal,
interest or other charges outstanding under this facility no later than the
Facility No. 1 Expiration Date.

 

(c)           The Borrower may prepay the loan in full or in part
at any time.  The prepayment will be
applied to the most remote payment of principal due under this Agreement.

 

1.4           Interest Rate.

 

The
interest rate is a rate per year equal to the sum of the “LIBOR Daily
Floating Rate” plus 1.25 percentage points. 
“LIBOR Daily Floating Rate” means a fluctuating rate of interest equal
to the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as selected by the Bank from time to time) as
determined for each banking day at approximately 11:00 a.m. London time
two (2) London Banking Days prior to the date in question, for U.S. Dollar
deposits (for delivery on the first day of such interest period) with a one
month term, as adjusted from time to time in the Bank’s sole discretion for reserve
requirements, deposit insurance assessment rates and other regulatory
costs.  If such rate is not available at
such time for any reason, then the rate for that interest period will be
determined by such alternate method as reasonably selected by the Bank.

 

1.5           Optional Interest Rates.

 

Instead of the interest rate
based on the rate stated in the paragraph entitled “Interest Rate” above, the
Borrower may elect the optional interest rates listed below for this Facility No. 1

 

2

 

during interest periods
agreed to by the Bank and the Borrower. 
The optional interest rates shall be subject to the terms and conditions
described later in this Agreement.  Any principal
amount bearing interest at an optional rate under this Agreement is referred to
as a “Portion.”  The following optional
interest rates are available:

 

(a)           The LIBOR Rate plus 1.25 percentage points

 

(b)           The Alternate Base Rate (as defined in Article 12
below)

 

1.6           Letters of Credit.

 

(a)           Subject to the execution and
delivery by the Borrower of a letter of credit application and any other
related documents on the Bank’s customary forms in effect from time to time
(collectively, the “Letter of Credit Documents”) and in reliance upon the
representations and warranties of the Borrower contained herein, the Bank
agrees from time to time until the first to occur of (i) the Facility No.1
Expiration Date or (ii) the termination of Facility No.1 pursuant to Article 11,
to issue, extend and renew for the account of the Borrower one or more standby
and documentary letters of credit (each individually, a “Letter of Credit”), in
such form as may be requested from time to time by the borrower and agreed to
by the Bank.  In the event and to the
extent that any provision of any Letter of Credit Document shall be
inconsistent with any provision of this Agreement, then the provisions of this
Agreement shall govern.

 

(b)           (i)            The obligation of the Bank
to issue, extend or renew any Letter of Credit hereunder shall be subject to
the conditions set forth in Article 6 below and to the following
additional conditions:

 

(A)          Such Letter of Credit shall provide for payment in
U.S. Dollars and shall expire by its terms no later than the earlier to occur
of (A) 30 days prior to the Expiration Date and (B) one year from the
date of its issuance;

 

(B)           After giving effect to such issuance, extension or
renewal, (1) the aggregate outstanding principal amount of amounts
outstanding under  this Facility No.1
including all Letters of Credit then outstanding shall not exceed the Facility No. 1
Commitment and (2) the LC Exposure Amount shall not exceed $1,000,000;

 

(C)           The form and terms of each Letter of Credit and the
related Letter of Credit Documents shall be acceptable to the Bank; and

 

(D)          Each Letter of Credit shall be issued to support
obligations of the Borrower incurred in the ordinary course of its business.

 

(ii)           Whenever the Borrower
desires to have a Letter of Credit issued, extended or renewed, the Borrower
will furnish to the Bank a written application therefore which shall (A) be
received by the Bank not less than three Business Days prior to the proposed
date of issuance, extension or renewal and (B) specify (1) such
proposed date ( which must be a Business Day), (2) the expiration date of
such Letter of Credit, (3) the name and address of the beneficiary of the
Letter of Credit, (4) the amount of such Letter of Credit, and (5) the
purpose and proposed form of such Letter of Credit.  Each Letter of Credit shall be subject to the
International Standby

 

3

 

Practices (1998) and, to the
extent not inconsistent therewith, the laws of the Commonwealth of
Massachusetts.

 

(c)           In order to induce the Bank
to issue, extend and renew each Letter of Credit, the Borrower hereby agrees to
reimburse or pay to the Bank:

 

(i)            except as otherwise
expressly provided in paragraph (ii) below, on the Business Day
immediately following each date that any draft presented under such Letter of
Credit is honored by the Bank or the Bank otherwise makes a payment with
respect thereto, as indicated in the notice thereof from the Bank to the
Borrower (A) the amount paid by the Bank under or with respect to such
Letter of Credit, and (B) the amount of any taxes, fees, charges or other
reasonable costs and expenses whatsoever incurred by the Bank in connection
with any payment made by the Bank under or with respect to such Letter of
Credit, and

 

(ii)           Upon the termination of
Facility No. 1, or the acceleration of loans and the LC Draw Obligations
in accordance with this Agreement, an amount equal to the LC Exposure Amount,
which amount shall be held by the Bank as cash collateral for all Letters of
Credit and LC Draw Obligations.

 

Interest shall accrue on any
and all amounts remaining unpaid by the Borrower under this §1.6 from the date
of any draw under a Letter of Credit until the Business Day immediately
following such draw at the rate specified in §1.4 for principal outstanding
and, thereafter, until payment in full (whether before or after judgment) at
the default rate set forth in §5.6, and shall be payable to the Bank on demand.

 

(d)           Except as otherwise provided
herein, the Borrower may elect to satisfy any LC Draw Obligation arising under
paragraph (c)(i) of this §1.6 by borrowing from Facility No. 1 in the
amount thereof and applying the proceeds thereto, provided that (i) all
conditions to such advance  set forth in Article 6
shall have been satisfied in full and (ii) after giving effect to such
advance and the application of proceeds thereof, the amounts outstanding under
Facility No. 1 including all outstanding Letters of Credit will not exceed
the Facility No. 1 Commitment.

 

(e)           The Borrower assumes all
risks in connection with the Letters of Credit. 
The Borrower’s obligations under this §1.6 shall be absolute and
unconditional under any and all circumstances and irrespective of the
occurrence of any Default or any condition precedent whatsoever or any setoff,
counterclaim or defense to payment which the Borrower may have or have had
against the Bank or any beneficiary of a Letter of Credit.  The Borrower also agrees that the Bank shall
not be responsible for, and the Borrower’s LC Draw Obligations shall not be
affected by, among other things, (i) the validity, genuineness or
enforceability of documents or of any endorsements thereon if believed by the
Bank to be valid, genuine and enforceable, even if such documents should in
fact provide to be in any or all respects invalid, insufficient (provided all
such documents conform on their face), fraudulent or forged, or (ii) any
dispute between or among the Borrower, any of its Subsidiaries, the beneficiary
of any Letter of Credit or any financing institution or other party to which
any Letter of Credit may be transferred or any claims or defenses whatsoever of
the Borrower or any of its Subsidiaries against the beneficiary of any Letter
of Credit or any such transferee.  The
Bank shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit unless caused by the gross
negligence, willful misconduct or bad faith of the Bank.  The Borrower agrees that any action taken or
omitted to be taken by the Bank under or in connection with each Letter of
Credit and 

 

4

 

the related drafts and
documents, if done in good faith without gross negligence or willful
misconduct, shall be binding upon the Borrower and shall not subject the Bank
to any liability.

 

(f)            The Bank shall be entitled
to rely, and shall be fully protected in relying upon, any Letter of Credit,
draft, writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person and upon advise and statements of legal counsel,
independent accountants and other experts selected by the Bank.

 

(g)           In order to induce the Bank
to issue, extend and renew each Letter of Credit which is a standby letter of
credit, the Borrower hereby agrees to pay to the Bank with respect to each such
issuance, extension and renewal a fee (in each case, a “Letter of Credit Fee”)
on the stated amount of such Letter of Credit at a rate per annum equal to
1.25% payable quarterly in arrears on the last day of each calendar
quarter.  In order to induce the Bank to
issue or extend each Letter of Credit which is a documentary letter of credit,
the Borrower hereby agrees to pay to the Bank with respect to each such
issuance or extension the Bank’s then standard fees for documentary letters of
credit.  In addition, the Borrower shall
pay to the Bank any and all standard charges customarily made by the Bank in
connection with such issuance, extension or renewal.

 

1.7  Reduction of Commitment No. 1.  The Borrower may, from time to time, at its
option, subject to the terms and conditions set forth herein, by written notice
to the Bank at least five (5) Business Days prior to the date of the
requested reduction, reduce the amount of Commitment No. 1 by integral
multiples of $500,000.  Any such
reduction shall be permanent and irrevocable. 
Simultaneously with any reduction in Commitment No. 1, the Borrower
shall pay to the Bank (i) amounts outstanding under Commitment No. 1
in the aggregate principal amount necessary to cause the outstanding principal
amount outstanding under Commitment No. 1 (including all outstanding
Letters of Credit) to be less than or equal to the Commitment No. 1 as so
reduced and (ii) all amounts owing to the Bank pursuant to Article 3
below with respect to any LIBOR Loans so repaid.

 

2.             FACILITY NO. 2 VARIABLE RATE TERM LOAN AMOUNT AND
TERMS

 

2.1           Loan Amount.

 

The
Bank agrees to provide a term loan to the Borrower in the amount of Ten Million
Dollars ($10,000,000) (the “Facility No. 2 Commitment”).

 

2.2           Availability Period.

 

The loan is available from
the Bank on or about the date of this Agreement as a single disbursement.

 

2.3           Repayment
Terms.

 

(a)           The Borrower will pay interest on the last day of
each month unless an Optional Interest Rate applies.

 

5

 

(b)           The Borrower will repay principal in equal
installments of One Hundred Sixty Six Thousand Six Hundred Sixty Six and 67/100
Dollars ($166,666.67) each, beginning on September 30, 2009, and on the
last day of each month thereafter, and ending on August 31, 2012 (the “Repayment
Period”).  In any event, on the last day
of the Repayment Period, the Borrower will repay the remaining principal
balance plus any interest then due.

 

(c)           The Borrower may prepay the loan in full or in part
at any time.  The prepayment will be
applied to the most remote payment of principal due under this Agreement.

 

(d)           Borrower will immediately repay the entire principal
balance of Facility No. 2 of this Agreement, together with interest, any
fees (including any prepayment fees) and any other amounts due thereunder, and
not obtain any further credit thereunder, upon the occurrence of the following
event:  Facility No. 1 of this
Agreement as now in effect or as hereafter renewed, amended or restated (the “Other
Credit Facility”), terminates for any reason, including, without limitation,
termination of the Other Credit Facility at the request of the Borrower,
termination resulting from failure by the Bank to renew the Other Credit
Facility, or termination as otherwise provided under the Other Credit Facility.

