LOAN AND SECURITY AGREEMENT

EXHIBIT 10(W)

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LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") dated as of May

25th, 2007 (the "EFFECTIVE DATE") between (i) SILICON VALLEY BANK, a California

corporation with a loan production office located at One Newton Executive Park,

Suite 200, 2221 Washington Street, Newton, Massachusetts 02462 ("BANK"), and

(ii) SPIRE CORPORATION ("Spire"), a Massachusetts corporation, and BANDWIDTH

SEMICONDUCTOR, LLC ("Bandwidth"), a Delaware limited liability company (jointly

and severally, individually and collectively, the "BORROWER"), provides the

terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The

parties agree as follows:

1 ACCOUNTING AND OTHER TERMS

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Accounting terms not defined in this Agreement shall be construed

following GAAP. Calculations and determinations must be made following GAAP.

Capitalized terms not otherwise defined in this Agreement shall have the

meanings set forth in Section 13. All other terms contained in this Agreement,

unless otherwise indicated, shall have the meaning provided by the Code to the

extent such terms are defined therein.

2 LOAN AND TERMS OF PAYMENT

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2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay

Bank the outstanding principal amount of all Credit Extensions and accrued and

unpaid interest thereon as and when due in accordance with this Agreement.

2.1.1 EQUIPMENT ADVANCES.

(a) Availability. Subject to the terms and conditions of this

Agreement, during the Draw Period, Bank shall make advances (each, an "EQUIPMENT

ADVANCE" and, collectively, "EQUIPMENT ADVANCES") not exceeding the Equipment

Line. Equipment Advances may only be used to finance Eligible Equipment

purchased within ninety (90) days (determined based upon the applicable invoice

date of such Eligible Equipment) before the date of each Equipment Advance, and

no Equipment Advance may exceed 100% of the total invoice for Eligible

Equipment, excluding taxes, shipping, warranty charges, freight discounts and

installation expenses relating to such Eligible Equipment. Notwithstanding the

foregoing, the initial Equipment Advance (the "INITIAL EQUIPMENT ADVANCE")

hereunder may be used to reimburse Borrower for Eligible Equipment purchased on

or after September 29, 2006. Unless otherwise agreed to by Bank, not more than

25% of the proceeds of the Equipment Line shall be used to finance Other

Equipment. After repayment, no Equipment Advance may be reborrowed.

(b) Repayment. In addition to the monthly payments of interest, as

set forth in Section 2.2(a) below, the principal amount of each Equipment

Advance is payable in thirty-six (36) consecutive equal monthly payments of

principal beginning on the first Payment Date following the Funding Date of such

Equipment Advance and continuing on each Payment Date thereafter. The final

payment due on the applicable Equipment Line Maturity Date shall include all

outstanding principal and all accrued unpaid interest.

(c) Prepayment Upon an Event of Loss. Borrower shall bear the risk

of any loss, theft, destruction, or damage of or to the Financed Equipment. If,

during the term of this Agreement, any item of Financed Equipment becomes

obsolete or is lost, stolen, destroyed, damaged beyond repair, rendered

permanently unfit for use, or seized by a governmental authority for any reason

for a period equal to at least the remainder of the term of this Agreement (an

"EVENT OF LOSS"), then, if no Event of Default has occurred or is continuing,

within ten (10) days following such Event of Loss, at Borrower's option,

Borrower shall (i) pay to Bank on account of the Obligations all accrued

interest to the date of the prepayment, plus all outstanding principal owing

with respect to the Financed Equipment subject to the Event of Loss; or (ii)

repair or replace any Financed Equipment subject to an Event of Loss provided

the repaired or replaced Financed Equipment is of equal or like value to the

Financed Equipment subject to an Event of Loss and provided further that Bank

has a first priority perfected security interest in such repaired or replaced

Financed Equipment.

(d) Mandatory Prepayment Upon an Acceleration. If the Equipment

Advances are accelerated following the occurrence of an Event of Default,

Borrower shall immediately pay to Bank an amount equal to the sum of (i) all

outstanding principal plus accrued and unpaid interest and (ii) all other sums,

if any, that shall have become due and payable, including interest at the

Default Rate with respect to any past due amounts.

