Document:

<PAGE>

                                                                   Exhibit 10.43

                              SETTLEMENT AGREEMENT

This Settlement Agreement (the "Agreement") is entered into this day of October,
2000, between MFIC Corporation, a Delaware corporation having its principal
offices at 30 Ossipee Road, Newton, Massachusetts 02464 ("MFIC"), and J.M. Huber
Corporation, a New Jersey corporation having its principal offices at 333
Thornall Street, Edison, New Jersey 08837, together with its Engineered
Materials Division having its principal offices at 4401 Northside Parkway, Suite
600, Atlanta, Georgia 30327 ("HUBER").

WHEREAS, MFIC commenced an action against HUBER in the United States District
Court for the District of Massachusetts, Civil Action No. 00-CV-11437-EFH, (the
"MFIC Case"); and

WHEREAS, HUBER commenced an action against MFIC and Epworth Manufacturing
Company ("Epworth") in the Superior Court of Gordon County, Georgia, Civil
Action No. 2000-CV-37580, which MFIC removed to the United States District Court
for the Northern District of Georgia, Rome Division, Civil Action No.
4:00-CV-279-HLM (the "HUBER Case"); and

WHEREAS, both the MFIC Case and the HUBER Case relate to the sale of seven (7)
Zinger(R) horizontal media mills purchased by HUBER from Epworth, now the
Epworth Mill Division of MFIC Corporation, together with all spare parts,
equipment, accessories, gauges, and accessions (collectively referred to
hereinafter as the "Equipment"); and

WHEREAS, MFIC and HUBER wish to fully and finally settle and terminate all
suits, causes of action, cases and controversy concerning the sale of the
Equipment to HUBER.

NOW THEREFORE, in consideration of the mutual covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which both
parties mutually acknowledge, MFIC and HUBER agree as follows:

1. MFIC shall pay the sum of one hundred thousand dollars ($100,000) to HUBER
upon execution of this Agreement.

2. Upon execution of this Agreement, MFIC shall execute a term purchase money
promissory note in the form annexed hereto as Exhibit A (the "Note") and loan
and security agreement in the form annexed hereto as Exhibit B (the "Security
Agreement"). The Note is in the face amount of $350,000 payable to the order of
HUBER and bears interest at a rate of ten percent (10%) per annum, payable
quarterly in arrears. The Note has a principal maturity date two (2) years from
the execution of this Agreement. Up to and including February 28, 2001 (the
"Prepayment Date"), MFIC may prepay the Note and discharge all obligations
thereunder by tendering the sum of three hundred thousand dollars ($300,000)
plus accrued and unpaid interest outstanding under the Note. The Security
Agreement is a purchase money security agreement on the Equipment, which MFIC
will repurchase from HUBER pursuant to this Agreement.

3. Simultaneously with the execution of this Agreement, HUBER shall:
<PAGE>

     A. Execute the Mutual Cross Releases in the form as attached hereto as
     EXHIBIT C, releasing to the fullest extent permitted by law, but subject to
     the express obligations of this Agreement and Exhibits A through C hereof,
     any and all claims, and/or causes of action against MFIC and Epworth
     arising out of or relating to the purchase and use of the Equipment by
     HUBER; and

     B. Execute the Stipulation of Dismissal in the form annexed hereto as
     Exhibit D or in such other form as may be required by the Court in order to
     terminate, with prejudice, the HUBER Case; and

     C. Execute a bill of sale for the Equipment to transfer all of its right,
     title and interest free and clear of any liens, claims, charges or other
     encumbrances and ship to MFIC (at MFIC's direction and expense) the
     Equipment for reconditioning and resale by MFIC. HUBER shall retain a
     purchase money security interest in the Equipment or any portion thereof
     until resale of such Equipment, or any portion thereof, by MFIC.

4. Simultaneously with the execution of this Agreement, MFIC shall:

     A. Execute the Mutual Cross Releases in the form as attached hereto as
     EXHIBIT C, releasing to the fullest extent permitted by law, but subject to
     the express obligations of this Agreement and Exhibits A through C hereof,
     any and all claims, and/or causes of action against HUBER arising out of or
     relating to the purchase and use of the Equipment by HUBER; and

     B. Execute the Stipulation of Dismissal in the form annexed hereto as
     Exhibit E or in such other form as may be required by the Court in order to
     terminate, with prejudice, the MFIC Case.

5. The parties further covenant and agree as follows:

     A. Upon receipt of the Equipment pursuant to paragraph 3(C) hereof, MFIC
     shall recondition the Equipment in a manner reasonably necessary to prepare
     the Equipment for sale to a third party.

     B. MFIC hereby covenants and agrees to make reasonable efforts to sell the
     Equipment to a third party in an arms-length transaction, upon commercially
     reasonable terms and conditions.

     C. HUBER warrants and represents to MFIC that HUBER has good and marketable
     title to the Equipment free and clear of any liens, claims, charges or
     other encumbrances.

6. This Settlement Agreement shall be binding upon the parties and their
respective successors or assigns.

7. The terms and provisions of this Agreement are contractual and not merely a
recital. This Agreement is voluntarily entered into and is not based, in whole
or in part, upon any

                                       2
<PAGE>

representation or statement of any kind not contained herein by any party hereto
or such party's respective attorneys or representatives, oral or otherwise, as
to the merit, legal validity, or value of any claim, demand, right, entitlement,
action or cause of action of any of the parties hereto or as to any other matter
whatsoever. Each party agrees with or warrants to the other: (a) that the
covenants, agreements and/or payments provided for herein, constitute good and
sufficient consideration for the covenants, agreements and/or payments made or
received by it; (b) that is it duly authorized to execute this Agreement; (c)
that is has not heretofore assigned to any other individual or entity of any
kind all or any portion of any claims released by it hereunder; and (d) that
this Agreement is a full, fair, arms-length, final and complete accord,
satisfaction and settlement of all matters contained herein, including all
claims that were asserted or could have been asserted in the MFIC Case or the
HUBER Case. The parties further acknowledge and agree that the wording in this
Agreement is the product of joint cooperation, collaboration, and negotiation
between the parties and their respective legal counsel.

