SEC Filing - AngioDynamics

Title of Each Class of

Securities to be Registered

Proposed Maximum
Aggregate Offering Price(a)

Amount of
Registration Fee

Common Stock, $.01 par value per share (and associated preferred stock purchase rights) (b)

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Form S-1

As Filed with the Securities and Exchange Commission on March 5, 2004

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT

Under The Securities Act of 1933

AngioDynamics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

3841

11-3146460

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

603 Queensbury Avenue

Queensbury, New York 12804

(518) 798-1215

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Eamonn P. Hobbs

AngioDynamics, Inc.

603 Queensbury Avenue

Queensbury, New York 12804

(518) 798-1215

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Marc A. Berger, Esq.

Scott M. Tayne, Esq.

Denis S. Frawley, Esq.

Davies Ward Phillips & Vineberg LLP

625 Madison Avenue

New York, New York 10022

(212) 308-8866

Jonathan B. Abram, Esq.

Dorsey & Whitney LLP

50 South Sixth Street

Suite 1500

Minneapolis, Minnesota 55402

(612) 340-2600

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

(continued on next page)

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ¨

Calculation of Registration Fee

(a)	Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(b)	The preferred stock purchase rights are initially attached to and trade with our shares of common stock registered hereby. Value attributed to such rights, if any, is reflected in the market price of our common stock.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We cannot sell these securities until the Securities and Exchange Commission declares our registration statement for our prospectus effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated March 5, 2004

PROSPECTUS

Shares

LOGO

Common Stock

This is AngioDynamics, Inc.’s initial public offering. AngioDynamics, Inc. is selling shares of common stock.

We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. After pricing the offering, we expect the common stock will be quoted on the Nasdaq National Market under the symbol “ANGO.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 6.

PRICE $ PER SHARE


	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Net proceeds, before expenses, to AngioDynamics	$	$

The underwriters may also purchase up to an additional shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.

The underwriters expect to deliver the shares on or about , 2004.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

RBC CAPITAL MARKETS

ADAMS, HARKNESS & HILL

, 2004

TABLE OF CONTENTS


	Page
Assumptions Used in this Prospectus	(iii	)
Prospectus Summary	1
Summary Consolidated Financial Data	4
Risk Factors	6
Forward Looking Statements	20
Use of Proceeds	21
Dividend Policy	21
Capitalization	22
Dilution	23
Selected Consolidated Financial Data	24
Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Business	40


		Page
Management		58
Relationship and Arrangements with E-Z-EM		71
Other Related Party Transactions		79
Principal Stockholder		80
Description of Capital Stock		81
Shares Eligible for Future Sale		85
Certain U.S. Federal Tax Considerations for Non-U.S. Holders		87
Underwriting		90
Legal Matters		93
Experts		93
Where You Can Find More Information		93
Index to Consolidated Financial Statements		F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. We are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers or sales are permitted. The information in this prospectus is only accurate on the date of this prospectus. Our business, financial condition or results of operations may have changed since that date.

For investors outside the United States: Neither we nor any of the underwriters for the offering of our common stock have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to, our offering and the distribution of this prospectus.

(ii)

ASSUMPTIONS USED IN THIS PROSPECTUS

Throughout this prospectus, our fiscal years ended May 29, 1999, June 3, 2000, June 2, 2001, June 1, 2002 and May 31, 2003 are referred to as fiscal 1999, 2000, 2001, 2002 and 2003, respectively. Our fiscal year consists of 52 or 53 weeks and ends on the Saturday nearest to May 31^st in the applicable year. Fiscal year 2000 was a 53-week year. All other fiscal years consisted of 52 weeks. The six-month periods included in this prospectus consist of 26 weeks ended on November 30, 2002 and November 29, 2003.

Unless we indicate otherwise, all of the information in this prospectus:

assumes reclassification and change of our outstanding shares of Class A voting common stock and Class B non-voting common stock into 9,200,000 shares of common stock (at a ratio of 9,200 shares to 1), to be effected prior to completion of this offering;

assumes the underwriters do not exercise the option granted by us to purchase additional shares in this offering;

does not give effect to the exercise of outstanding options to purchase 1,337,136 shares of common stock under our 1997 Stock Option Plan;

does not include an aggregate of 1,160,532 shares of our common stock available for future issuance or grant under our 1997 Stock Option Plan and our 2004 Stock and Incentive Award Plan; and

does not give effect to the exercise of options for shares of our common stock that we will issue to holders of E-Z-EM stock options in connection with the distribution of our common stock to the E-Z-EM stockholders.

We have registered the following marks with the U.S. Patent and Trademarks Office: AngioDynamics; Pulse*Spray; and Soft-Vu. This prospectus also contains trademarks of companies other than AngioDynamics, including elvs, a trademark of biolitec, Inc.

We have also registered the Internet domain names http://www.angiodynamics.com and http://www.elvslaser.com.

(iii)

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the Risk Factors section and our consolidated financial statements and the related notes.

Our Business

The procedures performed by interventional physicians to treat PVD-related and other non-coronary conditions require a variety of medical devices. We have developed a diversified product line to meet our customers’ needs. Our seven current product lines, and the percentage of our fiscal 2003 revenues they accounted for, include: angiographic catheters (35.6%), hemodialysis catheters (24.4%), percutaneous transluminal angioplasty, or PTA, dilation catheters (7.9%), thrombolytic products (7.8%), image-guided vascular access products (6.9%), endovascular laser venous system products (5.5%) and drainage products (3.4%).

We believe that we are well positioned to benefit from growth in the PVD market anticipated to result from ongoing medical and demographic trends. Millennium Research Group reports that over 11 million Americans suffer from PVD. We estimate that aggregate U.S. expenditures on PVD devices that we currently sell will increase from approximately $760 million in 2002 to over $1 billion in 2007. Several factors are driving this growth, including an aging population, higher incidence rates of obesity and diabetes, greater adoption of the minimally invasive procedures performed by interventional physicians, greater public awareness of PVD symptoms and treatments, and the introduction of new image-guided procedures.

We sell our products to interventional physicians through a direct sales force in the United States and through distributors in 26 non-U.S. markets. Because physicians believe that the outcome of medical procedures can be significantly affected by the specific device used, they typically influence the purchasing decisions of the hospitals and other institutions in which they practice. Consequently, our physician relationships are critical to our continued growth. In over a decade of serving interventional physicians, our management team and sales representatives have developed valuable relationships with, and brand awareness among interventional physicians. We believe we are the only company whose primary focus is to offer a comprehensive product line for the interventional treatment of PVD. This focus, combined with our responsive, physician-driven product development efforts, engenders brand loyalty among our customer base.

By expanding our sales force and introducing innovative products, we have generated strong, consistent sales growth over the past three fiscal years. Approximately 55% of our net sales for fiscal 2003 were from products introduced during the past five fiscal years. From fiscal 2000 to fiscal 2003, we increased sales from $21.8 million to $38.4 million, a compound annual growth rate, or CAGR, of 20.8%. During the same period, we increased earnings from a net loss of $1.4 million to net earnings of $1.2 million.

Our Strategy

We enter market segments in which we believe we can successfully compete with larger diversified competitors as well as single or limited product companies. We invest significantly in research and development and intend to continue to expand our product offering by entering new and attractive market segments. The key elements of our strategy include:

expanding our sales and marketing efforts;

developing new products and enhancing existing products;

offering a broad product line;

vertically integrating manufacturing; and

acquiring or partnering with complementary businesses.

Our History

We were founded in 1988 as a division of E-Z-EM, Inc., a leading developer and manufacturer of gastrointestinal contrast agents and related imaging accessories. E-Z-EM is a public company that is traded on the American Stock Exchange under the symbol EZM. In 1992, we were organized in the State of Delaware as a wholly-owned subsidiary of E-Z-EM under the name A.D., Inc. In 1996, E-Z-EM transferred the business of its AngioDynamics division to us, and we changed our name to AngioDynamics, Inc. Our corporate offices and manufacturing capabilities are in a single facility located at 603 Queensbury Avenue, Queensbury, New York, 12804. Our phone number is (518) 798-1215 and our website is www.angiodynamics.com. Information on our website is not a part of this prospectus.

Relationship with E-Z-EM, Inc.

We are a wholly-owned subsidiary of E-Z-EM. After the completion of this offering, E-Z-EM will own approximately % of the outstanding shares of our common stock, or approximately % if the underwriters fully exercise their option to purchase additional shares of our common stock. This means that E-Z-EM will control many aspects of our business.

E-Z-EM has advised us that it plans to distribute to its stockholders all of our common stock that it owns. E-Z-EM will, in its sole discretion, determine the timing, structure and all terms of the distribution. E-Z-EM has agreed with the underwriters that it will not complete the distribution until at least 120 days after the date of this prospectus without the prior written consent of RBC Capital Markets Corporation. The distribution depends on the satisfaction or waiver of a number of conditions. E-Z-EM has received a private letter ruling from the Internal Revenue Service that the distribution of its shares of our common stock to E-Z-EM stockholders will be tax-free to E-Z-EM and its stockholders. E-Z-EM has advised us that it intends to complete the distribution by February 5, 2005. However, E-Z-EM is not obligated to complete the distribution, and there can be no assurance that the distribution will occur.

Prior to the completion of this offering, we intend to enter into agreements related to the separation of our business operations from E-Z-EM, including:

master separation and distribution agreement;

corporate agreement; and

tax allocation and indemnification agreement.

The agreements relating to the separation of our business operations from E-Z-EM are described more fully in “Relationship and Arrangements with E-Z-EM” included elsewhere in this prospectus. The terms of these agreements with E-Z-EM will be established in the context of a parent-subsidiary relationship and may be more or less favorable to us than if they had been negotiated with unaffiliated third parties.

We believe that AngioDynamics will realize benefits from its separation from E-Z-EM, including:

Direct Access to Capital Markets. Following the expiration of restrictions on our ability to raise capital related to our separation from E-Z-EM, we will be able to directly access the capital markets to raise equity capital and issue debt securities in an efficient and cost-effective way, as well as to facilitate growth, including through acquisitions.

Greater Strategic Focus. We expect that the separation will allow our directors and management to concentrate on developing business and strategic opportunities focused only on our products and customer base.

Increased Speed and Responsiveness. As a separate company, we believe that we will be able to make decisions more quickly and assign resources more rapidly and efficiently than we could as part of a larger organization.

Better Incentives for Management and Employees and Greater Accountability. The separation will enable us to offer our employees compensation and incentive programs directly linked to the performance of the AngioDynamics business and the market performance of our stock, which we expect to enhance our ability to attract, retain and motivate qualified personnel.

The Offering

Common stock offered by us

Common stock outstanding after the offering

Use of proceeds

We intend to use the net proceeds from this offering for new product development, potential acquisitions, repayment of $3.0 million of debt to E-Z-EM and general corporate purposes. See “Use of Proceeds.”

Risk factors

See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in shares of our common stock.

Proposed Nasdaq National Market symbol

“ANGO”

Summary Consolidated Financial Data

The following tables summarize consolidated financial and operating data regarding our business and should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.


	Fifty-two weeks ended									Twenty-six weeks ended
	June 2, 2001			June 1, 2002			May 31, 2003			Nov. 30, 2002			Nov. 29, 2003
	(in thousands, except share and per share data)
Statement of earnings data:
Net sales	$	23,390		$	30,890		$	38,434		$	17,096		$	22,481
Cost of goods sold		12,418			15,333			18,572			8,135			10,854

Gross profit		10,792			15,557			19,862			8,961			11,627

Operating expenses:
Sales and marketing		7,089			8,901			11,338			5,127			6,239
General and administrative		1,875			2,317			2,777			1,303			1,637
Research and development		1,426			1,951			2,509			1,176			1,621
Loss on sale of subsidiary and related assets		872			—			—			—			—

Total operating expenses		11,262			13,169			16,624			7,606			9,497

Operating profit (loss)		(290	)		2,388			3,238			1,355			2,130
Interest expense, net (a)		(880	)		(818	)		(983	)		(475	)		(493	)

Earnings (loss) before income tax provision (benefit)		(1,170	)		1,570			2,255			880			1,637
Income tax provision (benefit)		(1,513	)		561			1,069			544			723

Net earnings	$	343		$	1,009		$	1,186		$	336		$	914

Net earnings per common share (b)
Basic:	$	343		$	1,009		$	1,186		$	336		$	914

Diluted:	$	343		$	994		$	1,152		$	327		$	881

Weighted average number of shares used in per share calculations (b)
Basic:		1,000			1,000			1,000			1,000			1,000
Diluted:		1,000			1,015			1,030			1,029			1,037

Cash flow data:
Net cash provided by (used in) operating activities	$	409		$	1,206		$	680		$	(267	)	$	780
Net cash provided by (used in) investing activities		1,499			(715	)		(4,572	)		(3,785	)		(321	)
Net cash provided by (used in) financing activities		(1,761	)		371			3,306			3,376			(120	)


	As of November 29, 2003
	Actual			Pro Forma as Adjusted(c)
Balance sheet data:
Cash and cash equivalents	$	1,278		$
Working capital		13,158
Total assets		28,542
Non-current liabilities		19,333
Additional paid-in capital		13,152
Accumulated deficit		(10,029	)
Total stockholders’ equity		2,956

(a)

Interest expense includes imputed interest on debt to E-Z-EM of $892, $446 and $421 for the fifty-two weeks ended May 31, 2003 and the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively. The interest charges are treated as non-cash items for cash flow purposes and increases to additional paid-in capital. Of the $16,148 debt due to E-Z-EM as of November 29, 2003, $13,148 will be capitalized prior to the completion of this offering and the remaining $3,000 will be repaid from the proceeds of this offering.

(b)	Does not give effect to the reclassification and change of our outstanding shares of Class A voting common stock and Class B non-voting common stock into 9,200,000 shares of common stock (at a ratio of 9,200 shares to 1) to be effected prior to completion of this offering.

(c)

Pro forma as adjusted amounts give effect to the issuance and sale of shares of our common stock at an initial public offering price of $ per share, the capitalization of $13,148 of debt due to E-Z-EM prior to completion of this offering, and the receipt and application of the estimated net proceeds of $ million from this offering, after deducting the underwriting discount and estimated offering expenses payable by us.

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully read and consider the risks described below before making an investment decision. If any of the following risks actually occurs, our business, financial condition, results of operations or cash flows could be seriously harmed. In any such case, the trading price of our common stock could decline and you could lose all or part of your investment. When determining whether to buy our common stock, you should also refer to the other information in this prospectus, including our financial statements and the related notes.

Risks Related to our Business

If we fail to develop new products and enhance existing products, we could lose market share to our competitors and our results of operations could suffer.

The market for interventional devices is characterized by rapid technological change, new and improved product introductions, changes in customer requirements and evolving industry standards. To be successful, we must develop and commercialize new products and enhanced versions of our existing products. Our products are technologically complex and require significant planning, design, development and testing before they may be marketed. This process takes at least nine to 12 months and may take up to several years. Our success in developing and commercializing new versions of our products is affected by our ability to:

timely and accurately identify new market trends;

accurately assess customer needs;

minimize the time and costs required to obtain regulatory clearance or approval;

adopt competitive pricing;

timely manufacture and deliver products;

accurately predict and control costs associated with the development, manufacturing and support of our products; and

anticipate and compete effectively with our competitors’ efforts.

Market acceptance of our products depends in part on our ability to demonstrate that our products are cost-effective and easier to use, as well as offer technological advantages. Additionally, we may experience design, manufacturing, marketing or other difficulties that could delay or prevent our development, introduction or marketing of new versions of our products. As a result of such difficulties and delays, our development expenses may increase and, as a consequence, our results of operations could suffer.

Competition may decrease our market share and cause our revenues to decline.

The markets for interventional devices are highly competitive, and we expect competition to intensify in the future. We may not be able to compete effectively in these markets and we may lose market share to our competitors. The principal competitors in the markets for our products currently include: Boston Scientific Corporation; Cook, Incorporated; Cordis Corporation, a subsidiary of Johnson & Johnson Inc.; C.R. Bard, Inc.; Diomed, Inc.; Medical Components, Inc., or Medcomp; and VNUS Medical Technologies, Inc. Many of our competitors have substantially greater:

financial and other resources;

variety of products;

technical capabilities;

ability to develop and introduce new products;

patent portfolios that may present an obstacle to our conduct of business;

name recognition; and

distribution networks and in-house sales forces.

Our competitors may succeed in developing technologies and products earlier, in obtaining patent protection or regulatory clearance earlier or in commercializing new products or technologies more rapidly than us. Our competitors may also develop products and technologies that are superior to those we are developing or that otherwise render our products obsolete or noncompetitive. In addition, we may face competition from providers of other medical therapies, such as pharmaceutical companies, which may offer non-surgical therapies for conditions that are currently or intended to be treated using our products. Our products are generally sold at higher prices than those of our competitors. In the current environment of managed care, economically motivated buyers, consolidation among healthcare providers, increased competition and declining reimbursement rates, we are increasingly being required to compete on the basis of price. If we are not able to compete effectively, our market share and revenues may decline.

If we fail to adequately protect our intellectual property rights, our business may suffer.

Our success depends in part on obtaining, maintaining and enforcing our patents, trademarks and other proprietary rights, and our ability to avoid infringing the proprietary rights of others. We take precautionary steps to protect our technological advantages and intellectual property. We rely upon patent, trade secret, copyright, know-how and trademark laws, as well as license agreements and contractual provisions, to establish our intellectual property rights and protect our products. These measures may not adequately protect our intellectual property rights.

Our patents may not provide commercially meaningful protection, as competitors may be able to design around our patents to produce alternative, non-infringing designs. Additionally, we may not be able to effectively protect our rights in unpatented technology, trade secrets and confidential information. Although we require our new employees, consultants and corporate partners to execute confidentiality agreements, these agreements may not provide effective protection of our information or, in the event of unauthorized use or disclosure, may not provide adequate remedies.

If third parties claim that our products infringe their intellectual property rights, we may be forced to expend significant financial resources and management time defending against such actions and our results of operations could suffer.

Third parties may claim that our products infringe on third-party patents and other intellectual property rights. Identifying third-party patent rights can be particularly difficult because, in general, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date. Some companies in the medical device industry have used intellectual property infringement litigation to gain a competitive advantage. If a competitor were to challenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive changes to our product designs, license rights in order to continue manufacturing and selling our products, or pay substantial damages. Third-party infringement claims, regardless of their outcome, would not only consume our financial resources but also

divert our management’s time and effort. Such claims could also cause our customers or potential customers to purchase competitors’ products or defer or limit their purchase or use of our affected products until resolution of the claim.

In January 2004, Diomed filed an action against us alleging that our elvs products for the treatment of varicose veins infringe on a patent held by Diomed for a laser system that competes with our elvs products. Diomed’s complaint seeks injunctive relief and compensatory and treble damages. If Diomed is successful in this action, our results of operations could suffer.

We are dependent on single and limited source suppliers, which puts us at risk for supplier business interruptions.

We currently purchase significant amounts of several key products and product components from single and limited source suppliers. For fiscal 2003, approximately 40% of our revenues were derived from sales of products manufactured for us by third parties. Our principal single source supplier, Medcomp, supplies us with our hemodialysis catheters, which accounted for about 24% of our revenues in fiscal 2003. Medcomp also competes with us by selling a hemodialysis catheter for which it has not granted us exclusive rights and other catheters that we do not license from them. Additionally, we purchase the laser and laser fibers for our elvs products from biolitec, Inc., which also competes with us. Any delays in delivery of or shortages in those products and components could interrupt and delay manufacturing of our products and result in the cancellation of orders for our products. Any or all of these suppliers could discontinue the manufacture or supply of these products and components at any time. We may not be able to identify and integrate alternative sources of supply in a timely fashion or at all. Any transition to alternate suppliers may result in production delays and increased costs and may limit our ability to deliver products to our customers. Furthermore, if we are unable to identify alternative sources of supply, we would have to modify our products to use substitute components, which may cause delays in shipments, increased design and manufacturing costs and increased prices for our products.

Our lack of customer purchase contracts and our limited order backlog make it difficult to predict sales and plan manufacturing requirements, which can lead to lower revenues, higher expenses and reduced margins.

We do not generally have long-term purchase contracts with our customers, who order products on a purchase order basis. Our typical order backlog is less than 10 days. These factors make it difficult to accurately forecast our component and product requirements. Our manufacturing and operating expenses are largely based on anticipated sales volume and a significant portion of these expenses are and will continue to be fixed. We must plan production and order products and product components several months in advance of customer orders. In addition, lead-times for products and product components that we order vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at any given time. These factors expose us to a number of risks such as:

if we overestimate our requirements we may be obligated to purchase more inventory than we need;

if we underestimate our requirements, we may have an inadequate product or product component inventory, which could interrupt manufacturing of our products and cause delays in shipments and revenues; and

we may experience shortages of product components from time to time, which could delay the manufacturing and shipping of our products.

If we do not develop or maintain successful relationships with non-U.S. distributors, our growth may be limited, sales of our products may decrease and our results of operations may suffer.

For fiscal 2003, we generated approximately 7% of our revenues from sales outside of the United States. All of our non-U.S. sales in recent periods were attributable to third-party distributors, and our success in expanding non-U.S. sales in the future will depend on our ability to develop and manage a network of non-U.S. distributors and on the performance of our distributors. Because we generally do not have long-term contracts with our distributors, our distribution relationships may be terminated on little or no notice. In addition, some of our distributors are not required to purchase any minimum amount of products from us, may sell products that compete with ours or devote more efforts to selling other products, and may stop selling our products at any time. If we lose any significant non-U.S. distributors, or if any of our distributors devote more effort to selling other products than to ours, our non-U.S. sales and results of operations may suffer and our growth may be limited. Additionally, because our products generally compete more on the basis of performance than price, they may not be as attractive to third-party distributors as lower priced products. Consequently, our success in expanding non-U.S. sales may be limited if our distributors lack, or are unable to develop, relationships with important target customers in non-U.S. markets.

Our business may be harmed if interventional cardiologists perform more of the procedures that interventional radiologists and vascular surgeons currently perform.

We market and sell our products primarily to interventional radiologists and vascular surgeons, who currently perform a large percentage of minimally invasive, image-guided interventional procedures for PVD. Many of our competitors have focused their sales efforts on the cardiology market for interventional procedures. Since we have focused our sales and marketing efforts on interventional radiologists and vascular surgeons, our competitors may have advantages over us for sales to cardiologists. Consequently, if cardiologists perform more of the procedures currently performed by interventional radiologists and vascular surgeons, our revenues may decline and our business may be harmed.

Our business could be harmed if we lose the services of our key personnel.

Our business depends upon the efforts of Eamonn P. Hobbs, our president and chief executive officer, and other key managerial, sales and technical personnel, as well as our ability to continue to attract and retain additional highly qualified personnel. We compete for such key personnel with other companies, healthcare institutions, academic institutions, government entities and other organizations. We do not maintain key person life insurance on any of our executive officers, and we do not have employment agreements with our executive officers. Our ability to maintain and expand our business may be impaired if we are unable to retain our current key personnel or hire or retain other qualified personnel in the future.

Undetected defects may increase our costs and impair the market acceptance of our products.

Our products have occasionally contained, and may in the future contain, undetected defects. When these problems occur, we must divert the attention of our engineering personnel to address them. We cannot assure you that we will not incur warranty or repair costs, be subject to liability claims for damages related to product defects, or experience manufacturing, shipping or other delays or interruptions as a result of these defects in the future. Any insurance policies that we may have may not provide sufficient protection should a claim be asserted. In addition, the occurrence of defects may result in significant customer relations problems and injury to our reputation and may impair the market acceptance of our products.

If a product liability claim is brought against us or our product liability insurance coverage is inadequate, our business could be harmed.

The design, manufacture and marketing of medical devices of the type we produce entail an inherent risk of product liability. Our products are used by physicians to treat seriously ill patients. Those patients may bring claims in a number of circumstances and for a number of reasons, including if our products were misused, if they produced unsatisfactory results and if the instructions for use and operating manuals for our products were found to be inadequate. Claims could also be brought by our customers. We currently are subject to an action claiming that we supplied a defective catheter that contributed to the death of a hemodialysis patient. Although we believe, based on claims made against us in the past, that our existing product liability insurance coverage is reasonably adequate to protect us from any liabilities we might incur, we cannot assure you that it will be sufficient to satisfy any claim made against us, or that we will be able to maintain this insurance at a reasonable cost and on reasonable terms, or at all. Any product liability claim brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing any coverage in the future. Additionally, if any such product liability claim or series of claims is brought against us for uninsured liabilities or is in excess of our insurance coverage, our business could be harmed. Further, such claims may require us to recall some of our products, which could result in significant costs to us, and could divert management’s attention from our business.

Our quarterly operating results are volatile, which may cause our stock price to decline.

Our quarterly results of operations have varied significantly in the past and are likely to vary significantly in the future due to a number of factors, many of which are outside of our control, including:

changes in our ability to obtain products and product components that are manufactured for us by third parties, as well as variations in prices of these products and product components;

delays in the development or commercial introduction of new versions of our products or components we use in our products;

our ability to attain and maintain production volumes and quality levels for our products and product components;

effects of domestic and foreign economic conditions on our industry and/or customers;

changes in the demand for our products;

changes in the mix of products and systems we sell;

delays in obtaining regulatory clearance for new versions of our products;

increased product and price competition;

changes in the availability of third-party reimbursement for our products;

the loss of key sales personnel or distributors; and

seasonality in the sales of our products.

Due to the factors summarized above, we do not believe that period-to-period comparisons of our results of operations are necessarily meaningful, or should necessarily be relied upon to predict future results of operations. Also, it is possible that in future periods, our results of operations will not meet the expectations of investors or analysts, or any published reports or analyses regarding AngioDynamics. In that event, the price of our common stock could decline, perhaps substantially.

Healthcare reform could cause a decrease in demand for our interventional products.

There are currently widespread legislative efforts to control healthcare costs in the United States and abroad, which we expect will continue in the future. For example, the Medicare Prescription Drug Improvement and Modernization Act of 2003 provides that from 2004 through 2008, reimbursement levels for durable medical equipment will no longer be increased on an annual basis and a competitive bidding program will be introduced. At this time, we are unable to determine whether and to what extent these changes will apply to our products and our business. Similar legislative efforts in the future could negatively impact demand for our products.

Inadequate levels of reimbursement from governmental or other third-party payors for procedures using our products may cause our revenues to decline.

Changes in healthcare systems in the United States or elsewhere could adversely affect the demand for our products, as well as the way we conduct business. Third-party payors have adopted, and are continuing to adopt, a number of healthcare policies intended to curb rising healthcare costs. These policies include:

controls on government-funded reimbursement for healthcare services and price controls on medical products and services providers;

challenges to the pricing of medical procedures or limits or prohibitions on reimbursement for specific devices and therapies through other means; and

the introduction of managed care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person.

We are unable to predict whether Federal, state or local healthcare reform legislation or regulation affecting our business may be proposed or enacted in the future, or what effect any such legislation or regulation would have on our business. These policies, or any reductions in the number of authorizations granted for procedures performed using our current and proposed products or in the levels of reimbursement for those procedures, could cause our revenues to decline.

Outside of the United States, reimbursement systems vary significantly by country. Many foreign markets have government-managed healthcare systems that govern reimbursement for new devices and procedures. These systems are subject to the same pressures to curb rising healthcare costs and control healthcare expenditures as those in the United States. If adequate levels of reimbursement from third-party payors outside of the United States are not obtained, sales of our products outside of the United States may decrease and we may fail to achieve or maintain significant non-U.S. sales.

If we cannot obtain approval from governmental agencies, we will not be able to sell our products.

Our products are medical devices that are subject to extensive regulation in the United States and in foreign countries where they are sold. Unless an exemption applies, each medical device that we wish to market in the United States must receive either 510(k) clearance or premarket approval from the FDA before the product can be sold. Either process can be lengthy and expensive. The FDA’s 510(k) clearance procedure, also known as “premarket notification,” is the process used for our current products. This process usually takes from four to 12 months from the date the application is submitted to, and filed with, the FDA, but may take significantly longer. Although we have obtained 510(k) clearances for our current products, our clearances may be revoked by the FDA if safety or effectiveness problems develop with the devices. The premarket approval process is much more costly, lengthy and uncertain. It generally takes from one to three years from the date the application is submitted to, and filed with, the FDA, and may take even longer. Achieving premarket approval may take numerous clinical trials and require the filing of numerous

amendments over time. Regulatory regimes in other countries similarly require approval or clearance prior to our marketing or selling products in those countries. If we are unable to obtain additional clearances or approvals needed to market existing or new products in the United States or elsewhere, or obtain these clearances or approvals in a timely fashion, our revenues and profitability may decline.

Modifications to our current products may require new marketing clearances or approvals or require us to cease marketing or recall the modified products until such clearances or approvals are obtained.

Any modification to an FDA-cleared medical device that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, requires a new and complete FDA 510(k) clearance or possibly premarket approval. The FDA requires every manufacturer to make its own determination as to whether a modification requires a new 510(k) clearance or premarket approval, but the FDA may review and disagree with any decision reached by the manufacturer. We have modified aspects of some of our devices since receiving regulatory clearance. We believed that some of these modifications were not significant and, therefore, did not seek new 510(k) clearances or premarket approvals. Other modifications we believed were significant and we have obtained additional 510(k) clearances from the FDA for these modifications. In the future, we may make additional modifications to our products after they have received FDA clearance or approval and, in appropriate circumstances, determine that new clearance or approval is unnecessary. Regulations in other countries in which we market or sell, or propose to market or sell, our products may also require that we make judgments about changes to our products and whether or not those changes are such that regulatory approval or clearance should be obtained. In the United States and elsewhere, regulatory authorities may disagree with our past or future decisions not to seek new clearance or approval and may require us to obtain clearance or approval for modifications to our products. If that were to occur for a previously cleared or approved product, we may be required to cease marketing or recall the modified device until we obtain the necessary clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other penalties. If any of the foregoing were to occur, our business could suffer.

If we or our suppliers fail to comply with the FDA’s Quality System regulation, our manufacturing operations could be delayed, and our product sales and profitability could suffer.

Our manufacturing processes and those of our suppliers must comply with the FDA’s Quality System regulation, which governs the methods used in, and the facilities and controls used for, the design, testing, manufacture, control, quality assurance, installation, servicing, labeling, packaging, storage and shipping of medical products. The FDA enforces the Quality System regulation through unannounced inspections. If we or one of our suppliers fails a Quality System regulation inspection, or if a corrective action plan adopted by us or one of our suppliers is not sufficient, the FDA may bring an enforcement action, and our operations could be disrupted and our manufacturing delayed. If we or our suppliers fail to take adequate corrective action in response to any significant compliance issue raised by the FDA, the FDA can take various enforcement actions, including an order to shut-down manufacturing operations or a recall of products. In either event, our product sales and profitability could suffer. In addition, most other countries require us and our suppliers to comply with manufacturing and quality assurance standards for medical devices that are similar to those in force in the United States before marketing and selling our products in those countries.

Even after receiving regulatory clearance or approval, our products may be subject to product recalls, which may harm our reputation and divert managerial and financial resources.

The FDA and similar governmental authorities in other countries have the authority to order mandatory recall of our products or order their removal from the market if there are material deficiencies or defects in

design, manufacture, installation, servicing or labeling of the device, or if the governmental entity finds that our products would cause serious adverse health consequences. A government mandated or voluntary recall by us could occur as a result of component failures, manufacturing errors or design defects, including labeling defects. Any recall of our products may harm our reputation with customers and divert managerial and financial resources.

We may require additional capital. Failure to attract additional capital could curtail our growth.

We may require additional capital to expand our business. If cash generated internally is insufficient to fund capital requirements, we will require additional debt or equity financing. Needed financing may not be available or, if available, may not be available on terms satisfactory to us and may result in significant shareholder dilution. We are subject to significant restrictions on our ability to issue equity securities or convertible debt to ensure that the distribution by E-Z-EM of our stock will be tax-free to E-Z-EM and its stockholders. In addition, covenants in our industrial bond financing and bank line of credit may also restrict our ability to obtain additional debt financing. If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our growth strategy by reducing or delaying capital expenditures and acquisitions, selling assets, restructuring our operations or refinancing our indebtedness.

Any disaster at our manufacturing facilities could disrupt our ability to manufacture our products for a substantial amount of time, which could cause our revenues to decrease.

We conduct all of our manufacturing and assembly at a single facility in Queensbury, New York. This facility and our manufacturing equipment would be difficult to replace and, if our facility is affected by a disaster, could require substantial lead-time to repair or replace. Additionally, we might be forced to rely on third-party manufacturers or to delay production of our products. Insurance for damage to our property and the disruption of our business from disasters may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. In addition, if one of our principal suppliers were to experience a similar disaster, uninsured loss or under-insured loss, we might not succeed in obtaining adequate alternative sources of supplies or products. Any significant uninsured loss, prolonged or repeated disruption, or inability to operate experienced by us or any of our principal suppliers could cause significant harm to our business, financial condition and results of operations.

Risks Related to our Relationship with and Separation from E-Z-EM

We have limited ability to engage in acquisitions and other strategic transactions using our equity, or to obtain equity financing, because of the Federal income tax requirements for a tax-free distribution.

For the distribution of our stock by E-Z-EM to qualify as tax-free to E-Z-EM and its stockholders, E-Z-EM must own at least 80% of the voting power of our outstanding voting stock and 80% of the total number of our outstanding shares of capital stock at the time of the distribution. The shares we will issue in this offering will constitute about % of our outstanding shares immediately after the offering, or %, if the underwriters exercise their over-allotment option in full. Following this offering, we will not issue equity securities or convertible debt without E-Z-EM’s prior consent if the issuance would cause E-Z-EM to own less than 80% of our outstanding equity or voting power on a fully-diluted basis or otherwise cause the distribution of our stock by E-Z-EM not to be tax-free to E-Z-EM and its stockholders. E-Z-EM’s consent right will terminate upon the earlier of:

E-Z-EM notifying us that it is abandoning the distribution;

completion of the distribution by E-Z-EM;

February 5, 2005; or

August 5, 2005 if, by February 5, 2005, E-Z-EM obtains an opinion of counsel that completion of the distribution after February 5, 2005 will not result in the distribution being taxable.

E-Z-EM may be unwilling to give its consent before completing the distribution or may impose conditions in its consent, including the right to acquire such number of our securities so as to enable it to maintain its percentage ownership of our securities. Additionally, for any distribution of our stock by E-Z-EM to qualify as tax-free to E-Z-EM, there must not be a change in ownership of 50% or greater in either the voting power or value of either our stock or E-Z-EM’s stock that is considered to be part of a plan or series of transactions related to the distribution. This offering of our common stock will be counted towards the 50%, with the result that a subsequent change in ownership (other than as the result of certain transactions in the public markets) of slightly more than 30% of our stock would render the distribution taxable to E-Z-EM. For a change in ownership occurring after the distribution to be characterized as part of a plan, there must have been an agreement, understanding, arrangement or substantial negotiations regarding the acquisition or a similar acquisition at some time during the two-year period ending on the date of the distribution. However, the shorter the time period between the distribution and change in ownership, the greater the burden of establishing that the two events are not part of a plan. Under a “safe harbor provision,” a distribution and acquisition will not be considered part of a plan if the distribution is motivated by a corporate business purpose (other than the acquisition) and the acquisition occurs more than six months after the distribution, provided that there was no agreement, understanding, arrangement or substantial negotiations with respect to the acquisition or a similar acquisition during the period that begins one year before the distribution and ends six months thereafter.

Our master separation and distribution agreement will provide that we will indemnify E-Z-EM if the distribution by E-Z-EM of its AngioDynamics shares does not qualify as tax-free due to actions we take or that otherwise relate to AngioDynamics, including any change of ownership of AngioDynamics. The process for determining whether a change of ownership has occurred under the tax rules is complex. If we do not carefully monitor our compliance with these rules, we might inadvertently cause or permit a change of ownership to occur, triggering our obligation to indemnify E-Z-EM. Our obligation to indemnify E-Z-EM if a change of ownership causes the distribution not to be tax-free could discourage or prevent a third party from making a proposal to acquire us.

For the reasons described above, our ability to use our stock for acquisitions and other similar strategic transactions, to raise capital, or for compensation for employees and others, will be restricted. Many of our competitors use their equity to complete acquisitions, to expand their product offerings and speed the development of new technology and to attract and retain employees and other key personnel, giving them a potentially significant competitive advantage over us.

If E-Z-EM does not complete its distribution of our common stock, the liquidity of our stock could be limited.

E-Z-EM has advised us that it plans to distribute to its stockholders all AngioDynamics common stock that it owns by February 5, 2005. However, completion of the distribution depends on the satisfaction or waiver of a number of conditions. E-Z-EM is not obligated to make the distribution and it may not occur.

If the distribution is delayed beyond February 5, 2005, the distribution may still be completed in reliance upon an opinion of E-Z-EM’s tax counsel. In any event, if the distribution is delayed or not completed, the liquidity of our shares will be constrained unless and until E-Z-EM elects to sell some

portion of its equity ownership in us. In addition, E-Z-EM has agreed with the underwriters that it will not complete the distribution until at least 120 days after the date of this prospectus without the prior written consent of RBC Capital Markets Corporation.

As long as E-Z-EM owns a majority of our common stock, our other stockholders will be unable to affect the outcome of stockholder voting.

After the completion of this offering, E-Z-EM will beneficially own at least 80% of the outstanding shares of our common stock. As long as E-Z-EM owns a majority of our outstanding common stock, our other stockholders will generally be unable to affect or change the management or the direction of our company without E-Z-EM’s support. Additionally, as long as E-Z-EM owns a majority of our outstanding common stock, E-Z-EM will continue to be able to elect our entire board of directors and, generally, to determine the outcome of all corporate actions requiring stockholder approval. E-Z-EM’s interests may differ from or conflict with the interests of our other stockholders. Although E-Z-EM will agree that, for so long as it owns any of our common stock, it will vote its shares to elect to our board of directors the number of independent directors required to comply with the Nasdaq National Market listing requirements, E-Z-EM will be in a position to control all matters affecting our company, including:

our general corporate direction and policies;

amendments to our certificate of incorporation and bylaws;

acquisitions, sales of our assets, mergers or similar transactions, including transactions involving a change of control;

future issuances of common stock or other securities of our company;

the incurrence of debt by our company;

the payment of dividends on our common stock;

compensation, stock option and other human resources policy decisions; and

the allocation of business opportunities that may be suitable for E-Z-EM and us.

Members of the Stern and Meyers families and their affiliates own in the aggregate approximately 57% of E-Z-EM’s outstanding shares of common stock. These stockholders are able to significantly influence all matters requiring E-Z-EM stockholder approval, including the election of directors and significant corporate transactions, such as mergers or other business combinations, and thus may indirectly affect us with respect to these types of matters. Further, if, as we expect, E-Z-EM completes the distribution to its stockholders of the AngioDynamics stock it owns, these two stockholder groups will own approximately 45% of our outstanding common stock (assuming no other issuances of our stock) and will be able to significantly influence, if not exercise control over, our important corporate and business matters. This control by E-Z-EM before the distribution, and by these stockholders after the distribution, may delay, deter or prevent a third-party from acquiring or merging with us. As a result, this control may not be in the best interests of our other stockholders, and may in turn reduce the market price of our common stock.

We cannot rely on E-Z-EM to fund our future capital requirements, and financing from other sources may not be available on favorable terms or at all.

In the past, most of our capital needs have been funded by E-Z-EM. However, following this offering, E-Z-EM will be under no obligation to provide funds to finance our working capital or other cash requirements. Financing or financial support from other sources, if needed, may not be available on favorable terms or at all.

We believe our capital requirements will vary greatly from quarter to quarter. Capital expenditures, fluctuations in our results of operations, financing activities, acquisitions, investments and inventory and receivables management may contribute to these fluctuations. Although we believe that the proceeds from this offering and our future cash flow from operations will be sufficient to satisfy our working capital, capital expenditure and research and development requirements for at least the next 12 months, we may require or choose to obtain additional debt or equity financing to finance acquisitions or other investments in our business. Future equity financings may be dilutive to the existing holders of our common stock. Future debt financings could involve restrictive covenants.

Some of our directors may have conflicts of interest because they are also directors of E-Z-EM, and some of our directors and executive officers own E-Z-EM stock or options to purchase E-Z-EM stock.

When we complete this offering of our common stock, three of our directors, Messrs. Echenberg, Meyers and Stern, will also be directors of E-Z-EM. These directors will have obligations to both companies and may have conflicts of interest with respect to matters involving or affecting us, including, for example, acquisitions and other corporate opportunities that may be suitable for both us and E-Z-EM. After completion of this offering, a number of our directors and executive officers will continue to own E-Z-EM stock or options to purchase E-Z-EM stock they acquired as directors or employees of E-Z-EM. These ownership interests could create, or appear to create, potential conflicts of interest when these directors and executive officers are faced with decisions that could have different implications for our company and E-Z-EM.

The agreements we are entering into with E-Z-EM in connection with this offering could restrict our operations.

Before the completion of this offering, we and E-Z-EM will enter into a number of agreements governing our separation from E-Z-EM and our future relationship. The terms and provisions of these agreements may be less favorable to us than terms and provisions we could have obtained in arm’s-length negotiations with unaffiliated third parties. Under these agreements with E-Z-EM, we will agree to take actions, observe commitments and accept terms and conditions that are or may be advantageous to E-Z-EM but are or may be disadvantageous to us. The terms of these agreements will include obligations and restrictive provisions, including, but not limited to:

an agreement to indemnify E-Z-EM, its affiliates, and each of their respective directors, officers, employees, agents and representatives from all liabilities that arise from our breach of, or performance under, the agreements we are entering into with E-Z-EM in connection with the separation and for any of our liabilities;

an agreement to indemnify E-Z-EM for certain tax liabilities and for any action or inaction by us that, if the distribution by E-Z-EM of our stock to its stockholders occurs, cause the distribution to be taxable to E-Z-EM or its stockholders;

an agreement to not change our significant accounting principles for periods in which our financial results are included in E-Z-EM’s consolidated financial statements, unless we are required to do so to comply, in all material respects, with generally accepted accounting principles and SEC requirements; and

an agreement not to compete with E-Z-EM’s current business activities for a period of five years.

We will also agree that, so long as E-Z-EM is required to consolidate our company within its financial statements, we will use E-Z-EM’s auditors, use reasonable efforts to have our annual audit completed on the same date as E-Z-EM’s annual audit and provide information and access to E-Z-EM and its auditors.

For a further discussion of our agreements with E-Z-EM, see “Relationship and Arrangements with E-Z-EM.”

We face risks associated with being a member of E-Z-EM’s consolidated group for Federal income tax purposes.

For so long as E-Z-EM continues to own at least 80% of the voting power and value of our capital stock, we will be included in E-Z-EM’s consolidated group for Federal income tax purposes. Under a tax allocation and indemnification agreement we will enter into with E-Z-EM, we will pay E-Z-EM the amount of Federal income taxes that we would be required to pay if we were a separate taxpayer not included in E-Z-EM’s consolidated return. In addition, by virtue of its controlling ownership and the tax responsibility allocation agreement, E-Z-EM will effectively control substantially all of our tax decisions and will have sole authority to respond to and conduct all tax proceedings, including tax audits relating to E-Z-EM’s consolidated income tax returns in which we are included. Moreover, notwithstanding the tax allocation and indemnification agreement, Federal law provides that each member of a consolidated group is liable for the group’s entire tax obligation. Thus, to the extent E-Z-EM or other members of the group fail to make any Federal income tax payments required of them by law, we could be liable for the shortfall. For a further discussion of these tax issues, see “Relationship and Arrangements with E-Z-EM — Tax Allocation and Indemnification Agreement.”

Risks Relating to the Offering of our Securities

We cannot predict the impact of the distribution on the price of our common stock.

We cannot predict the effect that the distribution by E-Z-EM of our stock to its stockholders will have on the market price of our common stock. E-Z-EM has advised us that it intends to distribute 9,200,000 shares of our common stock, or % of our common stock, by E-Z-EM to its stockholders. Of these shares, approximately 4,000,000 will be eligible for immediate resale in the public markets following the distribution. In addition, significant amounts of common stock may be sold in the open market in anticipation of, or following, the distribution by E-Z-EM. Sales of substantial amounts of our common stock in the public market, or the perception that substantial sales might occur, whether as a result of this distribution or otherwise, could cause the market price of our stock to decline significantly.

Our stock price may be volatile because of factors beyond our control, and you may lose all or a part of your investment.

Any of the following factors could affect the market price of our common stock:

our failure to maintain profitability;

our failure to meet financial analysts’ performance expectations;

changes in earnings estimates and recommendations by financial analysts;

actual or anticipated variations in our quarterly results of operations;

changes in market valuations of similar companies;

announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments;

the loss of major customers or product or component suppliers;

product liability lawsuits or product recalls; and

general market, political and economic conditions.

Before this offering, E-Z-EM held all of our outstanding common stock, and therefore, there has been no public market for shares of our common stock. An active trading market may not develop or be sustained following completion of this offering. The initial public offering price of the shares has been determined by negotiations between us and representatives of the underwriters. The price may bear no relationship to the price at which our common stock will trade upon completion of this offering. The stock market has experienced significant price and volume fluctuations. Fluctuations or decreases in the trading price of our common stock may adversely affect your ability to trade your shares.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s attention and resources that would otherwise be used to benefit the future performance of our business.

Future sales of our common stock by E-Z-EM and E-Z-EM’s ownership of a majority of our common stock could cause our stock price to decrease.

Our agreements with E-Z-EM will not prevent E-Z-EM from selling its AngioDynamics common stock. Additionally, if the distribution is delayed or not completed, we may be required to prepare and file with the SEC registration statements covering such sales by E-Z-EM, or prepare offering memorandums for use by E-Z-EM in private offerings of our stock. The sale or potential sale by E-Z-EM of AngioDynamics common stock, even of relatively small amounts, could result in a lower trading price of our stock. Additionally, as a result of E-Z-EM’s ability to control our company, some investors may be unwilling to purchase our common stock. If the demand for our common stock is reduced because of E-Z-EM’s control of our company, the price of our stock could be materially depressed.

Provisions in our charter documents, our rights plan, Delaware law and tax considerations related to the distribution by E-Z-EM may delay or prevent a change in control.

Provisions in our amended and restated certificate of incorporation and bylaws, our stockholder rights plan and under Delaware law could make it more difficult for other companies to acquire us, even if doing so would benefit our stockholders. Our amended and restated certificate of incorporation and bylaws contain the following provisions, among others, which may inhibit an acquisition of our company by a third party:

a classified board of directors;

advance notification procedures for matters to be brought before stockholder meetings;

a limitation on who may call stockholder meetings;

a prohibition on stockholder action by written consent after the distribution by E-Z-EM; and

the ability of our board of directors to issue up to 5,000,000 shares of preferred stock without a stockholder vote.

The issuance of stock under our stockholder rights plan could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests. We are also subject to provisions of Delaware law that prohibit us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 15% of our stock cannot acquire us for a period of three years from the date this person became an interested stockholder unless various conditions are met, such as approval of the transaction by our board of directors. Any of these restrictions could have the effect of delaying or preventing a change in control. For a more complete discussion of these provisions of Delaware law, please see “Description of Capital Stock — Anti-Takeover Provisions.”

In addition, our master separation and distribution agreement with E-Z-EM will provide that we will indemnify E-Z-EM for any taxes due if the distribution fails to qualify as tax-free because of our actions or inactions. An acquisition of us by a third party could have such an effect. As a result, these tax considerations may delay or prevent a third party from acquiring us in a transaction you may otherwise have considered favorable or reduce the amount you receive as part of the transaction.

As a new investor, you will experience immediate and substantial dilution in net tangible book value.

The initial public offering price per share of our common stock will exceed the net tangible book value per share of our common stock immediately after this offering. Accordingly, if you purchase common stock in this offering, you will incur immediate dilution in pro forma net tangible book value of approximately $ per share. If the holders of outstanding options for our common stock exercise these options in the future, you will incur further dilution.

We have not paid and have no plans to pay cash dividends.

We have not previously paid any cash dividends and we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.

FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including those relating to:

the unpredictability of our quarterly revenues and results of operations;

our ability to keep pace with a rapidly evolving marketplace and to develop and market new and enhanced products;

a highly competitive market for medical devices;

our reliance on single and limited sources of supply;

possible product liability lawsuits and product recalls;

inadequate levels of third-party reimbursement to healthcare providers;

our ability to obtain U.S. and foreign regulatory clearance for our products;

the effect of a disaster at our manufacturing facility; and

various risks related to our relationship with E-Z-EM.

Other risks, uncertainties and factors, including those discussed under “Risk Factors,” could cause our actual results to differ materially from those projected in any forward-looking statements we make.

We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

USE OF PROCEEDS

We estimate the net proceeds to us from the sale of shares of common stock being offered by us at an assumed initial public offering of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses, to be approximately $ million, or $ million if our underwriters exercise their over-allotment option in full. We intend to use the net proceeds of this offering for working capital and general corporate purposes, including new product development and potential acquisitions of complementary businesses, and to repay debt of $3,000,000 to E-Z-EM. This debt, which we originally incurred in 1997 and subsequently renewed, bears interest at an annual rate of 1.50% and is payable on November 8, 2006.

Pending the application of the net proceeds, we intend to invest the net proceeds in short-term, interest-bearing investment-grade securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for additional information regarding our sources and uses of capital.

DIVIDEND POLICY

We have never declared or paid cash dividends. We currently intend to retain any future earnings for the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

CAPITALIZATION

The following table sets forth our capitalization as of November 29, 2003:

the “Actual” column shows our capitalization on a historical basis, without any adjustments to reflect subsequent or anticipated events;

the “Pro Forma” column shows our capitalization with adjustments to reflect (i) the reclassification and change of our outstanding shares of Class A voting common stock and Class B non-voting common stock into 9,200,000 shares of common stock (at a ratio of 9,200 to 1) and (ii) the capitalization of $13,148,000 of long-term debt due to E-Z-EM prior to completion of this offering; and

the “Pro Forma as Adjusted” column shows our pro forma capitalization with adjustments to reflect (i) receipt by us of the estimated net proceeds from the sale of shares of common stock by us in this offering at an assumed initial public offering price of per share and (ii) the application of a portion of the estimated net proceeds to repay $3,000,000 of indebtedness to E-Z-EM. See “Use of Proceeds.”

The information in this table does not include:

an aggregate of 1,337,136 shares of our common stock issuable upon exercise of stock options issued under our 1997 Stock Option Plan at a weighted average exercise price of $4.51 per share;

an aggregate of 1,160,532 shares of our common stock that may be issued under our 1997 Stock Option Plan and our 2004 Stock and Incentive Award Plan; and

shares of our common stock that will be issuable upon exercise of options we will issue to holders of E-Z-EM stock options in connection with the distribution by E-Z-EM of our common stock to its stockholders.

You should read this table with our “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes to those statements, which are included elsewhere in this prospectus.


	November 29, 2003
	Actual			Pro Forma			Pro Forma as Adjusted
	(in thousands)
Cash & cash equivalents	$	1,278		$	1,278

Liabilities
Long-term debt, including current portion		3,325			3,325
Notes payable to parent		16,148			3,000		—

Total long-term debt		19,473			6,325

Stockholders’ equity
Class A common stock (voting), par value, $1.00 per share — authorized, issued and outstanding, 500 shares		1			—		—
Class B common stock (non-voting), par value, $1.00 per share — authorized, issued and outstanding, 500 shares		1			—		—
Common stock, par value $.01 per share — authorized 45,000,000 shares of which no shares are issued and outstanding (actual); 9,200,000 shares are issued and outstanding (pro forma); shares are issued and outstanding (pro forma as adjusted)		—			92
Preferred stock, par value $.01 per share — authorized 5,000,000 shares of which no shares are issued and outstanding		—			—		—
Additional paid in capital		13,152			26,210
Accumulated deficit		(10,029	)		(10,029	)
Accumulated other comprehensive loss		(169	)		(169	)

Total stockholders’ equity		2,956			16,104

Total capitalization	$	22,429		$	22,429

DILUTION

If you invest in our common stock, your interest will be diluted by the difference between the initial public offering price for each share you purchase and the as adjusted pro forma net tangible book value per share immediately after this offering. Net tangible book value per share represents the amount of our common stockholders equity, less intangible assets, diluted by the number of shares of common stock outstanding. As of November 29, 2003, our pro forma net tangible book value was approximately $15,129,000, or $1.64 per share, giving effect to the reclassification and change of our outstanding shares of Class A voting common stock and Class B non-voting common stock into 9,200,000 shares of common stock (at a ratio of 9,200 to 1) and the capitalization of $13,148,000 of long-term debt due to E-Z-EM. After giving effect to the sale of million shares of common stock offered by us in this offering at an assumed initial public offering price of $ per share and the application of the net proceeds therefrom, our pro forma as adjusted net tangible book value as of November 29, 2003 would have been approximately $ million, or $ per share. This represents an immediate increase in net tangible book value of $ to our existing stockholders and an immediate dilution of $ per share to new investors. The following table illustrates the substantial and immediate per share dilution to new investors:


Assumed initial public offering price per share	$
Pro forma net tangible book value as of November 29, 2003		1.64
Increase in pro forma net tangible book value per share attributable to new investors
Pro forma as adjusted net tangible book value per share after the offering
Dilution per share to new investors

	$

The following table sets forth on a pro forma as adjusted basis as of November 29, 2003, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by our existing stockholder and by new investors, before deducting the underwriting discounts and estimated offering expenses payable by us:


	Shares Purchased			Total Consideration				Average Price per Share
	Number	Percent		Amount		Percent		Average Price per Share
Existing stockholder	9,200,000	%		$	26,302,000	%		$	2.86
New investors

Total		100.0	%	$		100.0	%	$

The discussion and tables above assume no exercise of any outstanding options. As of November 29, 2003, there were 1,337,136 shares of common stock issuable upon exercise of stock options, none of which are currently exercisable, at a weighted average exercise price of $4.51 per share, and an aggregate of 1,160,532 shares available for future grant or issuance under our 1997 Stock Option Plan and our 2004 Stock and Incentive Award Plan. In addition, in connection with E-Z-EM’s distribution of our common stock to its stockholders, we will issue options to purchase our common stock to holders of E-Z-EM stock options at exercise prices below that of the market price of our stock at the time of issuance. To the extent that these options are exercised, there will be further dilution to new investors.

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected financial data in conjunction with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The consolidated statements of earnings data and the selected consolidated operating data for the fifty-two weeks ended June 2, 2001, June 1, 2002 and May 31, 2003, and the consolidated balance sheet data as of June 1, 2002 and May 31, 2003 are derived from the audited consolidated financial statements that are included elsewhere in this prospectus. The consolidated statements of earnings data and the selected consolidated operating data for the fifty-two weeks ended May 29, 1999 and the fifty-three weeks ended June 3, 2000 and the consolidated balance sheet data as of May 29, 1999, June 3, 2000 and June 2, 2001 are derived from our audited consolidated financial statements not included in the prospectus. The consolidated statements of earnings data and the selected consolidated operations data for the twenty-six weeks ended November 30, 2002 and November 29, 2003 and the consolidated balance sheet data as of November 29, 2003 are derived from our unaudited consolidated financial statements that are included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of November 29, 2003 and results of operations for the twenty-six weeks ended November 30, 2002 and November 29, 2003. Historical results are not necessarily indicative of the results of operations to be expected for future periods. See Note A of “Notes to Financial Statements” for a description of the method that we used to compute our historical basic and diluted net income (loss) per share attributable to common stockholders.


	Fifty-two weeks ended			Fifty-three weeks ended			Fifty-two weeks ended									Twenty-six weeks ended
	May 29, 1999			June 3, 2000			June 2, 2001			June 1, 2002			May 31, 2003			Nov. 30, 2002			Nov. 29, 2003
	(in thousands, except share and per share data)
Statement of earnings data:
Net sales	$	21,471		$	21,769		$	23,390		$	30,890		$	38,434		$	17,096		$	22,481
Cost of goods sold		12,425			11,911			12,418			15,333			18,572			8,135			10,854

Gross profit		9,046			9,858			10,972			15,557			19,862			8,961			11,627

Operating expenses:
Sales and marketing		6,011			6,823			7,089			8,901			11,338			5,127			6,239
General and administrative		2,400			2,132			1,875			2,317			2,777			1,303			1,637
Research and development		1,625			1,642			1,426			1,951			2,509			1,176			1,621
Loss on sale of subsidiary and related assets		—			—			872			—			—			—			—

Total operating expenses		10,036			10,597			11,262			13,169			16,624			7,606			9,497

Operating profit		(990	)		(739	)		(290	)		2,388			3,238			1,355			2,130
Other income (expenses)
Interest income		16			12			71			45			38			17			8
Interest expense(a)		(986	)		(1,005	)		(952	)		(863	)		(1,021	)		(492	)		(501	)
Other, net		257			19			1			—			—			—			—

Earnings (loss) before income tax provision (benefit)		(1,703	)		(1,713	)		(1,170	)		1,570			2,225			880			1,637
Income tax provision (benefit)		(546	)		(296	)		(1,513	)		561			1,069			544			723

Net earnings (loss)	$	(1,157	)	$	(1,417	)	$	343		$	1,009		$	1,186		$	336		$	914


	Fifty-two weeks ended			Fifty-three weeks ended			Fifty-two weeks ended									Twenty-six weeks ended
	May 29, 1999			June 3, 2000			June 2, 2001			June 1, 2002			May 31, 2003			Nov. 30, 2002			Nov. 29, 2003
Earnings per common share(b):
Basic	$	(1,157	)	$	(1,417	)	$	343		$	1,009		$	1,186		$	336		$	914

Diluted	$	(1,157	)	$	(1,417	)	$	343		$	994		$	1,152		$	327		$	881

Weighted average number of shares used in per share calculation(b):
Basic		1,000			1,000			1,000			1,000			1,000			1,000			1,000
Diluted		1,000			1,000			1,000			1,015			1,030			1,029			1,037

Cash flow data:
Net cash provided (used in) by operating activities	$	883		$	400		$	409		$	1,206		$	680		$	(267	)	$	780
Net cash provided by (used in) investing activities		(376	)		(393	)		1,499			(715	)		(4,572	)		(3,785	)		(321	)
Net cash provided by (used in) financing activities		—			—			(1,761	)		371			3,306			3,376			(120	)

				As of
				May 29, 1999			June 3, 2000			June 2, 2001			June 1, 2002			May 31, 2003			Nov. 29, 2003
Balance sheet data:
Cash and cash equivalents				$	613		$	530		$	1,948		$	1,525		$	939		$	1,278
Working capital					9,822			9,207			9,676			10,101			12,360			13,158
Total assets					18,469			17,872			16,782			20,647			27,056			28,542
Non-current liabilities					17,098			17,697			15,754			15,165			19,403			19,333
Accumulated deficit					(12,064	)		(13,481	)		(13,138	)		(12,129	)		(10,943	)		(10,029	)
Total stockholders’ equity (deficit)					(921	)		(2,602	)		(1,309	)		(295	)		1,487			2,956

(a)

(b)	Does not give effect to the reclassification and change of our outstanding shares of Class A voting common stock and Class B non-voting common stock into 9,200,000 shares of common stock (at a ratio of 9,200 shares to 1) to be effected prior to completion of this offering.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in “Risk Factors” and elsewhere in this prospectus.

Overview

AngioDynamics is a leading provider of innovative medical devices used in minimally invasive, image-guided procedures to treat peripheral vascular disease, or PVD. We design, develop, manufacture and market a broad line of therapeutic and diagnostic devices that enable interventional physicians (interventional radiologists, vascular surgeons and others) to treat PVD and other non-coronary diseases. We believe that we are the only company whose primary focus is to offer a comprehensive product line for the interventional treatment of these diseases. For the past five fiscal years, over 95% of our net sales were from single use, disposable products.

For the past three fiscal years our aggregate net sales from the following product categories have grown at a CAGR of 28.2%:


	2001				2002				2003
	$		%		$		%		$		%
	(dollars in thousands)
Angiographic products and accessories	$	11,895	50.8	%	$	13,042	42.2	%	$	13,701	35.6	%
Hemodialysis catheters		3,227	13.8			6,227	20.2			9,371	24.4
PTA dilation catheters		1,387	5.9			2,384	7.7			3,048	7.9
Thrombolytic products		2,623	11.2			2,808	9.1			2,989	7.8
Image-guided vascular access products		808	3.5			1,867	6.0			2,656	6.9
Endovascular Laser Venous System products		—	—			—	—			2,106	5.5
Drainage products		1,018	4.4			1,103	3.6			1,311	3.4
Other		2,432	10.4			3,459	11.2			3,252	8.5

	$	23,390	100.0	%	$	30,890	100.0	%	$	38,434	100.0	%

We sell our broad line of quality device products in the United States through a direct sales force comprised of 35 sales persons, five regional managers and a vice president of sales. Outside the United States, we sell our products indirectly through a network of distributors in 26 markets. For each of our last three fiscal years, less than 10% of our net sales were in markets outside the United States.

Our growth depends in large part on the continuous introduction of new and innovative products, together with ongoing enhancements to our existing products, through internal product development, technology licensing and strategic alliances. Approximately 67% of our sales growth over our past two fiscal years was attributable to products in three categories — hemodialysis catheters, image-guided vascular access, or IGVA, products and our elvs product line — that were obtained or developed either under licensing arrangements or through strategic alliances with third parties. We also achieved significant growth in sales of angiographic catheters and PTA dilation catheters, which we developed internally. Additionally, about 55% of our net sales for fiscal 2003 were from products introduced in the last five

years. For each of the past three fiscal years, we invested at least 6% of our net sales in research and development. We expect our research and development expenditures to exceed 7% of net sales for fiscal 2004 and to approximate 8% of net sales in the future.

For fiscal 2003, approximately 40% of our net sales were derived from products manufactured for us by third parties. Going forward, we intend to manufacture some of these products to achieve lower product costs and increased profitability. We recently expanded our facility to provide us with significantly greater manufacturing capacity and to accommodate additional research, development and administrative requirements.

There is significant competition among physicians to perform peripheral interventional procedures for PVD and other non-coronary diseases. We believe that the interventional radiologists and vascular surgeons who comprise our primary customer base will continue to capture a significant portion of these procedures due to several factors, including the increased focus by interventional radiologists on improving their clinical practice management skills and the increased partnering of interventional radiologists and vascular surgeons. However, as interventional procedures have gained greater acceptance, other medical specialists, particularly cardiologists, are competing for patients with peripheral vascular and other non-coronary disorders, and we expect this competition to intensify. If these physicians increase their share of interventional treatments at the expense of our primary customers, we may be at a competitive disadvantage. Several of our competitors are focused primarily on cardiology and have established relationships with many cardiologists, and may be better positioned than us to take advantage of any increased opportunities for sales to these physicians. In 2000, we made a strategic decision to focus on the market for interventional therapies for PVD and to exit the cardiovascular disease market due primarily to intensive competition and the significant resource requirements for competing successfully in that market.

To date, our primary sources of financing have been loans and capital contributions from E-Z-EM, long-term bank debt and cash generated from operations. Following the completion of this offering, we will not receive any additional financing from E-Z-EM. Furthermore, we are, and will be for two years following the distribution by E-Z-EM of our stock to its stockholders, subject to restrictions on our ability to raise capital by issuing equity or convertible debt securities, or to use our equity securities to acquire other businesses or assets. Additionally, we have historically provided contract manufacturing services to E-Z-EM. For fiscal 2003, our net sales for these services were $545,000. These arrangements will continue after our separation from E-Z-EM, but may be discontinued by E-Z-EM at any time on 60 days’ prior notice. Further, as a stand-alone publicly held company, we will incur additional expenses, including significantly higher premiums for directors and officers insurance and product liability insurance.

Critical Accounting Policies and Use of Estimates

Our significant accounting policies are summarized in Note A to our consolidated financial statements included elsewhere in this prospectus. While all these significant accounting policies affect the reporting of our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require us to use a greater degree of judgment and/or estimates. Actual results may differ from those estimates. The accounting policies identified as critical are as follows:

Revenue Recognition

We recognize revenues in accordance with generally accepted accounting principles as outlined in the SEC’s Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement

exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. Decisions relative to criterion (iii) regarding collectability are based upon our judgments, as discussed under “Accounts Receivable” below, and should conditions change in the future and cause us to determine this criterion is not met, our results of operations may be affected. We recognize revenue as products are shipped and title passes to customers. We negotiate shipping and credit terms on a customer-by-customer basis and products are shipped at an agreed upon price. All product returns must be pre-approved by us and, if approved, customers are subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and must have at least 12 months remaining prior to its expiration date.

Accounts Receivable

Accounts receivable are generally due within 30 to 60 days and are stated at amounts due from customers, net of an allowance for doubtful accounts. We perform ongoing customer credit evaluations and adjust credit limits based upon payment history and the customers’ current credit worthiness, as determined by a review of their current credit information. We continuously monitor aging reports, collections and payments from customers, and maintain a provision for estimated credit losses based upon historical experience and any specific customer collection issues we identify. While such credit losses have historically been within our expectations and allowances, we cannot guarantee the same credit loss rates will be experienced in the future. We write off accounts receivable when they become uncollectible. For the period from the beginning of fiscal 2002 to November 29, 2003, our write offs of accounts receivable aggregated $28,000.

Income Taxes

In preparing our financial statements, we calculate income tax expense for each jurisdiction in which we operate. This involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. We periodically evaluate deferred tax assets, capital loss carryforwards and tax credit carryforwards to determine their recoverability based primarily on our ability to generate future taxable income and capital gains. Where their recovery is not likely, we estimate a valuation allowance and record a corresponding additional tax expense in our statement of earnings. If actual results differ from our estimates due to changes in assumptions, the provision for income taxes could be materially affected. As of May 31, 2003, our valuation allowance and net deferred tax asset were approximately $1.2 million and $1.5 million, respectively.

We have a tax allocation and indemnification arrangement with E-Z-EM with whom we file a consolidated Federal tax return. Under this arrangement, we pay Federal income tax based on the amount of taxable income we generate and are credited for Federal tax benefits we generate that can be used by us or other members of the consolidated group. This arrangement does not cover tax liabilities arising from state, local and other taxing authorities to whom we report separately. We will enter into a tax allocation and indemnification agreement with E-Z-EM before this offering is completed generally on the same terms and conditions as our current arrangement.

Inventories

We value inventories at the lower of cost (on the first-in, first-out method) or market. On a quarterly basis, we review inventory quantities on hand and analyze the provision for excess and obsolete inventory based primarily on product expiration dating and our estimated sales forecast, which is based on sales

history and anticipated future demand. Our estimates of future product demand may not be accurate and we may understate or overstate the provision required for excess and obsolete inventory. Accordingly, any significant unanticipated changes in demand could have a significant impact on the value of our inventory and results of operations. As of June 1, 2002, May 31, 2003, and November 29, 2003, our reserve for excess and obsolete inventory was $1.0 million, $1.2 million and $1.4 million, respectively.

Property, Plant and Equipment

We state property, plant and equipment at cost, less accumulated depreciation, and depreciate these assets principally using the straight-line method over their estimated useful lives. We determine this based on our estimates of the period over which the assets will generate revenue. Any change in condition that would cause us to change our estimate of the useful lives of a group or class of assets may significantly affect depreciation expense on a prospective basis.

Results of Operations

Our operating results for fiscal 2001, 2002 and 2003 and for the twenty-six weeks ended November 29, 2002 and November 30, 2003 are expressed as a percentage of total net sales in the following table.


	Fifty-two weeks ended						Twenty-six weeks ended
	June 2, 2001		June 1, 2002		May 31, 2003		Nov. 30, 2002		Nov. 29, 2003
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	53.1		49.6		48.3		47.6		48.3

Gross profit	46.9		50.4		51.7		52.4		51.7

Operating expenses
Sales and marketing	30.3		28.8		29.5		30.0		27.8
General and administrative	8.0		7.5		7.2		7.6		7.3
Research and development	6.1		6.3		6.5		6.9		7.2
Loss on sale of subsidiary and related assets	3.7		0.0		0.0		0.0		0.0

Total operating expenses	48.1		42.6		43.3		44.5		42.2

Operating profit (loss)	(1.2	)	7.7		8.4		7.9		9.5

Other income (expenses)
Interest income	0.3		0.1		0.1		0.1		0.0
Interest expense	(4.1	)	(2.8	)	(2.7	)	(2.9	)	(2.2	)
Other, net	0.0		0.0		0.0		0.0		0.0

Earnings (loss) before income tax provision (benefit)	(5.0	)	5.1		5.9		5.1		7.3
Income tax provision (benefit)	(6.5	)	1.8		2.8		3.2		3.2

Net earnings	1.5	%	3.3	%	3.1	%	2.0	%	4.1	%

Earnings per common share:
Basic	1.5	%	3.3	%	3.1	%	2.0	%	4.1	%

Diluted	1.5	%	3.2	%	3.0	%	1.9	%	3.9	%

Twenty-six weeks ended November 29, 2003 and November 30, 2002

Net sales. Net sales consist of revenue derived from the sale of our products and related freight charges, less discounts and returns. For the twenty-six weeks ended November 29, 2003, or the fiscal 2004 period, net sales were $22.5 million, an increase of $5.4 million, or 31.5%, compared to the twenty-six weeks ended November 30, 2002, or the fiscal 2003 period. Sales increased across all of our principal product lines for the fiscal 2004 period compared to the fiscal 2003 period. The increase in our net sales was due to new product introductions, the expansion of our domestic sales force and increased sales of our existing product lines. Sales of hemodialysis catheters for the fiscal 2004 period increased by $2.1 million compared to the fiscal 2003 period, principally due to our introduction of the Dura-Flow chronic hemodialysis catheter in September 2002. Our elvs product, a device used in the treatment of varicose veins, was introduced in June 2002 and accounted for $1.9 million of the increase in our net sales for the fiscal 2004 period. Sales of angiographic, vascular access, PTA dilatation catheters and thrombolytic products in the aggregate accounted for $1.4 million of the increase in our net sales for the fiscal 2004 period. Net sales to non-U.S. markets for the fiscal 2004 period were $1.2 million, or 5.2% of net sales, compared to $1.3 million, or 7.7% of net sales, for the fiscal 2003 period. This decrease is due to lower sales of angiographic products resulting from increased pricing competition. Price increases were not a significant factor in the increase of our net sales.