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(e) Permitted Prepayment of Equipment Advances. So long as no

Event of Default has occurred and is continuing, Borrower shall have the option

to prepay all, but not less than all, of the Equipment Advances advanced by Bank

under this Agreement, provided Borrower (i) delivers written notice to Bank of

its election to prepay the Equipment Advances at least thirty (30) days prior to

such prepayment, and (ii) pays, on the date of such prepayment (A) all

outstanding principal plus accrued and unpaid interest and (B) all other sums,

if any, that shall have become due and payable, including interest at the

Default Rate with respect to any past due amounts.

2.2 PAYMENT OF INTEREST ON THE CREDIT EXTENSIONS.

(a) Interest Rate. Subject to Section 2.2(b), the principal amount

outstanding for each Equipment Advance shall accrue interest at a floating per

annum rate equal to one half of one percentage point (0.5%) above the Prime

Rate, which interest shall be payable monthly.

(b) Default Rate. Immediately upon the occurrence and during the

continuance of an Event of Default, Obligations shall bear interest at a rate

per annum which is three percentage points (3.0%) above the rate effective

immediately before the Event of Default (the "DEFAULT RATE"). Payment or

acceptance of the increased interest rate provided in this Section 2.2(b) is not

a permitted alternative to timely payment and shall not constitute a waiver of

any Event of Default or otherwise prejudice or limit any rights or remedies of

Bank.

(c) Adjustment to Interest Rate. Changes to the interest rate of

any Credit Extension based on changes to the Prime Rate shall be effective on

the effective date of any change to the Prime Rate and to the extent of any such

change.

(d) 360-Day Year. Interest shall be computed on the basis of a

360-day year for the actual number of days elapsed.

(e) Debit of Accounts. Bank may debit any of Borrower's deposit

accounts, including the Designated Deposit Account, for principal and interest

payments or any other amounts Borrower owes Bank when due. These debits shall

not constitute a set-off.

(f) Payments. Unless otherwise provided, interest is payable

monthly on the Payment Date of each month. Payments of principal and/or interest

received after 12:00 noon Eastern time are considered received at the opening of

business on the next Business Day. When a payment is due on a day that is not a

Business Day, the payment is due the next Business Day and additional fees or

interest, as applicable, shall continue to accrue.

2.3 FEES. Borrower shall pay to Bank:

(a) Commitment Fee. A fully earned, non-refundable commitment fee

of Seventeen Thousand Five Hundred Dollars ($17,500.00), on the Effective Date,

which fee the parties acknowledge and agree has been paid by the Borrower to the

Bank; and

(b) Bank Expenses. All Bank Expenses (including reasonable

attorneys' fees and expenses, plus expenses, for documentation and negotiation

of this Agreement) incurred through and after the Effective Date, when due.

3 CONDITIONS OF LOANS

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3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. Bank's

obligation to make the initial Credit Extension is subject to the condition

precedent that Bank shall have received, in form and substance satisfactory to

Bank, such documents, and completion of such other matters, as Bank may

reasonably deem necessary or appropriate, including, without limitation:

(a) Duly executed original signatures to the Loan Documents to

which it is a party;

(b) Duly executed original signatures to the Control Agreement[s];

(c) Spire shall have delivered its Operating Documents and a good

standing certificate of Borrower certified by the Secretary of State of the

Commonwealth of Massachusetts as of a date no earlier than thirty (30) days

prior to the Effective Date;

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(d) Bandwidth shall have delivered its Operating Documents and a

good standing certificate of Borrower certified by the Secretary of State of the

State of Delaware as of a date no earlier than thirty (30) days prior to the

Effective Date;

(e) Duly executed original signatures to the completed Borrowing

Resolutions for each Borrower;

(f) Bank shall have received certified copies, dated as of a

recent date, of financing statement searches, as Bank shall request, accompanied

by written evidence (including any UCC termination statements) that the Liens

indicated in any such financing statements either constitute Permitted Liens or

have been or, in connection with the initial Credit Extension, will be

terminated or released;

(g) Borrower shall have delivered a landlord's consent executed in

favor of Bank;

(h) Borrower shall have delivered a legal opinion of Borrower's

counsel dated as of the Effective Date together with the duly executed original

signatures thereto;

(i) Borrower shall have delivered evidence satisfactory to Bank

that the insurance policies required by Section 6.5 hereof are in full force and

effect, together with appropriate evidence showing loss payable and/or

additional insured clauses or endorsements in favor of Bank; and

(j) Borrower shall have paid the fees and Bank Expenses then due

as specified in Section 2.3 hereof.

