Document:

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                                                                   EXHIBIT 10.34

                             Subordination Agreement
--------------------------------------------------------------------------------

                                                   Date: As of February 28, 2000

      This Subordination Agreement is made amongst MFIC Corporation, a Delaware
corporation (hereinafter, the "Borrower"), with a place of business at 30
Ossipee Road, Newton, Massachusetts 02464; and

Lake Shore Industries, Inc. (hereinafter, the "Creditor"),
----------------------------------------------------------
Name

11323 Scogen Lane, Grand Haven, Michigan 49413
----------------------------------------------
Address

and National Bank of Canada, a Canadian chartered bank with offices at One
Federal Street, Boston, Massachusetts 02110 (hereinafter, the "Lender") for good
and valuable consideration and in consideration of the mutual covenants
contained herein and benefits to be derived herefrom.

      1. Unless and until the within Agreement is terminated by written notice
from the Lender, the Creditor and the Borrower hereby agree with the Lender that
all Junior Debt (defined below) is and shall be subject and subordinate to the
Liabilities (defined below) of the Borrower to the Lender on the terms and
conditions set forth in this Agreement.

      2. Unless and until the within Agreement is terminated by written notice
from the Lender, the Creditor shall not

            (1) subject to the provisions of Paragraph 4 hereof, demand, accept,
      or receive from the Borrower any payment or other value on account of the
      Junior Debt; or

            (2) set off, contra, or otherwise apply, all or any part of the
      Junior Debt towards satisfaction of any obligation of the Creditor to the
      Borrower; or

            (3) exercise any of the Creditor's rights, remedies, powers,
      privileges, and discretions with respect to the Junior Debt including,
      without limitation, the acceleration of the time for payment of the Junior
      Debt; or

            (4) demand, accept, or receive any evidence of, or collateral for,
      the Junior Debt; or

            (5) modify or amend any of the terms of the Junior Debt, including,
      without limitation, any provisions relating to the rate of interest,
      principal amortization, maturity, or the dates upon which payment of
      principal or interest are due.

      3. Unless and until the within Agreement is terminated by written notice
from the Lender, the Borrower shall not

            (1) subject to the provisions of Paragraph 4 hereof, make any
      payment or give any value to the Creditor on account of the Junior Debt;
      or

            (2) set off, contra, or otherwise apply, all or any part of any
      obligation of the Creditor to the Borrower towards satisfaction of the
      Junior Debt; or
<PAGE>

            (3) execute, give, or deliver any evidence of, or collateral for the
      Junior Debt; or

            (4) modify or amend any of the terms of the Junior Debt, including,
      without limitation, any provisions relating to the rate of interest,
      principal amortization, maturity, or the dates upon which payment of
      principal or interest are due.

      4. Until the Creditor and/or the Borrower receive notice from the Lender
(which notice may be furnished at any time after the occurrence of a default or
event of default (however defined) under any agreement between the Lender and
the Borrower (whether or not there are other parties thereto)), the Creditor may
receive, and the Borrower may make, payments on account of the Junior Debt as
follows: (a) Commencing May 31, 2000 and continuing through and including
February 28,2001, the Borrower may make, and the Creditor may receive, quarterly
payments of interest only at a rate not to exceed ten percent (10 %) per annum;
and (b) Commencing February 28, 2001 and continuing thereafter, the Borrower may
make, and the Creditor may receive, monthly payments of principal on account of
the Junior Debt, each of which shall not exceed the amount of Six Thousand Two
Hundred Fifty and 00/100 Dollars ($6,250.00) per month, plus interest at a rate
not to exceed ten percent (10 %) per annum. The Creditor may not, in any case,
receive payment of (i) interest which is accrued and past due or (ii) principal
which is past due, at the time of execution of this Subordination Agreement or
accelerate the time for payment of the Junior Debt, even if an event of default
arises thereunder.

      5. The Creditor shall cause all instruments, documents and agreements
evidencing the Junior Debt to bear the following legend prominently on the first
page thereof:

            PURSUANT TO A SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 28, 2000,
            AS AMENDED AND IN EFFECT BY AND AMONG MFIC CORPORATION, NATIONAL
            BANK OF CANADA AND LAKE SHORE INDUSTRIES, INC. THE REPAYMENT THIS
            NOTE AND ALL INDEBTEDNESS EVIDENCED HEREBY IS SUBJECT AND
            SUBORDINATE TO THE LIABILITIES OF MFIC CORPORATION DUE OR TO BECOME
            DUE TO NATIONAL BANK OF CANADA AND ITS SUCCESSORS AND ASSIGNS .