Gross profit. Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and resold by us, manufacturing personnel, freight, business insurance, depreciation of property and equipment and other manufacturing overhead. Gross profit for the fiscal 2004 period increased by $2.7 million, or 29.8%, to $11.6 million, compared to the fiscal 2003 period. As a percentage of net sales, gross profit decreased to 51.7% for the fiscal 2004 period, from 52.4% for the fiscal 2003 period, due to an inventory reserve for the planned discontinuation of two product lines and initial sales of our elvs lasers. Lasers are capital equipment and typically carry lower gross margins than elvs-related disposables.

Sales and marketing. Sales and marketing expenses consist primarily of the costs of salaries, commissions, travel and entertainment, attendance at medical society meetings, advertising and product promotions and samples. Sales and marketing expenses were $6.2 million for the fiscal 2004 period, an increase of $1.1 million, or 21.7%, compared to the fiscal 2003 period. Selling expenses increased due to an expansion of our domestic sales force and to other costs related to the increase in net sales, including increased commissions, promotions and samples, meals and entertainment, and travel and lodging. During the 2004 period, we added three new domestic sales representatives, bringing the total to 33, and one regional sales manager, bringing the total to five. Marketing expenses increased principally due to new product programs and our hiring of additional personnel to support the marketing efforts for our elvs product. As a percentage of net sales, sales and marketing expenses were 27.8% and 30.0% for the fiscal 2004 period and the fiscal 2003 period, respectively.

General and administrative. General and administrative expenses include corporate, finance, human resources, administrative and professional fees, as well as information technology expenses. General and administrative expenses increased to $1.6 million for the fiscal 2004 period, an increase of $334,000, or 25.6%, compared to the fiscal 2003 period. This increase was principally due to increased professional fees, overhead costs associated with the expansion of our facility in Queensbury and increased compensation expenses. As a percentage of net sales, general administrative expenses were 7.3% and 7.6% for the fiscal 2004 period and the fiscal 2003 period, respectively.

Research and development. Research and development expenses include costs to develop new products, enhance existing products, validate new and enhanced products and register, maintain and defend

our intellectual property. Research and development expenses increased to $1.6 million for the fiscal 2004 period, an increase of $445,000, or 37.8%, from the fiscal 2003 period. This increase was due primarily to expanded efforts to maintain and register our intellectual property assets and increased personnel in both our research and development departments. As a percentage of net sales, research and development expenses were 7.2% and 6.9% for the fiscal 2004 and 2003 periods, respectively.

Other income (expenses). Other income (expenses) principally includes interest income, interest expense and other miscellaneous items. For the fiscal 2004 period, other income (expenses) increased to a net expense of $493,000 from a net expense of $475,000 for the fiscal 2003 period. This increase is due to higher interest expense from the financing of our facility expansion and to lower interest income. Interest expense also includes an imputed interest charge on our debt to E-Z-EM. Although E-Z-EM waived interest charges on this debt, we recorded imputed interest charges of $421,000 and $446,000 for the fiscal 2004 and the fiscal 2003 periods, respectively. These charges are treated as non-cash items for cash flow purposes and as increases to additional paid in capital. As a percentage of net sales, other expenses, net, were 2.2% and 2.8% for the fiscal 2004 period and the fiscal 2003 period, respectively.

Income tax. Our effective income tax rates for the fiscal 2004 period and the fiscal 2003 period were 44.2% and 61.8%, respectively, compared to the Federal statutory rate of 34.0%. In both fiscal periods, we recorded expenses that were non-deductible for Federal income tax purposes, principally the imputed interest expense on our debt to E-Z-EM, which contributed to our higher than statutory effective tax rate. Further, in the 2004 fiscal period, the effect of non-deductible expenses was partially offset by utilization of capital loss carryforwards.

Fiscal Years Ended May 31, 2003 and June 1, 2002

Net sales. Net sales for fiscal 2003 were $38.4 million, an increase of $7.5 million, or 24.4%, from fiscal 2002 due to new product introductions, growth in existing products and expansion of our domestic sales force. Sales increased across all of our principal product lines for fiscal 2003 compared to fiscal 2002. Sales of our elvs products, which we introduced in the first quarter of fiscal 2003, accounted for $2.1 million of our net sales increase. Sales of hemodialysis catheters for fiscal 2003 increased by $3.1 million, principally due to our Dura-Flow hemodialysis catheter, introduced in the second quarter of fiscal 2003. Sales of the More Flow hemodialysis catheter contributed $1.5 million, or 26.9% of the increase of our sales of hemodialysis catheters. Sales of image-guided vascular access products increased by $789,000, or 42.2%, due to increased sales of our existing products. Net sales to non-U.S. markets were $2.7 million, or 6.9% of net sales, for fiscal 2003 compared to $2.8 million, or 9.0% of net sales, for fiscal 2002. This decline was due principally to competitive pricing pressure affecting our angiographic products. Price increases were not a significant factor in the increase of our net sales.

Gross profit. Gross profit for fiscal 2003 increased by $4.3 million, or 27.7%, to $19.9 million. This improvement was due to greater manufacturing efficiencies, lower freight costs and a decrease in our inventory reserves. Our improved manufacturing efficiencies resulted in large part from increased automation in the manufacture of angiographic catheters, PTA balloon catheters and other manufacturing processes. As a percentage of net sales, gross profit was 51.7% and 50.4% for fiscal 2003 and fiscal 2002, respectively.

Sales and marketing. Sales and marketing expenses were $11.3 million for fiscal 2003, an increase of $2.4 million, or 27.4%, compared to fiscal 2002. Selling expenses increased due to an expansion of our domestic sales force and to other costs related to the increase in our net sales, including for travel, entertainment and product samples. In fiscal 2003, we increased the number of our direct sales

representatives to 32 from 24 and added one regional sales manager to increase the number of sales regions to four. Marketing expenses increased principally due to new product introductions. As a percentage of net sales, sales and marketing expenses were 29.5% and 28.8% for fiscal 2003 and fiscal 2002, respectively.

General and administrative. General and administrative expenses increased to $2.8 million for fiscal 2003, an increase of $460,000, or 19.9%, compared to fiscal 2002, due principally to hiring additional employees and increased compensation, travel, meal and entertainment expenses. Other factors that contributed to these increased costs were the expansion of our facility in Queensbury, increased business insurance premiums and general inflation. As a percentage of net sales, general and administrative expenses were 7.2% and 7.5% for fiscal 2003 and fiscal 2002, respectively.

Research and development. Research and development expenses increased by $558,000, or 28.6%, to $2.5 million for fiscal 2003. This increase was due primarily to our expanded efforts to register and maintain our intellectual property, increases in our research and development staff and increased costs for materials and supplies. As a percentage of net sales, research and development expenses were 6.5% and 6.3% for fiscal 2003 and fiscal 2002, respectively.

Other income (expenses). Other income (expenses) increased to a net expense of $983,000 for fiscal 2003 from a net expense of $818,000 for fiscal 2002. This increase was due to higher interest expense from the financing of our facility expansion in Queensbury. Between September 2002 and May 2003, we borrowed $2.7 million against a credit facility of $3.5 million. Interest expense for fiscal 2003 includes an imputed interest charge on our debt to E-Z-EM. Although E-Z-EM waived interest charges for fiscal 2003, we recorded an imputed interest charge of $892,000, which is treated as a non-cash item for cash flow purposes and as an increase to additional paid in capital. Interest of $863,000 was charged on our debt to E-Z-EM for fiscal 2002. As a percentage of net sales, other expenses, net, were 2.6% and 2.7% for fiscal 2003 and fiscal 2002, respectively.

Income tax. Our effective income tax rate for fiscal 2003 was 47.4%, compared to the Federal statutory rate of 34%, because we recorded expenses that were non-deductible for Federal income tax purposes, principally the imputed interest expense on our debt to E-Z-EM. For fiscal 2002, our effective income tax rate was 35.7% due to other expenses that were non-deductible for income tax purposes.

Fiscal Years Ended June 1, 2002 and June 2, 2001

Net sales. Net sales for fiscal 2002 were $30.9 million, an increase of $7.5 million, or 32.1%, from fiscal 2001. This increase was due to new product introductions and increased sales of our existing products. Sales increased across all of our principal product lines in fiscal 2002 compared to fiscal 2001. Sales of hemodialysis catheters for fiscal 2002 were $6.2 million, an increase of $3.0 million, or 93.0%, compared to fiscal 2001. Introduced late in the second quarter of fiscal 2002, our More Flow hemodialysis catheter accounted for $2.6 million of this increase. Increased angiographic catheter sales for fiscal 2002 of $1.2 million, or 9.6%, were principally due to increased sales of sizing catheters. Our sales of image-guided vascular access products for fiscal 2002 increased by $1.1 million, or 131.2%. This increase was primarily due to the doubling of our sales of micro access sets. Sales of our PTA dilation catheters increased by $1.0 million, or 71.9%, in fiscal 2002 compared to fiscal 2001. This increase was primarily due to increased sales of our WorkHorse balloon catheter. Our sales of other products increased by $867,000, or 54.3%. This increase was primarily due to growth in our sales of biliary stents. Net sales to non-U.S. markets were $2.8 million, or 9.0% of net sales, for fiscal 2002 compared to $2.8 million, or 12.0% of net sales, for fiscal 2001. This decline, as a percentage of net sales, is due principally to the elimination of our cardiology product line, as we exited this market in July 2000. Price increases were not a significant factor in the increase of our net sales.

Gross profit. Gross profit for fiscal 2002 increased by $4.6 million, or 41.8%, to $15.6 million due primarily to higher manufacturing volume, which resulted in economies of scale and greater manufacturing efficiencies, and increased margin contributions from the sale of new products. As a percentage of net sales, gross profit was 50.4% and 46.9% for fiscal 2002 and fiscal 2001, respectively.

Sales and marketing. Sales and marketing expenses were $8.9 million for fiscal 2002, an increase of $1.8 million, or 25.6%, compared to fiscal 2001. Selling expenses increased principally due to an expansion of our domestic sales force, higher sales commissions, and increased costs for product samples. We increased the number of our direct sales representatives to 24 from 16 and added one regional sales manager, increasing the number of regional territories to three. Marketing expenses increased principally due to new product introductions and the hiring of additional marketing staff. As a percentage of net sales, sales and marketing expenses were 28.8% and 30.3% for fiscal 2002 and fiscal 2001, respectively.

General and administrative. General and administrative expenses increased to $2.3 million for fiscal 2002, an increase of $442,000, or 23.6%, compared to fiscal 2001. This increase was due principally to increased compensation costs. As a percentage of net sales, general and administrative expenses were 7.5% and 8.0% for fiscal 2002 and fiscal 2001, respectively.

Research and development. Research and development expenses increased to $2.0 million for fiscal 2002, an increase of $525,000, or 36.8%, from fiscal 2001. This increase was due primarily to increases in the size of our research and development staff, legal fees for intellectual property maintenance and an increase in our costs for materials and supplies. As a percentage of net sales, research and development expenses were 6.3% and 6.1% for fiscal 2002 and fiscal 2001, respectively.

Loss on sale of subsidiary and related assets. In July 2000, we recorded a loss on the sale of our Irish subsidiary and other related assets of $872,000 in connection with our decision to exit the cardiovascular market. As a result of this sale, the comparison of our operating profit in fiscal 2002 and fiscal 2001 is favorably affected since there was no comparable expense in fiscal 2002.

Other income (expenses). Other income (expenses) decreased to a net expense of $818,000 for fiscal 2002 from a net expense of $880,000 for fiscal 2001, due to a decline in the interest rate payable on our debt to E-Z-EM. As a percentage of net sales, other expenses, net, were 2.7% and 3.8% for fiscal 2002 and fiscal 2001, respectively.

Income tax. Our effective income tax rate for fiscal 2002 was 35.7% compared to the Federal statutory rate of 34%. For fiscal 2001, we recorded an income tax benefit of $1.5 million on a loss before income tax of $1.2 million. The 2001 tax benefit resulted primarily from a reduction in our tax valuation allowance of $1.3 million. Our future projected profitability made it more likely than not that deferred tax assets could be deducted against future taxable earnings. Accordingly, we reversed a portion of our tax valuation allowance.

Liquidity and Capital Resources

During the past three years, we financed our operations primarily through long-term debt and cash flow from operations. At November 29, 2003, $2.0 million, or 7.0%, of our assets consisted of cash and cash equivalents, excluding restricted cash of $220,000, and short-term debt securities. Our current ratio was 3.1 to 1, with net working capital of $13.2 million, at November 29, 2003, compared to a current ratio of 3 to 1, with net working capital of $12.4 million, at May 31, 2003. The current ratio was 2.75 to 1, with net working capital of $10.1 million, at June 1, 2002. At November 29, 2003, total debt was $19.5 million

comprised of $16.2 million of long-term notes payable to E-Z-EM and $3.3 million of short and long-term bank debt for financing our facility expansion in Queensbury, New York. Total debt was $19.5 million at May 31, 2003 and $16.2 million at June 1, 2002.

For the twenty-six weeks ended November 29, 2003, capital expenditures were funded by cash provided by operations and cash reserves. For fiscal 2003, capital expenditures and an equity investment at cost were funded by cash from long-term debt, operations and cash reserves. For fiscal 2002, capital expenditures were funded by cash provided by operations. For fiscal 2001, capital expenditures and the repayment of debt to E-Z-EM were funded by proceeds from the sale of our Irish subsidiary and by cash from operations.

Historically, our primary sources of financing have been loans and capital contributions from E-Z-EM. At November 29, 2003, May 31, 2003 and June 1, 2002, notes payable to E-Z-EM were $16.2 million. Under the master separation and distribution agreement we will enter into with E-Z-EM, E-Z-EM will agree to capitalize $13.2 million of this amount on or before the date of this prospectus. The remaining $3.0 million of debt will be repaid from the proceeds of this offering. Effective June 2, 2002 and through May 29, 2004, E-Z-EM agreed to waive interest payments on these notes. However, we recorded imputed interest charges for the twenty-six weeks ended November 29, 2003 and for fiscal 2003 of $421,000 and $892,000, respectively. These imputed interest charges were treated as non-cash items for cash flow purposes and as increases in additional paid in capital.

Net capital expenditures, primarily for facility expansion and machinery and equipment, were $4.1 million for fiscal 2003, compared to $682,000 for fiscal 2002 and $466,000 for fiscal 2001. Of the fiscal 2003 expenditures, $3.0 million was for the expansion of our headquarters and manufacturing facility. This expansion is expected to cost $3.5 million and is being financed by industrial revenue bonds. To secure this financing, we entered into agreements with local municipalities, a bank, a trustee and a remarketing agent. These agreements are referred to as the IDA agreements. The proceeds of the bonds are being advanced as construction occurs. As of November 29, 2003, the advances totaled $3.3 million, with the remaining proceeds of $220,000 classified as restricted cash. The bonds bear interest based on the market rate on the date the bonds are repriced and require quarterly principal payments ranging from $25,000 to $65,000 plus accrued interest through May 2022. We entered into an interest rate swap with a bank to convert the initial variable rate payments to a fixed interest rate of 4.45% per annum. The payments on the bonds are secured by a letter of credit in an initial amount of $3.6 million, and we are required to pay an annual fee ranging from 1.0% to 1.9% of the outstanding balance depending on our financial results. The current fee is 1.35% and is in effect until November 2005. The IDA agreements contain financial covenants relating to fixed charge coverage and interest coverage. At November 29, 2003, we were in compliance with these covenants. The outstanding debt is secured by a letter of credit and a first mortgage on the land, building and equipment comprising our facility in Queensbury. The debt covenants related to the industrial revenue bond financing and our bank line of credit, and the collateralization of substantially all of our assets to secure these financings, may restrict our ability to obtain debt financing in the future.

We are also restricted in our ability to obtain equity financing due to the anticipated distribution by E-Z-EM of our stock to its stockholders, which E-Z-EM has advised us that it intends to complete by February 5, 2005. We are limited in the amount of equity securities or convertible debt we can issue for a period of two years following the stock distribution by E-Z-EM in order to preserve the tax-free treatment of the distribution and avoid tax liabilities to E-Z-EM, its stockholders and, potentially, to us. Additionally, prior to the distribution, we cannot issue additional equity securities or convertible debt if to do so would reduce E-Z-EM’s ownership of our equity securities or voting power to less than 80% level required for the distribution to be tax-free to E-Z-EM and its stockholders. These factors could limit our sources of capital in the future.

We have available a $3.0 million bank line of credit, of which no amounts are outstanding. Our contractual obligations as of May 31, 2003, are set forth in the table below, as adjusted for the capitalization

of $13.2 million debt due to E-Z-EM and the repayment of the $3.0 million remaining balance from the proceeds of this offering. We have no variable interest entities or other off-balance sheet obligations. As of November 29, 2003, there were no material changes to these obligations.


	Cash Payments Due by Period as of May 31, 2003
	Total		Less than One Year		1-3 Years		3-5 Years		After 5 Years
	(in thousands)
Contractual obligations:
Notes payable to bank	$	3,395	$	140	$	500	$	550	$	2,205
Notes payable to parent(a)		3,000		3,000		—		—		—

	$	6,395	$	3,140	$	500	$	550	$	2,205

(a)

At May 31, 2003, we had $16,148 in notes payable to E-Z-EM. Under the master separation and distribution agreement we will enter into with E-Z-EM, E-Z-EM will capitalize $13,148 of this debt prior to completion of this offering, and we will repay the $3,000 remaining balance from the proceeds of this offering. The above contractual commitments have been adjusted to give effect to these agreements.

We believe that the net proceeds from this offering, together with our current cash and investment balances, cash generated from operations and existing lines of credit will provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months. If we seek to make significant acquisitions of other businesses or product lines, we will require additional financing. We cannot assure you that such financing will be available on commercially reasonable terms, if at all.

Quantitative and Qualitative Disclosure About Market Risk

We are exposed to market risk from changes in interest rates on investments and financing, which could impact our results of operations and financial position. Although we entered into an interest rate swap with a bank to limit our exposure to interest rate change market risk on our variable interest rate financing, we do not currently engage in any other hedging or other market risk management tools.

Our excess cash is invested in highly liquid, short-term, investment grade securities with maturities of less than one year. These investments are not held for speculative or trading purposes. Changes in interest rates may affect the investment income we earn on cash, cash equivalents and debt securities and therefore affect our cash flows and results of operations. As of November 29, 2003, we were exposed to interest rate change market risk with respect to our investments in tax-free municipal bonds in the amount of $733,000. The bonds bear interest at a floating rate established weekly. For fiscal 2003, the after-tax interest rate on the bonds approximated 1.30%. Each 100 basis point (or 1%) fluctuation in interest rates will increase or decrease interest income on the bonds by approximately $7,000 on an annual basis.

At November 29, 2003, we maintained variable interest rate financing of $3.3 million in connection with our facility expansion. We have limited our exposure to interest rate risk by entering into an interest rate swap agreement with a bank under which we agreed to pay the bank a fixed annual interest rate of 4.45% and the bank assumed our variable interest payment obligations under the financing.

As of December 29, 2003, we entered into an amended and restated $3.0 million working capital line of credit with a bank. Advances under this line of credit will bear interest at an annual rate of LIBOR plus 2.85%. We will thus be exposed to interest rate risk with respect to this credit facility to the extent that interest rates rise when there are amounts outstanding under the facility.

Recent Accounting Pronouncements

As of June 2, 2002, we adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” while retaining many of the requirements of such statement. The adoption of this statement has had no current effect on our financial position or results of operations.

In November 2002, the Emerging Issues Task Force, or EITF, reached a consensus opinion of EITF 00-21, “Revenue Arrangements with Multiple Deliverables.” That consensus provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The consideration of the arrangement should be allocated to the separate units of accounting based on their relative fair values, with different provisions if the fair value is contingent on delivery of specified items or performance conditions. Applicable revenue criteria should be considered separately for each separate unit of accounting. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Entities may elect to report the change as a cumulative effect adjustment in accordance with APB Opinion 20, “Accounting Changes.” The adoption of EITF 00-21 has had no current effect on our financial position and results of operations.

As of January 1, 2003, we adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. The adoption of this statement has had no current effect on our financial position or results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN No. 46”), “Consolidation of Variable Interest Entities.” In general, a variable interest entity is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets, including loans or receivables, real estate or other property. A variable interest entity may be essentially passive or it may engage in activities on behalf of another company. Until now, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN No. 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. FIN No. 46’s consolidation requirements apply immediately to variable interest entities created or acquired after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. In December 2003, the FASB completed deliberations of proposed modifications to FIN No. 46 (Revised Interpretations) resulting in multiple effective dates based on the nature as well as the creation date of the variable interest entity. Variable interest entities created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the third quarter of fiscal 2004. Variable interest entities created after January 1, 2004 must be accounted for under the Revised Interpretations. We do not have any variable interest entities that would require consolidation under FIN No. 46. Accordingly, the adoption of FIN No. 46 has had no current effect on our consolidated financial condition or results of operations.

As of July 1, 2003, we adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The adoption of this statement has had no current effect on our financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new statement requires that those instruments be classified as liabilities in statements of financial position. This statement shall be effective for financial instruments entered into or modified after May 31, 2003 and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. We are currently evaluating the effect of the adoption of SFAS No. 150 on our financial position and results of operations.

In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition” (SAB No. 104), which codifies, revises and rescinds certain sections of SAB No. 101, “Revenue Recognition”, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have a material effect on our financial position or results of operations.

Quarterly Results of Operations

The following table sets forth the unaudited quarterly results of operations for each of the 10 quarters in the period June 3, 2001 through November 29, 2003, as well as the same data expressed as a percentage of net sales. This information includes all adjustments management considers necessary for the fair presentation of such data. The information for each quarter is unaudited and we have prepared it on the same basis as the audited financial statements appearing elsewhere in this document. In our opinion, all necessary adjustments, consisting only of normal recurring adjustments, have been included to present fairly the unaudited quarterly results. We have historically experienced lower sales in the first and, to a lesser extent, in the second fiscal quarter due to lower volumes of elective surgeries in warmer months and increased purchasing following major medical society meetings that are typically held in our third and fourth fiscal quarters. These seasonal factors may lead to seasonality in our quarterly results of operations. The results of historical periods are not necessarily indicative of results for any future period.


	Results of Quarterly Operations Quarter Ended
	Fiscal 2002												Fiscal 2003												Fiscal 2004
	Sept. 1, 2001			Dec. 1, 2001			March 2, 2002			June 1, 2002			Aug. 31, 2002			Nov. 30, 2002			March 1, 2003			May 31, 2003			Aug. 30, 2003			Nov. 29, 2003
	(in thousands, except per share data)
Net sales	$	6,743		$	7,603		$	8,134		$	8,410		$	8,328		$	8,768		$	10,103		$	11,235		$	10,630		$	11,851
Cost of goods sold		3,562			3,667			4,318			3,786			4,160			3,974			5,036			5,402			5,095			5,759

Gross profit		3,181			3,936			3,816			4,624			4,168			4,794			5,067			5,833			5,535			6,092

Operating expenses
Sales and marketing		2,080			2,101			2,047			2,673			2,432			2,696			2,900			3,310			3,004			3,235
General and administrative		546			582			603			586			603			700			739			735			837			800
Research and development		350			477			515			609			573			603			593			740			751			870

Total operating expenses		2,976			3,160			3,165			3,868			3,608			3,999			4,232			4,785			4,592			4,905

Operating profit		205			776			651			756			560			795			835			1,048			943			1,187
Other income (expenses)
Interest income Interest expense		16 (216	)		12 (216	)		8 (216	)		9 (215	)		9 (223	)		8 (269	)		10 (266	)		11 (263	)		4 (260	)		4 (241	)

Earnings before income tax provision		5			572			443			550			346			534			579			796			687			950
Income tax provision		32			230			96			203			236			308			262			263			379			344

Net earnings (loss)	$	(27	)	$	342		$	347		$	347		$	110		$	226		$	317		$	533		$	308		$	606

Earnings (loss) per common share
Basic	$	(27	)	$	342		$	347		$	347		$	110		$	226		$	317		$	533		$	308		$	606

Diluted	$	(27	)	$	342		$	337		$	337		$	107		$	219		$	308		$	518		$	299		$	580


	Results of Quarterly Operations Quarter Ended
	Fiscal 2002								Fiscal 2003								Fiscal 2004
	Sept. 1, 2001		Dec. 1, 2001		March 2, 2002		June 1, 2002		Aug. 31, 2002		Nov. 30, 2002		March 1, 2003		May 31, 2003		Aug. 30, 2003		Nov. 29, 2003
	(in thousands, except per share data)

Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Cost of goods sold	52.8		48.2		53.1		45.0		50.0		45.3		49.8		48.1		47.9		48.6

Gross profit	47.2		51.8		46.9		55.0		50.0		54.7		50.2		51.9		52.1		51.4

Operating expenses
Sales and marketing	30.8		27.6		25.2		31.8		29.2		30.7		28.7		29.5		28.3		27.3
General and administrative	8.1		7.7		7.4		7.0		7.2		8.0		7.3		6.5		7.8		6.8
Research and development	5.2		6.3		6.3		7.2		6.9		6.9		5.9		6.6		7.1		7.3

Total operating expenses	44.1		41.6		38.9		46.0		43.3		45.6		41.9		42.6		43.2		41.4

Operating profit	3.1		10.2		8.0		9.0		6.7		9.1		8.3		9.3		8.9		10.0
Other income (expenses)
Interest income	0.2		0.2		0.1		0.1		0.1		0.1		0.1		0.1		0.0		0.0
Interest expense	(3.2	)	(2.8	)	(2.7	)	(2.6	)	(2.7	)	(3.1	)	(2.7	)	(2.3	)	(2.4	)	(2.0	)

Earnings before income tax provision	0.1		7.6		5.4		6.5		4.2		6.1		5.7		7.1		6.5		8.0
Income tax provision	0.5		3.1		1.1		2.4		2.8		3.5		2.6		2.3		3.6		2.9

Net earnings (loss)	(0.4	)%	4.5	%	4.3	%	4.1	%	1.3	%	2.6	%	3.1	%	4.8	%	2.9	%	5.1	%

Earnings (loss) per common share
Basic	(0.4	)%	4.5	%	4.3	%	4.1	%	1.3	%	2.6	%	3.1	%	4.8	%	2.9	%	5.1	%

Diluted	(0.4	)%	4.5	%	4.1	%	4.0	%	1.3	%	2.5	%	3.0	%	4.6	%	2.8	%	4.9	%

BUSINESS

Company Overview

We are a leading provider of innovative medical devices used in minimally invasive, image-guided procedures to treat peripheral vascular disease, or PVD. We design, develop, manufacture and market a broad line of therapeutic and diagnostic devices that enable interventional physicians (interventional radiologists, vascular surgeons and others) to treat PVD and other non-coronary diseases. PVD is a condition in which the arteries or veins that carry blood to or from the legs, arms and non-cardiac organs (kidney, intestines, brain) become narrowed, obstructed or ballooned. Our current product lines primarily consist of angiographic catheters, hemodialysis catheters, PTA dilation catheters, thrombolytic products, image-guided vascular access products, an endovascular laser venous system and drainage products.

The U.S. market for medical devices used to diagnose and treat PVD is large and growing. Millennium Research Group reports that over 11 million Americans currently suffer from PVD. We believe our markets will expand due to the growth in our target patient population, the increasing adoption of minimally invasive techniques for treating vascular and other non-coronary diseases and the refinement of image-guided procedures. These trends provide opportunities for interventional physicians to perform a greater number and variety of procedures using minimally invasive, image-guided techniques, such as lower limb arterial and venous procedures; aortic, renal and carotid arterial interventions; dialysis and access procedures; and tumor ablation and embolization therapies.

Our principal competitive advantages are our dedicated market focus, established brands and innovative products. We believe we are the only company whose primary focus is to offer a comprehensive product line for the interventional treatment of PVD and other non-coronary diseases. Several larger competitors are primarily focused on the treatment of coronary disease. We believe our dedicated focus enhances patient care and engenders loyalty among our customers. As a provider of interventional devices for over a decade, we have established AngioDynamics’ brands as premium performance products. We collaborate frequently with leading interventional physicians in developing our products and rely on these relationships to further support our brands. Our chief executive officer is the only business executive from the medical device industry to serve on the Strategic Planning Committee of the Society of Interventional Radiology. This appointment provides us with knowledge of emerging clinical trends, high visibility among interventional physicians and opportunities to understand and influence the evolution of interventional therapies. In addition, we believe our relationships with interventional physicians are critical to our continued success given that these physicians typically have considerable influence over purchasing decisions.

We sell our broad line of quality devices for minimally-invasive therapies in the United States through a direct sales force of 35 professionals, five regional sales managers and a vice president of sales. We also sell our products in 26 non-U.S. markets through a distributor network. We support our customers and sales organization with a marketing staff that includes product managers, customer service representatives and a clinical specialist. Our dedicated sales force and growing portfolio of products have contributed to our strong sales growth. From fiscal 2000 to fiscal 2003, we increased sales from $21.8 million to $38.4 million, a compound annual growth rate, or CAGR, of 20.8%. During the same period, we increased earnings from a net loss of $1.4 million to net earnings of $1.2 million.

Peripheral Vascular Disease

Peripheral vascular disease encompasses a number of conditions in which the arteries or veins that carry blood to or from the legs, arms or non-cardiac organs become narrowed, obstructed or ballooned. Structural deterioration in the blood vessels due to aging and the accumulation of atherosclerotic plaque

results in restricted or diminished blood flow. Common symptoms include numbness, tingling, persistent pain or cramps in the extremities and deterioration of organ function, such as renal failure or intestinal malabsorption. Common PVDs also include venous insufficiency, a malfunction of one or more valves in the leg veins, which often leads to painful varicose veins and/or potentially life-threatening blood clots, and abdominal aortic aneurysms, or AAA, a ballooning of the aorta, which can lead to a potentially fatal rupture. Individuals who are over age 50, smoke, are overweight, have lipid (i.e., cholesterol) disorders, are diabetic or have high blood pressure are at the greatest risk of developing PVD.

The U.S. market for medical devices used to diagnose and treat PVD and other non-coronary disease is large and growing. Based on data from IMS Health, Medtech Insight and Millennium Research Group, we estimate that aggregate U.S. expenditures on the categories of products we currently sell will increase from approximately $760 million in 2002 to over $1 billion in 2007.

Peripheral Interventional Medicine

Peripheral interventional medicine involves the use of minimally invasive, image-guided procedures to treat peripheral vascular and other non-coronary diseases. In these procedures, x-rays, ultrasound, MRI and other diagnostic imaging equipment are used to guide tiny instruments, such as catheters, through blood vessels or the skin to treat diseases. Increasing use of these techniques has accompanied advances in device designs and imaging technologies that enable physicians to diagnose and treat peripheral disorders in a much less invasive manner than traditional open surgery. Interventional procedures are generally less traumatic and less expensive, as they involve less anesthesia, a smaller incision and a quicker recovery time.

Peripheral interventional procedures are performed primarily by physicians specially trained in minimally invasive, image-guided techniques. This group of interventional physicians includes interventional radiologists, vascular surgeons and others. Interventional radiologists are board certified radiologists who are fellowship trained in image-guided, percutaneous (through the skin) interventions. These physicians historically have developed many interventional procedures, including balloon angioplasty, vascular stenting and embolization, and perform the majority of peripheral interventional procedures. There are currently more than 5,000 interventional radiologists in the United States performing over four million procedures annually. Vascular surgeons have traditionally been trained for open surgical repair of arterial and venous disorders. A large number are now increasingly performing interventional procedures. Accredited vascular surgery training programs now generally require instruction in interventional, image-guided peripheral vascular procedures. Increasingly, interventional radiologists and vascular surgeons are forming joint practices to capture additional patient referrals by providing a broader range of interventional treatments. Other physicians who perform peripheral interventional procedures include interventional cardiologists and interventional nephrologists.

We estimate that the number of peripheral interventional procedures in the United States performed by interventional physicians will grow from approximately 8.7 million in 2002 to 13 million in 2007. Several trends are responsible for this projected growth:

Demographic trends. The U.S. population is aging and developing increasing incidences of obesity and diabetes — each a leading risk indicator of PVD. The baby boom generation has largely entered the over-45 age bracket. Average spending on healthcare increases with age. People aged 65 years or over who do not reside in healthcare institutions spend, on average, six times as much for healthcare as do people under the age of 18 and almost three times that of people between the ages of 18 to 65 years. In addition, according to the Center for Disease Control, the percentage of Americans between the ages of 20 and 74 years that are considered obese increased from

approximately 15% in 1980 to an estimated 27% in 1999. Further, the American Diabetes Association estimates that 18.2 million Americans had diabetes in 2002.

Reduced patient risk and trauma. Patients, physicians and insurers are seeking minimally invasive therapies that involve less patient risk and trauma. Interventions performed with catheter devices inserted through small incisions under local anesthesia are generally safer and less traumatic than invasive open surgical procedures performed under general anesthesia.

Lower costs. Most interventional procedures are performed on an outpatient basis or require only a short hospital stay, which reduces hospital charges and physician fees. With recent significant increases in healthcare costs, U.S. businesses, politicians and consumers are seeking more cost-effective treatment alternatives.

New interventional treatments. Many emerging treatments use interventional approaches. Examples include endovascular grafting for AAA, percutaneous back therapies for lumbar disk disease, greater saphenous vein closures for venous insufficiency, embolizations for tumor or abnormal vessel configurations, retrievable vena cava filters, image-guided vascular access and thermal tumor ablations.

Greater public awareness. Awareness of PVD and minimally invasive treatment alternatives has traditionally been low in the United States, causing patients to be slow to seek treatment. Even primary care physicians may lack a proper understanding of PVD diagnoses and treatments. Recent emphasis on PVD education from medical associations, insurance companies and online medical communities is increasing public and physician awareness of PVD risk factors, symptoms and treatment options.

Evolving practice patterns. Interventional radiologists are increasingly assuming greater control of overall patient management and are more proactively educating patients and primary care physicians about available minimally invasive treatment options. We believe these factors will increase the number of patients that choose minimally invasive procedures over open surgical procedures. Vascular surgeons are also modifying their practice patterns to incorporate minimally invasive procedures, and are increasingly joining interventional radiologists to provide a more comprehensive approach to performing peripheral interventional procedures. We believe this collaboration will increase the number of minimally invasive procedures performed.

Our Strategy

Our goal is to be the leading provider of medical devices to interventional physicians for the treatment of PVD and other non-coronary diseases. The key elements of our strategy include:

Expanding sales and marketing. Since January 1, 2003, we have added four sales representatives and one regional manager and have launched patient education and physician training programs for our elvs products. To expand our coverage of interventional physicians and increase our market penetration, we intend to continue to add direct sales representatives in the United States and distributors in other markets.

Developing new products and enhancing existing products. We intend to increase our annual investment in research and development to approximately 8% of net sales from our historical levels of 6% to 7% to continue to develop new products and enhance existing products. In our current fiscal year, we have launched four new products. We invest approximately 25% of our research and development spending on improvements to our existing products based on customer feedback. This investment protects our market position and drives incremental sales.

Offering a broad product line. We believe our ability to offer a broad line of therapeutic and diagnostic products is a competitive advantage that differentiates us from single product niche device companies. We intend to continue to enter complementary product categories in which we feel we can become a market leader.

Vertically integrating manufacturing. In fiscal 2003, approximately 40% of our revenues were derived from products manufactured for us by third parties. We intend to manufacture a greater percentage of these products. We believe this increased vertical integration will enable us to lower production costs and increase profitability.

Acquiring or partnering with complementary businesses. We believe we will be able to leverage our existing sales infrastructure and to supplement our internal development efforts through selective licenses, alliances and acquisitions of technologies and products that will further enhance our presence in interventional medicine.

Products

Our current product offerings consist of the following product categories:


	Fiscal 2003
Product	Sales		%
	(dollars in thousands)

Angiographic products and accessories	$	13,701	35.6	%
Hemodialysis catheters		9,371	24.4
PTA dilation catheters		3,048	7.9
Thrombolytic products		2,989	7.8
Image-guided vascular access products		2,656	6.9
Endovascular Laser Venous System products		2,106	5.5
Drainage products		1,311	3.4
Other		3,252	8.5

Total	$	38,434	100.0	%

The sales reported in the table above as “Other” include revenues from freight charges, sales of biliary stents and revenues from contract manufacturing for E-Z-EM.

All products discussed below have been cleared for sale in the United States by the FDA.

Angiographic Products and Accessories

Angiographic products and accessories are used during virtually every peripheral vascular interventional procedure. These products permit interventional physicians to reach targeted locations within the vascular system to deliver contrast media for visualization purposes and therapeutic agents and devices, such as stents or PTA balloons. Angiographic products consist primarily of angiographic catheters. Angiographic accessories include entry needles and guidewires that are specifically designed for peripheral interventions, and fluid management products.

Millennium Research Group reports that the U.S. market for angiographic products and accessories for peripheral vascular applications in 2002 was $162.2 million. This aggregate market consisted of a $134.9 million market for peripheral vascular guidewires and a $27.3 million market for angiographic catheters.

We manufacture three lines of angiographic catheters that are available in over 500 tip configurations and lengths, either as standard items or made to order.

Soft-Vu. Our proprietary Soft-Vu technology incorporates a soft, atraumatic tip, which is easily visualized under fluoroscopy.

ANGIOPTIC. The ANGIOPTIC line is distinguished from other catheters because the entire instrument is highly visible under fluoroscopy.

Accu-Vu. The Accu-Vu is a highly visible, accurate sizing catheter to determine the length and diameter of a vessel for endovascular procedures. Accu-Vu provides a soft, highly radiopaque tip with a choice of platinum radiopaque marker patterns along the shaft for enhanced visibility and accuracy. Sizing catheters are used primarily in preparation for aortic aneurysm stent-grafts, percutaneous balloon angioplasty, peripherally-placed vascular stents and vena cava filters.

We offer several angiographic accessories to support our core angiographic catheter line. These products include standard entry needles and uncoated, Teflon-coated and hydrophilic-coated guidewires. We also manufacture several lines of products used to administer fluids and contain blood and other biological wastes encountered during an interventional procedure.

Our major competitors in the peripheral angiographic market are Boston Scientific, Cook and Cordis. Millennium Research Group reports that in 2002, we had the largest share of the peripheral angiographic catheter market, with 31% of the market.

Hemodialysis Catheters

We market a complete line of hemodialysis catheters that provide short- and long-term vascular access for hemodialysis patients. Hemodialysis, or cleaning of the blood, is necessary in conditions such as acute renal failure, chronic renal failure and end stage renal disease, or ESRD. The kidneys remove excess water and chemical wastes from blood, permitting clean blood to return to the circulatory system. When the kidneys malfunction, waste substances cannot be excreted, creating an abnormal buildup of wastes in the bloodstream. Hemodialysis machines are used to treat this condition. Vascular catheters, which connect the patient to the dialysis machine, are used at various stages in the treatment of every hemodialysis patient.

Millennium Research Group reports that in 2002, over 375,000 individuals in the United States were diagnosed with ESRD. This number is expected to increase at a CAGR of 7.0% to 527,000 in 2007. The total U.S. market for hemodialysis catheters was $84.5 million in 2002 and is expected to grow to $176.4 million in 2007, representing a CAGR of 15.9%. This growth is due to an anticipated increase in the patient population and the introduction of premium hemodialysis catheters, such as our high flow hemodialysis catheters.

We market a complete line of hemodialysis catheters for short- and long-term vascular access for the hemodialysis patient. We currently offer four high flow hemodialysis catheters that enable blood to be cleaned in a shorter period of time than other similar catheters.

Schon. The Schon chronic hemodialysis catheter is designed to be self-retaining, deliver high flow rates and provide patient comfort. The Schon is for long-term use.

More-Flow. The More-Flow chronic hemodialysis catheter permits easier insertion and delivers high flow rates. The material conforms well to the vessel anatomy, resulting in higher patient tolerance during extended use. The More-Flow is for long-term use.

Dura-Flow. The Dura-Flow chronic hemodialysis catheter is designed to be durable, maximize flow rates and provide for easier care and site maintenance. The Dura-Flow chronic hemodialysis catheter is for long-term use.

Schon XL. The Schon XL acute hemodialysis catheter is designed to be kink resistant, deliver high flow rates, offer versatile positioning and provide patient comfort. Schon XL is for short-term use.

Boston Scientific, C.R. Bard, Kendall Healthcare Products, a subsidiary of Tyco International Ltd., and Medcomp are our major competitors in the development, production and marketing of hemodialysis catheters. We obtain all of our hemodialysis catheters from Medcomp under an exclusive license, except for our More-Flow catheter, which we obtain under a non-exclusive license.

PTA Dilation Balloons

PTA procedures are used to open blocked blood vessels and hemodialysis access sites using a catheter that has a balloon at its tip. When the balloon is inflated, the pressure flattens the blockage against the vessel wall to improve blood flow. PTA is now the most common method for opening a blocked vessel in the heart, legs, kidneys or arms. According to Millennium Research Group, the 2002 U.S. market for PTA balloon catheters was $77.8 million and is expected to grow to $118.5 million in 2007, representing a CAGR of 8.8%. PTA dilation balloons used exclusively to treat obstructed hemodialysis access sites address a component of this market.

Our WorkHorse product is a high-pressure balloon catheter offered in 54 configurations. While the WorkHorse can perform other peripheral PTA procedures, we believe the device is used primarily for treating obstructed hemodialysis access sites.

Boston Scientific, Cordis, Cook and C.R. Bard are our primary competitors in the PTA dilation market.

Thrombolytic Products

Thrombolytic catheter products are used to deliver thrombolytic agents, drugs that dissolve blood clots in hemodialysis access grafts, arteries, veins and surgical bypass grafts. Medtech Insight reports that approximately 112,000 peripheral catheter-directed, thrombolytic procedures were performed in the United States in 2002. Medtech Insight reports that sales of catheter-directed thrombolytic devices for peripheral indications were an estimated $19.6 million in 2002 and are expected to grow to $25.6 million in 2007, representing a CAGR of 5.5%.

Our Pulse*Spray and UNI*FUSE catheters improve the delivery of thrombolytic agents by providing a controlled, forceful, uniform dispersion. Patented slits on the infusion catheter operate like tiny valves for an even distribution of thrombolytic agents. We believe that these slits reduce the amount of thrombolytic agents and time necessary for the procedure, resulting in cost savings and improved patient safety.

According to Medtech Insight, in 2002, we were the second largest provider of catheter-directed thrombolytic devices. Our primary competitors in this market include Boston Scientific, Cook and Micro Therapeutics, Inc.

Image-Guided Vascular Access Products

Image-guided vascular access, or IGVA, involves the use of advanced imaging equipment to guide the placement of catheters that deliver primarily short-term drug therapies, such as chemotherapeutic agents and antibiotics, into the central circulatory system. Delivery to the central system allows drugs to mix with a

large volume of blood as compared to intravenous drug delivery into a superficial vessel. IGVA procedures include the placement of percutaneously inserted central catheter lines, or PICC lines, implantable ports and central venous catheters, or CVCs.

Our IGVA products include:

Chemo-Port. The Chemo-Port maximizes options for patients with difficult and/or complex venous access needs. The port lock system is easy to attach and provides a secure connection.

Chemo-Cath. The Chemo-Cath, a central venous access catheter system, provides easy placement, safety and comfort to the patient.

Micro Access Sets. Our micro access sets provide interventional physicians with an access set with a smaller introducer system for minimally invasive procedures.

V-Cath PICC Lines. These PICC lines are for short- or long-term peripheral access to the central venous system for intravenous therapy or blood sampling.

Based on Millennium Research Group’s estimates of the U.S. markets for PICC lines, ports, CVCs, and IMS Health’s estimates of the U.S. market for micro access sets, we estimate that the market opportunity for our IGVA products exceeded $390 million in 2002. Micro access sets consist of an entry needle, guidewire and dilator, specifically designed for minimally invasive placement of vascular access catheters.

Our competitors in this market include Arrow International, Inc., Boston Scientific, Cook, C.R. Bard, Deltec, Inc., a subsidiary of Smiths Group plc, and Medcomp.

Endovascular Laser Venous System (elvs)

An endovascular laser procedure in the venous system is a less invasive alternative to vein stripping for the treatment of venous insufficiency of the greater saphenous vein. Vein stripping is a lengthy, painful and traumatic surgical procedure that involves significant patient recovery time. In contrast, laser treatment is an outpatient procedure that generally allows the patient to quickly return to normal activities with no scarring and minimal post-operative pain. The laser delivers energy that causes the degenerating vein to collapse. The body subsequently routes the blood to other healthy veins. Another treatment alternative to laser treatment is radio frequency ablation, which we believe is a more time consuming and expensive procedure than laser treatment.

We believe the endovascular laser venous market is nascent but poised for significant growth. Approximately 25% of women and 15% of men in the United States have some type of lower extremity venous insufficiency, a disorder characterized by incompetent vein valves and poor blood flow from the legs back to the heart. Of these people, an estimated 20% have visible varicose veins. Varicose vein symptoms include heavy or aching legs, leg swelling and skin discoloration. More serious complications may also result, such as eczema (inflamed tissue), skin ulcerations and thrombus (blood clots). Patients seek treatments for varicose veins because of their potential serious medical complications, as well as aesthetic concerns.

Our Precision 810 and Precision 980 elvs products treat venous insufficiency. When venous valves become incompetent, they allow blood to leak or reflux into thin-walled veins that are close to the skin’s surface. The refluxing blood increases the pressure within these veins, causing them to become enlarged, dilate and ultimately result in varicose veins. Laser energy is used to stop the source of the pressure by

delivering energy to collapse and destroy the affected vein. With our elvs products, a laser fiber is inserted into an affected vein through a sheath. Our elvs products are sold as a system that includes a diode laser, disposable components and training and marketing material. The diode laser is a self-contained reusable instrument. The disposable components in the system include a Sheath-Lok laser fiber system for which a patent application is pending, an access sheath, access wires and needles. The training and marketing material includes a two-day physician training course, a comprehensive business development package and patient marketing kit.

Competition for the treatment of venous insufficiency includes surgical vein stripping treatments, RF ablation and other laser treatment of the greater saphenous vein. The leading provider for RF ablation is VNUS Medical. Companies competing in the laser segment include biolitec, Inc., Diomed, Dornier MedTech GmbH and Vascular Solutions, Inc. We purchase the laser and laser fiber used in our Precision 810 and Precision 980 elvs products from biolitec, Inc.

Drainage Products

Drainage products percutaneously drain abscesses and other fluid pockets. An abscess is a tender, inflamed mass that typically must be drained by a physician. According to IMS Health, the 2002 U.S. market size for drainage catheters was approximately $25.5 million, an increase of 15.6% over the prior year.

Our line of drainage products consists of our ABSCESSION general drainage catheters and ABSCESSION biliary drainage catheters. These products feature a soft catheter material that is designed for patient comfort. These catheters also recover their shape if bent or severely deformed when patients roll over and kink the catheters during sleep.

Our primary competitors for drainage products include Boston Scientific, Cook and C.R. Bard.

New Products

We believe that consistently introducing innovative new products to our customers is critical to our ongoing success. In our current fiscal year, we have launched the following new products, all of which have received FDA clearance.

AQUALiner. In October 2003, we introduced the AQUALiner, a technologically advanced guidewire. This guidewire is used to provide access to difficult to reach locations in interventional procedures requiring a highly lubricious wire. The AQUALiner guidewire incorporates proprietary advanced coating technology that allows smooth, frictionless navigation.

WorkHorse II. In January 2004, we introduced the WorkHorse II, a low-profile, high-pressure, non-compliant PTA balloon catheter. This product is an extension to our WorkHorse PTA catheter. We have enhanced the WorkHorse features to improve product performance during declotting procedures for hemodialysis access sites.

4F Accu-Vu. In January 2004, we introduced our 4F Accu-Vu sizing angiographic catheter for use in determining the length and diameter of a vessel in preparation for performing endovascular procedures, such as abdominal aortic aneurysm (AAA) stent graft placement, percutaneous balloon angioplasty, peripherally placed vascular stents, or vena cava filters.

elvs 65cm Sheath Kit. In January 2004, we introduced the elvs 65cm sheath laser vein treatment kit. The kit features a 65cm sheath, which provides physicians the flexibility to treat longer vein segments with our elvs products.

In addition, in March and April 2004 we intend to launch the following new products, all of which have received FDA clearance.

MORPHEUS. The MORPHEUS PICC line provides short- or long-term peripheral access to the central venous system for intravenous therapy and blood sampling. This PICC line has a proprietary shaft design with increasing flexibility from the proximal to distal end. This design provides ease of use and enhanced patient safety and comfort.

Dynamic Flow. Our Dynamic Flow chronic hemodialysis catheter is intended for long-term use in dialysis patients. The catheter features a Durathane shaft that offers higher chemical resistance than polyurethane, simplifying site care requirements. The Dynamic Flow also features a user-friendly split tip design and a proximal shaft that reduces the chance of kinking post placement.

ANGIOFLOW. ANGIOFLOW is a catheter-based flow meter that we believe will be the first device to measure blood flow in hemodialysis access sites during an access site clearing procedure. The capability to measure blood flow will allow interventional physicians to evaluate the efficacy of an access site clearing procedure while performing the procedure, thus likely improving the outcome and decreasing repeat procedures.

SPEEDLYSER. Our SPEEDLYSER thrombolytic catheter will be used to effectively deliver thrombolytic agents into obstructed dialysis grafts. This new catheter features Pulse*Spray slit technology that simplifies catheter insertion and drug delivery.

Mariner. Our Mariner is a hydrophilic-coated angiographic catheter designed to access anatomy that is difficult to reach and for the delivery of embolic particles. It features a hydrophilic coating that is very durable and does not become tacky when dry.

Research & Development

Our future success will depend in part on our ability to continue to develop new products and enhance existing products. We recognize the importance of, and intend to continue to make significant investments in, research and development. Approximately 55% of our net sales for fiscal 2003 were from products we introduced in the last five fiscal years. For fiscal 2001, 2002 and 2003, our research and development expenditures were $1.4 million, $2.0 million and $2.5 million, respectively and constituted between 6% and 7% of net sales. We expect that our research and development expenditures will exceed 7% of net sales in fiscal 2004 and approximate 8% of net sales in the future.

We have separated our research and development group into distinct research and product development units. The research group is responsible for developing new product concepts and design innovations. The product development group converts the best ideas into marketable products. As of March 1, 2004, there were eight full-time employees in the research group and 13 full-time employees in the product development group. We commit approximately 25% of our annual research and development spending to enhancing our existing products to ensure these products continue to meet our customers’ evolving demands.

Our research and product development teams work closely with our sales force to incorporate customer feedback into our development and design process. We believe that we have a reputation among interventional physicians as being a good partner for product development because of our tradition of close physician collaboration, dedicated market focus, responsiveness and execution capabilities for product development and commercialization.

We conduct clinical research activities to support our product development efforts. Our preclinical studies are used to develop and evaluate new products and enhance existing products. We also manage clinical studies performed by investigators and institutions to study the clinical outcomes of our products. In addition to offering administrative support and funding, our research group assists investigators in writing protocols and collecting data when necessary.

Competition

We encounter significant competition from various entities across our product lines and in each market in which our products are sold. These markets are characterized by rapid change resulting from technological advances and scientific discoveries. In the product lines in which we compete, we face competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of products. In addition, we compete with providers of other medical therapies, such as pharmaceutical companies, which may offer non-surgical therapies for conditions that are currently or intended to be treated using our products. Our primary device competitors include: Boston Scientific, Cook, Cordis, C.R. Bard, Diomed, Medcomp and VNUS Medical. Medcomp supplies us with all of our hemodialysis catheters, but also competes with us by selling More-Flow catheters, which we buy from them on a non-exclusive basis, and other hemodialysis catheters that we do not license from them. Many of our competitors have substantially greater financial, technological, research and development, regulatory, marketing, sales and personnel resources than we do. Certain of these competitors may also have greater experience in developing products, obtaining regulatory approvals, and manufacturing and marketing such products. Certain of these competitors may obtain patent protection or regulatory approval or clearance, or achieve product commercialization, before us, any of which could materially adversely affect us.

We believe that our products compete primarily on the basis of their quality, ease of use, reliability, physician familiarity and cost-effectiveness. In some cases, they are sold at higher prices than those of our competitors. In the current environment of managed care, economically motivated buyers, consolidation among healthcare providers, increased competition and declining reimbursement rates, we have been increasingly required to compete on the basis of price. We believe that our continued competitive success will depend upon our ability to develop or acquire scientifically advanced technology, apply our technology cost-effectively across product lines and markets, develop or acquire proprietary products, attract and retain skilled development personnel, obtain patent or other protection for our products, obtain required regulatory and reimbursement approvals, manufacture and successfully market our products either directly or through outside parties, and maintain sufficient inventory to meet customer demand.

Sales and Marketing

We focus our sales and marketing efforts on interventional radiologists and vascular surgeons. There are over 5,000 interventional radiologists and 2,000 vascular surgeons in the United States. We educate these physicians on the clinical efficacy, performance, ease of use, value and other advantages of our products.

We sell our products through a direct sales force in the United States and a network of distributors in international markets. As of March 1, 2004, we employed 35 direct sales persons, five regional sales managers and a vice president of sales. In non-U.S. markets, as of March 1, 2004, we employed two sales directors, had a network of 25 distributors and sold our products in 26 markets. We support our distributors with clinical support staff and regional sales personnel, as well as by developing and funding promotional programs and materials.

As of March 1, 2004, our marketing staff included four product managers, who have global product-line responsibility, five customer service representatives, a coordinator of elvs products training and a vice president of marketing. The elvs products training is a comprehensive two-day training course offered free of charge to physicians who have purchased our elvs products. We use the elvs products training and other training programs to foster future collaboration with physicians and increase brand awareness and loyalty. We also seek to create patient awareness of this new treatment through our website, print materials and video news releases.

We promote our products through medical society meetings that are well attended by interventional radiologists, vascular surgeons, interventional cardiologists and interventional nephrologists. Our significant presence at these key meetings reflects our commitment to, and stature in, the interventional community.

Manufacturing

Our manufacturing facility is located in Queensbury, New York, and includes over 32,000 square feet of manufacturing and distribution space. We believe this facility has sufficient capacity to meet our anticipated manufacturing needs for the next five years.

We manufacture certain proprietary components and assemble, inspect, test and package our finished products. By designing and manufacturing many of our products from raw materials, and assembling and testing our subassemblies and products, we believe that we can maintain better quality control, ensure compliance with applicable regulatory standards and our internal specifications, and limit outside access to our proprietary technology. We have custom-designed proprietary manufacturing and processing equipment and have developed proprietary enhancements for existing production machinery.

Our management information system includes order entry, invoicing, on-line inventory management, lot traceability, purchasing, shop floor control and shipping and distribution analysis, as well as various accounting-oriented functions. This system enables us to track our products from the inception of an order through all parts of the manufacturing process until the product is delivered to the customer. Our efficient manufacturing capabilities enable us to ship 95% of products sold in the United States within 48 hours of when an order is placed.

We purchase components from third parties. Most of our components are readily available from several supply sources. We also purchase finished products from third parties. One supplier, Medcomp, currently supplies all of our hemodialysis catheters. Medcomp products accounted for approximately 24% of our net sales for fiscal 2003. Another supplier, biolitec, Inc., supplies us with the laser and laser fibers for our elvs products. To date, we have been able to obtain adequate supplies of all product and components in a timely manner from existing sources.

In fiscal 2003, 60% of our net sales were derived from products we manufactured ourselves, with the balance being derived from products manufactured for us by third parties. We intend to manufacture more of these outsourced products in our facility in 2004, which we believe will enable us to lower production costs and increase profitability.

We believe our manufacturing operations meet or exceed all applicable domestic and foreign regulations and standards. Our Queensbury facility is registered with the FDA and has been certified to ISO 13485, EN 46001 and ISO 9001 standards, as well as the CMD/CAS Canadian Medical Device Regulations. Our manufacturing facilities are subject to periodic inspections by regulatory authorities to ensure compliance with domestic and non-U.S. regulatory requirements. See “ — Government Regulation.”

Intellectual Property

In the United States, we own 23 patents and have exclusive licenses to 14 patents. We have 21 pending patent applications and exclusive licenses to three pending patent applications for fields of use related to our business. Internationally, we have 24 issued patents and 18 pending patent applications, all of which are foreign counterparts of the U.S. cases.

We currently hold U.S. patents covering certain aspects of the following products: Soft-Vu angiographic catheter lines, Pulse*Spray Infusion Systems, UNI*FUSE Infusion System, CO₂Ject carbon dioxide angiographic systems, PULSE*VU bloodless angiographic needle, Halo angiographic flush catheters, VISTAFLEX and OMNIFLEX peripheral and biliary stents and ANGIOFLUSH fluid delivery systems. In addition, we hold foreign patents or pending foreign patent applications for some of these products, in certain non-U.S. jurisdictions.

We also hold U.S. patents or pending patent applications regarding other devices and potential products, including retrievable and convertible IVC filters, needles, angioplasty balloons, stent delivery systems, angiographic catheters, thrombolytic devices, PICC lines, venous therapies, dialysis devices and drainage catheters. We hold foreign patent applications regarding other devices and potential products including IVC filters, needles, thrombolytic devices, PICC lines, venous therapies and dialysis devices.

We have licenses for U.S. patents or pending patent applications regarding potential products, including angiographic catheters, guidewires, micro-catheters, microwave tumor therapies, hemostasis sheaths and irrigation devices.

We believe that our success is dependent, to a large extent, on patent protection and the proprietary nature of our technology. We intend to file and prosecute patent applications for our technology and in jurisdictions where we believe that patent protection is effective and advisable. Generally, for products that we believe are appropriate for patent protection, we will attempt to obtain patents in the United States and Canada, France, Germany, Italy, Japan and Spain. However, depending on circumstances, we may not apply for patents in all or any of those jurisdictions, or we may pursue patent protection elsewhere.

Notwithstanding the foregoing, the patent positions of medical device companies, including our company, are uncertain and involve complex and evolving legal and factual questions. The coverage sought in a patent application can be denied or significantly reduced either before or after the patent is issued. Consequently, there can be no assurance that any of our pending patent applications will result in an issued patent. There is also no assurance that any existing or future patent will provide significant protection or commercial advantage, or whether any existing or future patent will be circumvented by a more basic patent, thus requiring us to obtain a license to produce and sell the product. Generally, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date. In addition, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that we were the first to invent the subject matter covered by each of our pending U.S. patent applications or that we were the first to file non-U.S. patent applications for such subject matter.

If a third party files a patent application relating to an invention claimed in our patent application, we may be required to participate in an interference proceeding declared by the U.S. Patent and Trademark Office to determine who owns the patent. Such proceeding could involve substantial uncertainties and cost, even if the eventual outcome is favorable to us. There can be no assurance that our patents, if issued, would be upheld as valid in court.

Third parties may claim that our products infringe on their patents and other intellectual property rights. Some companies in the medical device industry have used intellectual property infringement litigation to gain a competitive advantage. If a competitor were to challenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive changes to our product designs, license rights in order to continue manufacturing and selling our products, or pay substantial damages. Third-party infringement claims, regardless of their outcome, would not only consume our financial resources but also divert our management’s time and effort. Such claims could also cause our customers or potential customers to defer or limit their purchase or use of the affected products until resolution of the claim.

In January 2004, Diomed filed an action against us alleging that our elvs products for the treatment of varicose veins infringe on a patent held by Diomed in its competing laser system. Diomed’s complaint seeks injunctive relief and compensatory and treble damages. If Diomed is successful in this action, our results of operations could suffer. See “ — Litigation”.

We rely on trade secret protection for certain unpatented aspects of other proprietary technology. There can be no assurance that others will not independently develop or otherwise acquire substantially equivalent proprietary information or techniques, that others will not gain access to our proprietary technology or disclose such technology, or that we can meaningfully protect our trade secrets. We have a policy of requiring key employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting relationship with us. Our confidentiality agreements also require our employees to assign to us all rights to any inventions made or conceived during their employment with us. We also generally require our consultants to assign to us any inventions made during the course of their engagement by us. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for us in the event of unauthorized use, transfer or disclosure of confidential information or inventions.

The laws of foreign countries generally do not protect our proprietary rights to the same extent as do the laws of the United States. In addition, we may experience more difficulty enforcing our proprietary rights in certain foreign jurisdictions.

Government Regulation

The products we manufacture and market are subject to regulation by the FDA and, in some instances, state authorities and foreign governments.

United States Regulation

Before a new medical device can be introduced into the market, a manufacturer generally must obtain marketing clearance or approval from the FDA through either a 510(k) submission (a premarket notification) or a premarket approval application, or PMA.

The 510(k) procedure is less rigorous than the PMA procedure, but is available only in particular circumstances. The 510(k) clearance procedure is available only if a manufacturer can establish that its device is “substantially equivalent” to a legally marketed device. The 510(k) procedure applies both to new products and to modifications of existing products. The 510(k) clearance procedure generally takes from four to 12 months from the time of submission, but may take longer. The FDA may determine that a new device is not substantially equivalent to a legally marketed device or may require that additional information, including clinical data, be submitted before a determination is made, either of which could significantly delay the introduction of new device products. If a product does not satisfy the criteria of substantial equivalence, premarket approval is required prior to the introduction of that product into the market.

The PMA application procedure is more comprehensive than is the 510(k) procedure and typically takes several years to complete. The PMA application must be supported by scientific evidence providing preclinical and clinical data relating to the safety and efficacy of the device and include a variety of other information. The standard used by the FDA in determining whether to approve a PMA application is that there must be a reasonable assurance that the device is safe and effective for its intended purpose. As part of the PMA approval, the FDA may place restrictions on the device, such as requiring additional patient follow-up for an indefinite period of time. After a PMA is approved, if significant changes are made to a device, a PMA supplement containing additional information must be filed for FDA approval. If the FDA’s evaluation of the PMA application or the manufacturing facility is not favorable, the FDA may deny approval of the PMA application or issue a “not approvable” letter. The FDA may also require additional clinical trials, which can delay the PMA approval process by several years.

Historically, our products have been introduced into the market using the 510(k) procedure and we have never used the more rigorous PMA procedure. No current clinical trials are pending for any of our products.

The FDA approval process for a medical device is expensive, uncertain and lengthy, and a number of products for which FDA approval has been sought by other companies have never been approved for marketing. There can be no assurance that we will be able to obtain necessary regulatory approvals for any product requiring regulatory approval on a timely basis or at all. Delays in receipt of or failure to receive such approvals, the loss of previously received approvals, or the failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition and results of operation. If and when FDA marketing approvals are granted for a device, the products and their manufacture are subject to pervasive and continuing regulation by the FDA, including record keeping requirements and reporting of adverse experiences with the use of the device. The labeling and promotion activities with respect to devices and drugs are subject to scrutiny by the FDA, and in certain instances, by the Federal Trade Commission. The FDA actively enforces regulations prohibiting the marketing of devices and drugs for unapproved uses.

The devices manufactured by us are subject to current Good Manufacturing Practice and Quality System regulations. Device manufacturers are required to register their facilities and list their facilities with the FDA and certain state agencies. Every phase of production, including raw materials, components and subassemblies, manufacturing, testing, quality control, labeling, tracing of consignees after distribution, and follow-up and reporting of complaint information is governed by FDA regulations. The FDA periodically conducts inspections of manufacturing facilities and, if there are violations, the operator of a facility must correct or satisfactorily explain the violations or face potential regulatory action.

Non-compliance with applicable FDA requirements can result in, among other things, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the FDA to grant marketing approvals, withdrawal of marketing approvals, a recommendation by the FDA to disallow us to enter into government contracts, and criminal prosecutions. The FDA also has the authority to request repair, replacement or refund of the cost of any device manufactured or distributed by us.

Other

We and our products are also subject to a variety of state and local laws in those jurisdictions where our products are or will be marketed, and Federal, state and local laws relating to matters such as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. For example, we are registered with the Office of the Professions of the New York State Department of Education. We are subject to various Federal and state laws governing our relationships with the physicians and others who purchase or make referrals for our products. For instance, Federal law prohibits payments of any form that are intended to induce a referral for any item payable under Medicare, Medicaid or any other Federal healthcare program. Many states have similar laws. There can be no assurance that we will not be required to incur significant costs to comply with such laws and regulations now or in the future or that such laws or regulations will not have a material adverse effect upon our ability to do business.

Non-U.S. Regulation

Internationally, all of our current products are considered medical devices under applicable regulatory regimes and we anticipate that this will be true for all of our future products. Sales of medical devices are subject to regulatory requirements in many countries. The regulatory review process may vary greatly from country to country. For example, the European Union has adopted numerous directives and standards relating to medical devices regulating their design, manufacture, clinical trials, labeling and adverse event reporting. Devices that comply with those requirements are entitled to bear a Conformité Européenne, or CE Mark, indicating that the device conforms with the essential requirements of the applicable directives and can be commercially distributed in countries that are members of the European Union.

In some cases, we rely on our non-U.S. distributors to obtain premarket approvals, complete product registrations, comply with clinical trial requirements and complete those steps that are customarily taken in the applicable jurisdictions in connection in those countries to comply with governmental and quasi-governmental regulation. In the future, we expect to continue to rely on distributors in this manner in those countries where we continue to market and sell our products through them.

International sales of medical devices manufactured in the United States that are not approved or cleared by the FDA for use in the United States, or are banned or deviate from lawful performance standards, are subject to FDA export requirements. Before exporting such products to a foreign country, we must first comply with the FDA’s regulatory procedures for exporting unapproved devices.

There can be no assurance that new laws or regulations regarding the release or sale of medical devices will not delay or prevent sale of our current or future products.

Third-Party Reimbursement

United States

Our products are used in medical procedures where patients expect that coverage will be available from third-party payors, which can be government or private health plans. Therefore, our sales volumes and the prices we charge for our products depend significantly on the extent to which those third-party payors, such as Medicare, Medicaid, other government programs and private insurance plans, cover our products and the procedures performed with them.

In the United States, third-party payors generally pay healthcare providers directly for the procedures they perform, and in certain instances for the products they use. However, in many cases third-party payors operate by reimbursing patients for all or part of the charges that patients pay for procedures and products used in connection with those procedures. In either case, our sales volumes depend on the extent to which third-party payors cover our products and the procedures in which they are used. In general, a third-party payor only covers a medical product or procedure when the plan administrator is satisfied that the product or procedure improves health outcomes, including quality of life or functional ability, in a safe and cost-effective manner. Even if a device has received clearance or approval for marketing by the FDA, there is no assurance that third-party payors will cover the cost of the device and related procedures.

In many instances, third-party payors cover the procedures performed using our products using price schedules that do not vary to reflect the cost of the products and equipment used in performing those procedures. In other instances, payment or reimbursement is separately available for the products and equipment used, in addition to payment or reimbursement for the procedure itself. Even if coverage is available, third-party payors may place restrictions on the circumstances where they provide coverage or may offer reimbursement that is not sufficient to cover the cost of our products. Many of the products that compete with ours are less expensive. Therefore, although coverage may be available for our products and the related procedures, the levels of approved coverage may not be sufficient to justify using our products instead of those of competitors.

Third-party payors are increasingly challenging the prices charged for medical products and procedures and, where a reimbursement model is used, introducing maximum reimbursements for the procedures they cover. We believe that the minimally invasive procedures in which our products are used are generally less costly than open surgery. However, there is no guarantee that these procedures will be reimbursed. Third-party payors may not consider these minimally invasive procedures to be cost-effective and therefore refuse to authorize coverage.

In certain cases in which third-party payors will cover the cost of medical products or equipment in addition to a general charge for the related procedure, they maintain lists of exclusive suppliers or approved lists of products deemed to be cost-effective. Authorization from those third-party payors is required prior to using products that are not on these lists. If our products are not on the approved lists, healthcare providers must determine if the additional cost and effort required to obtain prior authorization is justified by the clinical benefits that we believe our products offer, in light of the uncertainty of actually obtaining coverage.

Finally, the advent of contracted fixed rates per procedure has made it difficult to receive reimbursement for disposable products, even if the use of these products improves clinical outcomes. In addition, many third-party payors are moving to managed care systems in which providers contract to provide comprehensive healthcare for a fixed cost per person. Managed care providers often attempt to

control the cost of healthcare by authorizing fewer elective surgical procedures. Under current prospective payment systems, such as the diagnosis related group system and the hospital out-patient prospective payment system, both of which are used by Medicare and in many managed care systems used by private third-party payors, the cost of our products will be incorporated into the overall cost of a procedure and there will be no separate reimbursement for our products. As a result, we cannot be certain that hospital administrators and physicians will purchase our products, despite the clinical benefits and opportunity for cost savings that we believe can be derived from their use.

If hospitals and physicians cannot obtain adequate reimbursement for our products or the procedures in which they are used, our business, financial condition and results of operations could suffer a material adverse impact.

Non-U.S.

Our success in non-U.S. markets will depend largely upon the availability of reimbursement from the third-party payors through which healthcare providers are paid in those markets. Reimbursement and healthcare payment systems in non-U.S. markets vary significantly by country. The main types of healthcare payment systems are government sponsored healthcare and private insurance. Reimbursement approval must be obtained individually in each country in which our products are marketed. Outside the United States, we generally rely on the distributors who sell our products to obtain reimbursement approval for those countries in which they will sell our products. There can be no assurance that reimbursement approval will be received.

Insurance

Our product liability insurance coverage is currently provided under E-Z-EM’s liability policy. This coverage is limited to a maximum of $5.0 million per product liability claim and an aggregate policy limit of $20.0 million, subject to a deductible of $500,000 per occurrence. Under the master separation and distribution agreement we will enter into with E-Z-EM, E-Z-EM will maintain this coverage until the earlier of the anniversary date of that policy and the completion of the distribution by E-Z-EM of our shares to its stockholders.

We cannot assure you that our current product liability insurance is adequate. We will endeavor to obtain our own product liability coverage to commence upon termination of our coverage under E-Z-EM’s policy. However, we cannot assure you that such insurance coverage will be available on commercially reasonable terms or at all. A successful product liability claim or other claim with respect to uninsured or underinsured liabilities could have a material adverse effect on us.

