EQUIPMENT AND COMMERCIAL REVOLVING LINE OF CREDIT AGREEMENT

 

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                                                                    Exhibit 10.5

 

                            EQUIPMENT AND COMMERCIAL

                       REVOLVING LINE OF CREDIT AGREEMENT

 

     This Equipment and Commercial Revolving Line of Credit Agreement (the

"Agreement") is dated as of September 30, 2001 and entered into by and between

HITTITE MICROWAVE CORPORATION, a Delaware corporation with a principal place of

business at 12 Elizabeth Drive, Chelmsford, Massachusetts 01824 (the "BORROWER")

and CITIZENS BANK OF MASSACHUSETTS, successor by merger to USTrust (together

with its successors and assigns the "Bank"), a Massachusetts bank with a

principal place of business at 28 State Street, Boston, Massachusetts 02109.

 

     WHEREAS, on July 18, 1997, USTrust extended to the Borrower a revolving

line of credit facility in the amount of One Million ($1,000,000.00) Dollars as

set forth in a Credit Agreement dated July 18, 1997, which agreement has been

amended on various occasions, most recently by a Fourth Amendment to Credit

Agreement and Ratification of Loan Documents - Revolving Line dated February 26,

2001;

 

     WHEREAS, on October 28, 1998, USTrust extended to the Borrower an equipment

line of credit in the amount of Seven Hundred Fifty Thousand and 00/100 Dollars

($750,000.00) for the purchase of equipment as set forth in a Credit Agreement

dated October 28, 1998, which agreement has been amended on various occasions,

most recently by a Fifth Amendment to Credit Agreement and Ratification of Loan

Documents dated August 1, 2001;

 

     WHEREAS, the Borrower has requested that the Bank increase the revolving

line of credit to Four Million ($4,000,000.00) Dollars; (ii) extend the Maturity

Date of the revolving line of credit to May 31, 2003, and (iii) extend the

Conversion Date of the $4,000,000.00 Equipment Line of Credit from September 30,

2001 to May 31, 2002, and subject to the terms and conditions hereof, the Bank

has agreed, and, in connection with the foregoing, the parties have agreed to

consolidate the foregoing agreements into one credit agreement and re-document

the related agreements and promissory notes;

 

     NOW THEREFORE, the parties hereto hereby agree as follows:

 

                                    ARTICLE I

                         DEFINITIONS AND ACCOUNTING TERMS

 

     SECTION 1.01.     DEFINED TERMS. As used in this Agreement, the following

terms have the following meanings (terms defined in the singular to have the

same meaning when used in the plural and vice versa):

 

     "AFFILIATE" or "AFFILIATES" means a person or entity which is a parent,

subsidiary or brother/sister corporation of or a person or entity who or which

owns or holds a significant ownership interest in or in which a significant

ownership interest is owned or held by, the Borrower, or is, directly or

indirectly, controlled by, or is under common control with, the Borrower.

 

     "CAPITAL LEASES" means capital leases, conditional sales contracts and

other title retention agreements relating to the purchase or acquisition of

capital assets.

 

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     "COLLATERAL" means all property which is subject or is to be subject to the

Liens granted by the Loan Documents.

 

     "COMMITMENT" means the Bank's obligation to make Loans to the Borrower

pursuant to Sections 2.011 and 2.012 in the amount referred to therein.

 

     "COST OF FUNDS RATE" means the per annum rate of interest for the term

selected by the Borrower which Lender is presumed to pay or is offering to pay,

for wholesale liabilities, adjusted for reserve requirements and such other

requirements as may be imposed by federal, state or local government and

regulatory agencies as determined and announced by Citizens Financial Group or

its successors.

 

     "DEFAULT" means any of the events specified in Section 8.01, whether or not

any requirement for the giving of notice, the lapse of time, or both, or any

other condition, has been satisfied.

 

     "DIVIDENDS" means, for the applicable period, the aggregate of all amounts

paid or payable (without duplication) as dividends, distributions or other owner

withdrawals with respect to Borrower's shares of stock, whether now or hereafter

outstanding and includes any purchase, redemption or other retirement of any

shares of the Borrower's stock, directly or indirectly through a Subsidiary of

the Borrower or otherwise and includes return of capital by the Borrower to its

shareholders.