 

2.4           Interest
Rate.

 

The interest rate is a rate
per year equal to the sum of the  “LIBOR Daily Floating Rate” plus 1.750
percentage points.  “LIBOR Daily Floating
Rate” means a fluctuating rate of interest equal to the rate per annum equal to
the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by
Reuters (or other commercially available source providing quotations of BBA
LIBOR as selected by the Bank from time to time) as determined for each banking
day at approximately 11:00 a.m. London time two (2) London Banking
Days prior to the date in question, for U.S. Dollar deposits (for delivery on
the first day of such interest period) with a one month term, as adjusted from
time to time in the Bank’s sole discretion for reserve requirements, deposit
insurance assessment rates and other regulatory costs.  If such rate is not available at such time
for any reason, then the rate for that interest period will be determined by
such alternate method as reasonably selected by the Bank.

 

2.5           Optional Interest Rates.

 

Instead of the interest rate
based on the rate stated in the paragraph entitled “Interest Rate” above, the
Borrower may elect the optional interest rates listed below for this Facility No. 2
during interest periods agreed to by the Bank and the Borrower.  The optional interest rates shall be subject
to the terms and conditions described later in this Agreement.  Any principal amount bearing interest at an
optional rate under this Agreement is referred to as a “Portion.”  The following optional interest rates are
available:

 

(a)           The LIBOR Rate plus 1.75 percentage points.

 

6

 

3.             OPTIONAL INTEREST RATES

 

3.1           Optional
Rates.

 

Each optional interest rate
is a rate per year.  Interest for each
optional interest rate will be paid on the last day of each interest period
applicable to such optional interest rate. 
No Portion will be converted to a different interest rate during the
applicable interest period.  Upon the
occurrence of an event of default under this Agreement, the Bank may terminate
the availability of optional interest rates for interest periods commencing
after the default occurs.  At the end of
any interest period, the interest rate will revert to the rate stated in the
paragraph(s) entitled “Interest Rate” above, unless the Borrower has
designated another optional interest rate for the Portion.

 

3.2           LIBOR Rate.

 

The
election of LIBOR Rates shall be subject to the following terms and
requirements:

 

(a)           The interest period during which the LIBOR Rate will
be in effect will be one, two or three months. 
The first day of the interest period must be a day other than a Saturday
or a Sunday on which banks are open for business in New York and London and
dealing in offshore dollars (a “LIBOR Banking Day”).  The last day of the interest period and the
actual number of days during the interest period will be determined by the Bank
using the practices of the London inter-bank market.

 

(b)           Each LIBOR Rate Portion will be for an amount not
less than $250,000 or an integral multiple of $100,000 in excess thereof.  There may be not more than five (5) LIBOR
Rate Portions outstanding at one time for Facility No. 1 and not more than
five (5) LIBOR Rate Portions for Facility No. 2.

 

(c)           The “LIBOR Rate” means the interest rate determined
by the following formula.  (All amounts
in the calculation will be determined by the Bank as of the first day of the
interest period.)

 

LIBOR Rate =        London Inter-Bank Offered
Rate

    (1.00
- Reserve Percentage)

 

Where,

 

(i)           “London Inter-Bank Offered Rate” means, for any
applicable interest period, the rate per annum equal to the British Bankers
Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as selected by the
Bank from time to time) at approximately 11:00 a.m. London time two (2) London
Banking Days before the commencement of the interest period, for U.S. Dollar
deposits (for delivery on the first day of such interest period) with a term
equivalent to such interest period.  If
such rate is not available at such time for any reason, then the rate for that
interest period will be determined by such alternate method as reasonably
selected by the Bank.  A “London Banking
Day” is a day on which banks in London are open for business and dealing in
offshore dollars.

 

7

 

(ii)           “Reserve Percentage” means the total of the maximum
reserve percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in
Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of one
percent.  The percentage will be
expressed as a decimal, and will include, but not be limited to, marginal,
emergency, supplemental, special, and other reserve percentages.

 

(e)           The Borrower shall irrevocably request a LIBOR Rate
Portion no later than 12:00 noon Boston time on the LIBOR Banking Day preceding
the day on which the London Inter-Bank Offered Rate will be set, as specified
above.  For example, if there are no
intervening holidays or weekend days in any of the relevant locations, the
request must be made at least three days before the LIBOR Rate takes effect.

 

(f)            The Bank will have no obligation to accept an
election for a LIBOR Rate Portion if any of the following described events has
occurred and is continuing:

 

(i)            Dollar deposits in the principal amount, and for
periods equal to the interest period, of a LIBOR Rate Portion are not available
in the London inter-bank market; or

 

(ii)           the LIBOR Rate does not accurately reflect the cost
of a LIBOR Rate Portion.

 

(g)           Each prepayment of a LIBOR Rate Portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied by the
amount of accrued interest on the amount prepaid and a prepayment fee as
described below.  A “prepayment” is a
payment of an amount on a date earlier than the scheduled payment date for such
amount as required by this Agreement.

 

(h)           The prepayment fee shall be in an amount sufficient
to compensate the Bank for any loss, cost or expense incurred by it as a result
of the prepayment, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained by it to
maintain such Portion or from fees payable to terminate the deposits from which
such funds were obtained.  The Borrower
shall also pay any customary administrative fees charged by the Bank in
connection with the foregoing.  For
purposes of this paragraph, the Bank shall be deemed to have funded each
Portion by a matching deposit or other borrowing in the applicable interbank
market, whether or not such Portion was in fact so funded.

 

3.3.          Alternate Base Rate

 

The Alternate Base Rate is available only as to Facility No. 1.   The term Alternate Base Rate is defined in Article 12
below.  Interest when measured by the
Alternate Base Rate shall be payable on the first Business Day of each month
and upon expiration or termination of Facility No. 1.

 

8

 

4.             FEES AND EXPENSES

 

4.1           Fees.

 

(a)           Loan Fee.  The Borrower agrees to pay a loan fee in the
amount of Fifty Thousand ($50,000.00) Dollars. 
This fee is due on the date of this Agreement.

 

(b)           Commitment Fee.  The Borrower agrees to pay to the Bank
commitment fees (“Commitment Fees”) with respect to Commitment No.1 on the
first day of each March, June, September and December so long as
Commitment No. 1 is in effect and on the Expiration Date or earlier
termination of Commitment No. 1.  
Such Commitment Fees will be payable, based on such daily average unused
portion of Commitment No.1, at a rate per annum of 0.25%, appropriately
prorated for any period of less than a calendar quarter.  As used herein, the term “unused portion of Commitment
No.1”, as determined at any time, means that amount by which Commitment No. 1
exceeds the sum of (x) the then outstanding aggregate principal amount of
loans outstanding under Commitment no,1 plus (y) the LC Exposure
amount.  The fees described in this Section are
in addition to any balances and fees required by the Bank or any of its
affiliates in connection with any other services now or hereafter made
available to the Borrower.

 

(c)           Waiver Fee.  If the Bank, at its discretion, agrees to
waive or amend any terms of this Agreement, the Borrower will, at the Bank’s
option, pay the Bank a fee for each waiver or amendment in an amount advised by
the Bank at the time the Borrower requests the waiver or amendment.  Nothing in this paragraph shall imply that
the Bank is obligated to agree to any waiver or amendment requested by the
Borrower.  The Bank may impose additional
requirements as a condition to any waiver or amendment.

 

(d)           Late Fee.  To the extent permitted by law, the Borrower
agrees to pay a late fee in an amount not to exceed four percent (4%) of any
payment that is more than fifteen (15) days late.  The imposition and payment of a late fee
shall not constitute a waiver of the Bank’s rights with respect to the default.

 

4.2           Expenses.

 

The Borrower agrees to
immediately repay the Bank for expenses that include, but are not limited to,
filing, recording and search fees, appraisal fees, title report fees, and
documentation fees.

 

4.3           Reimbursement
Costs.

 

(a)           The Borrower agrees to reimburse the Bank for any
expenses it incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. 
Expenses include, but are not limited to, reasonable attorneys’ fees,
including any allocated costs of the Bank’s in-house counsel to the extent
permitted by applicable law.

 

9

 

5.             DISBURSEMENTS, PAYMENTS AND COSTS

 

5.1           Disbursements
and Payments.

 

(a)           Each payment by the Borrower will be made in U.S.
Dollars and immediately available funds by debit to a deposit account, as
described in this Agreement or otherwise authorized by the Borrower.  For payments not made by direct debit,
payments will be made by mail to the address shown on the Borrower’s statement
or at one of the Bank’s banking centers in the United States, or by such other
method as may be permitted by the Bank.

 

(b)           The Bank may honor instructions for advances or
repayments given by the Borrower (if an individual), or by any one of the
individuals authorized to sign loan agreements on behalf of the Borrower, or
any other individual designated by any one of such authorized signers (each an “Authorized
Individual”).

 

(c)           For any payment under this Agreement made by debit
to a deposit account, the Borrower will maintain sufficient immediately
available funds in the deposit account to cover each debit.  If there are insufficient immediately
available funds in the deposit account on the date the Bank enters any such
debit authorized by this Agreement, the Bank may reverse the debit.

 

(d)           Each disbursement by the Bank and each payment by
the Borrower will be evidenced by records kept by the Bank.  In addition, the Bank may, at its discretion,
require the Borrower to sign one or more promissory notes.

 

(e)           Prior to the date each payment of principal and
interest and any fees from the Borrower becomes due (the “Due Date”), the Bank
will mail to the Borrower a statement of the amounts that will be due on that
Due Date (the “Billed Amount”).  The
calculations in the bill will be made on the assumption that no new extensions
of credit or payments will be made between the date of the billing statement
and the Due Date, and that there will be no changes in the applicable interest
rate.  If the Billed Amount differs from
the actual amount due on the Due Date (the “Accrued Amount”), the discrepancy
will be treated as follows:

 

(i)            If the Billed Amount is less than the Accrued
Amount, the Billed Amount for the following Due Date will be increased by the
amount of the discrepancy.  The Borrower
will not be in default by reason of any such discrepancy.

 

(ii)           If the Billed Amount is more than the Accrued
Amount, the Billed Amount for the following Due Date will be decreased by the
amount of the discrepancy.

 

Regardless of any such discrepancy, interest
will continue to accrue based on the actual amount of principal outstanding
without compounding.  The Bank will not
pay the Borrower interest on any overpayment.

 

10

 

5.2           Telephone
and Telefax Authorization.

 

(a)           The Bank may honor telephone
or telefax instructions for advances or repayments or for the designation of
optional interest rates and telefax requests for the issuance of letters of
credit given, or purported to be given, by any one of the Authorized
Individuals.