Environmental

We are subject to Federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain hazardous and potentially hazardous substances used in connection with our operations. Although we believe that we have complied with theses laws and regulations in all material respects and to date have not been required to take any action to correct any noncompliance, there can be no assurance that we will not be required to incur significant costs to comply with environmental regulations in the future.

Employees

As of December 31, 2003, we employed 218 full-time employees and three part-time employees, including 12 in administration; 35 in research, product development and regulatory approval/quality assurance; 55 in sales and marketing; and the balance in manufacturing functions. None of our employees is represented by a labor union and we have never experienced a work stoppage.

Facilities

We own a 56,000 square foot manufacturing, administrative, engineering and warehouse facility situated on 13 acres in Queensbury, New York. The land and buildings are subject to a first mortgage in favor of a bank. We believe that this facility has sufficient capacity to meet our anticipated manufacturing and other needs for the next five years.

Litigation

On January 6, 2004, Diomed filed an action against us entitled Diomed, Inc. v. AngioDynamics, Inc., civil action no. 04 10019 RGS in the U.S. District Court for the District of Massachusetts. Diomed’s complaint alleges that we have infringed on Diomed’s U.S. patent no. 6,398,777 by selling a kit for the treatment of varicose veins (the “elvs Procedure Kit”) and two diode laser systems: the Precision 980 Laser and the Precision 810 Laser, and by conducting a training program for physicians in the use of our elvs Procedure Kit. The complaint alleges our actions have caused, and continue to cause, Diomed to suffer substantial damages. The complaint seeks to prohibit us from continuing to market and sell these products, as well as conducting our training program, and asks for compensatory and treble money damages, reasonable attorneys’ fees, costs and pre-judgment interest. We believe, based on our analysis of Diomed’s patent and a written opinion of non-infringement from our patent counsel, that our product does not infringe the Diomed patent. We purchase the lasers and laser fibers for our laser systems from biolitec, Inc. under a supply and distribution agreement.

We have been named as a defendant in an action entitled Duhon, et. al v. Brezoria Kidney Center, Inc., case no. 27084 filed in the District Court of Brezoria County, Texas, 239^th Judicial District on December 29, 2003. The complaint alleges that we and our co-defendants, E-Z-EM and Medcomp, designed, manufactured, sold, distributed and marketed a defective catheter that was used in the treatment of, and caused the death of, a hemodialysis patient, as well as committing other negligent acts. The complaint seeks compensatory and other monetary damages in unspecified amounts.

Under our distribution agreement with Medcomp, Medcomp is required to indemnify us against all our costs and expenses, as well as losses, liabilities and expenses (including reasonable attorneys’ fees) that relate in any way to products covered by the agreement. We have tendered the defense of the Duhon action to Medcomp. Medcomp has accepted defense of the action.

We are party to other legal actions that arise in the ordinary course of our business. We believe that any liability resulting from any currently pending litigation will not, individually or in the aggregate, have a material adverse effect on our business or results of operations.

MANAGEMENT

Executive Officers and Directors

The following table sets forth the name, age and position of each of our executive officers and directors as of March 1, 2004.


Name	Age	Position
Eamonn P. Hobbs	45	President, Chief Executive Officer and Director
Joseph G. Gerardi	41	Vice President, Chief Financial Officer
Harold C. Mapes	44	Vice President, Operations
Robert M. Rossell	48	Vice President, Marketing
William M. Appling	40	Vice President, Research
Brian S. Kunst	44	Vice President, Regulatory Affairs/Quality Assurance
Paul J. Shea	50	Vice President, Sales
Paul S. Echenberg	59	Chairman
Howard S. Stern	72	Director
Jeffrey Gold	56	Director
David P. Meyers	39	Director
Howard W. Donnelly	42	Director
Dennis S. Meteny	50	Director

Eamonn P. Hobbs is one of our co-founders, and has been our President and Chief Executive Officer since June 1996. From 1991 until September 2002, Mr. Hobbs was a Vice President, and from October 2002 to the present has been a Senior Vice-President, of E-Z-EM, with operational responsibility for our company. He was first employed by E-Z-EM from 1985 to 1986 and has been continuously employed by E-Z-EM since 1988. Mr. Hobbs will resign as an officer of E-Z-EM effective upon completion of this offering. From 1986 to 1988, Mr. Hobbs was Director of Marketing for the North American Instrument Corporation (NAMIC), a medical device company since acquired by Boston Scientific. Mr. Hobbs started his career at Cook, a leading manufacturer of interventional radiology, interventional cardiology and gastroenterology medical devices. Mr. Hobbs is a bio-medical engineer with over 23 years experience in the interventional radiology, interventional cardiology and gastroenterology medical device industries. He is the only business executive from the medical device industry to serve on the strategic planning committee of the Society of Interventional Radiology, and is a frequent invited lecturer on the future of interventional radiology and interventional radiology practice trends.

Joseph G. Gerardi became our Vice President, Chief Financial Officer in March 2004, served as our Vice President, Controller since 1996 and, from 1992 to 1996, was our Plant Controller. From 1987 to 1992, Mr. Gerardi was the Controller of Mallinckrodt Medical, Inc.’s anesthesiology plant. Before joining Mallinckrodt Medical, Mr. Gerardi was employed by Factron/Schlumberger for over five years as Manager of Consolidations and as a cost accountant.

Harold C. Mapes has served as our Vice President, Operations since 1996 and was our Director of Operations from 1995 to 1996 and Product Development Project Manager from 1992 to 1994. Before joining us, Mr. Mapes held product development and supervisory manufacturing and engineering positions from 1988 to 1992 with Mallinckrodt Medical, a medical device manufacturer.

Robert M. Rossell has served as our Vice President, Marketing, since 1996, and from 1990 to 1996 was a Product Manager and then our Director of Marketing. Before joining us, Mr. Rossell was Marketing Manager at NAMIC from 1986 to 1990, and held sales positions with various leading healthcare companies, including American Hospital Supply Co., from 1981 to 1985, and Johnson & Johnson from 1977 to 1981.

William M. Appling has served as our Vice President, Research since 2002, Vice-President, Research and Development since 1996, and in other product development capacities since 1988. Before that, Mr. Appling was a Product Development Engineer with the North American Instrument Corporation from 1986 to 1988 and a Product Development Engineer with the Edwards Division of American Hospital Supply Corporation from 1984 to 1986.

Brian S. Kunst has served as our Vice President, Regulatory Affairs/Quality Assurance, or RA/QA, since 1997 and from 1995 to 1997 was our Director of RA/QA. From 1991 to 1995, Mr. Kunst was the Regulatory Affairs Manager for Surgitek, Inc., a medical device company. From 1990 to 1991, Mr. Kunst was a Regulatory Affairs Associate for W.L. Gore and Associates, a medical device manufacturer. From 1984 to 1990 he was a biomedical engineer with the U.S. Food and Drug Administration.

Paul J. Shea has served as our Vice President, Sales, since 1997 and from 1991 to 1997 held positions as our National Sales Manager, Director of U.S. Sales and Director of World Wide Sales. Before joining us, from 1985 to 1991, Mr. Shea held various sales and marketing positions including Product Manager, Regional Manager and National Sales Manager at Microvasive, Inc., a division of Boston Scientific. From 1978 to 1984, Mr. Shea was employed by American Hospital Supply Corporation where he held several positions, including Sales Representative, Business Analyst, Product Manager and Market Manager.

Paul S. Echenberg has been a director since 1996 and Chairman of our board of directors since February 2004. He has been a director of E-Z-EM since 1987 and has served as Chairman of the Board of E-Z-EM Canada since 1994. He has been the President, Chief Executive Officer and a director of Schroders & Associates Canada Inc., an investment buy-out advisory services company, and a director of Schroders Ventures Ltd., an investment firm, since 1997. He is also a founder and has been a general partner and director of Eckvest Equity Inc., a personal investment and consulting services company since 1989. He is a director of Lallemand Inc., Benvest Capital Inc., Colliers MacAuley Nicholl, ITI Medical, Flexia Corp., Fib-Pak Industries Inc., Med-Eng Systems Inc., MacroChem Corp., Matra Plast Industries Inc. and A.P. Plasman Corp. E-Z-EM has an investment in ITI Medical.

Howard S. Stern has served as a director since our inception and as Chairman of our board of directors from our inception until February 2004. He is a co-founder of E-Z-EM and has served as Chairman of the board and a director of E-Z-EM since its organization in 1962. Mr. Stern also served as President and Chief Executive Officer of E-Z-EM from 1997 to 2000. From 1962 to 1994, Mr. Stern served as E-Z-EM’s Chief Executive Officer and from 1962 until 1990 he served as E-Z-EM’s President. Mr. Stern is also a director of ITI Medical, in which E-Z-EM has an investment.

Jeffrey Gold has been President and CEO of CryoVascular Systems Inc., a PVD device company, since 2001. From 1997 to 2001, he was Executive Vice President and Chief Operating Officer of Cardio Thoracic Systems, Inc., a company engaged in the development and introduction of devices for beating heart coronary bypass surgery. Before that, he spent 18 years with Cordis in a variety of senior management roles including Vice President of Manufacturing and Vice President of Research and Development, and co-founder and President of Cordis Endovascular Systems, a Cordis subsidiary engaged in the interventional neuroradiology business. At Cordis, Mr. Gold also had responsibility for the peripheral vascular business of Cordis. He serves on the board of directors of several start-up medical device companies and is a Special Network Advisor to Sapient Capital Management. Mr. Gold holds a B.S. in Industrial Engineering from Northeastern University and an MBA from the University of Florida.

David P. Meyers has served as a director since 1996. He has been a director of E-Z-EM since 1996. He is a founder of Alpha Cord, Inc., which provides cryopreservation of umbilical cord blood, and has served

as its President since 2002. Previously, he founded MedTest Express, Inc., a provider of contracted laboratory services for home health agencies, and served as its President, Chief Executive Officer and a director from 1994 to September 2002.

Howard W. Donnelly joined our board of directors in March 2004. Mr. Donnelly is currently a principal in three privately-held start-up medical device companies that are targeting the hemodialysis, regional anesthetic and general anesthesia markets, respectively. From 1999 to 2002, he was President of Level 1, Inc., a medical device manufacturer and a subsidiary of Smiths Group. From 1990 to 1999, Mr. Donnelly was employed at Pfizer, Inc., with his last position being Vice President, Business Planning and Development, for Pfizer’s Medical Technology Group from 1997 to 1999. Mr. Donnelly is currently a director of Vital Signs, Inc., a medical device manufacturer for the anesthesia, critical care and sleep disorder markets.

Dennis S. Meteny joined our board of directors in March 2004. Since 2003, Mr. Meteny has been an Executive-in-Residence at the Pittsburgh Life Sciences Greenhouse, a strategic economic development initiative of the University of Pittsburgh Medical Center, the State of Pennsylvania and local foundations. From 2001 to 2003, he served as President and Chief Operating Officer of TissueInformatics, Inc., a privately-held company engaged in the medical imaging business. From 2000 to 2001, Mr. Meteny was a business consultant to various technology companies. Prior to that, Mr. Meteny spent 15 years in several executive-level positions, including as President and Chief Executive Officer from 1994 to 1999, with Respironics, Inc. a cardio-pulmonary medical device company. Mr. Meteny began his career in 1975 with Ernst & Young LLP.

Key Employees

Daniel K. Recinella has served as our Director, Product Development since 2001. Since joining us in 1991, Mr. Recinella has been a Project Manager and Senior Project Engineer for our product development group, and Director of Thrombolytic/Thrombectomy Products for our marketing group. In 1989, Mr. Recinella was a Senior Project Engineer for VASER, Inc., a medical devices company. From 1985 to 1989, he was a Project Engineer and Product Development Engineer with BSC/Mansfield Scientific, a medical devices company. From 1983 to 1985, Mr. Recinella was a Product Development Engineer with Sarns/3M, a medical capital and devices company.

Board of Directors

Our amended and restated bylaws provide for a board of directors consisting of up to 15 members. The size of the board is currently set at nine. We intend to add two new independent directors. Our directors will be divided into three classes serving staggered three-year terms. At each annual meeting of our stockholders, directors will be elected to succeed the class of directors whose terms have expired. For our current directors, Class I directors’ terms will expire at the 2004 annual stockholders’ meeting, Class II directors’ terms will expire at our 2005 annual stockholders’ meeting and Class III directors’ terms will expire at our 2006 annual stockholders’ meeting. Our classified board could have the effect of increasing the length of time necessary to change the composition of a majority of our board of directors. Generally, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in the majority of the members of our board of directors.

Directors’ Compensation

Directors who are not our employees receive a monthly retainer of $1,000, in addition to $1,000 for each board meeting attended in person, and $250 for each telephonic meeting of the board in which they

participate. Committee chairmen receive $1,000, and committee members $500, for each committee meeting in which they participate. Directors who are not our employees also receive an annual grant of an option to purchase 6,273 shares of our common stock for each year of service on our board of directors. Directors who are our employees receive no additional compensation for their services as directors. New directors receive options for 26,136 shares of our common stock upon joining our board.

Board Committees

Our board of directors has established an audit committee, a governance/nominating committee and a compensation committee.

Audit Committee

Our audit committee is solely responsible for the appointment of and reviewing fee arrangements with our independent accountants, as well as approving any non-audit services by our independent accountants. Our audit committee reviews and monitors our internal accounting procedures and reviews the scope and results of the annual audit and other services provided by our independent accountants. Our audit committee currently consists of Dennis Meteny, who chairs this committee. Our board of directors has determined that Mr. Meteny is an audit committee “financial expert” as defined under the regulations of the Securities Act. Our board intends to add two more independent directors to the audit committee prior to completion of this offering.

Governance/Nominating Committee

Our governance/nominating committee makes recommendations to the board of directors concerning nominations to the board, including nominations to fill a vacancy (including a vacancy created by an increase in the board of directors). The governance/nominating committee will consider nominees for directors nominated by stockholders upon submission in writing to our corporate secretary of the names of such nominees in accordance with our bylaws. This committee is also charged with shaping corporate governance policies and codes of ethical and legal conduct, and monitoring compliance with such policies. Our governance/nominating committee currently consists of Messrs. Gold and Meteny.

Compensation Committee

Our compensation committee is primarily responsible for reviewing and approving the compensation and benefits of our executive officers; evaluating the performance and compensation of our executive officers in light of our corporate goals and objectives; administering our employee benefit plans and making recommendations to our board of directors regarding these matters; and administering our equity compensation plans. Our board intends to appoint at least two independent directors to our compensation committee.

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. There are no family relationships among any of our directors or executive officers.

Scientific Advisory Board

We have formed a scientific advisory board to benefit from the collective knowledge of the board members, all of whom are prominent physicians with whom we have established working relationships. The board will meet up to twice annually, with such meetings timed to coincide with major medical conventions.

The scientific advisory board currently consists of the following members:


Robert T. Andrews, M.D.		Associate Professor of Radiology & Director, Center for Endovascular Therapy, University of Washington, Seattle, WA

John Aruny, M.D.		Assistant Professor, Department of Radiology and Co-Director, Section of Vascular & Interventional Radiology, Yale University Medical School, New Haven, CT

Jacob Cynamon, M.D.		Professor of Clinical Radiology and Director, Division of Vascular & Interventional Radiology, Department of Radiology, Albert Einstein School of Medicine and Montefiore Medical Center, New York, NY

Michael Dake, M.D.		Associate Professor of Radiology and Medicine and Chief of Cardiovascular-Interventional Radiology, Department of Radiology, Stanford University School of Medicine, Stanford, CA

Lowell Kabnick, M.D., F.A.C.S.		Assistant Clinical Professor, University of Medicine and Dentistry, Newark, NJ and Director, Vein Center of New Jersey, Morristown, NJ

Krishna Kandarpa, M.D., Ph.D.		Professor of Radiology and Chairman of Radiology, University of Massachusetts Medical Health Center, Worcester, MA

Barry T. Katzen, M.D., F.A.C.R., F.A.C.C.		Clinical Professor of Radiology, University of Miami School of Medicine, Miami, FL and Founder and Medical Director of Miami Cardiac & Vascular Institute, Baptist Hospital of Miami, Miami, FL

John A. Kaufman, M.D.		Professor of Interventional Radiology, Diagnostic Radiology and Surgery, and Chief of Vascular and Interventional Radiology, Dotter Interventional Institute, Oregon Health & Sciences University, Portland, OR

Stephen Kee, M.D.		Associate Professor of Radiology and Surgery, Stanford University Medical Center, Department of Radiology, Stanford, CA

Manual Maynar, M.D., Ph.D.		Professor of Radiology, University of Las Palmas, Grand Canary, Spain and Professor of Radiology, Louisiana State University, New Orleans, LA

Mark H. Messner, M.D., F.A.C.S.		Associate Professor of Surgery, University of Washington School of Medicine, Seattle, WA and Attending Surgeon, General and Vascular Surgery, Harborview Medical Center, Seattle, WA

Thomas A. Sos, M.D.		Professor of Radiology, Vice Chairman of Radiology, New York Presbyterian Hospital, New York, NY, Weill Medical College of Cornell University, School of Medicine, New York, NY



Kenneth R. Thomson, M.D.		Professor of Radiology and Director of Radiology, Monash University, Melbourne, Australia

Frank J. Veith M.D. F.A.C.S.		Professor of Surgery, Albert Einstein College of Medicine, New York, NY and Vice-Chairman of Surgery & Chief of Vascular Surgical Services, Montefiore Medical Center, New York, NY; William J. von Liebig Chair, Vascular Surgery, Montefiore Medical Center, New York, NY

Stock Ownership of Directors, Named Executive Officers and Principal E-Z-EM Stockholders

All of our common stock is currently owned by E-Z-EM and thus none of our named executive officers (as defined in the “Executive Compensation” section of this prospectus that follows immediately after this section) or directors currently owns shares of our common stock. Our named executive officers and directors will receive shares of our common stock in the distribution by E-Z-EM of our common stocks to its stockholders in respect of any E-Z-EM common stock that they hold on the record date of the distribution. The treatment of all E-Z-EM options held by our employees, including our named executive officers, is discussed below. We refer you to “ — Treatment of E-Z-EM Options.”

The following table sets forth the E-Z-EM common stock held by our directors, our named executive officers, all of our directors and executive officers as a group and all other persons known to us who beneficially own 5% or more of E-Z-EM’s outstanding common stock as of February 24, 2004. Except as otherwise noted, the individual director or named executive officer (including his or her family members) had sole voting and investment power with respect to the E-Z-EM common stock.


	Number of Shares of Common Stock Owned(a)(b)		% of Outstanding Shares
Eamonn P. Hobbs	32,699	(c)	*
Robert M. Rossell	3,419	(d)	*
Paul J. Shea	6,844	(e)	*
William M. Appling	6,809	(f)	*
Brian S. Kunst	4,502	(g)	*
Howard S. Stern	2,056,099	(h)	20.0
Jeffrey Gold	—		—
Paul S. Echenberg	95,202	(i)	*
David P. Meyers	748,667	(j)	7.3
Howard W. Donnelly	—		—
Dennis S. Meteny	—		—
Jonas I. Meyers	598,319	(k)	5.8
Stuart J. Meyers	691,973	(l)	6.7
Ira Albert	800,042	(m)	7.8
Wellington Management Company	707,402	(n)	6.9
All directors and executive officers as a group (13 persons)	2,960,382		27.8

(a)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options that are exercisable or will become exercisable within 60 days of

January 2, 2004 into shares of E-Z-EM common stock are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(b)

The table does not include shares of our common stock that are subject to outstanding options held by our officers and directors that are not currently exercisable. These options will become exercisable upon the earlier to occur of (i) 14 months after the completion of this offering and (ii) two months after completion of this offering and the distribution by E-Z-EM of our shares of common stock to its stockholders. These options held by our named executive officers and directors cover the following number of shares: Mr. Hobbs, 426,545 shares; Mr. Rossell, 52,272 shares; Mr. Shea, 52,272 shares; Mr. Appling, 52,272 shares; Mr. Kunst, 52,272 shares; Mr. Gold, 42,863 shares; Mr. Echenberg, 95,136 shares; Mr. Stern, 86,772 shares; and Mr. Meyers, 42,863 shares; and all of our directors and executive officers, 1,007,811 shares.

(c)	Includes 32,640 shares issuable under currently exercisable options at an exercise price of $4.22 per share.

(d)	Includes 3,419 shares issuable under currently exercisable options at an exercise price of $4.22 per share.

(e)	Includes 6,844 shares issuable under currently exercisable options at an exercise price of $4.22 per share.

(f)	Includes 6,809 shares issuable under currently exercisable options at an exercise price of $4.22 per share.

(g)	Includes 4,502 shares issuable under currently exercisable options at an exercise price of $3.78 per share.

(h)

Includes 2,000 shares issuable under currently exercisable options at an exercise price of $9.00 per share. Does not include 329,931 shares owned by Mr. Stern’s son or an aggregate of 447,877 shares owned or issuable under currently exercisable options held by Mr. Stern’s daughter, her husband and their minor children, as to which shares Mr. Stern disclaims beneficial ownership. The information relating to Mr. Stern’s share ownership and that of the persons named in this footnote was obtained from a Schedule 13D dated September 26, 2003, filed jointly by Mr. Stern, Seth F. Stern and Rachel Stern Graham and other information provided to us by E-Z-EM.

(i)	Includes 77,856 shares issuable under currently exercisable options at an average exercise price of $4.27 per share.

(j)

Includes 1,000 shares issuable under currently exercisable options at an exercise price of $9.00 per share. Does not include (i) 121,849 shares held by Mr. Meyers’ wife, (ii) 25,773.6 shares held by a trust established for the benefit of his children, and (iii) 52,134 shares in which Mr. Meyers has a remainder interest and his mother has a life estate. Mr. Meyers has disclaimed beneficial ownership of all of the shares described in the preceding sentence. The information relating to Mr. Meyers’ share ownership was obtained from a Schedule 13D dated February 23, 2004, filed jointly by Mr. Meyers and others and other information provided to us by E-Z-EM.

(k)	Excludes 49,632 shares in which Mr. Meyers has a remainder interest and his mother has a life estate, as to which he disclaims ownership. The information relating to Jonas I. Meyers’ share ownership was obtained from the Schedule 13D described in footnote (j), above.

(l)

Excludes (i) 119,940 shares held by Mr. Meyers’ wife, (ii) 290,002 shares held by a trust established for the benefit of his children, and (iii) 49,632 shares in which he has a remainder interest and his mother has a life estate, as to which Mr. Meyers disclaims beneficial ownership. The information relating to Stuart J. Meyers’ share ownership was obtained from the Schedule 13D described in footnote (j), above.

(m)	Mr. Albert’s share ownership was obtained from a Schedule 13D dated July 18, 2003.

(n)

Wellington Management Company’s share ownership was obtained from a Schedule 13G dated February 13, 2004. Of the shares beneficially owned by Wellington Management, 523,602 shares are owned of record by Vanguard Specialized Funds — Vanguard HealthCare Fund, or Vanguard, as reflected in a Schedule 13G dated February 5, 2004 filed by Vanguard and the Schedule 13G filed by Wellington Management.

*	Less than 1%.

Executive Compensation

The following table sets information concerning compensation awarded by us to our chief executive officer and each of our four most highly compensated executive officers whose total salary, bonus and other compensation exceeded $100,000 during our fiscal year ended May 31, 2003, whom we refer to in this prospectus as “named executive officers.” In accordance with the rules of the Securities and Exchange Commission, or the SEC, the compensation described in this table does not include perquisites and other personal benefits received by the executive officers named in the table below that do not exceed the lesser of $50,000 or 10% of the total salary and bonus reported for these executive officers.

Summary Compensation Table


		Annual Compensation				Long-Term Compensation
Name and Principal Position	Fiscal Year	Salary		Bonus		Securities Underlying Options (#)	All Other Compensation
Eamonn P. Hobbs President, Chief Executive Officer and Director	2003	$	240,000	$	119,050	—	$	6,948

Robert M. Rossell Vice President — Marketing	2003		150,000		63,777	—		6,058

Paul J. Shea Vice President — Sales	2003		150,000		63,777	—		3,394

William M. Appling Vice President — Research	2003		135,000		57,949	—		6,063

Brian S. Kunst Vice President — RA/QA	2003		130,000		55,640	—		5,371

Options Granted in Fiscal 2003

We did not grant any options to any of our named executive officers during our fiscal year ended May 31, 2003.

Aggregate Option Exercises in Fiscal 2003 and Fiscal Year-End Values

There were no option exercises by the named executive officers during our fiscal year ended May 31, 2003. The following table summarizes the value of the options held by them as of May 31, 2003. The value of unexercised in-the-money options at fiscal year end is calculated using the difference between the option

exercise price and the estimated fair market value at May 31, 2003, which has been deemed to be $ per share, multiplied by the number of shares underlying the option. An option is in-the-money if the fair market value of the common stock subject to the option is greater than the exercise price. The initial public offering price of $ per share is higher than the estimated fair market value at fiscal year end and the value of unexercised options would be higher than the numbers shown in the table if the value were calculated by subtracting the exercise price from the initial public offering price.


Name	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Securities Underlying Options at Fiscal Year-End		Value of Unexercised In-the-Money Options at Fiscal Year-End
			Exercisable	Unexercisable	Exercisable	Unexercisable
Eamonn P. Hobbs	—	—	—	426,545	—	$	1,773,913
Robert M. Rossell	—	—	—	52,272	—		217,391
Paul J. Shea	—	—	—	52,272	—		217,391
William M. Appling	—	—	—	52,272	—		217,391
Brian S. Kunst	—	—	—	52,272	—		217,391

Employment Agreements

We do not have any employment agreements with our executive officers.

Treatment of E-Z-EM Options

E-Z-EM has advised us that to give effect to the separation of our company from E-Z-EM, it intends to reduce the exercise price and the number of shares subject to all E-Z-EM stock options, including options held by our officers and directors, outstanding on the date that E-Z-EM distributes our shares of common stock to its stockholders. Under the master separation and distribution agreement we will enter into with E-Z-EM, we will agree to grant options to purchase shares of our common stock to the E-Z-EM option holders at that time. The number of shares subject to, and exercise prices of, the adjusted E-Z-EM options and the AngioDynamics options will be set so that the adjusted E-Z-EM options and the AngioDynamics options will have the same ratio of exercise price to market price, and the same aggregate difference between the market price and exercise price, or intrinsic value, as did the E-Z-EM options at the time of the distribution. We will use the opening market price of the E-Z-EM and AngioDynamics common stock on the first trading day immediately following the distribution to determine the number of shares subject to, and the exercise price of, the adjusted E-Z-EM options and AngioDynamics options to be issued.

Except for the adjusted exercise price, the terms and conditions of the E-Z-EM options, including the vesting provisions, will remain the same. In connection with the grant of AngioDynamics options, we may adopt certain option plans intended to “mirror” the provisions of the E-Z-EM option plan or plans under which the outstanding E-Z-EM options were granted. To ensure that each AngioDynamics option is granted without any additional benefit not provided by the underlying outstanding E-Z-EM option, the AngioDynamics options will be granted under the terms of the corresponding “mirror” plan, pursuant to an identical non-plan award agreement or under our 2004 Stock and Incentive Award Plan. The AngioDynamics option will vest and become exercisable in accordance with the terms of the E-Z-EM options to which they relate, and will expire as follows. For our officers and directors, one-half of the AngioDynamics options will expire upon the later of (i) 12 months after one-half of the options become exercisable in full and (ii) 12 months after expiration of the 180-day lock-up period described in the “Underwriting” section of this prospectus. The remaining one-half of the options will expire upon the later of (i) 24 months after the remaining one-half of the options become exercisable in full and (ii) 24 months

after expiration of the 180-day lock-up period. For all other options recipients, one-half of their options will expire upon the later of (i) 12 months after one-half of the options become exercisable in full and (ii) 12 months from the date of the completion by E-Z-EM of the distribution of our shares to its stockholders. The remaining one-half of their options will expire upon the later of (i) 24 months after the remaining one-half of the options become exercisable in full and (ii) 24 months from the date of the completion by E-Z-EM of the distribution. However, in no event will the options be exercisable beyond the exercise period of the E-Z-EM options to which they relate.

Employee Compensation Plans

1997 Stock Option Plan

In 1997, we adopted our 1997 Stock Option Plan. The 1997 Plan may be administered by our board of directors or a committee composed solely of two or more non-employee directors appointed by our board, or committee, and provides for grants of incentive and non-qualified stock options to purchase shares of our common stock. Incentive stock options may be granted to employees and may qualify for favorable tax treatment under Section 422 of the Internal Revenue Code if certain requirements are satisfied. Non-qualified stock options may be granted to employees, officers, directors, consultants or advisors and do not qualify for such favorable tax treatment. Individuals to whom options are granted are referred to as “participants.”

We have reserved 1,497,668 shares of our common stock for issuance upon exercise of incentive stock options and non-qualified options granted under the 1997 Plan, of which 1,337,136 shares are subject to outstanding options. Generally, the exercise price for incentive stock options and non-qualified options granted under the 1997 Plan may not be less than 100% of the fair market value of our common stock on the option grant date. If a participant owns more than 10% of our voting stock on the date an incentive stock option is granted, the exercise price may not be less than 110% of the fair market value of our common stock on the date of grant. A participant may pay the option exercise price in cash or, if approved by the board or the committee, with previously-owned shares of our common stock.

Options granted under the 1997 Plan are not transferable by the participant except by will or the laws of descent and distribution in the event of the participant’s death.

Generally, options are exercisable during a term of not more than 10 years from the date of grant, as determined by the board or the committee. If the participant owns more than 10% of our voting stock on the date an incentive stock option is granted, the option may not be exercisable during a term more than five years following the date of grant. All options currently outstanding under the Plan vest 20% per year over five years from the date of grant. Options that have vested, however, do not become exercisable until the earlier of (i) 14 months after the first to occur of the completion of an initial public offering of our stock or the distribution by E-Z-EM of all of its shares of our common stock to the E-Z-EM stockholders, (ii) two months after both the offering and the distribution have occurred, and (iii) nine years from the date of grant. In addition, all options, whether vested or not, become exercisable in full immediately upon a change of control, as defined under the 1997 Plan.

The 1997 Plan provides that options terminate within three months of an option holder’s termination of employment with us, other than for cause, disability or death. However, continued employment by E-Z-EM following the distribution by E-Z-EM of our shares of common stock to its stockholders, will constitute continued employment with us for purposes of the 1997 Plan.

If there is a stock dividend, stock split, recapitalization, combination, subdivision, issuance of rights to our stockholders, or other similar event, then the board will adjust the total number of shares that may be issued under the 1997 Plan, and the number of shares subject to, and the exercise price of, each outstanding option, as it deems appropriate. If there is a proposed merger, or if we sell all or substantially all of our assets or our outstanding stock is obtained by another person, or if there is a divisive reorganization, spin-off, liquidation or partial liquidation of AngioDynamics, then our board will take such action as it deems reasonable to permit option holders to realize the value of the rights granted to them under the 1997 Plan.

Our board may amend or terminate the 1997 Plan at any time, provided that no amendment shall affect the rights of any option holder without his or her consent. If our board amends the 1997 Plan, it does not need to ask for stockholder approval of the amendment unless the amendment (i) increases the number of shares subject to the 1997 Plan, (ii) changes the designation of the class of employees eligible to receive stock options, (iii) expands the types of options or awards issuable under the 1997 Plan, or (iv) increases the benefits accruing to participants under the 1997 Plan, including any material change to permit a repricing (or decrease in exercise price) of outstanding options, reduce the price at which shares or options to purchase shares may be offered, or extend the 1997 Plan’s duration.

2004 Stock and Incentive Award Plan

Before completing this offering, we will adopt our 2004 Stock and Incentive Award Plan, or 2004 Plan. Our 2004 Plan will provide for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to our employees, and for the grant of nonstatutory stock options, restricted stock, stock appreciation rights, performance units and performance shares to our employees, directors and other service providers.

A total of 1,000,000 shares of our common stock have been reserved for issuance under our 2004 Plan, of which up to shares may be issued upon exercise of incentive stock options. We will not make any awards under our 2004 Plan prior to completion of this offering.

A committee of our board will administer our 2004 Plan. The committee will consist of two or more members of the board, each of whom must (i) be an independent director under the rules of the Nasdaq Stock Market, (ii) qualify as a “non-employee” director under SEC Rule 16b-3, and (iii) qualify as an “outside director” within the meaning of Section 162(m) of the Code. The committee will have the power to select the participants in the 2004 Plan and determine the types of awards to be made and the terms of those awards, including the exercise price, the number of shares subject to each such award, the exercisability of the awards and the form of consideration, if any, payable upon exercise.

The committee will determine the exercise price of options granted under our 2004 Plan, but for all incentive stock options the exercise price must at least be equal to the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed ten years, except that for any participant who owns 10% of the voting power of all classes of our outstanding stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The committee will determine the term of all other options. After termination of service of an employee, director or other service provider, he or she may exercise his or her option for the period of time stated, and subject to any other terms and conditions included in the option agreement.

No participant in our 2004 Plan may receive options to purchase, or stock appreciation rights with respect to, more than shares in any year. The maximum number of shares for which awards other

than stock options or stock appreciation rights may be granted to a plan participant in any year is shares. Awards payable in cash under the 2004 Plan may not exceed $ for a participant in any year.

Stock appreciation rights, or SARs may, be granted under our 2004 Plan. SARs allow the recipient to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. The committee will determine the terms of SARs, including when such rights become exercisable and whether to pay the increased appreciation in cash or with shares of our common stock, or a combination thereof.

Restricted stock may be granted under our 2004 Plan. Restricted stock awards are grants of shares of our common stock that vest in accordance with terms and conditions established by the committee. The committee will determine the number of shares of restricted stock granted to any employee, director or other service provider. The committee may impose whatever conditions to vesting it determines to be appropriate. For example, the committee may set restrictions based on the achievement of specific performance goals. Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture. The committee may also make restricted stock unit awards, which are shares of our common stock that are issued only after the recipient satisfies any service or performance objectives or contingencies determined by the committee.

Our 2004 Plan does not allow for the transfer of awards, except for transfers by will or the laws of descent and distribution or to such other persons designated by a participant to receive the award upon the participant’s death, or except as may otherwise be authorized by the committee for any award other than an incentive stock option.

Performance units and performance shares may be granted under our 2004 Plan. Performance share awards are rights to receive a specified number of shares of our common stock and/or an amount of money equal to the fair market value of a specified number of shares of our common stock, at a future time or times if a specified performance goal is attained and any other terms and conditions specified by the committee are satisfied. Performance unit awards are rights to receive a specified amount of money (other than an amount of money equal to the fair market value of a specified number of shares of common stock) at a future time or times if a specified performance goal is attained and any other terms and conditions specified by the committee are satisfied. The committee will establish organizational or individual performance goals in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants.

Our 2004 Plan authorizes the committee to grant options and SARs that become exercisable, and any award under the Plan that becomes nonforfeitable, fully earned and payable, if we have a “change in control,” and to provide for money to be paid in settlement of any award under the 2004 Plan in such event. Additionally, if we have a change of control, the committee may authorize the exercise of outstanding nonvested appreciation rights, make any award outstanding under the 2004 Plan non-forfeitable, fully earned and payable, or require the automatic exercise for cash of all outstanding stock appreciation rights.

In general, under the 2004 Plan, a “change in control” will be deemed to occur if any person or group of persons acting in concert becomes the beneficial owner of more than 40% of our common stock; a majority of our board changes over any period of two years or less without the approval of a majority of the directors serving at the beginning of such period; or our stockholders approve a merger, reorganization, sale of assets or plan of complete liquidation following which our stockholders before the transaction will not own at least 60% of our voting power or assets.

Limitation of Liability and Indemnification Matters

Our amended and restated certificate of incorporation and bylaws will provide that we will indemnify all of our directors and officers to the fullest extent permitted by Delaware law. Our amended and restated certificate of incorporation and bylaws will also authorize us to indemnify our employees and other agents to the fullest extent permitted by Delaware law. We believe that these provisions will assist us in attracting and retaining qualified persons to serve as directors and officers.

Delaware law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for liability arising under Section 174 of the Delaware General Corporation Law, or for any transaction from which the director derived an improper personal benefit. Our certificate of incorporation will provide for the elimination of personal liability of a director for breach of fiduciary duty, as permitted by Delaware law.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company in accordance with the provisions contained in our charter documents, Delaware law or otherwise, we have been advised that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act, and we will follow the court’s determination. We have and intend to continue to maintain insurance on behalf of our officers and directors, insuring them against liabilities that they may incur in such capacities or arising out of this status.

RELATIONSHIP AND ARRANGEMENTS WITH E-Z-EM

We have provided below a summary description of the master separation and distribution agreement and the other agreements we will enter into with E-Z-EM that relate to our separation from E-Z-EM. This description, which summarizes the material terms of these agreements, is not complete. You should read the full text of these agreements, which will be filed with the SEC as exhibits to the registration statement of which this prospectus is a part. In this section, references to E-Z-EM include all of its subsidiaries except us.

Master Separation and Distribution Agreement

The master separation and distribution agreement contains the key provisions related to our separation from E-Z-EM, this offering and the distribution of our shares to E-Z-EM’s common stockholders. The other agreements referenced in the master separation and distribution agreement govern various interim and ongoing relationships between E-Z-EM and us following the closing of this offering. These agreements consist of a corporate agreement and a tax allocation and indemnification agreement.

The Distribution

The master separation and distribution agreement will govern the rights and obligations of E-Z-EM and our company regarding this offering and the proposed distribution by E-Z-EM to its common stockholders of the shares of our common stock held by E-Z-EM, which is also referred to in this prospectus as the “distribution.” E-Z-EM has agreed with the underwriters that it will not complete the distribution for 120 days after the date of this prospectus without the prior written consent of RBC Capital Markets Corporation. Although E-Z-EM has advised us that it intends to complete the distribution, there are a number of conditions to the completion of the distribution. Consequently, we cannot assure you as to whether or when the distribution will occur.

The master separation and distribution agreement will provide that the distribution is subject to a number of conditions that must be satisfied, or waived by, E-Z-EM in its sole discretion, including:

if the distribution has not been completed by February 5, 2005, that date being 12 months from the date of the private letter ruling E-Z-EM received from the Internal Revenue Service, or IRS, the receipt by E-Z-EM of an opinion from its tax counsel that the distribution will qualify as a tax-free distribution pursuant to which no gain or loss will be recognized by E-Z-EM or its stockholders for U.S. Federal income tax purposes under Section 355 and other related provisions of the Internal Revenue Code;

receipt of any government approvals and consents necessary to consummate the distribution; and

lack of any order, injunction, decree or regulation issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the distribution.

In addition, E-Z-EM may abandon the distribution at any time before it is completed. If E-Z-EM’s board of directors decides to abandon or change the terms of the distribution or waives a material condition to the distribution after the date of this prospectus, E-Z-EM will issue a press release or file a report on Form 8-K with the Securities and Exchange Commission disclosing the abandonment, change or waiver.

Pursuant to the master separation and distribution agreement, we will be required to cooperate with E-Z-EM to accomplish the distribution and, at E-Z-EM’s direction, to promptly take any and all actions necessary or desirable to effect the distribution.

Indemnification

Under the master separation and distribution agreement, we will indemnify E-Z-EM and its officers, directors, stockholders, employees or other representatives from all losses they suffer arising out of or due to any of the following:

our failure to pay, perform or discharge in due course the liabilities, if any, assumed by us in connection with the distribution or our separation from E-Z-EM;

our failure to comply with the terms of the master separation and distribution agreement or any of the other agreements we enter into with E-Z-EM in connection with the distribution;

any untrue statement of a material fact or material omission contained in this prospectus or any similar documents relating to this offering or the distribution other than information provided to us by E-Z-EM for use in this prospectus;

any action or inaction by us that causes the distribution by E-Z-EM of our stock to its stockholders to be taxable to E-Z-EM or its stockholders;

any defense of any claims, investigations or proceedings arising out of or in connection with the funding and other payment obligations of AngioDynamics related to E-Z-EM’s benefit plans;

any credit support agreement (e.g., guaranties) previously entered into by E-Z-EM for our benefit;

any proceedings relating to the operation of our business prior to the date of distribution in which E-Z-EM is a defendant solely because it was our stockholder;

any claims arising with respect to one of our pre-distribution employment arrangements;

any claims based on our gross negligence or willful misconduct in performing intercompany services; or

any claims based on our post-distribution manufacturing and production for E-Z-EM.

E-Z-EM will indemnify us and our officers, directors, stockholders, employees or other representatives from any and all losses we or E-Z-EM suffer arising out of or due to any of the following:

E-Z-EM’s failure to pay, perform or discharge in due course E-Z-EM’s liabilities that are not assumed by us in connection with the distribution or our separation from E-Z-EM;

E-Z-EM’s failure to comply with the terms of the master separation and distribution agreement or any of the other agreements we enter into with E-Z-EM in connection with the distribution;

any action or inaction by E-Z-EM that causes the distribution to be taxable, to the extent we or our stockholders are adversely affected;

any defense of any claims, investigations or proceedings arising out of E-Z-EM’s benefit plans if caused by the gross negligence or willful misconduct of E-Z-EM personnel;

any claims arising out of pre-distribution employment arrangements for which E-Z-EM is liable under the master separation and distribution agreement; or

any claims based on E-Z-EM’s gross negligence or willful misconduct in performing intercompany services.

All indemnification amounts will be reduced by any insurance proceeds and other offsetting amounts actually recovered by the party entitled to indemnification.

Access to Information

Under the master separation and distribution agreement, we and E-Z-EM will be obligated to provide each other access to information as follows:

we and E-Z-EM will provide each other with any information in our respective possession that the other party requests (i) to comply with requirements imposed on the requesting party by a governmental authority, (ii) for use in any proceeding or to satisfy audit, accounting, regulatory, litigation, tax or similar requirements, or (iii) to comply with its obligations under the master separation and distribution agreement or any ancillary agreement;

after the distribution, we and E-Z-EM will use reasonable commercial efforts to make available each other’s past, present and future directors, officers, other employees and agents as witnesses in any legal, administrative or other proceedings in which the other party may become involved;

the company providing information, consultant or witness services under the master separation and distribution agreement will be entitled to reimbursement from the other for reasonable expenses incurred in providing this assistance;

we will retain all proprietary information in our possession relating to our business for a period of time and, if we intend to destroy this information after the retention period, we must give E-Z-EM opportunity to take possession of the information; and

we and E-Z-EM will each agree to hold in strict confidence all information concerning or belonging to the other for a period of up to six years.

Use of Funds

Pursuant to the master separation and distribution agreement, we will use part of the proceeds of this offering to repay $3,000,000 of indebtedness to E-Z-EM and E-Z-EM will capitalize the remaining $13,148,000 of our indebtedness to E-Z-EM.

Termination

E-Z-EM may terminate the master separation and distribution agreement at any time prior to our issuance and sale to the underwriters of the shares to be sold by the underwriters in this offering. The master separation and distribution agreement may be terminated after the offering by the mutual consent of E-Z-EM and us.

Expenses

In general, E-Z-EM and our company will each be responsible for our own costs (including all associated third-party costs) incurred in connection with the transactions contemplated by the master separation and distribution agreement. However, we have agreed to pay all costs and expenses relating to this offering, including the underwriting discounts and commissions and E-Z-EM’s financial, legal, accounting and other expenses, and E-Z-EM has agreed to pay all costs (including all associated third-party costs) and expenses relating to the distribution.

Support Services, Manufacturing and Distribution Arrangements

The master separation and distribution agreement also governs the provision by E-Z-EM to us of support services, such as:

accounting and finance;

legal services;

consulting;

sales and marketing, to a limited extent; and

other general administrative functions.

The terms of these services generally will expire on December 31, 2004, unless terminated sooner by E-Z-EM.

Under the master separation and distribution agreement, we will also provide E-Z-EM with manufacturing services consistent with those provided prior to the distribution. On January 1, 2005, the prices E-Z-EM pays will increase so as to result in our achieving a gross margin of 50% on each product. These services will terminate on December 31, 2005, unless terminated sooner by E-Z-EM upon 60 days notice.

Under this agreement, we have agreed to engage subsidiaries of E-Z-EM as distributors of our products in Canada and the United Kingdom pursuant to exclusive three-year distribution agreements in substantially the form we use for unrelated distributors.

Corporate Agreement

If the distribution of our shares by E-Z-EM is not completed, E-Z-EM would not be permitted to sell its shares of our common stock without registration under the Securities Act or a valid exemption thereunder. Additionally, if after our initial public offering we issue additional shares or other voting equity interests, the ownership interest of E-Z-EM in our voting shares would likely decrease below the levels necessary for E-Z-EM to complete a tax-free distribution of our shares, as is currently contemplated. For these reasons, and to provide for certain other matters of a “corporate” nature, we will enter into an agreement with E-Z-EM to provide E-Z-EM with certain preemptive rights, registration rights and rights related to private sales of our common stock. We will also agree for our fiscal year and annual audit to coincide with those of E-Z-EM. E-Z-EM will agree not to vote its shares so as to cause the composition of our board of directors to not have a sufficient number of independent directors or a “financial expert” if required under the Sarbanes-Oxley Act of 2002 and applicable Nasdaq rules and regulations. E-Z-EM will also agree not to cast any other votes that would preclude us from qualifying for listing or being quoted as a public company under applicable securities laws or regulations, including the Sarbanes-Oxley Act of 2002 and rules and regulations applicable to Nasdaq companies.

In the context of the corporate agreement, unless the context below indicates to the contrary, references to E-Z-EM are deemed to include references to E-Z-EM’s wholly-owned affiliates or any entity that in the future wholly-owns E-Z-EM (or a wholly-owned subsidiary of such a company).

Approval Rights for Issuances

We will agree with E-Z-EM that we will not issue equity securities or convertible debt without E-Z-EM’s prior consent if the issuance would cause E-Z-EM to own less than 80% of our outstanding equity or voting power on a fully-diluted basis or otherwise cause the distribution not to be tax-free to E-Z-EM and its stockholders. E-Z-EM’s consent right will terminate upon the earliest of (i) E-Z-EM notifying us that it is abandoning the distribution, (ii) completion of the distribution by E-Z-EM, (iii) February 5, 2005, or (iv) August 5, 2005 if, by February 5, 2005, E-Z-EM obtains an opinion of counsel that completion of the distribution after February 5, 2005 will not result in the distribution being taxable to E-Z-EM and its stockholders. E-Z-EM may be unwilling to give its consent before completing the distribution or may impose conditions in its consent, including the right to acquire such number of our securities so as to enable it to maintain its percentage ownership of our securities.

Registration Rights

The demand registration rights under the corporate agreement will become effective six months after the completion of this offering. All registration rights terminate at such time as E-Z-EM no longer owns at least five percent of our issued and outstanding common stock or, if earlier, when E-Z-EM could sell all of the shares of our common stock owned by it pursuant to Rule 144 under the Securities Act during any three-month period. The corporate agreement will cover those shares of our common stock that are held by E-Z-EM. The rights thereunder are not otherwise transferable to unaffiliated companies.

Demand Registration

E-Z-EM will be able to require us to register for offer and sale all or a portion of our common stock held by E-Z-EM so long as the shares that E-Z-EM requires us to register, in each case, represent at least five percent of the then outstanding shares of our common stock. E-Z-EM may request no more than one demand registration or “unregistered demand” (described under “Private Sales,” below) during any twelve-month period.

Terms of Each Offering

E-Z-EM will designate whether its offering of common stock effected pursuant to a demand registration is a one time offering or a shelf registration. In any case, we will only be required to keep the applicable registration statement effective until the earlier of 120 days from the effective date of the registration statement or until E-Z-EM has disposed of the shares covered thereby. E-Z-EM has the right to designate the lead managing underwriter in any such offering. If the shares covered by the registration statement have an aggregate value in excess of $20 million, we may designate a co-managing underwriter, subject to E-Z-EM’s acceptance of such underwriter.

Timing of Demand Registrations

In addition to the above-noted limitation of one demand registrations during any 12-month period, we will not be required to undertake a demand registration (or the preparation of an offering memorandum for private sales) within six months of the completion of an offering under a previous demand registration. In addition, we will have the right, which may be exercised once in any 12-month period, to postpone the filing or effectiveness of any demand registration for up to 90 days if we determine that such registration would reasonably be expected to require the disclosure of non-public information concerning a material event or transaction and such disclosure would have a material adverse effect on us.

Piggy-Back Registration Rights

If we at any time intend to file on our behalf, or on behalf of any of our other security holders, a registration statement in connection with a public offering of any of our securities on a form and in a manner that would permit the registration for offer and sale of our common stock held by E-Z-EM, then E-Z-EM will have the right to include its shares in that offering. The number of shares sought by E-Z-EM to be included must constitute at least five percent of our issued and outstanding shares of common stock. If the managing underwriter notifies us that the number of securities proposed to be registered in the offering exceeds the number that can be sold in such offering, we will include in such offering the number of securities that, in the opinion of the managing underwriter, can be sold, as follows:

first, the securities that we propose to sell for our own account;

second, the shares of common stock that E-Z-EM requests to be included; and

third, other securities requested to be included in the offering.

Private Sales

Subject to the yearly limitation on demand registrations described above, E-Z-EM may require us to prepare and distribute an offering memorandum in connection with any unregistered offering of E-Z-EM’s shares of our common stock (an unregistered demand). The limitations above on E-Z-EM’s share ownership, the threshold amount of shares being sold, and our ability to postpone the sale apply equally to these unregistered offerings.

Expenses

We will be responsible for applicable registration and private offering expenses in connection with the performance of our obligations for a registration or a private sale under the applicable provisions of the corporate agreement. E-Z-EM is responsible for all of the fees and expenses of its counsel, any applicable underwriting discounts or commissions or placement agent’s fees and commissions, and any registration or filing fees with respect to the shares of our common stock being sold by E-Z-EM, as applicable.

Indemnification

With respect to both registered and unregistered offerings, the corporate agreement will provide for indemnification and contribution by us for the benefit of E-Z-EM and its affiliates and representatives. In limited situations, the corporate agreement will provide for indemnification by E-Z-EM for our benefit as well as for any underwriters with respect to the information included in any registration statement, prospectus or related document.

Transfer

Other than with respect to transfers by E-Z-EM to any of the entities described above, the transfer by E-Z-EM of its rights under the corporate agreement will not entitle the transferees of those rights to the benefits of the corporate agreement. Transfer rights do not “attach” to the shares of our common stock.

Other Covenants

We will agree that, for so long as E-Z-EM beneficially owns at least 50% of our outstanding common stock, we will not (without E-Z-EM’s prior consent):

take any action that would limit the ability of E-Z-EM or its transferee to transfer its shares of our common stock; or

issue any shares of our common stock or any rights, warrants or options to acquire our common stock if this would cause E-Z-EM to own less than 50% of the then outstanding shares of our common stock.

Under the corporate agreement, we will agree to keep E-Z-EM’s auditors as our auditors and to keep our fiscal year unchanged. We will also agree to provide to E-Z-EM and its independent auditors all information and documents required and to otherwise coordinate the audit of our financial statements and the preparation of our interim financial statements so that E-Z-EM or its auditors, as applicable, will be able to prepare, file and distribute E-Z-EM’s financial statements and audit report in a timely manner. We will also agree to provide to E-Z-EM and its independent auditors access to the auditor who reviewed our financial statements so that E-Z-EM and its independent auditors may conduct their audits relating to our financial statements. Additionally, we will not change our significant accounting policies for periods in

which our financial results are included in E-Z-EM’s consolidated financial statements unless we are required to do so to comply, in all material respects, with generally accepted accounting principles or SEC requirements. We will also agree to consult with E-Z-EM regarding the timing and content of its earnings releases. The foregoing obligations will survive for so long as E-Z-EM is entitled to consolidate our company within its audited financial statements.

Tax Allocation and Indemnification Agreement

Allocation of Taxes

In connection with this offering, we will enter into a tax allocation and indemnification agreement (“tax allocation agreement”) with E-Z-EM. The tax allocation agreement will govern the respective rights, responsibilities and obligations of E-Z-EM and us after this offering with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns.

In general, under the tax allocation agreement:

E-Z-EM is responsible for any U.S. Federal income taxes of the affiliated group of which E-Z-EM is the common parent. However, during the period (or portion of a period) that we are included in the affiliated group beginning after the date of this offering, we are responsible for our share of such income tax liability computed as if we had filed a separate Federal income tax return that included only us for that period (or portion of a period). For any periods beginning after the distribution of E-Z-EM of its shares of our common stock to its stockholders, we will be responsible for our own U.S. Federal income taxes.

E-Z-EM is responsible for any U.S. Federal income taxes reportable on a consolidated return that includes E-Z-EM or one of its subsidiaries and us. However, if we are included in such a group for U.S. Federal income tax purposes for periods (or portions thereof) beginning after the date of this offering, we are responsible for our portion of such income tax liability as if we had filed a separate tax return that included only us for that period (or portion of a period).

E-Z-EM is responsible for any U.S. Federal income taxes reportable on returns that include only E-Z-EM and its subsidiaries (excluding us), and we are responsible for any state or local income taxes filed on returns that include only us.

E-Z-EM and we are each responsible for any non-income taxes attributable to our business for all periods.

E-Z-EM is primarily responsible for preparing and filing any tax return for the E-Z-EM affiliated group for U.S. Federal income tax purposes. We will be responsible for preparing and filing any tax returns that include only us.

We generally have exclusive authority to control tax contests related to tax returns that include only us and our subsidiaries. E-Z-EM generally has exclusive authority to control tax contests related to any tax returns of the E-Z-EM affiliated group for U.S. Federal income tax purposes and related to any consolidated, combined or unitary group for U.S. state or local income tax purposes that includes E-Z-EM or any of its subsidiaries. However, E-Z-EM must consult with us with respect to any tax issue relating to us or any of our subsidiaries.

The tax allocation agreement also assigns responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the tax allocation agreement provides for cooperation and information allocation with respect to taxes.

Preservation of the Tax-free Status of the Distribution

E-Z-EM has received a private letter ruling from the IRS that the distribution will qualify as a tax-free distribution for which no gain or loss is recognized by E-Z-EM or its stockholders for Federal income tax purposes under Section 355 and related provisions of the Internal Revenue Code. In order to obtain the ruling, we were required to make certain representations regarding our company and our business and E-Z-EM was required to make certain representations regarding it and its business. We have also agreed to certain restrictions that are intended to preserve the tax-free status of the distribution. We may take certain actions otherwise prohibited by these covenants if E-Z-EM seeks and obtains another private letter ruling from the IRS to the effect that such action would not jeopardize the tax-free status of the distribution. These covenants include restrictions on our:

issuance, sale or acquisition of our stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements);

sales of assets outside the ordinary course of business; and

entering into any other corporate transaction that, together with the stock that is being sold in this offering, and certain other stock transactions, would cause us to undergo a 50% or greater change in our stock ownership.

We have generally agreed to indemnify E-Z-EM and its affiliates against any and all tax-related liabilities incurred by them relating to the distribution to the extent caused by an acquisition of our stock or assets, or other actions of ours.

OTHER RELATED PARTY TRANSACTIONS

Effective as of January 1, 2002, E-Z-EM entered into an agreement with Howard S. Stern, the chairman of E-Z-EM’s board and one of our directors, under which Mr. Stern agreed to provide certain services to E-Z-EM and us until December 31, 2004. These services include serving as chairman of both E-Z-EM’s and our board of directors, consulting with management of both companies on corporate governance, investor relations and other matters and generally providing guidance and assistance on industry-related matters. Under the agreement, Mr. Stern was nominated for, and subsequently elected to, a three-year term as a director of E-Z-EM, and serves as the chairman of E-Z-EM’s board. Mr. Stern has resigned as chairman of our board but remains a director. So long as Mr. Stern remains chairman of E-Z-EM, he is entitled to receive twice the regular fees and other compensation (including cash, stock and options) paid to other directors for service on E-Z-EM’s board, but not compensation paid to our other directors for service on our board. As compensation for his services, Mr. Stern is receiving 36 equal monthly payments of $20,833, as well as certain bonus opportunities from E-Z-EM. Mr. Stern also receives other benefits, including medical and dental insurance for himself and his wife and use of a company automobile, and, so long as he remains E-Z-EM’s chairman, up to $80,000 annually for reimbursement of reasonable business expenses. We currently reimburse E-Z-EM for 35% of Mr. Stern’s compensation and expenses paid under the agreement. Under the master separation and distribution agreement we will enter into with E-Z-EM, we will assume 35% of E-Z-EM’s payment obligations to Mr. Stern under the agreement, which will total $7,300 in fees and $2,300 for expenses on a monthly basis.

William M. Appling, our Vice President, Research has been a partner and executive officer of Protube Extrusion, LLP since 1992. Protube Extrusion produces tubing used in some of our catheters. In fiscal 2003, we purchased approximately $149,000 of products and services from Protube Extrusion, and we estimate that we will purchase approximately $175,000 of products and services from Protube Extrusion in fiscal 2004. The board has approved these transactions and determined that the terms of the transactions are equivalent to terms that would arise in an arm’s length relationship.

We have entered into an agreement, effective as of January 1, 2004, with Donald A. Meyer, who resigned as a director as of March 1, 2004, under which Mr. Meyer agreed to serve as the trustee of our 401(k) savings plan and to provide us with such other services as we may reasonably request from time-to-time. The agreement is for a term of 36 months but will terminate sooner upon a change in control of our company, Mr. Meyers’ death or a material breach of the agreement that is not cured within 30 days. Mr. Meyer will receive 36 equal monthly payments of $3,500 and reimbursement for reasonable business expenses incurred in providing services under the agreement. We also agreed that Mr. Meyer’s options to acquire 42,263 shares of our common stock, which would ordinarily terminate three months after his resignation as a director, will expire on the earlier of (i) December 31, 2006, (ii) the tenth anniversary of the original grant date of each option or (iii) 90 days after termination of the agreement.

PRINCIPAL STOCKHOLDER

All of our outstanding common stock is currently held beneficially and of record by E-Z-EM. After this offering, E-Z-EM will own % of our outstanding shares of common stock, assuming the underwriters do not exercise their option to purchase additional shares in this offering. Except for E-Z-EM, we are not aware of any person or group that will beneficially own more than 5% of our outstanding shares of common stock following this offering. None of our executive officers or directors currently owns any shares of our common stock. However, our officers and directors hold options to acquire an aggregate of 1,007,811 shares of our common stock that are not presently exercisable but substantially all of which will become exercisable upon the earliest to occur of (i) 14 months after either the completion of this offering of our stock or a distribution by E-Z-EM of its AngioDynamics stock to its stockholders or (ii) two months after completion of both this offering and the distribution. Our officers or directors who own shares of E-Z-EM common stock or options to purchase E-Z-EM common stock will be treated on the same terms as other holders of E-Z-EM common stock or options in the distribution by E-Z-EM of our shares of common stock to its stockholders. See “Management — Stock Ownership of Directors, Named Executive Officers and Principal E-Z-EM Stockholders — Treatment of E-Z-EM Options.”

DESCRIPTION OF CAPITAL STOCK

At the time of this offering, the total amount of authorized capital stock of our company will be 50,000,000 shares, consisting of 45,000,000 shares of common stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01 per share. Upon completion of this offering, shares of our common stock and no shares of preferred stock will be issued and outstanding. Before this offering, there has been no public market for our common stock.

The following is a summary of the rights of our common stock and preferred stock. This summary is not complete. For more detailed information, please see our amended and restated certificate of incorporation, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Common Stock

The holders of our common stock are entitled to one vote for each share held of record upon such matters and in such manner as may be provided by law. Subject to preferences applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably dividends, if any, as may be declared by our board of directors out of funds legally available for dividend payments. If we liquidate, dissolve or wind up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of the preferred stock. Holders of common stock have no pre-emptive rights or rights to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.

Preferred Stock

Following the closing of this offering, we will be authorized to issue 5,000,000 shares of preferred stock that will not be designated as a particular class. Our board of directors will have the authority to (i) issue the undesignated preferred stock in one or more series, (ii) determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and (iii) fix the number of shares constituting any series and the designation of the series, without any further vote or action by our stockholders. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock. Upon completion of this offering, no shares of our preferred stock will be outstanding and, other than shares of our preferred stock that may become issuable pursuant to our rights agreement, we have no present plans to issue any shares of preferred stock.

Anti-Takeover Provisions

Provisions of Delaware law and our certificate of incorporation and bylaws could make our acquisition by means of a tender offer, a proxy contest or otherwise, and the removal of incumbent officers and directors, more difficult. These provisions are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweighs the disadvantages of

discouraging proposals, including proposals that are priced above the then-current market value of our common stock, because, among other things, negotiation of these proposals could result in an improvement of their terms.

Delaware Law

We are governed by the provisions of Section 203 of the Delaware Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years, did own, 15% or more of the corporation’s voting stock. This statute could have the effect of delaying, deferring or preventing a change of control.

Certificate of Incorporation and Bylaws

Our amended and restated certificate of incorporation and bylaws will contain provisions that could discourage potential acquisition proposals or tender offers or delay or prevent a change in control of our company.

Our amended and restated certificate of incorporation and bylaws will not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder holding a sufficient number of shares may be able to ensure the election of one or more directors. The absence of cumulative voting may limit the ability of minority stockholders to effect changes in the board and, as a result, may deter a hostile takeover or delay or prevent a change in control or management of our company.

Our amended and restated certificate of incorporation will provide that our board of directors will be divided into three classes. The term of the first class of directors will expire at our 2004 annual meeting of stockholders, the term of the second class of directors will expire at our 2005 annual meeting of stockholders, and the term of the third class of directors will expire at our 2006 annual meeting of stockholders. At each of our annual meetings of stockholders, the successors of the class of directors whose term expires at that meeting will be elected for a three-year term, one class being elected each year by our stockholders. Our amended and restated certificate of incorporation and bylaws will also provide that vacancies on our board that result from an increase in the number of directors may be filled by a majority of directors then in office, provided a quorum is present, and that any other vacancy may be filled by a majority of directors in office, although less than a quorum, and not by the stockholders. Directors will be subject to removal by the stockholders only for cause. These provisions for electing and removing directors may discourage a third party from making a tender offer or otherwise attempting to obtain control of us if E-Z-EM no longer controls us because it generally makes it more difficult for stockholders to replace a majority of our directors.

Our amended and restated certificate of incorporation and bylaws will not provide that special meetings of the stockholders may be called by stockholders. Advance written notice is required, which generally must be received by the secretary not less than 90 days nor more than 120 days prior to the meeting, by a stockholder of a proposal or director nomination that the stockholder desires to present at a meeting of stockholders. Any amendment of this provision would require a vote of a majority of our capital stock. Our amended and restated certificate of incorporation will also provide that, following our separation from E-Z-EM, our stockholders will not be permitted to act by written consent.

Our amended and restated certificate of incorporation will allow us to issue up to 5,000,000 shares of undesignated preferred stock with rights senior to those of the common stock and that otherwise could adversely affect the rights and powers, including voting rights, of the holders of common stock. In certain circumstances, this issuance could have the effect of decreasing the market price of the common stock, as well as having the anti-takeover effect discussed above.

These provisions are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by them, and to discourage certain types of transactions that may involve an actual or threatened change in control of our company. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to discouraging certain tactics that may be used in proxy fights. However, these provisions could discourage others from making tender offers for our shares that could result from actual or rumored takeover attempts. These provisions also may have the effect of preventing changes in our management.

Stockholder Rights Plan

Our board of directors will adopt a stockholder rights plan prior to completion of this offering. Under the rights plan, each outstanding share of our common stock issued between the date on which E-Z-EM enters into the underwriting agreement for this offering and the distribution date (as described below) will be coupled with a stockholder right. Initially, the stockholder rights will be attached to the certificates representing outstanding shares of common stock, and no separate rights certificates will be distributed. Each right will entitle the holder to purchase one-ten thousandth of a share of our Series A junior participating preferred stock at a price of $ . Each one-ten thousandth of a share of Series A junior participating preferred stock will have economic and voting terms equivalent to one share of our common stock. Until it is exercised, the right itself will not entitle the holder thereof to any rights as a stockholder, including the right to receive dividends or to vote at stockholder meetings. The description and terms of the rights are set forth in a rights agreement to be entered into between us and , as rights agent. Although the material provisions of the rights agreement have been accurately summarized, the statements below concerning the rights agreement are not necessarily complete, and in each instance reference is made to the form of rights agreement itself, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. Each statement is qualified in its entirety by such reference.

Stockholder rights are not exercisable until the distribution date, and will expire on 2014, unless earlier redeemed or exchanged by us. A distribution date would occur upon the earlier of:

the tenth business day after the first public announcement or communication to us that a person or group of affiliated or associated persons (referred to as an acquiring person) has acquired beneficial ownership of 15% or more of our outstanding common stock; or

the tenth business day (or such later date as may be determined by our board of directors before such time as any person becomes an acquiring person) after the commencement or announcement of the intention to commence a tender offer or exchange offer that would result in a person or group becoming an acquiring person.

If any person becomes an acquiring person, each holder of a stockholder right will be entitled to exercise the right and receive, instead of Series A junior participating preferred stock, shares of our common stock having a value equal to two times the exercise price of the stockholder right. All stockholder rights that are beneficially owned by an acquiring person or its transferee will become null and void.

If at any time after a public announcement has been made or we have received notice that a person has become an acquiring person, (1) AngioDynamics is acquired in a merger or other business combination or (2) 50% or more of AngioDynamics’ assets, cash flow or earning power is sold or transferred, each holder of a stockholder right (except rights which previously have been voided as set forth above) will have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the right.

The exercise price of our rights, the number of one ten-thousandths of a share of Series A junior participating preferred stock or other securities or property issuable upon exercise of rights, and the number of rights outstanding, are subject to adjustment from time to time to prevent dilution. With certain exceptions, no adjustment in the exercise price or the number of shares of Series A junior participating preferred stock issuable upon exercise of a stockholder right will be required until the cumulative adjustment would require an increase or decrease of at least one percent in the exercise price or number of shares for which a right is exercisable.

At any time until the earlier of (1) the distribution date or (2) the final expiration date of the rights agreement, we may redeem all the stockholder rights at a price of $0.01 per right. At any time after a person has become an acquiring person and before the acquisition by such person of 50% or more of the outstanding shares of our common stock, we may exchange the stockholder rights, in whole or in part, at an exchange ratio of one share of common stock, or one ten-thousandth of a share of Series A junior participating preferred stock (or of a share of a class or series of preferred stock having equivalent rights, preferences and privileges), per right.

The stockholder rights plan is designed to protect our stockholders in the event of unsolicited offers to acquire us and other coercive takeover tactics which, in the opinion of our board, could impair its ability to represent stockholder interests. The provisions of the stockholder rights plan may render an unsolicited takeover more difficult or less likely to occur or may prevent such a takeover, even though such takeover may offer our stockholders the opportunity to sell their stock at a price above the prevailing market rate and may be favored by a majority of our stockholders.

E-Z-EM is excluded from the definition of “acquiring person” and therefore its ownership cannot trigger the distribution of rights under the rights plan. In addition, any person holding 15% or more of our issued and outstanding shares of common stock following the distribution of our common stock by E-Z-EM to its stockholders will be deemed an “exempt person” under the rights plan. The ownership of our common stock by these persons will not trigger the distribution of rights under the rights plan unless any such person acquires additional shares representing 1% or more of our issued and outstanding common stock.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Mellon Investor Services. Its address is 85 Challenger Road, Ridgefield Park, New Jersey and its telephone number is (201) 296-4000.

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no public market for our common stock, and we cannot predict the impact, if any, that the sale or availability for sale of shares of additional common stock will have on the market price of the common stock. Future sales of substantial amounts of common stock in the public market, or the perception that large block sales could occur, could unfavorably affect the market price of our common stock and could impair our future ability to raise capital through an offering of our equity securities.

All shares of our common stock sold in this offering, plus any shares issued upon the exercise by the underwriters’ of their option to purchase additional shares, will be freely tradable without restriction under the Securities Act, except for any shares acquired in the directed share program by our employees, executive officers and directors, which will be subject to lock-up transfer restrictions as described in the section of the prospectus entitled “Underwriting” and except for any shares that may be acquired by our affiliates, as that term is defined in Rule 144 under the Securities Act. Generally, affiliates include individuals or entities that control, are controlled by, or are under common control with, us and may include our directors, officers and significant stockholders.

E-Z-EM plans to distribute the 9,200,000 shares of our common stock that it owns to its stockholders. E-Z-EM has agreed with the underwriters that it will not complete the distribution for 120 days after the date of this prospectus without the prior written consent of RBC Capital Markets Corporation. Shares of our common stock distributed to E-Z-EM stockholders in the distribution generally will be freely transferable, except for shares of common stock received by persons who are determined to be our affiliates. Persons who are affiliates will be permitted to sell the shares of common stock that are issued in this offering or that they receive in the distribution only through registration under the Securities Act or under an exemption from registration, such as the exemption provided by Rule 144.

Before distribution, the shares of our common stock held by E-Z-EM are restricted securities, as defined in Rule 144. Restricted securities may not be sold other than through registration under the Securities Act or under an exemption from registration, such as those provided by Rule 144 or Rule 144(k) enacted under the Securities Act and summarized below. Our executive officers and directors, and E-Z-EM for dispositions other than the distribution of our shares to its stockholders, have agreed not to offer or sell any shares of our common stock for a period of 180 days after the date of this prospectus without the prior consent of RBC Capital Markets Corporation on behalf of the underwriters, with some exceptions.

In general, under Rule 144, a person who has beneficially owned restricted securities for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

one percent of the number of shares of common stock then outstanding, which will equal approximately shares immediately after the offering; or

the average weekly trading volume of the common stock during the four calendar weeks preceding the sale.

Sales under Rule 144 are also subject to requirements with respect to manner of sale, notice and the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the three months preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

We have reserved 1,497,668 shares of our common stock for issuance under our 1997 Stock Option Plan. As of the date of this prospectus, we have issued options to purchase 1,337,136 shares of our common stock under this plan. Substantially all of these options will become exercisable upon the earlier to occur of (i) 14 months after either the completion of this offering of our stock or a distribution by E-Z-EM of its AngioDynamics stock to its stockholders or (ii) two months after completion of both this offering and the distribution. We expect to file a registration statement under the Securities Act to register shares reserved for issuance under our 1997 Stock Option Plan. Shares issued through award grants after the effective date of the registration statement, other than shares issued to affiliates, generally will be freely tradable without further registration under the Securities Act.