3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations

to make each Credit Extension, including the initial Credit Extension, is

subject to the following:

(a) except as otherwise provided in Section 3.4, timely receipt of

an executed Payment/Advance Form;

(b) the representations and warranties in Section 5 shall be true

in all material respects on the date of the Payment/Advance Form and on the

Funding Date of each Credit Extension; provided, however, that such materiality

qualifier shall not be applicable to any representations and warranties that

already are qualified or modified by materiality in the text thereof; and

provided, further that those representations and warranties expressly referring

to a specific date shall be true, accurate and complete in all material respects

as of such date, and no Default or Event of Default shall have occurred and be

continuing or result from the Credit Extension. Each Credit Extension is

Borrower's representation and warranty on that date that the representations and

warranties in Section 5 remain true in all material respects; provided, however,

that such materiality qualifier shall not be applicable to any representations

and warranties that already are qualified or modified by materiality in the text

thereof; and provided, further that those representations and warranties

expressly referring to a specific date shall be true, accurate and complete in

all material respects as of such date; and

(c) in Bank's sole discretion, there has not been any material

impairment in the general affairs, management, results of operation, financial

condition or the prospect of repayment of the Obligations, nor has there been

any material adverse deviation by Borrower from the most recent business plan of

Borrower presented to and accepted by Bank.

3.3 COVENANT TO DELIVER. Borrower agrees to deliver to Bank each item

required to be delivered to Bank under this Agreement as a condition to any

Credit Extension. Borrower expressly agrees that the extension of a Credit

Extension prior to the receipt by Bank of any such item shall not constitute a

waiver by Bank of Borrower's obligation to deliver such item, and any such

extension in the absence of a required item shall be in Bank's sole discretion.

3.4 PROCEDURES FOR BORROWING. Subject to the prior satisfaction of all

other applicable conditions to the making of an Equipment Advance set forth in

this Agreement, to obtain an Equipment Advance, Borrower must notify Bank (which

notice shall be irrevocable) by electronic mail or facsimile no later than 12:00

noon Eastern time one (1) Business Day before the proposed Funding Date. The

notice shall be a Payment/Advance Form, must be signed by a Responsible Officer

or designee, and shall include a summary listing of the Equipment being

financed.

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4 CREATION OF SECURITY INTEREST

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4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure

the payment and performance in full of all of the Obligations, a continuing

security interest in, and pledges to Bank, the Collateral, wherever located,

whether now owned or hereafter acquired or arising, and all proceeds and

products thereof. Borrower represents, warrants, and covenants that the security

interest granted herein is and shall at all times continue to be a first

priority perfected security interest in the Collateral (subject only to

Permitted Liens that may have superior priority to Bank's Lien under this

Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall

promptly notify Bank in a writing signed by Borrower of the general details

thereof and grant to Bank in such writing a security interest therein and in the

proceeds thereof, all upon the terms of this Agreement, with such writing to be

in form and substance reasonably satisfactory to Bank.

If this Agreement is terminated, Bank's Lien in the Collateral shall

continue until the Obligations (other than inchoate indemnity obligations) are

repaid in full in cash. Upon payment in full in cash of the Obligations and at

such time as Bank's obligation to make Credit Extensions has terminated, Bank

shall, at Borrower's sole cost and expense, release its Liens in the Collateral

and all rights therein shall revert to Borrower.

4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby

authorizes Bank to file financing statements, without notice to Borrower, with

all appropriate jurisdictions to perfect or protect Bank's interest or rights

hereunder, including a notice that any disposition of the Collateral, by either

Borrower or any other Person, shall be deemed to violate the rights of Bank

under the Code.

5 REPRESENTATIONS AND WARRANTIES

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Borrower represents and warrants as follows:

5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each of its

Subsidiaries, if any, are duly existing and in good standing, as Registered

Organizations in their respective jurisdictions of formation and are qualified

and licensed to do business and are in good standing in any jurisdiction in

which the conduct of their business or their ownership of property requires that

they be qualified except where the failure to do so could not reasonably be

expected to have a material adverse effect on Borrower's business. In connection

with this Agreement, Borrower has delivered to Bank a completed perfection

certificate signed by Borrower (the "PERFECTION CERTIFICATE"). Borrower

represents and warrants to Bank that (a) Borrower's exact legal name is that

indicated on the Perfection Certificate and on the signature page hereof; (b)