 

(b)           Advances will be deposited in and repayments will be
withdrawn from Account Number 50327504 owned by Borrower, or such other of the
Borrower’s accounts with the Bank as designated in writing by the Borrower.

 

(c)           The Borrower will indemnify and hold the Bank
harmless from all liability, loss, and costs in connection with any act
resulting from telephone or telefax instructions the Bank reasonably believes
are made by any Authorized Individual. 
This paragraph will survive this Agreement’s termination, and will
benefit the Bank and its officers, employees, and agents.

 

(d)           On or about the date hereof the parties have
executed the Bank’s Autoborrow Agreement. 
Nothing herein contained shall be deemed to supersede the terms and
provisions of the Auto-Borrow Agreement.

 

5.3           Direct
Debit.

 

(a)           The Borrower agrees that on the Due Date the Bank
will debit the Billed Amount from deposit account number 50327504 owned by
Borrower,
or such other of the Borrower’s accounts with the Bank as designated in writing
by the Borrower (the “Designated Account”).

 

5.4           Banking
Days.

 

Unless otherwise provided in
this Agreement, a banking day is a day other than a Saturday, Sunday or other
day on which commercial banks are authorized to close, or are in fact closed,
in the state where the Bank’s lending office is located, and, if such day
relates to amounts bearing interest at an offshore rate (if any), means any
such day on which dealings in dollar deposits are conducted among banks in the
offshore dollar interbank market.  All
payments and disbursements which would be due on a day which is not a banking
day will be due on the next banking day. 
All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.

 

5.5           Interest
Calculation.

 

Except as otherwise stated
in this Agreement, all interest and fees, if any, will be computed on the basis
of a 360-day year and the actual number of days elapsed.  This results in more interest or a higher fee
than if a 365-day year is used. 
Installments of principal which are not paid when due under this
Agreement shall continue to bear interest until paid.

 

5.6           Default
Rate.

 

Upon the occurrence of any
default or after maturity or after judgment has been rendered on any obligation
under this Agreement, all amounts outstanding under this Agreement, including
any interest, fees, or costs which are not paid when due, will at the option of
the Bank bear interest at 

 

11

 

a rate which is 4.0
percentage point(s) higher than the rate of interest otherwise provided
under this Agreement.  This may result in
compounding of interest.  This will not
constitute a waiver of any default.

 

5.7           Taxes.

 

If any payments to the Bank
under this Agreement are made from outside the United States, the Borrower will
not deduct any foreign taxes from any payments it makes to the Bank.  If any such taxes are imposed on any payments
made by the Borrower (including payments under this paragraph), the Borrower will
pay the taxes and will also pay to the Bank, at the time interest is paid, any
additional amount which the Bank specifies by Bank Certificate  as necessary to preserve the after-tax yield
the Bank would have received if such taxes had not been imposed.  The Borrower will confirm that it has paid
the taxes by giving the Bank official tax receipts (or notarized copies) within
thirty (30) days after the due date.

 

6.             CONDITIONS

 

Before the Bank is required
to extend any credit to the Borrower under Facility No. 2, it must receive
any documents and other items it may reasonably require, in form and content
acceptable to the Bank, including any items specifically listed below.

 

6.1           Authorizations.

 

If the Borrower or any
guarantor is anything other than a natural person, evidence that the execution,
delivery and performance by the Borrower and/or such guarantor of this
Agreement and any instrument or agreement required under this Agreement have
been duly authorized.

 

6.2           Governing
Documents.

 

If required by the Bank, a
copy of the Borrower’s organizational documents.

 

6.3           Guaranties.

 

Guaranty signed by each of
the Guarantors.

 

6.4           Absence of Liens.

 

Evidence satisfactory to the Bank that there
are no liens or encumbrances on assets of the Borrower or any Guarantor except
those that have been approved by the Bank in writing.

 

6.5           Payment of Fees.

 

Payment of all fees and
other amounts due and owing to the Bank, including without limitation payment
of all accrued and unpaid expenses incurred by the Bank as required by the
paragraph entitled “Reimbursement Costs.”

 

12

 

6.6           Good Standing.

 

Certificates
of good standing for the Borrower and each Guarantor from its state of
formation and from any other state in which the Borrower or such Guarantor is
required to qualify to conduct its business.

 

6.7           Legal Opinion.

 

A
written opinion from Hughes & Associates, the Borrower’s legal
counsel, covering such matters as the Bank may require.  The terms of the opinion must be acceptable
to the Bank.

 

6.8           Insurance.

 

Evidence
of insurance coverage, as required in the “Covenants” section of this
Agreement.

 

6.9           Other
Required Documentation.  Submission to the bank of the definitive
purchase agreement relating to the purchase of all of the capital stock of
C.I.M, Industries, Inc., a New Hampshire corporation, together with such
other documents as the Bank or its counsel may require.

 

7.             REPRESENTATIONS AND WARRANTIES

 

When
the Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties.  Each request for an extension of credit
constitutes a renewal of these representations and warranties as of the date of
the request.

 

7.1           Formation.

 

The
Borrower and each Guarantor has been duly formed and existing under the laws of
the state or other jurisdiction where organized.

 

7.2           Authorization.

 

This Agreement, and any
instrument or agreement required hereunder, are within the Borrower’s and the
respective Guarantor’s powers, have been duly authorized, and do not conflict
with any of its organizational papers.

 

7.3           Enforceable
Agreement.

 

This
Agreement is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable against the Borrower or as it may appear
to be a party thereto, each Guarantor.

 

7.4           Good
Standing.

 

In
each state in which the Borrower or any Guarantor does business, it is properly
licensed, in good standing, and, where required, in compliance with fictitious
name statutes.

 

13

 

7.5                                 No Conflicts.

 

This
Agreement does not conflict with any law, agreement, or obligation by which the
Borrower or any Guarantor is bound.

 

7.6                                 Financial Information.

 

All
financial and other information that has been or will be supplied to the Bank
is sufficiently complete to give the Bank accurate knowledge of the Borrower’s
consolidated and consolidating financial condition, including all material
contingent liabilities.  Since the date
of the most recent financial statement provided to the Bank, there has been no
material adverse change in the business condition (financial or otherwise),
operations, properties or prospects of the Borrower or its subsidiaries,
individually or collectively.

 

7.7                                 Lawsuits.

 

There
is no lawsuit, tax claim or other dispute pending or threatened against the
Borrower or any Guarantor which, if lost, would impair the Borrower’s or such
Guarantor’s financial condition or ability to repay the loans under Facility No. 1
or Facility No.2, except as have been disclosed in writing to the Bank.

 

7.8                                 Permits, Franchises.

 

The
Borrower and each Guarantor possesses all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade name rights,
patent rights, copyrights, and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.

 

7.9                                 Other Obligations.

 

Neither
the Borrower nor any Guarantor is in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation, except as have been disclosed in writing to the Bank.

 

7.10                           Tax Matters.

 

Neither
the Borrower nor any Guarantor has knowledge of any pending assessments or
adjustments of its income tax for any year and all taxes due have been paid,
except as have been disclosed in writing to the Bank.

 

7.11                           No Event of Default.

 

There
is no event which is, or with notice or lapse of time or both would be, a
default under this Agreement.

 

7.12                           Insurance.

 

The
Borrower has obtained, and maintained in effect, the insurance coverage
required in the “Covenants” section of this Agreement.

 

14

 

7.13                           ERISA Plans.

 

(a)                                  Each Plan (other than a
multiemployer plan) is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law.  Each Plan has received a favorable
determination letter from the IRS and to the best knowledge of the Borrower,
nothing has occurred which would cause the loss of such qualification.  The Borrower has fulfilled its obligations,
if any, under the minimum funding standards of ERISA and the Code with respect
to each Plan, and has not incurred any liability with respect to any Plan under
Title IV of ERISA.

 

(b)                                 There are no claims,
lawsuits or actions (including by any governmental authority), and there has
been no prohibited transaction or violation of the fiduciary responsibility
rules, with respect to any Plan which has resulted or could reasonably be
expected to result in a material adverse effect.

 

(c)                                  With respect to any Plan
subject to Title IV of ERISA:

 

(i)                                     No reportable event has
occurred under Section 4043(c) of ERISA for which the PBGC requires
30-day notice.

 

(ii)                                  No action by the Borrower or
any ERISA Affiliate to terminate or withdraw from any Plan has been taken and
no notice of intent to terminate a Plan has been filed under Section 4041
of ERISA.

 

(iii)                               No termination proceeding
has been commenced with respect to a Plan under Section 4042 of ERISA, and
no event has occurred or condition exists which might constitute grounds for
the commencement of such a proceeding.

 

(d)                                 The following terms have the
meanings indicated for purposes of this Agreement:

 

(i)                                     “Code” means the Internal
Revenue Code of 1986, as amended from time to time.

 

(ii)                                  “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended from time to time.

 

(iii)                               “ERISA Affiliate” means any
trade or business (whether or not incorporated) under common control with the
Borrower within the meaning of Section 414(b) or (c) of the
Code.

 

(iv)                              “PBGC” means the Pension
Benefit Guaranty Corporation.

 

(v)                                 “Plan” means a pension,
profit-sharing, or stock bonus plan intended to qualify under Section 401(a) of
the Code, maintained or contributed to by the Borrower or any ERISA Affiliate,
including any multiemployer plan within the meaning of Section 4001(a)(3) of
ERISA.

 

15

 

7.14                           Location of Borrower.

 

The
place of business of the Borrower (or, if the Borrower has more than one place
of business, its chief executive office) is located at the address listed on
the signature page of this Agreement.

 

8.                                      AFFIRMATIVE COVENANTS

 

The
Borrower agrees, so long as credit is available under this Agreement and until
the Bank is repaid in full:

 

8.1                                 Use of Proceeds.

 

To
use the proceeds of Facility No. 1 only for working capital, general
corporate purposes, Letters Of Credit, and capital expenditures, and to use
Facility No. 2 only for financing of the acquisition of the capital stock
of C.I.M Industries, Inc..

 

8.2.          Legal Existence;
Qualification; Compliance.  The
Borrower will maintain (and will cause each Subsidiary of the Borrower to
maintain) its corporate existence and good standing in the jurisdiction of its formation.  The Borrower will qualify to do business and
will remain qualified and in good standing (and the Borrower will cause each
Subsidiary of the Borrower to qualify and remain qualified and in good
standing) in each other jurisdiction where the failure so to qualify could
(singly or in the aggregate with all other such failures) have a Material
Adverse Effect.  The Borrower will comply
in all material respects with (and will cause each Subsidiary of the Borrower
to comply with) its charter documents and by-laws.  The Borrower will comply with (and will cause
each Subsidiary of the Borrower to comply with) all applicable laws, rules and
regulations (including, without limitation, ERISA and those relating to
environmental protection) other than (a) laws, rules or regulations
the validity or applicability of which the Borrower or such Subsidiary shall be
contesting in good faith by proceedings which serve as a matter of law to stay
the enforcement thereof and (b) those laws, rules and regulations to
failure to comply with any of which could not (singly or in the aggregate) have
a Material Adverse Effect.