      6. The Creditor and the Borrower shall each execute all such further
instruments and do such other and further acts as the Lender may request in
furtherance of the Lender's rights hereunder and/or the purposes of this
Agreement. The respective obligations of the Creditor and the Borrower hereunder
being unique, are specifically enforceable by the Lender.

      7. The Creditor hereby designates the Lender as and for the
attorney-in-fact of the Creditor to exercise any and all rights, remedies,
powers, privileges, and discretions of the Creditor with respect to the Junior
Debt with respect to any bankruptcy proceeding including, without limitation, to
file a proof of claim or similar pleading in, participate in the place and stead
of the Creditor in, and receive any dividend or distribution on account of, any
bankruptcy or insolvency proceeding of the Borrower.

      8. The Lender shall have no duty as to the collection or protection of the
Junior Debt or any income or distribution thereon, beyond the safe custody of
such of the Junior Debt as may come into the possession of the Lender and shall
have no duty as to the preservation of any rights pertaining thereto, including,
without limitation, any rights against prior parties.

      9. In the event that notwithstanding the provisions of this Agreement, the
Creditor receives any payments or distribution of assets or securities of the
Borrower of any kind or character on account of the Junior Debt in violation of
this Agreement, the Creditor shall hold such payments, assets and /or securities
in trust for the Lender and shall not commingle such payments, assets and /or
securities with any other funds or property of the Creditor. The Creditor shall
deliver all such payments, assets and /or securities to the Lender immediately
upon the receipt thereof by the Creditor in the identical form received, duly
endorsed to the Lender for application toward the Liabilities as provided in
Paragraph 10, hereof.
<PAGE>

      10. The proceeds (if any) received by the Lender on account of the Junior
Debt shall be applied towards the Liabilities in such order and manner as the
Lender determines in its sole discretion (whether or not any default exists
under the Borrower's loan arrangement with the Lender). Any such proceeds
received by the Lender in excess of the amounts necessary to satisfy the
Liabilities shall be paid to the Creditor.

      11. The Creditor

            (1) waives notice of non-payment, presentment, demand, notice, and
      protest with respect to the Liabilities and/or the Junior Debt;

            (2) waives notice of the acceptance of this agreement by the Lender;

            (3) assents to any extension, renewal, indulgence or waiver,
      permitted the Borrower and/or any other person liable or obligated to the
      Lender for or on the Liabilities;

            (4) authorizes the Lender to alter, amend, cancel, waive, or modify
      any term or condition of the Liabilities and of the obligations of any
      other person liable or obligated to the Lender for or on the Liabilities
      without notice to, or consent from, the Creditor;

            (5) if entitled thereto, waives the right to notice and/or hearing
      prior to the Lender's exercising of the Lender's rights and remedies
      hereunder. No action by the Lender which has been assented to herein shall
      affect the obligations of the Creditor to the Lender hereunder.

      12. The subordination effected hereby shall not be affected by any
fraudulent, illegal, or improper act by the Borrower, the Creditor, or any
person liable or obligated to the Lender for or on the Liabilities, nor by any
release, discharge or invalidation, by operation of law or otherwise, of the
Liabilities or by the legal incapacity of the Borrower, the Creditor, or any
other person liable or obligated to the Lender for or on the Liabilities. All
interest and costs of collection with respect to the Liabilities for which the
Borrower has agreed to be liable shall continue to accrue and shall continue to
be Liabilities for purposes of the subordination effected hereby notwithstanding
any stay to the enforcement thereof against the Borrower or disallowance
therefor against the Borrower.

      13. The books and records of the Lender showing the account between the
Lender and the Borrower or the Lender and the Creditor shall be admissible in
any action or proceeding to enforce the within agreement and shall constitute
prima facie evidence and proof of the items contained therein.