Borrower is an organization of the type and is organized in the jurisdiction set

forth in the Perfection Certificate; (c) the Perfection Certificate accurately

sets forth Borrower's organizational identification number or accurately states

that Borrower has none; (d) the Perfection Certificate accurately sets forth

Borrower's place of business, or, if more than one, its chief executive office

as well as Borrower's mailing address (if different than its chief executive

office); (e) the Perfection Certificate accurately sets forth any changes to the

Borrower's (and each of its predecessors) jurisdiction of formation,

organizational structure or type, or any organizational number assigned by its

jurisdiction in the past five (5) years; and (f) all other information set forth

on the Perfection Certificate pertaining to Borrower and each of its

Subsidiaries is accurate and complete. If Borrower is not now a Registered

Organization but later becomes one, Borrower shall promptly notify Bank of such

occurrence and provide Bank with Borrower's organizational identification

number.

The execution, delivery and performance of the Loan Documents have been

duly authorized, and do not conflict with Borrower's organizational documents,

nor constitute an event of default under any material agreement by which

Borrower is bound. Borrower is not in default under any agreement to which it is

a party or by which it is bound in which the default could reasonably be

expected to have a material adverse effect on Borrower's business.

5.2 COLLATERAL. Borrower has good title to, has rights in, and the

power to transfer each item of the Collateral upon which it purports to grant a

Lien hereunder, free and clear of any and all Liens except Permitted Liens.

Borrower has no deposit accounts other than the deposit accounts with Bank, the

deposit accounts, if any, described in the Perfection Certificate delivered to

Bank in connection herewith, or of which Borrower has given Bank notice and

taken such actions as are necessary to give Bank a perfected security interest

therein. The Accounts are bona fide, existing obligations of the Account

Debtors.

The Collateral is not in the possession of any third party bailee (such

as a warehouse) except as otherwise provided in the Perfection Certificate. None

of the components of the Collateral shall be maintained at locations other than

as provided in the Perfection Certificate or as Borrower has given Bank notice

pursuant to Section 7.2. In the event that Borrower, after the date hereof,

intends to store or otherwise deliver any portion of the Collateral to a

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bailee, then Borrower will first receive the written consent of Bank and such

bailee must execute and deliver a bailee agreement in form and substance

satisfactory to Bank in its sole discretion.

All Financed Equipment is new, except for such Financed Equipment that

has been disclosed in writing to Bank by Borrower as "used" and that Bank, in

its sole discretion, has agreed to finance. All Inventory is in all material

respects of good and marketable quality, free from material defects.

Except as noted on the Perfection Certificate, Borrower is not a party

to, nor is bound by, any material license or other agreement with respect to

which Borrower is the licensee that prohibits or otherwise restricts Borrower

from granting a security interest in Borrower's interest in such license or

agreement or any other property. Borrower shall provide written notice to Bank

within ten (10) days of entering or becoming bound by any such license or

agreement which is reasonably likely to have a material impact on Borrower's

business or financial condition (other than over-the-counter software that is

commercially available to the public). Borrower shall take such steps as Bank

requests to obtain the consent of, or waiver by, any person whose consent or

waiver is necessary for all such licenses or contract rights to be deemed

"Collateral" and for Bank to have a security interest in it that might otherwise

be restricted or prohibited by law or by the terms of any such license or

agreement (such consent or authorization may include a licensor's agreement to a

contingent assignment of the license to Bank if Bank determines that is

necessary in its good faith judgment), whether now existing or entered into in

the future.

5.3 LITIGATION. Except as set forth on SCHEDULE 5.3 attached hereto,

there are no actions or proceedings pending or, to the knowledge of the

Responsible Officers, threatened in writing by or against Borrower or any of its

Subsidiaries involving more than One Hundred Thousand Dollars ($100,000.00).

5.4 NO MATERIAL DETERIORATION IN FINANCIAL STATEMENTS. All

consolidated financial statements for Borrower and any of its Subsidiaries

delivered to Bank fairly present in all material respects Borrower's

consolidated financial condition and Borrower's consolidated results of

operations. There has not been any material deterioration in Borrower's

consolidated financial condition since the date of the most recent financial

statements submitted to Bank.

5.5 SOLVENCY. The fair salable value of Borrower's assets (including

goodwill minus disposition costs) exceeds the fair value of its liabilities;

Borrower is not left with unreasonably small capital after the transactions in

this Agreement; and Borrower is able to pay its debts (including trade debts) as

they mature.