We have also reserved 1,000,000 shares for issuance under our 2004 Stock and Incentive Award Plan. As of the date of the prospectus, we have not made any grants or issuance under this plan. Additionally, in conjunction with the distribution by E-Z-EM of our common stock to its stockholders, we will issue options to purchase shares of our common stock to persons, including our directors and officers, who hold options to purchase E-Z-EM shares under either (i) certain option plans intended to “mirror” the E-Z-EM option plan or plans under which the E-Z-EM options were granted, (ii) identical non-plan award agreements or (iii) our 2004 Stock and Incentive Award Plan. These options will vest and become exercisable in accordance with the terms of the E-Z-EM options to which they relate. We expect to file one or more registration statements under the Securities Act to register these shares.

CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

The following is a general discussion of material anticipated U.S. Federal income and estate tax considerations with respect to the ownership and disposition of shares of our stock applicable to non-U.S. holders. In general, a “non-U.S. holder” is any holder other than:

a citizen or resident of the United States;

a corporation created or organized in the United States or under the laws of the United States or of any state;

an estate, the income of which is includible in gross income for U.S. Federal income tax purposes regardless of its source; or

a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more U.S. persons have the authority to control all substantial decisions of the trust.

This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, final, temporary or proposed Treasury regulations promulgated thereunder, judicial opinions, published positions of the IRS and all other applicable authorities, all of which are subject to change (possibly with retroactive effect). We assume in this discussion that a non-U.S. holder holds shares of our stock as a capital asset (generally property held for investment). This discussion does not address all aspects of U.S. Federal income and estate taxation that may be important to a particular non-U.S. holder in light of that non-U.S. holder’s individual circumstances, nor does it address any aspects of U.S. state, local or non-U.S. taxes. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder subject to special treatment under the U.S. Federal income tax laws (such as insurance companies, tax-exempt organizations, financial institutions, brokers, dealers in securities, partnerships, owners of five percent or more of our common stock and certain U.S. expatriates). Accordingly, we urge prospective investors to consult with their own tax advisors regarding the U.S. Federal, state, local and non-U.S. income and other tax considerations of acquiring, holding and disposing of shares of our stock.

Dividends

We do not anticipate paying cash dividends on our common stock in the foreseeable future. In general, dividends we pay, if any, to a non-U.S. holder will be subject to U.S. withholding tax at a 30% rate of the gross amount (or a reduced rate prescribed by an applicable income tax treaty) unless the dividends are effectively connected with a trade or business carried on by the non-U.S. holder within the United States and, if a treaty applies, are attributable to a permanent establishment of the non-U.S. holder within the United States. Dividends effectively connected with this U.S. trade or business, and, if a treaty applies, attributable to such a permanent establishment of a non-U.S. holder, generally will not be subject to U.S. withholding tax if the non-U.S. holder files certain forms, including IRS Form W-8ECI (or any successor form), with the payer of the dividend, and generally will be subject to U.S. Federal income tax on a net income basis, in the same manner as if the non-U.S. holder were a resident of the United States. A non-U.S. holder that is a corporation may be subject to an additional “branch profits tax” at a rate of 30% (or a reduced rate as may be specified by an applicable income tax treaty) on the repatriation from the United States of its “effectively connected earnings and profits,” subject to certain adjustments. Under applicable Treasury regulations, a non-U.S. holder (including, in certain cases of non-U.S. holders that are entities, the owner or owners of such entities) is required to satisfy certain certification requirements in order to claim a reduced rate of withholding pursuant to an applicable income tax treaty.

Gain on Sale or Other Disposition of Stock

In general, a non-U.S. holder will not be subject to U.S. Federal income tax on any gain realized upon the sale or other disposition of the holder’s shares of our stock unless:

the gain is effectively connected with a trade or business carried on by the non-U.S. holder within the United States (in which case the branch profits tax discussed above may also apply if the non-U.S. holder is a corporation) and, if required by an applicable income tax treaty as a condition to subjecting a non U.S. holder to United States income tax on a net basis, the gain is attributable to a permanent establishment of the non-U.S. holder maintained in the United States;

the non-U.S. holder is an individual and is present in the United States for 183 days or more in the taxable year of disposition and certain other tests are met;

the non-U.S. holder is subject to tax pursuant to the provisions of the Internal Revenue Code regarding the taxation of U.S. expatriates; or

we are or have been a U.S. real property holding corporation (a USRPHC) for U.S. Federal income tax purposes (which we do not believe that we have been, currently are, or will become) at any time within the shorter of the five-year period preceding the disposition and the non-U.S. holder’s holding period. We believe that we are not a USRPHC, and we do not anticipate becoming a USRPHC. If we were or were to become a USRPHC at any time during this period, generally gains realized upon a disposition of shares of our stock by a non-U.S. holder that did not directly or indirectly own more than five percent of our common stock during this period would not be subject to U.S. Federal income tax, provided that our stock is “regularly traded on an established securities market” (within the meaning of Section 897(c)(3) of the Internal Revenue Code). We believe that our stock will be treated as regularly traded on an established securities market during any period in which it is listed on the Nasdaq National Market.

U.S. Federal Estate Tax

Shares of our stock that are owned or treated as owned by an individual who is not a citizen or resident (as defined for U.S. Federal estate tax purposes) of the United States at the time of death will be includible in the individual’s gross estate for U.S. Federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and therefore may be subject to U.S. Federal estate tax.

Backup Withholding, Information Reporting and Other Reporting Requirements

Generally, we must report annually to the IRS and to each non-U.S. holder the amount of dividends paid to, and the tax withheld with respect to, each non-U.S. holder. These reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable tax treaty. Copies of this information also may be made available under the provisions of a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established.

U.S. backup withholding tax is imposed at the rate of 28% on certain payments to persons that fail to furnish the information required under the U.S. information reporting requirements.

Under the Treasury regulations, the payment of proceeds from the disposition of shares of our common stock by a non-U.S. holder made to or through a U.S. office of a broker generally will be subject to information reporting and backup withholding, unless the beneficial owner, under penalties of perjury, certifies, among other things, its status as a non-U.S. holder or otherwise establishes an exemption. The

payment of proceeds from the disposition of shares of our common stock by a non-U.S. holder made to or through a non-U.S. office of a broker generally will not be subject to backup withholding and information reporting, except as noted below. In the case of proceeds from a disposition of shares of our common stock by a non-U.S. holder made to or through a non-U.S. office of a broker that is:

a U.S. person;

a “controlled foreign corporation” for U.S. Federal income tax purposes;

a foreign person, 50% or more of whose gross income from certain periods is effectively connected with a U.S. trade or business; or

a foreign partnership, if at any time during its tax year (i) one or more of its partners are U.S. persons who, in the aggregate, hold more than 50% of the income or capital interests of the partnership or (ii) the foreign partnership is engaged in a U.S. trade or business,

information reporting (but not backup withholding) will apply unless the broker has documentary evidence in its files that the owner is a non-U.S. holder and certain other conditions are satisfied, or the beneficial owner otherwise establishes an exemption (and the broker has no actual knowledge to the contrary).

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder can be refunded or credited against the non-U.S. holder’s U.S. Federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner.

The foregoing discussion of certain U.S. Federal income tax considerations is for general information only and is not tax advice. Accordingly, each prospective non-U.S. holder of shares of our stock should consult his, her or its own tax adviser with respect to the Federal, state, local and foreign tax consequences of the acquisition, ownership and disposition of common stock.

UNDERWRITING

RBC Capital Markets Corporation and Adams, Harkness & Hill, Inc. are acting as book-running managers of the offering and as representatives of the underwriters named below. Subject to the terms and conditions in the underwriting agreement, each underwriter named below has agreed to purchase from us, on a firm commitment basis, the respective number of shares of common stock shown opposite its name below:


Underwriters		Number of Shares
RBC Capital Markets Corporation
Adams, Harkness & Hill, Inc.




Total

The underwriting agreement provides that the underwriters’ obligations to purchase our common stock are subject to approval of legal matters by counsel and to the satisfaction of other conditions. The underwriters are obligated to purchase all of the shares (other than those covered by the over-allotment option described below) if they purchase any shares.

Commissions and Expenses

The representatives have advised us that the underwriters propose to offer the common stock directly to the public at the public offering price presented on the cover page of this prospectus, and to selected dealers, who may include the underwriters, at the public offering price less a selling concession not in excess of $ per share. The underwriters may allow, and the selected dealers may reallow, a concession not in excess of $ per share to brokers and dealers. After the offering, the underwriters may change the offering price and other selling terms. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.

The following table summarizes the underwriting discounts and commissions that we will pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of common stock.

We estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, will be approximately $ million.

Over-Allotment Option

We have granted to the underwriters an option to purchase up to an aggregate of shares of common stock, exercisable solely to cover over-allotments, if any, at the public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option in whole or in part at any time until 30 days after the date of the underwriting agreement. To the extent the underwriters exercise this option, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares proportionate to that underwriter’s initial commitment as indicated in the preceding table.

Lock-Up Agreements

We have agreed that, without the prior written consent of RBC Capital Markets Corporation, we will not, directly or indirectly, offer, sell or dispose of any common stock or any securities which may be converted into or exchanged for any common stock for a period of 180 days from the date of this prospectus. Our executive officers and directors, and E-Z-EM for dispositions other than the distribution of our shares to its stockholders, have agreed under lock-up agreements not to, without the prior written consent of RBC Capital Markets Corporation, directly or indirectly, offer, sell or otherwise dispose of any common stock or any securities which may be converted into or exchanged or exercised for any common stock for a period of 180 days from the date of this prospectus. E-Z-EM has also agreed with the underwriters that it will not complete the distribution of our shares to its stockholders until 120 days after the date of this prospectus without the prior written consent of RBC Capital Markets Corporation.

Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price has been negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives considered

prevailing market conditions;

our historical performance and capital structure;

estimates of our business potential and earnings prospects;

an overall assessment of our management; and

the consideration of these factors in relation to market valuation of companies in related businesses.

We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol “ANGO.”

Indemnification

The underwriting agreement provides for the indemnification of the underwriters against liabilities relating to the offering, including liabilities under the Securities Act and liabilities arising from breaches of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

Stabilization, Short Positions and Penalty Bids

The representatives may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934.

Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market.

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specific maximum.

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Directed Share Program

At our request, the underwriters have reserved up to shares, or five percent of our common stock offered by this prospectus, for sale under a directed share program to our officers, directors, employees and to our business associates. All of the persons purchasing the reserved shares must commit to purchase no later than the close of business on the day following the date of this prospectus. The number of shares available for sale to the general public will be reduced to the extent these persons purchase the reserved shares. Shares committed to be purchased by directed share participants that are not so purchased will be reallocated for sale to the general public in the offering. All sales of shares under the directed share program will be made at the initial public offering price set forth on the cover page of this prospectus.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

LEGAL MATTERS

Davies Ward Phillips & Vineberg LLP will pass upon the validity of the common stock offered by this prospectus for us. Dorsey & Whitney LLP will pass upon certain legal matters in connection with this offering for the underwriters.

EXPERTS

Grant Thornton LLP, independent certified public accountants, have audited our consolidated financial statements as of June 1, 2002 and May 31, 2003 and for the fifty-two weeks ended June 2, 2001, June 1, 2002 and May 31, 2003 as set forth in their report. We have included our financial statements in this prospectus in reliance on Grant Thornton LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, or SEC, a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the shares of common stock offered under this prospectus. This prospectus does not contain all of the information in the registration statement and the exhibits. For further information about us and our common stock, we refer you to the registration statement and to the exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete and, in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 450 Fifth Street, N.W., Washington, DC 20549. You may also obtain copies of the document at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

Upon completion of the distribution and offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, and we will file reports, proxy statements and other information with the SEC. We also intend to furnish our stockholders with annual reports containing our financial statements audited by an independent public accounting firm.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page
AngioDynamics, Inc.:
Report of Independent Certified Public Accountants		F-2

Financial Statements
Consolidated Balance Sheets — June 1, 2002 and May 31, 2003 and November 29, 2003 (unaudited)		F-3–F-4
Consolidated Statements of Earnings — Fifty-two Weeks Ended June 2, 2001, June 1, 2002 and May 31, 2003, and twenty-six weeks ended November 30, 2002 and November 29, 2003 (unaudited)		F-5
Consolidated Statement of Stockholder’s Equity (Deficit) and Comprehensive Income — Fifty-two Weeks Ended June 2, 2001, June 1, 2002 and May 31, 2003, and twenty-six weeks ended November 29, 2003 (unaudited)		F-6
Consolidated Statements of Cash Flows — Fifty-two Weeks Ended June 2, 2001, June 1, 2002 and May 31, 2003, and twenty-six weeks ended November 30, 2002 and November 29, 2003 (unaudited)		F-7
Notes to Consolidated Financial Statements		F-8–F-27

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholder

AngioDynamics, Inc.

We have audited the accompanying consolidated balance sheets of AngioDynamics, Inc. and Subsidiaries, a wholly-owned subsidiary of E-Z-EM, Inc., as of June 1, 2002 and May 31, 2003, and the related consolidated statements of earnings, stockholder’s equity (deficit) and comprehensive income, and cash flows for the fifty-two weeks ended June 2, 2001, June 1, 2002 and May 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AngioDynamics, Inc. and Subsidiaries as of June 1, 2002 and May 31, 2003, and the consolidated results of their operations and their consolidated cash flows for the fifty-two weeks ended June 2, 2001, June 1, 2002 and May 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

As described in Note I to the consolidated financial statements, the Company depends on E-Z-EM, Inc.’s support for a significant amount of its financing requirements.

/s/ GRANT THORNTON LLP

Melville, New York

July 3, 2003

F-2

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

CONSOLIDATED BALANCE SHEETS

(in thousands)


	June 1, 2002		May 31, 2003		Nov. 29, 2003
					(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,525	$	939	$	1,278
Restricted cash		—		798		220
Debt securities, at fair value		1,318		729		733
Accounts receivable — trade, net of allowance for doubtful accounts of $229, $228 and $251 at June 1, 2002, May 31, 2003 and November 29, 2003, respectively		4,461		6,532		6,940
Inventories		7,909		8,631		9,285
Deferred income taxes		465		652		575
Prepaid expenses and other		200		244		380

Total current assets		15,878		18,525		19,411
PROPERTY, PLANT AND EQUIPMENT — AT COST, less accumulated depreciation and amortization		2,730		6,261		6,875
DEFERRED INCOME TAXES		882		826		826
INTANGIBLE ASSETS, less accumulated amortization of $668, $789 and $850 at June 1, 2002, May 31, 2003 and November 29, 2003, respectively		1,157		1,036		975
OTHER ASSETS		—		408		455

	$	20,647	$	27,056	$	28,542

The accompanying notes are an integral part of these statements.

F-3

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 1, 2002			May 31, 2003			Nov. 29, 2003
							(unaudited)
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable	$	2,294		$	2,707		$	2,623
Accrued liabilities		1,891			2,072			1,983
Due to parent		609			1,246			1,507
Current portion of long-term debt		—			140			140
Current portion of notes payable — Parent		983			—			—

Total current liabilities		5,777			6,165			6,253
LONG-TERM DEBT, net of current portion		—			3,255			3,185
NOTES PAYABLE — PARENT, net of current portion		15,165			16,148			16,148

Total liabilities		20,942			25,568			25,586


COMMITMENTS AND CONTINGENCIES

STOCKHOLDER’S EQUITY (DEFICIT)
Class A common stock (voting), par value, $1.00 per share — authorized, issued and outstanding, 500 shares		1			1			1
Class B common stock (nonvoting), par value, $1.00 per share — authorized, issued and outstanding, 500 shares		1			1			1
Additional paid-in capital		11,832			12,729			13,152
Accumulated deficit		(12,129	)		(10,943	)		(10,029	)
Accumulated other comprehensive loss		—			(300	)		(169	)

Total stockholder’s equity (deficit)		(295	)		1,488			2,956

	$	20,647		$	27,056		$	28,542

The accompanying notes are an integral part of these statements.

F-4

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)


	Fifty-two weeks ended									Twenty-six weeks ended
	June 2, 2001			June 1, 2002			May 31, 2003			Nov. 30, 2002			Nov. 29, 2003
										(unaudited)
Net sales	$	23,390		$	30,890		$	38,434		$	17,096		$	22,481
Cost of goods sold		12,418			15,333			18,572			8,135			10,854

Gross profit		10,972			15,557			19,862			8,961			11,627

Operating expenses
Sales and marketing		7,089			8,901			11,338			5,127			6,239
General and administrative		1,875			2,317			2,777			1,303			1,637
Research and development		1,426			1,951			2,509			1,176			1,621
Loss on sale of subsidiary and related assets		872			—			—			—			—

Total operating expenses		11,262			13,169			16,624			7,606			9,497

Operating profit (loss)		(290	)		2,388			3,238			1,355			2,130
Other income (expenses)
Interest income		71			45			38			17			8
Interest expense		(952	)		(863	)		(1,021	)		(492	)		(501	)
Other, net		1			—			—			—			—

Earnings (loss) before income tax provision (benefit)		(1,170	)		1,570			2,255			880			1,637
Income tax provision (benefit)		(1,513	)		561			1,069			544			723

Net earnings	$	343		$	1,009		$	1,186		$	336		$	914

Earnings per common share
Basic	$	343		$	1,009		$	1,186		$	336		$	914

Diluted	$	343		$	994		$	1,152		$	327		$	881

The accompanying notes are an integral part of these statements.

F-5

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY (DEFICIT) AND COMPREHENSIVE INCOME

Fifty-two weeks ended June 2, 2001, June 1, 2002 and May 31, 2003

and twenty-six weeks ended November 29, 2003 (unaudited)

(in thousands, except share data)


	Common Stock —Class A			Common Stock —Class B			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Compre- hensive Loss			Total			Compre- hensive Income
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Compre- hensive Loss			Total			Compre- hensive Income
Balance at June 3, 2000	500	$	1	500	$	1	$	11,822	$	(13,481	)	$	(945	)	$	(2,602	)		—
Compensation related to stock option plan	—		—	—		—		5		—			—			5			—
Net earnings	—		—	—		—		—		343			—			343		$	343
Foreign currency translation adjustments arising during the year	—		—	—		—		—		—			(49	)		(49	)		(49	)
Reclassification adjustment for sale of investment in a foreign entity	—		—	—		—		—		—			994			994			994

Comprehensive income																		$	1,288

Balance at June 2, 2001	500		1	500		1		11,827		(13,138	)		—			(1,309	)		—
Compensation related to stock option plan	—		—	—		—		5		—			—			5			—
Net earnings	—		—	—		—		—		1,009			—			1,009		$	1,009

Comprehensive income																		$	1,009

Balance at June 1, 2002	500		1	500		1		11,832		(12,129	)		—			(295	)		—
Compensation related to stock option plan	—		—	—		—		5		—			—			5			—
Capital contribution — imputed interest on note payable to Parent	—		—	—		—		892		—			—			892			—
Net earnings	—		—	—		—		—		1,186			—			1,186		$	1,186
Unrealized loss on interest rate swap, net of tax	—		—	—		—		—		—			(300	)		(300	)		(300	)

Comprehensive income																		$	886

Balance at May 31, 2003	500		1	500		1		12,729		(10,943	)		(300	)		1,488			—
Compensation related to stock option plan	—		—	—		—		2		—			—			2			—
Capital contribution — imputed interest on note payable to Parent	—		—	—		—		421		—			—			421			—
Net earnings	—		—	—		—		—		914			—			914			914
Unrealized gain on interest rate swap, net of tax	—		—	—		—		—		—			131			131			131

Comprehensive income																		$	1,045

Balance at November 29, 2003	500	$	1	500	$	1	$	13,152	$	(10,029	)	$	(169	)	$	2,956

The accompanying notes are an integral part of this statement.

F-6

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Fifty-two weeks ended									Twenty-six weeks ended
	June 2, 2001			June 1, 2002			May 31, 2003			Nov. 30, 2002			Nov. 29, 2003
										(unaudited)
Cash flows from operating activities
Net earnings	$	343		$	1,009		$	1,186		$	336		$	914
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation and amortization		565			569			657			286			343
Provision for doubtful accounts		42			55			13			21			26
Deferred income tax provision (benefit)		(1,076	)		55			45			—			—
Imputed interest on note payable to Parent		—			—			892			446			421
Loss on sale of assets		872			—			—			—			—
Other noncash items		5			5			5			2			2
Changes in operating assets and liabilities
Accounts receivable		(307	)		(811	)		(2,084	)		(360	)		(434	)
Inventories		232			(2,555	)		(722	)		(917	)		(653	)
Prepaid expenses and other		(98	)		(13	)		(67	)		59			(136	)
Other Assets		—			—			—			(87	)		2
Accounts payable and accrued liabilities		(33	)		1,848			118			(645	)		35
Due to (from) Parent		(136	)		1,044			637			592			260

Net cash provided by (used in) operating activities		409			1,206			680			(267	)		780

Cash flows from investing activities
Addition to property, plant and equipment		(466	)		(682	)		(4,062	)		(1,632	)		(895	)
Investment at cost		—			—			(300	)		(300	)		—
(Increase) decrease in restricted cash		—			—			(798	)		(2,447	)		578
Proceeds from sale of subsidiary and related assets		3,250			—			—			—			—
Purchase of available-for-sale securities		(10,840	)		(8,519	)		(5,547	)		(2,696	)		(955	)
Proceeds from sale of available-for-sale securities		9,555			8,486			6,135			3,290			951

Net cash provided by (used in) investing activities		1,499			(715	)		(4,572	)		(3,785	)		(321	)

Cash flows from financing activities
Proceeds from long-term debt		—			—			3,500			3,500			—
Repayment of long-term debt		—			—			(105	)		(35	)		(70	)
Increase in deferred financing costs		—			(23	)		(89	)		(89	)		—
Proceeds (repayment) of note payable—Parent		(1,761	)		394			—			—			(50	)

Net cash provided by (used in) financing activities		(1,761	)		371			3,306			3,376			(120	)

Effect of exchange rate changes on cash and cash equivalents		(14	)		—			—			—			—

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		133			862			(586	)		(676	)		339
Cash and cash equivalents at beginning of period		530			663			1,525			1,525			939

Cash and cash equivalents at end of period	$	663		$	1,525		$	939		$	849		$	1,278

Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest	$	952		$	469		$	116		$	46		$	93
Income taxes		6			—			19			—			1

The accompanying notes are an integral part of these statements.

F-7

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2003 and June 1, 2002

(Information with respect to November 29, 2003 and the twenty-six weeks ended

November 30, 2002 and November 29, 2003 is unaudited)

NOTE A — BASIS OF PRESENTATION, BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Presentation and Business Description

The consolidated financial statements include the accounts of AngioDynamics, Inc. and its wholly-owned subsidiaries, AngioDynamics Ltd. (“Limited”), formed in November 1996, and Leocor, Inc. (“Leocor”) (collectively, the “Company” or “AngioDynamics”). The Company is primarily engaged in the design, development, manufacture and marketing of medical products used by interventional radiologists and other physicians for the minimally invasive therapeutic treatment of peripheral vascular disease. The Company’s principal sales territory includes the continental United States. International sales are principally in Europe and Japan (see Note Q).

Operations outside the U.S. are included in the consolidated financial statements and consist of Limited, a subsidiary located in Ireland primarily engaged in contract manufacturing for AngioDynamics through July 27, 2000, the date on which Limited was sold to an unrelated third party (see Note D).

All significant intercompany balances and transactions have been eliminated.

2. Fiscal Year

The Company reports on a fiscal year which concludes on the Saturday nearest to May 31. Fiscal years 2001, 2002 and 2003 ended on June 2, 2001, June 1, 2002 and May 31, 2003, respectively, for reporting periods of fifty-two weeks.

3. Cash and Cash Equivalents

The Company considers all unrestricted highly liquid investments purchased with a maturity of less than three months to be cash equivalents. As of June 1, 2002, May 31, 2003 and November 29, 2003, approximately $1,425,000, $1,537,000 and $1,298,000, respectively, of cash and cash equivalents and restricted cash held by financial institutions in the United States exceeded Federal Deposit Insurance Corporation insured amounts.

4. Debt Securities

Debt securities, which are principally municipal bonds that reprice weekly, are classified as “available-for-sale securities” and reported at fair value, with unrealized gains and losses excluded from operations and reported as a component of accumulated other comprehensive income (loss), net of the related tax effects, in stockholder’s equity (deficit). Cost is determined using the specific identification method.

5. Accounts Receivable

Accounts receivable, principally trade, are generally due within 30 to 60 days and are stated at amounts due from customers net of an allowance for doubtful accounts. The Company performs ongoing credit

F-8

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

evaluations of its customers and adjusts credit limits based upon payment history and the customers’ current creditworthiness, as determined by a review of their current credit information. The Company continuously monitors agings, collections and payments from customers and a provision for estimated credit losses is maintained based upon its historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within the Company’s expectations and the provisions established, the Company cannot guarantee that the same credit loss rates will be experienced in the future. The Company writes off accounts receivable when they become uncollectible.

Changes in the Company’s allowance for doubtful accounts are as follows:


	June 1, 2002			May 31, 2003			Nov. 29, 2003
							(unaudited)
	(in thousands)
Beginning balance	$	185		$	229		$	228
Provision for doubtful accounts		55			13			26
Write-offs		(11	)		(14	)		(3	)

Ending balance	$	229		$	228		$	251

6. Inventories

Inventories are stated at the lower of cost (on the first-in, first-out method) or market. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.

7. Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the terms of the related leases or the useful life of the improvements, whichever is shorter. Expenditures for repairs and maintenance are charged to expense as incurred. Renewals and betterments are capitalized.

8. Accounting for Business Combinations, Goodwill and Intangible Assets

As of June 3, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” These standards require that all business combinations initiated after June 30, 2001 be accounted for under the purchase method. In addition, all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged shall be recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives are no longer subject to amortization, but are subject to at least an annual assessment for impairment by applying a fair value based test.

Intangible assets, which consist primarily of technology, trademarks, licenses and know-how, are being amortized on a straight-line basis over the estimated useful lives of the respective assets of approximately

F-9

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fifteen years. Annual amortization of intangible assets was $128,000, $122,000 and $121,000 in 2001, 2002, and 2003 and $61,000 and $61,000 for the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively. As of May 31, 2003, annual amortization of these intangible assets will approximate $121,000 for each of the next five years.

On an ongoing basis, management reviews the valuation and amortization of intangible assets to determine possible impairment by considering current operating results and comparing the carrying values to the anticipated undiscounted future cash flows of the related assets.

9. Revenue Recognition

The Company recognizes revenue on the date the product is shipped, which is when title passes to the customer. Shipping and credit terms are negotiated on a customer-by-customer basis. All customer returns must be preapproved by the Company.

10. Research and Development

The Company charges all costs incurred to establish the technological feasibility of a product or product enhancement to research and development expense.

11. Shipping and Handling Costs

Shipping and handling costs, associated with the distribution of finished product to customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer.

12. Advertising

All costs associated with advertising are expensed as incurred. Advertising expense, included in sales and marketing was $97,000, $102,000, $520,000, $198,000 and $79,000 in 2001, 2002, 2003 and twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively.

13. Income Taxes

Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities and loss carryforwards and tax credit carryforwards for which income tax benefits are expected to be realized in future years. A valuation allowance has been established to reduce deferred tax assets as it is more likely than not that all, or some portion, of such deferred tax assets will not be realized under the tax-sharing arrangement described below. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company and its Parent have a tax-sharing arrangement with respect to Federal income taxes, which continues until such time as the Company is disconsolidated for tax purposes as a result of a change in ownership. Pursuant to the tax-sharing arrangement, the Company will pay Federal taxes based on the amount of taxable income generated and be credited for Federal tax benefits generated.

F-10

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and accounts payable, short-term and long-term debt. The carrying amount of these instruments approximates fair value due to the immediate or short-term maturities and variable interest rates. During 2003, the Company entered into an interest rate swap agreement. The interest rate swap agreement has been recorded at its fair value (see Note L).

15. Foreign Currency Translation

In accordance with SFAS No. 52, “Foreign Currency Translation,” the Company had determined that the functional currency for its former foreign subsidiary was the local currency. This assessment considered that the day-to-day operations were not dependent upon the economic environment of the Parent’s functional currency, financing was effected through their own operations, and the foreign operations primarily generated and expended foreign currency. Foreign currency translation adjustments were accumulated as a component of accumulated other comprehensive loss in stockholder’s equity (deficit.)

Translation gains and losses in 2001 arose from exchange rate fluctuations relating to a formerly owned foreign subsidiary (see Note A-1) on transactions denominated in a currency other than the functional currency.

16. Derivative Financial Instruments

In accordance with SFAS No. 133, “Accounting for Derivatives and Hedging Activities,” as amended, the Company recognized its interest rate swap agreement in the consolidated financial statements at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in stockholders’ equity as a component of accumulated other comprehensive income (loss) depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value or cash flow hedge. Generally, the changes in the fair value of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair value of hedged items that relate to the hedged risks. Changes in the fair value of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in accumulated other comprehensive income (loss).

17. Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net earnings and earnings per share in annual and interim financial statements. The adoption of SFAS No. 148 disclosure requirements, effective March 2, 2003, did not have an effect on the Company’s

F-11

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consolidated financial statements. At May 31, 2003, the Company has one stock-based compensation plan, which is described more fully in Note O. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations.

Accordingly, no compensation expense has been recognized under this plan concerning options granted to key employees and to members of the Board of Directors, as all such options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. Compensation expense of $5,000, $5,000, $5,000 in 2001, 2002 and 2003 and $2,000 and $2,000 for the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively, was recognized under this plan for options granted to consultants.

If the Company had elected to recognize compensation expense based upon the fair value at the grant date for options granted under this plan to key employees and to members of the Board of Directors, consistent with the methodology prescribed by SFAS No. 123, the Company’s pro forma net earnings (loss) and earnings (loss) per common share would be as follows:


										Twenty-six weeks ended
										Nov. 30,			Nov. 29,
	2001			2002			2003			2002			2003
										(unaudited)
	(in thousands, except per share data)
Net earnings (loss)
As reported	$	343		$	1,009		$	1,186		$	336		$	914
Deduct total stock-based compensation under fair value based method for all awards, net of tax effects		(430	)		(292	)		(304	)		(152	)		(158	)

Pro forma net earnings (loss)		(87	)		717			882			184			756

Basic earnings (loss) per common share
As reported	$	343		$	1,009		$	1,186		$	336		$	914
Pro forma		(87	)		717			882			184			756

Diluted earnings (loss) per common share
As reported	$	343		$	994		$	1,152		$	326		$	881
Pro forma		(87	)		717			872			182			738

18. Earnings Per Common Share

Basic earnings per share are based on the weighted-average number of common shares outstanding without consideration of potential common stock. Diluted earnings per share are based on the weighted-average number of common and potential dilutive common shares outstanding. The calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the period.

F-12

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the reconciliation of the weighted-average number of common shares:


				Twenty-six weeks ended
				Nov. 30, 2002	Nov. 29, 2003
	2001	2002	2003	Nov. 30, 2002	Nov. 29, 2003
				(unaudited)
Basic	1,000	1,000	1,000	1,000	1,000
Effect of dilutive securities (stock options)	—	15	30	29	37

Diluted	1,000	1,015	1,030	1,029	1,037

Excluded from the calculation of diluted earnings per common share, are options to purchase 132.67, 4.03, 7.44 and 4.03 shares of common stock at June 2, 2001, June 1, 2002, May 31, 2003 and November 30, 2002, respectively, as their inclusion would not be dilutive. The exercise prices on the excluded options were $40,000 per share at June 2, 2001, $60,000 per share at June 1, 2002, $60,000 per share at May 31, 2003 and $60,000 per share at November 30, 2002.

19. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at year-end and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

20. Effects of Recently Issued Accounting Pronouncements

As of June 2, 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” while retaining many of the requirements of such statement. The adoption of this statement has had no current effect on the Company’s financial position or results of operations.

In November 2002, the Emerging Issues Task Force (“EITF”) reached a consensus opinion of EITF 00-21, “Revenue Arrangements with Multiple Deliverables.” That consensus provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The consideration of the arrangement should be allocated to the separate units of accounting based on their relative fair values, with different provisions if the fair value is contingent on delivery of specified items or performance conditions. Applicable revenue criteria should be considered separately for each separate unit of accounting. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Entities may elect to report the change as a cumulative effect adjustment in accordance with APB Opinion 20, “Accounting Changes.” As of May 31, 2003, the Company was evaluating the effect of the adoption of EITF 00-21 on its financial position and results of operations. During the twenty-six weeks ended November 29, 2003, the Company concluded that the adoption had no current effect on its financial position and results of operations.

F-13

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. The adoption of this statement has had no current effect on the Company’s financial position or results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN No. 46”), “Consolidation of Variable Interest Entities.” In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets, including loans or receivables, real estate or other property. A variable interest entity may be essentially passive or it may engage in activities on behalf of another company. Until now, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN No. 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. FIN No. 46’s consolidation requirements apply immediately to variable interest entities created or acquired after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. In December 2003, the FASB completed deliberations of proposed modifications to FIN No. 46 (Revised Interpretations) resulting in multiple effective dates based on the nature as well as the creation date of the variable interest entity. Variable interest entities created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the third quarter of fiscal 2004. Variable interest entities created after January 1, 2004 must be accounted for under the Revised Interpretations. The Company does not have any variable interest entities which would require consolidation under FIN No. 46. Accordingly, the adoption of FIN No. 46 has had no effect on the Company’s consolidated financial condition or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new statement requires that those instruments be classified as liabilities in statements of financial position. This statement shall be effective for financial instruments entered into or modified after May 31, 2003 and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. The Company is currently evaluating the effect of the adoption of SFAS No. 150 on its financial position and results of operations.

F-14

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of July 1, 2003, the Company adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The adoption of this statement has had no current effect on the Company’s financial position or results of operations.

In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition” (SAB No. 104), which codifies, revises and rescinds certain sections on SAB No. 101, “Revenue Recognition”, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have a material effect on the Company’s financial position or results of operations.

21. Interim Financial Information (Unaudited)

The financial statements of the Company as of November 29, 2003 and for the twenty-six weeks ended November 30, 2002 and November 29, 2003 are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and rules and regulations of the Securities and Exchange Commission for interim financial information.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring entries) necessary to present fairly the Company’s financial position as of November 29, 2003, and its operations and cash flows for the twenty-six weeks ended November 30, 2002 and November 29, 2003. The results reported for the twenty-six weeks ended November 29, 2003 are not necessarily indicative of the results of operations that may be expected for a full year.

NOTE B — COMPREHENSIVE INCOME

The Company records comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income.” SFAS No. 130 requires unrealized holding gains or losses on investments available-for-sale, cumulative translation adjustments and cash flow hedges (net of tax) to be included in the accumulated other comprehensive income (loss), as a separate component of stockholders’ equity (deficit). At May 31, 2003 and November 29, 2003, accumulated other comprehensive loss relating to cash flow hedges was $300,000 and $169,000, respectively.

F-15

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of comprehensive income are detailed in the Company’s accompanying consolidated statement of stockholder’s equity (deficit) and comprehensive income.


									Twenty-six weeks ended
									Nov. 30, 2002			Nov. 29, 2003
	2001			2002		2003			Nov. 30, 2002			Nov. 29, 2003
									(unaudited)
	(in thousands)
Net earnings	$	343		$	1,009	$	1,186		$	336		$	914
Reclassification adjustment for sale of investment in foreign entity		994			—		—			—			—
Foreign currency translation adjustments arising during the year		(49	)		—		—			—			—
Increase (decrease) in fair value on interest rate swap		—			—		(300	)		(172	)		131

	$	1,288		$	1,009	$	886		$	164		$	1,045

NOTE C — INVESTMENT AT COST

In June 2002, the Company acquired 1,158,000 shares of the Series C preferred stock and 42,000 shares of common stock, or approximately 8.8% of the outstanding shares prior to effects of dilutive securities, of Surgica, Inc. for $300,000, which is included in the accompanying consolidated balance sheet under the caption “Other assets.” Surgica, a Delaware corporation based in California, is a medical device company that designs, patents and markets vascular blocking materials (embolic agents). The Company has been provided registration rights, as specified in a registration rights agreement. The Company’s investment in Surgica is accounted for by the cost method. Further, the Company entered into a distribution agreement with Surgica, whereby Surgica provided the Company exclusive worldwide distribution rights for an initial term of five years, and an automatic renewal of three years, subject to termination clauses. In connection with this distribution agreement, Surgica granted the Company exclusive, royalty-free rights and license to use all trademarks.

NOTE D — SALE OF SUBSIDIARY AND RELATED ASSETS

On July 27, 2000, the Company sold all the capital stock of Limited and certain other assets to Limited’s management. The aggregate consideration received was $3,250,000 in cash. The sale was the culmination of the Company’s strategic decision to exit the cardiovascular market and to focus entirely on the interventional radiology marketplace. As a result of this sale, the Company recognized a pretax loss of approximately $872,000 during the first quarter of fiscal 2001. The aforementioned pretax loss on the sale includes the effect of previously unrealized losses on foreign currency translation of approximately $994,000 and the write-off of approximately $673,000 in inventory and intangibles related to the cardiovascular product line, both of which were non-cash charges. Further, the Company entered into a manufacturing agreement, a distribution agreement and a royalty agreement with the buyer. Under the two-year manufacturing agreement, which was terminated on April 9, 2002, the buyer manufactured certain interventional radiology products sold by the Company.

F-16

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE E — DEBT SECURITIES

Debt securities at June 1, 2002 consist of the following:


	Amortized		Fair
	Cost		Value
	(in thousands)
Available-for-sale securities (carried on the balance sheet at fair value)
Municipal bonds with maturities
Due in 1 through 10 years	$	315	$	315
Due after 10 years and through 20 years		500		500
Due after 20 years		500		500

Other		3		3

	$	1,318	$	1,318

Debt securities at May 31, 2003 consist of the following:


	Amortized Cost		Fair Value
	(in thousands)
Available-for-sale securities (carried on the balance sheet at fair value)
Municipal bonds with maturities
Due after 10 years and through 20 years	$	350	$	350
Due after 20 years		375		375
Other		4		4

	$	729	$	729

Debt securities at November 29, 2003 consist of the following:


	Amortized Cost		Fair Value
	(unaudited)
	(in thousands)
Available-for-sale securities (carried on the balance sheet at fair value)
Municipal bonds with maturities
Due after 10 years and through 20 years	$	350	$	350
Due after 20 years		380		380
Other		3		3

	$	733	$	733

F-17

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE F — INVENTORIES

Inventories consist of the following:


	June 1, 2002		May 31, 2003		Nov. 29, 2003
					(unaudited)
	(in thousands)
Finished goods	$	4,103	$	5,198	$	5,322
Work in process		1,315		1,033		1,434
Raw materials		2,491		2,400		2,529

	$	7,909	$	8,631	$	9,285

NOTE G — PROPERTY, PLANT AND EQUIPMENT, AT COST

Property, plant and equipment are summarized as follows:


	Estimated Useful Lives	June 1, 2002		May 31, 2003		Nov. 29, 2003
						(unaudited)
	(in thousands)
Building and building improvements	39 years	$	1,393	$	4,611	$	5,015
Machinery and equipment	3 to 8 years		4,616		5,461		6,011
Leasehold improvements	Term of lease		59		59		—

			6,068		10,131		11,026
Less accumulated depreciation and amortization			3,550		4,082		4,363

			2,518		6,049		6,663
Land			212		212		212

		$	2,730	$	6,261	$	6,875

NOTE H — INCOME TAXES

Income tax provision (benefit) analyzed by category and by statement of earnings classification is summarized as follows:


	2001			2002		2003
	(in thousands)
Current
Federal	$	(433	)	$	503	$	985
State and local		(4	)		3		39

		(437	)		506		1,024
Deferred		(1,076	)		55		45

	$	(1,513	)	$	561	$	1,069

F-18

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Federal income tax expenses (benefits), generated under the tax-sharing arrangement and not yet reimbursed, are classified in “Due to parent” in the accompanying balance sheets. In 2001, the deferred tax benefit primarily resulted from the reduction in the Company’s valuation allowance to recognize deferred tax assets of approximately $1,344,000. The future projected profitability of the Company made it more likely than not that certain deferred tax assets would be realized through future taxable earnings.

Temporary differences which give rise to deferred tax assets and liabilities are summarized as follows:


	June 1,			May 31,
	2002			2003
	(in thousands)
Deferred tax assets
Capital loss carryforwards	$	1,219		$	1,219
Expenses incurred not currently deductible		241			237
Unrealized loss on interest rate swap		—			176
Impairment of long-lived assets		1,115			999
Inventories		273			250
Other		13			8

Gross deferred tax asset		2,861			2,889

Deferred tax liabilities
Excess tax over book depreciation		168			180
Other		8			12

Gross deferred tax liability		176			192
Valuation allowance		(1,338	)		(1,219	)

Net deferred tax asset	$	1,347		$	1,478

Earnings (loss) before income tax provision (benefit) for U.S. and international operations consists of the following:


	2001			2002		2003
	(in thousands)
U.S.	$	(1,065	)	$	1,570	$	2,255
International		(105	)		—		—

	$	(1,170	)	$	1,570	$	2,255

F-19

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s consolidated income tax provision (benefit) has differed from the amount which would be provided by applying the U.S. Federal statutory income tax rate to the Company’s earnings (loss) before income taxes for the following reasons:


	2001			2002			2003
	(in thousands)
Income tax provision (benefit)	$	(1,513	)	$	561		$	1,069
Effect of
State income taxes, net of Federal tax benefit		(8	)		(8	)		(16	)
Tax-exempt interest		16			8			4
Research and development tax credit		—			13			32
Extraterritorial income exclusion		—			11			11
Nondeductible expenses		(143	)		(145	)		(501	)
Losses of entities generating no current tax benefit		(33	)		—			—
Change in valuation allowance		55			—			119
Difference between book and tax basis of subsidiary		1,245			—			—
Overaccrual of prior year Federal and state taxes		—			94			60
Other		(17	)		—			(12	)

Income tax provision (benefit) at statutory tax rate of 34% in 2001, 2002 and 2003	$	(398	)	$	534		$	766

NOTE I — NOTES PAYABLE — PARENT

The Company depends on the Parent’s support for a significant portion of its financing requirements. At May 31, 2003, the Company has outstanding unsecured notes payable of $16,148,000 (the “Notes”) with the Parent. The Notes, which bear interest at annual rates ranging from 1.53% to 6.15%, mature from November 8, 2003 through May 31, 2006. The Parent has agreed to extend $15,165,000 of the Notes due in Fiscal 2004 for an additional three years. Interest is payable at maturity or at an earlier date at the option of the Company. At June 1, 2002 and May 31, 2003, deferred payments of interest expense to parent, which are included in Notes payable—parent, approximated $983,000. Effective June 1, 2002 and through May 29, 2004, the Parent agreed to suspend interest charges on the outstanding Notes. The Company recorded an imputed interest charge of $892,000 in 2003 and $446,000 and $421,000 for the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively, for the suspended interest and a corresponding credit to “Additional paid-in capital.” Amounts charged to interest expense on the Notes were $952,000 and $863,000 in 2001 and 2002, respectively. The repayment of the Notes and other indebtedness to the Parent (the “Subordinated Indebtedness”), is subordinated to the outstanding long-term debt (see Note L). The long-term debt agreement provides for semiannual payments of Subordinated Indebtedness and interest, provided no event of default exists after such payment.

F-20

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE J — ACCRUED LIABILITIES

Accrued liabilities consist of the following:


	June 1, 2002		May 31, 2003		Nov. 29, 2003
					(unaudited)
	(in thousands)
Payroll and related expenses	$	1,756	$	1,405	$	1,508
Fair value of interest rate swap (see Note L)		—		476		268
Other		135		191		207

	$	1,891	$	2,072	$	1,983

NOTE K — LINE OF CREDIT

The Company has available $800,000 under a line of credit with a bank, which is collateralized by substantially all of the assets of the Company and expires on October 31, 2003. Borrowings under the line of credit bear interest at the London Interbank Offering Rate (“LIBOR”) plus 285 basis points (4.17% at May 31, 2003). The line of credit requires the Company to maintain the same financial covenants as under the outstanding long-term debt (see Note L).

NOTE L — LONG-TERM DEBT

In September 2002, the Company closed on the financing for the expansion of its headquarters and manufacturing facility in Queensbury, New York. The expansion is being financed principally with Industrial Revenue Bonds (the “Bonds”) issued by the Warren and Washington Counties Industrial Development Agency (the “Agency”) aggregating $3,500,000. The Bonds are issued under a Trust Agreement by and between the Agency and a bank, as trustee (the “Trustee”). The proceeds of the Bonds are being advanced, as construction occurs, pursuant to a Building Loan Agreement by and among the Agency, the Trustee, a second bank (the “Bank”) and the Company. As of May 31, 2003, the advances aggregated $2,702,000 with the remaining proceeds of $798,000 classified as restricted cash. The Bonds reprice every seven days and are resold by a Remarketing Agent. As of November 29, 2003, the advances aggregated $3,280,000 with the remaining proceeds of $220,000 classified as restricted cash. The Bonds bear interest based on the market rate on the date the Bonds are repriced (1.35% and 1.30% per annum at May 31, 2003 and November 29, 2003, respectively) and require quarterly interest payments and quarterly principal payments ranging from $25,000 to $65,000 through May 2022. In connection with the issuance of the Bonds, the Company entered into a Letter of Credit and Reimbursement Agreement with the Bank which requires the maintenance of a letter of credit for an initial amount of $3,575,000 to support principal and certain interest payments of the Bonds and requires payment of an annual fee on the outstanding balance ranging from 1% to 1.9%, depending on financial results achieved. The Company also entered into a Remarketing Agreement, pursuant to which the Remarketing Agent will use its best efforts to arrange for a sale in the secondary market of such Bonds. The Remarketing Agreement provides for the payment of an annual fee of .1% of the remaining balance.

F-21

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Reimbursement Agreement contains certain financial covenants, relating to fixed charge coverage and interest coverage, as defined (see Note K). Amounts borrowed under the Agreement are secured by the aforementioned letter of credit and a first mortgage on the land, building and equipment relating to the facility with a net carrying value of $6,261,000 and $6,875,000 at May 31, 2003 and November 29, 2003, respectively.

The Company entered into an interest rate swap agreement (the “Swap Agreement”) with the Bank, effective September 2002, with an initial notional amount of $3,500,000 to limit the effect of variability due to interest rates on its rollover of the Bonds. The Swap Agreement, which qualifies as a hedge under SFAS No. 133, is a contract to exchange floating interest rate payments for fixed interest payments periodically over the life of the agreement without the exchange of the underlying notional amounts. The Swap Agreement requires the Company to pay a fixed rate of 4.45% and receive payments based on 30-day LIBOR repriced every seven days through May 2022. At May 31, 2003 and November 29, 2003, since the Swap Agreement is classified as a cash flow hedge, the fair value of $476,000 and $268,000, respectively has been recorded as a component of accrued liabilities, and accumulated other comprehensive loss has been increased by $300,000 and $169,000, respectively, net of tax benefit. As of May 31, 2003 an estimated $110,000 of the $476,000 is expected to be reclassified into earnings over the following twelve months. Amounts to be paid or received under the Swap Agreement are accrued as interest rates change and are recognized along with any hedge ineffectiveness over the life of the Swap Agreement as an adjustment to interest expense.

At May 31, 2003, future minimum principal payments on long-term debt were as follows:


	(in thousands)
2004	$	140
2005		155
2006		165
2007		180
2008		200
Thereafter		2,555

	$	3,395

NOTE M — RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Allocations from Parent

Certain identifiable, allocable costs incurred by the Parent on behalf of the Company with respect to commissions, foreign selling and administrative expenses are proportionately charged to the Company.

In addition to the allocations, the Parent provides the Company with insurance coverage, if such coverage is reasonably available. The amount payable by the Company for such coverage is the actual cost of such insurance as allocated by the insurance carrier providing such coverage, and if such allocation is not provided by the insurance carrier, the amount payable by the Company is determined by the Parent based upon the respective total revenues of the Parent and the Company and such other factors as the Parent

F-22

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reasonably determines to be appropriate. Either the Parent or the Company may terminate such coverage under the Parent’s policies at any time on 60 days’ written notice.

These costs are included in the respective statements of earnings as follows:


							Twenty-six weeks ended
	2001		2002		2003		Nov. 30, 2002		Nov. 29, 2003
							(unaudited)
	(in thousands)
Cost of goods sold	$	140	$	301	$	366	$	147	$	211
Selling and administrative		131		225		330		148		202

	$	271	$	526	$	696	$	295	$	413

Capitalization

The Class A common stock and Class B common stock are identical in all material respects except that: (i) shares of the Class A common stock entitles the holders to one vote per share on all matters and shares of the Class B common stock are nonvoting, and (ii) the shares of the Class B common stock are subject to certain restrictions on transfer.

Sales to Parent and Parent’s Affiliates

Sales to the Parent and the Parent’s affiliates were approximately $714,000, $1,045,000, $958,000, $422,000 and $411,000 in 2001, 2002, 2003 and for the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively. Amounts due from affiliates of the Parent, which are included in “Accounts receivable—trade” in the accompanying balance sheets, were $117,000, $85,000 and $73,000, at June 1, 2002, May 31, 2003 and November 29, 2003, respectively.

NOTE N — RETIREMENT PLANS

The Company has a profit-sharing plan under which the Company makes discretionary contributions to eligible employees, and a companion 401(k) plan under which eligible employees can defer a portion of their compensation, part of which is matched by the Company. Profit-sharing contributions were $173,000, $214,000, $266,000, $136,000 and $162,000 in 2001, 2002, 2003 and for the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively. Matching contributions were $103,000, $130,000, $155,000, $79,000 and $91,000 in 2001, 2002, 2003 and for the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively.

NOTE O — STOCK OPTION PLAN

In 1997, the Company adopted a Stock Option Plan (the “Plan”). The Plan provides for the grant to key employees of both nonqualified stock options and incentive stock options and to members of the Board of Directors and consultants of nonqualified stock options. A total of 162.79 shares (including 26.43 shares authorized in May 2002) of AngioDynamics’ Class B common stock may be issued under the Plan pursuant

F-23

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to the exercise of options. All stock options must have an exercise price of not less than the market value of the shares on the date of grant. Options will be exercisable over a period of time to be designated by the administrators of the Plan (but not more than 10 years from the date of grant) and will be subject to such other terms and conditions as the administrators may determine. The Plan terminates in March 2007. Options outstanding at June 1, 2002 and May 31, 2003 vest and are exercisable on the ninth anniversary from the date of grant or an earlier date, upon the occurrence of certain conditions, as defined.

A summary of the status of the Company’s stock option plan as of June 2, 2001, June 1, 2002 and May 31, 2003, changes for the three years then ended, is presented below:


	2001				2002				2003
	Shares (000)		Weighted- average Exercise Price		Shares (000)		Weighted- average Exercise Price		Shares (000)		Weighted- average Exercise Price
Outstanding at beginning of year	136.14		$	40,000	132.67		$	40,000	139.77		$	40,577
Granted	1.65		$	40,000	7.21		$	51,181	3.41		$	60,000
Forfeited	(5.12	)	$	40,000	(.11	)	$	40,000	(1.30	)	$	40,000

Outstanding at end of year	132.67		$	40,000	139.77		$	40,577	141.88		$	41,049

Options exercisable at year-end	None				None				None
Weighted-average fair value of options granted during the year			$	25,315			$	32,702			$	36,943

On May 31, 2003 and November 29, 2003, there remained 20.92 and 17.34 shares, respectively available for granting of options under the Plan. Options are exercisable into Class B common stock.

The following information applies to options outstanding at May 31, 2003:


Exercise price	Number Outstanding	Weighted- average Remaining Life in Years	Weighted- average Exercise Price
$40,000	134.44	4.16	$	40,000
60,000	7.44	9.44		60,000

	141.88

The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model assuming no expected dividends and the following weighted-average assumptions:


	2001	2002	2003
Expected stock price volatility	45.07%	45.87%	47.88%
Risk-free interest rate	5.53%	5.42%	3.64%
Expected life of options	9½ years	9½ years	9½ years

F-24

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the twenty-six weeks ended November 29, 2003, options for 3.58 shares were granted at $60,000 per share, options for .11 shares were forfeited at $40,000 per share, and no options were exercised or expired during the twenty-six weeks ended November 29, 2003.

NOTE P — COMMITMENTS AND CONTINGENCIES

Leases

The Company is committed under noncancellable operating leases for facilities and equipment. During 2001, 2002, 2003 and twenty-six weeks ended November 30, 2002 and November 29, 2003, aggregate rental costs under all operating leases were approximately $269,000, $347,000, $435,000, $208,000 and $156,000, respectively. Future annual payments under non-cancellable operating equipment leases in the aggregate which include escalation clauses, with initial remaining terms of more than one year at May 31, 2003, are summarized as follows:


	(in thousands)
2004	$	46
2005		35
2006		9
2007		6

	$	96

Litigation Matters

The Company is presently involved in various claims, legal actions and complaints arising in the ordinary course of business. The Company believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

NOTE Q — EXPORT SALES AND OVERSEAS DISTRIBUTORS

The Company’s export sales were $2,814,000, $2,771,000, $2,656,000, $1,320,000 and $1,162,000 for 2001, 2002, 2003 and the twenty-six weeks ended November 30, 2002 and November 29, 2003, respectively.

The Company markets its products internationally through independent distributors. These international distributors may also distribute competitive products under certain circumstances. The international distributors also play an important role in the Company’s clinical testing outside of the United States.

F-25

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE R — EVENTS UNAUDITED SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

In October 2003, the Company’s Parent announced that it was considering a spin-off and initial public offering of the Company. The Parent signed a letter of engagement with an investment banking firm, regarding the possible spin-off and public offering of the Company, the initiation and timing of which will be subject to market and other conditions, including the receipt by the Parent of a favorable private letter ruling from the Internal Revenue Service. The Parent received the private letter ruling in February 2004.

In conjunction with the proposed initial public offering, the Company will reclassify and change the outstanding shares of Class A voting common stock and Class B non-voting common stock for 9,200,000 shares of common stock (at a ratio of 9,200 for 1), to be effected prior to the completion of this offering.

In connection with the proposed initial public offering, the Company and the Company’s Parent will enter into a master separation and distribution agreement, a corporate agreement, and tax allocation and indemnification agreement. Under the master separation and distribution agreement, the Company’s Parent will capitalize $13,148,000 of the notes payable to the Company’s Parent and the Company will repay the remaining balance of notes payable of $3,000,000 as of May 31, 2003 (see Note I) from the proceeds of the proposed initial public offering. Further, the Company and the Company’s Parent will provide indemnification to each other, as defined.

The proposed corporate agreement will provide the Company’s Parent with, among others, certain preemptive rights, registration rights and rights related to private sales of the Company’s common stock.

The proposed tax allocation and indemnification agreement will govern the respective rights, responsibilities and obligations of the Company’s Parent and the Company after the proposed initial public offering with respect to tax liabilities and benefits, currently included in the tax-sharing arrangement (see Note A-13).

2.	As of December 29, 2003, the Company entered into an amended and restated $3,000,000 line of credit with a bank expiring on November 30, 2004. The terms of the line of credit are the same as the line of credit that expired with the same bank on October 31, 2003 (see Note K).

The Company has been named as a defendant in an action entitled Duhon, et. al vs. Brezoria Kidney Center, Inc., filed in the District Court of Brezoria County, Texas, 239^th Judicial District on December 29, 2003. The complaint alleges that the Company and its co-defendants, E-Z-EM and Medical Components, Inc. (“Medcomp”), designed, manufactured, sold, distributed and marketed a defective catheter that was used in the treatment of, and caused the death of, a hemodialysis patient, as well as committing other negligent acts. The complaint seeks compensatory and other monetary damages in unspecified amounts. Under AngioDynamics’ distribution agreement with Medcomp, Medcomp is required to indemnify AngioDynamics against all its costs and expenses, as well as losses, liabilities and expenses (including reasonable attorneys’ fees) that relate in any way to products covered by the agreement. The Company has tendered the defense of the Duhon actions to Medcomp. Medcomp has accepted defense of the action.

F-26

ANGIODYNAMICS, INC. AND SUBSIDIARIES

(a wholly-owned subsidiary of E-Z-EM, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On January 6, 2004, Diomed filed an action against the Company entitled Diomed, Inc, v. AngioDynamics, Inc. in the U.S. District Court for the District of Massachusetts. Diomed’s complaint alleges that the Company has infringed on Diomed’s U.S. patent no. 6,398,777 by selling a kit for the treatment of varicose veins (the “elvs Procedures Kit”) and two diode laser systems; the Precision 980 Laser and the Precision 810 Laser, and by conducting a training program for physicians in the use of our elvs Procedure Kit. The complaint alleges that the Company’s actions have caused, and continue to cause, Diomed to suffer substantial damages. The complaint seeks to prohibit the Company from continuing to market and sell these products, as well as conducting training programs, and asks for compensatory and treble money damages, reasonable attorneys’ fees, costs and prejudgment interest. The Company believes, based on its analysis of Diomed’s patent and a written opinion of non-infringement from the Company’s patent counsel, that the product does not infringe the Diomed patent. The Company purchases the lasers and laser fibers for the laser systems from biolitec, Inc. under a supply and distribution agreement.

F-27

Through and including , 2004 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Shares

LOGO

Common Stock

PRICE $ PER SHARE

RBC CAPITAL MARKETS

ADAMS, HARKNESS & HILL

PROSPECTUS

, 2004

PART II

Information Not Required in Prospectus

Item 13. Other Expenses of Issuance and Distribution

The expenses to be paid by the Registrant in connection with the distribution of the securities being registered, other than underwriting discounts and commissions, are as follows:


	Amount
Securities and Exchange Commission Filing Fee	$	3,875
NASD Filing Fee		3,580
Nasdaq National Market Listing Fee		100,000
Accounting Fees and Expenses		*
Blue Sky Fees and Expenses		*
Legal Fees and Expenses		*
Transfer Agent and Registrar Fees and Expenses		*
Printing Expenses		*
Miscellaneous Expenses		*

Total	$

*	To be completed by amendment.

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to officers, directors and other corporate agents under certain circumstances and subject to certain limitations. The Registrant’s amended and restated certificate of incorporation and bylaws provide that the Registrant shall indemnify its directors, officers, employees and agents to the full extent permitted by Delaware General Corporation Law, including in circumstances in which indemnification is otherwise discretionary under Delaware law.

These indemnification provisions may be sufficiently broad to permit indemnification of the Registrant’s officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act.

The underwriting agreement, which is Exhibit 1.1 to this registration statement, provides for indemnification by the underwriters of the Registrant’s directors, certain of its officers, and persons who control the Registrant within the meaning of Section 15 of the Securities Act, for certain liabilities arising under the Securities Act or otherwise.

Item 15. Recent Sales of Unregistered Securities

In the three years preceding the filing of this registration statement, the Registrant issued the securities described below (adjusted to give effect to a reclassification and change of each outstanding share of the Registrant’s Class A common stock and Class B common stock into 9,200 shares of common stock) that were not registered under the Securities Act.

On June 2, 2001, the Registrant granted options to purchase an aggregate of 14,638 shares of common stock at an exercise price of $4.35 per share to directors under its 1997 Stock Option Plan.

On August 27, 2001, the Registrant granted options to purchase an aggregate of 29,261 shares of common stock at an exercise price of $4.35 per share to employees under its 1997 Stock Option Plan.

II-1

On May 21, 2002, the Registrant granted options to purchase an aggregate of 37,109 shares of common stock at an exercise price of $6.52 per share to non-employee directors under its 1997 Stock Option Plan.

On May 31, 2003, the Registrant granted options to purchase an aggregate of 31,360 shares of common stock at an exercise price of $6.52 per share to non-employee directors under its 1997 Stock Option Plan.

On August 31, 2003, the Registrant granted options to purchase an aggregate of 32,398 shares of common stock at an exercise price of $6.52 per share to employees under its 1997 Stock Option Plan.

The option grants described above were made in reliance upon the exemption from registration under the Securities Act provided by Rule 701 under the Act in that the transactions were effected under a written compensatory benefit plan relating to compensation as provided under the Rule.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

The exhibits are as set forth in the Exhibit Index.

(b) Financial Statement Schedules.

All schedules have been omitted because they are not required or are not applicable or the required information is shown in the financial statements or related notes.

Item 17. Undertakings

The Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Queensbury, State of New York on the 5^th day of March, 2004.


ANGIODYNAMICS, INC.

By:		/s/ EAMONN P. HOBBS

		Eamonn P. Hobbs President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eamonn P. Hobbs and Joseph G. Gerardi, and each of them individually, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ EAMONN P. HOBBS Eamonn P. Hobbs	President, Chief Executive Officer and Director (Principal Executive Officer)	March 5, 2004

/s/ JOSEPH G. GERARDI Joseph G. Gerardi	Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	March 5, 2004

/s/ HOWARD J. STERN Howard J. Stern	Director	March 5, 2004

/s/ JEFFREY GOLD Jeffrey Gold	Director	March 5, 2004

/s/ PAUL S. ECHENBERG Paul S. Echenberg	Director	March 5, 2004

/s/ DAVID P. MEYERS David P. Meyers	Director	March 5, 2004

II-3


Signature	Title	Date

/s/ HOWARD W. DONNELLY Howard W. Donnelly	Director	March 5, 2004

/s/ DENNIS S. METENY Dennis S. Meteny	Director	March 5, 2004

II-4

EXHIBIT INDEX


Exhibit Number		Document

1.1		Form of Underwriting Agreement*

3.1		Amended and Restated Certificate of Incorporation of the Registrant*

3.2		Amended and Restated Bylaws of the Registrant*

4.1		Form of Stockholder Rights Plan of the Registrant*

4.2		Form of specimen Stock Certificate of the Registrant*

5.1		Opinion of Davies Ward Phillips & Vineberg LLP*

10.1		Supply and Distribution Agreement dated April 1, 2002 between the Registrant and biolitec, Inc.**

10.2		The Registrant’s 1997 Stock Option Plan, as amended

10.3		Form of Master Separation and Distribution Agreement*

10.4		Form of Tax Allocation and Indemnification Agreement*

10.5		Form of Corporate Agreement*

10.6		Distribution Agreement dated March 31, 2002 between the Registrant and Medical Components Inc.**

10.7		Loan and Security Agreement dated August 28, 2002, between the Registrant and Keybank National Association

10.8		First Amendment to Loan and Security Agreement dated as of December 29, 2003, between the Registrant and Keybank National Association

10.9		Amended and Restated Promissory Note dated as of December 29, 2003, between the Registrant and Keybank National Association

10.10		Building Loan Agreement dated as of August 1, 2002, between the Registrant and Keybank National Association

10.11		Mortgage and Security Agreement dated as of August 1, 2002, among the Counties of Warren and Washington Industrial Development Agency, the Registrant and Keybank National Association

10.12		Trust Indenture dated as of August 1, 2002, between the Counties of Warren and Washington Industrial Development Agency and The Huntington National Bank

10.13		Remarketing Agreement dated as of August 1, 2002, among the Registrant, McDonald Investments Inc., as Remarketing Agent, and the Counties of Warren and Washington Industrial Development Agency

10.14		Counties of Warren and Washington Industrial Development Agency Muti-Mode Variable Rate Industrial Development Revenue Bond (AngioDynamics, Inc. Project-Letter of Credit Secured), Series 2002, having a Maturity Date of August 1, 2022

10.15		Installment Sale Agreement dated as of August 1, 2002, between the Counties of Warren and Washington Industrial Development Agency and the Registrant


Exhibit Number		Document

10.16		Reimbursement Agreement dated as of August 1, 2002, between the Registrant and Keybank National Association

10.17		First Amendment to Reimbursement Agreement dated as of December 29, 2003, between the Registrant and Keybank National Association

10.18		The Registrant’s 2004 Stock and Incentive Award Plan*

10.19		Agreement effective as of January 1, 2002 between E-Z-EM, Inc. and Howard Stern***

10.20		Agreement effective as of January 1, 2004 between the Registrant and Donald A. Meyer.

21.1		Subsidiaries of the Registrant

23.1		Consent of Davies Ward Phillips & Vineberg LLP*

23.2		Consent of Grant Thornton LLP

24.1		Power of Attorney (see Page II-4)

*	To be filed by amendment.

**	Subject to a request for confidential treatment.

***	Incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K of E-Z-EM, Inc. (Commission file no. 1-11479) for the fiscal year ended June 1, 2002 filed with the Commission on August 29, 2002.



                                                                    Exhibit 10.1

                                               Confidential Treatment Requested.
                                                   Confidential portions of this
                                                 document have been redacted and
                                             have been separately filed with the
                                                                     Commission.

                        SUPPLY AND DISTRIBUTION AGREEMENT

     THIS SUPPLY AND DISTRIBUTION AGREEMENT (this "Agreement") is made as of
April 1, 2002 (the "Effective Date") by and between AngioDynamics Inc., a
Delaware corporation ("AngioDynamics") and Biolitec, Inc., a New Jersey
corporation having offices at 515 Shaker Road, East Longmeadow, MA 01028
("BIOLITEC").

                                    RECITALS

     WHEREAS BIOLITEC is engaged in the development and manufacturing of the
Products;

     AND WHEREAS BIOLITEC and AngioDynamics desire that BIOLITEC grant to
AngioDynamics the right to market, sell, offer for sale and distribute the
Products on the terms and conditions set forth herein;

     AND WHEREAS BIOLITEC and AngioDynamics further desire to enter into such
other agreements as are contained herein;

     NOW THEREFORE, in consideration of the foregoing premises and the covenants
set forth below, the parties hereby agree as follows:

1.   DEFINITIONS. As used herein, the following terms shall have the following
meanings:

     1.1  "Adequate Supply" shall mean the supply of Products in ordered
          quantity that is delivered on a timely basis according to written
          purchase orders pursuant to Section 3.2(b) and that comply with the
          Manufacturing Requirements.

     1.2  "Affiliate" as applied to any Person, shall mean (a) any other Person
          directly or indirectly controlling, controlled by or under common
          control with, that Person, (b) any other Person that owns or controls
          (i) 5% or more of any class of equity securities of that Person or any
          of its Affiliates or (ii) 5% or more of any class of equity securities
          (including any equity securities issuable upon the exercise of any
          Option or convertible security) of that Person or any of its
          Affiliates, or (c) any director, partner, officer, agent, employee or
          relative of such Person. For the purposes of this definition,
          "control" (including with correlative meanings, the terms
          "controlling", "controlled by"; and "under common control with") as
          applied to any Person, means the possession, directly or indirectly,
          of the power to direct or cause the direction of the management and
          policies of that Person, whether through ownership of voting
          securities or by contract or otherwise.

     1.3  "Applicable Laws" shall mean all applicable laws, rules, regulations
          and guidelines within or without the Territory that may apply to the
          development, manufacturing, marketing and/or sale of the Products in
          the Territory or the performance of either party's obligations under
          this Agreement including laws,



                                      -2-

          regulations and guidelines governing the import, export, development,
          manufacturing, marketing, distribution and sale of the Products in the
          Territory, and including all Good Manufacturing Practices or Good
          Clinical Practices standards or guidelines promulgated by Competent
          Authorities and including the FD&C Act and trade association
          guidelines.

     1.4  "Competent Authorities" shall mean the entities in the Territory
          responsible for the regulation of medical devices intended for human
          use, and shall include the FDA.

     1.5  "Confidential Information" shall mean, subject to the exceptions set
          forth in Section 6.2, any information received by one party from the
          other party pursuant to this Agreement, including, without limitation,
          all know-how, data, process, technique, or formula relating to the
          Products and any research project, work in process, future
          development, scientific, engineering, manufacturing, marketing,
          business plan, financial or personnel matter relating to either party,
          its present or future products, sales, suppliers, customers,
          employees, investors or business, whether in oral, written, graphic or
          electronic form. It includes information exchanged under the Mutual
          Confidentiality Agreement, dated 15th of March, 2002.

     1.6  "Contract Year" shall mean the year long period commencing on the
          Effective Date and ending on the twelve month anniversary and each
          subsequent twelve (12) month period thereafter.

     1.7  "FDA" shall mean the United States Food and Drug Administration.

     1.8  "FD&C Act" shall mean the United States Federal Food, Drug and
          Cosmetic Act and applicable regulations promulgated thereunder, as
          amended from time to time.

     1.9  "Field" shall mean the Interventional Radiology and Vascular Surgery
          marketplace.

     1.10 "BIOLITEC" Technology" shall mean all know how, technology, patents,
          trade secrets, processes, data, methods and any physical, chemical or
          biological material or other information that BIOLITEC owns, controls
          or acquires or has or acquires a license to relating to the
          development, manufacturing, and use of Products.

     1.11 "Improvements" shall mean any improved or modified element or feature
          of BIOLITEC Technology for use in the Field made during the term of
          this Agreement which is applicable to a Product.

     1.12 "Licenses" shall mean the licenses granted to AngioDynamics pursuant
          to Section 2.1.



                                      -3-

     1.13 "Loss" shall mean any and all damages, fines, fees, penalties,
          deficiencies, liabilities, losses and expenses, including without
          limitation, interest, reasonable expenses of investigation, court
          costs, reasonable fees and expenses of attorneys, accountants and
          other experts or other expenses of litigation or other proceedings or
          of any claim, default or assessment (such fees and expenses to include
          without limitation, all fees and expenses, including, without
          limitation fees and expenses of attorneys, incurred in connection with
          (i) the investigation or defense of any third party claims or (ii)
          successfully asserting or disputing any rights under this Agreement
          against any party hereto or otherwise).

     1.14 "Manufacturing Requirements" shall mean the requirements set forth in
          Section 3.5(a).

     1.15 "Marketing Authorization" shall mean each necessary and appropriate
          approval, where applicable, to put Products on the market in a
          particular jurisdiction in the Territory, including any applicable
          approvals from Competent Authorities.