 

     "EQUIPMENT CREDIT" shall have the meaning assigned to such term in Section

2.012.

 

     "EVENT OF DEFAULT" means any of the events specified in Section 8.01,

provided that any requirement for the giving of notice, the lapse of time, or

both, or any other condition, has been satisfied.

 

     "GAAP" or "Generally Accepted Accounting Principles" shall mean generally

accepted accounting principles as defined by controlling pronouncements of the

Financial Accounting Standards Board, as amended or supplemented from time to

time.

 

     "INDEBTEDNESS" means, as to any Person, all obligations, contingent or

otherwise, that in accordance with GAAP should be classified as liabilities upon

such Person's balance sheet or to which reference should be made by footnotes

thereto, but in any event including (1) indebtedness or liability for borrowed

money or for the deferred purchase price of property or services (including

trade obligations); (2) obligations as lessee under any Capital Leases, as such

term is defined by the Financial Accounting Standards Board; (3) current

liabilities in respect of unfunded vested benefits under any Plan as defined in

the Employee Retirement Income Security Act of 1974; (4) obligations under

letters of credit issued for the account of any Person; (5) all guaranties,

endorsements (other than for collection or deposit in the ordinary course of

business), and other contingent obligations to purchase, to provide funds for

payment, to supply funds to invest in any Person, or otherwise to assure a

creditor against loss; and (6) obligations secured by any Lien on property owned

by the Person, whether or not the obligations have been assumed.

 

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     "LIEN" means any mortgage, deed of trust, pledge, security interest,

hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or

other), or preference, priority, or other security agreement or preferential

arrangement, charge, or encumbrance of any land or nature whatsoever (including,

without limitation, any conditional sale or other title retention agreement, any

financing lease having substantially the same economic effect as any of the

foregoing, and the filing of any financing statement under the Uniform

Commercial Code or comparable law of any jurisdiction to evidence any of the

foregoing).

 

     "LOAN OR LOANS" shall have the meaning assigned to such term in Section

2.011 and 2.012.

 

     "LOAN DOCUMENTS" means this Agreement, the Revolving Credit Note, the

Master Equipment Promissory Note, the Equipment Installment. Note(s), the

Security Agreement, the UCC Financing Statement(s) and all other related

documents and instruments executed and delivered by Borrower to the Bank and all

of even date herewith, and all extensions and modifications thereof, and all

amendments and supplements thereto.

 

     "NOTES" shall mean the Revolving Credit Note, the Master Equipment

Promissory Note and the Equipment Installment Notes, as defined in Sections

2.011 and 2.012.

 

     "OBLIGATIONS" means all the Borrower's Indebtedness to the Bank and all of

the Borrower's other liabilities to the Bank of every kind, nature and

description, direct or indirect, secured or unsecured, joint, several, joint and

several, absolute or contingent, due or to become due, now existing or hereafter

arising, regardless of how such Indebtedness or liability arises or by what

agreement or instrument it may be evidenced, or whether evidenced by any

agreement or instrument, including, but not limited, to the Loans, any other

Indebtedness or liability of the Borrower under this Agreement or any other Loan

Document or under any other financing agreement between the Bank and the

Borrower, including the obligation to reimburse the Bank for any draws under

letters of credit issued or to be issued for the account of the Borrower, and

all amounts owing by the Borrower to the Bank by reason of purchases made by the

Borrower and financed by the Bank which amounts, whether or not matured and

whether or not disputed, may be charged to the Borrower's account hereunder,

with or without prior notice to the Borrower, and all obligations of the

Borrower to the Bank to perform acts or refrain from taking any action. Without

limiting the generality of the foregoing, the term "Obligations" shall include

all obligations evidenced by the Notes and by a promissory note dated March 5,

2001 in the original principal amount of $1,047,665.00; a promissory note dated

October 2, 2000 in the original principal amount of $952,335.00; a promissory

note dated May 18, 2000 in the original principal amount of $ 406,677.00; a

promissory note dated January 12, 2000 in the original principal amount of

$320,147.00; a promissory note dated June 29, 1999 in the original principal

amount of $554,000.00; a promissory note dated December 16, 1998 in the original

principal amount of $257,455.00; a promissory note dated October 28, 1998 in the

original principal amount of $740,722.49; and a promissory note dated October

28, 1998 in the original principal amount of $211,715.00. "Other Bank Documents"

shall have the meaning assigned to such term in Section 8.01.