8. This Agreement constitutes the entire agreement between the parties with
respect to the subject matter of the Agreement and there are no understandings
or agreements or representations relative to the Agreement which are not fully
expressed in the Agreement.

9. This Agreement may be executed in a number of counterparts, each of which
shall be deemed to be an original, and all of which taken together shall
comprise but a single instrument.

10. Should any provision of this Agreement be invalid or unenforceable for any
reason, the remaining provisions hereof shall remain of full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement under seal by their
duly authorized representative, as of the date and year first written above.

MFIC CORPORATION

<TABLE>
<S>                                                                    <C>
By:__________________________________________________                  Attest:_____________________________________

Name:________________________________________________                  Name:_______________________________________

Title:_______________________________________________                  Title:______________________________________
                                                                                           [Corporate Seal]
</TABLE>

                                       3
<PAGE>

J.M. HUBER CORPORATION

<TABLE>
<S>                                                                    <C>
By:__________________________________________________                  Attest:_____________________________________

Name:________________________________________________                  Name:_______________________________________

Title:_______________________________________________                  Title:______________________________________
                                                                                           [Corporate Seal]
</TABLE>

                                       4
<PAGE>

EXHIBIT A

                         PURCHASE MONEY PROMISSORY NOTE

$350,000                                                   October ____, 2000
                                                           Boston, Massachusetts

FOR VALUE RECEIVED, the undersigned promises to pay to the order of J.M. HUBER
CORPORATION ("CREDITOR"), a New Jersey Corporation with its principal place of
business in Edison, New Jersey, the principal sum of THREE HUNDRED AND FIFTY
THOUSAND DOLLARS ($350,000), with interest thereon, or on such part thereof as
shall from time to time remain unpaid, from the date of this promissory note
(the "Note") until paid, at the rate set forth below, payable as follows:

         Interest shall be payable on the unpaid principal balance hereunder at
a rate of ten percent (10%) per annum. Interest shall be compounded annually,
and shall be calculated based on a 360-day year of twelve 30-day months.
Payments of accrued interest shall be paid quarterly in arrears, commencing on
December 31, 2000 or, if such date falls on a non-business day, on the next
business day thereafter.

         Up to and including February 28, 2001 (the "Prepayment Date"), MFIC may
prepay this Note and discharge all obligations hereunder including all principal
and interest whether accrued or unpaid or not, by tendering the sum of three
hundred thousand dollars ($300,000), whether paid in one or more installments,
plus accrued and unpaid interest outstanding on this Note (in the aggregate the
"Prepayment Amount"). Upon receipt by CREDITOR of the full Prepayment Amount on
or before the Prepayment Date, CREDITOR shall mark the Note paid in full and
return it to MFIC.

         All outstanding principal and interest shall be due and payable on the
two year anniversary of this Note. Payments shall be made to CREDITOR at its
principal place of business and shall be deemed made by placing such payment in
any form of traceable overnight delivery or by wire transfer.

         This Note is subject to and secured by the terms of that certain Loan
and Security Agreement dated as of even date herewith between the undersigned
and the CREDITOR (hereinafter, as it may be amended or supplemented from time to
time, called the "Security Agreement").

         The undersigned agrees to pay all costs and expenses, including all
attorneys' fees in connection with the collection of this Note upon default. The
undersigned shall pay to CREDITOR a late charge of five (5%) percent of any
payment of interest not paid to CREDITOR within three (3) business days after
receipt by the undersigned of written notice sent by CREDITOR to the
undersigned, by any form of traceable delivery whether by United States mail or
any private delivery service, to the effect that said payment was not received
by CREDITOR when due.
<PAGE>

         At the option of CREDITOR, the Note shall become immediately due and
payable in full without notice or demand upon the occurrence at any time of an
"Event of Default" under the Security Agreement or any of the following events:
(1) default in any payment of interest due hereunder, and the continuation of
such default for three (3) business days after receipt by the undersigned of
written notice of such default sent by CREDITOR to the undersigned by any form
of traceable delivery, whether by United States mail or any private delivery
service; (2) the liquidation, termination or dissolution of the undersigned; (3)
any levy, seizure or attachment of any of the undersigned's property; or (4) if
the undersigned, shall: (i) cease generally to pay its obligations as they
become due, or be unable, or admit in writing its inability to pay its debts as
they mature, or make a general assignment for the benefit of, or enter into any
composition, trust mortgage or other arrangement with creditors; (ii) apply for,
or consent (by admission of material allegations of a petition or otherwise) to
the appointment of a receiver, trustee or liquidator of the undersigned, or of a
substantial part of its assets, or authorize such application or consent, or
proceedings seeking such appointment shall be commenced against the undersigned,
and continue undismissed for sixty (60) days; or (iii) apply for, or consent (by
admission of material allegations of a petition or otherwise) to the application
of any bankruptcy, reorganization, readjustment of debt, insolvency,
dissolution, liquidation or other similar law of insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorize such
application or consent, or proceedings to such and shall be instituted against
the undersigned, and remain unstayed or undismissed for sixty (60) days, be
approved as properly instituted or result in adjudication of bankruptcy or
insolvency.