     1.16 "Minimum Purchase Default" shall mean, as to any Product, the failure
          of AngioDynamics in a Contract Year to purchase the Minimum Quantities
          of such Product, provided that it shall not be a Minimum Purchase
          Default if such failure to purchase is to any degree due to (a)
          BIOLITEC's breach of this Agreement, (b) the failure of BIOLITEC to
          timely deliver sufficient Products complying with the Manufacturing
          Requirements to AngioDynamics or (c) either the infringement of the
          BIOLITEC Technology by any person or entity or the infringement by the
          BIOLITEC Technology of the patent rights or other proprietary rights
          of any person or entity.

     1.17 "Minimum Quantities" shall mean for each Product, the minimum number
          of units of such Product required to be purchased in a Contract Year
          by AngioDynamics, as set forth on Schedule C.

     1.18 "Packaging Specifications" shall mean the bulk, non-sterile packaging
          specifications for the Products as may be determined by BIOLITEC and
          AngioDynamics from time to time, as such specifications may be amended
          from time to time by BIOLITEC and AngioDynamics.

     1.19 "Product Specifications" shall mean the specifications for the
          Products that are attached hereto as Schedule B, as such
          specifications may be amended from time to time by mutual agreement of
          the parties, including, without limitation, such amendments as may be
          necessary to obtain any Marketing Authorizations or other approvals
          within the Territory.

     1.20 "Products" means the diode lasers and laser fibers privately labeled
          for AngioDynamics as more fully described on Schedule A hereto and
          also includes Improvements.

     1.21 "Rights" mean the right to market, sell and/or distribute a product.



                                      -4-

     1.22 "United States" shall mean the United States of America and its
          territories and possessions.

     1.23 "Territory" shall mean the United States and Canada.

2.   GRANT OF RIGHTS

     2.1 Appointment.

     (a) Products. Subject to Section 2.1 (f), BIOLITEC hereby appoints
AngioDynamics as its exclusive (even as to BIOLITEC) distributor to market,
sell, offer for sale and distribute the Products in the Territory for the Field.
Outside the United States AngioDynamics shall have the right to sub-license the
rights granted in this Section 2.1 to (a) one or more of its Affiliates and (b)
one or more distributors, sub-distributors or dealers, provided that
AngioDynamics shall have the right to sell Products through (a) one or more of
its Affiliates and (b) one or more distributors, subdistributors or dealers
without in any such case sub-licensing the rights granted in this Section 2.1.

     (b) BIOLITEC Obligations. BIOLITEC shall not directly or indirectly,
market, promote, sell or distribute any of the Products to any third party
directly or indirectly in the Field in the Territory other than AngioDynamics.
BIOLITEC shall take all appropriate actions to prevent any distributors,
sub-distributors or dealers of the Products from marketing, selling, offering
for sale or distributing the Products in or to the Field in the Territory.
BIOLITEC shall refer all inquires from the in the Territory concerning Products
to AngioDynamics. BIOLITEC shall not discontinue the manufacturing of any
Product without the prior written consent of AngioDynamics.

     (c) ANGIODYNAMICS Obligations. ANGIODYNAMICS shall actively market the sale
of the Products with a marketing plan commensurate with the Sales Forecast for
each Contract Year. ANGIODYNAMICS shall keep BIOLITEC apprised of these
marketing plans as they become actionable.

     (d) Cooperation Concerning Improvements. BIOLITEC agrees to keep
AngioDynamics fully informed of Improvements that it develops as it pertains to
the Product.

 (e) Right of First Refusal for Improvements. Provided the appointment as
set forth in Section 2.1 (a) remains exclusive, in the event BIOLITEC develops
any Improvements which can be used for the Products, it shall provide
AngioDynamics with written notice regarding such Improvement. If AngioDynamics
desires to market and sell such Improvements, the parties shall negotiate in
good faith the price for such Improvements. If,



                                      -5-

after six (6) months of negotiations, the parties are unable to reach an
agreement on the price, BIOLITEC shall be entitled to offer such Improvements to
any third party, but only on such terms and conditions as were offered to
AngioDynamics. If BIOLITEC offers better terms and conditions for such
Improvements to a third party, then AngioDynamics shall have a right of first
refusal on such better terms and conditions.

     (f) Loss of Exclusivity. If there is a Minimum Purchase Default as to any
Product, the exclusive licenses in Section 2.1 (a) shall thereafter be
nonexclusive. The loss of exclusivity provided for (i)in this Section 2.1 (d)
shall be the sole and exclusive remedy for a Minimum Purchase Default.

3.   MANUFACTURE AND SUPPLY OF PRODUCTS

     3.1  (a) Manufacturing. BIOLITEC shall be the exclusive manufacturer of the
          Products sold by AngioDynamics; provided, however, that if a problem
          arises with regard to Adequate Supply, then AngioDynamics shall give
          BIOLITEC written notice and thirty (30) days to cure any failure to
          provide Adequate Supply. If BIOLITEC does not cure such failure within
          such thirty (30) day period, AngioDynamics may, with notice to
          BIOLITEC, who may join in the process, take whatever steps are
          necessary, including directly contacting suppliers, to obtain the
          Products and in such event BIOLITEC shall grant a license to
          AngioDynamics or to a new supplier selected by AngioDynamics on market
          standard terms and conditions to use the BIOLITEC Technology to
          manufacture Products and shall cooperate with AngioDynamics and/or
          such new supplier to transfer manufacturing of the Products. If the
          parties are unable to agree on the terms and conditions of such
          license, the license terms and conditions shall be determined by a
          panel of arbitrators experienced in licensing matters chosen in
          accordance and acting in accordance with the Commercial Arbitration
          Rules (Expedited Procedures) of the American Arbitration Association,
          who shall specifically take into account the fact that the license is
          being granted due to BIOLITEC's inability to fulfill its obligations
          under this Agreement. In no event shall BIOLITEC subcontract its
          manufacturing obligations under this Agreement without the prior
          written consent of AngioDynamics. BIOLITEC shall only be entitled to
          two thirty (30) day cure periods pursuant to this Section 3.1 in any
          twelve month period.

     3.2  Supply Forecasts and Ordering Procedures.

     (a)  AngioDynamics shall furnish the following reports to BIOLITEC:

               (i)  non-binding annual sales forecast reports, by Product by
                    month, not later than thirty (30) days prior to the
                    beginning of each Contract Year, with the sales forecast
                    report for the Contract Years being attached hereto as
                    Schedule D; and



                                      -6-

               (ii) non-binding quarterly sales forecast deviation reports on a
                    rolling four-quarter basis for each quarter of each Contract
                    Year.

     (b)  AngioDynamics shall submit firm orders for Products at least one
hundred eighty (180) days prior to the requested delivery date. Orders may be
submitted by fax, e-mail or US mail. BIOLITEC shall confirm each order within
ten (10) days after receipt. Confirmation shall be by mail.

     3.3  Delivery. All Products shall be shipped F.O.B. (Incoterms 2000) point
          of departure from BIOLITEC's facility in East Longmeadow, MA to such
          locations and in such manner as directed by AngioDynamics from time to
          time.

     3.4  Price and Payment Terms. The price for Products shall be as set forth
          on Schedule E. AngioDynamics shall have payment terms of 45 days after
          Invoice Date during the first six months of this agreement and thirty
          (30) days after Invoice Date thereafter. The invoice date shall in no
          event be earlier than the date of shipment. All payments to BIOLITEC
          shall be made by check and shall be made in U.S. Dollars. The price
          for Improvements shall be negotiated by the parties in good faith.

     (a)  BIOLITEC intends to maintain the pricing to AngioDynamics of PRODUCTS
as given in Exhibit E, but reserves the right to increase prices in light of
extraordinary, unusual increases to its manufacturing costs: In the event of any
price change BIOLITEC agrees to notify AngioDynamics, in writing, at least sixty
(60) days prior to the effective date of the increase. BIOLITEC agrees to honor
any orders it has accepted during the sixty day notice period.

     3.5  Quality Control and Assurance.

     (a)  BIOLITEC shall manufacture and supply the Products in an ISO certified
facility in accordance with (i) the Product Specifications, (ii) the Packaging
Specifications, (iii) current good manufacturing practices specified by any
applicable Competent Authority (collectively, "cGMPs") and (iv) all other
Applicable Laws. Furthermore, BIOLITEC warrants that all Products provided
hereunder shall be free from defect in material and workmanship at the time of
shipment to AngioDynamics.

     (b)  BIOLITEC shall be responsible for quality control of the Products and
shall perform such quality control and quality assurance testing as is necessary
or appropriate to ensure that the Products comply with the Manufacturing
Requirements.

     (c)  Each time BIOLITEC ships Products to AngioDynamics, it shall provide
AngioDynamics with a certificate of compliance that sets out the test results
for each lot of Products, and that certifies that the Products shipped to
AngioDynamics have been evaluated by BIOLITEC's Quality



                                       -7-

Control/Quality Assurance department and that the Products comply with the
Manufacturing Requirements.

     (d) BIOLITEC shall permit AngioDynamics or its designated representative to
perform such audits and inspections as may be requested by AngioDynamics of the
facilities, procedures and records that are relevant to BIOLITEC's manufacturing
of Products, and to the extent reasonably obtainable by BIOLITEC, of facilities,
procedures and records that are relevant to such audits or inspections of
unaffiliated parties with responsibility for testing, analyzing, labeling or
packaging the Product.

     (e) BIOLITEC shall notify AngioDynamics of any proposed changes in critical
materials or processes which affect the form, fit or function of Products at
least ninety (90) days prior to such actions and shall not make any such change
without the prior written consent of AngioDynamics, which consent shall not be
unreasonably withheld, conditioned or delayed.

     (f) BIOLITEC shall promptly inform AngioDynamics of the results of all
visits and inspections, relating to the Product, by Competent Authorities,
including, without limitation, providing AngioDynamics with copies of all
warning letters, 483s and other correspondence with the Competent Authority.

     (g) In the event of any customer complaints regarding the Product, BIOLITEC
agrees to cooperate and assist AngioDynamics in investigating such complaints
and providing an appropriate response.

     3.6 Packaging and Trademarks.

     (a) Packaging of the Products shall comply with the Packaging
Specifications.

     (b) AngioDynamics shall be responsible for final packaging, instructions
for use and labeling of the Products.

     (c) BioLitec hereby grants an exclusive, royalty free license to
AngioDynamics to use the "ELVeS" trademark connection with the promotion,
marketing, and sale of the Products. AngioDynamics may use any other trademark
or trade dress as it deems appropriate in the promotion, marketing and sale of
the Products. BIOLITEC shall the right to preview and comment on items
containing its trademarks.

4.   SERVICE AND PRODUCT WARRANTY

     4.1 At the request of AngioDynamics, BIOLITEC will provide repair service
         on the Ceralas D lasers and bill AngioDynamics based on an agreed upon
         hourly rate per unit plus materials. AngioDynamics will administer the
         service (take service



                                      -8-

         calls, document calls and/or contacts, sell extended factory
         warranties) for the Territory.

     4.2 BIOLITEC will provide a product warranty from one year from the date of
         installation, except for promotional lasers, with AngioDynamics
         administering the warranty cards, namely having them completed,
         collected and sent to BIOLITEC, within ten (10) days of installation.

5.   MARKETING AUTHORIZATIONS; OTHER REGULATORY COMPLIANCE ISSUES

     5.1 Marketing Authorizations. BIOLITEC shall be responsible for applying
         for such Marketing Authorizations as may be necessary to market the
         Products in the Territory and in the Field. (including a 510K clearance
         to market the Products in the United States); provided, however, that
         AngioDynamics shall be free to apply for any such additional Marketing
         Authorization as it deems necessary in its sole judgment. AngioDynamics
         shall own all such additional Marketing Authorizations and agrees, for
         the term of this Agreement, to grant BIOLITEC the right to sell product
         under such additional Marketing Authorizations except in or to the
         Field, provided, however, that in the event BIOLITEC desires to sell
         product under such additional Marketing Authorizations, BIOLITEC agrees
         that AngioDynamics shall be its exclusive supplier for any finished
         kits containing the BIOLITEC optical fiber, provided that such kits are
         transferred at a reasonable price to BIOLITEC. BIOLITEC shall provide
         such assistance as may be requested by AngioDynamics in connection with
         obtaining such additional Marketing Authorizations, including, without
         limitation, providing (i) ordered Product for testing and (ii)
         requested documents and data for submission to the Competent
         Authorities. AngioDynamics shall be responsible for any sterility and
         biocompatibility testing of the Products as may be necessary in order
         to obtain such additional Marketing Authorizations.

     5.2 Compliance. AngioDynamics and BIOLITEC shall comply with all Applicable
         Laws including the provision of information by AngioDynamics and
         BIOLITEC to each other necessary for BIOLITEC and AngioDynamics to
         comply with Applicable Laws (including reporting requirements). Each
         party shall retain all records concerning the Products as may be
         required under Applicable Laws.

     5.3 Adverse Reaction Reporting. Each party shall advise the other party, by
         telephone or facsimile, within such time as is required to comply with
         Applicable Laws, after it becomes aware of any adverse reaction
         involving the Products. Such advising party shall provide the other
         party with a written report delivered by confirmed facsimile of any
         adverse reaction, stating the full facts known to it, including but not
         limited to customer name, address, telephone number, batch, lot and
         serial numbers, as required by Applicable Laws. To the extent permitted
         by Applicable Laws, AngioDynamics shall have full responsibility for
         monitoring such adverse reactions and making any reports to the
         Competent Authorities.



                                       -9-

     5.4 Product Recall. AngioDynamics and BIOLITEC each shall notify the other
         promptly if any Product is the subject of a recall, market withdrawal
         or correction, and the parties shall cooperate in the handling and
         disposition of such recall, market withdrawal or correction. BIOLITEC
         shall bear the cost of all recalls, market withdrawals or corrections
         of the Products; provided, however, that AngioDynamics shall pay for
         such recall, market withdrawal or correction if and to the extent
         caused by (i) the unlawful sale, promotion or distribution of the
         Products by AngioDynamics in the Territory, (ii) any unauthorized
         modification or alteration made by AngioDynamics to the Products, (iii)
         the improper sterilization or labeling of the Products, (iv) a breach
         of any representation made or warranty given in this Agreement by
         AngioDynamics, (v) mishandling of fibers during unpacking and
         repackaging of bulk fibers delivered to AngioDynamics for the purpose
         of putting into their kits, or (vi) the design of a product solely by
         AngioDynamics. AngioDynamics shall in all events be responsible for
         conducting any recalls, market withdrawals or corrections with respect
         to the Products.

6.   CONFIDENTIALITY

     6.1 Nondisclosure Obligations. During the term of this Agreement, and for a
         period of 5 years after termination hereof, each party will maintain
         all Confidential Information in trust and confidence and will not
         disclose any Confidential Information to any third party or use any
         Confidential Information for any unauthorized purpose. Each party may
         use such Confidential Information only to the extent required to
         accomplish the purposes of this Agreement. Confidential Information
         shall not be used for any purpose or in any manner that would
         constitute a violation of Applicable Laws. Confidential Information
         shall not be reproduced in any form except as required to accomplish
         the intent of this Agreement. Each party will use at least the same
         standard of care as it uses to protect proprietary or confidential
         information of its own. Each party will promptly notify the other upon
         discovery of any unauthorized use or disclosure of the Confidential
         Information.

     6.2 Exceptions. Confidential Information shall not include any information
         that:

     (a) is now, or hereafter becomes, through no act or failure to act on the
part of the receiving party, generally known or available;

     (b) is known by the receiving party at the time of receiving such
information, as evidenced by its written records;

     (c) is hereafter furnished to the receiving party by a third party, as a
matter of right and without restriction on disclosure;

     (d) is independently developed by the receiving party without any breach of
Section 6.1; .



                                      -10-

     (e) is the subject of a written permission to disclose provided by the
disclosing party; or

         The parties agree that the material financial terms of this Agreement
         will be considered Confidential Information of both parties. However,
         each party shall have the right to disclose the material financial
         terms of this Agreement to any potential acquirer, merger partner, or
         other bona fide potential financial partner, subject to a requirement
         to secure confidential treatment of such information or if it is
         prudent or proper to make such disclosure to comply with Applicable
         Laws or to meet Generally Accepted Accounting Principles.

     6.3 Authorized Disclosure. Notwithstanding any other provision of this
         Agreement, each party may disclose Confidential Information if such
         disclosure:

     (a) is in response to a valid order of a court or other governmental body
of any jurisdiction in the Territory or of any political subdivision thereof;
provided, however, that the responding party shall first have given notice to
the other party hereto and shall have made a reasonable effort to obtain a
protective or other appropriate form of order requiring that the Confidential
Information so disclosed be used only for the purposes for which the order was
issued;

     (b) is otherwise required by Applicable Laws; or

     (c) is otherwise necessary to file or prosecute patent applications,
prosecute or defend litigation or comply with Applicable Laws or otherwise
establish rights or enforce obligations under this Agreement, but only to the
extent that any such disclosure is necessary.

7.   INTELLECTUAL PROPERTY

     7.1 Ownership of Intellectual Property. BIOLITEC shall retain all of its
         rights, title and interest in and to all BIOLITEC Technology.

     7.2 Infringement of Third Party Patents and Rights. BIOLITEC represents
         that to the best of BIOLITEC's knowledge, the manufacture, marketing,
         sale, distribution and use of the Products does not and will not
         infringe any United States or foreign patent or other proprietary
         rights held by any third party. If a third party asserts that a patent
         or other proprietary right owned by it is infringed by the manufacture,
         marketing, sale, distribution or use of a Product, the party against
         whom such a claim was asserted shall provide the other party with
         notice of such claim within fifteen (15) days. BIOLITEC agrees to
         undertake the sole and complete defense, at its sole cost and expense,
         of any such claim -through counsel of its choice and control the
         settlement of any such claim. In case of any such claims, BIOLITEC
         shall promptly, at its sole discretion and own cost, either (i) procure
         for AngioDynamics the right to continue distributing and using such
         Product, or (ii) replace the same with a comparable non-infringing non-



                                      -11-

         violating Product, or modify the Product so that it becomes
         non-infringing and non-violating. If BIOLITEC fails to take such
         action, AngioDynamics shall be entitled to do so and BIOLITEC shall
         promptly reimburse AngioDynamics for pre-agreed upon expenses it
         incurs, including without limitation reasonable attorneys' fees and
         expenses.

8.   TERM AND TERMINATION OF AGREEMENT; RENEWAL RIGHTS

     8.1 Term. This Agreement shall commence on the Effective Date, and issuance
         of the Initial Purchase Order, as described in Exhibit C, and terminate
         on the fifth (5) anniversary thereafter, unless terminated sooner as
         provided in Section 8.

     8.2 Termination For Material Breach. If either party is in material breach
         of any obligation hereunder, the party contending there is a breach
         (the charging party) may give written notice to the accused party of
         the nature of the breach and shall provide thirty (30) days after the
         giving of such notice for the breach to be cured to the reasonable
         satisfaction of the charging party. If such breach is not cured to the
         reasonable satisfaction of the charging party, the charging party by
         notice to the accused party shall have the right to immediately
         terminate this Agreement.

     8.3 Termination for Insolvency. If either party (1) is dissolved (other
         than pursuant to a consolidation, amalgamation or merger); (2) becomes
         insolvent or is unable to pay its debts or fails or admits in writing
         its inability generally to pay its debts as they become due; (3) makes
         a general assignment, arrangement or composition with or for the
         benefit of its creditors; (4) institutes or has instituted against it a
         proceeding seeking a judgment of insolvency or bankruptcy or any other
         relief under any bankruptcy or insolvency law or other similar law
         affecting creditors' rights, or a petition is presented for its.
         winding-up or liquidation, and, in the case of any such proceeding or
         petition instituted or presented against it, such proceeding or
         petition (A) results in a judgment of insolvency or bankruptcy or the
         entry of an order for relief or the making of an order for its
         winding-up or liquidation or (B) is not dismissed, discharged, stayed
         or restrained in each case within 30 days of the institution or
         presentation thereof; (5) has a resolution passed for its winding-up,
         official management or liquidation (other than pursuant to a
         consolidation, amalgamation or merger); (6) seeks or becomes subject to
         the appointment of an administrator, provisional liquidator,
         conservator, receiver, trustee, custodian or other similar official for
         it or for all or substantially all of its assets or has a distress,
         execution, attachment, sequestration, or other legal process levied,
         enforced or sued on or against all or substantially all of its assets
         and such secured party maintains possession, or any such process is not
         dismissed, discharged, stayed or restrained, in each case within 30
         days thereafter; (8)causes or is subject to any event with respect to
         it which, under the applicable laws of any jurisdiction, has an
         analogous effect to any of the events specified in clauses (1) to (7)
         (inclusive); or (9) takes any action in furtherance of, or indicating
         its consent to, approval of, or acquiescence in, any



                                      -12-

         of the foregoing acts, than the other party shall have the right to
         immediately terminate this Agreement without giving prior notice or any
         right to cure.

     8.4 Accrued Rights. Termination or expiration of this Agreement shall not
         affect any accrued rights of either party.

     8.5 Effect Of Termination. Upon termination of this Agreement for any
         reason, other than for lack of payment of ordered and received Product,
         AngioDynamics shall be permitted to sell off existing inventory for one
         (1) year following the termination date, provided, however that
         BIOLITEC shall be given a right of first refusal to purchase the
         existing inventory on the same terms and conditions as to any third
         party bona fide purchaser. AngioDynamics shall in any event be entitled
         to continue to provide consumables to its customers of record for the
         lasers. In the event of a termination due to a material breach by
         AngioDynamics, AngioDynamics agrees not to sell lasers or fibers other
         than the existing inventory sell off for a period of one (1) year
         following said existing inventory sell off. In no event shall this
         period extend beyond two (2) years following the date of termination.

     8.6 Surviving Obligations; Termination or expiration of this Agreement
         shall not relieve either party of its obligations under Sections 6,7,8
         and 9.

     8.7 Renewal Option. This Agreement may be renewed for additional five (5)
         year terms by the mutual written consent of the parties.

     8.8 Remedies Not Exclusive. Except in the event of a Minimum Purchase
         Default, rights and remedies set forth herein shall not be exclusive
         and shall be in addition to any and all rights and remedies available
         to either party upon termination of this Agreement.

9.   INDEMNIFICATION AND INSURANCE

     9.1 Indemnification by BIOLITEC. BIOLITEC agrees to indemnify and hold
         AngioDynamics harmless from and against any and all Loss that
         AngioDynamics may incur to the extent that such Loss arises out of or
         results from (i) a breach of any representation or warranty or
         agreement given in this Agreement by BIOLITEC, or (ii) the injury,
         illness or death of any person which arises out of or relates to the
         manufacture or the design of Products.

     9.2 Indemnification by AngioDynamics. AngioDynamics agrees to indemnify and
         hold BIOLITEC harmless from and against any and all Loss that BIOLITEC
         may incur to the extent that such Loss arises out of or results from
         (i) the unlawful sale, promotion and distribution of the Products by
         AngioDynamics in the Territory, (ii) any unauthorized modification or
         alteration made by AngioDynamics to the Products, (iii) the improper
         sterilization or labeling of the Products, (iv) a breach of any
         representation made or warranty given in this Agreement by
         AngioDynamics, (v) mishandling of fibers during unpacking and
         repackaging of bulk fibers



                                      -13-

              delivered to AngioDynamics for the purpose of putting into their
              kits, or (vi) the design of a product solely by AngioDynamics.

       9.3    Indemnification Procedure. The party seeking indemnification (the
              "Indemnified Party") shall (i) give the other party (the
              "Indemnifying Party") notice of the relevant claim, (ii) cooperate
              with the Indemnifying Party, at the Indemnifying Party's expense,
              in the defense of such claim, and (iii) give the Indemnifying
              Party the right to control the defense and settlement of any such
              claim, provided however that the Indemnifying Party shall not
              enter into any settlement that affects the Indemnified Party's
              rights or interests without the Indemnified Party's prior written
              approval, such approval not to be unreasonably withheld,
              conditioned or delayed.

       9.4    Insurance. Each party shall carry comprehensive general liability
              insurance of a type as may be necessary to protect their interests
              and fulfill their obligations under this Agreement in an amount of
              at least three million dollars (US $3,000,000) per occurrence
              during the term of this Agreement and for a period of three (3)
              years after the expiration or termination of this Agreement. Upon
              request, each party shall provide the other party with a
              certificate of insurance evidencing the minimum coverage required
              by this Section 9.4. For greater certainty, this Section 8.4 shall
              not limit the liability of either party pursuant to this
              Agreement.

10.    REPRESENTATIONS AND WARRANTIES

       10.1   Representation and Warranties of BIOLITEC. BIOLITEC hereby
              represents and warrants as follows:

       (a) Corporate Power. BIOLITEC is duly organized and validly existing
under the laws of the State of New Jersey and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.

       (b) Due Authorization. BIOLITEC is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder.

       (c) Binding Agreement, No Conflict. This Agreement is a legal and valid
obligation binding upon BIOLITEC and is enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by BIOLITEC
does not conflict with, violate or give any person or entity rights under, any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it or its assets may be bound or affected, nor does it violate any
Applicable Laws.

       10.2   Representations and Warranties of AngioDynamics. AngioDynamics
              hereby represents and warrants as follows:



                                      -14-

       (a) Corporate Power. AngioDynamics is duly organized and validly existing
under the laws of Delaware and has full corporate power and authority under
Applicable Laws to enter into this Agreement and to carry out the provisions
hereof.

       (b) Due Authorization. AngioDynamics is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.

       (c) Binding Agreement, No Conflict. This Agreement is a legal and valid
obligation binding upon AngioDynamics and is enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by
AngioDynamics does not conflict with, violate or give any person or entity
rights under, any agreement, instrument or understanding, oral or written, to
which it is a party or by which it or its assets may be bound or affected, nor
does it violate any Applicable Laws.

11.    ASSIGNMENT

       11.1   Non-Assignment. Except as set forth in Section 11.2, neither party
              shall assign its rights or delegate its duties under this
              Agreement without the prior written consent of the other party.

       11.2   Exception. Notwithstanding Section 11.1, each party may assign
              this Agreement to any successor by merger or sale of substantially
              all of its assets.

       11.3   Assignment or Delegation Null and Void. Any attempted assignment
              or delegation in contravention of this Article shall be void and
              of no effect.

       11.4   Benefits and Binding Nature of Agreement. In the case of any
              permitted assignment of this Agreement, this Agreement or the
              relevant provisions shall be binding upon, and inure to the
              benefit of, the successors, executors, heirs, representatives,
              administrators and assigns of the parties hereto.

12.    MISCELLANEOUS

       12.1   Entire Agreement and Amendments. This Agreement, together with any
              exhibits and schedules attached and referenced herein, embodies
              the final, complete and exclusive understanding between the
              parties, and replaces all previous agreements, understandings or
              arrangements between the parties with respect to its subject
              matter. No modification or waiver of any terms or conditions
              hereof, nor any representations or warranties shall be of any
              force or effect unless such modification or waiver is in writing
              and signed by an authorized officer of each party hereto.



                                      -15-

12.2   Press Release. All press releases concerning the relationship between
       AngioDynamics and BIOLITEC are subject to the approval of both parties,
       not to be unreasonably withheld, provided that neither party is precluded
       by this Section 12.2 from taking any action to comply with Applicable
       Laws.

12.3   Notice. All notices concerning this Agreement shall be in writing and
       shall be deemed to have been received (a) two (2) days after being
       properly sent by commercial overnight courier, or (b) one (1) day after
       being transmitted by confirmed facsimile, in each case addressed to the
       address below:

       If to BIOLITEC:

               515 Shaker Road
               East Longmeadow, MA 01028

               Attention: Kelly Moran, COO

               Telephone: (413) 525-0600
               Facsimile: (413) 525-0611

       If To AngioDynamics:

               603 Queensbury Avenue
               Queensbury, New York 12804

               Attention: Eamonn Hobbs, President and CEO

               Telephone: (518) 798-1215
               Facsimile: (518) 798-3625

12.4   Waiver. Any waiver (express or implied) by either party of any default or
       breach of this Agreement shall not constitute a waiver of any other or
       subsequent default or breach.

12.5   Severability. In the event that any provision of this Agreement shall be
       unenforceable or invalid under any Applicable Laws or be so held by
       applicable court decision, such enforceability or invalidity shall not
       render this Agreement unenforceable or invalid as a whole, and, in such
       event, such provision shall be changed and interpreted so as to best
       accomplish the objectives of such unenforceable or invalid provision
       within the limits of Applicable Laws or applicable court decisions.

12.6   Rights and Remedies Cumulative. Except as expressly provided herein, the
       rights and remedies provided in this Agreement shall be cumulative and
       not exclusive of any other rights and remedies provided by law or
       otherwise.



                                      -16-

       12.7   Independent Contractors. Each party shall act as an independent
              contractor under the terms of this Agreement. Neither party is,
              nor shall it be deemed to be, an employee, agent, co-venturer,
              partner or legal representative of the other for any purpose.
              Neither party shall be entitled to enter into any contracts in the
              name of, or on behalf of the other, nor shall either party be
              entitled to pledge the credit of the other in any way or hold
              itself out as having authority to do so.

       12.8   Captions and Section References. The section headings appearing in
              this Agreement are inserted only as a matter of convenience and in
              no way define, limit, construe or describe the scope or extent of
              such section or in any way affect such section.

       12.9   Counterparts. This Agreement may be executed in counterparts with
              the same force and effect as if each of the signatories had
              executed the same instrument.

       IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by their duly authorized representatives as of the date
first written above.

                                         BIOLITEC, Inc.

                                         By: /s/ [Illegible]
                                             ------------------------------
                                         Title: COO
                                                ---------------------------
                                         AngioDynamics Inc.

                                         By:  /s/ Eamonn P. Hobbs
                                             ------------------------------
                                         Title: President & CEO
                                                ---------------------------



                                      -17-

                   Supply and Distribution Agreement Schedules

Schedule A: Products

Schedule B: Product Specifications

Schedule C: Minimum Quantities (units)

Schedule D: Sales Forecast

Schedule E: Product Pricing



                                      -18-

                              Schedule A: Products

1. Ceralas(R) D15 980 nm laser

2. Ceralas(R) D 810 nm laser

3. 600 micron optical fiber for laser transmission



                                      -19-


                       Schedule B: Product Specifications

                     Product 1: Ceralas(R) D15 980 nm laser

PRODUCT DEFINITION

Laser Type                      Integrated GaAIAs Semiconductor laser arrays

Wavelength                      980nm

Output Power                    15 Watts (must be minimum of 15 W)

Power Range                     1-15W

Increments                      1W

Operating modes                 Continuous, Pulsed

Pulse Duration ON/OFF           0.01 to 99.9 seconds

Aiming Beam                     635nm; 4mW

Cooling                         Air cooled

Weight                          15 lbs (9kg)

Dimensions                      14" x 9" x 7"

Power Requirements              110/220v



                                      -20-

PRODUCT 1 DRAWING



                                    [DRAWING]



                                      -21-


                      Product 2: Ceralas(R) D 810 nm laser

PRODUCT DEFINITION

Laser Type                      Integrated GaAIAs Semiconductor laser arrays

Wavelength                      810nm

Output Power                    15 Watts (must be minimum of 15 W)

Power Range                     1-15W

Increments                      1W

Operating modes                 Continuous, Pulsed

Pulse Duration ON/OFF           0.01 to 99.9 seconds

Aiming Beam                     635nm; 4mW

Cooling                         Air cooled

Weight                          15 lbs (9kg)

Dimensions                      14" x 9" x 7"

Power Requirements              110/220v



                                      -22-


PRODUCT 2 DRAWING



                                    [DRAWING]



                                      -23-

                            Product 3: Optical Fiber

PRODUCT DEFINITION

Fiber Type                                Fused Silica Optical Fiber

Core Diameter                             600um

Tip Design                                Bare fiber with polished open tip

Fiber Proximal Connector to laser         Standard SMA connector



                                      -24-

PRODUCT 3 DRAWING

                                    [DRAWING]



                                      -25-

                     Schedule C: Minimum Quantities (Units)

Contract Year minimums are as follows:

Minimums- IR and VS combined

                                                                        
Optical Fiber     Contract Year    Contract Year    Contract Year     Contract Year    Contract Year
                        1                2                3                 4                5

Minimums          *** units        *** units        *** units         *** units        *** units

Ceralas@ Laser     Contract Year    Contract Year    Contract Year     Contract Year    Contract Year
                        1                2                3                 4                5

Minimums              *** Units        *** Units        *** Units         *** Units        *** Units



Upon signing of this Agreement an Initial Purchase order shall be placed for
sixteen (16) lasers and two thousand twelve (2012) disposable fiber packages of
which ten (10) lasers are for promotional use and six (6) are against the
contract Year 1 Minimum Quantity. Of the 2012 disposable fiber packages, six
hundred (600) disposable fiber packages will be delivered within six (6) weeks,
seven hundred six (706) will be delivered on July 1, 2002, and seven hundred six
(706) will be delivered on October 1, 2002 as required to warrant private
labelled fiber packages.

________________
*** Confidential material redacted and filed separately with the Commission.



                                      -26-

                           Schedule D: Sales Forecasts

Contract Year Sales Forecasts are as follows:

Sales Forecast - IR and VS combined

                                                                                 
Optical Fiber      Contract Year      Contract Year      Contract Year       Contract Year      Contract Year
                         1                 2                 3                   4                  5

Forecast           *** Units          *** Units          *** Units           *** Units          *** Units

Ceralas(R)Laser     Contract Year      Contract Year      Contract Year       Contract Year      Contract Year
                         1                 2                 3                   4                  5

Forecast ***           *** Units          *** Units          *** Units           *** Units          *** Units



______________
*** Confidential material redacted and filed separately with the Commission.



                                      -27-

                           Schedule E: Product Pricing

F.O.B. East Longmeadow, MA

The pricing will be as follows:

     (a) Pricing for the Ceralas D15 980 nm laser or Ceralas D15 810 nm laser
for the initial 30 units will be $*** each. This reflects a reduction in price
to-cover the 10 promotional lasers purchased within this initial group.

     (b) After the initial 30 units are purchased, pricing for the Ceralas D 980
nm laser or Ceralas D 810 nm laser will be based on quantity tiered levels for a
given order:

                 1 - 50 units                             $ ***

                 51 - 99 units                            $ ***

                 100 - 199 units                          $ ***

                 200 + units                              $ ***

     (c) Pricing for the laser fibers: $*** each.

     (d) Pricing for sterilized laser fibers: $*** each. This requires purchase
and delivery of the minimum *** fibers before December 30, 2002. AngioDynamics
to provide labeling for the sterilized packaging.

_______________
*** Confidential material redacted and filed separately with the Commission.



                                                                    EXHIBIT 10.2

                      As amended by the Board and Shareholders February 27, 2004

                               ANGIODYNAMICS INC.
                               ------------------

                             1997 STOCK OPTION PLAN
                             ----------------------

1.   PURPOSE OF PLAN
     ---------------

The purpose of this 1997 Stock Option Plan (the "Plan") is to assist
AngioDynamics Inc. (the "Company") and its subsidiaries in the continued
employment of key employees, consultants and directors by offering them a
greater stake in the Company's success and a closer identity with it, and to aid
in gaining the services of individuals who would be helpful to the Company and
would contribute to its success.

2.   DEFINITIONS
     -----------

     (a) "Board" means the board of directors of the Company.

     (b) "Code" means the Internal Revenue Code of 1986, as amended.

     (c) "Committee" means the committee described in Paragraph 5.

     (d) "Date of Grant" means the date on which an Option is granted.

     (e) "Exercise Price" means the price per Share that an Optionee must pay in
order to exercise an Option.

     (f) "Incentive Stock Option" shall mean an Option granted under the Plan,
designated at the time of such grant as an Incentive Stock Option (and
qualifying as such under Section 422 of the Code) and containing the terms
specified herein for Incentive Stock Options.

     (g) "Non-Qualified Option" shall mean an Option granted under the Plan, As
amended by the Board and Shareholders February 27, 2004 designated at the time
of such grant as a Non-Qualified Option and containing the terms



                      As amended by the Board and Shareholders February 27, 2004

specified herein for Non-Qualified Options.

     (h) "Option" means any stock Option granted under the Plan and described
either in Paragraph 3(a) or 3(b).

     (i) "Option Agreement" shall have the meaning set forth in Paragraph 7.

     (j) "Optionee" means a person to whom an Option has been granted under the
Plan, which Option has not been exercised and has not expired or terminated.

     (k) "Shares" means shares of Class B Non-Voting Common Stock of the
Company.

     (l) "Ten Percent Shareholder" means a person who on the Date of the Grant
owns, either directly or within the meaning of the attribution rules contained
in Section 425(d) of the Code, stock possessing more than ten percent of the
total combined voting power of all classes of stock of his or her employer
corporation or of its parent or subsidiary corporations, as defined respectively
in Sections 425(e) and (f) of the Code.

     (m) "Value" means on any given date, the closing price of the Shares as
reported by NASDAQ, or if listed on a national exchange, the closing price of
the Shares on such exchange on such date, or if not so reported or listed, the
fair market value of the Shares as determined by the Company in good faith.

3.   RIGHTS TO BE GRANTED
     --------------------

     Rights that may be granted under the Plan are:

                                       2



                      As amended by the Board and Shareholders February 27, 2004

     (a) Incentive Stock Options, that give the Optionee the right for a
specified time period to purchase a specified number of Shares at an Exercise
Price not less than that specified in Paragraph 7(a).

     (b) Non-Qualified Options, that give the Optionee the right for a specified
time period to purchase a specified number of Shares at an Exercise Price not
less than that specified in Paragraph 7(a).

4.   STOCK SUBJECT TO PLAN
     ---------------------

     The maximum number of Shares that may be issued under the Plan is
One-Hundred-Thirty-Six and Four-Tenths (136.4) Shares, subject to adjustment
pursuant to the provisions of Paragraph 10. If an Option terminates without
having been exercised in whole or part, other Options may be granted covering
the Shares as to which the Option was not exercised. Notwithstanding anything
contained in the Plan to the contrary, no recipient of Options may be granted
Options to purchase in excess of thirty-five percent (35%) of the maximum number
of Shares authorized to be issued under the Plan.

5.   ADMINISTRATION OF PLAN
     ----------------------

     The grant of options under this Plan shall be approved by the Company's
Board of Directors or a committee of the Board of Directors composed solely of
two or more Non-Employee Directors (as that term is defined in Rule 16b-3 under
the Securities Exchange Act of 1934, as amended) and any determination regarding
the terms of such Options or any other determination regarding such Options
shall be made by the Board of Directors or

                                       3



                      As amended by the Board and Shareholders February 27, 2004

such committee.

6.   GRANTING OF OPTIONS
     -------------------

     (a) Subject to Section 7, hereof the Company may, from time to time,
designate: the key employees, consultants and directors of the Company to whom
Options may be granted; the number of Shares covered by an Option; the relevant
Exercise Price of an Option; the vesting provisions of the Option; and the term
of an option.

     (b) An Incentive Stock Option shall not be granted to a director of the
Company unless, as of the Date of Grant, such director is also an officer or key
employee of the Company.

     (c) An Incentive Stock Option shall not be granted to a Ten Percent
Shareholder except on such terms concerning the Exercise Price and period of
exercise as are provided in Paragraph 7 with respect to such a person.

7.   OPTIONS AGREEMENTS AND TERMS
     ----------------------------

     Each Option shall be granted within 10 years of the date on which the Plan
is adopted by the Board or the date the Plan is approved by the shareholders of
the Company, whichever is earlier, and shall be evidenced by an option agreement
that shall be executed on behalf of the Company and by the respective Optionee
("Option Agreement"). The terms of each Option Agreement shall be consistent
with the following:

     (a) Exercise Price. The Exercise Price per Share shall not be less than 100
         --------------
percent of the Value of the Shares on the Date of Grant; provided that with
respect to any

                                       4



                      As amended by the Board and Shareholders February 27, 2004

Incentive Stock Options granted to a Ten Percent Shareholder, the Exercise Price
per Share shall not be less than 110 percent of the Value of the Shares on the
Date of Grant.

     (b) Restriction on Transferability. No Option granted hereunder shall be
         ------------------------------
pledged, hypothecated, charged, transferred, assigned or otherwise encumbered or
disposed of by the Optionee, whether voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and any attempt
to do so will cause such Option to be null and void. During the lifetime of the
Optionee, an Option shall be exercisable only by Optionee, and upon the death of
an Optionee the person to whom the rights shall have passed by will or by the
laws of descent and distribution may exercise any Option in accordance with the
provisions of Paragraph 7(e).

     (c) Payment. Full payment for Shares purchased upon the exercise of an
         -------
Option shall be made in cash or by surrendering Shares that have been owned by
the Optionee for at least six months and that have an aggregate Value equal to
the aggregate Exercise Price, or by delivering a combination of such Shares and
cash. Upon the exercise of an Option, the Company shall have the right to
require the Optionee to remit to the Company, in cash and/or through the
retention of Shares acquired upon the exercise, an amount sufficient to satisfy
all federal, state and local withholding tax requirements prior to the delivery
by the Company of any certificate for Shares. Upon the exercise of the Option,
if the Company approves in its sole discretion or if a registered initial public
offering of equity securities of the Company has occurred, the Optionee may
elect to have the Company satisfy all or part of "the employer's minimum
statutory withholding" obligation (within the meaning of Question 15(c) of FASB
Interpretation No. 44) through the retention of whole

                                       5



                      As amended by the Board and Shareholders February 27, 2004

Shares acquired upon the exercise of such Option having a Value on the exercise
date equal to the withholding obligation or part thereof in question.

     (d) Issuance of Certificates. Upon payment of the Exercise Price, a
         ------------------------
certificate for the number of Shares shall be delivered to such Optionee by the
Company. If listed on a national securities exchange, or reported on NASDAQ, the
Company shall not be obligated to deliver any certificates for Shares until
(A)(i) such Shares have been listed (or authorized for listing upon official
notice of issuance) on each securities exchange upon which outstanding Shares of
such class at the time are listed or (ii) if such outstanding Shares are quoted
on NASDAQ, such Shares have been approved for quotation thereon and (B) there
has been compliance with such laws or regulations as the Company may deem
applicable. The Company shall use its reasonable efforts to effect such listing
or reporting and compliance.

     (e) Periods of Exercise of Options. An Option shall be exercisable in whole
         ------------------------------
or in part at such time as may be stated in the Option Agreement, provided that:

     (i) an Incentive Stock Option granted to a Ten Percent Shareholder shall in
no event be exercisable after 5 years from the Date of Grant, and all other
Options shall in no event be exercisable after 10 years from the Date of Grant;

     (ii) Incentive Stock Options shall be subject to the limitation set forth
in Paragraph 8;

     (iii) if an Optionee ceases to be employed by the Company for any reason
other than death or disability, an Incentive Stock Option or a Non-Qualified
Option shall not be exercisable by such Optionee after three months from the
date the Optionee ceases to be employed by the Company; provided, however, that
if an Optionee's employment or other

                                       6



                      As amended by the Board and Shareholders February 27, 2004

relationship with the Company is terminated by the Company for cause, then an
Incentive Stock Option or Non-Qualified Stock Option shall not be exercisable by
such Optionee after the time of such termination;

     (iv) if an Optionee ceases to be employed by the Company due to disability,
an Incentive Stock Option or Non-Qualified Option shall not be exercisable by
such Optionee after one year from the date the Optionee ceases to be employed by
the Company, and;

     (v) if an Optionee ceases to be employed by the Company due to death, an
Incentive Stock Option or Non-Qualified Stock Option granted to such Optionee
shall not be exercisable after one year from the date of death of such Optionee;
provided that in such event, the person to whom the rights of the Optionee shall
have passed by will or by the laws of descent and distribution may exercise any
of the decedent's Options to the extent determined by the Company in its
discretion, even if the date of exercise is within any time period prescribed by
the Plan before or after which such Option shall not be exercisable.

     (f) Date of Exercise. The date of exercise of an Option shall be the date
         ----------------
on which written notice of exercise is hand delivered or telecopied to the
Company, attention: Comptroller; provided that the Company shall not be obliged
to deliver any certificates for Shares pursuant to the exercise of an Option
until the Optionee shall have made full payment for such Shares in accordance
with Section 7(c). Each such exercise shall be irrevocable when given. Each
notice of exercise must state whether the Optionee is exercising an Incentive
Stock Option or a Non-Qualified Option and must include a statement of
preference or election as to the manner in which payment to the Company shall be
made (Shares or cash or a combination of Shares and cash).

                                        7



                      As amended by the Board and Shareholders February 27, 2004

     (g) Termination of Status and Related Matters. For the purposes of the
         -----------------------------------------
Plan: (i) a transfer of an employee between two employers, each of which is a
company considered to be either a parent of the Company within the meaning of
Section 424(e) of the Code or a subsidiary of the Company within the meaning of
Section 424(f) of the Code, shall not be deemed a termination of employment,
(ii) employees of E-Z-EM, Inc. shall be deemed to be employees of the Company,
and employment by E-Z-EM, Inc. shall be deemed to be employment by the Company,
and (iii) service as a consultant or director of the Company shall be deemed to
be employment by the Company; provided that the foregoing clauses (ii) and (iii)
shall apply to Incentive Stock Options only if and to the extent permitted by
the Code.

     (h) No Relation Between Incentive Stock Options and Non-Qualified Options.
         ---------------------------------------------------------------------
The grant, exercise, termination or expiration of any Incentive Stock Option
granted to an Optionee shall have no effect upon any Non-Qualified Option held
by such Optionee, nor shall the grant, exercise, termination or expiration of
any Non-Qualified Option granted to an Optionee have any effect upon any
Incentive Stock Option held by such Optionee.

8.   LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS
     -------------------------------------------------

     The aggregate fair market value (determined as of the time Incentive Stock
Options are granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by an Optionee during any calendar year under
the Plan (and any other plan of his or her employer corporation and its parent
and subsidiary corporations, as defined respectively in Sections 424(e) and (f)
of the Code), shall not exceed $100,000.

                                       8



                      As amended by the Board and Shareholders February 27, 2004

9.   RIGHTS AS STOCKHOLDERS
     ----------------------

     An Optionee shall have no rights as a stockholder with respect to any
Shares covered by his or her Options until the date of issuance of a stock
certificate to him or her for such Shares.

10.  CHANGES IN CAPITALIZATION
     -------------------------

     In the event of a stock dividend, stock split, recapitalization,
reclassification of shares, combination, subdivision, issuance of rights to all
stockholders, or other similar corporate change, the Company shall make such
adjustment in the aggregate number and class of Shares that may be issued under
the Plan, and the number and class of Shares subject to, and the Exercise Price
of, each then-outstanding Option, as it, in its sole and absolute discretion,
deems appropriate.

11.  MERGERS, DISPOSITIONS AND CERTAIN OTHER TRANSACTIONS
     ----------------------------------------------------

     If during the term of any Option the Company shall be merged into or
consolidated with or otherwise combined with another person or entity, or
substantially all of the property or stock of the Company is acquired by another
person or entity, or there is a divisive reorganization, spin-off or liquidation
or partial liquidation of the Company, the Company may choose to take no action
with regard to the Options outstanding or to take any of the following courses
of action:

     (a) The Company may provide in any agreement with respect to any such
merger,

                                       9



                      As amended by the Board and Shareholders February 27, 2004

consolidation, combination or acquisition that the surviving, new or
acquiring corporation shall grant Options to the Optionees to acquire shares in
such corporation with respect to which the excess of the fair market value of
the shares of such corporation immediately after the consummation of such
merger, consolidation, combination or acquisition over the Exercise Price, shall
not be greater than the excess of the Value of the Shares over the Exercise
Price of the Options, immediately prior to the consummation of such merger,
consolidation, combination or acquisition; or

     (b) The Company may take such other action as the Board shall determine to
be reasonable under the circumstances in order to permit Optionees to realize
the value of rights granted to them under the Plan.

12.  PLAN NOT TO AFFECT EMPLOYMENT
     -----------------------------

     Neither the Plan nor any Option shall confer upon any employee of the
Company any right to continue in the employment of the Company.

13.  INTERPRETATION
     --------------

     The Company shall have the power to interpret the Plan and to make and
amend rules for putting it into effect and administering it. It is intended that
the Incentive Stock Options shall constitute incentive stock options within the
meaning of Section 422 of the Code, that the Non-Qualified Options shall
constitute property subject to U.S. Federal income tax at exercise pursuant to
the provisions of Section 83 of the Code and that the Plan shall qualify for the
exemption available under the Rule. The provisions of the Plan shall be
interpreted and applied insofar as possible to carry out such intent.

                                       10



                      As amended by the Board and Shareholders February 27, 2004

14.  AMENDMENTS
     ----------

     The Plan may be amended by the Board. No outstanding Option shall be
affected by any such amendment that adversely affects the Option without the
written consent of the Optionee or other person then entitled to exercise such
Option.

15.  SECURITIES LAWS
     ---------------

     The Company shall have the power to make each grant under the Plan subject
to such conditions as it deems necessary or appropriate to comply with the then
existing rules and regulations of the Securities and Exchange Commission.

16.  EFFECTIVE DATE AND TERM OF PLAN
     -------------------------------

     The Plan shall become effective on the date the Plan is adopted by the
Board, and shall expire on the date that is ten years after the date on which
the Plan is adopted by the Board unless sooner terminated by the Board. No
Options may be granted under the Plan on or after the date on which it expires
or is terminated, but the Plan shall continue in effect on and after that date
with respect to any Options that were granted under the Plan before that date
and that remain outstanding after that date, until such Options are exercised,
forfeited or expire.

                                       11



                      As amended by the Board and Shareholders February 27, 2004

17.  GOVERNING LAW
     -------------

     The Plan and all matters to which reference is made herein shall be
governed by and interpreted in accordance with the laws of the State of
Delaware.

                                              By order of the Board of Directors

                                       12



                                                                    Exhibit 10.6

                                               Confidential Treatment Requested.
                                          Confidential portions of this document
                                                have been redacted and have been
                                           separately filed with the Commission.

                             DISTRIBUTION AGREEMENT

THIS AGREEMENT is effective as of the last date of signature set forth herein
and is by and between ANGIODYNAMICS(R), Inc., (hereinafter "ANGIODYNAMICS"), a
Delaware Corporation having a principal place of business at 603 Queensbury
Avenue, Queensbury, New York 12804, and Medical Components Inc., (hereinafter
"MEDCOMP"), a Pennsylvania corporation, having a principal place of business at
1499 Delp Drive, Harleysville, Pennsylvania 19438.

IN CONSIDERATION of the mutual promises contained herein, the parties agree as
follows:

1.   DEFINITIONS

     1.1  "Territory" as used herein shall mean the entire world except where
          specifically indicated otherwise.

     1.2  Products" as used herein shall mean those products as set forth in
          Exhibits A, B, C, D, E ("hereinafter Exhibits A-E") attached hereto.
          Exhibits A-E may be modified from time to time, during the effective
          period of this Agreement, by the mutual written consent of the
          parties.

     1.3  "Know-how" as used herein shall include all technology and trade
          secrets necessary for the manufacture, sale, research and development,
          and marketing of the Products.

     1.4  "Patent Rights" as used herein shall include any U.S. patent, reissued
          patent or patent re-examination certificate and any foreign
          counterparts which have a claim that covers the Products which are or
          will be licensed and/or assigned to MEDCOMP including pending U.S.
          Patent Applications, as well as any and all patent rights which are
          related thereto, and any patent rights acquired in the future by
          MEDCOMP for any improvements, adaptations, modifications or derivative
          inventions having a claim that covers the Products, provided that for
          any such rights which are licensed to or will be licensed to MEDCOMP,
          MEDCOMP has been granted or will be granted a right to sublicense
          under such license or a right to assign or otherwise convey the
          license agreement to third parties.

     1.5  "Trademarks" as used herein includes all trademark(s) and trade
          name(s) pertaining to the Products and any related trade dress rights.

     1.6  "Intellectual Property Right" as used herein shall include any and to
          all rights in and to the Products in the form of Know-how, Patent
          Rights, Trademarks, and copyrights which are owned, licensed or
          otherwise possessed by MEDCOMP.

     1.7  "Specifications" shall mean the specifications for each of the
          Products and attached herewith in Exhibits A-E, as they are modified
          during the effective period of this Agreement by the mutual written
          consent of the parties.



                                      -2-

2.   APPOINTMENT

     2.1  As designated on each of the Exhibits A, B, and E, MEDCOMP hereby
          grants to ANGIODYNAMICS the sole and exclusive distributorship,
          together with the. right to appoint others, for the Products in
          Exhibits A, B, and E throughout the Territory. MEDCOMP shall not sell,
          either directly or indirectly, any of the Products in Exhibits A, B,
          and E to any other person or entity.

     2.2  As designated on Exhibit C, MEDCOMP hereby grants to ANGIODYNAMICS the
          sole and exclusive distributorship, together with the right to appoint
          others, for the Products listed in Exhibit C throughout the United
          States, and a non-exclusive distributorship for the Products listed in
          Exhibit C, together with the right to appoint others, throughout the
          Territory, except for the United States which shall remain exclusive.
          In the United States, MEDCOMP shall not sell, either directly or
          indirectly, any of the Products in Exhibit C to any other person or
          entity.

     2.3  As designated on Exhibit D, MEDCOMP hereby grants to ANGIODYNAMICS a
          non-exclusive distributorship for the Products listed in Exhibit D
          throughout the Territory, together with the right to appoint others.

     2.4  For each of the appointments in paragraphs 2.1-2.3, ANGIODYNAMICS
          shall inform MEDCOMP of its selection of any appointees and MEDCOMP
          shall have the right to reasonably object to any such appointment.

3.   PRICE, PAYMENT, AND ORDERlNG

     3.1  The price of the Products shall be as set forth in Exhibit A-E
          attached hereto, as such price is indicated next to each Product. This
          price includes the cost of sterilization and packaging. Such prices
          shall be firm for the initial Twelve (12) month period of this
          Agreement, and thereafter, such prices may be adjusted upon Thirty (3)
          days notice to ANGIODYNAMICS by no more than Two percent (2%) per year
          or the US. consumer price index which ever is greater. The price of
          the Products as set forth in Exhibit A-E does not include any
          applicable sales and use taxes, which MEDCOMP has the legal obligation
          to pay.

     3.2  Orders for the Products shall be initiated by a written purchase order
          sent or faxed to MEDCOMP. To facilitate MEDCOMP's production schedule,
          ANGIODYNAMICS shall submit purchase orders to MEDCOMP at least
          Forty-five (45) days prior to the requested date of delivery.

     3.3  ANGIODYNAMICS purchase orders, submitted to MEDCOMP with respect to
          the Products, shall be governed by the terms and conditions of this
          Agreement.

     3.4  Full payment of the purchase price of the Products shall be net
          Forty-five (45) days and payment shall be made by check, or other
          instrument agreed to by both parties. Payment by ANGIODYNAMICS' rights
          under Paragraph 6 or as acceptance of the Products delivered.



                                      -3-

4.   MINIMUM SALES

     4.1  ANGIODYNAMICS agrees to purchase from MEDCOMP the minimum yearly
          number of Product units for each set of Products as set forth in
          Exhibit A-E attached hereto. In the event that ANGIODYNAMICS fails to
          purchase at least 90% of the annual minimum as set forth on each
          Exhibit or the adjusted minimums if this contract is extended as set
          forth in Section 4.3, MEDCOMP, at its sole discretion, may convert the
          distributorship for those Products set forth as exclusive on that
          Exhibit for either the Territory or that portion of the Territory that
          was exclusive to a non-exclusive distributorship. Such remedy shall be
          MEDCOMP's sole and exclusive remedy in the event that ANGIODYNAMICS
          fails to purchase at least 90% of minimums as set forth above.

     4.2  It shall not be considered a material breach by MEDCOMP if they supply
          at least 90% of the minimum requirements set forth herein.

     4.3  If this Agreement is extended for an additional five-year term
          pursuant to Section 13.6, the minimum yearly number of Product units
          for each set of products will be 10% higher than the previous years'
          sales of each set of the Products:

5.   PACKAGING AND SHIPPING

     5.1  All Products shipped pursuant to this Agreement shall be packaged,
          labeled, and shipped in accordance with ANGIODYNAMICS' instructions.
          All freight, insurance, and other shipping expenses, as well as
          applicable taxes and duties, shall be borne by ANGIODYNAMICS. Each
          shipping container must be marked to show quantity, order, number, lot
          number, contents, and shipper's name. A packing slip showing this
          information shall be included with the shipment. A Certificate of
          Compliance shall accompany each lot within the shipment.

     5.2  Title to and risk of loss of the Products shall pass to ANGIODYNAMICS
          from MEDCOMP at the point of destination, ANGIODYNAMICS' receiving
          dock.

     5.3  MEDCOMP agrees to ship the Products with not less than three years
          remaining on its stated expiration date.

6.   SPECIFICATIONS

     6.1  The Products shall meet the Specifications attached herewith in
          Exhibits A-E. ANGIODYNAMICS reserves all right to return, at MEDCOMP's
          sole expense, any Product not meeting said Specifications.
          ANGIODYNAMICS must inform MEDCOMP within Forty Five (45) days of
          receipt of Product if it believes that any Product fails to meet the
          Specification. In the event that MEDCOMP is unable to replace such
          returned Product with an acceptable Product within Forty-Five (45)
          days, such failure shall be considered a material breach of this
          Agreement.



                                      -4-

7.   REGULATORY

     7.1  MEDCOMP shall produce all Products in accordance with all applicable
          regulatory laws, rules, and regulations. MEDCOMP will permit
          ANGIODYNAMICS, or its designated representative, to perform vendor
          audits of MEDCOMP's facilities and procedures. MEDCOMP will notify
          ANGIODYNAMICS of any FDA inspections, observations, and/or'483's. Any
          observations/483's shall be given to ANGIODYNAMICS in writing within
          30 days of the inspection. Further, MEDCOMP will provide ANGIODYNAMICS
          with a Certificate of Compliance, a Sterilization Certificate, and
          certification of non-pyrogenicity for each batch/lot of Products
          shipped. MEDCOMP will allow ANGIODYNAMICS, or its designated
          representative, subject to the confidentiality provisions herein, to
          inspect the Products' Design History Files and will also allow
          confidential access to all technical documentation necessary to
          demonstrate compliance with the European Medical Device Directive.
          Additionally, MEDCOMP will notify ANGIODYNAMICS of any proposed'
          changes in raw materials, components, processes, or labeling, at least
          Ninety (90) days prior to such action and must obtain ANGIODYNAMICS'
          written approval for such changes, which shall not be unreasonably
          withheld. MEDCOMP guarantees that no Products sold pursuant to this
          Agreement are adulterated or misbranded within the meaning of The
          Federal Food, Drug and Cosmetics Act (hereinafter the "Act"), and
          further guarantees that no Products sold pursuant to this Agreement
          are barred from introduction into inter-state commerce under the
          provisions in Sections 404, 505 or 512 of the Act.

     7.2  All customer complaints for the Products will be processed through
          ANGIODYNAMICS' Customer Service Department. Once a complaint has been
          received, it is the responsibility of ANGIODYNAMICS to forward a copy
          of the complaint within five (5) working days to MEDCOMP. If MEDCOMP
          receives such a complaint, MEDCOMP will notify ANGIODYNAMICS within
          five (5) working days. MEDCOMP agrees to perform an investigation of
          each customer complaint and forward complaint results in writing to
          ANGIODYNAMICS within a reasonable time considering the nature of the
          complaint. ANGIODYNAMICS agrees to complete the complaint file and
          respond to the customer. MEDCOMP agrees to comply with all applicable
          regulatory laws, rules and regulations for reporting of customer
          complaints by manufacturers. ANGIODYNAMICS agrees to comply with all
          applicable regulatory laws, rules and regulations for the reporting of
          customer complaints by distributors.

     7.3  Recalls. Each party agrees to notify the other party promptly if any
          of the Products are the subject of a recall, market withdrawal or
          correction and the parties shall cooperate in the handling and
          disposition of such recall, market withdrawal or correction. MEDCOMP
          shall be responsible for the costs of such recall, market withdrawal
          or correction, except to the extent that such recall, market
          withdrawal or correction is due to ANGIODYNAMICS' improper storage,
          handling, distribution or marketing of the Products in which case
          ANGIODYNAMICS shall be responsible for the costs of such recall,
          market withdrawal or correction.



                                      -5-

8.   LABELS AND LABELING

     8.1  MEDCOMP shall have the obligation to design and produce all labels,
          labeling, and inserts for the Products, other than the pouch and box
          labels

     8.2  ANGlODYNAMICS shall have the obligation to design and produce the
          pouch and box labels for the Products.

     8.3  ANGIODYNAMICS may waive the obligation to design and produce the pouch
          and box labels for the Products, if both parties agree in writing that
          MEDCOMP labels are to be used.

     8.4  Each party shall obtain the other party's prior written approval for
          the labels if they have designed, prior to production of the same.

     8.5  MEDCOMP shall have the responsibility to apply all labels, including
          the pouch and box labels to the Products

     8.6  MEDCOMP agrees that the labeling may include the ANGIODYNAMICS'
          trademark.

     8.7  ANGIODYNAMICS agrees that the Products and/or their packaging shall
          bear, where appropriate, MEDCOMP's trademarks, and a statutory
          indication of the patent number or the legend "US. patent pending" or
          "U.S. pat. pending" in the U.S. and any required foreign patent
          marking where foreign patent rights exist.

     8.8  MEDCOMP shall allow the addition of the ANGIODYNAMICS trademark to all
          currently published literature and educational materials associated
          with the Products.

9.   WARRANTIES

     9.1  MEDCOMP warrants that the (i) title to all Product conveyed hereunder
          is good, (ii) the Products delivered hereunder are free from any
          security interest or other lien or encumbrance, (iii) the Products
          shall be delivered free of the rightful claim of any third party by
          way of infringement of any patent or trademark, and (iv) the Products
          will be manufactured in accordance with the product specifications,
          (v) the Products are fit for the purposes described in the
          instructions for use and shall be free any defects that may effect the
          intended use, (vi) the Products shall be manufactured, produced, and
          delivered to ANGIODYNAMICS in accordance with all applicable laws,
          rules, and regulations, (vii) MEDCOMP agrees to indemnify, defend and
          hold harmless ANGIODYNAMICS, its customers, and users of the Products
          from all loss, damages, cost, or expense, including reasonable
          attorney's fees, arising from the breach by MEDCOMP of the
          aforementioned warranties.

10.  OPTION FOR FUTURE LICENSE OR TECHNOLOGY TRANSFER

     10.1 In the event that MEDCOMP elects not to continue manufacturing the
          Products, or in the event that this Agreement is terminated for a
          failure to supply as set forth in this Agreement, or due to MEDCOMP's
          insolvency or bankruptcy, MEDCOMP agrees to negotiate in good faith a
          royalty-bearing non-exclusive license or sublicense to make, use or
          sell Products under the Patent Rights to ANGIODYNAMICS, provided such
          ability and right to license or sublicense is available to MEDCOMP.



                                      -6-

     10.2    In the event that MEDCOMP ceases manufacturing the Products, to the
             extent such cessation is within MEDCOMP's control, MEDCOMP will
             provide ANGIODYNAMICS with written notice, Six (6) months in
             advance of the. anticipated date of cessation of manufacture.

     10.3    In the event a license or sublicense is successfully negotiated in
             accordance with Paragraphs 10.1, MEDCOMP agrees to cooperate with
             ANGIODYNAMICS and to train ANGIODYNAMICS' personnel on manufacture,
             design, assembly, quality control and packaging of the Products for
             a period of Six (6) months at no cost to ANGIODYNAMICS, and to
             transfer any manufacturing Know-how.

11.  IMPROVEMENTS

     11.1    ANGIODYNAMICS shall have the right to develop design improvements
             for the Products, and if developed solely by ANGIODYNAMICS any
             associated Intellectual Property rights shall belong solely to
             ANGIODYNAMICS and such Products shall become part of this Agreement
             asset forth in paragraph 11.2.

     11.2    In the event that such design improvements are developed by
             ANGIODYNAMICS, the parties agree to amend this Agreement to add
             such improvements to the Products as set forth on Exhibit A-E.

     11.3    ANGIODYNAMICS and MEDCOMP shall have the right to cooperate in
             development of design improvements for the Products. In the event
             ANGIODYNAMICS and MEDCOMP jointly develop design improvements for
             the Products, any associated Intellectual Property rights shall
             belong to ANGIODYNAMICS and MEDCOMP jointly and shall become part
             of this Agreement and shall be added as improvements to the
             Products as set forth on Exhibit A-E.

     11.4    MEDCOMP shall have the right to develop design improvements for the
             Products and in the event that such design improvements are
             developed solely by MEDCOMP, MEDCOMP shall solely own all
             Intellectual Property rights to such improvements. The parties
             agree to amend this Agreement to add such improvements to the
             Products on Exhibit A-E.

12.  INTELLECTUAL PROPERTY

     12.1    MEDCOMP shall retain all of its rights, title and interest in and
             to its patents, copyrights, trademarks, trade names, and all other
             industrial and intellectual property. Except as otherwise expressly
             provided in this Agreement, ANGIODYNAMICS shall have no right,
             title or interest in any industrial or intellectual property
             relating to the Products, except to marketing and promotional
             materials and reports and all marketing data and all intellectual
             property relating thereto. Nothing herein shall be construed as a
             license or other grant of rights in any of the Intellectual
             Property of either party.

     12.2    Validity and Infringement of MEDCOMP's Patents:

     12.2.1. In the event ANGIODYNAMICS or MEDCOMP become aware of any actual or
             threatened infringement of any MEDCOMP patents, that party shall
             promptly notify the other.



                                       -7-

      12.2.2. MEDCOMP shall have the first and exclusive right, but not the
obligation, to bring and control any infringement action against any person or
entity materially infringing any MEDCOMP Patent Rights directly or
contributorily and shall have the first right, but not the obligation, to defend
any MEDCOMP Patent Rights against any challenge to the validity and
enforceability of that patent in the Courts of the United States or in the
United States Patent and Trademark Office or in any foreign jurisdiction. At the
request of MEDCOMP, ANGIODYNAMICS agrees to cooperate with MEDCOMP, at MEDCOMP's
sole cost, in any lawsuit on any of the Patent Rights, including being named as
a party, if necessary.

      12.2.3. MEDCOMP shall bear the full cost of any action brought by MEDCOMP
regarding its Patent Rights and shall be entitled to all recovery from such
lawsuit.

13.   TERM AND TERMINATION

      13.1    Subject to earlier termination as provided in this Section 13,
              this Agreement shall be for a term of Five (5) years.

      13.2    Either party shall have the right to terminate this Agreement by
              written notice to the other party immediately upon the occurrence
              of the following:

      13.2.1. The bankruptcy or insolvency of the other party, or the
              commencement of any proceedings by or against the other party
              seeking receivership, trusteeship, bankruptcy, reorganization,
              assignments for the benefit of creditors or similar proceedings.

      13.2.2. Failure of the other party to cure any material breach (a failure
              by AngioDynamics to purchase the minimum requirements of each
              Product shall not be deemed a material breach for purposes of this
              Agreement) of this Agreement within Sixty (60) days after written
              notice of such breach. In the event ANGIODYNAMICS purchases Sixty
              percent (60%) or less of its minimum requirement for any Product,
              ANGIODYNAMICS shall lose its exclusivity rights, if any, to that
              Product. Furthermore, in the event ANGIODYNAMICS purchases Forty
              percent (40%) or less of its minimum requirement for any product,
              MEDCOMP shall have the right, upon written notice to
              ANGIODYNAMICS, to cancel this Agreement as to such Product and
              make any arrangements MEDCOMP believes is appropriate, in its sole
              and absolute discretion, to sell such Product through other
              individuals or entities.

      13.2.3. Upon the mutual written consent of both parties.

      13.3    ANGIODYNAMICS may terminate this Agreement immediately, if
              MEDCOMP, for any reason, is unable to supply Products that meet
              the product Specifications to ANGIODYNAMICS for a period of Ninety
              (90) days.



                                       -8-

      13.4    Upon termination of this Agreement, for any reason other than
              ANGIODYNAMICS' failure to pay for the Products, MEDCOMP shall
              honor ANGIODYNAMICS' orders that were placed prior to the
              effective date of termination and ANGIODYNAMICS shall pay for such
              orders and make any other payments due to MEDCOMP pursuant to the
              terms of this Agreement. Notwithstanding that ANGIODYNAMICS'
              rights to purchase the product for distribution and sale have
              ceased, ANGIODYNAMICS shall be entitled to sell or otherwise
              dispose of the Products then remaining in its inventory.

      13.5    Termination of the Agreement shall not relieve, nor be construed
              as relieving either party of any obligation or liability to the
              other party arising out of, or in connection with, such party's
              breach of, or failure to perform, any covenant, agreement or duty
              contained in or pursuant to this Agreement. It is expressly agreed
              that Paragraphs 7 and 9 shall survive until all products are sold
              from inventory by ANGIODYNAMICS, paragraph 15 shall survive in
              accordance with the terms of that paragraph, and paragraphs 14, 16
              and 18 hereof shall survive the termination of this Agreement.

      13.6    If all minimums are met per this Agreement the terms of this
              contract will be extended for an additional five-year term.

14.   CONFIDENTIALITY

      14.1    Each party acknowledges and agrees that information of a
              confidential nature ("Confidential Information") may be disclosed
              by one party ("disclosing party") to the other party ("receiving
              party") pursuant to this Agreement. The receiving party agrees
              that, except as required by law, it will retain such Confidential
              Information in confidence and will not disclose, publish or make
              use of all or any part of such Confidential Information given to
              it by the disclosing party for any purpose other than those
              specified in this Agreement, without first obtaining the
              disclosing party's written consent. Notwithstanding the foregoing,
              the obligations specified herein shall not apply to any
              Confidential Information that is demonstrated to fall within any
              of the following categories: (a) to any Confidential Information
              which now is or hereinafter becomes publicly known or available
              otherwise than through unauthorized disclosure by the receiving
              party, and (b) to any Confidential Information which the receiving
              party received in good faith from a third party who is not under a
              similar restriction of confidentiality and having a right to
              disclose the information, and (c) to any Confidential Information
              that was already in the receiving party's possession or can be
              proven to have been independently developed by the receiving
              party, after disclosure hereunder, without the aid, application or
              use in any way of the Confidential Information received from the
              disclosing party under this Agreement, and (d) to any Confidential
              Information which is required by law or judicial order should be
              disclosed.