5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or

a company "controlled" by an "investment company" under the Investment Company

Act of 1940. Borrower is not engaged as one of its important activities in

extending credit for margin stock (under Regulations T and U of the Federal

Reserve Board of Governors). Borrower has complied in all material respects with

the Federal Fair Labor Standards Act. Borrower has not violated any laws,

ordinances or rules, the violation of which could reasonably be expected to have

a material adverse effect on its business. None of Borrower's or any of its

Subsidiaries' properties or assets has been used by Borrower or any Subsidiary

or, to the best of Borrower's knowledge, by previous Persons, in disposing,

producing, storing, treating, or transporting any hazardous substance other than

legally. Borrower and each of its Subsidiaries have obtained all consents,

approvals and authorizations of, made all declarations or filings with, and

given all notices to, all government authorities that are necessary to continue

its business as currently conducted.

5.7 SUBSIDIARIES; INVESTMENTS. Borrower does not own any stock,

partnership interest or other equity securities except for Permitted

Investments.

5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has

timely filed all required tax returns and reports, and Borrower and its

Subsidiaries have timely paid all foreign, federal, state and local taxes,

assessments, deposits and contributions owed by Borrower. Borrower may defer

payment of any contested taxes, provided that Borrower (a) in good faith

contests its obligation to pay the taxes by appropriate proceedings promptly and

diligently instituted and conducted, (b) notifies Bank in writing of the

commencement of, and any material development in, the proceedings, (c) posts

bonds or takes any other steps required to prevent the governmental authority

levying such contested taxes from obtaining a Lien upon any of the Collateral

that is other than a "Permitted Lien". Borrower is unaware of any claims or

adjustments proposed for any of Borrower's prior tax years which could result in

additional taxes becoming due and payable by Borrower. Borrower has paid all

amounts necessary to fund all present pension, profit sharing and deferred

compensation plans in accordance with their terms, and Borrower has not

withdrawn from participation in, and has not permitted partial or complete

termination of, or permitted the occurrence of any other event with respect to,

any such plan which could reasonably be expected to

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result in any liability of Borrower, including any liability to the Pension

Benefit Guaranty Corporation or its successors or any other governmental agency.

5.9 USE OF PROCEEDS. Borrower shall use the proceeds of the Credit

Extensions solely to purchase Eligible Equipment and to fund its general

business requirements and not for personal, family, household or agricultural

purposes.

5.10 FULL DISCLOSURE. No written representation, warranty or other

statement of Borrower in any certificate or written statement given to Bank, as

of the date such representations, warranties, or other statements were made,

taken together with all such written certificates and written statements given

to Bank, contains any untrue statement of a material fact or omits to state a

material fact necessary to make the statements contained in the certificates or

statements not misleading (it being recognized by Bank that the projections and

forecasts provided by Borrower in good faith and based upon reasonable

assumptions are not viewed as facts and that actual results during the period or

periods covered by such projections and forecasts may differ from the projected

or forecasted results).

6 AFFIRMATIVE COVENANTS

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Borrower shall do all of the following:

6.1 GOVERNMENT COMPLIANCE. Maintain its and all its Subsidiaries'

legal existence and good standing in their respective jurisdictions of formation

and maintain qualification in each jurisdiction in which the failure to so

qualify would reasonably be expected to have a material adverse effect on

Borrower's business or operations. Borrower shall comply, and have each

Subsidiary comply, with all laws, ordinances and regulations to which it is

subject, the noncompliance with which could have a material adverse effect on

Borrower's business.

6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

(a) Deliver to Bank: (i) as soon as available, but no later than

thirty (30) days after the last day of each month, a company prepared

consolidated balance sheet and income statement covering Borrower's consolidated

operations during the period certified by a Responsible Officer and in a form

acceptable to Bank; (ii) as soon as available, but no later than one hundred

fifty (150) days after the last day of Borrower's fiscal year, audited

consolidated financial statements prepared under GAAP, consistently applied,

together with an unqualified opinion on the financial statements from an

independent certified public accounting firm acceptable to Bank in its

reasonable discretion; (iii) within five (5) days of delivery, copies of all

statements, reports and notices made available to Borrower's security holders or

to any holders of Subordinated Debt; (iv) in the event that Borrower becomes

subject to the reporting requirements under the Securities Exchange Act of 1934,

as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and

8-K filed with the Securities and Exchange Commission or a link thereto on

Borrower's or another website on the Internet; (v) a prompt report of any legal

actions pending or threatened against Borrower or any of its Subsidiaries that

could result in damages or costs to Borrower or any of its Subsidiaries of One

Hundred Thousand Dollars ($100,000) or more; (vi) annually, but no later than

forty-five (45) days of Board approval, annual budget and financial projections

with any material changes; and (vii) other financial information reasonably

requested by Bank.