 

8.3.          Maintenance of Property;
Insurance.  Subject to
§9.8, the Borrower will maintain and preserve (and will cause each Subsidiary
of the Borrower to maintain and preserve) all of its properties in good working
order and condition, making all necessary repairs thereto and replacements
thereof.  The Borrower will maintain (and
will cause each of its Subsidiaries to maintain) insurance with respect to its
property and business against such liabilities, casualties and contingencies
and of such types and in such amounts as shall be reasonably satisfactory to
the Bank from time to time and in any event all such insurance as may from time
to time be customary for companies conducting a business similar to that of the
Borrower in similar locales.

 

8.4.          Payment of Taxes and Charges.  The Borrower will pay and discharge (and will
cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any such 

 

16

 

Subsidiary, except any of
the foregoing which is being contested in good faith and by appropriate
proceedings which serve as a matter of law to stay the enforcement thereof and
for which the Borrower has established and is maintaining adequate
reserves.  The Borrower will maintain in
full force and effect, and comply with the terms and conditions of, all
permits, permissions and licenses necessary or desirable for its business.

 

8.5.          Accounts.  The Borrower will maintain its principal
depository and operating accounts with the Bank.

 

8.6.          Conduct of Business.  The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged.  The Borrower will not, without the prior
written consent of the Bank, directly or indirectly (itself or through any
Subsidiary) enter into any other lines of business, businesses or ventures
which are not reasonably related to the business in which the Borrower is
presently engaged.

 

8.7.          Reporting Requirements.  The Borrower will furnish to the Bank:

 

(a)           Within 90 days after the end
of each fiscal year of the Borrower, a copy of the annual audit report for such
fiscal year for the Borrower, including therein consolidated balance sheets of
the Borrower and Subsidiaries as at the end of such fiscal year and related
consolidated statements of income, stockholders’ equity and cash flow for the
fiscal year then ended.  The annual
consolidated financial statements shall be certified by independent public
accountants selected by the Borrower and reasonably acceptable to the Bank
(which acceptable accountants shall include PricewaterhouseCoopers) such
certification to be in such form as is generally recognized as “unqualified”.  The Borrower will also deliver to the Bank,
within 90 days following the end of each fiscal year, an annual budget for the
following year (including balance sheet and income statement projections) for
the Borrower, prepared by the Borrower’s management and approved by the
Borrower’s Board of Directors, such budget to be in such detail as is
reasonably satisfactory to the Bank.

 

(b)           Within 45 days after the end
of each fiscal quarter of the Borrower, consolidated balance sheets of the
Borrower and Subsidiaries and related consolidated statements of income and
cash flow, unaudited but prepared in accordance with generally accepted
accounting principles consistently applied fairly presenting the financial
condition of the Borrower and Subsidiaries as at the dates thereof and for the
periods covered thereby (except that such quarterly statements need not contain
notes to the financial statements) and certified as complete by the chief
financial officer of the Borrower, such balance sheets to be as at the end of
such fiscal quarter and such statements of income and cash flow to be for such
fiscal quarter and for the fiscal year to date, in each case together with a
comparison to the results for the corresponding fiscal period of the
immediately prior fiscal year.

 

(c)           At the time of delivery of
each annual or quarterly report or financial statement of the Borrower, a
certificate executed by the chief financial officer of the Borrower stating
that he or she has reviewed this Agreement and the other Loan Documents and has
no knowledge of any Event of Default or, if he or she has such knowledge,
specifying each such Event of Default and the nature thereof.  Each such certificate given as at the end of
any fiscal quarter of the Borrower will set forth the calculations necessary to
evidence compliance with §§8.8-8.9.

 

17

 

(d)           As soon as possible and in
any event within five days after the Borrower has actual knowledge of the
occurrence of any Default or Event of Default, the statement of the Borrower
setting forth details of each such Default or Event of Default and the action
which the Borrower proposes to take with respect thereto.

 

(e)           Promptly after receipt, a
copy of all audits or reports submitted to any Company by independent public
accountants in connection with any annual special or interim audit of the books
and records of such Company prepared by such accountants and any “management
letter” prepared by such accountants.

 

(f)            Promptly after the
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, to which the Borrower or any Subsidiary
of the Borrower is a party.

 

(g)           Promptly upon request, such
other information respecting the financial condition, operations and prospects
of the Borrower or any Subsidiary as the Bank may from time to time reasonably
request.

 

8.8.          Total Liabilities to
Tangible Net Worth Ratio.  The
Borrower shall, at the end of each of its fiscal quarters, maintain a ratio of Total
Liabilities to Tangible Net Worth not exceeding 2.00:1.00.

 

8.9           Debt Service Coverage Ratio.  For the 
twelve month period ending on each May 31, August 31, November 30
and February 28(29), the Borrower will not permit the ratio of Operating
Cash Flow to Debt Service to be less than 1.25:1.00.

 

8.10         Books and Records;
Inspections.  The
Borrower will maintain (and will cause each of its Subsidiaries to maintain)
complete and accurate books, records and accounts which will at all time
accurately and fairly reflect all of its transactions in accordance with
generally accepted accounting principles consistently applied.  The Borrower will, at any reasonable time and
from time to time upon reasonable notice and during normal business hours (and
without any necessity for notice following the occurrence of an Event of
Default), permit the Bank, and any agent or representatives thereof, to examine
and make copies of and take abstracts from the records and books of account of,
and visit the properties of the Borrower and its Subsidiaries, and to discuss
its affairs, finances and accounts with its officers, directors and/or
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this §8.10.  Each financial statement of the Borrower
hereafter delivered pursuant to this Agreement will be complete and accurate
and will fairly present the financial condition of the Borrower as at the date
thereof and for the periods covered thereby; provided, as to interim
statements, that footnotes and the information normally contained therein are
not included and that such statements are subject to year-end adjustments.

 

 

18

 

9.             NEGATIVE COVENANTS

 

Without limitation of any
other covenants and agreements contained herein or elsewhere, the Borrower
agrees that so long as any Commitment under this Agreement is in effect, or any
loan, Letter of Credit  or other
obligations of the Borrower shall be outstanding:

 

9.1.          Indebtedness.  The Borrower will not create, incur, assume
or suffer to exist any Indebtedness (nor allow any of its Subsidiaries to
create, incur, assume or suffer to exist any Indebtedness), except for:

 

(a)           Indebtedness owed to the
Bank;

 

(b)           Indebtedness of the Borrower
or any Subsidiary for taxes, assessments and governmental charges or levies not
yet due and payable;

 

(c)           unsecured current
liabilities of the Borrower or any Subsidiary (other than for money borrowed or
for purchase money Indebtedness with respect to fixed assets) incurred upon
customary terms in the ordinary course of business;

 

(d)           purchase money Indebtedness
(including, without limitation, Capital Lease Obligations) hereafter incurred
to equipment vendors, equipment lessor and other Persons providing purchase
money financing to the Borrower for new equipment purchased or leased by the
Borrower after the date hereof for use in the Borrower’s business; provided
that the Indebtedness permitted under this clause (d) of this §9.1 will
not exceed $500,000 in the aggregate outstanding at any one time;

 

(e)           other Indebtedness (not
described in any of clauses (a)-(d) above) existing at the date hereof,
but only to the extent set forth as item 9.1 of the attached Disclosure
Schedule;

 

(f)            any guaranties or other
contingent liabilities expressly permitted pursuant to §9.3; and

 

(g)           Any Synthetic Lease, so long
as the Bank has previously approved the terms thereof in writing.

 

9.2.          Liens.  The Borrower will not create, incur, assume
of suffer to exist (nor allow any of its Subsidiaries to create, incur, assume
or suffer to exist) any mortgage, deed of trust, pledge, lien, security
interest, or other charge or encumbrance (including the lien or retained
security title of a conditional vendor) of any nature (collectively, “Liens”),
upon or with respect to any of its property or assets, now owned or hereafter
acquired (including, without limitation, any trustee process affecting any
account of the Borrower with the Bank), except that the foregoing restrictions
shall not apply to:

 

(a)           Liens for taxes, assessments
or governmental charges or levies on property of the Borrower or any of its
Subsidiaries if the same shall not at the time be delinquent or thereafter can
be paid without interest or penalty or are being contested in good faith and by
appropriate proceedings which serve as a matter of law to stay any enforcement
thereof and as to which adequate reserves are maintained;

 

(b)           Liens imposed by law, such
as carriers’, warehousemen’s and mechanics’ liens and other similar Liens
arising in the ordinary course of business for sums not yet due or which are
being contested in good faith and by appropriate proceedings which serve as a
matter of law to stay the enforcement thereof and as to which adequate reserves
are maintained;

 

19

 

(c)           pledges or deposits under
workmen’s compensation laws, unemployment insurance, social security,
retirement benefits or similar legislation;

 

(d)           Liens in favor of the Bank;

 

(e)           Liens in favor of equipment
vendors, equipment lessors and other Persons securing any purchase money
Indebtedness permitted by clause (d) of §9.1; provided that no such Lien
will extend to any property of the Borrower other than the specific items of
equipment financed;

 

(f)            rights of the licensee under
any commercially reasonable license of technology or other intellectual
property given by the Borrower to any of the Borrower’s customers in the
ordinary course of its business;

 

(g)           refinancings, renewals or
extensions of any of the foregoing Liens; provided, however, that no such
refinanced, renewed or extended Lien at any time will extend to any property of
any property of any Borrower or any Subsidiary other than the specific assets
previously subject to such Liens;

 

(h)           easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business that, in the aggregate, do not in any case materially detract from the
value of the property subject thereto or materially interfere in the ordinary
conduct of the business of the Borrower or any of its Subsidiaries.

 

(i)            other Liens existing at the
date hereof, but only to the extent and with the relative priorities set forth
on item 9.2 of the attached Disclosure Schedule.

 

9.3.          Guaranties.  The Borrower will not, without the prior
written consent of the Bank, assume, guarantee, endorse or otherwise become
directly or contingently liable (including, without limitation, liable by way
of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in any debtor or otherwise to
assure any creditor against loss) (and will not permit any of its Subsidiaries
so to assume, guaranty or become directly or contingently liable) in connection
with any indebtedness of any other Person, except (a) guaranties by
endorsement for deposit or collection in the ordinary course of business, and (b) guaranties
existing at the date hereof and described on item 9.3 of the attached
Disclosure Schedule.