      14.2    The receiving party represents that it has procedures designed to
              protect Confidential Information and agrees that it shall impose
              upon its employees and agents the same obligations with respect to
              the other disclosing party's Confidential Information as it
              imposes upon them with respect to its own Confidential
              Information.



                                       -9-

15.   INSURANCE

      15.1    MEDCOMP warrants that it has product liability insurance in the
              amount of at least $3,000,000. (Three Million Dollars). MEDCOMP
              shall provide ANGIODYNAMICS with a Certificate of Insurance
              indicating such coverage, and shall have ANGIODYNAMICS named as an
              additional insured under its policy. MEDCOMP agrees to provide
              said coverage for the duration of this Agreement and for a period
              of three years following the termination of this , contract as
              provided in Section 13.

16.   INDEMNIFICATION

      16.1    MEDCOMP agrees to indemnify and hold ANGIODYNAMICS harmless from
              and against any and all costs, losses, liability, damages and
              expense claims (including reasonable attorneys' fees) made by any
              person or entity arising out of the manufacturing, processing,
              marketing, distribution, sale and use of the - Products, where and
              to the extent such damages have been cause by the negligence,
              recklessness or willful misconduct of MEDCOMP or its employees or
              agents, or relate in any way to the Products as set forth in
              Exhibit A-E.

      16.2    ANGIODYNAMICS agrees to indemnify MEDCOMP from and against any and
              all costs, losses, liability and expense claims (including
              reasonable attorneys' fees) made by any person or entity arising
              out of the marketing, distribution and sale of the Products, where
              and to the extent such damages have been caused by the negligence,
              recklessness or willful misconduct of ANGIODYNAMICS or its
              employees or agents.

      16.3    The indemnifying party shall have the right to defend or, at its
              option, settle such claims, and if it chooses to exercise such
              right, it shall have control over any such claim or settlement
              negotiations. The indemnifying party shall be relieved of the
              foregoing obligations unless the indemnified party gives prompt
              notice in writing of any such claim, suit or proceeding and, at
              the indemnifying party's expense, gives the indemnifying party
              proper and full information and assistance to settle and/or defend
              any such claim, suit, or proceeding.

17.   ARBITRATION

      17.1    If any dispute or claim arising under this Agreement cannot be
              readily resolved by the parties, the parties agree to refer the
              matter to a panel consisting of one (1) senior executive from each
              party (or an affiliated company of the party) for review and
              resolution. The senior executive shall preferably not have been
              directly involved in the claim or dispute. A copy of the Agreement
              terms, relevant facts, areas of disagreement and a concise summary
              of basis of each side's contention will be provided to both
              executives who shall review the same, and attempt to reach a
              mutual resolution of the issue. The senior executives shall meet
              and attempt to resolve the dispute within thirty (30) days of
              their appointment. If the dispute or claim cannot be resolved by
              the senior executive panel within forty-five (45) days of the date
              of the senior executives' conference, a party may refer the matter
              to binding arbitration.



                                      -10-

      17.2    The parties agree that all disputes, controversies or claims
              arising out of or , relating to this Agreement, with the exception
              of any disputes concerning the terms governing enforcement of any
              of MEDCOMP Patent Rights, shall be finally resolved and/or
              otherwise settled by arbitration in accordance with the
              arbitration rules of the American Arbitration Association then in
              force. The parties will not be asked to take any action that is
              illegal in any country. Each party shall bear its own costs and
              shall jointly share the costs of the arbitration, except to the
              extent that either of the parties shall be found to have acted
              maliciously or without justification under the terms of the
              Agreement by the arbitrators in which case the losing party shall
              bear all expense and legal fees of the other. The award of the
              arbitrators shall be final and conclusive and binding on both
              parties.

      17.3    The number of arbitrators for all arbitration in accordance with
              paragraph l7.2 of this Article shall be three (3): one shall be
              appointed by ANGIODYNAMICS, one shall be appointed by MEDCOMP, and
              a third arbitrator shall be selected jointly by those two
              arbitrators and who shall be president of the arbitration panel.
              The arbitrators shall be appointed within sixty (60) days
              following notification of a dispute requiring resolution by
              arbitration. If one party fails to appoint an arbitrator within
              such time period, the other party may abandon arbitration and seek
              resolution in a court of appropriate jurisdiction or seek
              appointment of two (2) objectives, court-approved arbitrators
              within thirty (30) days of the failure of the party to initially
              appoint an arbitrator, one of such court-approved arbitrators to
              act on behalf of the party failing to initially appoint an
              arbitrator, and one of whom will act as president of the
              arbitration panel. If the party failing to initially appoint an
              arbitrator has a reasonable objection for good cause to any such
              court-approved arbitrators selected by the other party, the
              objecting party shall suggest an alternative arbitrator within
              thirty (30) days, or forfeit its right to object to any of the
              chosen court-approved arbitrators.

      17.4    In construing the rights and obligations of the parties to this
              Agreement and the other agreements associated herewith, the
              arbitrators shall apply the law of the state of New York and the
              place of arbitration shall be in the Commonwealth of Pennsylvania
              at a neutral location to be agreed to by the parties, but shall
              not be in the place of business of either party.

      17.5    If insofar as the arbitration award is deemed not to have the
              force and validity of a legal judgment, the award nonetheless
              shall be binding on the Parties as if agreed between themselves.

      17.6    When any dispute occurs and when any dispute is under
              arbitration, except for the matters under dispute, the parties
              shall, within reason and to the extent practical, continue to
              exercise their remaining respective rights, and fulfill their
              remaining respective obligations under this Agreement hereunder
              during the period of arbitration or dispute.



                                      -11-

18.   PROPERTY RIGHTS

      18.1    If the parties agree that this Agreement shall not affect
              ownership of patents, trademarks, trade names, inventions,
              copyrights, know-how, and trade secrets, the use of the other
              party's aforementioned property rights is authorized only for the
              purposes herein set forth, and upon termination of the Agreement
              for any reason such authorization shall cease.

19.   FORCE MAJEURE

      19.1    No performance of either party shall be excused to the extent that
              performance is rendered impossible by strike, fire, flood,
              governmental acts, or orders, or restrictions, failure of
              suppliers, or any other reason where failure to perform is beyond
              the reasonable control of and is not caused by the negligence of
              the non-performing party.

20.   ASSIGNMENT

      20.1    This Agreement shall be binding upon and inure to the benefit of
              the parties hereto and their successors and assigns; provided,
              however, that neither party shall assign, any of its rights or
              delegate any of its duties of performance hereunder without the
              prior written consent of the other party, which shall not be
              unreasonably withheld; provided that such consent shall not be
              necessary to make an assignment to an entity that is, (a) an
              organization of which more than fifty (50%) percent of the voting
              stock is controlled or owned directly or indirectly by either
              party to this Agreement; (b) an organization that directly or
              indirectly owns or controls more than fifty (50%) percent of the
              voting stock of either party to this Agreement; (c) an
              organization, the majority ownership of which is directly or
              indirectly common to the majority ownership of either party to
              this Agreement.

21.   WAIVER

      21.1    All waivers hereunder must be made in writing. Course of conduct
              between the parties, whether or not contrary to the terms of this
              Agreement, shall not be construed as a waiver of any of the terms
              of this Agreement. Failure by any party to require the other
              party's performance of any obligation under this Agreement shall
              not affect, limit, or waive the other party's right to require
              strict performance of that obligation any time thereafter. The
              waiver of any breach of a provision of this Agreement shall not be
              construed in any way as a waiver of any continuing or succeeding
              breach of such provision or modification of the provision.

22.   CAPACITY

      22.1    Both parties warrant that they have the legal capacity to enter
              into this Agreement and that they have not signed any other
              agreement which could conflict with the terms of this Agreement.



                                      -12-

23.    AGENCY

       23.1   Nothing contained in this Agreement shall be construed as a
              license or create a joint venture or establish any other
              relationship of similar nature between the parties.

24.    INVALIDITY

       24.1   Should any provision of this Agreement be ruled invalid, the
              remaining provisions shall not be affected and shall remain in
              full force and effect. The parties shall in such an instance
              endeavor to replace the invalidated provision by a valid provision
              with similar intent

25.    ENTIRE AGREEMENT

       25.1   This Agreement constitutes the entire Agreement between the
              parties hereto, and all prior or other agreements or
              representations, whether written or oral, are of no force or
              validity and are hereby superseded. The parties specifically
              acknowledge and agree that upon the execution of this Agreement,
              this Agreement shall supercede and replace all prior agreements
              between the parties inc1udingwithout limitation the distribution
              agreements dated March 18, 1998, and August 27, 1996. The parties
              hereby confirm expressly that the Agreement was freely negotiated
              by them.

26.    HEADINGS

       26.1   The headings in this Agreement are inserted for convenience of
              reference only, and shall not affect the interpretation of this
              Agreement.

27.    NOTICES

       27.1   Any notice required by this Agreement shall be deemed to have been
              given when sent by certified mail, return receipt requested, or by
              receipted messenger service, or by Facsimile (with a confirmatory
              copy sent by receipted certified mail), to the party to be
              notified at the following addresses, or to such other addresses as
              is supplied by one party to the other:

              If to ANGIODYNAMICS:                    President & CEO
                                                      603 Queensbury Avenue
                                                      Queensbury, NY 12804
                                                      Facsimile#: (518) 798.3625

              If to MEDCOMP:                          President & CEO
                                                      1499 Delp Drive
                                                      Harleysville, PA 19438
                                                      Facsimile#: (215) 513.2203



                                      -13-

28.    GOVERNING LAW

       28.1   The validity, construction, interpretation and enforcement of this
              Agreement, or any breach thereof, shall be governed by the laws of
              the State of New York. However, any arbitration conducted
              hereunder shall be conducted in the Commonwealth of Pennsylvania.

       IN WITNESS WHEREOF, the parties have by their duly authorized officers,
executed this Agreement..

ANGIODYNAMICS, Inc.                             MEDICAL COMPONENTS, INC.

By:  /s/ Eamonn P. Hobbs                        By:  /s/ [Illegible]

Title: President and CEO                        Title: President

Date: 22 March, 2002                            Date: March 24, 2002



                                                                       EXHIBIT A

SchonCath(R)Long Term Catheter
Exclusive World Wide Agreement*



- ------------------------------------------------------------------------------------------------
PRODUCT         PRODUCT                   UNIT              ANNUAL MIN BY YEAR (1/2/3/4/5)
NO.             DESCRIPTION               PRICE        1        2         3         4        5
- ------------------------------------------------------------------------------------------------
                                                                       

10800201        SchonCath 14cm            $***        ***      ***       ***       ***      ***
- ------------------------------------------------------------------------------------------------
10800202        SchonCath 16cm            $***
- ------------------------------------------------------------------------------------------------
10800203        SchonCath 18cm            $***
- ------------------------------------------------------------------------------------------------
10800204        SchonCath 20cm            $***
- ------------------------------------------------------------------------------------------------
10800205        SchonCath 22cm            $***
- ------------------------------------------------------------------------------------------------
10800206        SchonCath 24cm            $***
- ------------------------------------------------------------------------------------------------
10800208        SchonCath 45cm            $***
- ------------------------------------------------------------------------------------------------
10800209        SchonCath 55cm            $***
- ------------------------------------------------------------------------------------------------
10800301        Cutting Insertion Tray    $***
- ------------------------------------------------------------------------------------------------
10800302        Blunt Insertion Tray      $***
- ------------------------------------------------------------------------------------------------
10800401        Venous Adapters           $***
- ------------------------------------------------------------------------------------------------
10800402        Arterial Adapters         $***
- ------------------------------------------------------------------------------------------------
10800501        Peelaway sheaths          $***
- ------------------------------------------------------------------------------------------------
10800502        Peelaway sheaths-long     $***
- ------------------------------------------------------------------------------------------------
10800601        Tunnelers - Blunt         $***
- ------------------------------------------------------------------------------------------------
10800602        Tunnelers - Sharp         $***
- ------------------------------------------------------------------------------------------------


       *  AngioDynamics shall purchase the annual minimum number of products
          units referenced in the chart above for each respective year from the
          list of products on said chart.

Kit

1 - Appropriate Catheter
1 - 13ga Red Compression Collar
1 - 13ga Blue Compression Collar
1 - 10F Tesio Venous Catheter Extension
1 - 10F Tesio Arterial Catheter Extension
2 - Compression Ring
1 - CSR Wrap
1 - #11 Blade Scalpel
1 - 2-0 Silk Suture w/Curved Needle
1 - .038 x 70cm Marked GW (Schon)
1 - 3M Tegaderm Oval
2 - Modified Tunneler
1 - Oval Tearaway Sheath/Dilator
1 - Angio GW Direction Sheet
1 - Angio Adaptor Direction Sheet
1 - Angio Direction Sheet
1 - Oval Sheath Tearaway Clip
2 - Injection Port
1 - 18ga Introducer Needle
1 - Red Robert's Mini Clamp
1 - Blue Robert's Mini Clamp

Catheter

1 - Appropriate Schon Catheter
1 - 13ga Red Compression Collar
1 - 13ga Blue Compression Collar
1 - 10F Tesio Venous Catheter Extension
1 - 10F Tesio Arterial Catheter Extension
1 - CSR Wrap
1 - Angio Adaptor Direction Sheet
1 - Angio Direction Sheet
2 - Injection Port
1 - Blue Robert's Mini Clamp
1 - Red Robert's Mini Clamp
2 - Compression Ring

- ---------------------
*** Confidential material redacted and filed separately with the Commission.

Confidential Exhibits              14                                   03/21/02



Cutting Insertion Tray

1 - 13ga Red Compression Collar
1- 13ga Blue Compression Collar
1 - 10F Tesio Venous Catheter Extension
1 - 10F Tesio Arterial Catheter Extension
2 - Compression Ring
1 - CSR Wrap
1 - #11 Blade Scalpel
1 - 2-0 Silk Suture w/Curved Needle
1 - .038 x 70cm Marked GW (Schon)
1 - Tegaderm Oval
2 - Modified Tunneler
1 - Oval Tearaway Sheath/Dilator
1 - Angio GW Direction Sheet
1 - Angio Adaptor Direction Sheet
1 - Angio Direction Sheet
1 - Oval Sheath Tearaway Clip
2 - Injection Port
1 - 18ga x 2 3/4" Introducer Needle
1 - Red Robert's Mini Clamp
1 - Blue Robert's Mini Clamp

Venous Adapters

1 - 13ga Blue Compression Collar
1 - 10F Tesio Catheter Venous Extension
1 - Compression Ring.
1 - Angio Adaptor Direction Sheet

Tearaway Sheath

1 - Oval Tearaway Sheath/Dilator
1 - Oval Sheath Tearaway Clip

Blunt Tunnelers

1 - Blunt Tunneler for Tesio Catheter

Blunt Insertion Tray

1 - 13ga Red Compression Collar
1 - 13ga Blue Compression Collar
1 - 10F Tesio Venous Catheter Extension
1 - 10F Tesio Arterial Catheter Extension
2 - Compression Ring
1 - CSR Wrap
1 - #11 Blade Scalpel
1 - 2-0 Silk Suture w/Curved Needle
1 - .038 x 70cm Marked GW (Schon)
1 - Tegaderm Oval
2 - Blunt Tunneler for Tesio Catheter
1 - Oval Tearaway Sheath/Dilator
1 - Angio GW Direction Sheet
1 - Angio Adaptor Direction Sheet
1 - Angio Direction Sheet
1- Oval Sheath Tearaway Clip
2 - Injection Port
1 - 18ga x 2 3/4" Introducer Needle
1 - Red Robert's Mini Clamp
1 - Blue Robert's Mini Clamp

Arterial Adaptors

1 - 13ga Red Compression Collar
1 - 10F Tesio Catheter Arterial Extension
1 - Compression Ring
1 - Angio Adaptor Direction Sheet

Tearaway Sheath - Long

1 - 20cm Oval Tearaway Sheath/Dilator
1 - Oval Sheath Tearaway Clip

Sharp Tunnelers

1 - Modified Tunneler for Tesio Catheter

Confidential Exhibits              15                                   03/21102



                                                                       EXHIBIT B

Schon XL Acute Dialysis Catheters
Exclusive World Wide Agreement*

- --------------------------------------------------------------------------------
PRODUCT      PRODUCT                  UNIT     ANNUAL MIN BY YEAR (1/2/3/4/5)
NO.          DESCRIPTION              PRICE      1     2     3     4     5
- --------------------------------------------------------------------------------
10801701     Schon XL 15cm - Cath     $***      ***   ***   ***   ***   ***
- --------------------------------------------------------------------------------
10801702     Schon XL 20cm - Cath     $***
- --------------------------------------------------------------------------------
10801703     Schon XL 24cm - Cath     $***
- --------------------------------------------------------------------------------
10800701     Schon XL 15cm - Set      $***
- --------------------------------------------------------------------------------
10800702     Schon XL 20cm - Set      $***
- --------------------------------------------------------------------------------
10800703     Schon XL 24cm - Set      $***
- --------------------------------------------------------------------------------
10802701     Schon XL 15cm - Tray     $***
- --------------------------------------------------------------------------------
10802702     Schon XL 20cm - Tray     $***
- --------------------------------------------------------------------------------
10802703     Schon XL 24cm - Tray     $***
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

 * AngioDynamics shal1 purchase the annual minimum number of product units
   referenced in the chart above for each respective year from the list of
   products on said chart.

Catheter

1 - Appropriate Schon XL Catheter
1 - Hemocath Clip
1 - Angio Direction Sheet
2 - Injection Port

Set

1 - Appropriate Schon XL Catheter
1 - #11 Blade Scalpel
1 - .035 x 70cm J-Flex GW
1 - Tegaderm Oval
1 - Hemo-Cath Clip
1 - 2-0 Curved Monofilament Suture
1 - 12F x 6" Vessel Dilator
1 - 14F x 6" Vessel Dilator
1 - Angio GW Direction Sheet
1 - Angio Direction Sheet
2 - Injection Port
1 - 18ga x 2 3/4" Introducer Needle


Tray

1 - Appropriate Schon XL Catheter
2 - CSR Wrap
4 - 4" x 4" Gauze
2 - 5cc Luer Lock Syringe
1 - 25ga x 5/8" Needle
1 - 22ga x 1 1/2" Vessel Locating Needle
1 - #11 Blade Scalpel
1 - Povidone Iodine Swabsticks
1 - Surgical Gloves
1 - 5cc Ampule Lidocaine
2 - l0cc Luer Lock Syringe
1 - 18ga x 1 1/2" Aspirating Needle
1 - .035 x 70cm J-Flex GW
1 - Fenestrated Drape
1 - Hemostat
1 - Tegaderm Oval
1 - Hemocath Clip
1 - 2-0 curved Monofilament Suture
1 - 15F x 6" Vascu-Sheath
1 - 12F x 6" Vessel Dilator
1 - 14F x 6" Vessel Dilator
1 - Angio GW Direction Sheet
1 - Angio Direction Sheet
2 - Injection Port
1- 18ga x 2 3/4" Introducer Needle

_________________
*** Confidential material redacted and filed separately with the Commission.

Confidential Exhibits                  16                              03/21/02



                                                                       EXHIBIT C

Dynamic Flow
USA Exclusive Agreement
Rest of World (ROW) Non-Exclusive Agreement*

- --------------------------------------------------------------------------------
PRODUCT      PRODUCT            UNIT     ANNUAL ESTIMATES BY YEAR
 NO.         DESCRIPTION        PRICE    (Units)
                                USA         1   2   3   4   5
- --------------------------------------------------------------------------------
 10300701    D.F. 24cm - Set    $***       *** *** *** *** ***
- --------------------------------------------------------------------------------
 10300702    D.F. 28cm - Set    $***
- --------------------------------------------------------------------------------
 10300703    D.F. 32cm - Set    $***
- --------------------------------------------------------------------------------
 10300704    D.F. 36cm - Set    $***
- --------------------------------------------------------------------------------
 10300705    D.F. 55cm - Set    $***
- --------------------------------------------------------------------------------
 10300601    D.F. 24cm - Tray   $***
- --------------------------------------------------------------------------------
 10300602    D.F. 28cm - Tray   $***
- --------------------------------------------------------------------------------
 10300603    D.F. 32cm -Tray    $***
- --------------------------------------------------------------------------------
 10300604    D.F. 36cm -Tray    $***
- --------------------------------------------------------------------------------
 10300605    D.F. 55cm - Tray   $***
- --------------------------------------------------------------------------------
             Tunnelers
- --------------------------------------------------------------------------------
             Sheath/dilators
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ROW Pricing will be granted by MEDCOMP upon proof of sale to non-USA Market by
AngioDynamics. ROW Pricing shall be USA Price less $***

       * AngioDynamics shall purchase the annual minimum number of product
units referenced in the chart above for each respective year from the list of
products on said chart.

       Set
       1 - Catheter
       1 - Introducer Needle
       1 - Tunneling Tool
       2 - Vessel Dilators
       2 - Injection Caps
       1 - Scalpel
       1 - Tearaway Sheath Introducer
       1 - J/Flex Guidewire
       1 - Adhesive Wound Dressing

       Catheter
       1 - Catheter
       1 - Tunneling Tool
       2 - Injection Caps
       1 - Tearaway Sheath Introducer
____________________
*** Confidential material redacted and filed separately with the Commission.

Confidential Exhibits                  17                               03/21/02



                                                                       EXHIBIT D

MoreFlow Dialysis Catheters
Non-Exclusive Worldwide Agreement
NO MINIMUMS

 -------------------------------------------------------------------------------
  PRODUCT NO.    PRODUCT DESCRIPTION                     UNIT PRICE
 -------------------------------------------------------------------------------
  10300501       M.F. 24cm - Basic Kit - Straight        $***
 -------------------------------------------------------------------------------
  10300502       M.F. 28cm - Basic Kit - Straight        $***
 -------------------------------------------------------------------------------
  10800503       M.F. 32cm - Basic Kit - Straight        $***
 -------------------------------------------------------------------------------
  10800504       M.F. 36cm - Basic Kit - Straight        $***
 -------------------------------------------------------------------------------
  10800505       M.F. 55cm - Basic Kit - Straight        $***
 -------------------------------------------------------------------------------
  10800506       M.F. 24cm - Basic Kit - Pre-Curve       $***
 -------------------------------------------------------------------------------
  10800507       M.F. 28cm - Basic Kit - Pre-Curve       $***
 -------------------------------------------------------------------------------
  10800508       M.F. 32cm - Basic Kit - Pre-Curve       $***
 -------------------------------------------------------------------------------
  10800509       M.F. 36cm - Basic Kit - Pre-Curve       $***
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------

 ROW Pricing will be granted by MEDCOMP upon proof of sale to non-USA market by
 AngioDynamics. ROW Pricing shall be USA Price less $***.

 Tray
 1 - Appropriate MoreFlow Catheter
 1 - Raulerson Bulb Syringe
 2 - CSR Wrap
 4 - 4x4 Gauze Sponge
 1 - Povidone Iodine Ointment
 2 - 5cc Luer Lock Syringe
 1 - 25ga x 5/8" Syringe
 1 - 22ga x 1/2" Syringe
 1 - #11 Blade Scalpel
 1 - Povidone Iodine Swabsticks
 1 - Surgical Gloves
 1 - 5cc Ampule Lidocaine
 2 - 10cc Luer Lock Syringe
 1 - 18ga x 1 1/2" Aspirating Needle

 MoreFlow Kit
 1 - Appropriate More-Flow Catheter
 1 - Raulerson Bulb Syringe
 1 - # 11 Blade Scalpel
 1 - .038 x 70cm J-Flex GuideWire
 1 - Tegaderm Oval
 1 - 15F x 6" Vascu-Sheath
 I - 12F x 6" Vessel Dilator
 1 - 14F x 6" Vessel Dilator
 1 - Angio GW Direction Sheet
 1 - Angio More-Flow IFU
 1 - Sheath Dilator
 1 - Tunneler w/Tri-Ball Tip
 2 - Injection Ports
 1 - 18ga x 2 3/4" Introducer Needle
 1 - .038 x 70cm J-Flex GuideWire
 1 - 2-0 Silk Suture w/Curved Needle
 1 - Fenestrated Drape
 1 - Hemostat
 1 - Tegaderm Oval
 1 - 15F x 6" Vascu-Sheath
 1 - 12F x 6" Vessel Dilator
 1 - 14F x 6" Vessel Dilator
 1 - Angio GW Direction Sheet
 1 - Angio MoreFlow IFU
 1 - Sheath Dilator
 1 - Tunneler w/Tri-Ball Tip
 2 - Injection Ports
 1 - 18ga x 2 3/4" Introducer Needle

_______________
*** Confidential material redacted and filed separately with the Commission.

Confidential Information                    18                          03/21/02



                                                                       EXHIBIT E

DuraFlow Dialysis Catheters
Exclusive Worldwide Agreement
NO MINIMUMS



- ----------------------------------------------------------------------------------------------------
PRODUCT      PRODUCT DESCRIPTION                  UNIT    7,000    11,000   14,000   16,000   18,000
NO.                                              PRICE
- ----------------------------------------------------------------------------------------------------
                                                                         
            D.F. 24cm - Full Tray - Straight     $***
- --------------------------------------------------------
            D.F. 28cm - Full Tray- Straight      $***
- --------------------------------------------------------
            D.F. 32cm - Full Tray - Straight     $***
- --------------------------------------------------------
            D.F. 36cm - Full Tray - Straight     $***
- --------------------------------------------------------
            D.F. 55cm - Full Tray - Straight     $***
- --------------------------------------------------------
            D.F. 24cm - Full Tray - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 28cm - Full Tray - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 32cm - Full Tray - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 36cm - Full Tray - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 24cm - Basic Kit - Straight     $***
- --------------------------------------------------------
            D.F. 28cm - Basic Kit - Straight     $***
- --------------------------------------------------------
            D.F. 32cm - Basis Kit - Straight     $***
- --------------------------------------------------------
            D.F. 36cm - Basic Kit - Straight     $***
- --------------------------------------------------------
            D.F. 55cm - Basic Kit - Straight     $***
- --------------------------------------------------------
            D.F. 24cm - Basic Kit - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 28cm - Basic Kit - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 32cm - Basic Kit - Pre-Curve    $***
- --------------------------------------------------------
            D.F. 36cm - Basic Kit - Pre-Curve    $***
- --------------------------------------------------------

- --------------------------------------------------------


ROW pricing will be granted by MEDCOMP upon proof of sale to non-USA market by
AngioDynamics. ROW Pricing shall be USA Price less $***.

Tray

1 - Appropriate Dura Flow catheter
1 - Raulerson Bulb Syringe
2 - CSR Wrap
4 - 4x4 Gauze Sponge
1 - Povidone Iodine Ointment
2 - 5cc Luer Lock Syringe
1 - 25ga x 5/8" Syringe
1 - 22ga 1/2" Syringe
1 - #11 Blade Scalpel
1 - Povidone Iodine Swabsticks
1 - Surgical Gloves
1 - 5cc Ampule Lidocaine
2 - 10cc Luer Lock Syringe
1 - 18ga x 1 1/2" Aspirating Needle
1 - .038 x 70cm J-Flex Guidewire
1 - 2-0 Silk Suture w/Curved Needle
1 - Fenestrated Drap
1 - Hemostat
1 - Tegaderm Oval
1 - 16F x 6" Vascu-Sheath
1 - 12F x 6" Vessel Dilator
1 - 14F x 6" Vessel Dilator
1 - Angio GW Direction Sheet
1 - Angio MoreFlow IFU
1 - Sheath Dilator
1 - Tunneler w/Tri-Ball Tip
2 - Injection Ports
1 - 18ga x 2 3/4" Introducer Needle

____________

*** Confidential material redacted and filed separately with the Commission.

Confidential Exhibits                    19                             03/21/02



More-Flow Kit

1 - Appropriate More-Flow Catheter
1 - Raulerson Bulb Syringe
1 - #11 Blade Scalpel
1 - .038 x 70cm J-Flex Guidewire
1 - Tegaderm Oval
1 - 16F x 6" Vascu-Sheath
1 - 12F x 6" Vessel Dilator
1 - 14Fx 6" Vessel Dilator
1 - Angio GW Direction Sheet
1 - Angio More-Flow IFU
1 - Sheath Dilator
1 - Tunneler w/Tri-Ball Tip
2 - Injection Ports
1 - 18ga x 2 3/4" Introducer Needle

Confidential Exhibits                    20                             03/21/02



                                                                       EXHIBIT F

HemoCath
Exclusive Worldwide Agreement
NO MINIMUMS

- --------------------------------------------------------------------------------
PRODUCT               PRODUCT         UNIT
NO.                   DESCRIPTION     PRICE
- --------------------------------------------------------------------------------
10300301              Hemo*Cath(R)    $***
- --------------------------------------------------------------------------------

Catheter

1 - Appropriate HemoCath Catheter
1 - Angio IFU

___________

*** Confidential material redacted and filed separately with the Commission.

Confidential Exhibits                    21                             03/21/02



                                                                    Exhibit 10.7


- --------------------------------------------------------------------------------

                               ANGIODYNAMICS, INC.

                                       AND

                          KEYBANK NATIONAL ASSOCIATION

================================================================================

                           LOAN AND SECURITY AGREEMENT

================================================================================

                              DATED AUGUST 28, 2002

- --------------------------------------------------------------------------------

          THIS AGREEMENT (A) AFFECTS TANGIBLE AND INTANGIBLE PERSONAL
          PROPERTY, (B) CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS,
          (C) IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT UNDER THE
          UNIFORM COMMERCIAL CODE AND (D) SECURES AN OBLIGATION UNDER
          WHICH THE INTEREST RATE MAY VARY FROM TIME TO TIME.



                           LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (the "Security Agreement") dated August
___, 2002 by and between ANGIODYNAMICS, INC., a Delaware corporation; with its
principal place of business at 603 Queensbury Avenue,. Queensbury, New York
12804 (the "Borrower"), to KEYBANK NATIONAL ASSOCIATION, a national banking
association, having an office at 66 South Pearl Street, Albany, New York 12207
(the "Holder");

                                   WITNESSETH:

     WHEREAS, the Holder will make the Loan (as herein defined) to the Borrower,
the repayment of which is evidenced the Note (as herein defined) from the
Borrower in favor of the Holder; and

     WHEREAS, the Loan will be made upon the terms, conditions and provisions
hereinafter set forth; and

     WHEREAS, as security for the payment of principal, premium, if any and
interest on the Note, the Borrower intends to grant the Holder a security
interest in certain of the assets of the Borrower as hereinafter set forth;

     NOW, THEREFORE, THIS SECURITY AGREEMENT FURTHER WITNESSETH:



                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01. DEFINITIONS OF TERMS. The following words and terms if used in
this document shall have the following meanings unless the context or use
indicates another or different meaning or intent and the singular shall include
the plural and the plural shall include the singular, as the context may
require:

     "AFFILIATE" shall mean, with respect to any Person, any other Person
directly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control a second Person if such
first Person possesses, directly or indirectly, the power to (i) vote 10% or
more of the securities having ordinary voting power for the directors or
managers of such second Person or (ii) direct or cause the direction of the
management and policies of such second Person, whether through the ownership of
voting securities, by contract or otherwise. Notwithstanding the foregoing, (x)
a director, officer, or employee of a Person shall not, solely by reason of such
status, be considered an Affiliate of such Person and (y) the Holder shall not
be considered an Affiliate of the Borrower.

     "AMORTIZATION EXPENSE" shall mean, for any period, all amortization
expenses of the Borrower, calculated in accordance with GAAP.

     "APPRAISAL" means an appraisal of the Collateral in form and substance
satisfactory to the Holder, prepared by an Appraiser, indicating a value with
respect to the Collateral.

     "APPRAISER" means an appraiser satisfactory to the Holder.

     "BONDS" shall have the meaning assigned to such term in the Reimbursement
Agreement.

     "BORROWER" means Angiodynamics, Inc., a Delaware corporation having an
address of 603 Queensbury Avenue, Queensbury, New York 12804 and its successors
and permitted assigns.

     "CASH INTEREST EXPENSE" shall mean for any period, Interest Expense,
reduced by any amount included therein which is "paid-in-kind" through an
increase to principal or the issuance of an additional debt security in a
principal amount equal to such interest.

     "CLOSING" means the closing with respect to the execution and delivery of
the Note by the Borrower to the Holder.

     "CLOSING DATE" means the date of the execution and delivery of the Note by
the Borrower to the Holder.

                                      - 2 -



     "COLLATERAL" means all property which may from time to time be subject to
the Lien of the Security Agreement.

     "DEFAULT RATE" shall have the meaning assigned to such term in the Note.

     "DEPRECIATION EXPENSE" shall mean, for any period, all depreciation
expenses of the Borrower, calculated in accordance with GAAP.

     "EBIT" shall mean, for any period, Net Income for such period, plus the sum
of the amounts for such period included in determining such Net Income of (i)
Interest Expense and (ii) Income Tax Expense, calculated in accordance with
GAAP.

     "EBITDA" shall mean, for any period, EBIT for such period, plus the sum
(without duplication) of the amounts for such period included in determining
EBIT of (i) Depreciation Expense, and (ii) Amortization Expense, calculated in
accordance with GAAP.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may from time to time be amended or supplemented, and all regulations
promulgated thereunder.

     "EVENT OF DEFAULT" means any of those events defined as Events of Default
by the terms of any of the Financing Documents.

     "FINANCING DOCUMENTS" means the Note, this Security Agreement, and any
other document now or hereafter executed by the Borrower by or in favor of the
Holder which affects the rights of the Holder in or to the Collateral, in whole
or in part, or which evidences, secures or guarantees any sum due under the Note
or any of the other Financing Documents.

     "FIXED CHARGE COVERAGE RATIO" shall mean the ratio of the Borrower's (i)
EBITDA plus lease expense less other income less Unfunded Capital Expenditures
less cash taxes paid less dividends and distributions to (ii) current maturities
of long term debt plus current portion of long term leases plus Cash Interest
Expense paid on loans and leases plus lease expense, calculated in accordance
with GAAP.

     "GAAP" means generally accepted accounting principles as then in effect,
which shall include the official interpretations thereof by the Financial
Accounting Standards Board, consistently applied.

     "GOVERNMENTAL AUTHORITY" means the United States, the State and any
political subdivision thereof, and any agency, department, commission, court,
board, bureau or instrumentality of any of them.

     "HOLDER" means KeyBank National Association., as the original owner of the
Note, and any subsequent owner at the time in question of the Note.

     "INCOME TAX EXPENSE" shall mean, for any period, all provisions for taxes
based upon Net Income (including, without limitation, any additions to such
taxes, any penalties and interest with respect thereto), calculated in
accordance with GAAP.

                                      - 3 -



     "INDEBTEDNESS" means, at a particular date, all indebtedness for money
borrowed or for the deferred purchase price of property and lease obligations of
the Borrower which have been, or which in accordance with Statement of Financial
Accounting Standards No. 13, as from time to time amended, should be,
capitalized.

     "INTEREST COVERAGE RATIO" shall mean the ratio of the Borrower's (i) EBIT
to (ii) Cash Interest Expense, calculated in accordance with GAAP.

     "INTEREST EXPENSE" shall mean, for any period, total interest expense
(including that which is capitalized, that which is attributable to capital
leases and the pre-tax equivalent of dividends payable on redeemable stock) with
respect to all outstanding Indebtedness including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and net costs under any hedging agreements.

     "LETTER OF CREDIT FEES" shall have the meaning assigned to such term in the
Reimbursement Agreement.

     "LIEN" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar title exceptions and encumbrances,
including but not limited to mechanics', materialmens', warehousemens' and
carriers' liens and other similar encumbrances, affecting real property. For the
purposes hereof, a Person shall be deemed to be the owner of Property which it
has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.

     "LOAN" means the loan in the principal amount of $800,000.00 from the Bank
to the Borrower as evidenced by the Note.

     "NET INCOME" shall mean, for any period, the net income (or loss), without
deduction for minority interests, for such period taken as a single accounting
period and calculated in accordance with GAAP.

     "NET PROCEEDS" means so much of the gross proceeds with respect to which
that term is used as remain after payment of all expenses, costs and taxes
(including attorneys' fees) incurred in obtaining such gross proceeds.

     "NOTE" means the promissory note dated the Closing Date in the principal
amount of $800,000.00 from the Borrower in favor of the Holder as said
promissory note may be amended, modified, supplemented, consolidated or extended
from time to time.

     "NOTE PAYMENT DATE" means each date on which interest or both principal and
interest shall be payable on the Note according to its terms so long as such
shall be outstanding.

                                      - 4 -



     "PERMITTED ENCUMBRANCES" means (i) Liens for taxes, assessments, or
governmental charges or levies the payment of which is not at the time required
by law; (ii) Liens imposed by law, such as Liens of landlords, carriers,
warehousemen, mechanics, and materialmen arising in the ordinary course of
business for sums not yet due or being contested by appropriate proceedings
promptly initiated and diligently conducted, provided other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance, and other types
of social security, or to secure the performance of tenders, statutory
obligations, and surety and appeal bonds, or to secure the performance and
return of money bonds and other similar obligations, excluding obligations for
the payment of borrowed money; (iv) any judgment Lien, unless the judgment it
secures shall, within thirty (30) days after the entry thereof, have been
discharged or execution therefor stayed pending appeal, or shall have been
discharged within thirty (30) days after the expiration of any such stay; (v)
other Liens (other than mechanic's liens relating to the Project) incidental to
the conduct of Borrower's business or ownership of properties and assets, which
are not incurred nor granted in connection with the borrowing of money or the
obtaining of advances or credits, and which do not in the aggregate materially
detract from the value of its property or assets or materially impair the use
thereof in the ordinary course of business; provided the aggregate amount of all
such Liens by Borrower shall not exceed $10,000.00; and (vi) Liens evidenced by
the Security Agreement as well as any other Liens in favor of Bank or any
affiliate of Bank.

     "PERSON" means an individual, partnership, corporation, limited liability
Borrower, trust or unincorporated organization, and a government or agency or
political subdivision thereof.

     "PLAN" means any plan defined in Section 4021(a) of ERISA in respect of
which the Borrower or any Subsidiary thereof is an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.

     "PRINCIPAL BALANCE" means the aggregate outstanding principal balance of
the Note from time to time.

     "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "REIMBURSEMENT AGREEMENT" means the reimbursement agreement dated as of
August 1,2002 by and between the Borrower and the Holder, as said reimbursement
agreement may be amended or supplemented from time to time.

     "REPORTABLE EVENT" means any reportable event as defined in ERISA.

     "REQUIREMENT" or "LOCAL REQUIREMENT" means any law, ordinance, order,
judgment, decree, rule, regulation, permit, license, authorization, certificate
or approval of a Governmental Authority or a Local Authority respectively.

     "SECURITY AGREEMENT" means this loan and security agreement dated the
Closing Date from the Borrower in favor of the Holder and securing the Note, as
said loan and security

                                      - 5 -



agreement may be modified, amended, supplemented, consolidated, spread or
assumed from time to time.

     "STATE" means the State of New York.

     "SUBSIDIARY" shall mean for any Person (i) any for-profit entity more than
fifty percent (50%) of the capital stock of which is owned or controlled,
directly or indirectly, by such Person or any Subsidiary and whose accounts are
required to be consolidated with those of said Person in accordance with GAAP
and (ii) any non-profit entity which is controlled, directly or indirectly, by
such Person.

     "SWAP AGREEMENT" shall have the meaning assigned to such term in the
Reimbursement Agreement.

     "TOTAL DEBT" shall mean the total of all items of Indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
on the liability side of the balance sheet as of the date of determination.

     "UNFUNDED CAPITAL EXPENDITURES" shall mean total capital expenditures minus
any corresponding increase in long-term debt or leases, calculated in accordance
with GAAP.

                                   ARTICLE II

            MAKING OF THE LOAN: CONDITIONS PRECEDENT TO THE HOLDER'S
                              OBLIGATIONS HEREUNDER

SECTION 201. MAKING OF THE LOAN.

Subject to the provisions of Section 202 hereof, the Holder shall make available
to the Borrower the proceeds of the Loan from time to time in accordance with
the terms, provisions and conditions of the Note. Provided that no Event of
Default has occurred, as the Borrower repays principal under the Note, it shall
be permitted to re-borrow until the Maturity Date provided, however, that at no
time shall the Principal Balance exceed $800,000.00.

SECTION 202. CONDITIONS.

The Holder shall not be obligated hereunder to make the Loan unless the
following conditions shall have been satisfied:

     (A)  The Holder shall have received on or before the Closing Date the
following all, where applicable, in form and substance satisfactory to the
Holder:

          1.   the executed Note,

          2.   an executed counterpart of this Security Agreement,

                                      - 6 -



          3.   (a) the commitment fees of the Holder, if any and (b) the
Holder's counsel fees,

          4.   an executed debt subordination agreement from E-Z-EM, Inc.;

          5.   the certificates and policies, if available, of insurance
required by the Security Agreement accompanied by evidence of the payment of
the premiums therefor,

          6.   Uniform Commercial Code financing statements or comparable
security instruments to evidence or perfect the security interests created or
purported to be created by the Security Agreement,

          7.   opinion of counsel for the Borrower in form and substance
satisfactory to the Holder and its counsel; and

     (B)  The Holder's counsel shall have received (and approved as appropriate)
on or before the Closing Date copies of:

          (1)  With respect to the Borrower, an executed closing certificate
together with a certified copy of the articles of incorporation as filed with
the New York Secretary of State together with all amendments thereto, a good
standing certificate issued by the New York Secretary of State, a certified copy
of the by-laws of the Borrower and an approval of the board of directors
authorizing the execution and delivery and performance of the Financing
Documents, and

          (2)  Judgment, Bankruptcy, Lien searches and UCC searches with respect
to the Borrower.

                                   ARTICLE III

                       GRANTING CLAUSES; GENERAL COVENANTS

SECTION 3.01. GRANTING CLAUSES. The Borrower, in consideration of the making of
the Loan by the Holder and for other good and valuable consideration, receipt of
which is hereby acknowledged, and in order to secure (1) the payment of the
principal of, premium, if any, and interest on the Note, issued in the original
amount of Eight Hundred and 00/100 Dollars ($800,000.00) according to its tenor
and effect (2) the payment of all other sums required to be paid hereunder and
under the other Financing Documents and (3) the performance and observance by
the Borrower of all of the covenants, agreements, representations and warranties
herein and in the other Financing Documents (collectively, the "Indebtedness");
and in order to secure the Indebtedness; hereby warrant, assign, mortgage,
hypothecate, pledge, and grant a security interest in, set over and confirm unto
the Holder and its respective successors and assigns forever, all of the estate,
right, title and interest of the Borrower in, to and under any and all assets of
the Borrower, including, but not limited to any and all of the following
described property (the "Collateral") whether now owned or held or hereafter
acquired:

                                      - 7 -



     (A)  All office, trade, manufacturing and all other equipment and all
goods, including, without limitation, machinery, tools, fixtures, computers,
furniture, furnishings, chattels, motor vehicles and other tangible personal
property that is not inventory, and all parts, components, attachments,
accessories, accessions, replacements, substitutions, additions and improvements
to any of the above (all of which is collectively called the "Equipment");

     (B)  All inventory, including, without limitation, goods acquired or held
for sale or lease or furnished or to be furnished under contracts of rental or
service, all new materials, work in process, finished goods, returned goods,
repossessed goods, all livestock and their young after conception, all crops and
timber, and all packaging materials, supplies and containers relating to or used
or consumed in connection with any of the foregoing (all of which is
collectively called the "Inventory");

     (C)  All debts, accounts, claims, demands, moneys and choses in action
which now are, or which may at any time be, due or owing to or owned by the
Borrower and all books, records, documents, papers and electronically recorded
data recording, evidencing or relating to the debts, accounts, claims, demands,
moneys and choses in action (all of which is collectively called the
"Accounts");

     (D)  All documents of title, chattel paper, instruments, securities and
money, and all other personal property, of the Borrower that is not Equipment,
Inventory or Accounts;

     (E)  All patents, trade-marks, copyrights, industrial designs, plant
breeder's rights, integrated circuit topographies, trade-names, goodwill,
confidential information, trade secrets and know-how, including without
limitation, environmental technology and bio-technology, software and any
registrations and applications for registration of the foregoing and all other
intellectual and industrial property of the Borrower (all of which is
collectively called the "Intellectual Property");

     (F)  All the Borrower's contractual rights, licenses and all other choses
in action of every kind which now are, or which may at any time be due or owing
to or owned by the Borrower, and all other intangible property of the Borrower,
that is not Accounts, chattel paper, instruments, documents of title,
Intellectual Property, securities or money;

     (G)  Any and all moneys and securities from time to time held by the Holder
under the terms of this Security Agreement, and any and all other Property of
every name and nature, from time to time hereinafter by delivery or by writing
of any kind conveyed, mortgaged, pledged, assigned or transferred as and for
additional security hereunder by the Borrower or by anyone on its behalf or with
its written consent in favor of the Holder;

     (H)  All proceeds of and any unearned premiums on any insurance policies
covering the foregoing, including, without limitation, the right to receive and
apply the proceeds of any insurance or judgments, or settlements made in lieu
thereof, for damage to any of the foregoing;

                                      - 8 -



     (I)  The right, in the name and on behalf of the Borrower, to appear in and
defend any action or proceeding brought with respect to the above or any part
thereof and to commence any action or proceeding to protect the interest of the
Holder with respect thereto;

     (J)  All other proceeds of the conversion, whether voluntary or
involuntary, of the above or any other Property or rights encumbered or conveyed
hereby into cash or liquidated claims, including, without limitation, all title
insurance, hazard insurance, Condemnation and other awards; and

     (K)  All extensions, additions, substitutions and accessions with respect
to any of the foregoing.

TO HAVE AND TO HOLD the foregoing Collateral unto the Holder and its successors
and assigns forever.

SECTION 3.02. SECURITY AGREEMENT. The Collateral includes all rights and
interest, whether tangible or intangible in nature, of the Borrower in the
Collateral. This Security Agreement shall constitute a security agreement under
the Uniform Commercial Code of the State so that the Holder shall have and may
enforce a security interest in any or all of the Collateral, such security
interest to attach at the earliest moment permitted by law and also to include
and attach to all additions and accessions thereto, all substitutions and
replacements therefor, all proceeds thereof, including insurance and
Condemnation proceeds, and all contract rights, rental or lease payments and
general intangibles of the Borrower obtained in connection with or relating to
the Collateral as well as any and all items of Property in the foregoing
classifications which are hereafter acquired. The Borrower shall, at the request
of the Holder, deliver to the Holder, any and all further instruments which the
Holder shall require in order to further secure and perfect the Lien of the
Security Agreement. Pursuant to the Uniform Commercial Code of the State, the
Borrower hereby authorizes the Holder to execute and file UCC Financing
Statements and continuation statements, at the expense of the Borrower, without
the necessity of the Borrower's signature as debtor if the Holder shall
determine that such are necessary or advisable in order to perfect its security
interest in any of the Collateral covered by this Security Agreement, and shall
pay to the Holder, on demand, any expenses incurred by the Holder in connection
with the preparation, execution and filing of such statements and any
continuation statements that may be filed by the Holder without the necessity of
the Borrower's signature as debtor.

SECTION 3.03. PERFORMANCE OF COVENANTS. The Borrower hereby covenants that it
will faithfully observe and perform, or cause to be observed and performed, at
all times any and all covenants, undertakings, stipulations and provisions on
their respective parts to be observed or performed contained in the Security
Agreement and in the other Financing Documents, including, but not limited to,
the obligation to make all payments due and owing under the Note at the time and
in the manner set forth therein.

SECTION 3.04. PRIORITY OF LIEN OF SECURITY AGREEMENT; DISCHARGE OF LIENS AND
ENCUMBRANCES. (A) The Borrower hereby covenants that the Borrower is lawfully
seized of the estate conveyed hereby and has the right to grant a security
interest in and

                                      - 9 -



Lien on the Collateral, and Borrower will warrant and defend title to the
Collateral against all claims and demands.

     (B)  The Borrower shall not permit or create or suffer to be permitted or
created any Lien, except for Permitted Encumbrances, upon the Collateral or any
part thereof.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants as follows:

     (A)  (1) The Borrower has good, marketable and insurable title to the
Collateral, subject only to Permitted Encumbrances and (2) this Security
Agreement is and will remain a valid and enforceable Lien on the Collateral;

     (B)  It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, possesses full power and
authority to consummate the transactions contemplated hereby and is authorized
to conduct business in the State of New York and in all other jurisdictions
wherein the nature of its activities requires such;

     (C)  No approval or other action by any Governmental Authority is required
in connection with the execution or performance by the Borrower of the Financing
Documents;

     (D)  The financial statements of the Borrower, if any, heretofore delivered
to the Holder are true and correct in all respects, have been prepared in
accordance with GAAP, and fairly present the respective financial conditions of
the subjects thereof as of the respective dates thereof;

     (E)  The Financing Documents and all other documents to be executed by the
Borrower in connection therewith, when executed and delivered by the respective
parties thereto, will constitute valid and binding obligations of the Borrower.
The execution and delivery by the Borrower of the Financing Documents and the
performance of the Financing Documents by the Borrower (1) have been authorized
by all necessary corporate action and (2) do not and will not conflict with, or
result in any breach of, or constitute a default under the Borrower's articles
of incorporation or by-laws or any indenture, mortgage, deed of trust, bank loan
or credit agreement or any other agreement or instrument to which the Borrower
is a party or by which the Borrower or any of its Property may be bound or
affected for which a valid consent has not been secured, or result in the
creation of any Lien (other than that created by the Financing Documents) upon
or with respect to any Property of the Borrower,

     (F)  There has been no material adverse change in the business, Property or
financial condition, taken as a whole, of the Borrower from that shown on the
financial statements delivered heretofore to the Holder;

                                     - 10 -



     (G)  There are no actions, suits or proceedings at law or in equity, or
before or by any Governmental Authority, pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Collateral or
which may materially adversely affect the financial condition of the Borrower or
involving the validity or enforceability of the Financing Documents or the
priority of the Liens thereof, and to the Borrower's knowledge it is not in
default with respect to any order, writ, judgment, decree or demand of any court
or any Governmental Authority;

     (H)  There is no default under the Financing Documents and no event has
occurred and is continuing which with notice or the passage of time or either
would constitute a default under any thereof;

     (I)  All Federal, state, county, municipal and city income and other tax
returns and other reports and documents required to have been filed by the
Borrower have been filed or alternatively the Borrower has procured lawful
extensions to file such and the Borrower has paid all fees and taxes which have
become due pursuant to such returns, reports and documents or pursuant to any
assessments received by the Borrower, and the Borrower knows of no basis for any
additional assessment in respect of any such taxes; and

     (J)  No Reportable Event or Prohibited Transaction (as defined in Section
4975 of the Internal Revenue Code) has occurred and is continuing with respect
to any Plan and the Borrower has not incurred any "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA).

                                   ARTICLE IV

                            COVENANTS OF THE BORROWER

SECTION 401. AFFIRMATIVE COVENANTS OF THE BORROWER WITH THE HOLDER.

The Borrower covenants with the Holder as follows:

     (A)  It will pay to the Holder the Holder's commitment fee and its counsel
fees and expenses promptly upon receipt of bills therefor submitted by the
Holder at the Closing and will pay all costs and expenses required to satisfy
the conditions of this Security Agreement; without limiting the generality of
the foregoing, the Borrower will pay (from moneys advanced hereunder or
otherwise):

          (1)  all taxes (other than the Holder's income taxes), filing and
recording expenses, including documentary stamp and intangible taxes, if any;

          (2)  the fees and commissions, if any, lawfully due to brokers in
connection with this transaction; and

          (3)  Appraisal fees, if any;

     (B)  It will cause all conditions to the Closing set forth herein to be
satisfied;

                                     - 11 -



     (C)  It will indemnify the Holder from claims of brokers arising by reason
of the Borrower's acts in connection with the execution and delivery hereof and
of the other Financing Documents executed by it or the consummation of the
transactions contemplated hereby or thereby and from expenses incurred by the
Holder in connection with any such claims (including reasonable attorneys' fees)
and each of the Holder and the Borrower represent that it has not dealt with any
broker in connection with the Loan nor is aware of such claims of brokers;

     (D)  It will deliver to the Holder on demand, certified copies of any
contracts, bills of sale, statements, receipted vouchers or agreements, under
which the Borrower claims title to any materials, fixtures or articles subject
to the Lien of the Security Agreement;

     (E)  The Holder may apply amounts due hereunder in accordance with the
terms hereof and amounts so applied shall be deemed part of the Loan and shall
be secured by the Security Agreement;

     (F)  It will transmit to the Holder, immediately upon receipt thereof, any
material communication adversely affecting the Holder's security and will
promptly respond fully to any inquiry of the Holder made with respect thereto;

     (G)  It will promptly respond fully to any inquiry made by the Holder with
respect to the Note or the other Financing Documents or the transactions
contemplated thereby;

     (H)  It will notify the Holder of any material adverse change in the
financial condition or business of the Borrower and furnish such other
information concerning its financial condition and business as may be reasonably
requested by the Holder from time to time;

     (I)  It will inspect the Collateral including the right to conduct field
examinations thereof at such times as the Holder may determine in its
discretion, the cost of which inspections and examinations should be borne by
the Borrower;

     (J)  It will give written notice to the Holder within ten (10) days of
becoming aware of any condition or event which constitutes an event of default
beyond any applicable grace or cure period with respect to other outstanding
debt of the Borrower;

     (K)  It will at all times keep adequate books and records, in accordance
with GAAP so that at any time, and from time to time, its financial condition
may be readily determined in all material respects; and, at Holder's request,
make and take away copies thereof;

     (L)  It will as soon as practicable after the end of each fiscal quarter in
each fiscal year, except the last, commencing with the fiscal quarter ended
August 31, 2002 and in any event within forty five (45) days thereafter, furnish
to the Holder financial statements of the Borrower for such quarter, certified
as complete and correct by the principal financial officer of the Borrower,
subject to changes resulting from year-end adjustments;

     (M)  It will as soon as practicable after the end of each fiscal year,
commencing with the fiscal year ending on or about May 31, 2003 and in any event
within one hundred twenty (120) days thereafter, furnish to the Holder (i)
annual revenue and expense budget for the current fiscal year including the
assumptions underlying the forecasts forming the basis thereof, and

                                     - 12 -



accounts receivable aging report, each prepared by the Borrower, together with
copies of filed federal income tax returns including all schedules and (ii)
annual statement of condition of the Borrower as of the end of such year, and
statements of cash flows and changes in financial position and/or changes in
fund balances as applicable of the Borrower for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified as complete and correct by the principal
financial officer of the Borrower, accompanied by a report and an unqualified
opinion of independent certified public accountants of recognized standing,
selected by the Borrower and satisfactory to the Holder, which report and
opinion shall be audited and prepared in accordance with GAAP

     (N)  It will not later than August 15th of each calendar year, furnish to
the Holder a certificate on behalf of the Borrower of the chief financial
officer to the effect that, to the best knowledge of the Borrower, no Default or
Event of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof and the actions the Borrower proposes
to take with respect thereto, which certificate shall set forth the calculation
of the calculations required to establish compliance with the provisions of
subsection (O) of this Section 401;

     (O)  It will maintain (1) a minimum Fixed Charge Coverage Ratio of 1.25 to
1.00 calculated as of each May 31st and November 30th based upon the most
recently concluded four fiscal quarters of the Borrower and (2) a minimum
Interest Coverage Ratio of 2.00 to 1.00 calculated as of each May 31st and
November 30th based upon the most recently concluded four fiscal quarters of the
Borrower.

In calculating the foregoing ratios for the periods ending November 30th, 2002
and May 31st, 2003, (i) principal shall be determined using the current
maturities of long term debt (in accordance with GAAP) on a pro-forma basis for
the twelve months following the Closing Date, (ii) Cash Interest Expense shall
be calculated as the pro-forma Cash Interest Expense for the twelve months
following the Closing Date (utilizing the appropriate amortization schedules and
interest rates for the Indebtedness, including the fixed rate achieved under the
SWAP Agreement and all Letter of Credit Fees and related fees) and (iii)
thereafter both principal and Cash Interest Expense shall be calculated on the
actual principal and Cash Interest Expense, respectively, for the period in
question.

     (P)  It will promptly inform the Holder of any pending or threatened
litigation against the Borrower or affecting any of the Borrower's property, if
such litigation or potential litigation could reasonably be expected to have a
material adverse effect on the Borrower's financial condition or to cause an
event of default;

     (Q)  It will preserve and maintain its corporate existence, all rights,
licenses, privileges, franchises, certificates and the like necessary for the
operation of its business and the maintenance of its existence where the failure
to maintain the same is reasonably expected to have a material adverse effect
upon the Borrower, and promptly and properly comply with all laws, statutes,
ordinances and governmental regulations applicable to it or to any of its
property, business operations and transactions where the failure to comply with
the same is reasonably expected to have a material adverse effect upon the
Borrower;

                                     - 13 -



     (R)  It will maintain, with financially sound and reputable insurance
companies or associations, workmen's compensation insurance, liability
insurance, and extended coverage and any other insurance of the kinds usually
carried by companies engaged in business similar to that of the Borrower, in an
amount not less than full replacement cost on its present and future properties
normally covered by insurance (less reasonable deductibles), against such
casualties, risks and contingencies as are customarily insured against, and at
the Holder's request, deliver to the Holder evidence of the maintenance of such
insurance;

     (S)  It will promptly pay when due any and all taxes, lawful claims
(whether for labor, materials or otherwise), assessments and governmental
charges upon the Borrower or against any of the Borrower's property, unless the
same is being contested in good faith by appropriate proceedings and reserves
consistent with GAAP have been established therefore;

     (T)  It will maintain all of its tangible property in good condition and
repair, and make all necessary replacements thereof where the failure to do so
would have a material adverse effect upon the Borrower or upon the value of the
Collateral; and

     (U)  It will maintain with the Holder all of the Borrower's operating and
cash management accounts.

SECTION 402. NEGATIVE COVENANTS OF THE BORROWER WITH THE HOLDER.

The Borrower covenants with the Holder as follows:

     (A)  It shall not mortgage, assign, hypothecate, grant a security interest
in, or encumber any of the Collateral, except for Permitted Encumbrances;

     (B)  It shall not endorse, guarantee, or otherwise become surety for or
contingently liable upon the obligations of any Person (provided, however, that
the foregoing shall not apply to endorsements of negotiable instruments by the
Borrower in the ordinary course of business);

     (C)  It shall not sell, assign, lease, exchange or otherwise dispose of any
of its assets used or useful in its business, except inventory or obsolete or
unused equipment in the ordinary course of business;

     (D)  It shall not sell any of its assets to any other Person with the
understanding or agreement that such assets shall be leased back to the
Borrower;

     (E)  It shall not make any loans or advances except for advances to
employees in the ordinary course of business, or sell any of its accounts
receivables with or without recourse;

     (F)  It shall not change its fiscal year or methods of accounting;

     (G)  It shall not assign or transfer, or attempt to so do, any of its
rights, powers, duties or obligations arising pursuant to this Security
Agreement;

     (H)  It shall not make any distributions or payments of dividends;

                                     - 14 -



     (I)  It shall not reorganize, merge or consolidate with, or acquire,
directly or indirectly, all or substantially all of the assets, property or
stock of any Borrower, person or other entity, sell all or substantially all of
its assets or approve a sale of all or substantially all of its stock or make
any other substantial change in its capitalization or character of its business,
without the express written consent of the Holder,

     (J)  It shall not directly or indirectly, engage in any business other than
that currently engaged in by the Borrower, discontinue any of its existing lines
of business which materially contribute to the Borrower's operations, or
substantially alter its method of doing business;

     (K)  It shall not suffer any change in the management or ownership of the
Borrower; and

     (L)  It shall not, directly or indirectly, create, incur, or assume
Indebtedness, or otherwise become, be, or remain liable with respect to, any
Indebtedness in excess of $100,000.00 in the aggregate during any fiscal year,
provided that the foregoing restrictions shall not apply to:

          (1)  the Indebtedness evidenced hereunder and any other Indebtedness
now or hereafter payable by the Borrower to the Holder or any affiliate of the
Holder;

          (2)  existing Indebtedness which is reflected on the Borrower's
financial statements referred to in Section 3.01 (F) hereof; or

(3)  Indebtedness of the Borrower evidenced by the Bonds; or

     (M)  It shall not make any payments of any kind to any other Person,
including any Affiliate of the Borrower, except for payments in the ordinary
course of business. Any Indebtedness due and owing E Z-EM, Inc. from the
Borrower (hereinafter the "Subordinated Indebtedness") shall be fully
subordinated to the repayment by the Borrower of all amounts due and owing to
the Holder hereunder and under the other Financing Documents. Provided that no
Event of Default has occurred, the Borrower may make payments of principal and
interest with respect to the Subordinated Indebtedness on a semi-annual basis
provided that after giving effect to such payment on a pro-forma basis, the
Borrower shall be in full compliance with all of the terms, provisions and
conditions set forth herein and in the other Financing Documents.

                                    ARTICLE V

                 MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

SECTION 5.01.  MAINTENANCE AND MODIFICATIONS OF COLLATERAL. The Borrower agrees
that during the period that the Note are outstanding it will (1) keep that
portion of the Collateral constituting tangible property in good condition and
repair and preserve the same against waste, loss, damage and depreciation,
ordinary wear and tear excepted, and (2) make all necessary repairs and
replacements to such portions of the Collateral or any part thereof (whether
ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen).

                                     - 15 -



SECTION 5.02.  TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) The Borrower shall
pay or cause to be paid, as the same respectively become due, (1) all taxes and
governmental charges of any kind whatsoever which may at any time be lawfully
assessed or levied against or with respect to the Collateral, (2) all utility
and other charges, including "service charges", incurred or imposed for the
operation, maintenance, use, occupancy, upkeep and improvement of the
Collateral, and (3) all assessments and charges of any kind whatsoever lawfully
made by any Governmental Authority for public improvements, provided that, with
respect to special assessments or other governmental charges that may lawfully
be paid in installments over a period of years, the Borrower shall be obligated
hereunder to pay only such installments as are required to be paid during all
periods that sums payable by the Borrower hereunder are due and owing.

     (B)  Notwithstanding the provisions of subsection (A) of this Section 5.02,
the Borrower may in good faith actively contest any such taxes, assessments and
other charges, provided that the Borrower shall have paid such taxes,
assessments and other charges if required by law to do so or provided that (1)
the Borrower first shall have notified the Holder in writing of such contest,
(2) no Event of Default exists hereunder or under the other Financing Documents,
(3) the Borrower shall have set aside adequate reserves for any such taxes,
assessments and other charges and at the option of the Holder shall have pledged
such reserves to the Holder, and (4) the Borrower demonstrates to the reasonable
satisfaction of the Holder that the nonpayment of any such items will not
materially endanger the Lien of the Security Agreement in any part of the
Collateral. Otherwise, such taxes, assessments or other charges shall be paid
promptly by the Borrower or, at the Borrower's option, secured by the Borrower's
posting a bond in form and substance satisfactory to the Holder.

SECTION 5.03.  INSURANCE REQUIRED. At all times that the Note are outstanding,
the Borrower shall maintain insurance with respect to the Collateral against
such risks and for such amounts as are customarily insured against by businesses
of like size and type, paying, as the same become due and payable, all premiums
with respect thereto, including, but not necessarily limited to:

     (A)  Insurance protecting the interests of the Borrower as insured and the
Holder as loss payee, as their interests may appear, against loss or damage to
the Collateral by fire, lightning, vandalism, malicious mischief and other
perils and casualties normally insured against with a uniform extended coverage
endorsement, such insurance at all times to be in an amount not less than the
unpaid principal amount of the Note outstanding; provided, however, that the
Borrower may, with the consent of the Holder (such consent not to be
unreasonably withheld or delayed) insure all or a portion of the Collateral
under a blanket insurance policy or policies covering not only the Collateral or
portions thereof but other Property.

     (B)  To the extent applicable, workers' compensation insurance, disability
benefits insurance and such other forms of insurance which the Borrower is
required by law to provide, covering loss resulting from injury, sickness,
disability or death of employees of the Borrower.

     (C)  Insurance protecting the Borrower and the Holder against loss or
losses from liabilities imposed by law or assumed in any written contract and
arising from personal injury or death or damage to the property of others caused
by any accident or occurrence, with limits of

                                     - 16 -



not less than $2,000,000 per person per accident or occurrence on account of
personal injury, including death resulting therefrom, and $2,000,000 per
accident or occurrence on account of damage to the property of others, excluding
liability imposed upon the Borrower by any applicable workers' compensation law,
and a separate commercial umbrella liability policy in excess of the basic
coverage stated above protecting the Borrower and the Holder with a limit of not
less than $5,000,000.

     (D)  If requested by the Holder, policies of insurance against loss or
damage to any air conditioning, heating or ventilation system, steam boilers or
other high pressure machinery, if any, as well as such other equipment as the
Holder shall designate, in an amount satisfactory to the Holder.

     (E)  Other insurance coverage required by any Governmental Authority in
connection with any Requirement.

SECTION 5.04.  ADDITIONAL PROVISIONS RESPECTING INSURANCE. All insurance
required by Section 5.03 hereof shall be procured and maintained in financially
sound and generally recognized responsible insurance companies selected by the
Borrower and authorized to write such insurance in the State and satisfactory to
the Holder. The Borrower or companies issuing the policies required by Sections
5.03(A) shall be rated "A" or better by A.M. Best Co., Inc. in the most recent
edition of Best's Key Rating Guide. Such insurance may be written with
deductible amounts comparable to those on similar policies carried by other
companies engaged in businesses similar in size, character and other respects to
those in which the Borrower is engaged. All policies evidencing such insurance
shall name the Borrower as insured and the Holder as mortgagee and loss payee
under a lender's loss payable endorsement, as their interests may appear, and
provide for at least thirty (30) days' written notice to the Borrower and the
Holder prior to cancellation, lapse, reduction in policy limits or material
change in coverage thereof. The insurance required by Sections 5.03(A) and
5.03(D) hereof shall be fully paid for and shall contain a standard
noncontributory mortgagee endorsement in favor of the Holder as mortgagee and
loss payee. All insurance required hereunder shall be in form, content and
coverage satisfactory to the Holder. Certificates satisfactory in form and
substance to the Holder to evidence all insurance required hereby shall be
delivered to the Holder on or before the Closing Date. The Borrower shall
deliver to the Holder on or before the first Business Day of each calendar year
thereafter a certificate dated not earlier than the immediately preceding
December 1 reciting that there is in full force and effect, with a term covering
at least the next succeeding calendar year, insurance in the amounts and of the
types required by Sections 5.03 and 5.04 hereof. At least thirty (30) days prior
to the expiration of any such policy, the Borrower shall furnish to the Holder
evidence that the policy has been renewed or replaced or is no longer required
hereby.

     (B)  All premiums with respect to the insurance required by Section 5.03
hereof shall be paid by the Borrower, provided, however, that if the premiums
are not timely paid, the Holder may pay such premiums and the Borrower shall pay
immediately upon demand all sums so expended by the Holder, together with
interest, to the extent permitted by law, at the Default Rate from the date on
which such payment was due until the date on which the payment is made.

                                     - 17 -



     (C)  The Borrower shall give the Holder prompt notice of any loss covered
by the insurance required in this Article, and any Net Proceeds of insurance
claims received by the Borrower shall promptly be paid over to the Holder to be
held by the Holder in accordance with the provisions of Section 5.05 hereof.

     (D)  (1)  The Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under Section 5.03 unless the Holder is included therein as a named insured with
loss payable to Holder under a standard non-contributory mortgage endorsement of
the above described character. The Borrower shall immediately notify the Holder
whenever any such separate insurance is taken out and shall promptly deliver to
the Holder the policy or policies of such insurance.

          (2)  Each of the policies required pursuant to Section 5.03 hereof
shall waive any right of subrogation against any Person insured under such
policy, and shall waive any right of the insurers to any set-off or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of any Person insured under such policy.

SECTION 5.05.  APPLICATION OF NET PROCEEDS OF INSURANCE. The Net Proceeds of the
insurance carried pursuant to the provisions of Section 5.03 hereof shall be
applied as follows: (A) the Net Proceeds of the insurance required by Section
5.03(A) and 5.03(D) hereof shall be paid to the Holder and applied toward
payment of Debt Service Payments payable pursuant to the Note and the payment of
the Borrower's obligations hereunder and (B) the Net Proceeds of the insurance
required by Section 5.03(B), 5.03(C) and 5.03(F) hereof shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds may be paid.