         The undersigned hereby: (1) waives presentment, demand, protest and
notices of every kind and description (other than any notice of default in
payment as herein provided); (2) waives any defenses based upon, and
specifically assents to, any and all extensions and postponements of the time of
payment and all other indulgences and forbearances which may be granted by the
holder to the undersigned; and (3) agrees to be bound by all other terms
contained in this Note.

         No delay or omission on the part of CREDITOR in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
CREDITOR, nor shall any delay, omission or waiver on any one occasion be deemed
a bar to or waiver of the same or any other right on any future occasion.

         No single or partial exercise of any power hereunder shall preclude
other or future exercise thereof or the exercise of any other power.

Signed in the presence of:                                MFIC CORPORATION

<TABLE>
<S>                                                       <C>
____________________________________________              By:______________________________

                                                          Name:____________________________

                                                          Title:___________________________
</TABLE>

                                       2
<PAGE>

EXHIBIT C

                              MUTUAL CROSS RELEASES

         This MUTUAL CROSS RELEASE AGREEMENT (the "Release") is made as of
October ____, 2000, by and between MFIC Corporation ("MFIC"), a Delaware
corporation, and J.M. HUBER Corporation ("HUBER"), a New Jersey corporation.

         WHEREAS, except for the obligations contained in a Settlement Agreement
of even date herewith, HUBER and MFIC wish to settle all claims between HUBER
and MFIC arising out of or relating to the purchase and use of the Equipment (as
"Equipment" is defined in the Settlement Agreement of even date herewith;
hereinafter the "Equipment") including all pending litigation.

         NOW THEREFORE, for good and valuable consideration and the mutual
payment of one dollar, the receipt of which is hereby acknowledged, the parties
agree as follows:

         1. Release of HUBER. MFIC, together with any of its subsidiaries or
divisions, hereby jointly and severally remise, release and forever discharge
HUBER and its representatives, successors, assigns, and all persons acting
through, by or in concert with it from any and all debts, demands, actions,
torts, breaches, causes of action, suits, accounts, covenants, agreements,
contingencies, promises, understandings, damages, expenses, compensation, claims
or liabilities that any of the releasors now has, may have or ever had, whether
in law or in equity, or whether known or unknown, from the beginning of the
world to the date hereof arising out of or relating to the purchase and use of
the Equipment by HUBER, including but not limited to, any claim relating to,
arising out of or that could have been made in either J.M. Huber Corporation v.
MFIC Corporation and Epworth Manufacturing Company, a/k/a Epworth
Morehouse-COWLES, a/k/a Lake Shore Industries, Inc., Civil Action No.
4:00-CV-279-HLM, pending in the United States District Court for the Northern
District of Georgia, Rome Division, or MFIC Corporation v. J. M. Huber
Corporation , Civil Action No. 00-CV-11437-EFH, pending in the United States
District Court for the District of Massachusetts. MFIC acknowledges that
subsequent to the date of this Release, it may determine that it has incurred or
suffered loss, damage, or injuries related to the releases herein given, but
which were unknown or unanticipated at the time this Release was executed. MFIC
assumes the risk that the releases contained herein shall apply to all unknown
and unanticipated results arising from or related to the releases herein given,
as well as to results known and anticipated, and has so acted upon the advice of
legal counsel. Notwithstanding anything in this Release to the contrary, there
shall be no release of the covenants terms and conditions of the Settlement
Agreement of even date herewith, including without limitation Exhibits A through
C thereof.

         2. Release of MFIC, Epworth and Lakeshore. HUBER, together with any of
its subsidiaries or divisions, hereby jointly and severally remise, release and
forever discharge MFIC, Epworth Manufacturing Company, Epworth Morehouse-COWLES,
and Lake Shore Industries, Inc. and their representatives, successors, assigns,
and all persons acting through, by or in concert with them from any and all
debts, demands, actions, torts, breaches, causes of action, suits, accounts,
covenants, agreements, contingencies, promises, understandings,
<PAGE>

damages, expenses, compensation, claims or liabilities that any of the releasors
now has, may have or ever had, whether in law or in equity, or whether known or
unknown, from the beginning of the world to the date hereof arising out of or
relating to the purchase and use of the Equipment by HUBER, including but not
limited to, any claim relating to, arising out of or that could have been made
in either J.M. Huber Corporation v. MFIC Corporation and Epworth Manufacturing
Company, a/k/a Epworth Morehouse-COWLES, a/k/a Lake Shore Industries, Inc.,
Civil Action No. 4:00-CV-279-HLM, pending in the United States District Court
for the Northern District of Georgia, Rome Division, or MFIC Corporation v.
J.M. Huber Corporation , Civil Action No. 00-CV-11437-EFH, pending in the United
States District Court for the District of Massachusetts. HUBER acknowledges that
subsequent to the date of this Release, it may determine that it has incurred or
suffered loss, damage, or injuries related to the releases herein given, but
which were unknown or unanticipated at the time this Release was executed. HUBER
assumes the risk that the releases contained herein shall apply to all unknown
and unanticipated results arising from or related to the releases herein given,
as well as to results known and anticipated, and has so acted upon the advice of
legal counsel. Notwithstanding anything in this Release to the contrary, there
shall be no release of: (i) the covenants, terms and conditions of the
Settlement Agreement of even date herewith, including without limitation
Exhibits A through C thereof; or (ii) any claim over by Huber against MFIC for
any debts, demands, actions, torts, breaches, causes of action, suits, accounts,
covenants, agreements, contingencies, promises, understandings, damages,
expenses, compensation, claims or liabilities asserted by a third party against
Huber arising out of or relating to the resale of the Equipment by MFIC.