      14. In the event (a) the Lender determines that any representation made by
the Borrower or the Creditor to the Lender herein was not true or accurate when
given and/or (b) the Borrower or the Creditor (or both) fails to promptly,
punctually, and faithfully perform or discharge any obligation hereunder or an
event of default occurs under any other instrument, document, or agreement
between the Borrower or the Creditor and the Lender, all Liabilities, and any
and all liabilities, obligations, and indebtedness of the Creditor to the
Lender, whether arising hereunder or under any other document, instrument, or
agreement to the Lender (whether now existing or hereafter arising), shall
become immediately due and payable, at the Lender's option and without notice or
demand.

      15. The Borrower will pay on demand all attorneys' fees and out-of-pocket
expenses incurred by the Lender's attorneys and all costs incurred by the
Lender, including, without limitation, costs associated with travel on behalf of
the Lender, which costs and expenses are directly or indirectly related to the
Lender's efforts to preserve, protect, collect, or enforce any of the
obligations of the Creditor and/or any of the obligations of the Borrower and/or
any of the Lender's Rights and Remedies hereunder (whether or not suit is
instituted by or against the Lender).

                                      -3-
<PAGE>

      16. The Creditor will pay on demand all attorneys' fees and out-of-pocket
expenses incurred by the Lender's attorneys and all costs incurred by the
Lender, including, without limitation, costs associated with travel on behalf of
the Lender, which costs and expenses are directly or indirectly related to the
Lender's efforts to preserve, protect, collect, or enforce any of the
obligations of the Creditor and/or any of the Lender's Rights and Remedies
hereunder (whether or not suit is instituted by or against the Lender).

      17. The within Agreement incorporates all discussions and negotiations
amongst and between the Borrower, the Creditor, and the Lender concerning the
subordination effected hereby. No such discussions or negotiations shall limit,
modify, or otherwise affect the provisions hereof. No provisions hereof may be
altered, amended, waived, cancelled, or modified, except by a written instrument
executed, sealed, and acknowledged by a duly authorized officer of the Lender.

      18. The Lender may continue to rely upon the within Agreement and the
subordination effected hereby with respect to all Liabilities which may arise
hereafter. The repayment and satisfaction of all of such Liabilities shall not
terminate the within Agreement and the subordination effected hereby as to
Liabilities which arise thereafter.

      19. The rights, remedies, powers, privileges, and discretions of the
Lender hereunder (hereinafter, the "Lender's Rights and Remedies") shall be
cumulative and not exclusive of any rights or remedies which it would otherwise
have. No delay or omission by the Lender in exercising or enforcing any of the
Lender's Rights and Remedies shall operate as, or constitute, a waiver thereof.
No waiver by the Lender of any of the Lender's Rights and Remedies or of any
default or remedy under any other agreement with the Borrower or the Creditor
shall operate as a waiver of any other default hereunder or thereunder. No
exercise of the Lender's Rights and Remedies and no other agreement or
transaction, of whatever nature, entered into between the Lender and the
Creditor and/or between the Lender and the Borrower at any time shall preclude
any other or further exercise of the Lender's Rights and Remedies. No waiver by
the Lender of any of the Lenders' Rights and Remedies on any one occasion shall
be deemed a continuing waiver. All of the Lender's Rights and Remedies and all
of the Lender's rights, remedies, powers, privileges, and discretions under any
other agreement with the Creditor and/or the Borrower shall be cumulative, and
not alternative or exclusive, and may be exercised by the Lender at such time or
times and in such order of preference as the Lender in its sole discretion may
determine. The Lender may proceed with respect to the Junior Debt and the Junior
Collateral without resort or regard to other collateral or sources of
satisfaction of the Liabilities or the liabilities, obligations and indebtedness
of the Creditor to the Lender.

      20. As used herein, the following terms have the following meanings:

      "Liability" and "Liabilities" shall have the meaning set forth in that
certain Revolving Credit and Term Loan Agreement dated February 28, 2000 by and
between the Borrower and the Lender, as the same may be modified, amended and/or
restated.

      The Lender's books and records shall be prima facie evidence of the
Borrower's Liabilities.

      "Junior Debt" includes all liabilities, obligations, and indebtedness now
or hereafter owed by the Borrower to the Creditor pursuant to that certain
promissory note dated February 28, 2000 in the original principal amount of
Three Hundred Thousand and 00/100 Dollars made payable by the Borrower to the
Creditor.