 

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     "PERSON" means an individual, partnership, corporation, business trust,

joint stock company, trust, unincorporated association, joint venture,

governmental authority, or other entity of whatever nature.

 

     "PRIME RATE" shall mean the rate of interest announced by Bank from time

to time as the Citizens Bank Prime Rate, it being understood that such rate

is a reference rate and not necessarily the lowest fate of interest charged

by the Bank. The rate of interest payable hereunder shall be changed

effective as of that day on which a change in the Prime Rate becomes

effective. In the event the Bank ceases to publish a Prime Rate, then the

term Prime Rate shall mean the Bank's prime rate or then announced base rate,

which in each case most closely approximates the Prime Rate. Interest will be

computed on the basis of a 360-day year for the actual number of days elapsed.

 

     "REVOLVING CREDIT" shall have the meaning assigned to such term in Section

2.011.

 

     "REVOLVING CREDIT NOTE" shall have the meaning assigned to such term in

Section 2.012.

 

     "REVOLVING PERIOD" shall have the meaning assigned to such term in

Section 2.03.

 

     "SECURITY AGREEMENT" shall have the meaning assigned to such term in

Section 3.01.

 

     "SUBORDINATED DEBT" means all indebtedness of the Borrower to

shareholders of the Borrower which has been subordinated to the Obligations

by subordination agreements prepared by or otherwise approved by the Bank in

writing.

 

     "SUBSIDIARY" or "SUBSIDIARIES" means, as to any Person, a corporation of

which shares of stock having ordinary voting power (other than stock having such

power only by reason of the happening of a contingency) to elect a majority of

the board of directors or other managers of such corporation are at the time

owned, or the management of which is otherwise controlled, directly, or

indirectly through one or more intermediaries, or both, by such Person.

 

     "TANGIBLE NET WORTH" means the excess of total assets over total

liabilities, total assets and total liabilities each to be determined in

accordance with Generally Accepted Accounting Principles consistent with those

applied in the preparation of the financial statements referred to in Sections

5.08(1) and (2) excluding, however, from the determination of total assets all

assets which would be classified as intangible assets under generally accepted

accounting principles, including, without limitation, goodwill, patents,

trademarks, trade names, copyrights, franchises, and intangibles, and excluding

the value of leasehold improvements and other leasehold assets.

 

     "TERMINATION DATE" in the case of the Revolving Credit means May 31, 2003,

unless extended as provided hereafter. The Bank may extend the term of the

Revolving Credit for periods of one year, commencing on June 1, 2003 and on the

same day of each year thereafter. It shall, however, be in the sole discretion

of the Bank as to whether to grant any such extension and the failure of the

Bank to do so shall be based solely on such reasons as the Bank deems proper.

 

     "TOTAL LIABILITIES" means total Indebtedness determined in accordance with

Generally Accepted Accounting Principles (GAAP).

 

     SECTION 1.02.     ACCOUNTING TERMS. All accounting terms not specifically

defined herein shall be construed in accordance with GAAP consistent with that

applied in the

 

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preparation of the financial statements referred to in Section 4.04, and all

financial data submitted pursuant to this Agreement shall be prepared in

accordance with such principles, except interim financial data may be subject to

year-end adjustments.

 

                                   ARTICLE II

                          AMOUNT AND TERMS OF THE LOANS

 

     SECTION 2.011.    REVOLVING CREDIT. The Bank shall, from time to time,

prior to the Termination Date, make loans to the Borrower under and pursuant to

the terms of the Revolving Credit Note of even date (the "Revolving Credit

Note"), as it may be extended or renewed, substituted or replaced, in an

aggregate amount not to exceed Four Million ($4,000,000.00) Dollars (the

"Revolving Credit"). The loans made pursuant to this section and Section 2.012

shall be known as the "Loan" or "Loans", as the context requires or permits.