         3. Valid Consideration. The parties hereto warrant, represent and
acknowledge that this Release is executed and delivered by the parties hereto
for adequate consideration and value and is valid, binding and enforceable in
accordance with its terms.

         4. No Duress. The parties hereto warrant, represent and acknowledge
that they have executed and delivered this Release without any duress or
wrongful pressure whatsoever imposed by any party hereto or by any other person
or entity acting on behalf of or in concert with any party hereto or by any
independent third party, and that this Release has been executed as the free act
and deed of the parties hereto.

         5. No Alienation of Claims. The parties hereto warrant and represent to
one another that they have not granted or purported to grant to any other person
or entity any interest whatsoever in any claim, action or cause of action
released herein, as security or otherwise, and that their execution hereof does
not require the consent of or notice to any third party in order to be fully
effective as to any claim, action or cause of action that may have existed in
favor of them at any time.

         6. Effective Date. The effective date (the "Effective Date") shall be
the date as of which all parties hereto have executed and delivered this
Release. This Release shall not be enforceable against any party prior to the
Effective Date.

         7. Entire Agreement. The parties hereto acknowledge, warrant and
represent that the effect of this Release is not subject to any condition that
has not been satisfied fully and completely as of its Effective Date and that
there are no other agreements between the parties

                                       2
<PAGE>

hereto, either oral or in writing, that impair the scope of this Release or its
validity, binding effect or enforceability in any respect whatsoever, other than
the Settlement Agreement between the parties dated as of the date hereof. This
release is intended to be broadly construed to effect the purposes and intent of
the parties hereto.

         8. Amendment and Waiver. No provisions hereof may be amended or waived
other than by written document executed and delivered by the parties hereto.

         9. No Admission. It is expressly understood and agreed by all parties
hereto that this Release is entered into for the purpose of avoiding litigation,
and the request of the parties hereto that one another execute this Release does
not constitute an admission by the parties hereto of the existence of any claim,
action, cause of action or defense on behalf of the parties hereto or any other
person or entity.

         10. Admissibility of Release. This Release may be pleaded in any action
or other proceeding which may be brought, instituted or taken in connection with
the matters addressed herein, by one party hereto against the other person or
entity.

         11. Assignment. This Release shall be binding upon the heirs,
successors and assigns of the parties hereto and shall inure to the benefit of
the heirs, successors and assigns of the parties hereto.

         12. Severability. Should any provision of this Release be invalid or
unenforceable for any reason, the remaining provisions hereof shall remain of
full force and effect.

         13. Counterparts. This Release may be executed in one or more
counterparts and each such counterpart shall constitute an original.

         IN WITNESS WHEREOF, the parties have executed this Agreement under seal
by their duly authorized representative, as of the date and year first written
above.

MFIC CORPORATION

<TABLE>
<S>                                                                    <C>
By:__________________________________________________                  Attest:_____________________________________

Name:________________________________________________                  Name:_______________________________________

Title:_______________________________________________                  Title:______________________________________
                                                                                           [Corporate Seal]
</TABLE>

                                       3
<PAGE>

J.M. HUBER CORPORATION

<TABLE>
<S>                                                                    <C>
By:__________________________________________________                  Attest:_____________________________________

Name:________________________________________________                  Name:_______________________________________

Title:_______________________________________________                  Title:______________________________________
                                                                                           [Corporate Seal]
</TABLE>

                                       4
<PAGE>

EXHIBIT D

                          UNITED STATES DISTRICT COURT
                                     for the
                          NORTHERN DISTRICT OF GEORGIA
                                  ROME DIVISION

------------------------------------
J.M. HUBER CORPORATION,             )
                                    )
Plaintiff,                          )
                                    )        Civil Action No. 4:00-CV-279-HLM
v.                                  )
                                    )
MFIC CORPORATION, et al.            )
                                    )
Defendants.                         )
------------------------------------)

                       VOLUNTARY STIPULATION OF DISMISSAL

   Pursuant to Fed. R. Civ. P. Rule 41(a)(1), the parties in the above-captioned
action hereby stipulate to the voluntary dismissal of all claims and
counterclaims with prejudice and without costs to any party.

<TABLE>
<S>                                                         <C>
MFIC Corporation                                            J. M. Huber Corporation
By its attorneys,                                           By its attorneys,

_________________________________________                   __________________________________________
Leslie A. Allen, Georgia Bar No. 011150                     William B. B. Smith Georgia Bar No. 664637
Joseph R. Manning, Georgia Bar No. 469600                   Mark R. Bridwell Georgia Bar No. 081601
Morris, Manning & Martin, LLP                               Jones, Day, Reavis & Pogue
1600 Atlanta Financial Center                               3500 SunTrust Plaza
3343 Peachtree Road, N.E.                                   303 Peachtree Street
Atlanta, GA  30326                                          Atlanta, GA  30308-3242
(404) 233-7000                                              (404) 521-3939
</TABLE>

Dated: October  , 2000
<PAGE>

Exhibit E

                          UNITED STATES DISTRICT COURT
                                     for the
                            DISTRICT OF MASSACHUSETTS

------------------------------------
                                    )
MFIC CORPORATION,                   )
                                    )
Plaintiff,                          )
                                    )        Civil Action No. 00-CV-11437-EFH
v.                                  )
                                    )
J.M. HUBER CORPORATION,             )
                                    )
Defendant.                          )
------------------------------------)

                       VOLUNTARY STIPULATION OF DISMISSAL

   Pursuant to Fed. R. Civ. P. Rule 41(a)(1), the parties in the above-captioned
action hereby stipulate to the voluntary dismissal of all claims and
counterclaims with prejudice and without costs to any party.