                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES

SECTION 6.01.  EVENTS OF DEFAULT DEFINED. The following shall be "Events of
Default" under the Security Agreement and the terms "Event of Default" or
"default" shall mean, whenever they are used in the Security Agreement, anyone
or more of the following events:

     (A)  If the Borrower fails to comply with any of the covenants, conditions
or agreements made, or to be observed, by it in the Security Agreement, other
than a covenant, condition or agreement specified in subsection (B) below, and
such failure shall have continued for a period of thirty (30) days following
written notice thereof;

     (B)  Notwithstanding the foregoing subsection (A) above, the following
shall be immediate Events of Default for which there shall be no cure period
under this Section:

          (1)  if a default by the Borrower occurs in the due and punctual
payment of any amounts specified to be paid herein or under any of the other
Financing Documents (other than any amounts payable on the Maturity Date or any
earlier date on which the entire Principal

                                     - 18 -



Balance together with all accrued but unpaid interest and all other sums
evidenced or secured by the Financing Documents shall be due and payable in
full);

          (2)  if the Borrower fails to pay any amount due on the Maturity Date
or any earlier date on which the entire Principal Balance together with all
accrued but unpaid interest and all other sums evidenced or secured by the
Financing Documents shall be due and payable in full;

          (3)  if the Borrower fails to comply with any of the covenants made by
it in the Security Agreement for which a specific time period is set forth;

          (4)  if the Borrower should fail to comply with the provisions of
Section 401 (O) or Section 402 hereof;

          (5)  if an Event of Default or a default beyond any applicable grace
or cure period under any of the other Financing Documents shall occur;

          (6)  if at any time any material representation or warranty made by
the Borrower herein or in any other instrument or document delivered by the
Borrower to the Holder in connection with the Note shall be incorrect in a
material manner;

          (7)  if at any time any insurance policy required to be maintained
pursuant to any of the Financing Documents shall be canceled, terminated or
lapse and shall not have been replaced prior to the effective date of such
cancellation, termination or lapse by a policy covering the same matters as the
lapsed policy, which new policy shall comply with all requirements in the
Financing Documents relating to such type of insurance;

          (8)  if the Borrower shall assign or conveyor attempt to assign or
convey any of its rights, duties or obligations under the Security Agreement or
the other Financing Documents;

          (9)  if the Borrower shall mortgage, grant a security interest with
respect to, encumber or otherwise transfer or convey all or any portion of the
Collateral or any interest therein, except as permitted under the terms of this
Security Agreement or the other Financing Documents;

          (10) if by order of a court of competent jurisdiction a custodian,
trustee, receiver or liquidator of the Collateral or any part thereof, or of the
Borrower, shall be appointed and such order shall not be discharged or dismissed
within sixty (60) days after such appointment;

          (11) (1) the dissolution or winding-up of the Borrower; (2) the filing
by the Borrower of a voluntary petition under Title 11 of the United States Code
or any other federal or state bankruptcy statute; (3) the failure by the
Borrower within ninety (90) days to lift any execution, garnishment or
attachment of such consequence as will impair the Borrower's ability to carry
out its obligations hereunder; (4) the commencement of a case under Title II of
the United States Code against the Borrower as the debtor or commencement under
any other federal or state bankruptcy statute of a case, action or proceeding
against any of the foregoing and
                                     - 19 -



continuation of such case, action or proceeding without dismissal for a period
of ninety (90) days; (5) the filing, grant or entry of any order for relief by a
court of competent jurisdiction under Title 11 of the United States Code or any
other federal or state bankruptcy statute with respect to the debts of the
Borrower; or (6) in connection with any insolvency or bankruptcy case, action or
proceeding, appointment by final order, judgment or decree of a court of
competent jurisdiction of a receiver or trustee of the whole or a substantial
portion of the Collateral or of the Borrower unless such order, judgment or
decree is vacated, dismissed or dissolved within ninety (90) days of its
issuance;

          (12) if any final judgment or a series of final judgments for the
payment of money in excess of $10,000 in the aggregate not covered by insurance
shall be rendered against the Borrower and the Borrower shall not discharge the
same or cause it to be discharged within sixty (60) days from the entry thereof,
or shall not appeal therefrom or from the order, decree or process upon which or
pursuant to which said judgment was granted, based or entered, and secure a stay
of execution pending such appeal;

          (13) if a notice of federal or state tax lien which affects title to
the Collateral is filed and not discharged or removed from the record within
sixty (60) days of such filing;

          (14) if the Borrower shall default beyond any applicable grace or cure
period under any other agreement or document now or hereafter in effect with the
Holder; or

          (15) if a material adverse change, in the sole judgment of the Holder
reasonably exercised, in the identity, control, condition or operations,
financial or otherwise, of the Borrower shall occur.

SECTION 6.02.  ACCELERATION; ANNULMENT OF ACCELERATION. (A) Upon the occurrence
of an Event of Default hereunder, the Holder may, by notice in writing delivered
to the Borrower declare the whole of the Indebtedness immediately due and
payable, whereupon the same shall become and be immediately due and payable,
anything in the Security Agreement or any other Financing Documents to the
contrary notwithstanding. In such event, there shall be due and payable the
total amount of Indebtedness plus all accrued but unpaid interest thereon and
all interest which will accrue thereon to the date of payment.

     (B)  At any time after the principal of the Note shall have been so
declared to be due and payable and before the entry of final judgment or decree
in any suit, action or proceeding instituted on account of such default, or
before the completion of the enforcement of any other remedy under the Security
Agreement, the Holder may at its option annul such declaration and its
consequences. No such annulment shall extend to or affect any subsequent Event
of Default or impair any right consequent thereon.

SECTION 6.03.  ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and continuance
of any Event of Default, the Holder may proceed forthwith to protect and enforce
its rights under the Security Agreement, and the other Financing Documents by
such suits, actions or proceedings as it shall deem appropriate, including,
without limitation, an action to foreclose the Lien of the Security Agreement,
in which case the Collateral or any interest therein may be sold for cash or
credit in one or more interests and in any order or manner.

                                     - 20 -



     (B)  The Holder may sue for, enforce payment of and receive any amounts due
or becoming due from the Borrower for principal, premium, if any, interest or
otherwise under any of the provisions of the Security Agreement or the other
Financing Documents, without prejudice to any other right or remedy of the
Holder.

     (C)  Regardless of the happening of an Event of Default, the Ho1der may
institute and maintain such suits and proceedings as it may be advised shall be
necessary or expedient to prevent any impairment of the security under the
Security Agreement by any acts which may be unlawful or in violation of the
Security Agreement, or to preserve or protect the interests of the Holder.

     (D)  The Holder shall have the right to appear in and defend any action or
proceeding brought with respect to the Collateral and to bring any action or
proceeding, in the name and on behalf of the Borrower, which the Holder, in its
discretion, determines should be brought to protect their interests in the
Collateral.

     (E)  Upon the occurrence and continuance of any Event of Default hereunder,
the Borrower, upon demand of the Holder, shall forthwith surrender the
possession of, and it shall be lawful for the Holder, to take possession of, all
or any part of the Collateral, together with the books, papers and accounts of
the Borrower pertaining thereto, and to hold, operate and manage the same, and
from time to time to make all needed repairs and improvements as the Holder
shall deem wise; and the Holder may sell the Collateral or any part thereof, or
lease the Collateral or any part thereof in the name and for the account of the
Borrower, collect, receive and sequester the rents, revenues, earnings, income,
products and profits therefrom, and pay out of the same all proper costs and
expenses of taking, holding leasing, selling and managing the Collateral,
including reimbursement for expenses reasonably and actually incurred by the
Holder and its agents and counsel, and any charges of the Holder hereunder, and
any taxes and other charges prior to the Lien of the Security Agreement which
the Holder may deem it wise to pay, and any expenses of such repairs and
improvements, and apply the remainder of the moneys so received in accordance
with the provisions of Section 5.05 hereof.

     Whenever all that is due under the Note shall have been paid and all
defaults made good, the Holder shall surrender possession to the Borrower; the
same right of entry, however, to exist upon any subsequent Event of Default.

     (F)  The Holder may exercise any and/or all of the rights and remedies
available to a secured party under the New York Uniform Commercial Code in such
order and in such manner as the Holder, in its sole discretion, may determine;
provided, however, that the expenses of retaking, holding, preparing for sale or
the like as provided thereunder shall include reasonable attorneys' fees and
other actual expenses of the Holder and shall be additionally secured by this
Security Agreement.

     (G)  Notwithstanding anything herein contained to the contrary, the
Borrower or anyone claiming through or under either of them (1) will not (a) at
any time insist upon, or plead, or in any manner whatever claim or take any
benefit or advantage of any stay or extension or moratorium law, any exemption
from execution or sale of the Collateral or any part thereof, wherever enacted,
now or at any time hereafter in force, which may affect the covenants and

                                     - 21 -



terms of performance of the Security Agreement, (b) claim, take or insist upon
any benefit or advantage of any law now or hereafter in force providing for the
valuation or appraisal of the Collateral, or any part thereof, prior to any sale
or sales thereof which may be made pursuant to any provision hereof, or pursuant
to the decree, judgment or order of any court of competent jurisdiction, or (c)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the Property so sold or any part
thereof, (2) hereby expressly waive all benefit or advantage of any such law or
laws, and (3) covenant not to hinder, delay or impede the execution of any power
herein granted or delegated to the Holder, but to suffer and permit the
execution of every power as though no such law or laws had been made or enacted.
The Borrower for itself and all who may claim under it, waives, to the extent
that it lawfully may, all right to have the Collateral marshaled upon any
foreclosure hereof.

SECTION 6.04.  APPOINTMENT OF RECEIVERS. Upon the occurrence of an Event of
Default hereunder and upon the filing of a suit or commencement of other
judicial proceedings to enforce the rights of the Holder under the Security
Agreement, the Holder shall be entitled, as a matter of right, without notice
and without regard to the adequacy of any security for the debt secured hereby,
to the appointment of a receiver or receivers of the Collateral and of the
revenues and receipts thereof, pending the conclusion of such proceedings and
any appeal therefrom, with such powers as the court making such appointment
shall confer. The receiver shall be entitled to occupational rent from an
owner/occupant and may upon nonpayment of said rent evict the owner/occupant.

SECTION 6.05.  APPLICATION OF MONEYS. The Net Proceeds received by the Holder or
pursuant to any right given or action taken under the provisions of this Article
VI shall, during the continuance of an Event of Default hereunder, be applied
(A) first, to the payment of the fees, costs and expenses reasonably incurred by
the Holder to operate the Collateral and protect and enforce its rights
hereunder and under the other Financing Documents, including reasonable
attorney's fees; (B) second, to the payment of all installments of interest then
due and payable on the Note; (C) third, to the payment of unpaid principal of
and premium, if any, on the Note, whether or not then due and payable; (D)
fourth, to the payment of any sum or charge (other than principal or interest)
evidenced or secured by the Security Agreement and all interest payable thereon;
(E) fifth, to the payment of interest on principal amounts then due and payable
under any other Financing Document; and (F) sixth, the balance thereof to be
applied in reduction of principal amounts then due and payable under or any
other Financing Document, with any excess remaining to be paid to the Borrower.
The Holder reserves the right to apply such Net Proceeds in any other fashion as
is shall determine.

SECTION 6.06.  REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Holder is intended to be exclusive of any other available remedy, but
each and every such remedy shall be cumulative and in addition to every other
remedy given under the Security Agreement or under any other Financing Document
now or hereafter existing at law or in equity. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Holder to exercise any remedy reserved to it of them in
this Article VI, it shall not be necessary to give any notice, other than such
notice as may be expressly required in the Security Agreement.

                                     - 22 -



SECTION 6.07.  TERMINATION OF PROCEEDINGS. In case any proceeding taken by the
Holder on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Holder,
then the Holder and the Borrower shall be restored to their former positions and
rights hereunder, and all rights, remedies and powers of the Holder shall
continue as if no such proceeding had been taken.

SECTION 6.08.  WAIVER AND NON-WAIVER OF EVENT OF DEFAULT. (A) The Holder may, in
its discretion, agree to waive, in writing, any Event of Default hereunder and
its consequences and annul any acceleration in accordance with Section 6.02
hereof. No such waiver shall extend to or affect any other existing or any
subsequent Event of Default.

     (B)  The failure of the Holder to insist upon strict performance of any
term hereof shall not be deemed to be a waiver of any term of the Security
Agreement. The Borrower shall not be relieved of the Borrower's obligations
hereunder by reason of (1) failure of the Holder to comply with any request of
the Borrower to take any action to foreclose the Security Agreement or otherwise
enforce any of the provisions hereof, (2) the release, regardless of
consideration, of the whole or any part of the Collateral, or (3) any agreement
or stipulation by the Holder extending the time of payment or otherwise
modifying or supplementing the terms of the Security Agreement or any of the
other Financing Documents. The Holder may resort for the payment of the
Indebtedness to any other security held by the Holder pursuant to the Financing
Documents in such order and manner as the Holder, in its discretion, may elect.
The Holder may take action to recover the Indebtedness, or any portion thereof,
or to enforce any covenant hereof without prejudice to the right of the Holder
thereafter to foreclose the Security Agreement. The rights of the Holder under
the Security Agreement shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of the Holder shall be
construed as an election to proceed under anyone provision herein to the
exclusion of any other provision. No waiver of any right of the Holder shall be
effective unless it is in a writing signed by an officer of the Holder.

SECTION 6.09.  REPAYMENT AND SECURING OF EXPENSES PAID BY THE HOLDER. In the
event the Holder shall pay any premiums on any policies of insurance required to
be maintained or procured by Section 5.03 hereof, or in the event the Holder
shall expend any funds for the payment of any unpaid taxes or assessments upon
the Collateral, or expend any funds in payment of any unpaid installments under
any applicable agreement for payments in lieu of taxes with any taxing entity or
pay or perform any other obligation of the Borrower under any of the Financing
Documents, then in any such event such payment shall be deemed to be secured by
the Security Agreement and shall be payable to the Holder in the manner provided
and with interest as provided herein, or if not so provided therein, shall be
payable on demand as an additional payment under the other Financing Documents
with interest at the rate of the Default Rate or the minimum amount permitted by
law, whichever is less.

SECTION 6.10.  OTHER ACTIONS BY THE HOLDER. Regardless of the happening of an
Event of Default, the Holder may institute and maintain such suits and
proceedings as it shall deem necessary or expedient to prevent any impairment of
the security under the Security Agreement by any acts which may be unlawful or
in violation of the Security Agreement, or to preserve or protect the interests
of the Holder.

                                     - 23 -



                                   ARTICLE VII

                                  MISCELLANEOUS

SECTION 7.01.  LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from the
Security Agreement or the other Financing Documents is intended or shall be
construed to give to any Person, other than the parties hereto or thereto, and
their successors and assigns, any right, remedy or claim under or with respect
to the Security Agreement or any covenants, conditions and provisions herein
contained. The Security Agreement and all of the covenants, conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
parties hereto and their successors and assigns as herein provided.

SECTION 7.02.  LAWS. If any law or ordinance is enacted or adopted which imposes
a tax, either directly or indirectly, on the Security Agreement, the Borrower
will pay, or cause to be paid, such tax, with interest and penalties thereon, if
any.

SECTION 7.03.  REVENUE STAMPS. If at any time any Governmental Authority shall
require revenue or other stamps to be affixed to the Security Agreement, the
Borrower will pay, or cause to be paid, the same, with interest and penalties
thereon, if any.

SECTION 7.04.  FURTHER ASSURANCE. The Borrower will execute and procure for the
Holder and cause to be done any further conveyances, instruments or acts of
further assurance as the Holder shall reasonably require to perfect the security
of the Holder in the Collateral intended now or hereafter to be covered by the
Security Agreement or otherwise for carrying out the intention of facilitating
the performance of the terms of the Security Agreement.

SECTION 7.05.  SATISFACTION OF SECURITY AGREEMENT. Upon the payment in full of
all of the amounts due under the Note, if the Borrower has performed and
observed all the covenants to be performed and observed hereunder and have
performed all obligations under the other Financing Documents to which they are
parties, the Holder by acceptance of the Security Agreement, agrees to execute
and deliver, any and all instruments necessary and/or appropriate to discharge
the Lien of the Security Agreement of record and to terminate UCC Financing
Statements.

SECTION 7.06.  SEVERABILITY. (A) If any provision of the Security Agreement
shall, for any reason, be held or shall, in fact, be inoperative or
unenforceable in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance or render any other provision herein contained inoperative or
unenforceable.

     (B)  The invalidity of anyone or more phrases, sentences, clauses,
paragraphs or sections in the Security Agreement shall not affect the remaining
portions of the Security Agreement or any part thereof.

SECTION 7.07.  NOTICES. An notices, certificates and other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the

                                     - 24 -



applicable address stated below by registered or certified mail, return receipt
requested, postage prepaid, or by such other means (including, without
limitation, overnight delivery) as shall provide the sender with documentary
evidence of such delivery, or (B) delivery is refused by the addressee, as
evidenced by the affidavit of the Person who attempted to effect such delivery
or such other evidence of such attempted delivery. The addresses to which
notices, certificates and other communications hereunder shall be delivered are
as follows:

TO THE BORROWER:

Angiodynamics, Inc.
603 Queensbury Avenue
Queensbury, New York 12804
Fax Number: 518-798-3625
Attention: Eamonn P. Hobbs and Joseph Gerardi

WITH A COPY TO:

Bond Schoeneck & King PLLC
111 Washington Avenue
Albany, New York 12210
Fax Number: (518) 462-7441
Attention: Kevin J. Kelley, Esq.

TO THE HOLDER:

KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Fax Number: (518) 257-8587
Attention: Bryant J. Cassella, Vice President

WITH A COPY TO:

Lemery Greisler LLC
10 Railroad Place
Saratoga Springs, New York 12866
Fax Number: (518) 581-8823
Attention: James A. Canninucci, Esq.

The Borrower and the Holder may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates and
other communications shall be sent.

SECTION 7.08.  COUNTERPARTS. The Security Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

                                     - 25 -



SECTION 7.09.  TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING The table
of contents and the headings of the several articles and sections of the
Security Agreement have been prepared for convenience of reference only and
shall not control, affect the meaning of or be taken as an interpretation of any
provision of the Security Agreement.

SECTION 7.10.  AMENDMENT, ETC. Neither the Security Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

SECTION 7.11.  WAIVER OF NOTICE. Whenever in the Security Agreement the giving
of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the Person or Persons entitled to receive such notice.

SECTION 7.12.  INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.

     (A)  The Borrower shall indemnify, defend and hold the Holder harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Loan claiming to have dealt with the Borrower,
and (ii) against any and all liability, obligations, losses, damages, penalties,
claims, actions, suits, costs, and expenses (including its reasonable attorneys'
fees, together with reasonable appellate counsel fees, if any) of whatever kind
or nature which may be imposed on or incurred by the Holder at any time pursuant
either to a judgment or decree or other order entered into by a court or
administrative agency or to a settlement reasonably approved by the Borrower,
which judgment, decree, order or settlement relates in any way to or arises out
of the offer, sale or lease of the Collateral and/or the ownership, use, or
operation of any portion of the Collateral.

     (B)  If the Holder is made a party defendant to any litigation concerning
the loan which is the subject of the Note, this Security Agreement, the
Collateral, or any part thereof, or any interest therein, or the occupancy
thereof, then the Borrower shall indemnify, defend and hold the Holder harmless
from all liability by reason of said litigation, including reasonable attorneys'
fees (together with reasonable appellate counsel fees, if any) and expenses
incurred by the Holder in any such litigation, whether or not any such
litigation is prosecuted to judgment. If the Holder commences an action against
the Borrower to enforce any of the terms hereof or to prosecute any breach by
the Borrower of any of the terms hereof or to recover any sum secured hereby,
the Borrower shall pay to the Holder such reasonable attorneys' fees (together
with reasonable appellate counsel fees, if any) and expenses. The right to such
attorneys fees (together with reasonable appellate counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If an
Event of Default occurs hereunder, the Holder may employ an attorney or
attorneys to protect its rights hereunder, and in the event of such employment
following any such Event of Default, the Borrower shall pay the Holder
reasonable attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses incurred by the Holder, whether or not an action is actually
commenced against the Borrower by reason of such breach.

                                     - 26 -



     (C)  A waiver of subrogation shall be obtained by the Borrower from its
insurance carrier and, consequently, the Borrower waives any and all right to
claim or recover against the Holder, its officers, employees, agents and
representatives, for loss of or damage to the Borrower, the Collateral, the
Borrower's property or the property of others under the Borrower's control from
any cause insured against or required to be insured against by the provisions of
this Security Agreement

     (D)  All sums payable by the Borrower hereunder shall be paid without
notice (except as may otherwise be provided herein), demand, counterclaim,
set-off, deduction or defense and without abatement, suspension, deferment,
diminution or reduction, and the obligations and liabilities of the Borrower
hereunder shall in no way be released, discharged or otherwise affected by
reason of: (i) any damage to or destruction of or any condemnation or similar
taking of the Collateral or any part thereof; (ii) any restriction or prevention
of or interference with any use of the Collateral or any part thereof; (iii) any
title defect or encumbrance or any eviction from the Collateral or any part
thereof by title superior or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation, or other like
proceeding relating to the Holder, or any action taken with respect to this
Security Agreement by any trustee or receiver of the Holder, or by any court, in
such proceeding; (v) any claim which the Borrower has, or might have, against
the Holder; (vi) any default or failure on the part of the Holder to perform or
comply with any of the terms hereof or of any other agreement with the Borrower;
or (vii) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not the Borrower shall have notice or knowledge of any of
the foregoing. The Borrower waives all rights now or hereafter conferred by
statute or otherwise to any abatement, suspension, deferment, diminution, or
reduction of any sum secured hereby and payable by the Borrower.

SECTION 7.13.  JURY TRIAL WAIVER. THE BORROWER AND THE HOLDER (BY ACCEPTANCE OF
THIS SECURITY AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING WITHOUT LIMITATION, ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THIS SECURITY AGREEMENT, AND AGREE
THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A

                                     - 27 -



MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THE NOTE AND MAKE THE LOAN.

SECTION 7.14.  RIGHT OF SET OFF. The Borrower hereby grants to the Holder, a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of Charter One Financial Inc. and its successors
and assigns, or in transit to any of them. At any time, without demand or notice
(any such notice being expressly waived by the Borrower), the Holder may set off
the same or any part thereof and apply the same to any liability or obligation
of the Borrower even though unmatured and regardless of the adequacy of any
other collateral securing the Note. ANY AND ALL RIGHTS TO REQUIRE THE HOLDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

SECTION 7.15.  EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Borrower
shall pay on demand all expenses of the Holder in connection with the
preparation, administration, default, collection, waiver or amendment of loan
terms, or in connection with the Holder's exercise, preservation or enforcement
of any of its rights, remedies or options hereunder, including, without
limitation, fees of outside legal counselor the allocated costs of in-house
legal counsel, accounting, consulting, brokerage or other similar professional
fees or expenses, and any fees or expenses associated with travel or other costs
relating to any appraisals or examinations conducted in connection with the loan
or any collateral therefor, and the amount of all such expenses shall, until
paid, bear interest at the rate applicable to principal hereunder (including any
default rate) and be an obligation secured by any collateral.

SECTION 7.16.  CHOICE OF LAW. This Security Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York (the "Governing State")
(excluding the laws applicable to conflicts or choice of law).

THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS SECURITY AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SET FORTH HEREIN. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT FORUM.

SECTION 7.17.  MERGER. This Security Agreement is intended by the parties as the
final, complete and exclusive statement of the transactions evidenced by this
Security Agreement. All prior contemporaneous promises, agreements and
understandings, whether oral or written, are deemed to be superceded by this
Security Agreement, and no party is relying on any promise,

                                     - 28 -



agreement or understanding not set forth in this Security Agreement. This
Security Agreement may not be amended or modified except by a written instrument
describing such amendment or modification executed by the Borrower and the
Holder.

IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.

                                        ANGIODYNAMICS, INC.


                                        By:  /s/ Eamonn P. Hobbs
                                             -----------------------------------
                                             Eamonn P. Hobbs, President and
                                             Chief Executive Officer

                                        KEYBANK NATIONAL ASSOCIATION


                                        By:  /s/ Bryant J. Cassela, V.P.
                                             -----------------------------------
                                             Bryant J. Cassela, Vice President

STATE OF NEW YORK  )

                   ) ss.:

COUNTY OF ALBANY   )

On the 28/th/ day of August in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared EAMONN P. HOBBS,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.


                                            /s/ Carolyn A. Wildman
                                            ------------------------------------
                                            Notary Public

                                     - 29 -



STATE OF NEW YORK  )

                   ) ss.:

COUNTY OF ALBANY   )

On the 28/th/ day of August in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared BRYANT J. CASSELLA,
personally known t() me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.


                                            /s/ Carolyn A. Wildman
                                            ------------------------------------
                                            Notary Public


[NOTARY STAMP]

                                     - 30 -



                                                                    Exhibit 10.8

                 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") dated as
of December 29, 2003 by and between ANGIODYNAMICS, INC., a Delaware corporation,
with its principal place of business at 603 Queensbury Avenue, Queensbury, New
York 12804 (the "Borrower"), to KEYBANK NATIONAL ASSOCIATION, a national banking
association, having an office at 66 South Pearl Street, Albany, New York 12207
(the "Holder");

                              W I T N E S S E T H:

     WHEREAS, in connection with the making of the Loan (as hereinafter
defined), the Borrower executed and delivered in favor of the Holder a certain
loan and security agreement dated August 28, 2002 (the "Security Agreement")
(all terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Security Agreement); and

     WHEREAS, the parties desire to modify the Security Agreement in the manner
hereinafter set forth; and

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

     1.   The following definitions set forth in Section 1.01 of the Security
Agreement are hereby amended and restated in their entirety to read as follows:

          "LOAN" means the loan in the principal amount of
          $3,000,000.00 from the Bank to the Borrower as evidenced by
          the Note.

          "NOTE" means the amended and restated promissory note dated
          as of December 29, 2003 in the principal amount of
          $3,000,000.00 from the Borrower in favor of the Holder as
          said amended and restated promissory note may be further
          amended, modified, supplemented, consolidated or extended
          from time to time.

     2.   The definition of "Interest Coverage Ratio" set forth in Section 1.01
of the Security Agreement is hereby deleted.

     3.   Section 1.01 of the Security Agreement is hereby amended to include
the following defined terms to appear in their proper alphabetical order with
Section 1.01:

     "SENIOR FUNDED INDEBTEDNESS" shall mean total Indebtedness less any
subordinated Indebtedness.

     "SENIOR LEVERAGE RATIO" shall mean the ratio of the Borrower's (i) Senior
Funded Indebtedness to (ii) EBITDA less Unfunded Capital Expenditures,
calculated in accordance with GAAP.



                                      - 2 -

     4.   Section 2.01 of the Security Agreement is hereby amended and restated
in its entirety to read as follows:

          "SECTION 201. MAKING OF THE LOAN.

          Subject to the provisions of Section 202 hereof, the Holder
          shall make available to the Borrower the proceeds of the
          Loan from time to time in accordance with the terms,
          provisions and conditions of the Note. Provided that no
          Event of Default has occurred, as the Borrower repays
          principal under the Note, it shall be permitted to re-borrow
          until the Maturity Date provided, however, that at no time
          shall the Principal Balance exceed $3,000,000.00."

     5.   Subsection (O) of Section 4.01 of the Security Agreement is hereby
amended and restated in its entirety to read as follows:

          "(O) It will (1) maintain a minimum Fixed Charge Coverage
          Ratio of 1.25 to 1.00 calculated as of each May 31st and
          November 30th based upon the most recently concluded four
          fiscal quarters of the Borrower and (2) not permit the
          Borrower's Senior Leverage Ratio to exceed 2.75 to 1.00
          calculated as of each May 31st and November 30th based upon
          the most recently concluded four fiscal quarters of the
          Borrower.

          In calculating the foregoing ratios for the periods ending
          November 30th, 2002 and May 31st, 2003, (i) principal shall
          be determined using the current maturities of long term debt
          (in accordance with GAAP) on a pro-forma basis for the
          twelve months following the Closing Date, (ii) Cash Interest
          Expense shall be calculated as the pro-forma Cash Interest
          Expense for the twelve months following the Closing Date
          (utilizing the appropriate amortization schedules and
          interest rates for the Indebtedness, including the fixed
          rate achieved under the SWAP Agreement and all Letter of
          Credit Fees and related fees) and (iii) thereafter both
          principal and Cash Interest Expense shall be calculated on
          the actual principal and Cash Interest Expense,
          respectively, for the period in question."

     6.   The Note is hereby amended and restated as set forth on Schedule "A"
attached hereto.

     7.   The Borrower hereby represents and warrants as follows:

          (i)   as of the date hereof, there is outstanding under the Note the
sum of $0.00 together with accrued and unpaid interest;

          (ii)  no Event of Default has occurred and no event has occurred with
which the passage of time or the giving of notice or both would constitute an
Event of Default;



                                      - 3 -

          (iii) there exist no defenses or offsets to the obligations of the
Borrower under the Note and the Security Agreement; and

          (iv)  the execution and delivery of this Amendment have been approved
by all necessary corporate action on the part of the Borrower.

     8.   As modified hereby, all of the terms, provisions and conditions of the
Security Agreement are hereby ratified and confirmed.

     9.   The Amendment may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.




                                      - 4 -

     IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the day and year first above written.

                                        ANGIODYNAMICS, INC.


                                        By:/s/ Joseph G. Gerardi
                                           -------------------------------------
                                           Joseph G. Gerardi, Vice President and
                                           Controller


                                        KEYBANK NATIONAL ASSOCIATION


                                        By:/s/ Bryant J. Cassella
                                           -------------------------------------
                                           Bryant J. Cassella, Senior Vice
                                           President



                                      - 5 -

                                  SCHEDULE "A"

                            AMENDED AND RESTATED NOTE



                                                                    Exhibit 10.9

                      AMENDED AND RESTATED PROMISSORY NOTE
                           (Revolving Line of Credit)

$3,000,000.00                                            As of December 29, 2003
                                                                Albany, New York

FOR VALUE RECEIVED, the undersigned, ANGIODYNAMICS, INC., a Delaware
corporation, with its principal place of business at 603 Queensbury Avenue,
Queensbury, New York 12804 (herein called the "Borrower"), hereby promises to
pay to the order of KEYBANK NATIONAL ASSOCIATION, a national banking
association, its successors and assigns (herein called the "Payee" or the
"Bank"), at such Payee's main office at 66 South Pearl Street, Albany, New York
12207, or such other location as the Payee shall designate in writing from time
to time, the unpaid amount of all sums that have been advanced to or for the
benefit of the Borrower in accordance with the terms hereof in an amount not to
exceed the principal sum of THREE MILLION AND NO/100 Dollars ($3,000,000.00),
together with interest on the disbursed, unpaid principal, or, if less, the
aggregate unpaid principal amount due hereunder as shown on records of Payee,
together with interest at the applicable rate per annum set forth herein until
paid in full. The records of the Payee maintained in the ordinary course of
business shall be prima facie evidence of the existence and amounts of the
Borrower's obligations recorded therein. All computations of interest under this
Note shall be made on the basis of a three hundred sixty (360) day year and the
actual number of days elapsed.

DEFINITIONS. As used herein, the following terms shall have the following
meanings:

     "Adjusted LIBOR Rate" - Means for any LIBOR Rate Interest Period, an
interest rate per annum equal to the sum of (A) the rate obtained by dividing
(x) the LIBOR Rate for such LIBOR Rate Interest Period by (y) a percentage equal
to one hundred percent (100%) minus the Reserve Percentage for such LIBOR Rate
Interest Period and (B) the LIBOR Rate Margin.

     "Adjusted Prime Rate" - A rate per annum equal to the sum of (a) the Prime
Rate Margin and (b) the greater of (i) the Prime Rate or (ii) one percent (1%)
in excess of the Federal Funds Effective Rate. Any change in the Adjusted Prime
Rate shall be effective immediately from and after such change in the Adjusted
Prime Rate.

     "Breakage Costs" - The cost to the Bank of re-employing funds bearing
interest at an Adjusted LIBOR Rate, incurred (or expected to be incurred) in
connection with (i) any payment of any portion of the Loan bearing interest at
an Adjusted LIBOR Rate prior to the termination of any applicable LIBOR Rate
Interest Period, (ii) the conversion of an Adjusted LIBOR Rate to any other
applicable interest rate on a date other than the last day of the relevant
interest period, or (iii) the failure of Borrower to draw down, on the first day
of the applicable LIBOR Rate Interest Period, a Loan Portion.

     "Business Day" - A day on which commercial banks settle payment in New
York.

     "Default Rate" - A per annum rate to four percent (4%) above the rate of
interest otherwise applicable to the Note.

     "Event Of Default" - Any of those events defined as an Event of Default
under this Note or any other instrument or documents executed in connection
herewith.



     "Federal Funds Effective Rate" - Shall mean, for any day, the rate per
annum (rounded upward to the nearest on one-hundredth of one percent (1/100 of
1%)) announced by the Federal Reserve Bank of Cleveland on such day as being the
weighted average of the rates on overnight federal funds transactions arranged
by federal funds brokers on the previous trading day, as computed and announced
by such Federal Reserve Bank in substantially the same manner as such Federal
Reserve Bank computes and announces the weighted average it refers to as the
"Federal Funds Effective Rate."

     "LIBOR Business Day" - A Business Day on which dealings in U.S. dollars are
carried on in the London Interbank Market.

     "LIBOR Rate" - For any LIBOR Rate Interest Period, the average rate
(rounded upwards to the nearest 1/16th) as shown in Dow Jones Markets (formerly
Telerate) (Page 3750) at which deposits in U.S. dollars are offered by first
class banks in the London Interbank Market at approximately 11:00 a.m. (London
time) on the day that is two (2) LIBOR Business Days prior to the first day of
such LIBOR Rate Interest Period with a maturity approximately equal to such
LIBOR Rate Interest Period and in an amount approximately equal to the amount to
which such LIBOR Rate Interest Period relates, adjusted for reserves and taxes
if required by future regulations. If Dow Jones Markets no longer reports such
rate or Bank determines in good faith that the rate so reported no longer
accurately reflects the rate available to Bank in the London Interbank Market,
Bank may select a replacement index.

     "LIBOR Rate Interest Period" - With respect to each amount bearing interest
at a LIBOR based rate, a period of one month, to the extent deposits with such
maturities are available to Bank, commencing on a LIBOR Business Day, as
selected by Borrower provided, however, that (i) any LIBOR Rate Interest Period
which would otherwise end on a day which is not a LIBOR Business Day shall
continue to and end on the next succeeding LIBOR Business Day, unless the result
would be that such LIBOR Rate Interest Period would be extended to the next
succeeding calendar month, in which case such LIBOR Rate Interest Period shall
end on the next preceding LIBOR Business Day and (ii) any LIBOR Rate Interest
Period which begins on a day for which there is no numerically corresponding
date in the calendar month in which such LIBOR Rate Interest Period would
otherwise end shall instead end on the last LIBOR Business Day of such calendar
month.

     "LIBOR Rate Margin" - Two and eighty five one hundredths percent (2.85 %)
per annum.

     "Loan" - The Loan of up to $3,000,000.00 by the Bank to the Borrower that
is the subject of this Note.

     "Loan Portion" - Each advance of Loan proceeds by the Bank to the Borrower.

     "Maturity Date" - November 30, 2004.

     "Prime Rate" - That interest rate established from time to time by the Bank
as the Bank's Prime Rate, whether or not such rate is publicly announced; the
Prime Rate may not be the lowest interest rate charged by the Bank for
commercial or other extensions of credit;

     "Prime Rate Margin" - one half of one percent (.50%) per annum.

     "Security Agreement" - Means the loan and security agreement dated August
28, 2002 from the Borrower in favor of the Bank, as amended by a first amendment
thereto of even date herewith, as such loan and security agreement may be
further amended or supplemented from time to time.



ADVANCES; INTEREST RATE. (A). Advances under this Note shall be reflected on the
records of the Payee. In absence of default by the Borrower, as the Borrower
makes repayments of principal, it shall be permitted to re-borrow hereunder
until the Maturity Date.

     (B)  Except as set forth below and subject, however, to the provisions of
the paragraph hereof entitled "Default", interest on the outstanding principal
balance hereof shall accrue at the Adjusted LIBOR Rate. If Bank determines
(which determination shall be conclusive and binding upon Borrower, absent
manifest error) (i) that Dollar deposits in an amount approximately equal to a
Loan Portion are not generally available at such time in the London interbank
market for deposits in Dollars, (ii) that the rate at which such deposits are
being offered will not adequately and fairly reflect the cost to Bank of
maintaining a LIBOR Rate on such Loan Portion due to circumstances affecting the
London interbank market generally, (iii) that reasonable means do not exist for
ascertaining a LIBOR Rate, or (iv) that an Adjusted LIBOR Rate would be in
excess of the maximum interest rate which Borrower may by law pay, then, in any
such event, Bank shall so notify Borrower and all Loan Portions bearing interest
at an Adjusted LIBOR Rate that are so affected shall, as of the date of such
notification with respect to an event described in clause (ii) or (iv) above, or
as of the expiration of the applicable LIBOR Rate Interest Period with respect
to an event described in clause (i) or (iii) above, bear interest at the
Adjusted Prime Rate until such time as the situations described above are no
longer in effect

     (C)  If the introduction of or any change in any law, regulation or treaty,
or in the interpretation thereof by any Governmental Authority (as described in
the Security Agreement) charged with the administration or interpretation
thereof, shall make it unlawful for Bank to maintain the interest rate
applicable to a Loan Portion at an Adjusted LIBOR Rate with respect to the Loan
Portion, or to fund a Loan Portion in Dollars in the London interbank market,
then (1) Bank shall notify Borrower that Bank is no longer able to maintain the
interest rate applicable to such Loan Portion at an Adjusted LIBOR Rate, (2) the
applicable interest rate for any such Loan Portion shall automatically be
converted to the Adjusted Prime Rate, and (3) Borrower shall pay to Bank the
amount of Breakage Costs (if any) incurred in connection with such conversion.

PAYMENTS. In the event the entire amount of any payment due hereunder is not
paid within five (5) days after the same is due a late fee equal to five percent
(5%) of the required payment will be charged by the Payee.

     Accrued interest shall be payable on the first day of the month immediately
succeeding the date of this Note, and on the first day of each succeeding month
thereafter during the term of this note and all disbursed unpaid principal
together with accrued interest will be paid in full no later than the Maturity
Date. All payments shall be applied first to the payment of all fees, expenses
and other amounts due to the Payee (excluding principal and interest), then to
accrued interest, and the balance on account of outstanding principal; provided,
however that after the occurrence of an Event of Default, payments will be
applied to the obligations of the Borrower to the Payee as the Payee determines
in its sole discretion. All payments shall be in lawful money of the United
States in immediately available funds, without counterclaim or set off and free
and clear of and without any deduction or withholding for, any taxes or other
payments.

     Notwithstanding anything to the contrary contained herein, the Borrower
shall be required to pay off in full the outstanding principal balance hereof
and maintain a zero outstanding balance hereunder for at least thirty (30)
consecutive days during the term hereof.



PREPAYMENT. The Borrower shall have the right to make prepayments of the Loan,
in whole or in part, without prepayment penalty, upon not less than three (3)
days' prior written notice to the Bank. No prepayment of all or part of the Loan
shall be permitted unless same is made together with the payment of all interest
accrued on the Loan through the date of prepayment and an amount equal to all
Breakage Costs and attorneys' fees and disbursements incurred by the Bank as a
result of the prepayment.

FEES. (A) On the date of execution and delivery of this Note and on each
one-year anniversary thereof, the Borrower shall remit to the Bank a fee in the
amount of $7,500.00.

          (B) The Borrower recognizes that the cost to the Bank of maintaining
the Loan or any Loan Portion may fluctuate and, the Borrower agrees to pay the
Bank additional amounts to compensate the Bank for any increase in its actual
costs incurred in maintaining the Loan or any Loan Portion outstanding or for
the reduction of any amounts received or receivable from the Borrower as a
result of:

          (i) any change after the date hereof in any applicable law, regulation
          or treaty, or in the interpretation or administration thereof, or by
          any domestic or foreign court, (A) changing the basis of taxation of
          payments under this Note to the Bank (other than taxes imposed on all
          or any portion of the overall net income or receipts of the Bank), or
          (B) imposing, modifying or applying any reserve, special deposit or
          similar requirement against assets of, deposits with or for the
          account of, credit extended by, or any other acquisition of funds for
          loans by the Bank (which includes the Loan or any Loan Portion)
          (provided, however, that the Borrower shall not be charged again the
          Reserve Percentage already accounted for in the definition of the
          Adjusted LIBOR Rate), or (C) imposing on the Bank, or the London
          interbank market generally, any other condition affecting the Loan,
          provided that the result of the foregoing is to increase the cost to
          the Bank of maintaining the Loan or any Loan Portion or to reduce the
          amount of any sum received or receivable from the Borrower by the Bank
          hereunder or under the other Financing Documents (as defined in the
          Security Agreement; or

          (ii) the maintenance by Bank of reserves in accordance with reserve
          requirements promulgated by the Board of Governors of the Federal
          Reserve System of the United States with respect to "Eurocurrency
          Liabilities" of a similar term to that of the applicable Loan Portion
          (without duplication for reserves already accounted for in the
          calculation of a LIBOR Rate pursuant to the terms hereof).

          (C) If the application of any law, rule, regulation or guideline
adopted or arising out of the July, 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption after
the date hereof of any other law, rule, regulation or guideline regarding
capital adequacy, or any change after the date hereof in any of the foregoing,
or in the interpretation or administration thereof by any domestic or foreign
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank, with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has the effect
of reducing the rate of return on the Bank's capital to a level below that which
the Bank would have achieved but for such



application, adoption, change or compliance (taking into consideration the
policies of Bank with respect to capital adequacy), then, from time to time the
Borrower shall pay to the Bank such additional amounts as will compensate the
Bank for such reduction with respect to any Loan Portion outstanding.

     Any amount payable by the Borrower under subsection (B) or subsection (C)
of this Section shall be paid within five (5) days of receipt by the Borrower of
a certificate signed by an authorized officer of the Bank setting forth the
amount due and the basis for the determination of such amount, which statement
shall be conclusive and binding upon the Borrower, absent manifest error.
Failure on the part of the Bank to demand payment from the Borrower for any such
amount attributable to any particular period shall not constitute a waiver of
the Bank's right to demand payment of such amount for any subsequent or prior
period. The Bank shall use reasonable efforts to deliver to the Borrower prompt
notice of any event described in subsection (A) or (B) above, of the amount of
the reserve and capital adequacy payments resulting therefrom and the reasons
therefor and of the basis of calculation of such amount; provided, however, that
any failure by the Bank to so notify the Borrower shall not affect the
Borrower's obligation to pay the reserve and capital adequacy payment resulting
therefrom.

DEFAULT. Upon the occurrence of one or more Events of Default, the entire
principal and interest on this Note shall become immediately due and payable
without presentment or protest or other notice of demand, all of which are
expressly waived by the Borrower. If the Bank, in its sole and absolute
discretion, elects not to demand payment by the Borrower, notwithstanding said
failure to demand, the Bank shall be under no obligation to make advances
pursuant to the terms of this Note unless and until the Event of Default is
cured to the satisfaction of the Bank. Anyone or more of the following shall
constitute an Event of Default:

          (A) Upon the failure of the Borrower to pay any part of the principal
of this Note on the Maturity Date or interest on this Note when due and payable;
or

          (B) The occurrence of an event of default under the Security Agreement

     If an Event of Default should occur and be continuing or after the Maturity
Date or after judgment has been rendered on this Note, all Loan Portions shall
bear interest at the Default Rate until the earlier of (i) the Event of Default
is cured, or (ii) all Loan Portions are paid in full.

     The powers and remedies given hereby shall not be exclusive of any other
powers and remedies available to the Payee. No course of dealings between the
Borrower and the Payee and no delay on the part of the Payee in exercising any
rights with respect to any default shall operate as a waiver of any rights of
the Payee. Failure upon the part of the Payee to exercise any rights with
respect to any default shall not operate as a waiver of any rights with respect
to any other default.

PARTIAL INVALIDITY. If any provision of this Note or the application of it to
any person or circumstance, shall be invalid or unenforceable, the remainder of
this Note or the application of that provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected and every other provision of this Note shall be valid and fully
enforceable.

WAIVER, CHANGE, MODIFICATION OR DISCHARGE. This Note may not be waived, changed,
modified or discharged orally, but only by agreement in writing signed by the
party against whom any enforcement of any waiver, change, modification or
discharge is sought.



COVENANT AGAINST USURY. All agreements between the Borrower and the Bank are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Bank for the use or
the forbearance of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however that in the
event there is a change in the law which results in a higher permissible rate of
interest, then this Note shall be governed by such law as of its effective date.
In this regard, it is expressly agreed that it is the intent of the Borrower and
the Bank in the execution, delivery and acceptance of this Note to contract in
strict compliance with the laws of the State of New York from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof at the time of performance of such provision shall be due,
shall involve transcending the limit of such validity prescribed by applicable
law, then the obligation to be fulfilled shall automatically be reduced to the
limits of such validity, and if under or from circumstances whatsoever the Bank
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Borrower and the Bank.

WAIVER OF DILIGENCE, PRESENTMENT, DEMAND, ETC. The Borrower hereby waives with
respect to this Note: diligence, presentment, demand for payment, filing of
claims with a court in the event of bankruptcy of the Borrower or any other
person or entity liable in respect to this Note, any right to require a
proceeding first against the Borrower or any other such person; protest, notice
of dishonor or nonpayment of any such liabilities and any other notice and all
demands whatsoever except as specifically set forth in this Note.

TRANSFER AND ASSIGNMENT OF NOTE; PLEDGE OF RIGHTS: PARTICIPATION. (A) The Bank
shall have the right in its discretion to transfer ownership of this Note and
the security therefor or to assign, as collateral or otherwise, its rights
hereunder, including the right to receive payments of principal and interest, in
all instances without prior notice to or the consent of the Borrower.
Additionally, the Bank may at any time pledge all or any portion of its rights
under this Note to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release the Bank from its obligations hereunder.

          (B) The Bank shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to the Borrower, to grant to
one or more banks or other financial institutions (each, a "Participant")
participating interests in the Bank's obligation to lend hereunder and/or any or
all of the loans held by the Bank hereunder. In the event of any such grant by
the Bank of a participating interest to a Participant, whether or not upon
notice to the Borrower, the Bank shall remain responsible for the performance of
its obligations hereunder and the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
hereunder.

     The Bank may furnish any information concerning the Borrower in its
possession from time to time to prospective Assignees and Participants, provided
that the Bank shall require any such



prospective Assignee or Participant to agree in writing to maintain the
confidentiality of such information.

JURY TRIAL WAIVER. THE BORROWER AND THE BANK (BY ACCEPTANCE OF THIS NOTE)
MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE BANK RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF
THIS NOTE, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE
LOAN.

RIGHT OF SET OFF. The Borrower hereby grants to the Bank, a continuing lien,
security interest and right of setoff as security for all liabilities and
obligations to the Bank, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Bank or any entity under the
control of KeyCorp and its successors and assigns or in transit to any of them.
At any time, without demand or notice (any such notice being expressly waived by
the Borrower), the Bank may set off the same or any part thereof and apply the
same to any liability or obligation of the Borrower even though unmatured and
regardless of the adequacy of any other collateral securing this Note. ANY AND
ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT
OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Borrower shall pay on
demand all expenses of the Payee in connection with the preparation,
administration, default, collection, waiver or amendment of loan terms, or in
connection with the Payee's exercise, preservation or enforcement of any of its
rights, remedies or options hereunder, including, without limitation, fees of
outside legal counsel or the allocated costs of in-house legal counsel,
accounting, consulting, brokerage or other similar professional fees or
expenses, and any fees or expenses associated with travel or other costs
relating to any appraisals or examinations conducted in connection with the loan
or any collateral therefor, and the amount of all such expenses shall, until
paid, bear interest at the rate applicable to principal hereunder (including any
default rate) and be an obligation secured by any collateral.



CHOICE OF LAW. This Note and the rights and obligations of the parties hereunder
shall be construed and interpreted in accordance with the laws of the State of
New York (the "Governing State") (excluding the laws applicable to conflicts or
choice of law).

     THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE
BROUGHT IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SET FORTH HEREIN. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT FORUM.

MERGER. This Note is intended by the parties as the final, complete and
exclusive statement of the transactions evidenced by this Note. All prior
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Note, and no party is relying on
any promise, agreement or understanding not set forth in this Note. This Note
may not be amended or modified except by a written instrument describing such
amendment or modification executed by the Borrower and the Bank.

USE OR PROCEEDS. No portion of the proceeds of this Note shall be used, in whole
or in part, for the purpose of purchasing or carrying any "margin stock" as such
term is described in Regulation U of the Board of Governors of the Federal
Reserve System.

LOST OR DAMAGED NOTE. Upon receipt of an affidavit of an officer of the Holder
as to the loss, theft, destruction or mutilation of this Note or any other
security document which is not of public record, and, in the case of any such
loss, theft, destruction or mutilation, upon surrender and cancellation of such
Note or other security document, the Holder will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.

AMENDMENT AND RESTATEMENT. This Amended and Restated Note amends and restates
that certain promissory note dated August 28, 2002 in the principal amount of
$800,000.00 from the Borrower in favor of the Holder.

ANGIODYNAMICS, INC.


By: /s/ Joseph G. Gerardi
   -------------------------------------
        Joseph G. Gerardi, Vice President
        and Controller



                                                                   EXHIBIT 10.10

                             BUILDING LOAN AGREEMENT
                             -----------------------

THIS BUILDING LOAN AGREEMENT dated as of August 1, 2002 (the "Building Loan
Agreement") by and between ANGIODYNAMICS, INC., a corporation organized and
existing under the laws of the State of Delaware, having a place of business at
603 Queensbury Avenue, Queensbury, New York 12804 (the "Company"), and KEYBANK
NATIONAL ASSOCIATION, a national banking association having an office for the
transaction of business at 66 South Pearl Street, Albany, New York 12207 (the
"Bank").

                              W I T N E S S E T H:

     WHEREAS, the Company has requested the COUNTIES OF WARREN AND WASHINGTON
INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New
York (the "State") having an office for the transaction of business located at 5
Warren Street, Glens Falls, New York 12801 (the "Issuer"), to undertake a
project consisting of (A)(i) the acquisition of an interest in a certain parcel
or parcels of land located at 603 Queensbury Avenue, Town of Queensbury, County
of Warren, State of New York (the "Land"), (ii) the acquisition thereon of an
approximately 32,000 square foot facility (the "Existing Facility"), together
with equipment therein (the "Existing Equipment"), (iii) the making of certain
renovations to the Existing Facility (as so renovated, the "Improvements")
consistent with its present and authorized use, (iv) the construction of
approximately 32,000 square feet of additions(s) to the Existing Facility, (v)
the purchase of additional equipment (together with the Existing Equipment, the
"Equipment" and, together with the Land and the Facility, the "Project") and (B)
the financing of a part of the cost of the foregoing by issuing its tax-exempt
Industrial Development Revenue Bonds (the "Bonds") in an aggregate principal
amount not to exceed $4,500,000.00, all pursuant to Title 1 of Article 18-A of
the General Municipal Law of the State of New York (collectively, the "Act"), as
amended, the proceeds of which may be applied to the costs of issuance, and, as
necessary and appropriate, the provision of a debt service reserve fund,
capitalized interest or other means of providing credit enhancement for the
Bonds; and (C) to lease (with the option to purchase) and/or sell the Project to
the Company, all pursuant to the Act; and

     WHEREAS, the Issuer proposes to finance a portion of the costs of the
Project by the issuance of its Tax-Exempt Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Angiodynamics, Inc. Project), Series 2002, in the
aggregate principal amount of $3,500,000 (the "Bonds"), which are to be issued
under and secured by an Indenture of Trust dated as of August 1, 2002 (the
"Indenture") by and between the Issuer and The Huntington National Bank,
Cleveland, Ohio as trustee (the "Trustee"); and

     WHEREAS, to secure the Bonds, the Company (sometimes referred to as the
"Applicant") and the Bank have entered into a reimbursement agreement dated as
of August 1, 2002 (the "Reimbursement Agreement") pursuant to which the Bank is
to issue in favor of the Trustee its irrevocable transferable letter of credit
(the "Letter of Credit"), and the Applicant agrees to reimburse the Bank for any
amount drawn on the Letter of Credit; and

     WHEREAS, the Issuer and the Company, as security for the performance of the
Company's obligations under the Reimbursement Agreement will execute and deliver
to the Bank a mortgage, dated as of August 1, 2002, on, and security interest in
the Project (the "Mortgage"); and

     WHEREAS, all things necessary to constitute the Mortgage as a valid lien on
and pledge of the Mortgaged Property (as defined in the Mortgage) in accordance
with the terms thereof have been or are to



be done and performed, and the creation, execution and delivery of the Mortgage,
as security for the Company's obligations under the Reimbursement Agreement have
in all respects been duly authorized;

     WHEREAS, pursuant to the Indenture, the proceeds of the sale of the Bonds
(the "Bond Proceeds") will be deposited into various trust funds held by the
Trustee under the Indenture and will be disbursed by the Trustee from time to
tome to pay the costs of the Project, but only upon satisfaction of the
requirements for making such disbursements set forth in the Indenture, in the
Installment Sale Agreement, in the Reimbursement Agreement and the Building Loan
Agreement.

     NOW, THEREFORE, FOR AND IN CONSIDERATION OF THE PREMISES AND THE MUTUAL
COVENANTS HEREINAFTER CONTAINED, THE PARTIES HERETO HEREBY FORMALLY COVENANT,
AGREE AND BIND THEMSELVES AS FOLLOWS TO WIT:

                                    ARTICLE 1
                                    ---------

                              TERMS AND DEFINITIONS
                              ---------------------

     In addition to the other terms hereinafter defined, the following terms
shall have the meanings set forth in this Article. References to documents and
other materials shall include those documents and materials as they may be
revised, amended and modified, from time to time, with the prior written
approval of Bank.

     1.1   Advance. "Advance" means any disbursement of the proceeds of the Loan
by Bank pursuant to the terms of this Agreement.

     1.2   Approval. "Approval", "Approved", "approval" or "approved" means, as
the context so determines, an approval in writing given to the party seeking
approval after full and fair disclosure to the party giving approval of all
material facts necessary in order to determine whether approval should be
granted.

     1.3   Architect. "Architect" means any architect who provides labor or
services in connection with the construction of the Improvements pursuant to an
Architect Contract.

     1.4   Architect Contract. "Architect Contract(s)" means any contract
entered into by Company and any Architect.

     1.5   Building Loan Budget. "Building Loan Budget" means that portion of
the Construction Budget being advanced pursuant to this Agreement.

     1.6   Completion Date. "Completion Date" shall have the meaning assigned to
such term in the Indenture.

     1.7   Commitment. "Commitment" means the commitment letter dated May 6,
2002 from the Bank to the Company for issuance of the Letter of Credit.

     1.8   Construction Budget. "Construction Budget" means the budget for total
estimated Project Costs, submitted by Company, approved by Bank, as amended from
time to time with the approval of Bank, which includes: (a) a line item cost
breakdown for construction of the Improvements by trades, jobs and
subcontractors (the "Direct Cost Breakdown"); (b) a line item cost breakdown for

                                        2



Indirect Costs (the "Indirect Cost Breakdown"); and (c) a schedule of the
sources of funds to pay Project Costs, indicating by item the portion of Project
Costs to be funded through the Loan and Required Equity Funds (the "Source of
Funds Schedule"), and which shall indicate which items are a part of the
Building Loan Budget and which items are a part of the Project Loan Budget.

     1.9   Construction Contract(s). "Construction Contract(s)" means any
contract entered into by Company and any Contractor providing for the
performance of work or the supplying of materials in connection with the
construction of the Improvements.

     1.10  Construction Inspector. "Construction Inspector" means at Bank's
option, either an officer or employee of Bank or other consulting architects,
engineers or inspectors appointed by Bank.

     1.11  Construction Schedule. "Construction Schedule" means the schedule,
broken down by trade, of the estimated dates of commencement and completion of
the Improvements, submitted by Company and approved by Bank.

     1.12  Intentionally Omitted.

     1.13  Contractor. "Contractor" means any contractor who provides labor or
materials in connection with the construction of the Improvements pursuant to a
Construction Contract.

     1.14  Costs of Improvement. "Costs of Improvement" means those items
defined as such under Section 2(5) of Article 1 of the Lien Law, as such term
applies to the portion of the Project being financed with that portion of the
Loan being advanced hereunder.

     1.15  Credit Documents. "Credit Documents" shall have the meaning set forth
in the Reimbursement Agreement.

     1.16  Disbursement Schedule. "Disbursement Schedule" means the schedule of
the amounts of Advances anticipated to be requisitioned by Company each month
during the term of construction of the Improvements (including an itemization of
direct costs and Indirect Costs to be included in each such requisition),
approved by Bank.

     1.17  Draw Request. "Draw Request" means, with respect to each Advance,
Company's request for such Advance, and documents required by this Agreement to
be furnished to Bank as a condition to such Advance.

     1.18  Event of Default. "Event of Default" means any condition or event
described herein as such.

     1.19  Governmental Approvals. "Governmental Approvals" means all approvals,
consents, waivers, orders, acknowledgments, authorizations, permits and licenses
required under applicable Requirements to be obtained from any Governmental
Authority for the construction of the Improvements and the use, occupancy and
operation of the Project following completion of construction of the
Improvements.

     1.20  Governmental Authority. "Governmental Authority" means the United
States of America, the state(s) in which the Land is located and Company and
Guarantor are located or organized, any political subdivision thereof,
municipalities in which the Land is located, and any agency, authority,
department, commission, board, bureau, or instrumentality of any of them.

                                        3



     1.21  Intentionally Omitted.

     1.22  Intentionally Omitted. Guaranty means the guaranty by Guarantor of
Company's obligations under the Credit Documents.

     1.23  Improvements. "Improvements" shall have the meaning set forth in the
first WHEREAS paragraph above, in accordance with the Plans and Specifications.

     1.24  Indirect Costs. "Indirect Costs" mean and include title insurance
premiums, survey charges, engineering fees, architectural fees, real estate
taxes during the period of construction, commitment fees and interest payable to
Bank under the Loan, premiums for insurance, legal fees and all other expenses
which are, in accordance with sound accounting practices, capital expenditures
relating to the Project.

     1.25  Land. "Land" means the real property described in Exhibit A attached
hereto.

     1.26  Lien Law. "Lien Law" means the Lien Law of the State of New York.

     1.27  Loan. "Loan" means the Bond issuance which is the subject of this
Agreement.

     1.28  Loan Amount. "Loan Amount" means $3,500,000.00 which is the amount of
the Bonds.

     1.29  Intentionally Omitted.

     1.30  Payment and Performance Bonds. "Payment and Performance Bonds" mean
dual-obligee payment and performance bonds relating to the Contractor and/or
such major subcontractors, as Bank may require from time to time, issued by a
surety company or companies acceptable to Bank, in each case in an amount not
less than the full contract price.

     1.31  Personal Property. "Personal Property" means materials, furnishings,
fixtures, machinery, equipment including the Equipment and all items of tangible
and intangible personal property now or hereafter owned by Company, wherever
located, and either (i) to be incorporated into the Improvements, (ii) used in
connection with the construction of the Improvements or (iii) to be used in
connection with the operation of the Land or Improvements or both.

     1.32  Phase I: "Phase I" means any environmental assessment report of the
Land submitted by Company to Bank in connection with the issuance of the Letter
of Credit.

     1.33  Plans and Specifications. "Plans and Specifications" means the plans
and specifications for the Improvements prepared by Architect and previously
submitted to Bank.

     1.34  Project. "Project" means the collective reference to (i) the Land;
(ii) the Improvements; (iii) all of the Company's developmental rights and other
rights, privileges, easements, hereditaments and appurtenances relating or
appertaining thereto, and (iv) the Personal Property.

     1.35  Project Costs. "Project Costs" means the costs of undertaking the
construction and installation of the Project.

                                        4



     1.36  Project Loan Budget. "Project Loan Budget" means that portion of the
Construction Budget being advanced to acquire the Land and for other
non-allowable Costs of Improvements under the Lien Law.

     1.37  Property. "Property" means the collective reference to the (i) Land;
(ii) the Improvements; and (iii) the "Personal Property".

     1.38  Required Equity Funds. "Required Equity Funds" means the sums, if
any, required of Company by Bank, to be available to pay the difference between
Project Costs and the amount of the Loan.

     1.39  Requirements. "Requirements" means any law, ordinance, order, rule or
regulation of any Governmental Authority relating in any way to the Project,
Company or Guarantor.

     1.40  Taking. "Taking" shall mean any condemnation for public use of, or
damage by reason of, the action of any Governmental Authority, or any transfer
by private sale in lieu thereof, either temporarily or permanently.

     1.41  Termination Date. "Termination Date" means the earlier of August 29,
2005, or such other date as may be set forth herein which fixes the termination
of Bank's obligations to make Advances.

                                    ARTICLE 2
                                    ---------

                              Intentionally deleted

                                    ARTICLE 3
                                    ---------

                    REPRESENTATIONS AND WARRANTIES OF COMPANY
                    -----------------------------------------

     Company hereby represents and warrants to Bank as follows:

     3.1   Validity of Credit Documents. That the Credit Documents are in all
respects valid and legally binding obligations, enforceable in accordance with
their respective terms, subject to those exceptions in the legal opinions issued
to Bank, and grant to Bank a direct, valid and enforceable first mortgage lien
on and security interest in and to the Project, including any and all Personal
Property acquired by Company after the date of this Agreement.

     3.2   Title to Project. That based upon a review of the title insurance
policy issued to Bank, Issuer has good clear record and marketable fee simple
absolute title to the Land, subject to no liens, security interests, charges or
encumbrances in favor of any person other than Bank other than those listed as
exceptions in the Title Insurance Policy, as defined herein.

     3.3   Absence of Conflicts. That the execution and delivery of the Credit
Documents by Company and any Guarantor do not, and the performance and
observance by Company and any Guarantor of their obligations thereunder will
not, contravene or result in a breach of their corporate documents.

                                        5



     3.4   Pending Litigation. That there are no actions, suits, investigations
or proceedings pending, or, to the knowledge of Company, threatened against or
affecting Company, or involving the validity or enforceability of any of the
Credit Documents or the priority of the lien thereof, or which will affect
Company's ability to repay the Loan, at law or in equity or before or by any
Governmental Authority.

     3.5   Violations of Requirements. That Company has no knowledge of any
violations or notices of violations of any Requirements.

     3.6   Compliance with Requirements. That the Plans and Specifications and
construction of the Improvements pursuant thereto and the use of the Project
contemplated thereby will comply with all Requirements.

     3.7   Organization, Status and Authority.

           The Company (i) is duly organized, validly existing and in good
     standing under the laws of the State of Delaware, (ii) it is duly qualified
     to do business and is in good standing in the State of New York, (iii) it
     has the requisite power, authority and legal right to own and operate its
     properties and assets, carry on the business now being conducted and
     subject to the issuance of additional licenses, permits and other approvals
     which Company reasonably believes will be granted in due course, proposed
     to be conducted by it, and to engage in the transactions contemplated by
     the Credit Documents, and (iv) the execution and delivery of the Credit
     Documents to which it is a party and the performance and observance of the
     provisions thereof have been duly authorized by all necessary company
     actions.

     3.8   Availability of Utilities. That all utility services necessary and
sufficient for the construction, development and operation of the Project for
its intended purposes are presently available to the boundaries of the Land
through dedicated public rights of way or through perpetual private easements,
approved by Bank, with respect to which the Mortgage creates a valid, binding
and enforceable first lien, including, but not limited to, water supply, storm
and sanitary sewer, gas, electric and telephone facilities, and drainage.

     3.9   Condition of Project. That neither the Project nor any portion
thereof is now damaged or injured as result of any fire, explosion, accident,
flood or other casualty or has been the subject of any Taking, and to the
knowledge of Company, no Taking is pending or contemplated.

     3.10  Brokerage Commissions. That any brokerage commissions due in
connection with the transactions contemplated hereby have been paid in full and
that any such commissions coming due in the future will be promptly paid by
Company. Company agrees to and shall indemnify Bank from any liability, claims
or losses arising by reason of any such brokerage commissions. This provision
shall survive the repayment of the Loan and shall continue in full force and
effect so long as the possibility of such liability, claims or losses exists.

     3.11  Financial Statements. That the financial statements of Company
previously delivered to Bank are true and correct in all respects, have been
prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the respective financial conditions of
Company as of the respective dates thereof and the results of their operations
for the periods covered thereby; that no adverse change has occurred in the
assets, liabilities, or financial conditions reflected therein since the
respective dates thereof.

                                        6



     3.12  Taxes. That all federal, state and other tax returns of Company
required by law to be filed have been filed or alternatively the Company has
received a valid extension with respect to the filings thereof, that all
federal, state and other taxes, assessments and other governmental charges upon
Company and any Guarantor or their respective properties which are due and
payable have been paid or extended as allowable by law, and that Company have
set aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods for which such returns have been
filed.

     3.13  Other Contracts. That Company has made no contract or arrangement of
any kind or type whatsoever (whether oral or written, formal or informal) other
than title exceptions of record and permitted encumbrances, the performance of
which by the other party thereto could give rise to a lien or encumbrance on the
Project, except for contracts (all of which have been disclosed in writing to
Bank) made by Company with parties who have executed and delivered lien waivers
to Company, and which, in the opinion of Bank's counsel, will not create rights
in existing or future lien claimants which may be superior to the lien of the
Mortgage.

     3.14  Construction Contract. That (i) all Construction Contract(s) are in
full force and effect; (ii) both Company and Contractor are in full compliance
with their respective obligations under any Construction Contract; (iii) the
work to be performed by Contractor under the Construction Contract is the work
called for by the Plans and Specifications and all work required to complete the
Improvements in accordance with the Plans and Specifications is provided for
under the Construction Contract(s); and (iv) all work on the Improvements shall
be completed in accordance with the Plans and Specifications in a good and
workmanlike manner and shall be free of any defects.

     3.15  Access. That the rights of way for all roads necessary for the full
utilization of the Improvements for their intended purposes have either been
acquired by the Company, the appropriate Governmental Authority or have been
dedicated to public use and accepted by such Governmental Authority, and all
such roads shall have been completed, or all necessary steps shall have been
taken by Company and such Governmental Authority to assure the complete
construction and installation thereof prior to the date upon which access to the
Property via such roads will be necessary. All curb cuts, driveway permits and
traffic signals shown on the Plans and Specifications or otherwise necessary for
access to the Property are existing or have been fully approved by the
appropriate Governmental Authority.

     3.16  No Default. That no Event of Default exists and no event which but
for the passage of time, the giving of notice or both would constitute an Event
of Default has occurred.

     3.17  Architect's Contract. That (i) the Architect's Contract(s) are in
full force and effect; and (ii) both Company and Architect are in full
compliance with their respective obligations under the Architect's Contract(s).
Company shall from time to time, upon request by Bank, cause Architect to
provide Bank with reports in regard to the status of construction of the
Improvements, in such form and detail as reasonably requested by Bank.

     3.18  Plans and Specifications. That Company has furnished Bank true and
complete sets of the Plans and Specifications which comply with all
Requirements, all Governmental Approvals, and all restrictions, covenants and
easements affecting the Project, and which have been approved by the Contractor,
Architect, and such Governmental Authority as is required for construction of
the Improvements.

                                        7



     3.19  Governmental Approvals. That Company has obtained all Governmental
Approvals from, and has given all such notices to, and has taken all such other
actions with respect to such Governmental Authority as may be required under
applicable Requirements for the construction of the Improvements.

     3.20  Building Loan Budget. That the Building Loan Budget accurately
reflects those portions of the Construction Budget which are to be advanced
pursuant to this Agreement.

     3.21  Construction Budget. That the Construction Budget accurately reflects
all Project Costs.

     3.22  Feasibility. That each of the Construction Schedule and the
Disbursement Schedule is realistic and feasible, and is accurate to date.

     3.23  Effect of Draw Request. That each Draw Request submitted to Bank as
provided in Article 6 hereof shall constitute an affirmation that the
representations and warranties contained in Article 3 of this Agreement and in
the other Credit Documents remain true and correct as of the date thereof; and
unless Bank is notified to the contrary, in writing, prior to the disbursement
of the requested Advance or any portion thereof, shall constitute an affirmation
that the same remain true and correct on the date of such disbursement.

                                    ARTICLE 4
                                    ---------

                              COVENANTS OF COMPANY
                              --------------------

     Company hereby covenants and agrees with Bank as follows:

     4.1   Commitment. To permit no default under the terms of the Commitment.

     4.2   Construction Contract. (i) to enter into no Construction Contract
that is not a fixed-price contract or a guaranteed maximum cost contract; (ii)
to permit no default under the terms of any Construction Contract; (iii) to
waive none of the material obligations of Contractor thereunder, (iv) to do no
act which would relieve Contractor from its obligations to construct the
Improvements according to the Plans and Specifications;(v) to make no material
amendments to or change orders under any Construction Contract without the prior
approval of Bank; provided, however, that the prior approval of Bank shall not
be required for individual change orders of less than $15,000.00 so long as such
change order, together with change orders previously made does not cause the
aggregate amount of change orders under all Construction Contracts to exceed
$15,000.00 and so long as such change order does not materially affect the
quality of materials or work.

     4.3   Architect's Contract. (i) To permit no default under the terms of any
Architect's Contract, (ii) to waive none of the obligations of Architect
thereunder, (iii) to do no act which would relieve Architect from its
obligations under any Architect's Contract, and (iv) to make no amendments to
any Architect's Contract without the prior approval of Bank.

     4.4   Insurance. To obtain insurance or evidence of insurance as Bank may
reasonably require, including, but not limited to, the following:

           (a)  Title Insurance. A mortgagee title insurance policy (the "Title
     Insurance Policy") in an amount, and issued by a title insurance company
     (the "Title Insurer") and through a

                                        8



     title agent as shall be approved by Bank, insuring a valid first lien upon
     and security interest in and to the Land and Improvements by virtue of the
     Mortgage, with such reinsurance or co-insurance agreements as may be
     required by Bank. The Title Insurance Policy shall contain no exceptions
     other than those specifically approved in writing by Bank, contain a
     pending disbursements clause or endorsement and such other endorsements as
     Bank may reasonably require, and such affirmative insurance as Bank may
     reasonably require. The Title Insurance Policy, together with evidence of
     payment of premiums thereon, shall be delivered to Bank on or before the
     date of this Agreement.

           (b)  Insurance Required by Mortgage. Such insurance as may be
     required by the Mortgage. If any hazard insurance required by the Mortgage
     is obtained as to all or part of the Project before completion of
     construction then such policy shall contain an endorsement recognizing that
     construction is in progress and agreeing that such shall not adversely
     affect the coverage or be asserted as a defense on any claim under such
     policy.

           (c)  Professional Liability Insurance. Evidence or certificates from
     insurance companies indicating that the Architect, the Contractor and all
     other architects, engineers, contractors and subcontractors responsible for
     the design or construction of the Improvements are covered by professional
     liability insurance to the satisfaction of Bank; such evidence or
     certificates to be delivered to Bank on or before the date of this
     Agreement.

     4.5   Application of Bond Proceeds. To use the proceeds of the Bonds solely
for the purpose of paying Project Costs in accordance with the terms of the
Indenture, this Agreement and the Construction Budget.

     4.6   Project Costs and Expenses. To pay all Project Costs, regardless of
the amount, and to pay all costs and expenses of Bank with respect to the
financing, acquisition and construction of the Project, including but not
limited to, appraisal fees, inspection fees, surveying costs, legal
fees(including legal fees incurred by Bank subsequent to the closing of the Loan
in connection with the disbursement, administration, collection or transfer of
the Loan), advances, recording expenses, surveys, intangible taxes, expenses of
foreclosure (including attorney's fees) and similar items.