      21. The within Agreement shall be binding upon the Creditor, the Borrower
and their respective heirs, executors, administrators, representatives,
successors, and assigns, and shall inure to the benefit of the Lender, and the
Lender's successors and assigns. Without limiting the foregoing, any assignee of
the Creditor shall be bound by the terms and conditions of this Agreement, and
such assignee shall, at the Lender's option, execute and deliver to the Lender
such documents as the Lender may reasonably require

                                      -4-
<PAGE>

to confirm such assignee's acknowledgment of the same. However, the failure of
such assignee to execute any such document shall in no way modify or impair the
terms and conditions of this Agreement.

      22. It is intended that this Agreement take effect as a sealed instrument
and be governed by the laws of The Commonwealth of Massachusetts. The Creditor
and the Borrower each submit to the jurisdiction of the courts of said
Commonwealth for all purposes in connection with the within Agreement and their
respective relationships with the Lender.

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

      The undersigned certify that the undersigned read this Agreement prior to
its execution.

Witness                             LAKE SHORE INDUSTRIES, INC.
                                                              ("Creditor")

_______________________________     By: /s/ Bret A. Lewis
                                        ----------------------------------
                                    Print Name: Bret A. Lewis
                                    Title: President

Witness:                            MFIC CORPORATION
                                                              ("Borrower")

_______________________________     By: /s/ Irwin J. Gruverman
                                        ----------------------------------
                                    Print Name: Irwin J. Gruverman
                                    Title: Chairman and C.E.O.

Witness:                            NATIONAL BANK OF CANADA
                                                                ("Lender")

_________________________________   By: /s/ A. Keith Broyles
                                        ----------------------------------
                                    Print Name: A Keith Broyles
                                    Title:  Vice President

                                    By: /s/ Leonard J. Pellecchia
                                        ----------------------------------
                                    Print Name: Leonard J. Pellecchia
                                    Title: Vice President

                                      -5-<PAGE>

                                                                   EXHIBIT 10.35

PURSUANT TO A SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 28, 2000, AND IN
EFFECT BY AND AMONG MFIC CORPORATION, NATIONAL BANK OF CANADA AND LAKE SHORE
INDUSTRIES, INC. THE REPAYMENT OF THIS NOTE AND ALL INDEBTEDNESS EVIDENCED
HEREBY IS SUBJECT AND SUBORDINATE TO THE LIABILITIES OF MFIC CORPORATION DUE OR
TO BECOME DUE TO NATIONAL BANK OF CANADA AND ITS SUCCESSORS AND ASSIGNS.

                          SUBORDINATED PROMISSORY NOTE

$300,000.00                                           FEBRUARY 28, 2000

      FOR VALUE RECEIVED, MFIC Corporation, a Delaware corporation (the
"Company"), hereby promises to pay to the order of Lake Shore Industries, Inc.,
a Michigan corporation, (the "Payee"), subject to the conditions set forth
herein, the principal sum of Three Hundred Thousand Dollars ($300,000.00) in
lawful money of the United States, together with interest accruing from the date
hereof on the outstanding principal balance (and on any interest installment not
paid when due) at a rate per annum equal to ten (10%) percent per annum.
Principal shall be paid in forty-eight (48) equal monthly consecutive
installments, and the first payment shall be due on the Principal Repayment Date
(as defined in the succeeding sentence) and subsequent payments shall be due on
the last day of each month thereafter until the principal balance is paid in
full. The Principal Repayment Date shall be February 28, 2001.

      Interest shall be payable quarterly in arrears and the first payment shall
be due on May 31, 2000, and subsequent payments shall be due on the last day of
each August, November, February and May thereafter. Interest shall be calculated
on the basis of actual days elapsed over a 365 or 366-day year, as the case may
be. Any payments hereunder will be applied in the following order of priority:
first to any accrued and unpaid interest due and owing by the Company to the
Payee and then to the unpaid principal balance of this Note. The Company may
prepay the principal amount outstanding on this Note (together with any accrued
but unpaid interest) in whole or in part without premium, penalty or fee at any
time.

      Payments of principal and interest will be made by check or by wire
transfer of funds, in immediately available United Stated funds, sent to the
holder at the address furnished to the Company for that purpose.