<TABLE>
<S>                                                    <C>
J. M. Huber Corporation                                MFIC Corporation
By its attorneys,                                      By its attorneys,

________________________________                       ____________________________________
William B. B. Smith                                    William A. Zucker, Esq., BBO #541240
Georgia Bar No. 664637                                 Gadsby Hannah LLP
Mark R. Bridwell                                       225 Franklin Street
Georgia Bar No. 081601                                 Boston, MA  02110
Jones, Day, Reavis & Pogue                             (617) 345-7000
3500 SunTrust Plaza
303 Peachtree Street
Atlanta, GA  30308-3242
(404) 521-3939
</TABLE>

Dated: October  , 2000<PAGE>

                                                                   Exhibit 10.44

                        SEPARATION AGREEMENT AND RELEASE

         It is hereby agreed by and between Michael A. Lento of 12 Sherman Road,
Melrose, MA 02176, ("Mr. Lento") and MFIC Corporation, a Delaware corporation,
together with its Microfluidics Corporation subsidiary, Epworth Mill and
Morehouse-COWLES operating divisions, (collectively the "Company"), for good and
sufficient consideration more fully described below, that:

         1. Employment Status. Effective as of November 30, 2000 (the
"Termination Date"), Mr. Lento was terminated from employment with the Company
and has resigned any officer position(s) he holds or has held with the Company,
as evidenced by his execution of the resignation(s) attached as Exh. 1. As of
such Termination Date, Mr. Lento's salary ceased and any entitlement he has or
might have under any Company provided benefit program terminated except as
required by federal or state law or as otherwise described below.

         2. Consideration.

         (A) Post-Termination Separation Compensation.

         (i) For a period commencing as of November 30, 2000 and continuing
through February 28, 2001 (the "Severance Period"), the Company shall pay to Mr.
Lento a bi-weekly gross amount of Five Thousand One Hundred Fifty Three Dollars
and Eighty Five Cents ($5,153.85) ("Bi-Weekly Severance Payment") for a total of
Thirty Two Thousand Nine Hundred Eighty Four Dollars and Sixty Four Cents
$32,984.64 (collectively, the "Severance Payment"). The first such Bi-Weekly
Severance Payment is to be made on the first regularly scheduled payday
immediately after the expiration of the Revocation Period in para. 20.

         (ii) In addition, Mr. Lento shall be paid Five Thousand ($5,000)
Dollars immediately after the expiration of the Revocation Period in para. 20.

         (iii) All payments set forth in this clause (A) of Section 2 shall be
made in accordance with the Company's normal payroll practices and are subject
to all applicable (if any) federal, state, and/or local withholding, payroll and
other taxes.

         (B) Bonus Compensation. Mr. Lento shall be entitled to receive 100% of
any bonus compensation due him pursuant to the Bonus Compensation Plan between
the Company and Mr. Lento dated February 2, 2000 (the "Bonus Comp Plan"),
attached hereto as Exh. 2. As provided in the Bonus Comp Plan, such bonus, if
any, shall be calculated and payable only after the earlier to occur of: (i) the
availability of the calendar year 2000 audited financial statements of MFIC
Corporation, or (ii) ninety (90) days after the end of the Company's fiscal
year, ended December 31, 2000.

         (C) Stock Options. Mr. Lento holds certain "Qualified Stock Options" to
purchase the Company's Common Stock issued pursuant to the Company's 1988 Stock
Option Plan (the "Qualified Option Plan"), as identified in Exh. 3. The Company,
its Board of Directors, and the Administrator under the Qualified Option Plan
agree or shall agree that Mr. Lento's termination date solely for purposes of
vesting of stock options will be extend to January 3, 2001. To accomplish this,
Mr. Lento's acknowledges and agrees that the Administrator of the
<PAGE>

Company's Qualified Option Plan may, pursuant to Section 13 thereof, reclassify
such options from "qualified" under the Qualified Option Plan to "non-qualified"
options if acceleration of vesting or continuation of vesting after the
Termination Date would or may adversely impact or endanger the tax "qualified"
status of the Company's Qualified Option Plan. Mr. Lento may execute any such
vested options on a "net" basis, i.e. in a cashless exercise.

         3. Insurance and Other Benefits.

         (A) Group Health and Dental Coverage. Mr. Lento shall be continued on
the Company group health insurance plan at the same contribution rate until the
end of the Severance Period. Thereafter, Mr. Lento may continue receiving group
medical coverage at his own expense as provided by federal COBRA law, provided
that Mr. Lento elects, within the established COBRA guidelines, COBRA
continuation. Eligibility to continue this insurance under COBRA ceases upon the
termination of any period allowed by law.

         (B) Life Insurance Coverage. The Company shall continue to provide Mr.
Lento with the existing group life insurance at the same contribution rate until
the Termination Date. After that date, Mr. Lento may apply to convert the
existing group life insurance to an individual policy at his own expense.

         (C) Disability Insurance. Disability insurance will cease as of the
Termination Date, and there is no right of individual conversion.

         (D) Retirement Plans. Mr. Lento shall be entitled to his vested benefit
in the Company's 401(k) plan as determined by the plan provisions. Service
credit will cease as of the Termination Date, and he may not make further
contributions or salary reduce after the Termination Date.

         (E) Vacation Pay. Mr. Lento has received full payment for all accrued
unused vacation as of the Termination Date.

         (F) Cessation of Benefits. Unless otherwise provided for expressly in
this Agreement, all other benefits have ceased as of the Termination Date,
including without limitation, the accrual of vacation time.