 

9.4.          Loans and Advances.  The Borrower will not make (and will not
permit any Subsidiary to make) any loans or advances to any Person, including,
without limitation, the Borrower’s directors, officers and employees, except (a) as
described on item 4.4 of the attached Disclosure Schedule, (b) so long as
no Default then exists, Affiliate Loans, (c)  advances to such directors,
officers or employees with respect to expenses incurred by them in the ordinary
course of their duties and advances against salary, all of which loans and
advances under this clause (c) will not exceed, in the aggregate, $100,000
outstanding at any one time, and (d) advances for security deposits.

 

20

 

9.5.          Subsidiaries; Acquisitions.  Other than the acquisition concurrently
herewith of all of the capital stock of C.I.M. Industries, Inc., which
acquisition is expressly permitted, the Borrower will not, without the prior
written consent of the Bank, make (and will not permit any Subsidiary to make)
any acquisition of all or substantially all of the stock or other Equity
Interest of any other Person or of all or substantially all of the assets of
any other Person, other than, any acquisition the purchase price for which does
not exceed $1,000,000.  The Borrower will
not become a partner in any partnership or limited liability company.  The Borrower will promptly inform the Bank if
it forms any Subsidiaries after the date of this Agreement.

 

9.6.          Merger.  The Borrower will not, without the prior
written consent of the Bank, merge or consolidate with any Person, or sell,
lease, transfer or otherwise dispose of (whether in one or more transactions)
any material portion of its assets (including, without limitation, any material
portion of its intellectual property), other than (a) in a sale of
inventory in the ordinary course; and (b) licensing of any of its
intellectual property in the ordinary course of Borrower’s business to another
Person on commercially reasonable terms.

 

9.7.          Affiliate Transactions.  Except for transactions described on item 9.7
of the attached Disclosure Schedule, the Borrower will not, without the prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sale or exchange of any property or the rendering of
any service, with any Affiliate of the Borrower, except in the ordinary course
and pursuant to the reasonable requirements of the Borrower’s business and upon
fair and reasonable terms no less favorable to the Borrower than would be
obtained in a comparable arms’-length transaction with any Person not an
Affiliate; provided that nothing in this §9.7 shall be deemed to restrict the
payment of salary or other similar payments to any officer or director of the
Borrower at a level consistent with the salary and other payments being paid at
the date of this Agreement and heretofore disclosed in writing to the Bank, nor
to prevent the hiring of additional officers at a salary level consistent with
industry practice, nor to prevent reasonable periodic increases in salary or
benefits.

 

9.8.          Change of Structure, etc.  The Borrower will not change its corporate
name or legal structure, nor will the Borrower change its fiscal year or
materially change its methods of financial reporting unless, in each instance,
prior written notice of such change is given to the Bank and prior to such
change the Borrower enters into amendments to this Agreement in form and
substance reasonably satisfactory to the Bank in order to preserve unimpaired
the rights of the Bank and the obligations of the Borrower hereunder.

 

9.9.          Hazardous Waste.  Except as provided below, the Borrower will
not dispose of or suffer or permit to exist any hazardous material or oil on
any site or vessel owned, occupied or operated by the Borrower or any
Subsidiary of the Borrower, nor shall the Borrower store (or permit any
Subsidiary to store) on any site or vessel owned, occupied or operated by the
Borrower or any such Subsidiary, or transport or arrange the transport of, any hazardous
material or oil (the terms “hazardous material”, “oil” and “vessel”,
respectively, being used herein with the meanings given those terms in Mass.
Gen. Laws. Ch. 21E or any comparable terms in any comparable 

 

21

 

statute in effect in any
other relevant jurisdiction).  The
Borrower shall provide the Bank with written notice of (i) the intended
storage or transport of any hazardous material or oil by the Borrower or any
Subsidiary of the Borrower, (ii) any potential or known release or threat
of release of any hazardous material or oil at or from any site or vessel
owned, occupied or operated by the Borrower or any Subsidiary of the Borrower,
and (iii) any incurrence of any expense or loss by any government or
governmental authority in connection with the assessment, containment or
removal of any hazardous material or oil for which expense or loss the Borrower
or any Subsidiary of the Borrower may be liable.  Notwithstanding the foregoing, the Borrower
and its Subsidiaries may use, store and transport, and need not notify the Bank
of the use, storage or transportation of, (x) oil in reasonable
quantities, as fuel for heating of their respective facilities or for vehicles
or machinery used in the ordinary course of their respective businesses and (y) hazardous
materials that are solvents, cleaning agents or other materials used in the
ordinary course of the respective business operations of the Borrower and its
Subsidiaries in reasonable quantities, as long as in any case the Borrower of
the Subsidiary concerned (as the case may be) has obtained and maintains in
effect any necessary governmental permits, licenses and approvals, complies
with all requirements of applicable federal, state and local law relating to
such use, storage or transportation, follows the protective and safety
procedures that a prudent businessperson conducting a business the same as or
similar t o that of the Borrower or such Subsidiary (as the case may be) would
follow, and disposes of such materials (not consumed in the ordinary course)
only through licensed providers of hazardous waste removal services.

 

9.10.        No Margin Stock.  No proceeds of any Loan shall be used
directly or indirectly to purchase or carry any margin security.

 

9.11.        Negative Pledges.  The Borrower will not enter into (and will
not permit any of its Subsidiaries to enter into) any agreement, amendment or
arrangement (excluding this Agreement or any other Loan Document) prohibiting
or restricting (a) such Person from amending or otherwise modifying this
Agreement or any other Loan Document, (b) the creation or assumption of
any Liens upon its properties, revenues or assets, whether now owned or
hereafter acquired or (c) the ability of any such Person to make any
payment or distribution, directly or indirectly, to the Borrower.

 

10.           DEFAULT AND REMEDIES

 

If
any of the following events of default occurs, the Bank may do one or more of
the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its entire
debt immediately and without prior notice. 
If an event which, with notice or the passage of time, will constitute
an event of default has occurred and is continuing, the Bank has no obligation
to make advances or extend additional credit under this Agreement.  In addition, if any event of default occurs,
the Bank shall have all rights, powers and remedies available under any
instruments and agreements required by or executed in connection with this
Agreement, as well as all rights and remedies available at law or in
equity.  If an event of default occurs
under the paragraph entitled “Bankruptcy,” below, with respect to the Borrower,
then the entire debt outstanding under this Agreement will automatically be due
immediately.  The occurrence of any one
of the following events shall constitute an Event of Default hereunder:

 

22

 

(a)           The Borrower shall (i) fail
to make any payment of interest within five (5) days of the date when due
or (ii) fail to make any payment of principal hereunder or under any LC
Draw Obligation on or before the date when due; or

 

(b)           Any representation or
warranty of the Borrower contained herein shall at any time prove to have been
incorrect in any material respect when made or any representation or warranty
made by the Borrower in connection with any Loan or Letter of Credit shall at
any time prove to have been incorrect in any material respect when made; or

 

(c)           The Borrower shall default
in the performance or observance of any agreement or obligation under §§8.2,
8.7, 8.8, 8.9 and 8.10 or any provision of Article 9 hereof; or

 

(d)           The Borrower shall default
in the performance of any other term, covenant or agreement contained in this
Agreement and such default shall continue unremedied for 30 days after written
notice thereof shall have been given to the Borrower, or

 

(e)           Any default on the part of
the Borrower or any Subsidiary of the Borrower shall exist, and shall remain unwaived
or uncured beyond the expiration of any applicable notice and/or grace period,
under any other contract, agreement or undertaking now existing or hereafter
entered into with or for the benefit of the Bank (or any affiliate of the
Bank), including without limitation, Swap Contract; or

 

(f)            Any other Indebtedness of
the Borrower or any Subsidiary of the borrower for borrowed money or
representing the deferred purchase price of the property in excess of $500,000
in aggregate principal amount or with respect to any instrument evidencing,
guaranteeing, securing or otherwise relating to any such Indebtedness shall
have been declared to be due and payable prior to its stated maturity or shall
not have been paid at the stated maturity thereof; or

 

(g)           The Borrower shall be
dissolved , or the Borrower or any Subsidiary of the Borrower shall become
insolvent or bankrupt or shall cease paying its debts as they mature or shall
make an assignment for the benefit of creditors, or a trustee, receiver or
liquidator shall be appointed for the Borrower or any Subsidiary of the
Borrower or for a substantial part of the property of the Borrower or any such
Subsidiary, or bankruptcy, reorganization, arrangement, insolvency or similar
proceedings shall be instituted by or against the Borrower or any such
Subsidiary under the laws of any jurisdiction (except for an involuntary
proceeding filed against the Borrower or any Subsidiary of the Borrower which
is dismissed within 90 days following the institution thereof); or

 

(h)           Any execution or similar
process shall be issued or levied against any material part of the property of
the Borrower or any Subsidiary and such execution or similar process shall not
be paid, stayed, released, vacated or fully bonded within 10 days after its
issue or levy; or

 

(i)            Any final uninsured judgment
in excess of $500,000 shall be entered against any Borrower or any Subsidiary
of the borrower by any court of competent jurisdiction and shall remain unpaid,
unbonded or unstayed for a period of 60 days; or

 

23

 

(j)            The Borrower or any
Subsidiary of the Borrower shall fail to meet its minimum funding requirements
under ERISA with respect to any employee benefit plan (or other class of
benefit which the PBGC has elected to insure) or any such plan shall be the subject
of termination proceedings (whether voluntary or involuntary) and there shall
result from such termination proceedings a liability of the borrower or any
Subsidiary of the Borrower to the PBGC which, in each case, in the reasonable
opinion of the Bank may have material adverse effect upon the financial
condition of the Borrower or any such Subsidiary; or

 

(k)           Any Loan Document shall for
any reason (other than due to payment in full of all amounts evidenced thereby
or due to discharge in writing by the Bank) not remain in full force and
effect; or

 

(l)            Any Subsidiary of the
Borrower shall cease to be a direct or indirect wholly-owned Subsidiary, except
for Northeast Quality Products Co., Inc.

 

11.           ENFORCING THIS AGREEMENT; MISCELLANEOUS

 

11.1.                        Rights and Remedies on
Default.  Upon the occurrence of any
Event of Default, in addition to any other rights and remedies available to the
Bank hereunder or otherwise, the Bank may exercise any one or more of the
following rights and remedies (all of which shall be cumulative):

 

(a)           Declare the entire unpaid
principal amount due under this Agreement and then outstanding, all interest
accrued and unpaid thereon, any LC Draw Obligations and all other amounts
payable under this Agreement, and all other Indebtedness of the Borrower to the
Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrower.

 

(b)           Terminate the arrangements
for revolving loans and Letters of Credit provided for under Facility No. 1
under this Agreement.