 

     SECTION 2.012.    EQUIPMENT CREDIT. The Bank shall, from time to time, prior

to May 31, 2002 (the "Conversion Date"), make equipment loans to the Borrower

("Equipment Credit") in an aggregate amount not to exceed Four Million

($4,000,000.00) Dollars, with the Equipment Credit evidenced by a Master

Equipment Promissory Note. Each advance under the Equipment Credit shall reduce

the availability under the Master Equipment Promissory Note. Not later than the

Conversion Date (or earlier, for all or any portion of outstanding advances, at

the Borrower's election), the remaining outstanding balance of the Master

Equipment Promissory Note shall termed out for a period of not more than Sixty

(60) months, said term to be selected by the Borrower. Advances which are termed

out shall be evidenced by a separate commercial promissory note (each an

"Equipment Installment Note" and collectively the "Equipment Installment Notes")

in a form substantially identical to Exhibit A-1. Amounts borrowed prior to the

Conversion Date which have not been termed out prior to the Conversion Date and

which have been repaid prior to the Conversion Date shall be available for

reborrowing up to the Conversion Date, but not thereafter.

 

     The Borrower shall be entitled to borrow up to 80% percent of the retail

invoice cost of new equipment purchased with the Loans pursuant to the Equipment

Credit, with the Bank to have a first lien on all such equipment.

 

     SECTION 2.02.     NOTICE AND MANNER OF BORROWING. The Borrower shall give

the Bank notice prior to 12:00 p.m. with respect to the Revolving Credit and

with respect to the Equipment Credit two (2) Business Days written notice either

in accordance with the terms hereof or via facsimile (effective upon receipt) of

a request for any Loan.

 

     SECTION 2.03.     INTEREST.

 

          (a)     The Borrower shall pay interest to the Bank on the outstanding

and unpaid principal amount of the Loans made under the Revolving Credit, at a

floating rate per annum equal to the aggregate of (i) Prime Rate minus (ii) one

half (0.50 %) Percent. Any principal amount not paid when due (at maturity, by

acceleration, or otherwise) shall bear interest thereafter until paid at a rate

equal to four (4%) percentage points greater than the rate which would otherwise

be applicable (the "DEFAULT RATE").

 

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          (b)     The Borrower shall pay interest only for advances made under

the Equipment Credit for the period prior to the Conversion Date, or, at such

earlier time as the Borrower elects, if Borrower elects to term out all or a

portion of the advances under the Equipment Credit prior to the Conversion Date.

Effective on the Conversion Date, or earlier, for such portions of the Equipment

Credit as the Borrower elects to term out earlier, the outstanding balance shall

be repaid over up to sixty (60) months, at an interest rate, at the election of

the Borrower, of either (1) a floating rate of interest equal to the Prime Rate

in effect from time to time (the "Prime Rate Option"); or (ii) a fixed rate for

the term of the Equipment Installment Note equal to the aggregate of (i) the

Bank's Cost of Funds Rate plus (ii) 200 basis points (the "COST OF FUNDS

OPTION").

 

     After acceleration or maturity, interest shall accrue and be payable at a

rate of interest equal to four (4%) percent higher than would otherwise be in

effect for each and all of the Notes. Interest shall be calculated on a 360 day

year for the actual days elapsed.

 

     SECTION 2.04.     BORROWING BASE.   The term "Borrowing Base" as used herein

shall mean the aggregate of:

 

               (i)     Eighty (80%) percent of the unpaid face amount of

                      Qualified Accounts (as defined below) (the product of the

                      aforesaid calculation being the "Eligible Account

                      Availability"); and

 

               (ii)    the lesser of (1) Fifty (50%) percent of the lower of cost

                      or market value of all Eligible Inventory (as defined

                      below), not to exceed, in any event, $2,000,000.00; or (2)

                      Fifty (50%) of the Eligible Account Availability

                      ("Eligible Inventory Availability").

 

     By way of example, if Qualified Accounts are $2,000,000.00 and Eligible

Inventory is $8,000,000.00, the Borrower, would have Eligible Account

Availability of $1,600,000.00 (80% of $2,000,000.00) and Eligible Inventory

Availability of $800,000.00 (50% of $1,600,000.00) for a Borrowing Base of

$2,400,000.00.

 

     The aforesaid advance rates are subject to review and modification upon

determination by the Bank, after its field examination(s), that the quality of

the accounts or Eligible Inventory require, in the Bank's sole discretion,

adjustment.

 

     Whenever the outstanding principal balance of all loans under the Revolving

Credit exceed the Borrowing Base, Borrower shall immediately pay to Bank the

excess of the outstanding principal balance of the Revolving Credit loans over

the Borrowing Base.