         4. Return of Property. Mr. Lento has returned or shall return all
papers, files, documents, computers, reference guides, equipment, keys,
identification, credit cards, software, computer access codes, disks and
institutional manuals, or other property belonging to the Company on or before
the Termination Date. Mr. Lento shall not retain any copies, duplicates,
reproductions or excerpts thereof.

         5. Nondisclosure of Confidential Information. Mr. Lento agrees not to
use to his own advantage or to disclose to any person or entity any confidential
information of the Company or of any past or present customer of the Company,
vendor, subcontractor or supplier of the Company, including but not limited to
financial data or projections, customer lists, projects, economic information,
pricing, systems, plans, methods, procedures, operations, techniques, know-how,
trade secrets or merchandising or marketing strategies. Mr. Lento reaffirms and
shall adhere to his obligations, in their entirety, to protect and to refrain
from disclosing the Company's confidential information, trade secrets, and
customer relationships as

                                       2
<PAGE>

such obligations and restrictions are set forth in the Invention, Assignment and
Proprietary Information Agreement between Mr. Lento and the Company dated June
26, 1997 (the "Invention Agreement"), which agreement is hereby incorporated by
reference, made a part hereof, and is attached hereto as Exh. 4.

         6. Cooperation in Execution of Documents, Patent Related Applications,
Assignment Elections, and other Instruments.

         (i) With regard to the Company's applied-for patents relating to its
Multiple Stream Mixer Reactor device, processes and products produced thereby,
of which invention Mr. Lento is listed as a co-inventor (the "Invention"), Mr.
Lento agrees to, without the payment of additional compensation or
consideration, execute any assignments, transfers, elections, extensions,
amendments, country entry applications or other reasonably necessary documents
relating to patent application of the Invention and prosecution thereof at the
direction of the Company, in order to more completely vest control and ownership
of the Invention in the Company.

         (ii) Mr. Lento agrees to execute any and all other necessary and proper
documents relating to his resignation as an officer of the Company, signatory to
Company bank accounts, Trustee of the Company's Retirement Program ("401(k)
Program") and to sign such other documents as are required for an effective and
orderly termination and transition of his authority and responsibilities. Mr.
Lento shall execute a 401(k) Trustee Resignation in the form of Exh. 5.

         7. Settlement of Amounts Due Mr. Lento. The amounts set forth above in
Section 2 together with any amounts including earned but unused vacation pay,
the consideration set forth in Section 3 shall constitute the complete and
unconditional payment, settlement, satisfaction and accord with respect to all
obligations and liabilities of the Company (including its successors and
assigns, its officers and directors, shareholders, employees and/or agents) to
Mr. Lento, and any claims, causes of action and damages by Mr. Lento against the
Company and/or any such other party regarding Mr. Lento's employment with the
Company, including without limitation, all claims for back wages, salary, draws,
commissions, bonuses, vacation pay, expenses, compensation, severance pay,
attorney's fees, compensatory damages, exemplary damages, or other costs of any
kind or nature whatsoever.

         8. Release.

         (A) Release from Mr. Lento to Company. In exchange for the amount and
actions described in Section 2 and other good and valuable consideration,
receipt of which is hereby acknowledged, Mr. Lento and his representatives,
agents, estate, successors and assigns, absolutely and unconditionally hereby
release and forever discharge the Company, and its successors, assigns,
shareholders, officers, directors, employees, including but not limited to Irwin
Gruverman, Jack Swig and Jody Buck and/or agents, both individually and in their
official capacities, for and on account of any and all liabilities, agreements,
promises, debts and damages, whether existing or contingent, known or unknown,
which arise out of Mr. Lento's employment with, separation from, or termination
from the Company, and with respect to, any and all debts, demands, actions,
causes of action, suits, covenants, contracts, wages, bonuses, damages and any
and all claims, demands, liabilities, and expenses (including attorneys' fees
and

                                       3
<PAGE>

costs) whatsoever of any name or nature both in law and in equity ("Claim")
which Mr. Lento now has, ever had or may in the future have against the Company
by reason of any matter, cause or thing which has happened, developed or
occurred before the signing of this Agreement, including, but not limited to,
any and all suits in tort or contract, and any Claims or suits relating to
salary, wages, raises, bonuses and commissions, stock or stock options, the
breach of an oral or written contract, misrepresentation, defamation, and
interference with prospective economic advantage, interference with contract,
intentional, or negligent infliction of emotional distress, negligence, breach
of the covenant of good faith and fair dealing, and Claims arising out of, based
on, or connected with his employment by the Company and the termination of that
employment as set forth in this Agreement, including any causes of action or
Claims for unlawful employment discrimination of any kind, including
discrimination due to age, sex, disability, race, national origin, or harassment
arising under or based on Title VII of the Civil Rights Act of 1964, as amended;
the Age Discrimination in Employment Act of 1967 ("ADEA"), as amended; the Equal
Pay Act of 1963; the Massachusetts Fair Employment Practices Act; the
Massachusetts Civil Rights Act; the Massachusetts Equal Rights Law and any other
state or federal equal employment opportunity or anti-discrimination law,
policy, order or regulation affecting or relating to Claims or rights of
employees, which Mr. Lento ever had, now has, or claims to have against the
Company. Mr. Lento further agrees not to institute any charge, complaint, or
lawsuit to challenge the validity of this Agreement or the circumstances
surrounding its execution, subject to the provisions of Section 14. This is a
General Release, including a waiver for any claims of age discrimination under
federal and state statutes, such as the ADEA.