 

(c)           Exercise all rights and
remedies hereunder and under each and any other agreement with the Bank, and
exercise all other rights and remedies which the Bank may have under applicable
law.

 

11.2         Set-off.  Borrower hereby grants to Bank, a continuing
lien, security interest and right of setoff as security for all liabilities and
obligations to Bank, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Bank of America, N.A. or its affiliates and its successors and
assigns or in transit to any of them, At any time, without demand or notice
(any such notice being expressly waived by Borrower), Bank may setoff the same
or any part thereof and apply the same to any liability or obligation of
Borrower even though unmatured and regardless of the adequacy of any other
collateral. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OF THE
OBLIGATIONS PRIOR TO THE EXERCISE BY THE BANK OF ITS RIGHT OF SET-OFF 

 

24

 

UNDER THIS SECTION ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

11.3         Letters of Credit.  Without limitation of any other right or
remedy of the Bank, (i) if an Event of Default shall have occurred and the
Bank shall have accelerated the amounts due under this Agreement or (ii) if
this Agreement and/or the revolving financing arrangements described herein
shall have expired or shall have been earlier terminated by either the Bank or
the Borrower for any reason, the Borrower will forthwith deposit with the Bank
in cash a sum equal to 110% of the total of all then undrawn amounts of all
outstanding letters of credit issued by the Bank for the account of the
Borrower, such sum to be pledged to secure the Borrower’s reimbursement
obligations.

 

11.4         GAAP.

 

Except
as otherwise stated in this Agreement, all financial information provided to
the Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.

 

11.5         Governing Law.

 

This Agreement shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts.  To the extent that the
Bank has greater rights or remedies under federal law, whether as a national
bank or otherwise, this paragraph shall not be deemed to deprive the Bank of
such rights and remedies as may be available under federal law.

 

11.6         Successors and Assigns.

 

This Agreement is binding on
the Borrower’s and the Bank’s successors and assignees.  The Borrower agrees that it may not assign
this Agreement without the Bank’s prior consent.  The Bank may sell participations in or assign
this loan, and may exchange information about the Borrower or any Subsidiary
(including, without limitation, any information regarding any hazardous
substances) with actual or potential participants or assignees.  If a participation is sold or the loan is
assigned, the purchaser will have the right of set-off against the Borrower and
any Guarantor.

 

11.7         Dispute
Resolution Provision.

 

This
paragraph, including the subparagraphs below, is referred to as the “Dispute
Resolution Provision.”  This Dispute
Resolution Provision is a material inducement for the parties entering into
this agreement.

 

(a)                                  This Dispute Resolution
Provision concerns the resolution of any controversies or claims between the
parties, whether arising in contract, tort or by statute, including but not
limited to controversies or claims that arise out of or relate to: (i) this
agreement (including any renewals, extensions or modifications); or (ii) any
document related to this agreement (collectively a “Claim”).  For the purposes of this Dispute Resolution
Provision only, the term “parties” shall include any parent corporation,
subsidiary or 

 

25

 

affiliate of the Bank
involved in the servicing, management or administration of any obligation
described or evidenced by this agreement.

 

(b)                                 At the request of any party
to this agreement, any Claim shall be resolved by binding arbitration in
accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).  The Act will apply even though this agreement
provides that it is governed by the law of a specified state.

 

(c)                                  Arbitration proceedings will
be determined in accordance with the Act, the then-current rules and
procedures for the arbitration of financial services disputes of the American
Arbitration Association or any successor thereof (“AAA”), and the terms of this
Dispute Resolution Provision.  In the
event of any inconsistency, the terms of this Dispute Resolution Provision
shall control.  If AAA is unwilling or
unable to (i) serve as the provider of arbitration or (ii) enforce
any provision of this arbitration clause, the Bank may designate another
arbitration organization with similar procedures to serve as the provider of
arbitration.

 

(d)                                 The arbitration shall be
administered by AAA and conducted, unless otherwise required by law, in any
U.S. state where real or tangible personal property collateral for this credit
is located or if there is no such collateral, in the state specified in the
governing law section of this agreement. 
All Claims shall be determined by one arbitrator; however, if Claims
exceed Five Million Dollars ($5,000,000), upon the request of any party, the
Claims shall be decided by three arbitrators. 
All arbitration hearings shall commence within ninety (90) days of the
demand for arbitration and close within ninety (90) days of commencement and
the award of the arbitrator(s) shall be issued within thirty (30) days of
the close of the hearing.  However, the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional sixty (60) days.  The arbitrator(s) shall provide a
concise written statement of reasons for the award.  The arbitration award may be submitted to any
court having jurisdiction to be confirmed and have judgment entered and
enforced.

 

(e)                                  The arbitrator(s) will
give effect to statutes of limitation in determining any Claim and may dismiss
the arbitration on the basis that the Claim is barred. For purposes of the
application of any statutes of limitation, the service on AAA under applicable
AAA rules of a notice of Claim is the equivalent of the filing of a
lawsuit.  Any dispute concerning this
arbitration provision or whether a Claim is arbitrable shall be determined by
the arbitrator(s), except as set forth at subparagraph (h) of this Dispute
Resolution Provision.  The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this agreement.

 

(f)                                    This paragraph does not
limit the right of any party to: (i) exercise self-help remedies, such as
but not limited to, setoff; (ii) initiate judicial or non-judicial
foreclosure against any real or personal property collateral; (iii) exercise
any judicial or power of sale rights, or (iv) act in a court of law to
obtain an interim remedy, such as but not limited to, injunctive relief, writ
of possession or appointment of a receiver, or additional or supplementary
remedies.

 

26

 

(g)                                 The filing of a court action
is not intended to constitute a waiver of the right of any party, including the
suing party, thereafter to require submittal of the Claim to arbitration.

 

(h)                                 Any arbitration or trial by
a judge of any Claim will take place on an individual basis without resort to
any form of class or representative action (the “Class Action Waiver”).  Regardless of anything else in this Dispute
Resolution Provision, the validity and effect of the Class Action Waiver
may be determined only by a court and not by an arbitrator.  The parties to this Agreement acknowledge
that the Class Action Waiver is material and essential to the arbitration
of any disputes between the parties and is nonseverable from the agreement to
arbitrate Claims. If the Class Action Waiver is limited, voided or found
unenforceable, then the parties’ agreement to arbitrate shall be null and void
with respect to such proceeding, subject to the right to appeal the limitation or
invalidation of the Class Action Waiver. 
The Parties acknowledge and agree that
under no circumstances will a class action be arbitrated.

 

(i)                                     By agreeing to binding
arbitration, the parties irrevocably and voluntarily waive any right they may
have to a trial by jury in respect of any Claim.  Furthermore, without intending in any way to
limit this agreement to arbitrate, to the extent any Claim is not arbitrated,
the parties irrevocably and voluntarily waive any right they may have to a
trial by jury in respect of such Claim. 
This waiver of jury trial shall remain in effect even if the Class Action
Waiver is limited, voided or found unenforceable.  WHETHER THE CLAIM IS DECIDED BY ARBITRATION OR BY TRIAL BY A
JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS
THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY
LAW.

 

11.8         Severability; Waivers.

 

If
any part of this Agreement is not enforceable, the rest of the Agreement may be
enforced.  The Bank retains all rights,
even if it makes a loan after default. 
If the Bank waives a default, it may enforce a later default.  Any consent or waiver under this Agreement
must be in writing.

 

11.9         Attorneys’
Fees.

 

The
Obligors shall reimburse the Bank for any reasonable costs and attorneys’ fees
incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver, “workout”
or restructuring under this Agreement. 
In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys’ fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.  In the event that
any case is commenced by or against any Obligor under the Bankruptcy Code
(Title 11, United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys’ fees incurred by the Bank
related to the preservation, protection, or enforcement of any rights of the
Bank in such a case.  As used in this
paragraph, “attorneys’ fees” includes the allocated costs of the Bank’s
in-house counsel.

 

27

 

11.10       One Agreement.

 

This
Agreement and any related security or other agreements required by this
Agreement, collectively:

 

(a)                                  represent the sum of the
understandings and agreements between the Bank and the Borrower concerning this
credit;

 

(b)                                 replace any prior oral or
written agreements between the Bank and the Borrower concerning this credit;
and

 

(c)                                  are intended by the Bank and
the Borrower as the final, complete and exclusive statement of the terms agreed
to by them.

 

In
the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.  Any reference in any related document to a “promissory
note” or a “note” executed by the Borrower and dated as of the date of this
Agreement shall be deemed to refer to this Agreement, as now in effect or as
hereafter amended, renewed, or restated.

 

11.11       Indemnification.

 

The
Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and costs of any kind relating to or arising directly or
indirectly out of (a) this Agreement or any document required hereunder, (b) any
credit extended or committed by the Bank to the Borrower hereunder, and (c) any
litigation or proceeding related to or arising out of this Agreement, any such
document, or any such credit.  This
indemnity includes but is not limited to attorneys’ fees (including the
allocated cost of in-house counsel). 
This indemnity extends to the Bank, its parent, subsidiaries and all of
their directors, officers, employees, agents, successors, attorneys, and
assigns.  This indemnity will survive
repayment of the Borrower’s obligations to the Bank.  All sums due to the Bank hereunder shall be
obligations of the Borrower, due and payable immediately without demand.

 

11.12       Notices.

 

Unless otherwise provided in
this Agreement or in another agreement between the Bank and the Borrower, all
notices required under this Agreement shall be personally delivered or sent by
first class mail, postage prepaid, or by overnight courier, to the addresses on
the signature page of this Agreement, or sent by facsimile to the fax
numbers listed on the signature page, or to such other addresses as the Bank
and the Obligors may specify from time to time in writing.  Notices and other communications shall be
effective (i) if mailed, upon the earlier of receipt or five (5) days
after deposit in the U.S. mail, first class, postage prepaid, (ii) if
telecopied, when transmitted, or (iii) if hand-delivered, by courier or
otherwise (including telegram, lettergram or mailgram), when delivered.

 

28

 

11.13       Headings.

 

Article and
paragraph headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.

 

11.14       Counterparts.

 

This
Agreement may be executed in as many counterparts as necessary or convenient,
and by the different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts shall
constitute but one and the same agreement.

 

11.15       Obligor Information; Reporting to
Credit Bureaus.

 

The Obligors authorize the
Bank at any time to verify or check any information given by any Obligor to the
Bank, check the Obligors’ credit references, verify employment, and obtain
credit reports.  The Borrower agrees that
the Bank shall have the right at all times to disclose and report to credit
reporting agencies and credit rating agencies such information pertaining to
the Borrower and/or all guarantors as is consistent with the Bank’s policies
and practices from time to time in effect.