 

     SECTION 2.05.     REVOLVING CREDIT LIMIT.   The term "Revolving Credit Limit"

as used herein shall mean an amount equal to the lesser of (i) Four Million

($4,000,000.00) Dollars or (ii) the Borrowing Base.

 

     SECTION 2.06.     PAYMENT. Borrower hereby authorizes and directs Bank, in

Bank's sole discretion (provided, however, Bank shall have no obligation to do

so) to charge any of Borrower's accounts under the control of Bank if the

Borrower has failed to timely pay any

 

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amount due hereunder or after the occurrence of an Event of Default or demand.

Bank shall promptly notify Borrower of any such charges or applications.

 

     SECTION 2.07.     PREPAYMENTS. The Borrower may at anytime prepay without

premium or penalty while a variable rate of interest is in effect and shall pay

such prepayment fees as is provided in the Notes when a fixed rate is in effect.

 

     SECTION 2.08.     DEFINITION OF QUALIFIED ACCOUNT. The term "Qualified

Account", as used herein, means an account, as such term is defined by the

Massachusetts UCC (hereinafter an "Account") owing to Borrower which met the

following specifications at the time it came into existence and continues to

meet the same until it is collected in full:

 

          (a)     The Account is not more than sixty (60) days past due nor more

than ninety (90) days past invoice date;

 

          (b)     The Account arose from the performance of services or an

outright sale of goods by Borrower, such goods have been shipped to the account

debtor, and Borrower has possession of, or has delivered to Bank, shipping and

delivery receipts evidencing such shipment;

 

          (c)     The Account is not subject to any prior assignment, claim,

lien, or security interest, and Borrower will not make any further assignment

thereof or create any further security interest therein, nor permit Borrower's

rights therein to be reached by attachment, levy, garnishment or other judicial

process;

 

          (d)     The Account is net of set-offs, credits, allowances or

adjustments by the account debtor, and the account debtor has not disputed its

liability thereon and has not returned any of the goods from the sale of which

the Account arose;

 

          (e)     The Account arose in the ordinary course of Borrower's business

and did not arise from the performance of services or a sale of goods to a

supplier or employee of the Borrower;

 

          (f)     No notice of bankruptcy or insolvency of the account debtor has

been received by or is known to the Borrower;

 

          (g)     The Account is not owed by an account debtor which is a foreign

corporation or whose principal place of business is outside the United States of

America unless FCIA insured or backed by a letter of credit, except in the

Bank's sole and absolute discretion;

 

          (h)     The Account is not owed by an entity which is a parent,

brother/sister, subsidiary or affiliate of Borrower;

 

          (i)     The Account is not evidenced by a promissory note, unless such

note has been delivered to the Bank;

 

           (j)     The Account did not arise out of any sale made on a bill and

hold, dating or delayed shipment basis;

 

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          (k)     The Account is not owed by a governmental agency or entity of

any kind; or

 

          (l)     Bank, in accordance with its credit policies, has deemed the

Account to be otherwise unacceptable for any reason;

 

PROVIDED THAT if, at any time Twenty (20%) percent or more of the aggregate

amount of the Accounts due from any account debtor are more than ninety (90)

days past due or more than one hundred twenty (120) days past the invoice date,

none of the Accounts (then existing or hereafter or thereafter arising) due from

such account debtor shall be deemed to be Qualified Accounts until such time as

less than Twenty (20%) percent of the Accounts due from such account debtor are

(as a result of actual payments received thereon) more than ninety (90) days

past due more or one hundred twenty (120) days past the invoice date. Accounts

payable by Borrower to an account debtor shall be netted against Accounts due

from such account debtor and the difference (if positive) shall constitute

Qualified Accounts from such account debtor for purposes of determining the

Borrowing Base (notwithstanding paragraph (d) above). Characterization of any

Account due from an account debtor as a Qualified Account shall not be deemed a

determination by Bank as to its actual value nor in any way obligate Bank to

accept any Account subsequently arising from such account debtor to be, or to

continue to deem such Account to be, a Qualified Account. It is Borrower's

responsibility to determine the credit-worthiness of account debtors and all

risks concerning the same and collection of Accounts are with Borrower; and all

Accounts whether or not Qualified Accounts constitute Collateral.