         (B) Release from Company to Mr. Lento. In exchange for good and
valuable consideration, receipt of which is hereby acknowledged, the Company
absolutely and unconditionally hereby releases and forever discharges Mr. Lento
for and on account of any and all liabilities, agreements, promises, debts and
damages, whether existing or contingent, known or unknown, which arise out of
Mr. Lento's employment with, separation from, or termination from the Company,
and with respect to, any and all debts, demands, actions, causes of action,
suits, covenants, contracts, damages and any and all claims, demands,
liabilities, and expenses (including attorneys' fees and costs) whatsoever of
any name or nature both in law and in equity ("Claim") which the Company has by
reason of any matter, cause or thing which has happened, developed or occurred
before the signing of this Agreement, excluding enforcement of the terms of this
Agreement and any past violations(s) of the Invention Agreement.

         9. Covenant Not to Sue. Mr. Lento agrees not only to release and
discharge the Company and/or its successors, assigns, shareholders, officers,
directors, employees and/or agents from any and all claims as stated above that
Mr. Lento could make on his own behalf or on the behalf of others, but also
those claims which might be made by any other person or organization on behalf
of Mr. Lento, and Mr. Lento specifically waives any right to become a member of
any class, participate in or induce or encourage participation in any case,
proceeding or undertaking in which a claim or claims against the Company and/or
its successors, assigns, shareholders, officers, directors, employees and/or
agents are made involving any matters which arise out of Mr. Lento's employment
with or termination from employment with the Company, or any shareholder or
shareholder derivative action.

         Mr. Lento represents and warrants that he has not filed any complaints,
charges, or claims for relief against the Company with any local, state or
federal court or administrative agency.

                                       4
<PAGE>

Mr. Lento agrees and covenants not to sue or bring any claims or charges against
the Company with respect to any matters arising out of or relating to his
employment with or separation from the Company, other than enforcement of the
terms of this Agreement, or any claims that as a matter of law cannot be
released, such as under the Massachusetts workers compensation system, for
unemployment benefits or any claims related to the Company's future involvement
with, if any, Mr. Lento's 401(k) retirement plan with the Company or except as
set forth in Section 14. In the event that Mr. Lento on his own behalf
institutes any such action, that claim shall be dismissed upon presentation of
this Agreement and he shall reimburse the Company for all legal fees and
expenses incurred in defending such claim and obtaining its dismissal.

         10. Non-Interference/Non-Solicitation. Mr. Lento agrees that during the
term of this Agreement and for a period of eighteen (18) months following the
expiration or termination of this Agreement, he will not, without the prior
written agreement of the Company: (i) solicit, or solicit for hire or cause any
other person or entity to solicit, or solicit for hire any individual who is or
has been employed by the Company or any of its affiliates, or any customer,
vendor, subcontractor or technical consultant of the Company with whom Mr. Lento
had contact at any time during the period Mr. Lento was President of the
Company; or (ii) solicit, participate in, or ally himself with any person or
entity to engage in or be engaged in any tender offer or so-called "hostile
take-over" of or concerning the Company or its securities. Notwithstanding the
provisions of para.10, subsection (i) neither Mr. Lento nor any entity with
which he enters into employment or becomes otherwise affiliated with shall be
prohibited from the solicitation of any customer, vendor, subcontractor or
technical consultant of the Company so long as such solicitation (i) does not
result in any direct competition with the Company or its products, and (ii) the
result of such solicitation does not utilize proprietary manufacturing or
technical information of the Company and its products. Mr. Lento will inform
prospective employers and any entity with which he becomes affiliated, including
but not limited to one for which he performs services as an independent
contractor, of the obligations of Mr. Lento under this Agreement while such
obligations continue in effect.

         11. Pejorative Statements/DET Claim. The Company hereby represents,
warrants and covenants that it shall avoid making pejorative statements about
Mr. Lento and the terms of the his separation from employment with the Company,
to the fullest extent possible, except as required by legal process, law or
regulation. Company will not hereafter oppose an application for unemployment
benefits to the DET by Mr. Lento, and will respond appropriately thereto. Mr.
Lento understands that the DET, not the Company, makes the determination as to
such benefits, and that the Company cannot assure that Mr. Lento will receive
such benefits or the amount of such benefits. In response to an employment
reference request, the Company will respond only with his dates of employment
and positions held. Mr. Lento hereby represents, warrants and covenants that he
will not make pejorative statements about the Company and/or its officers,
directors, employees, or agents except as required by legal process, law or
regulation. Mr. Lento further represents, warrants and covenants that he shall
not make any detrimental or disparaging remarks about the products, equipment,
machinery or systems, manufactured, distributed or sold by the Company.

         12. Nonadmissions Clause. It is understood and agreed that this
Agreement does not constitute any admission by the Company that any action taken
with respect to Mr. Lento was unlawful or wrongful, or that such action
constituted a breach of contract or violated any federal or state law, policy,
rule or regulation.

                                       5
<PAGE>

         13. Nondisclosure of this Agreement. Mr. Lento expressly agrees, and
hereby instructs his attorney and immediate family, if any, that the nature and
terms of this Agreement are confidential, and expressly agrees not to discuss or
disclose them, or the facts and contentions contained therein, without the prior
written consent of the Company, with or to any person, except to the Internal
Revenue Service, state tax authorities, his accountant or tax advisor, his
attorneys, his immediate family, his therapist or healthcare provider, or as
required by law.

         14. Exclusion. Nothing in this Agreement shall preclude Mr. Lento from
filing a charge or complaint, including a challenge to the validity of this
Agreement, with the Equal Employment Opportunity Commission or the Massachusetts
Commission Against Discrimination or from participating or cooperating in any
investigation or proceeding conducted by either of those agencies. In the event
that a charge or complaint is filed with any administrative agency or in the
event of an authorized investigation, charge or lawsuit filed by any
administrative agency, Mr. Lento expressly waives and shall not accept any award
or damages therefrom.