(b) Within thirty (30) days after the last day of each month,

deliver to Bank with the monthly financial statements, a duly completed

Compliance Certificate signed by a Responsible Officer setting forth

calculations showing compliance with the financial covenants set forth in this

Agreement.

6.3 INVENTORY; RETURNS. Keep all Inventory in good and marketable

condition, free from material defects. Returns and allowances between Borrower

and its Account Debtors shall follow Borrower's customary practices as they

exist at the Effective Date. Borrower must promptly notify Bank of all returns,

recoveries, disputes and claims that involve more than Two Hundred Fifty

Thousand Dollars ($250,000).

6.4 TAXES; PENSIONS. Make, and cause each of its Subsidiaries to make,

timely payment of all foreign, federal, state, and local taxes or assessments

(other than taxes and assessments which Borrower is contesting pursuant to the

terms of Section 5.8 hereof) and shall deliver to Bank, on demand, appropriate

certificates attesting to such payments, and pay all amounts necessary to fund

all present pension, profit sharing and deferred compensation plans in

accordance with their terms.

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6.5 INSURANCE. Keep its business and the Collateral insured for risks

and in amounts standard for companies in Borrower's industry and location and as

Bank may reasonably request. Insurance policies shall be in a form, with

companies, and in amounts that are satisfactory to Bank. All property policies

shall have a lender's loss payable endorsement showing Bank as lender loss payee

and waive subrogation against Bank, and all liability policies shall show, or

have endorsements showing, Bank as an additional insured. All policies (or the

loss payable and additional insured endorsements) shall provide that the insurer

must give Bank at least twenty (20) days notice before canceling, amending, or

declining to renew its policy. At Bank's request, Borrower shall deliver

certified copies of policies and evidence of all premium payments. Proceeds

payable under any policy shall, at Bank's option, be payable to Bank on account

of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of

Default has occurred and is continuing, Borrower shall have the option of

applying the proceeds of any casualty policy up to $250,000 with respect to any

loss, but not exceeding $500,000, in the aggregate for all losses under all

casualty policies in any one year, toward the replacement or repair of destroyed

or damaged property; provided that any such replaced or repaired property (i)

shall be of equal or like value as the replaced or repaired Collateral and (ii)

shall be deemed Collateral in which Bank has been granted a first priority

security interest, and (b)after the occurrence and during the continuance of an

Event of Default, all proceeds payable under such casualty policy shall, at the

option of Bank, be payable to Bank on account of the Obligations. If Borrower

fails to obtain insurance as required under this Section 6.5 or to pay any

amount or furnish any required proof of payment to third persons and Bank, Bank

may make all or part of such payment or obtain such insurance policies required

in this Section 6.5, and take any action under the policies Bank deems prudent.

6.6 OPERATING ACCOUNTS.

(a) Borrower and its Subsidiaries shall maintain their domestic

depository accounts (with the exception of petty cash deposit accounts, as set

forth on SCHEDULE 6.6, provided that the maximum aggregate balance of such

accounts do not exceed Fifty Thousand Dollars ($50,000.00), in the aggregate, at

any time, and a Citizens Bank Savings Account No. 1165-123685 up to Three

Hundred Thousand Dollars ($300,000.00) to secure reimbursement obligations under

letters of credit, collectively, the "PERMITTED ACCOUNTS") and securities

accounts (with the exception of Borrower's Citibank Securities Account) with

Bank and Bank's affiliates. In addition to the foregoing, within ninety (90)

days after the Effective Date, Borrower shall maintain its and its Subsidiaries'

operating accounts with Bank and Bank's affiliates.