 

11.16       Limitation of Interest and Other
Charges.

 

If,
at any time, the rate of interest, together with all amounts which constitute
interest and which are reserved, charged or taken by the Bank as compensation
for fees, services or expenses incidental to the making, negotiating or
collection of the loan evidenced hereby, shall be deemed by any competent court
of law, governmental agency or tribunal to exceed the maximum rate of interest
permitted to be charged by the Bank to the Borrower under applicable law, then,
during such time as such rate of interest would be deemed excessive, that
portion of each sum paid attributable to that portion of such interest rate
that exceeds the maximum rate of interest so permitted shall be deemed a
voluntary prepayment of principal.  As
used herein, the term “applicable law” shall mean the law in effect as of the
date hereof; provided, however, that in the event there is a change in the law
which results in a higher permissible rate of interest, then this Agreement
shall be governed by such new law as of its effective date.

 

12.           DEFINED TERMS

 

In addition to terms defined
elsewhere in this Agreement, as used herein, the following terms have the
following respective meanings:

 

“Acquisition”  Any acquisition of all or substantially all
of the assets or over 80% of the equity interests of any Person or any division
thereof

 

“Affiliate”   Any Person which, directly or indirectly,
controls or is controlled by or is under common control with the Borrower; any
officer or director of the Borrower; any Person owning of record or
beneficially, directly or indirectly, 5% or more of any class of capital stock
of the Borrower or 5% or more of any class of capital stock or other equity
interest having voting power (under ordinary circumstances) of any of the other
Persons described above; and any member of the immediate family of any of the
foregoing.

 

“Alternate Base Rate”  The greater of (A) (i) the sum of
one-half of one percent (0.50%) per annum, plus (ii) the Federal
Funds Effective Rate or (B) the Prime Rate as in effect from time to time.

 

29

 

“Bank Certificate”   A certificate signed by an officer of the
Bank setting forth any additional amount required to be paid by the Borrower to
the Bank pursuant to §5.7 of this Agreement, which certificate shall be
submitted by the Bank to the Borrower in connection with each demand made at
any time by the Bank upon the Borrower with respect to any such additional
amount, and each such certificate shall, save for manifest error, constitute
preemptive evidence of claim by the Bank for all or any part of any additional
amount required to be paid by the Borrower may be made before and/or after the
end of the period to which such claim relates or during which such claim has
arisen and before and/or after any payment hereunder to which such claim
relates.  Each Bank Certificate shall set
forth in reasonable detail the basis for and the calculation of the claim to
which it relates.

 

“Capital Expenditures”  As to any Person for any period, the sum of
all amounts which would, in accordance with GAAP, be included as additions to
property, plant and equipment and other Capital Expenditures for such period,
including, without limitation, amounts with respect to capitalized leases.

 

“Capital Lease Obligations”   As to any person, the obligations of such
Person or any of its Subsidiaries to pay rent or other amounts under any lease
of (or other arrangement conveying the right to use) real or personal property,
or a combination thereof; to the extent such obligations are required to be
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP.  For purposes of this
Agreement, the amount of such obligations at any time shall be the capitalized
amount thereof at such time determined in accordance with GAAP.

 

“CERCLA” The Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42, U.S.C. Section 9601
et  seq., as amended by the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613.

 

“Debt Service”  For any period, the aggregate amount of
principal and premium, if any, and interest and fees paid or required to be
paid during such period in respect of all indebtedness for borrowed money of
the Borrower and its Subsidiaries.

 

“Default”  Any event or circumstance which, with the
passage of time or the giving of notice or both, could become an Event of
Default.

 

“Earnings Before Interest
and Taxes”  For any period, Net Income
for such period plus taxes
in respect of income and profits paid or accrued by the Borrower and its
Subsidiaries during such period and Interest Expense to the extent deducted in
calculating Net Income for such period.

 

“Equity Interests”  Any and all shares, interests, participations
or other equivalents (however designated) of capital stock, partnership
interests, member interests and any and all equivalent ownership interests in a
Person and any and all warrants, rights or options to purchase any of the
foregoing, other than equity interests or warrants, right or options issued in
connection with the exercise by a present or former employee, officer or
director under a stock incentive plan, stock option plan or other equity-based
compensation plan or arrangement.

 

“ERISA”  The Employee Retirement Income Security Act
of 1974, as amended.

 

“Federal Funds Effective
Rate”  For any day, a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such 

 

30

 

day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Bank from three Federal funds brokers of recognized standing selected by the
Bank.

 

“GAAP”  generally accepted accounting principles in
the United States as in effect from time to time consistently applied.

 

“Guarantors”  collectively, C.I.M Industries, Inc., a
New Hampshire corporation, RWA, Inc., a Massachusetts corporation, Chase
Facile, Inc., a Massachusetts corporation and Capital Services of New York, Inc.,
a New York corporation, each of which individually may be called a Guarantor.

 

“Impositions”  All present and future taxes, levies, duties,
impositions, deductions, charges and withholdings applicable to the Bank with
respect to any LIBOR Loan, excluding, however, any taxes imposed directly on
the Bank’s income and any franchise taxes imposed on it by the Jurisdiction
under the laws of which the Bank is organized or any political subdivision
thereof or where the Bank does business.

 

“Indebtedness”  All obligations of a Person, whether current
or long-term, senior or subordinated, which in accordance with GAAP would be
included as liabilities upon such Person’s balance sheet at the date as of
which indebtedness, is to be determined, and shall also include guaranties,
endorsements (other than for collection in the ordinary course of business) or
other arrangements whereby responsibility is assumed for the obligations of
others, whether by agreement to purchase or otherwise acquire the obligations
of others, including any agreement, contingent or otherwise, to furnish funds
through the purchase of goods, supplies or services for the purpose of payment
of the obligations of others.

 

“Interest Expense”  For any period, the aggregate amount of
interest paid or required to be paid during such period in respect of all
indebtedness of the Borrower and its Subsidiaries  (including imputed interest on Capital Lease
Obligations) and amortized debt discount for such period.

 

“LC Draw Obligation”  The Borrower’s obligation to reimburse the
Bank on account of any drawing under any Letter of Credit as provided in
§1.6(c).

 

“LC Exposure Amount”  At any time, the sum of (i) the
aggregate undrawn stated amount of all Letters of Credit outstanding at such
time, plus  (ii) the
aggregate amount of all drawings under Letters of Credit for which the Bank
shall not have received reimbursement by the Borrower as provided in §1.6(c).

 

“Loan Documents”  Each of this Agreement and each other
instrument, document or agreement evidencing, securing, guaranteeing or
relating in any way to any of the Loans, all whether now existing or hereafter
arising or entered into.

 

“London”  The City of London in England.

 

“Material Adverse Effect”  A material adverse effect on (a) the
business, property, operations or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, (b) the ability of any
Company to perform its obligations under the Loan Documents to which it is a
party, or (c) the validity or enforceability of this Agreement, the Notes,
the 

 

31

 

Guarantee, or, taken as a
whole, the other Loan Documents, or the rights or remedies of the Bank under
this Agreement, or, taken as whole, the other Loan Documents.

 

“Net Income” (or “Net Loss”)  The
book net income (or book net loss, as the case may be) of a Person for any
period, after all taxes actually paid or accrued and all expenses and other
charges determined in accordance with generally accepted accounting principles
consistently applied.

 

“Obligors”  Collectively, the Borrower and all Guarantors.

 

“Obligations”  All indebtedness, covenants, agreements,
liabilities and obligations, now existing or hereafter arising, made by the
Borrower with or for the benefit of the Bank or owed by the Borrower to the
Bank in any capacity.

 

“Operating Cash Flow”  For any period, Earnings Before Interest and
Taxes plus depreciation
and amortization for such period, minus
unfinanced Capital Expenditures, dividends and deferred compensation paid or
incurred during such period, and minus
any cash taxes paid.

 

“PBGC”  The Pension Benefit Guaranty Corporation or
any successor thereto.

 

“Person”  An individual, corporation, partnership,
limited partnership, limited liability company, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.

 

“Prime Rate”  That variable rate interest per annum
designated by the Bank, from time to time, as being its prime rate, it being
understood that such rate is merely a reference rate and does not necessarily
represent the lowest or best rate being charged to any customer.

 

“Subsidiary”  Any corporation or other entity of which a
Person and/or any of its Subsidiaries directly or indirectly, owns, or has the
right to control or direct the voting of fifty (50%) percent or more of the
outstanding capital stock or other ownership interest having general voting
power (under ordinary circumstances).

 

“Synthetic Leases”  Means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product where such transaction is considered borrowed money Indebtedness for
tax purposes but is classified as an operating lease under GAAP.

 

“Tangible Net Worth”  At the applicable date, the total assets of
the Borrower and its Subsidiaries minus
(a) the sum of any amounts attributable to (i) goodwill, (ii) intangible
items such as unamortized debt discount and expense, patents, trade and service
marks and names, copyrights and research and development expenses except
prepaid expenses, (iii) all reserves not already deducted from assets, (iv) any
write-up in the book value of assets resulting from any revaluation thereof
subsequent to the date hereof, and (v) the value of any minority interests
in any companies, and (b) Total Liabilities of the Borrower and its
Subsidiaries.

 

“Total Liabilities”  The aggregate amount of liability of a Person
determined in accordance with GAAP.

 

Any defined term used in the
plural preceded by the definite article shall be taken to encompass all members
of the relevant class. Any defined term used in the singular preceded by “any”
shall be taken to indicate any number of the members of the relevant
class.  All 

 

32

 

calculations contemplated by
financial terms used with respect to the Borrower and its Subsidiaries shall be
made on a consolidated basis, in accordance with GAAP and any other financial
definitions not otherwise defined herein shall have the meanings given to them
under GAAP.

 

33

 

The Borrower executed this Agreement as of the date
stated at the top of the first page, intending to create an instrument executed
under seal.

 

	
   

  	
  CHASE
  CORPORATION.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Typed
  Name

  	
   

  
	
   

  	
  Title

  	
   

  
					

 

 

	
  WITNESS

  	
   

  	
  Address
  where notices to the Borrower are to be sent:

  
	
   

  	
   

  
	
   

  	
  26
  Summer Street

  
	
   

  	
  Bridgewater
  MA 02324

  
	
   

  	
  Attn:

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
  Facsimile:

  	
   

  

 

34

 

	
   

  	
  BANK OF AMERICA, N.A

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Typed Name

  	
   

  
	
   

  	
  Title

  	
   

  
					

 

	
   

  	
  Address where notices to the Bank are to be sent:

  
	
   

  	
  100 Federal Street

  
	
   

  	
  Boston, MA 02110

  
	
   

  	
  Attn:  Peter
  McCarthy SVP

  
	
   

  	
  Mail Stop MA5-100-08-13

  
	
   

  	
  Facsimile: 617-434-1226

  

 

Federal law requires Bank of
America, N.A. (the “Bank”) to provide the following notice. The notices is not
part of the foregoing agreement or instrument and may not be altered.  Please read the notice carefully.