 

     The Bank, in its sole discretion, may, on a case by case basis, by written

notice, waive one or more of the specifications enumerated above required of a

Qualified Account, provided however, a waiver of a specification or requirement

in one instance shall not be deemed a waiver of any other specification nor a

waiver of said specification or requirement on any other occasion.

 

     SECTION 2.10.     ELIGIBLE INVENTORY. The term "Eligible Inventory", as used

herein, means Borrower's raw materials and finished goods which are initially

and at all times until sold: new and unused (except, with Bank's written

approval, used equipment held for sale or lease), in first-class condition,

merchantable and saleable through normal trade channels; at a location which has

been identified in writing to Bank; subject to a perfected security interest in

favor of Bank; owned by Borrower free and clear of any lien except in favor of

Bank; not held by any distributor; not obsolete; not scrap, waste, defective

goods and the like; have been produced by Borrower in accordance with the

Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations

and orders promulgated thereunder; not stored with a bailee, warehouseman or

similar party unless Bank has given its prior written consent thereto and

Borrower has caused each such bailee, warehouseman or similar party to issue and

deliver to Bank warehouse receipts in Bank's name for such Inventory; and have

not been designated by Bank, in accordance with its normal credit policies, as

unacceptable for any reason by notice to Borrower. No work in process shall be

included in Eligible Inventory. Inventory that is being shipped overseas and is

"on the water" will be deemed Eligible Inventory provided that, prior to

shipment of such inventory, the Bank is furnished with the specifics of such

inventory and evidence that property and casualty insurance is in place for such

inventory in such form as the Bank reasonably requires and names the Bank as

loss payee.

 

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     SECTION 2.11.     BANK'S REPORTS. After the end of each month, Bank may

render to Borrower a statement regarding Borrower's loan account under the

Revolving Credit with Bank hereunder. Each statement and the information

contained therein shall be considered correct and to have been accepted by

Borrower and, in the absence of manifest error, shall be conclusively binding

upon Borrower in respect of all charges, debits and credits of whatsoever nature

contained therein under or pursuant to this Agreement, and the closing balance

shown therein, unless Borrower notifies Bank in writing of any discrepancy

within twenty (20) days from the mailing by Bank to Borrower of any such monthly

statement.

 

     SECTION 2.12.     LETTERS OF CREDIT. At the request of the Borrower, and

upon the execution of letter of credit documentation satisfactory to Bank, Bank,

within the limits of the Borrowing Base, as then computed and also within the

limits of the Revolving Credit Limit shall issue letters of credit and/or

acceptances from time to time for the account of the Borrower (hereinafter

collectively "Letter(s) of Credit"). The Letters of Credit shall be on terms

mutually acceptable to Bank and the Borrower. A loan in an amount equal to any

amount paid by Bank under a Letter of Credit shall be deemed made to Borrower,

without request therefor, immediately upon any payment by Bank on such Letter of

Credit. In connection with the issuance of any Letter of Credit, Borrower shall

pay to Bank a percentage of the face amount of any Letter of Credit according to

the fee schedule then in effect at Bank, plus transaction fees at Bank's

customary rates, and all other normal and customary fees charged by Bank.

Borrower hereby authorizes and directs Bank, in Bank's sole discretion

(provided, however, Bank shall have no obligation to do so) to pay all such fees

and costs as the same become due and payable and to treat the same as a loan to

Borrower, which shall be added to Borrower's loan balance pursuant to this

Agreement. For purposes of computing the Revolving Credit, all Letters of Credit

and one hundred (100%) percent of acceptances shall be deemed to be Loans.

 

                                    ARTICLE III

                              CONDITIONS PRECEDENT

 

     SECTION 3.01.     CONDITION PRECEDENT TO LOANS. The agreement of the Bank

(at its discretion) to make the initial Loans (and all subsequent Loans) to the

Borrower is subject to the condition precedent that the Bank shall have received

on or before the day of such Loan each of the following in form and substance

satisfactory to the Bank and its counsel:

 

     (1)   NOTE(S). The Note(s) executed and delivered by the Borrower;

 

     (2)   SECURITY AGREEMENT. A Security Agreement (All Assets) duly executed by

          the Borrower (the "Security Agreement"), together with acknowledgment

          copies of the Financing Statements (UCC-1) duly filed under the

          Uniform Commercial Code from all jurisdictions necessary or, in the

          opinion of the Bank, desirable to perfect a first priority security

          interest and evidence satisfactory to the Bank indicating that no

          party claims an interest in any of the collateral identified in the

          Security Agreement.