(b) Provide Bank five (5) days prior written notice before

establishing any Collateral Account at or with any bank or financial institution

other than Bank or its Affiliates. In addition, for each Collateral Account that

Borrower at any time maintains (with the exception of the Permitted Accounts),

Borrower shall cause the applicable bank or financial institution (other than

Bank) at or with which any Collateral Account is maintained to execute and

deliver a Control Agreement or other appropriate instrument with respect to such

Collateral Account to perfect Bank's Lien in such Collateral Account in

accordance with the terms hereunder. The provisions of the previous sentence

shall not apply to deposit accounts exclusively used for payroll, payroll taxes

and other employee wage and benefit payments to or for the benefit of Borrower's

employees and identified to Bank by Borrower as such.

6.7 FINANCIAL COVENANTS.

Borrower shall maintain, at all times, to be tested as of the last

day of each month, unless otherwise noted, on a consolidated basis:

(a) Adjusted Quick Ratio. An Adjusted Quick Ratio of at least: (i)

1.0 to 1.0 as of the last day of each of the months ending May 31, 2007, and

June 30, 2007; and (ii) 1.5 to 1.0 as of the last day of the month ending July

31, 2007, and as of the last day of each month thereafter. Notwithstanding the

foregoing, the failure of Borrower to comply with this financial covenant during

any such month shall not constitute an Event of Default provided that: (a)

during any quarter in which Borrower maintains Net Income (tested as of the last

day of each quarter) of less then One Dollar ($1.00), Borrower's Unrestricted

Cash is greater than or equal to one and one-quarter times (1.25x) the

outstanding principal amount of the Equipment Line at all times during such

month, or (b) during any quarter in which Borrower maintains Net Income (tested

as of the last day of each quarter) of at least One Dollar ($1.00), Borrower's

Unrestricted Cash is greater than or equal to one times (1.0x) the principal

amount of the outstanding Equipment Line at all times during such month.

(b) Minimum Quarterly Net Income. Borrower shall maintain Net

Income of at least: (i) ($1,500,000.00) as of the last day of the quarter

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ending June 30, 2007, (ii) $1.00 as of the last day of the quarter ending

September 30, 2007, and (iii) $250,000.00 as of the last day of the quarter

ending December 31, 2007, and as of the last day of each quarter thereafter.

6.8 INTENTIONALLY DELETED.

6.9 LITIGATION COOPERATION. From the date hereof and continuing

through the termination of this Agreement, make available to Bank, without

expense to Bank, Borrower and its officers, employees and agents and Borrower's

books and records, to the extent that Bank may deem them reasonably necessary to

prosecute or defend any third-party suit or proceeding instituted by or against

Bank with respect to any Collateral or relating to Borrower.

6.10 FURTHER ASSURANCES. Execute any further instruments and take

further action as Bank reasonably requests to perfect or continue Bank's Lien in

the Collateral or to effect the purposes of this Agreement.

7 NEGATIVE COVENANTS

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Borrower shall not do any of the following without Bank's prior written

consent:

7.1 DISPOSITIONS. Convey, sell, lease, transfer, assign, or otherwise

dispose of (collectively, "TRANSFER"), or permit any of its Subsidiaries to

Transfer, all or any part of its business or property, except for Transfers (a)

of Inventory in the ordinary course of business; (b) of worn-out or obsolete

Equipment that does not constitute Financed Equipment; and (c) in connection

with Permitted Liens and Permitted Investments.

7.2 CHANGES IN BUSINESS, MANAGEMENT, OWNERSHIP, OR BUSINESS LOCATIONS.

(a) Engage in or permit any of its Subsidiaries to engage in any business other

than the businesses currently engaged in by Borrower and such Subsidiary, as

applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) if

a Key Person ceases to hold such office with Borrower and a replacement

satisfactory to Bank is not made within ninety (90) days thereafter. Borrower

shall not, without at least thirty (30) days prior written notice to Bank: (1)

add any new offices or business locations, including warehouses (unless such new

offices or business locations contain less than Ten Thousand Dollars ($10,000)

in Borrower's assets or property), (2) change its jurisdiction of organization,

(3) change its organizational structure or type, (4) change its legal name, or

(5) change any organizational number (if any) assigned by its jurisdiction of

organization.

7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of

its Subsidiaries to merge or consolidate, with any other Person, or acquire, or

permit any of its Subsidiaries to acquire, all or substantially all of the

capital stock or property of another Person. A Subsidiary may merge or

consolidate into another Subsidiary or into Borrower.

7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any

Indebtedness, or permit any Subsidiary to do so, other than Permitted

Indebtedness.