 

USA PATRIOT
ACT NOTICE

 

Federal
law requires all financial institutions to obtain, verify and record
information that identifies each person who opens an account or obtains a
loan.  The Bank will ask for the Borrower’s
legal name, address, tax ID number or social security number and other
identifying information.  The Bank may
also ask for additional information or documentation or take other actions
reasonably necessary to verify the identity of the Borrower, guarantors or
other related persons.

 

35

 

DISCLOSURE SCHEDULE

 

Item 9.1:

 

Item 9.2:

 

Item 9.3:

 

Item 9.7:

 

36

 

EXHIBIT 8.2

 

COVENANT COMPLIANCE CERTIFICATE

 

The undersigned, being the Chief Financial
Officer of Chase Corporation, do hereby certify to Bank of America, N.A. that,
to the best of the knowledge of the undersigned, after review of the Loan
Agreement (defined below) and appropriate inquiry, no Default or Event of
Default, as each such term is defined in the Loan Agreement dated September     
2009 (the “Loan Agreement”) has occurred and is continuing.  Without limiting the generality of the
foregoing, I hereby certify that, based upon such financial information which I
believe to be accurate, the Obligors are in compliance with the financial
covenants, all as set forth in Section 8.3 and 8.4 of the Loan
Agreement.  My calculations showing such
compliance are attached hereto.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  CHASE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  
	
   

  	
  Date:

  	
   

  
					

 

Show
Calculations:

 

37Exhibit 10.11.6

 

CHASE CORPORATION

2005 INCENTIVE PLAN

 

Stock Option
Agreement

 

Chase Corporation (the “Company”)
hereby grants to you (the “Optionee”) the following option (the “Option”)
to purchase Common Stock of the Company:

 

	
  Name of Optionee:

  	
   

  
	
   

  	
   

  
	
  Total Number of Shares Subject to
  this Option:

  	
   

  
	
   

  	
   

  
	
  Type of Option:

  	
   

  
	
   

  	
   

  
	
  Exercise Price per Share:

  	
   

  
	
   

  	
   

  
	
  Grant Date:

  	
   

  
	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  
	
   

  	
   

  
	
  Vesting Commencement Date:

  	
   

  
	
   

  	
   

  
	
  Number of Vested Shares on Grant
  Date:

  	
   

  
	
   

  	
   

  
	
  Vesting Period:

  	
   

  
	
   

  	
   

  
	
  Number of Shares Vesting at end of
  each 

  Vesting Period:

  	
   

  
	
   

  	
   

  
	
  Expiration Date:

  	
   

  

 

By your signature and the signature of the Company’s
representative below, you and the Company agree that this Option is granted
under and governed by the terms of the Chase Corporation 2005 Incentive Plan
(the “Plan”) and this Stock Option Agreement (this “Agreement”),
which includes the incorporated terms and conditions attached to and made a
part of this Agreement.  This Agreement
is an Award Agreement issued under the Plan.

 

	
  OPTIONEE

  	
   

  	
  CHASE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
   

  	
  By:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 

CHASE CORPORATION

 

Stock Option
Agreement

under the 2005 Incentive Plan

 

Incorporated Terms
and Conditions

 

1.             Grant of Option. On the terms and
conditions set forth in this Agreement, the Company grants to the Optionee on
the Grant Date this Option to purchase at the exercise price per share set
forth on the Signature Page of this Agreement the number of shares of the
Company’s Common Stock set forth on said Signature Page.  This Option is granted pursuant to and is
governed by Plan, the terms of which are incorporated into this Agreement by
this reference.  To the extent there is
any inconsistency between the terms of the Plan and this Agreement, the terms
of the Plan shall control.  Unless the
context otherwise requires, capitalized terms used herein without definitions
shall have the respective meanings assigned to them in the Plan.  By signing this Agreement, the Optionee
acknowledges receipt of a copy of the Plan.

 

2.             Type of Option.  This Option is intended to qualify either as
an ISO or an NQO, as set forth on the Signature Page of this
Agreement.  If this Option is intended to
qualify as an ISO, it is agreed that the Exercise Price is at least 100% of the
Fair Market Value per Share on the Grant Date (110% of Fair Market Value if Section 7.2
of the Plan applies).

 

3.             Exercisability Schedule.  The Optionee may exercise this Option for
such number of Shares as have become exercisable pursuant to the vesting
schedule set forth on the Signature Page of this Agreement.

 

4.             Exercise of Option. Prior to the Expiration
Date (or such earlier date as set forth in Section 5 below), the Optionee
may exercise this Option by delivering a Notice of Stock Option Exercise in the
form attached hereto as Exhibit A (the “Notice”), signed by
the Participant, and received by the Company at its principal office,
accompanied by this Agreement and payment in full in the manner provided in the
Plan.  The Participant may purchase less
than the number of shares covered hereby, provided that no partial exercise of
this option may be for any fractional share or for fewer than ten (10) whole
shares.  The Optionee (or any other
person entitled to exercise this Option) shall not be entitled to any rights as
a shareholder of the Company with respect to any Shares issuable upon exercise
of this Option until such Shares shall have been registered on the stock
transfer books of the Company in the name of the Optionee (or such other
person).

 

5.             Exercise of Option After Termination
of Employment.

 

(a)           Termination of service.  Except as otherwise determined by the Board,
or as may otherwise be expressly provided in any employment agreement between
the Company and the Optionee, upon the termination of the service of the
Optionee to the Company (or to an affiliate), this Option shall expire on the
earliest of the following occasions:

 

(i)            the date that is [   ] after the voluntary termination
of the Optionee’s service or the termination of the Optionee’s service by the
Company (or by an affiliate) other than for cause;

 

 

(ii)           the date of the termination of the
Optionee’s service by the Company (or by an Affiliate) for cause;

 

(iii)          the date [one year]
after the termination of the Optionee’s service by reason of Disability or
death;

 

(v)           the specified expiration date of the
Option, as set forth on the Signature Page.

 

Any portion of this Option that is not exercisable on
the date of termination of the Optionee’s service with the Company, for any
reason, shall terminate immediately and be null and void and of no further
force and effect.

 

6.             Notice of Premature Disposition.  If this Option is intended to qualify as an
ISO, as provided on the Signature Page of this Agreement, then if, within (2) two
years from the Grant Date or within one (1) year after the issuance of
Shares to the Optionee upon exercise of this Option, the Optionee makes a
disposition (as defined in Section 424(c) of the Code) of any Shares,
the Optionee shall notify the Treasurer of the Company within ten (10) days
after such disposition.

 

7.             Restrictions on Transfer.  The Optionee shall not sell, assign,
transfer, pledge, hypothecate or otherwise dispose of, by operation of law or
otherwise except by will or the laws of descent and distribution, and during
the lifetime of the Participant, this Option shall be exercisable only by the
Participant.

 

8.             Withholding.  No Shares shall be issued pursuant to the
exercise of this Option unless and until the Participant pays to the Company or
makes provision satisfactory to the Company for payment of any federal, state
or local withholding taxes required by law to be withheld in respect of this
Option.

 

9.             Amendment. The Board may at any
time or times amend the Plan or this Agreement for the purpose of satisfying
the requirements of any changes in applicable laws or regulations or for any
other purpose which at the time may be permitted by law.  No termination, amendment of the Plan or
amendment of this Agreement shall, without the Optionee’s consent, materially
adversely affect the Optionee’s rights under this Agreement.

 

10.           Notices. 
All notices, requests, consents and other communications shall be
in writing and be deemed given when delivered personally, by telex or facsimile
transmission or when received if mailed by first class registered or certified
mail, postage prepaid.  Notices to the
Company or the Optionee shall be addressed as set forth underneath their
signatures below, or to such other address or addresses as may have been
furnished by such party in writing to the other.

 

11.           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to conflict of law principles.

 

12.           Counterparts.  For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.

 

 

Exhibit A

 

NOTICE OF STOCK OPTION
EXERCISE

 

	
   

  	
   

  	
  [DATE]

  

 

[   ]

[INSERT ADDRESS]

Attention: 
Treasurer

 

Dear Sir or Madam

 

Pursuant to the terms of the
stock option agreement between myself and Chase Corporation (the “Company”)
dated                 
(the “Agreement”), under the Company’s 2005 Incentive Plan, I, [Insert Name]                                    ,
hereby [Circle One] partially/fully exercise such Option by including herein
payment in the amount of $                    
representing the purchase price for [Fill in number of Underlying Shares]                
Shares.  I have chosen the following form(s) of
payment:

 

	
  [ ]

  	
   

  	
  1.

  	
   

  	
  Cash

  
	
  [ ]

  	
   

  	
  2.

  	
   

  	
  Certified or bank check payable to [   ]

  
	
  [ ]

  	
   

  	
  3.

  	
   

  	
  Other (as described in the Plan (please describe))

  
	
   

  	
   

  	
   

  	
   

  	
                                                                                                                         .

  

 

In connection with my
exercise of the Option as set forth above, I hereby represent and warrant to
the Company as follows:

 

(i)            I am purchasing
the Shares for my own account for investment only, and not with a view to, or
for sale in connection with, any distribution of the Shares in violation of the
Securities Act, or any rule or regulation under the Securities Act.

 

(ii)           I have had such
an opportunity as I have deemed adequate to obtain from the Company such
information as is necessary to permit me to evaluate the merits and risks of my
investment in the Company and have consulted with my own advisers with respect
to my investment in the Company.

 

(iii)          I have
sufficient experience in business, financial and investment matters to be able
to evaluate the risks involved in the purchase of the Shares and to make an
informed investment decision with respect to such purchase.

 

(iv)          I can afford a
complete loss of the value of the Shares and am able to bear the economic risk
of holding such Option Shares for an indefinite period of time.

 

(v)           I understand
that the Shares have not be registered under the Securities Act (it being
understood that the Shares are being issued and sold in reliance on the
exemption provided in Rule 701 thereunder) or any applicable state
securities or “blue sky” laws and may not be sold or otherwise transferred or
disposed of in the absence of an effective registration statement under the
Securities Act of 1933 and under any applicable state securities or “blue sky”
laws (or 

 

 

exemptions
from the registration requirements thereof). 
I further acknowledge that certificates representing Shares will bear
restrictive legends reflecting the foregoing.

 

(vi)          I understand
and agree that the Shares when issued will continue to be subject to the Plan.

 

	
   

  	
  Sincerely yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
   

  
	
   

  	
  Address:

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