 

     (3)   OTHER DOCUMENTS. Such other and further documents, agreements and

          instruments as the Bank or Bank's counsel deems appropriate or

          necessary.

 

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     SECTION 3.02.     CONDITIONS PRECEDENT TO ALL LOANS. The agreement of the

Bank (at its discretion) to make each Loan (including the initial Loan) shall be

subject to the further conditions precedent that on the date of such Loan:

 

     (1)   The following statements shall be true and upon request by the Bank,

          the Bank shall have received a certificate signed by duly authorized

          officers of the Borrower, dated the date of such Loan, stating that:

 

           (a)   The Borrower's representations and warranties contained in

               Article IV of this Agreement and in the Security Agreement and

               the other Loan Documents are correct on and as of the date of

               such Loan as though made on and as of such date;

 

          (b)   No Default or Event of Default has occurred and is continuing, or

               would result from such Loan or other event has occurred which

               would constitute an Event of Default but for the requirement that

               notice be given or time elapse or both; and

 

          (c)   There has been no material adverse change in the assets,

               liabilities, financial condition or business of the Borrower

               since the date of their, financial statements most recently

               delivered to the Bank.

 

     (2)   Each request for a Loan under the Equipment Credit shall be

          accompanied by a bill of sale, certificate of title or other

          certificate of ownership (including the executed application to add a

          lien holder), if applicable, an executed Installment Note, a separate

          security agreement, to the extent deemed necessary or appropriate by

          the Bank, and UCC-1 financing statements, if requested by the Bank,

          and such other documents as may reasonably be required by Bank or its

          counsel (including executed application(s) to add the Bank as a lien

          holder in the case of motor vehicles; and

 

     (3)   The Bank shall have received such other approvals, opinions,

          assurances or documents as the Bank may reasonably request from the

          Borrower.

 

                                   ARTICLE IV

                          REPRESENTATION AND WARRANTIES

 

     The Borrower represents and warrants to the Bank that:

 

     SECTION 4.01.     INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION. The

Borrower is a corporation duly incorporated, validly existing, and in good

standing under the laws of The Commonwealth of Massachusetts; has the corporate

power and authority to own its assets and to transact the business in which it

is now engaged or proposed to be engaged in; and is duly qualified as a foreign

corporation and in good standing under the laws of each other jurisdiction in

which such qualification is required.

 

     SECTION 4.02.     CORPORATE POWER AND AUTHORITY. The execution, delivery,

and performance by the Borrower of the Loan Documents to which it is a party

have been duly

 

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authorized by all necessary corporate action and do not and will not (1) require

any consent or approval of the stockholders of such corporation; (2) contravene

such corporation's charter or bylaws; (3) violate any provision of any law,

rule, regulation (including, without limitation, Regulation U of the Board of

Governors of the Federal Reserve System), order, writ, judgment, injunction,

decree, determination, or award presently in effect having applicability to such

corporation; (4) result in a breach of or constitute a default under any

indenture or loan or credit agreement or any other agreement, lease, or

instrument to which such corporation is a party or by which it or its properties

may be bound or affected; (5) result in, or require, the creation or imposition

of any Lien upon or with respect to any of the properties now owned or hereafter

acquired by such corporation, except as provided in this Agreement; and (6)

cause such corporation to be in default under any such law, rule, regulation,

order, writ, judgment, injunction, decree, determination or award or any such

indenture, agreement, lease, or instrument.

 

     SECTION 4.03.     LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each

of the other Loan Documents when delivered under this Agreement will be, legal,

valid, and binding obligations of the Borrower, enforceable against the Borrower

in accordance with their respective terms, except to the extent that such

enforcement may be limited by applicable bankruptcy, insolvency, and other

similar laws affecting creditors' rights generally.

 

     SECTION 4.04.     FINANCIAL STATEMENTS OF THE BORROWER. The financial

statements of the Borrower for the fiscal year then ended, and the accompanying

footnotes, and the interim balance sheet and the related statement of income and

retained earnings for the period then ended, copies of which have been furnished

to the Bank, are complete and correct and fairly