         15. Breach. Mr. Lento agrees that the compensation and benefits
contained in this Agreement and which flow to him from the Company are subject
to termination, reduction or cancellation in the event that he takes any action
or engages in any conduct deemed by the Company to be in violation of this
Agreement. In the event that Mr. Lento institutes legal proceedings to enforce
this Agreement, he agrees that the sole remedy available to him shall be
enforcement of the terms of this Agreement and/or a claim for damages resulting
from the breach of this Agreement, but that under no circumstances shall he be
entitled to receive or collect any damages for claims that he has released under
this Agreement in accordance with the General Release contained in Section 8 of
this Agreement.

         16. Injunctive Relief. The parties hereto acknowledge that any breach,
by either party, of the representations, warranties and covenants contained in
this Agreement (particularly in Sections 5, 9, 10 and 11 hereof) would cause
irreparable harm not adequately compensable by money damages. Consequently, the
parties hereby stipulate that the non-breaching party may seek injunctive relief
to prevent an actual or threatened violation of this Agreement. The parties
consent to jurisdiction and venue of any state or federal court for the purposes
of any suit for equitable relief hereunder, and to service of process by
certified or registered mail, return receipt requested. All equitable rights,
remedies and damages available to the parties shall be considered cumulative and
use of a particular right, remedy, damage or relief shall not preclude the
non-breaching party's further exercise of other rights, remedies and damages.

         17. Arbitration. With the exception in Section 16 seeking injunctive
relief sought by the Company, or as otherwise provided in this Agreement, any
controversy or claim regarding this Agreement, its enforcement or
interpretation, shall be settled by final and binding arbitration administered
by the American Arbitration Association sitting in Boston, under its Employment
Dispute Resolution Rules (one arbitrator) and the award rendered by the
Arbitrator shall be enforceable in any court of competent jurisdiction.

         18. Representations. Mr. Lento acknowledges that in exchange for
entering into this Agreement he has received good and valuable consideration in
excess of that to which he would otherwise have been entitled in the absence of
this Agreement. This consideration includes, but

                                       6
<PAGE>

is not limited to, the Company's Severance Payment to Mr. Lento as described in
Section 2. Mr. Lento further acknowledges the sufficiency of that consideration.

         19. Time To Consider Agreement. Mr. Lento acknowledges that he has been
advised in writing to consult with an attorney and has had ample opportunity to
consult with and review this Agreement with an attorney of his choice, and has
been given a period of at least twenty-one (21) days within which to consider
whether to sign this Agreement. Mr. Lento may sign this Agreement prior to the
end of this twenty-one (21) day period, provided Mr. Lento does this knowingly
and voluntarily.

         20. Revocation. It is agreed and understood that for a period of seven
(7) days following the execution of this Agreement, which period shall end at
5:00 p.m. on the seventh day following the date of execution, Mr. Lento may
revoke this Agreement. This Agreement will not become effective until this
revocation period has expired. This seven (7) day revocation period cannot be
shortened by agreement of the parties or by any other means.

         21. Severability. If any of the terms of this Agreement shall be held
to be invalid and unenforceable, the remaining terms of this Agreement are
severable and shall not be affected thereby. The invalidity or unenforceability
of any provision of this Agreement shall be revised, construed and reformed, to
the fullest extent possible to effectuate the purpose and intent of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
Company and Mr. Lento and their respective heirs, successors and assigns.

         22. Entire Agreement. This Agreement and its Exhibits constitutes the
entire agreement between the parties about or relating to Mr. Lento's separation
from employment with the Company, or the Company's obligations to him with
respect his termination and fully supersedes any and all prior agreements or
understanding between the parties. The terms of this Agreement are contractual
in nature and not a mere recital, and they shall take effect as a sealed
document. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts, and may not be changed orally, but only by agreement in writing
signed by both parties. The parties attest that no other representations were
made regarding this Agreement other than those contained herein.

         IN WITNESS WHEREOF, the parties have signed this agreement as an
instrument under seal as of the date set forth below.

_______________________________________________      December ___, 2000
           Michael A. Lento

MFIC Corporation

By:____________________________________________      December ___, 2000
   Irwin Gruverman, President, CEO and Chairman

<PAGE>
                          M.A.L. TERMINATION AGREEMENT

Exhibit 1.  Resignation from MFIC Officer Positions (attached)

Exhibit 2.  Bonus Compensation Plan

Exhibit 3.  Summary of "Qualified Stock Options"

Exhibit 4.  Invention Assignment & Proprietary Information Agmt. - 6/26/97

Exhibit 5.  Resignation as Trustee from 401(k) Plan (attached)
<PAGE>
Exhibit 1.

                                Michael A. Lento
                                12 Sherman Road
                               Melrose, MA 02176

December 14, 2000

MFIC Corporation
30 Ossipee Road
Newton, MA 02464-9101

Gentlemen,

This letter will confirm my resignation from the positions of President and
Treasurer of MFIC Corporation, a Delaware corporation, effective as of November
20, 2000.

Yours truly,
<PAGE>
Exhibit 5.

                                Michael A. Lento
                                12 Sherman Road
                               Melrose, MA 02176

December 14, 2000

MFIC Corporation
30 Ossipee Road
Newton, MA 02464-9101

Gentlemen,

This letter will confirm my resignation, effective November 20, 2000, from the
position of Trustee of MFIC Corporation's 401(k) Plan.

Yours truly,

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