7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its

property, or assign or convey any right to receive income, including the sale of

any Accounts, or permit any of its Subsidiaries to do so, except for Permitted

Liens, or permit any Collateral not to be subject to the first priority security

interest granted herein, or enter into any agreement, document, instrument or

other arrangement (except with or in favor of Bank) with any Person which

directly or indirectly prohibits or has the effect of prohibiting Borrower or

any Subsidiary from assigning, mortgaging, pledging, granting a security

interest in or upon, or encumbering any of Borrower's or any Subsidiary's

intellectual property, except as is otherwise permitted in Section 7.1 hereof

and the definition of "Permitted Liens" herein.

7.6 MAINTENANCE OF COLLATERAL ACCOUNTS. Maintain any Collateral

Account except pursuant to the terms of Section 6.6(b) hereof.

7.7 DISTRIBUTIONS; INVESTMENTS. (a) Directly or indirectly make any

Investment other than Permitted Investments, or permit any of its Subsidiaries

to do so; or (b) pay any dividends or make any distribution or payment or

redeem, retire or purchase any capital stock.

7.8 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 7.8,

directly or indirectly enter into or permit to exist any material transaction

with any Affiliate of Borrower, except for transactions that are in the

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ordinary course of Borrower's business, upon fair and reasonable terms that are

no less favorable to Borrower than would be obtained in an arm's length

transaction with a non-affiliated Person.

7.9 SUBORDINATED DEBT. (a) Make or permit any payment on any

Subordinated Debt, except under the terms of the subordination, intercreditor,

or other similar agreement to which such Subordinated Debt is subject, or (b)

amend any provision in any document relating to the Subordinated Debt which

would increase the amount thereof or adversely affect the subordination thereof

to Obligations owed to Bank.

7.10 COMPLIANCE. Become an "investment company" or a company controlled

by an "investment company", under the Investment Company Act of 1940 or

undertake as one of its important activities extending credit to purchase or

carry margin stock (as defined in Regulation U of the Board of Governors of the

Federal Reserve System), or use the proceeds of any Credit Extension for that

purpose; fail to meet the minimum funding requirements of ERISA, permit a

Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail

to comply with the Federal Fair Labor Standards Act or violate any other law or

regulation, if the violation could reasonably be expected to have a material

adverse effect on Borrower's business, or permit any of its Subsidiaries to do

so; withdraw or permit any Subsidiary to withdraw from participation in, permit

partial or complete termination of, or permit the occurrence of any other event

with respect to, any present pension, profit sharing and deferred compensation

plan which could reasonably be expected to result in any liability of Borrower,

including any liability to the Pension Benefit Guaranty Corporation or its

successors or any other governmental agency.

8 EVENTS OF DEFAULT

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Any one of the following shall constitute an event of default (an

"EVENT OF DEFAULT") under this Agreement:

8.1 PAYMENT DEFAULT. Borrower fails to (a) make any payment of

principal or interest on any Credit Extension on its due date, or (b) pay any

other Obligations within three (3) Business Days after such Obligations are due

and payable (which three (3) Business Day grace period will not apply to

payments due on the Equipment Line Maturity Date). During the cure period, the

failure to cure the payment default is not an Event of Default (but no Credit

Extension will be made during the cure period);

8.2 COVENANT DEFAULT.

(a) Borrower fails or neglects to perform any obligation in

Sections 6.2, 6.5, 6.6, 6.7, or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any

other term, provision, condition, covenant or agreement contained in this

Agreement, any Loan Documents, and as to any default (other than those specified

in this Section 8) under such other term, provision, condition, covenant or

agreement that can be cured, has failed to cure the default within ten (10) days

after the occurrence thereof; provided, however, that if the default cannot by

its nature be cured within the ten (10) day period or cannot after diligent

attempts by Borrower be cured within such ten (10) day period, and such default

is likely to be cured within a reasonable time, then Borrower shall have an

additional period (which shall not in any case exceed thirty (30) days) to

attempt to cure such default, and within such reasonable time period the failure

to cure the default shall not be deemed an Event of Default (but no Credit

Extensions shall be made during such cure period). Grace periods provided under

this Section shall not apply, among other things, to financial covenants or any

other covenants set forth in subsection (a) above;

8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;

8.4 ATTACHMENT. (a) Any material portion of Borrower's assets is

attached, seized, levied on, or comes into possession of a trustee or receiver

and the attachment, seizure or levy is not removed in ten (1