      1. Subordination. The Payee's rights to payment of principal and interest
hereunder shall be subject to the rights of the holders of Senior Debt pursuant
to and as defined in the Subordination Agreement with The National Bank of
Canada dated as of the date hereof (the "Subordination Agreement"), consistent
with the provisions of the Settlement Agreement dated January 17, 2000, by and
among the Company, the Payee and others.

      2. Events of Default. The outstanding principal of and accrued interest on
this Note shall, at the option of the holder hereof, become immediately due and
payable without notice or demand, subject to the terms of the Subordination
Agreement, upon the happening of any one of the following specified events (such
events referred to herein as an "Event of Default"):

            (a) failure to pay any amount as herein set forth within fifteen
      (15) days following the due date thereof, which failure remains uncured
      for thirty (30) days,
<PAGE>

                                      -2-

      provided that an Event of Default will not be deemed to have occurred if,
      in accordance with the terms of the Subordination Agreement, the Company
      is precluded from making any payments when due hereunder.

            (b) the making of a general assignment for the benefit of creditors.

            (c) the filing of any petition or the commencement of any proceeding
      by the Company for any relief under any bankruptcy or insolvency laws, or
      any laws relating to the relief of debtors, readjustment of indebtedness,
      reorganizations, compositions, or extensions; or

            (d) the filing of any petition or the commencement of any proceeding
      against the Company for any relief under any bankruptcy or insolvency
      laws, or any laws relating to the relief of debtors, readjustment or
      indebtedness, reorganizations, compositions, or extensions, which
      proceeding is not dismissed within sixty (60) days.

      3. Waiver of Holder. No waiver of any obligation of the Company under this
Note shall be effective unless it is in a writing signed by the holder. A waiver
by the holder of any right or remedy under this Note on any occasion shall not
be a bar to exercise of the same right or remedy on any subsequent occasion or
of any other right or remedy at any time.

      4. Notice. Any notice required or permitted under this Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:

            if to the Company, at

            MFIC Corporation
            30 Ossipee Road
            Newton, Massachusetts 02464-9101; or

            at such other address which the Company may provide to the Payee in
writing from time to time; and

            If to the holder, at the most recent address provided to the Company
by the holder for such purpose; or , in each case, to the most recent address,
specified by written notice, given to the Company pursuant to this paragraph.

      5. Waiver by Company. The Company hereby expressly waives presentment,
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the holder hereof with respect to the time of payment
of any other provision hereof.

      6. Severability. In the event any one or more of the provisions of this
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or
<PAGE>

                                      -3-

in the event that any one or more of the provisions of this Note operate or
would prospectively operate to invalidate this Note, then and in any such event,
such provision(s) only shall be deemed null and void and shall not affect any
other provision of this Note and the remaining provisions of this Note shall
remain operative and in full force and effect and in no way shall be affected,
prejudiced, or disturbed thereby.

      7. Governing Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts.

      8. Prohibition on Certain Transfers.

      (a) Company's Consent. This Note shall not be transferred, assigned,
encumbered, pledged or hypothecated by the Payee during its term, nor shall it
dispose of any right, claim, title or interest in this Note without the express
written approval of the Company as evidenced solely by the Company's Chairman or
Board of Directors. The Payee grants unconditionally to the Company a first
right of refusal (of not less then ten (10) business days) to purchase this Note
under the same terms and conditions as those offered by or to any qualified
purchaser. The Payee warrants and agrees that should the Company grant it the
right to sell this Note to a third party (where such agreement to sell shall not
be unreasonably withheld by the Company), then the terms and conditions of such
sale shall clearly require that the purchaser be a qualified investor under the
Securities Act of 1933, that such purchaser execute an investment representation
letter under terms which are acceptable to the Company and the terms of the
Senior Debt and that the purchaser execute a letter of assent, agreeing to be
bound by the conditions as set forth in the Subordination Agreement and all
succeeding documents, including the terms and conditions of the Senior Debt.

      (b) Legend. THIS NOTE MAY BE DEEMED A SECURITY AND, AS SUCH, HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. IF THIS NOTE IS DEEMED A SECURITY, IT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MFIC CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.

      Signed the day and year first above written.

                                MFIC CORPORATION

                                By: /s/ Irwin J. Gruverman
                                    ---------------------------------------
                                        Irwin J. Gruverman, Chief Executive
                                                Officer

ATTESTED:

By: /s/ Jack M. Swig
   --------------------------------------
        Jack M. Swig, General Counsel

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