     4.7   Commencement and Completion of Construction. To diligently pursue
construction, which has commenced, to completion prior to the Completion Date in
accordance with the Plans and Specifications, in full compliance with all
restrictions, covenants and easements affecting the Land, all Requirements, and
all Governmental Approvals, and with all terms and conditions of the Credit
Documents without deviation from the Plans and Specifications unless with the
prior approval of Bank to pay all sums and to perform such duties as may be
necessary to complete such construction of the Improvements in accordance with
the Plans and Specifications and in full compliance with all restrictions,
covenants and easements affecting the Land, all Requirements and all
Governmental Approvals, and with all terms and conditions of the Credit
Documents, all of which shall be accomplished on or before the Completion Date,
free from any liens, claims or assessments (actual or contingent) asserted
against the Project for any material, labor or other items furnished in
connection therewith. Evidence of satisfactory compliance with the foregoing
shall be furnished by Company to Bank on or before the Completion Date.

     4.8   Right of Bank to Inspect Project. Upon reasonable notice and at
reasonable times (except where an Event of Default has occurred and is
continuing, when no notice or time restriction will apply), to permit Bank and
its representatives and agents to enter upon the Project and to inspect the
Improvements and all materials to be used in the construction thereof and to
cooperate and cause Contractor to cooperate with Bank and its representatives
and agents during such inspections (including

                                        9



making available to Bank working copies of the Plans and Specifications together
with all related supplementary materials); provided, however, that this
provision shall not be deemed to impose upon Bank any obligation to undertake
such inspections.

     4.9   Correction of Defects. Unless Company demonstrates to Bank that such
corrective work is inappropriate or inconsistent with the Plans and
Specifications, to promptly correct all defects in the Improvements or any
departure from the Plans and Specifications not previously approved by Bank.
Company agrees that the advance of any proceeds of the Loan whether before or
after such defects or departures from the Plans and Specifications are
discovered by, or brought to the attention, of Bank, shall not constitute a
waiver of Bank's right to require compliance with this covenant.

     4.10  (Intentionally Deleted)

     4.11  Approval of Change Orders. To permit no deviations from the Plans and
Specifications during construction without the prior approval of the Bank
(except for change within the constraints of Section 4.2 above) and the surety
company or companies issuing any Payment and Performance Bonds.

     4.12  Notice of Occupancy. To notify Bank on the date of occupancy of each
tenant of any portion of the Project, such notice upon occupancy to include the
name of the tenant and the date of occupancy.

     4.13  Books and Records. To keep and maintain complete proper and accurate
books, records and accounts reflecting all items of income and expense of
Company in connection with the Project and the construction of the Improvements
and the results of the operation thereof; and, upon the request of Bank, to make
such books, records and accounts immediately available to Bank for inspection or
independent audit at reasonable times and upon reasonable notice.

     4.14  Financial Statements and Other Information. To furnish to Bank such
financial statements and information as Company has agreed to provide elsewhere
in the Credit Documents.

     4.15  Construction Inspector. To permit Bank to retain the Construction
Inspector at the cost of Company to perform the following services on behalf of
Bank:

           (a)  To review and advise Bank whether, in the opinion of the
     Construction Inspector, the Plans and Specifications are satisfactory;

           (b)  To review Draw Requests and change orders;

           (c)  To make periodic inspections (approximately at the date of each
     Draw Request) for the purpose of assuring that construction of the
     Improvements to date is in accordance with the Plans and Specifications and
     to approve Company's then current Draw Request as being consistent with
     Company's obligations under this Agreement, including inter alia, an
     opinion as to Company's continued compliance with the provisions of Section
     6.1 (g) (4) hereof.

     The fees of the Construction Inspector shall be paid by Company forthwith
upon billing therefor and expenses incurred by Bank on account thereof shall be
reimbursed to Bank forthwith upon request therefor, but neither Bank nor the
Construction Inspector shall have any liability to Company on account of (i) the
services performed by the Construction Inspector, (ii) any neglect or failure on
the part of the Construction Inspector to properly perform its services, or
(iii) any approval by the Construction Inspector of construction of the
Improvements. Neither Bank nor the Construction Inspector assumes any

                                       10



obligation to Company or any other person concerning the quality of construction
of the Improvements or the absence therefrom of defects.

     4.16  (Intentionally Deleted)

     4.17  Insufficiency of Loan Proceeds. If at any time or from time to time
during the terms of this Agreement, in Bank's judgment and opinion, the
remaining undisbursed portion of the Loan, together with the undisbursed
balances of other sums previously deposited by Company with Bank in connection
with the Loan, is or will be insufficient to fully complete the Improvements in
accordance with the Plans and Specifications, to operate and carry the Project
after completion of the Improvements until payment in full of the Loan by
Company, to pay all other Project Costs, to pay all interest accrued or to
accrue on the Loan during the term of the Loan from and after the date hereof,
and to pay all other sums due or to become due under the Credit Documents,
regardless of how such condition may be caused, Company shall, within ten (10)
Business Days after written notice thereof from Bank, provide Bank with evidence
of availability of such sums of money in an amount sufficient to remedy such
condition, and sufficient to pay any liens for services and materials alleged to
be due and payable at that time in connection with the Improvements, and, at
Bank's option, no further Advances of the Loan shall be made by Bank until the
provisions of this Paragraph have been fully complied with.

     4.18  Additional Documents. To perform hereunder as follows:

           (a)  Regarding Construction. To furnish to Bank all instruments,
     documents, boundary surveys, footing or foundation surveys, certificates,
     plans and specifications, appraisals, title and other insurance, reports
     and agreements and each and every other document and instrument required to
     be furnished by, the terms of the Commitment or this Agreement or the other
     Credit Documents, all at Company's expense.

           (b)  Regarding Preservation of Security. To execute and deliver to
     Bank such documents, instrument, assignments and other writings, and to do
     such other acts necessary or desirable, to preserve and protect the
     collateral at any time securing or intended to secure the Loan, as Bank may
     require.

           (c)  Regarding this Agreement. To do and execute all and such further
     lawful and reasonable acts, conveyances and assurances in the law for the
     better and more effective carrying out of the intents and purposes of this
     Agreement as Bank shall require from time to time.

     4.19  Financing Publicity. To permit Bank to obtain publicity in connection
with the construction of the Improvements through press releases and
participation in such events as ground breaking and opening ceremonies; and to
give Bank ample advance notice of such events and to give Bank as much
assistance as possible in connection with obtaining such publicity as Bank may
request.

     4.20  Easements and Restrictions. To submit to Bank for Bank's approval
prior to the execution thereof by Company all proposed easements, restrictions,
covenants, permits, licenses, and other instruments which would or might affect
the title to the Land, accompanied by a survey showing the exact proposed
location thereof and such other information as Bank shall reasonably require.
Company shall not subject the Project or any part thereof to any easement (other
than utility and like easements granted in the ordinary cause of Company's
business), restriction or covenant (including any restriction or exclusive use
provision in any lease or other occupancy agreement) without the prior approval
of Bank, which approval shall not be unreasonably withheld or delayed.

                                       11



     4.21  Compliance with Requirements. To comply promptly with all
requirements and Governmental Approvals and to furnish Bank, on demand, with
independent evidence of such compliance.

     4.22  Leases. To enter into no leases or occupancy agreements affecting the
Project without the prior approval of Bank. Company shall deliver to Bank
executed counterparts of all leases and occupancy agreements affecting the
Project whether executed before or after the date of this Agreement, and shall
not amend any provision thereof or waive any obligations of tenants under any
leases or occupancy agreements affecting the Project without the prior approval
of Bank, which approval shall not be unreasonably withheld. In the event Bank
fails to respond to Company's request for approval within five (5) Business Days
such approval shall be deemed given.

     4.23  Compliance With Restrictions, Covenants and Easements. To comply with
all restrictions, covenants and easements affecting the Project.

     4.24  Laborers, Subcontractors and Materialmen. In addition, Company will
notify Bank immediately, and in writing, if Company receives any notice, written
or oral, from any laborer, subcontractor or materialmen to the effect that said
laborer, subcontractor or materialmen has not been paid when due for any labor
or materials furnished in connection with the construction of the Improvements.
Company will also furnish to Bank, at any time and from time to time upon demand
by Bank, lien waivers bearing a then current date from Contractor and such
subcontractors or materialmen as Bank may designate.

     4.25  Further Assurance of Title. To further assure title as follows: If at
any time Bank or Bank's counsel has reason to believe that any Advance is not
secured or will or may not be secured by the Mortgage as a first lien or
security interest on the Project, then Company shall, within ten (10) days after
written notice from Bank, do all things and matters necessary, to assure to the
satisfaction of Bank and Bank's counsel that any Advance previously made
hereunder or to be made hereunder is secured or will be secured by the Mortgage
as a first lien or first security interest on the Project, and Bank, at its
option, may decline to make further Advances hereunder until Bank has received
such assurance.

     4.26  No Transfers or Encumbrances. To cause or permit no sale, conveyance,
transfer, assignment or encumbering of the Project or any interest therein
without the prior approval of Bank.

     4.27  Compliance With Phase I. To comply with all of the recommendations
set forth in the Phase I immediately and if compliance with those
recommendations results in the need for further testing or environmental
remediation, that said testing and remediation will be completed immediately in
conformance with all applicable environmental laws, rules and regulations,
unless such testing or remediation is the responsibility of the United States
Government under its agreement with the Company and/or Guarantor, in which case
Company will keep Bank fully informed of all such testing and remediation and
will provide Bank with copies of all correspondence to and from the United
States Government in connection therewith.

                                       12



                                    ARTICLE 5
                                    ---------

                                AGREEMENT TO LEND
                                -----------------

     Subject to the terms and conditions set forth in this Agreement, Bank
agrees to approve Advances of the Loan to Company from time to time during the
period from the date hereof to the Termination Date in an aggregate principal
amount of up to and including the amount reflected in the Building Loan Budget
to pay Project Costs actually incurred in connection with the acquisition of the
Land and construction of the Improvements (including Indirect Costs) if and to
the extent such Project Costs are reflected in the Construction Budget as being
funded by Bank.

     5.1   Bonds. The obligation of Company to pay the principal amount of all
Advances approved by Bank to Company under this Agreement, plus all interest
accrued thereon at the rate or rates set forth in the Bonds, shall be evidenced
by the Bonds.

     5.2   Advances. The Construction Budget reflects, by category and line
items, the purposes and the amounts for which Advances under this Agreement are
to be used. Bank shall not be required to disburse for any category or line item
more than the amount specified therefor in the Construction Budget as the same
may be amended from time to time with Bank's written approval.

     5.3   Cost Overruns. If Company becomes aware of any change in Project
Costs which will increase or decrease a category or line item of Project Costs
reflected on the Construction Budget (as the Construction Budget is revised from
time to time and approved by Bank), Company shall immediately notify Bank in
writing and, if the change exceeds the thresholds set forth in Section 4.2
above, will promptly submit to Bank for its approval a revised Construction
Budget. No further Advances need be directed by Bank unless and until the
revised Construction Budget so submitted by Company is approved by Bank, and
Bank reserves the right to approve or disapprove any revised Construction Budget
in its sole and reasonable discretion. If Bank approves the revised Construction
Budget, and such revised Construction Budget reflects Project Costs to be funded
by Bank in excess of the Loan Amount, the amount of such excess shall be added
to the Loan Amount, and Company's obligation to repay the same, together with
interest thereon at the rate or rates provided in the Note, shall be deemed to
be evidenced by the Bonds and secured by the Credit Documents. Any actual
savings realized on a line item (as confirmed by Bank after consultation with
the Construction Inspector) in the Construction Budget may be reallocated by
Company to other line items in the Construction Budget.

     5.4   Contingency Reserve. Any amount allocated as Contingency Reserve is
not intended to be disbursed and will only be directed by Bank to be disbursed
upon the prior approval of Bank, which approval will not be unreasonably
withheld. The disbursement of a portion of the Contingency Reserve shall in no
way prejudice Bank from withholding disbursement of any further portion of the
Contingency Reserve.

     5.5   Stored Materials. Bank shall not be required to direct a disbursement
of any funds for any materials, furnishings, fixtures, machinery or equipment
not yet incorporated into Land or Improvements (the "Stored Materials"). Any
disbursement for the cost of Stored Materials shall be contingent upon Bank
receiving satisfactory evidence that:

           (a)  The Stored Materials are components in a form ready for
     incorporation into the Improvements;

                                       13



           (b)  The Stored Materials are stored at the Land, in a bonded
     warehouse, at a site controlled by Company, or at such other site as Bank
     shall approve, and are protected against theft and damage;

           (c)  The Stored Materials have been paid for in full or will be paid
     for with the funds to be disbursed and all lien rights or claims of the
     supplier have been released or will be released upon payment with disbursed
     funds;

           (d)  Bank has or will have upon payment with disbursed funds a
     perfected, first priority security interest in the Stored Materials; and

           (e)  The Stored Materials are insured for an amount equal to their
     replacement costs.

     5.6   Amount of Advances. In no event shall any Advance exceed the full
amount of Indirect Costs approved by Bank and theretofore paid or to be paid
with the proceeds of such Advance plus ninety percent (90%) of all costs for
construction of Improvements approved by Bank and incurred by Company through
the date of the Draw Request for such Advance less the aggregate amount of any
Advances previously made by Bank. It is further understood that the retainage of
ten percent (10%) described above (the "Retainage") is intended to provide a
contingency fund protecting Bank against failure of Company to fulfill any
obligations under the Credit Documents, and that Bank may charge amounts against
such retainage in the event Bank is required or elects to expend its own funds
to cure any default or Event of Default. No Retainage will be required for
Advances for purchases of equipment used in connection with the Improvements and
designated as such in the Construction Budget.

     5.7   Quality of Work. No Advance shall be due unless all work done at the
date the Draw Request for such Advance is submitted is done in a good and
workmanlike manner and without defects, as confirmed by the report of the
Construction Inspector, but Bank may disburse all or part of any Advance before
the sum shall become due if Bank believes it advisable to do so, and all such
Advances or parts thereof shall be deemed to have been made pursuant to this
Agreement.

     5.8   Release of Retainage. It is further understood that the Retainage
will be released for the relevant trades upon expiration of the requisite lien
period or the receipt of evidence as may be reasonably required by Bank that no
claim may thereafter arise with respect to any work performed or labor or
material supplied.

     5.9   Developer Fees and Leasing Commissions. Notwithstanding anything
herein to the contrary, all Developer Fees and Real Estate or Leasing
Commissions set forth in the Construction Budget will be funded only when
construction of the Improvements is complete, the Tenant under any Required
Leases are in occupancy and paying rent.

                                    ARTICLE 6
                                    ---------

                             CONDITIONS PRECEDENT TO
                          DISBURSEMENT OF LOAN PROCEEDS
                          -----------------------------

     6.1   Conditions of Initial Advance. The obligation of Bank to direct
Trustee to make the initial Advance of the proceeds of the Bonds shall be
subject to the following conditions precedent:

                                       14



           (a)  Commitment. All items required by the Commitment regarding the
     Loan shall have been delivered to the proper parties as required therein,
     and all conditions set forth in the Commitment or such letter of
     instructions shall have been satisfied.

           (b)  Credit Documents. The Credit Documents, in form and substance
     satisfactory to Bank, shall have been duly executed and delivered by the
     parties thereto and shall be in full force and effect, there shall be no
     Event of Default thereunder and Bank shall have received the original or a
     fully executed counterpart thereof. All Credit Documents to be filed or
     recorded in the public records shall have been so filed or recorded in the
     appropriate public records.

           (c)  Construction Documents. The Architect's Contract, if any, and
     Construction Contract, in form and substance satisfactory to Bank, shall
     have been duly executed and delivered by the parties thereto, shall be in
     full force and effect, and Bank shall have received a certified or a fully
     executed counterpart thereof. The Architect, if any, and the Contractor
     shall have duly executed and delivered to Bank a consent to the assignment
     of the Architect's Contract, if any and Construction Contract, in form and
     substance satisfactory to Bank, and Bank shall have received the original
     or a fully executed counterpart thereof.

           (d)  Subcontracts. Bank shall have received a list of all
     subcontractors and materialmen who have been or, to the extent identified
     by Company, will be supplying labor or materials for the Project, and, if
     provided to Company, a copy of the standard form of subcontract to be used
     by the Contractor, and correct and complete photocopies of all executed
     subcontracts and contracts.

           (e)  Other Contracts. Company shall have delivered to Bank correct
     and complete photocopies of all other executed contracts with contractors,
     engineers or consultants for the Project, and of all development,
     management, brokerage, sales or leasing agreements for the Project.

           (f)  Deliveries. The following items or documents shall have been
     delivered to Bank:

                (1)  Plans and Specifications. Two complete sets of the Plans
           and Specifications and approval thereof by any necessary Governmental
           Authority, with a certification from Architect that the Improvements
           to be constructed comply with all Requirements and Governmental
           Approvals and that the Construction Contract satisfactorily provides
           for the construction of the Improvements.

                (2)  Title Insurance Policy. A paid title insurance policy or
           report (the "Title Insurance Policy") in all respects satisfactory to
           Bank and its counsel.

                (3)  Other Insurance. Policies (or, if permitted, certificates
           or other evidence of) all insurance required by this Agreement or any
           other Loan Document.

                (4)  Evidence of Sufficiency of Funds. Evidence satisfactory to
           Bank that the proceeds of the Loan, together with Required Equity
           Funds, will be sufficient to cover all Project Costs reasonably
           anticipated to be incurred, and to satisfy the obligations of Company
           to Bank under this Agreement.

                                       15



                (5)  Evidence of Access, Availability of Utilities, Governmental
           Approvals. Evidence satisfactory to Bank as to:
                     (A) the methods of access to and egress from the Project,
                and nearby or adjoining public ways, meeting the reasonable
                requirements of Project of the type contemplated to be completed
                under this Agreement and the status of completion of any
                required improvements to such access;

                     (B) the availability of storm and sanitary sewer facilities
                meeting the reasonable requirements of the Project;

                     (C) the availability of all other required utilities, in
                location and capacity sufficient to meet the reasonable needs of
                the Project; and

                     (D) the securing of all Governmental Approvals from the
                applicable Governmental Authority which are required under
                applicable Requirements for the construction of the
                Improvements, together with copies of all such Governmental
                Approvals.

                (6)  Environmental Report. An environmental assessment report or
           reports of one or more qualified environmental engineering or similar
           inspection firms approved by Bank in form, scope and substance
           satisfactory to Bank, which report or reports shall indicate a
           condition of the Land in all respects satisfactory to Bank in its
           sole discretion and upon which report or reports Bank is expressly
           entitled to rely. Bank will not require updates of the initial
           environmental assessment report unless it has reason to believe that
           there has been a change in the environmental condition of the Land
           since the initial report.

                (7)  Survey. A survey prepared in accordance with Bank's survey
           requirements, certified by a land surveyor registered as such in the
           state in which the Land is located, which survey shall be in form and
           substance satisfactory to Bank.

                (8)  Draw Request. A Draw Request complying with the provisions
           of this Agreement.

           (h)  Legal Opinions. Bank shall have received opinions in form and
     substance satisfactory to Bank and Bank's counsel from counsel satisfactory
     to Bank as to such matters as Bank shall reasonably request.

           (i)  Certification Regarding Chattels. Bank shall have received a
     certification from the Title Insurer or counsel satisfactory to Bank (which
     shall be updated from time to time at Company's expense upon request by
     Bank) that a search of the public records disclosed no conditional sales
     contracts, chattel mortgages, leases of personalty, financing statements or
     title retention agreements which affect the Project.

           (j)  Notices. All notices required by any Governmental Authority or
     by any applicable Requirement to be filed prior to commencement of
     construction of the Improvements shall have been filed.

           (k)  Appraisal. Any appraisal requirements set forth in the
     Commitment shall have been satisfied.

                                       16



           (l)  Performance; No Default. Company shall have performed and
     complied with all terms and conditions herein required to be performed or
     complied with by it at or prior to the date of the initial Advance, and on
     the date of the initial Advance, there shall exist no default or Event of
     Default.

           (m)  Representations and Warranties. The representations and
     warranties made by Company in the Credit Documents or otherwise made by or
     on behalf of Company or any Guarantor in connection therewith or after the
     date thereof shall have been true and correct in all respects on the date
     on which made and shall also be true and correct in all respects on the
     date of the initial Advance.

           (n)  Other Documents. Such other documents, opinions and certificates
     as Bank or its counsel may reasonably require.

           (o)  Proceedings and Documents. All proceedings in connection with
     the transactions contemplated by this Agreement and the other Credit
     Documents shall be satisfactory to Bank and Bank's counsel in form and
     substance, and Bank shall have received all information and such
     counterpart originals on certified copies of such documents and such other
     certificates, opinions or documents as Bank and Bank's counsel may
     reasonably require.

     6.2   Conditions of Subsequent Advances. The obligation of Bank to make any
Advance after the initial Advance shall be subject to the following conditions
precedent:

           (a)  Prior Conditions Satisfied. All conditions precedent to the
     initial Advance and any prior Advance shall continue to be satisfied as of
     the date of such subsequent Advance.

           (b)  Performance; No Default. Company shall have performed and
     complied with all terms and conditions herein required to be performed or
     complied with by it at or prior to the date of such advance, and on the
     date of such Advance there shall exist no Default or Event of Default.

           (c)  Representations and Warranties. The representations and
     warranties made by Company in the Credit Documents or otherwise made by or
     on behalf of Company or any Guarantor in connection therewith after the
     date thereof shall have been true and correct in all respects on the date
     on which made and shall also be true and correct in all respects on the
     date of such Advance.

           (d)  No Damage. The Improvements shall not have been injured or
     damaged by fire, explosion, accident, flood or other casualty, unless Bank
     shall have received insurance proceeds sufficient in the judgment of Bank
     to effect the satisfactory restoration of the Improvements and to permit
     the completion thereof prior to the Completion Date.

           (e)  Receipt by Bank. Bank shall have received:

                (1)  Draw Request. A Draw Request complying with the
     requirements hereof;

                (2)  Endorsement to Title Insurance Policy. A "run down"
     endorsement to the Title Insurance Policy or report indicating no change in
     the state of title and containing no

                                       17



     survey exceptions not approved by Bank, which endorsement shall, expressly
     or by virtue of a proper "pending disbursements" clause or endorsement in
     the policy, increase the coverage of the policy to the aggregate amount of
     all proceeds of the Loan advanced on or before the effective date of such
     endorsement;

                (3)  Current Survey. An updated survey if required by the Bank;

                (4)  Certificates. Certificates from Company, Architect and the
     Construction Inspector to the effect that in their opinion, based upon
     on-site observations and submissions by the Contractor, the construction of
     the Improvements to the date thereof was performed in a good and
     workmanlike manner and in accordance with the Plans and Specifications,
     stating the estimated total cost of construction of the Improvements,
     stating the percentage of the in-place construction of the Improvements and
     stating that the remaining non-disbursed portion of the Loan allocated for
     such purpose is adequate, together with such Required Equity Funds as are
     held by Bank, to complete the construction of the Improvements;

                (5)  Contracts. Evidence that one hundred percent (100%) of the
     cost of the remaining construction work is covered by firm contracts or
     subcontracts, or orders for the supplying of materials, with contractors,
     subcontractors, materialmen or suppliers satisfactory to Bank, except for
     work in the Construction Budget to be performed by the company and
     identified as such.

           (f)  Other Documents. Such other documents, opinions and certificates
     as Bank or its counsel may reasonably require.

     6.3   Conditions of Final Advance. In addition to the conditions set forth
in Paragraph 6.2 above, Bank's obligation to approve the payments of funds
advance sums retained by the Trustee pursuant to this Agreement shall be subject
to receipt by Bank of the following:

           (a)  Approval of Improvements. Evidence of the approval by all
     appropriate Governmental Authority of the Improvements in their entirety
     for permanent occupancy to the extent any such approval is or will be a
     condition of lawful use and occupancy of the Improvements, and evidence of
     approval by all appropriate Governmental Authority of the contemplated uses
     thereof.

           (b)  Approval by Construction Inspector. Notification from the
     Construction Inspector to the effect that the Improvements have been
     completed in a good and workmanlike manner in accordance with the Plans and
     Specifications.

           (c)  Final Survey. A copy of the survey required under Section 6.1
     above which is marked up by Company to show which buildings on the Land
     have been or will be demolished as contemplated by the Plans and
     Specifications.

           (d)  Certificate of Architect. Certificate of Architect that the
     Improvements have been completed in accordance with the Plans and
     Specifications and that the Improvements comply with all applicable
     Requirements and Governmental Approvals and are in all respects (except for
     work to be performed by tenants) ready for occupancy.

           (e)  Payment of Costs. Evidence satisfactory to Bank that all sums
     due in connection with the construction of the Improvements have been paid
     in full (or will be paid out

                                       18



     of the funds requested to be advanced) and that no party claims or has a
     right to claim any statutory or common law lien arising out of the
     construction of the Improvements or the supplying of labor, material,
     and/or services in connection therewith.

                                    ARTICLE 7
                                    ---------

                     METHOD OF DISBURSEMENT OF LOAN PROCEEDS
                     ---------------------------------------

     Bank agrees to direct Trustee to make Advances in accordance with the
Construction Budget and subject to the following procedures.

     7.1   Draw Request to be Submitted to Bank. At such time as Company shall
desire to obtain an Advance, Company shall complete, execute and deliver to Bank
a Company's Requisition in the form attached as Exhibit C to the Indenture
(hereinafter referred to as "Company's Requisition"). Each Company's Requisition
shall be accompanied by:

           (a)  if Company's Requisition includes amounts to be paid to the
     Contractor under the Construction Contract, it shall be accompanied by a
     completed and itemized Application and Certificate for Payment (AIA
     Document No. G702) or similar form approved by Bank, containing the
     certification of Contractor and Architect and the Construction Inspector as
     to the accuracy of same, together with invoices relating to all items of
     direct cost covered thereby. All such applications for payment shall show
     all subcontractors by name and trade, and the amount to be paid from the
     proceeds of the Advance to each subcontractor;

           (b)  if Company's Requisition includes payments for Indirect Costs,
     it shall be accompanied by a completed and itemized Indirect Cost statement
     executed by Company, together with invoices for all items of Indirect Costs
     covered thereby;

           (c)  written lien waivers from the Contractor and such laborers,
     subcontractors and materialmen for work done and materials supplied by them
     which were paid for pursuant to any prior Draw Request;

           (d)  a written request of Company for any necessary changes in the
     Plans and Specifications, the Construction Budget, the Building Loan
     Budget, the Disbursement Schedule or the Construction Schedule;

           (e)  copies of all change orders and subcontracts, and, to the extent
     requested by Bank, of all inspection or test reports and other documents
     relating to the construction of the Improvements, not previously delivered
     to Bank; and

           (f)  such other information, documentation and certification as Bank
     shall reasonably request.

     7.2   Notice and Frequency of Advances. Each Draw Request shall be
submitted to Bank at least seven (7) business days prior to the date of the
requested Advance, and no more frequently than monthly.

     7.3   Deposit of Funds Advanced. Company shall open and maintain a
non-interest bearing loan checking account with Bank into which Bank shall
deposit the proceeds of each Advance. Bank is

                                       19



hereby irrevocably authorized to make an Advance to and/or charge any account of
Company with Bank, including such loan checking account, without the further
approval of Company, for (i) any installment of interest due under the Note,
(ii) any expenses incurred by Bank (including without limiting the generality of
the foregoing, reasonable attorneys' fees and other fees incurred by Bank), or
(iii) any other sums due to Bank under the Note, this Agreement or any of the
other Credit Documents, all to the extent that the same are not paid by the
respective due dates thereof out of Advances of the Loan proceeds. Company shall
at all times maintain and keep collected balances in such loan checking account
sufficient to satisfy the foregoing obligations on the due date thereof.

     7.4   Advances to Contractor. Upon five (5) Business Days prior written
notice to Company and after an Event of Default, at its option, Bank may direct
Trustee to make any or all Advances for construction expenses directly to
Contractor for deposit in an appropriately designated special bank account, and
the execution of this Agreement by Company shall, and hereby does, constitute an
irrevocable authorization so to advance the proceeds of the Loan. No further
authorization from Company shall be necessary to warrant such direct Advances to
Contractor and all such Advances shall satisfy pro tanto the obligations of Bank
hereunder and shall be secured by the Mortgage and the other Credit Documents as
fully as if made directly to Company.

     7.5   Advances to Title Insurer or to Others. Upon five (5) Business Days
prior written notice to Company and after an Event of Default, at its option,
Bank may direct Trustee to make any or all Advances through the Title Insurer
and any portion of the Loan so disbursed by Bank shall be deemed disbursed as of
the date on which such Title Insurer receives such disbursement. At its option,
Bank may authorize Advances of portions of the proceeds of the Loan to any
person to whom Bank in good faith determines payment is due and any portion of
the Loan so disbursed by Bank shall be deemed disbursed as of the date on which
the person to whom payment is made receives the same. The execution of this
Agreement by Company shall, and hereby does, constitute an irrevocable
authorization to Advance the proceeds of the Loan. No further authorization from
Company shall be necessary to warrant such direct Advances and all such Advances
shall satisfy pro tanto the obligations of Bank hereunder and shall be secured
by the Mortgage and the other Credit Documents as fully as if made directly to
Company.

     7.6   Advances Do Not Constitute a Waiver. No Advance shall constitute a
waiver of any of the conditions of Bank's obligation to authorize further
Advances nor, in the event Company is unable to satisfy any such condition,
shall any Advance have the effect of precluding Bank from thereafter declaring
such inability to be an Event of Default hereunder.

     7.7   Trust Fund Provisions. All proceeds advanced hereunder shall be
subject to the trust fund provisions of Section 13 of the Lien Law. The
affidavit attached hereto as Exhibit B is made pursuant to and in compliance
with Section 22 of the Lien Law, and, if so indicated in said affidavit, Loan
proceeds will be used, in part, for reimbursement for payments made by the
Company prior to the initial Advance hereunder but subsequent to the
commencement of the construction and equipping of the Improvements for items
constituting Costs of Improvement.

     7.8   Termination Date. Bank may, but shall not be obligated to make any
Advance hereunder after the Termination Date.

                                       20



                                    ARTICLE 8
                                    ---------

                               EVENTS OF DEFAULTS
                               ------------------

     The occurrence of any one or more of the following conditions or events
(each an "Event of Default") shall constitute a default under and breach of this
Agreement:

           (a)  any failure by Company to pay as and when due and payable any
     interest on or principal of or other sum payable under the Reimbursement
     Agreement; or

           (b)  any failure by Company to deposit with Bank any funds required
     by this Agreement to be deposited with Bank and continuation of such
     failure for a period of five (5) Business Days after written notice thereof
     from Bank;

           (c)  any failure by Company to pay as and when due and payable any
     other sums to be paid by Company to Bank under this Agreement and
     continuance of such failure for a period of five (5) days after written
     notice thereof from Bank; or

           (d)  title to the Project is or becomes unsatisfactory to Bank by
     reason of any lien, charge, encumbrance, title condition or exception
     (including without limitation, any mechanic's, materialman's or similar
     statutory or common law lien or notice thereof), and such matter causing
     title to be or become unsatisfactory is not cured or removed (including by
     bonding) within twenty (20) days after notice thereof from Bank to Company;
     or

           (e)  any refusal by the Title Insurer to insure any Advance as being
     secured by the Mortgage as a valid first lien on the Land and Improvements
     and continuance of such refusal for a period of twenty (20) days after
     notice thereof by Bank to Company; or

           (f)  subject to force majeure, the Improvements are not completed by
     the Completion Date or, in the reasonable estimation of Bank, construction
     of the Improvements will not be completed by the Completion Date; or

           (g)  the Project or any portion thereof is injured by fire,
     explosion, accident, flood or other casualty, unless Bank shall have
     received insurance proceeds sufficient in the reasonable estimation of Bank
     to effect the satisfactory restoration of the Project and to permit the
     completion of the Improvements prior to the Completion Date; or

           (h)  the Project is subject to any Taking, or the Project or any
     portion thereof is subject to any Taking which will prevent, in the
     reasonable estimation of Bank, the completion of the Improvements prior to
     the Completion Date; or

           (i)  any voucher or invoice is submitted at any time which Company
     knows has not been earned by the payee for services performed or for
     materials used in or furnished for the Project; or

           (j)  [intentionally omitted]

           (k)  Company confesses inability to continue or complete construction
     of the Improvements in accordance with this Agreement; or

                                       21



           (l)  [intentionally omitted]

           (m)  any material representation or warranty made or deemed to be
     made by or on behalf of Company in this Agreement or in any other Credit
     Document, or in any report, certificate, financial statement, Draw Request
     or other instrument furnished in connection with this Agreement, any
     Advance or any other Loan Document, shall prove to have been false or
     incorrect in any material respect as at the date of which made or deemed to
     be made; or

           (n)  any dissolution, termination, partial or complete liquidation,
     merger or consolidation of Company, , or any sale, transfer or other
     disposition of all or substantially all of the assets of Company, , other
     than with the prior approval of Bank; or

           (o)  any suit or proceeding shall be filed against Company, or the
     Project which, if adversely determined, would have a materially adverse
     affect on the ability of Company to perform each and every one of its
     obligations under and by virtue of the Credit Documents; or

           (p)  any failure by Company to obtain any Governmental Approvals, or
     the revocation or other invalidation of any Governmental Approvals
     previously issued; or

           (q)  any change in the legal or beneficial ownership of Company,
     other than with the prior approval of Bank; or

           (r)  any one or more of the obligations of Company under the Credit
     Documents shall at any time and for any reason cease to be in full force
     and effect; or

           (s)  Company, any affiliate of Company shall be involved in financial
     difficulties as evidenced by: (1) its commencement of a voluntary case
     under Title 11 of the United States Code as from time to time in effect, or
     its authorizing, by appropriate proceedings of partners, directors or other
     governing body, the commencement of such a voluntary case; (2) its filing
     an answer or other pleading admitting or failing to deny the material
     allegations of a petition filed against it commencing an involuntary case
     under said Title 11, or seeking, consenting to or acquiescing in the relief
     therein provided, or by its failing to controvert timely the material
     allegations of any such petition; (3) the entry of an order for relief in
     any involuntary case commenced under said Title 11; (4) its seeking relief
     as a debtor under any applicable law, other than said Title 11, of any
     jurisdiction relating to the liquidation or reorganization of debtors or to
     the modification or alteration of the rights of creditors, or by its
     consenting to or acquiescing in such relief; (5) the entry of an order by a
     court of competent jurisdiction which is not withdrawn, reversed or
     rescinded within sixty (60) days after its entry (i) finding it to be
     bankrupt or insolvent, (ii) ordering or approving its liquidation,
     reorganization or any modification or alteration of the rights of its
     creditors, or (ii) assuming custody of, or appointing a receiver or other
     custodian for, all or a substantial part of its property; (6) by its making
     an assignment for the benefit of, or entering into a composition with, its
     creditors, or appointing or consenting to the appointment of a receiver or
     other custodian for all or a substantial part of its property; or (7)
     generally, its failure to pay its debts as such debts become due; or

           (t)  any failure by Company to duly observe or perform any other
     term, covenant, condition or agreement under this Agreement and continuance
     of such failure for a period of thirty (30) days after written notice
     thereof from Bank; provided, however, that if such failure is not
     susceptible of cure during such thirty (30) day period (but is susceptible
     of cure) and Company promptly commences and diligently pursues cure of such
     failure during such thirty (30)

                                       22



     day period, then such thirty (30) day period shall be extended for an
     additional consecutive period of thirty (30) days before an Event of
     Default is deemed to have occurred; or

           (u)  any "default" or "Event of Default" shall occur under any of the
     other Credit Documents.

                                    ARTICLE 9
                                    ---------

                           RIGHTS AND REMEDIES OF BANK
                           ---------------------------

     9.1   Remedies. Upon the occurrence of any Event of Default, and so long as
the Letter of Credit is in effect, the Bank may at any time thereafter refuse to
consent to further Advances and at its option, and upon written notice to the
Trustee, exercise any or all of the following rights and remedies:

     (a)   The Bank may, in its sole discretion, deliver to the Trustee, with a
copy to the Issuer and the Company, notice of such occurrence and direct the
Trustee to accelerate the Bonds; and

     (b)   The Bank may, in its sole discretion, by notice to the Trustee, the
Issuer and the Company, declare all unpaid principal of and accrued interest due
in accordance with the Reimbursement Agreement, together with all other sums
payable under the Credit Documents, to be immediately due and payable, whereupon
same shall become and be immediately due and payable, anything in the
Reimbursement Agreement or other Credit Documents to the contrary
notwithstanding, and without presentation, protest or further demand or notice
of any kind, all of which are expressly hereby waived by the Company; provided,
however, that the Bank may consent to Advance by the Trustee thereafter without
thereby waving the right to demand payment of the sums owing under the
Reimbursement Agreement, without being obligated to consent to-any other or
further Advances, and without affecting the validity of or enforceability of the
Reimbursement Agreement or other Credit Documents. Notwithstanding and without
limiting the generality of the foregoing, upon the occurrence of an Event of
Default under paragraph (u) of Article 8 of the Building Loan Agreement, or if
any event has occurred which but for the passage of time, the giving of notice
or both would constitute an Event of Default, at the sole option of the Bank,
all obligations of the Trustee to make further Advances shall terminate, and all
unpaid principal of and accrued interest on the Bonds, together with all sums
payable under the Reimbursement Agreement, automatically shall become and be
immediately so due and payable, without any declaration or other act; and

     (c)   At the discretion of the Bank and on behalf of the Trustee (but in
its own behalf the event that the Trustee has drawn upon the Letter of Credit in
accordance with Section 2.06 of the Indenture), the Bank may cause the Facility
to be completed and may enter upon the Land and construct, equip and complete
the Facility in accordance with the Plans and Specifications, with such changes
therein as the Bank may, from time to time, and in its sole discretion, deem
appropriate.

     In connection with any construction of the Facility undertaken by the Bank
pursuant to the provisions of this subparagraph, the Bank may:

           (1)  use any funds of the Company, including any balance which may be
           held by the Bank as security or in escrow, and any funds remaining
           unadvanced under the loan;

                                       23



           (2)  employ existing contractors, subcontractors, agents, architects,
           engineers, and the like, or terminate the same and employ others;

           (3)  employ security watchmen to protect the Facility;

           (4)  make such additions, changes and corrections in the Plans and
           Specifications as shall, in the judgment of the Bank, be necessary or
           desirable;

           (5)  take over and use any and all Equipment contracted for or
           purchased by the Company, if appropriate, or dispose of the same as
           the Bank sees fit;

           (6)  execute all applications and certificates on behalf of the
           Company which may be required by the Governmental Authority or
           Requirement or contract documents or agreements;

           (7)  pay, settle or compromise all existing or future bills and
           claims which are or may be liens against the Facility, or may be
           necessary for the completion of the Facility or the clearance of
           title to the Facility;

           (8)  complete the marketing and leasing of leasable space in the
           Facility, enter into new leases and occupancy agreements, and modify
           or amend existing leases and occupancy agreements, all as the Bank
           shall deem to be necessary or desirable;

           (9)  prosecute and defend all actions and proceedings in connection
           with the construction of the Facility or in any other way affecting
           the Land or the Facility and take such action and require such
           performance as the Bank deems necessary under any payment and
           performance bonds; and

           (10) take such action hereunder, or refrain from acting hereunder, as
           the Bank may, in its sole and absolute discretion, from time to time
           determine, and without any limitation whatsoever, to carry out the
           intent of this subparagraph. The Company shall be liable to the Bank
           for all costs paid or incurred for the construction, completion and
           equipping of the Facility, whether the same shall be paid or incurred
           pursuant to the provisions of this subparagraph or otherwise, and all
           payments made or liabilities incurred by the Bank hereunder of any
           kind whatsoever shall be deemed advances made to the Company under
           the Building Loan Agreement and shall be secured by the Mortgage or
           the Indenture, and other Credit Documents.

     To the extent that any costs so paid or incurred by the Bank, together with
all other Advances made by the Bank hereunder, exceed the Loan, such excess
costs shall be paid by the Company to the Bank on demand, with interest thereon
at the Default Interest Rate, if any, set forth in the Reimbursement Agreement
or the Bonds or, in the absence of a Default Interest Rate, at the interest rate
set forth in the Reimbursement Agreement, until paid; and the Company shall
execute such notes or amendments to the Reimbursement Agreement as may be
requested by the Bank to evidence the Company's obligation to pay such excess
costs and until such notes or amendments are so executed by the Company, the
Company's obligation to pay such excess costs shall be deemed to be evidenced by
the Building Loan Agreement. In the event the Bank takes possession of the
Facility and assumes control of such construction as aforesaid, it shall not be
obligated to continue such construction longer than it shall see fit and may
thereafter, at any time, change any course of action undertaken by it or abandon
such construction and decline to make further payments for the account of the
Company whether or not the Facility shall have been completed.

                                       24



For the purpose of this subparagraph, the construction, equipping and completion
of the Facility shall be deemed to include any action necessary to cure any
Event of Default by the Company under any of the terms and provisions of any of
the Credit Documents.

     (d)   the Bank may to the extent permitted by applicable law, at any time
and from time to time, without notice (any such notice being expressly waived),
without regard to the adequacy of any collateral, set off and apply any and all
deposits (general or specific time or demand, provisional or final, regardless
of currency, maturity, or the branch of the Bank where the deposits are held) at
any time held or other sums credited by or due from the Bank to the Company
against any and all liabilities, direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising of the Company to the Bank.

     (e)   the Bank may exercise any or all of the rights and remedies set forth
in the Reimbursement Agreement or the Mortgage, or other Documents, as
appropriate.

     9.2   Power of Attorney. Upon notice to the Company for the purposes of
carrying out the provisions and exercising the rights, powers and privileges
granted by or referred to in this Agreement, Company hereby irrevocably
constitutes and appoints Bank its true and lawful attorney-in-fact, with full
power of substitution, to execute, acknowledge and deliver any instruments and
do and perform any acts which are referred to in this Agreement, in the name and
on behalf of Company. Bank shall provide copies of any instrument executed by
such power within a reasonable period of time. The power vested in such
attorney-in-fact is, and shall be deemed to be, coupled with an interest and
irrevocable.

     9.3   Remedies Cumulative. Upon the occurrence of any Event of Default, the
rights, powers and privileges provided in this Article 9 and all other remedies
available to Bank under this Agreement or under any of the other Credit
Documents or at law or in equity may be exercised by Bank at any time and from
time to time and shall not constitute a waiver of any of Bank's other rights or
remedies thereunder, whether or not the Loan shall be due and payable, and
whether or not Bank shall have instituted any foreclosure proceedings or other
action for the enforcement of its rights under the Credit Documents.

     9.4   Annulment of Defaults. An Event of Default shall not be deemed to be
in existence for any purpose of this Agreement or any Loan Document if Bank
shall have waived such Event of Default in writing or stated that the same has
been cured to its reasonable satisfaction, but no such waiver shall extend to or
affect any subsequent Event of Default or impair any of the rights of Bank upon
the occurrence thereof.

     9.5   Waivers. Company hereby waives to the extent not prohibited by
applicable law (a) all presentments, demands for payment or performance, notices
of nonperformance (except to the extent required by the provisions hereof or of
any other Credit Documents), protests and notices of dishonor, (b) any
requirement of diligence or promptness on Bank's part in the enforcement of its
rights (but not fulfillment of its obligations) under the provisions of this
Agreement or any other Loan Document, and (c) any and all notices of every kind
and description which may be required to be given by any statute or rule of law
and any defense of any kind which Company may now or hereafter have with respect
to its liability under this Agreement or under any other Loan Document.

     9.6   Course of Dealing, Etc. No course of dealing between Company and Bank
shall operate as a waiver of any of Bank's rights under this Agreement or any
Loan Document. No delay or omission on Bank's part in exercising any right under
this Agreement or any Loan Document shall operate as a waiver of such right or
any other right hereunder. A waiver on any one occasion shall not be construed
as a bar to or waiver of any right or remedy on any future occasion No waiver or
consent shall be binding

                                       25



upon Bank unless it is in writing and signed by Bank. The making of an Advance
hereunder during the existence of an Event of Default shall not constitute a
waiver thereof.

                                   ARTICLE 10
                                   ----------

                               GENERAL CONDITIONS
                               ------------------

     The following conditions shall be applicable throughout the term of this
Agreement:

     10.1  Rights of Third Parties. All conditions of the obligations of Bank
hereunder, including the obligation to authorize Advances, are imposed solely
and exclusively for the benefit of Bank and its successors and assigns and no
other person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Bank will make
Advances in the absence of strict compliance with any or all thereof and no
other person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or in part
by Bank at any time if in its sole discretion it deems it desirable to do so. In
particular, Bank makes no representations and assumes no obligations as to third
parties concerning the quality of the construction by Company of the
Improvements or the absence therefrom of defects. In this connection Company
agrees to and shall indemnify Bank from any liability, claims or losses
resulting from the disbursement of the Loan proceeds or from the condition of
the Project whether related to the quality of construction or otherwise and
whether arising during or after the term of the Letter of Credit made by Bank to
Company in connection herewith. This provision shall survive the repayment of
the Loan and shall continue in full force and effect so long as the possibility
of such liability, claims or losses exists.

     10.2  Relationship. The relationship between Bank and Company is solely
that of a Bank and Company, and nothing contained herein or in any of the other
Credit Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than Bank and Company.

     10.3  Evidence of Satisfaction of Conditions. Any condition of this
Agreement which requires the submission of evidence of the existence or
non-existence of a specified fact or facts implies as a condition the existence
or non-existence, as the case may be, of such fact of facts and Bank shall, at
all times, be free independently to establish to its satisfaction and in its
absolute discretion such existence or non-existence.

     10.4  Notices. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth in the
Reimbursement Agreement, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given, in
the case of notice by personal delivery, upon actual delivery, and in the case
of appropriate mail or courier service, upon deposit with the U.S. Postal
Service or delivery to the courier service.

     10.5  Assignment. Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior approval of Bank.

     10.6  Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such

                                       26



parties shall be included and all covenants and agreements contained in this
Agreement by or on behalf of Company or by or on behalf of Bank shall bind and
inure to the benefit of their respective heirs, legal representatives,
successors and assigns, whether so expressed or not.

     10.7  Headings. The headings of the Articles, Paragraphs and subparagraphs
of this Agreement are for the convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.

     10.8  Invalid Provisions to Affect No Others. If fulfillment of any
provision hereof or any transaction related hereto at the time performance of
such provisions shall be due, shall involve transcending the limit of validity
presently prescribed by law, with regard to obligations of like character and
amount, then ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision herein contained operates
or would prospectively operate to invalidate this Agreement in whole or in part,
then such clause or provision only shall be held for naught, as though not
herein contained, and the remainder of this Agreement shall remain operative and
in full force and effect.

     10.9  Number and Gender. Whenever the singular or plural number, or the
masculine, feminine or neuter gender is used herein, it shall equally include
the other.

     10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with laws of the State of New York.

     10.11 Consent to Jurisdiction. Company hereby irrevocably and
unconditionally (a) submits to personal jurisdiction in the State of New York
over any suit, action or proceeding arising out of or relating to this
Agreement, and (b) waives any and all personal rights under the laws of any
state (i) to the right, if any, to trial by jury, or (ii) to object to
jurisdiction within the State of New York or venue in any particular forum
within the State of New York. Nothing contained herein, however, shall prevent
Bank from bringing any suit, action or proceeding or exercising any rights
against any security and against Company, and against any property of Company,
in any other state. Initiating such suit, action or proceeding or taking such
action in any state shall in no event constitute a waiver of the agreement
contained herein that the laws of the State of New York shall govern the rights
and obligations of Company and Bank hereunder or the submission herein by
Company to personal jurisdiction within the State of New York.

     10.12 Amendments. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.

                                       27



     IN WITNESS WHEREOF, Company and Bank have executed this Agreement under
seal on the date first above written.

                                        ANGIODYNAMICS, INC.


                                        By:   /s/ Eamonn P. Hobbes
                                            ------------------------------------
                                              Eamonn P. Hobbs,
                                              President and Chief Executive
                                              Officer

                                        KEYBANK NATIONAL ASSOCIATION


                                        By:   /s/ Bryant J. Cassella, V.P.
                                            ------------------------------------
                                              Bryant J. Cassella, Vice President

STATE OF NEW YORK       )
                        ) ss.
COUNTY OF Albany             )

     On the 28 day of August in the year 2002 before me, the undersigned, a
notary public in and for said state, personally appeared Eamonn P. Hobbs,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed the instrument.


                                                /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                                     Notary Public

STATE OF NEW YORK       )
                        ) ss.
COUNTY OF Albany             )

     On the 28 day of August in the year 2002 before me, the undersigned, a
notary public in and for said state, personally appeared Bryant J. Cassella,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed the instrument.


                                                /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                                     Notary Public

[Notary Stamp]

                                       28



                                   SCHEDULE A

     All that certain piece or parcel of land situate, lying and being in the
Town of Queensbury, County of Warren and the State of New York, being lots 51,
52, 53 and 71 as shown on a map of Warren and Washington Counties Industrial
Development Agency dated June 2, 1978, filed in the Warren County Clerk's Office
on September 19, 1978, more particularly bounded and described as follows:
BEGINNING at a point in the southerly bounds of Hicks Road at the northwest
- ---------
corner of said Lot 71 as shown on said map; thence running easterly along the
southerly bounds of said Hicks Road, the following four courses and distances:
(1) South 87 degrees, 16 minutes and 29 seconds East, a distance of 194.21 feet;
(2) South 78 degrees, 21 minutes and 59 seconds East, a distance of 84.37 feet;
(3) South 66 degrees, 51 minutes and 46 seconds East, a distance of 242.77 feet;
(4) South 62 degrees, 21 minutes and 01 seconds East, a distance of 127.87 feet
to the intersection with County Line Road at the northeast corner of Lot 51 as
shown on said map; thence running South 05 degrees, 35 minutes and 54 seconds
West, along the westerly bounds of said County Line Road and the easterly bounds
of Lots 51, 52 & 53, a distance of 740.97 feet to the southeast corner of said
Lot 53; thence running North 84 degrees, 24 minutes and 06 seconds West, along
the southerly bounds of said Lot 53 and the southerly bounds of Lot 71 as shown
on said map, a total distance of 726.66 feet to the southwest corner of said Lot
71; thence running North 12 degrees, 08 minutes and 30 seconds East, along the
westerly bounds of said Lot 71 a distance of 866.92 feet to the point and place
of beginning, containing 12.97 acres of land to be the same more or less.

     Bearings given in the above description refer to magnetic North.

     SUBJECT to easements of record.

                                       A-1



                                    Exhibit B
                         LIEN LAW, SECTION 22 AFFIDAVIT

STATE OF NEW YORK       ) ss.:
COUNTY OF ______ )

     Eamonn P. Hobbs, being duly sworn, deposes and says:

     1.   He is the President and Chief Executive Officer of Angiodynamics, Inc.
described as the Company in the Building Loan Agreement to which this Affidavit
is annexed.

     2.   The Company and the Bank have entered into a certain Building Loan
Agreement relating to the construction and equipping of Improvements on Land
which are more particularly described in Schedule A. The Building Loan Agreement
is intended to be filed in the Onondaga County Clerk's Office in accordance with
Section 22 of the Lien Law. All capitalized terms used herein and not otherwise
defined shall have the same meanings assigned thereto in the Building Loan
Agreement.

     3.   $3,500,000.00 of the proceeds of the Loan will be advanced in
accordance with the terms of the Building Loan Agreement.

     4.   The consideration, if any, paid, or to be paid, for the Loan is set
forth in item 5(a) below.

     5.   All other expenses paid or to be paid in connection with the Loan are
as follows:

     (a)  Fair and reasonable sums paid for obtaining the Loan and subsequent
          financing:

          (i)    Origination or commitment fee for Loan

                 --------------

          (ii)   Private Placement Fee

                 --------------

          (iii)  First Year Letter of Credit Fee

                 --------------

          (iv)   Trustee Fee

                 --------------

          (v)    Appraisal fees

                 --------------

          (vi)   Construction supervisor fees

                 --------------

          (vii)  Fees and disbursements of Bank's counsel

                 --------------

                                       B-2



          (viii) Costs of title examination and UCC searches, title insurance
                 premiums and title continuation charges

                 --------------

          (ix)   Survey costs

                 --------------

          (x)    Recording and filing fees

                 --------------

          (xi)   Mortgage tax

                 --------------

     Subtotal:
               ----------------

     (b)  Architectural and engineering fees

          --------------

     (c)  Construction period interest

          --------------

     (d)  Insurance premiums during construction of Improvements,

          --------------

     (e)  Paid to Bank to repay sums previously loaned to pay costs of
          construction,

          --------------

     (f)  Payment and Performance Bond premiums

          --------------

     (g)  Sums paid to take by assignment prior existing mortgages

          --------------

     (h)  Sums paid to discharge or reduce the indebtedness under prior existing
          mortgages

          --------------

     (i)  Taxes, assessments and other municipal charges existing prior to the
          commencement of construction of the Improvements

          --------------

     (j)  Taxes, assessments and other municipal charges accruing during
          construction of the Improvements

          --------------

          Total
                -----------------------

     Certain of the foregoing amounts are based upon good faith estimates of
costs or expenses not yet incurred and certain items listed above may cost more
or less than such estimates. The Company reserves the right to use unexpended
amounts from any of said items to defray increases incurred in any other item

                                       B-3



or items listed above so long as the total amount expended on such items does
not exceed the amount of the Loan.

     6.   That after payment of all the above fees and expenses, the amount of
money which will be available to pay for the cost of making the improvements
referred to in the Building Loan Agreement will be the sum of $______________
less all monies needed to pay insurance premiums, interest, taxes, assessments,
water and sewer costs and rent becoming due while the improvements are being
made.

     7.   All monies advanced by the Bank to the Company under the Agreement
shall be subject to the Trust Fund provisions of Section 13 of the Lien Law. If
an Event of Default occurs during construction of the Improvements, the Bank may
refuse to advance additional funds and such unadvanced sums would not be
available to the Company to pay the cost of constructing the Improvements.

     8.   This affidavit is made pursuant to and in compliance with Section 22
of the Lien Law by the Company, as the "Company" for the purposes of said
Section.

     9.   The facts herein stated are true to the best of deponent's knowledge.


                                        ----------------------------------------
                                        Eamonn P. Hobbs

Sworn to before me this
_____ day of _____, 2002.


- -------------------------------
NOTARY PUBLIC-STATE OF NEW YORK

                                       B-4



                                    Exhibit C
                    REQUISITION FOR PAYMENT AND DISBURSEMENT

To:  KeyBank National Association
     66 South Pearl Street
     Albany, New York 12207

Re:  Counties of Warren and Washington Industrial Development Agency
     Tax-Exempt Multi-Mode Variable Rate Demand
     Industrial Development Revenue Bonds
     (Angiodynamics, Inc. Project-Letter of Credit Secured), Series 2002

     Requisition Number: 1
     Date: ______________

Gentlemen:

     Pursuant to Section 4.02 of the Indenture of Trust, dated as of August 1,
2002 (the "Indenture"), by and between the Counties of Warren and Washington
Industrial Development Agency (the "Issuer") and The Huntington National Bank,
Cleveland, Ohio, as trustee (the "Trustee"), the undersigned Authorized
Representative of the Company hereby requests and authorizes the trustee (the
"Trustee"), as depository of the Project Fund created by the Indenture to pay to
the Company or to the person(s) listed in items (i) and (ii) below, out of the
money deposited in the Project Fund the aggregate sum of $_________ to pay such
person(s) or to reimburse the Company in full, as indicated in items (i) and
(ii) below, for the advance, payments and expenditures made by it in connection
with the following:.

     (i)  Name(s) and address(es) of the person(s) to whom payment is to be
made, and the amount to be paid to each:

Payee                                   Amount
- -----                                   ------


     (ii) General classification of the expenditure pursuant to Section 4.3 of
the Installment Sale Agreement by and between the Issuer and the Company, dated
as of August 1, 2002 (the "Installment Sale Agreement"):

                                       C-1



                   Cost of Preparing Plans and Specifications

     1.   Architect's, Engineer's and similar fees:            $
                                                                 ---------------

     2.   Broker's fees and costs of constructing the
           Facility:                                           $
                                                                 ---------------

          a. Broker's Fees:                                    $
                                                                 ---------------
          b. Sitework Construction:                            $
                                                                 ---------------
          c. Miscellaneous Construction:                       $
                                                                 ---------------

     3.   Fees and other expenses for recording and filing:    $
                                                                 ---------------

     4.   Fees or expenses relating to actions to protect
           the Bank's security interest in the Facility:       $
                                                                 ---------------

     5.   Insurance premiums:                                  $
                                                                 ---------------

     6.   Construction period interest:                        $
                                                                 ---------------

     7.   Legal, accounting, investment banking, etc. fees:    $
                                                                 ---------------

          a. Borrower's Counsel:                               $
                                                                 ---------------
          b. Letter of Credit Bank's Counsel:                  $
                                                                 ---------------
          c. IDA Counsel:                                      $
                                                                 ---------------
          d. Bond Counsel:                                     $
                                                                 ---------------
          e. Commitment Fee:                                   $
                                                                 ---------------
          f. Placement Agent's Counsel                         $
                                                                 ---------------

     9.   Administrative fee of the Issuer:                    $
                                                                 ---------------

     10.  Taxes paid during installation:                      $
                                                                 ---------------

     11.  Title insurance and surveying fees:                  $
                                                                 ---------------

     12.  Reimbursement for payment by the Company of items
           in 1-11 above:                                      $
                                                                 ===============

     With respect to the obligation(s) referred to above, the undersigned, an
Authorized Representative of the Company, hereby certifies that:

     (A)  each item for which disbursement is requested hereunder is properly
payable out of the Project Fund in accordance with the terms and conditions of
the Indenture and Lease Agreement and none of those items has formed the basis
for any disbursement heretofore made from said Project Fund;

                                       C-2



     (B)  each such item is or was necessary in connection with the
construction, furnishing, equipment or improvement of the Project, as defined in
the Indenture;

     (C)  with respect to items covered in this requisition, the undersigned has
no knowledge of any vendors', mechanics' or other liens, bailment leases,
conditional sale contracts, security interests or laborers' claims which should
be satisfied or discharged before the payments as requisitioned are made or
which will not be discharged by such payment;

     (D)  that such requested disbursement is consistent in all material aspects
with the Tax Compliance Agreement;

     (E)  none of the items for which this requisition is made has been the
basis for any prior disbursement of Bond Proceeds;

     (F)  this document shall be conclusive evidence of the facts and statements
set forth herein and shall constitute full warrant, protection and authority to
the Trustee for its actions taken pursuant hereto;

     (G)  the undisbursed Bond Proceeds are sufficient to complete the
acquisition, construction, reconstruction and equipping of the Facility in
accordance with the Plans and Specifications;

     (H)  the amount hereby requested has been paid or is to be paid or shall be
paid from the moneys requested and that insofar as the payment if for work,
materials, supplies, or equipment, the work has been performed and the
materials, supplies or equipment have been installed in the Facility or have
been delivered either at the Facility or at a proper place for fabrication and
are covered by adequate insurance;

     (I)  there exists no Event of Default under any of the Bond Documents;

     (J)  this document constitutes the approval of the Company of each
disbursement hereby requested and authorized;

     The capitalized terms herein, unless otherwise defined, will have the
meaning provided in the Indenture.
     IN WITNESS WHEREOF, the party hereto has caused this document to be duly
executed by its respective authorized officer as of the Closing Date.

                                        ANGIODYNAMICS, INC.


                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

Approved by:

KEYBANK NATIONAL ASSOCIATION, as Issuer
of the Credit Facility


By:
    -----------------------------------
Name:

                                       C-3



                                                                   EXHIBIT 10.11

- --------------------------------------------------------------------------------

                        COUNTIES OF WARREN AND WASHINGTON
                          INDUSTRIAL DEVELOPMENT AGENCY

                                       AND

                               ANGIODYNAMICS, INC.

                                       TO

                          KEYBANK NATIONAL ASSOCIATION


                                   ----------

                         MORTGAGE AND SECURITY AGREEMENT

                                   ----------

                           DATED AS OF AUGUST 1, 2002

                                   ----------

THIS MORTGAGE AND SECURITY AGREEMENT (A) AFFECTS TANGIBLE AND INTANGIBLE
PERSONAL PROPERTY AS WELL AS REAL PROPERTY, (B) CONTAINS AFTER-ACQUIRED PROPERTY
PROVISIONS, AND (C) IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT UNDER THE
UNIFORM COMMERCIAL CODE OF THE STATE OF NEW YORK.

- --------------------------------------------------------------------------------



                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----
MORTGAGE AND SECURITY AGREEMENT................................................2
ARTICLE I......................................................................6
DEFINITIONS
ARTICLE II....................................................................28
LAND MORTGAGE; GRANTING CLAUSES; SECURITY AGREEMENT; GENERAL COVENANTS
   SECTION 2.01. GRANTING CLAUSES.............................................28
   SECTION 2.02. SECURITY AGREEMENT...........................................30
   SECTION 2.03. INFORMATION UNDER THE UNIFORM COMMERCIAL CODE................30
   SECTION 2.04. PERFORMANCE OF COVENANTS.....................................31
   SECTION 2.05. PRIORITY OF LIEN OF MORTGAGE; DISCHARGE OF LIENS AND
                 ENCUMBRANCES.................................................31
ARTICLE III...................................................................32
REPRESENTATIONS AND WARRANTIES
   SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE ISSUER.................32
   SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................32
   SECTION 3.03. PAYMENT OF PRINCIPAL AND INTEREST ON THE BONDS...............33
ARTICLE IV....................................................................34
MAINTENANCE, MODIFICATION, TAXES AND INSURANCE
   SECTION 4.01. MAINTENANCE OF AND MODIFICATIONS TO THE MORTGAGED
                 PROPERTY BY THE COMPANY......................................34
   SECTION 4.02. INSURANCE REQUIRED...........................................34
   SECTION 4.03. TAXES, ASSESSMENTS AND UTILITY CHARGES.......................34
ARTICLE V.....................................................................36
SPECIAL COVENANTS
   SECTION 5.01. RIGHT OF ACCESS TO THE MORTGAGED PROPERTY....................36
   SECTION 5.02. INSPECTION OF BOOKS AND RECORDS..............................36
   SECTION 5.03. AGREEMENT TO PROVIDE INFORMATION.............................36
   SECTION 5.04. BOOKS OF RECORD AND ACCOUNT..................................36
   SECTION 5.05. COMPLIANCE WITH APPLICABLE LAWS..............................36
   SECTION 5.06. RECORDATION OF MORTGAGE AND FILING OF SECURITY INSTRUMENTS...37
   SECTION 5.07. ENFORCEMENT OF DUTIES AND OBLIGATIONS OF THE COMPANY.........37
   SECTION 5.08. ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS......37
ARTICLE VI....................................................................40
EVENTS OF DEFAULT AND REMEDIES
   SECTION 6.01. EVENTS OF DEFAULT DEFINED....................................40
   SECTION 6.02. ACCELERATION; ANNULMENT OF ACCELERATION......................41

                                        i



   SECTION 6.03. ENFORCEMENT OF REMEDIES......................................42
   SECTION 6.04. APPOINTMENT OF RECEIVERS.....................................43
   SECTION 6.05. APPLICATION OF MONEYS........................................44
   SECTION 6.06. REMEDIES CUMULATIVE..........................................44
   SECTION 6.07. TERMINATION OF PROCEEDINGS...................................44
   SECTION 6.08. WAIVER AND NON-WAIVER OF EVENT OF DEFAULT....................44
   SECTION 6.09. REPAYMENT AND SECURING OF EXPENSES PAID BY THE BANK..........45
   SECTION 6.10. REPAYMENT AND SECURING OF COLLECTION COSTS
                 INCURRED BY THE BANK.........................................45
   SECTION 6.11. OTHER ACTIONS BY THE HOLDER..................................45
   SECTION 6.12. SALE IN ONE PARCEL...........................................46
ARTICLE VII...................................................................46
MISCELLANEOUS
   SECTION 7.01. LIMITATION OF RIGHTS.........................................46
   SECTION 7.02. NOTICES......................................................46
   SECTION 7.03. COUNTERPARTS.................................................48
   SECTION 7.04. APPLICABLE LAW...............................................49
   SECTION 7.05. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING.......49
   SECTION 7.06. SEVERABILITY.................................................49
   SECTION 7.07. COVENANTS RUN WITH THE LAND..................................49
   SECTION 7.08. AMENDMENT....................................................49
   SECTION 7.09. USURY........................................................49
   SECTION 7.10. NO RECOURSE; SPECIAL OBLIGATION..............................49
   SECTION 7.11. TAX LAWS.....................................................50
   SECTION 7.12. REVENUE STAMPS...............................................51
   SECTION 7.13. FURTHER ASSURANCE............................................51
   SECTION 7.14. SATISFACTION OF MORTGAGE.....................................51
   SECTION 7.15  LIEN LAW.....................................................51
EXHIBIT A.....................................................................54
DESCRIPTION OF THE LAND
EXHIBIT B.....................................................................55
DESCRIPTION OF THE EQUIPMENT

                                       ii



                         MORTGAGE AND SECURITY AGREEMENT

     THIS MORTGAGE AND SECURITY AGREEMENT dated as of August 1, 2002 (the
"Mortgage") from the COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT
AGENCY, a public benefit corporation of the State of New York having an office
for the transaction of business located at 5 Warren Street, Glens Falls, New
York 12801 (the "Issuer") and ANGIODYNAMICS, INC., a corporation organized and
existing under the laws of the State of New York, having an office for the
transaction of business located at 603 Queensbury Avenue, Queensbury, New York
12804 (the "Company") to KEYBANK NATIONAL ASSOCIATION, a banking corporation
organized and existing under the laws of the State of New York, having an office
for the transaction of business located at 66 South Pearl Street, Albany, New
York 12207, as Bank (the "Bank") for the holders of the Issuer's Multimode
Variable Rate Industrial Development Revenue Bonds (Angiodynamics, Inc.
Project), Series 2002 in the aggregate principal amount of $3,500,000 (the
"Initial Bonds") and any Additional Bonds (as defined in the Indenture
hereinafter referred to and collectively with the Initial Bonds, the "Bonds")
issued pursuant to a certain trust indenture dated as of August 1, 2002 (the
"Indenture") by and between the Issuer and the Bank;

                                   WITNESSETH:

     WHEREAS, Title 1 of Article 18-A of the General Municipal Law of the State
of New York (the "Enabling Act") was duly enacted into law as Chapter 1030 of
the Laws of 1969 of the State of New York; and

     WHEREAS, the Enabling Act authorizes and provides for the creation of
industrial development agencies for the benefit of the several counties, cities,
villages and towns in the State of New York (the "State") and empowers such
agencies, among other things, to acquire, construct, reconstruct, lease,
improve, maintain, equip and dispose of land and any building or other
improvement, and all real and personal properties, including, but not limited
to, machinery and equipment deemed necessary in connection therewith, whether or
not now in existence or under construction, which shall be suitable for
manufacturing, warehousing, research, civic, commercial or industrial purposes,
in order to advance the job opportunities, health, general prosperity and
economic welfare of the people of the State and to improve their standard of
living; and

     WHEREAS, the Enabling Act further authorizes each such agency to lease or
sell any or all of its facilities, to issue its bonds, for the purpose of
carrying out any of its corporate purposes and, as security for the payment of
the principal and redemption price of and interest on any such bonds so issued
and any agreements made in connection therewith, to mortgage and pledge any or
all of its facilities, whether then owned or thereafter acquired, and to pledge
the revenues and

                                        2



receipts from the lease or sale thereof to secure the payment of such bonds and
interest thereon; and

     WHEREAS, the Issuer was created, pursuant to and in accordance with the
provisions of the Enabling Act, by Chapter 862 of the Laws of 1971 of the State,
as amended (collectively, with the Enabling Act, the "Act") and is empowered
under the Act to undertake the Project (as hereinafter defined) in order to so
advance the job opportunities, health, general prosperity and economic welfare
of the people of the State and improve their standard of living; and

     WHEREAS, the Company has presented an application (the "Application") to
the Issuer which Application requested that the Issuer consider undertaking a
project (the "Project") consisting of (A)(i) the acquisition of an interest in a
certain parcel or parcels of land located at 603 Queensbury Avenue, Town of
Queensbury, County of Warren, State of New York (the "Land"), (ii) the
acquisition thereon of an approximately 32,000 square foot facility (the
"Existing Facility"), together with equipment therein (the "Existing
Equipment"), (iii) the making of certain renovations to the Existing Facility
(as so renovated, the "Facility") consistent with its present and authorized
use, (iv) the construction of approximately 32,000 square feet of additions(s)
to the Existing Facility, (v) the purchase of additional equipment (together
with the Existing Equipment, the "Equipment" and, together with the Land and the
Facility, the "Project Facility") and (B) the financing of a part of the cost of
the foregoing by issuing its tax-exempt Industrial Development Revenue Bonds
(the "Bonds") in an aggregate principal amount not to exceed $4,500,000.00, all
pursuant to Title 1 of Article 18-A of the General Municipal Law of the State of
New York (collectively, the "Act"), as amended, the proceeds of which may be
applied to the costs of issuance, and, as necessary and appropriate, the
provision of a debt service reserve fund, capitalized interest or other means of
providing credit enhancement for the Bonds; and (C) to lease (with the option to
purchase) and/or sell the Project Facility to the Company, all pursuant to the
Act;

     WHEREAS, pursuant to Article 8 of the Environmental Conservation Law,
Chapter 43-B of the Consolidated Laws of New York, as amended (the "SEQR Act"),
and the regulations adopted pursuant thereto by the Department of Environmental
Conservation of the State of New York, being 6 NYCRR Part 617, as amended (the
"Regulations", and collectively with the SEQR Act, "SEQRA"), by resolution
adopted by the members of the Issuer on June 24, 2002 (the "SEQR Resolution"),
the Issuer (A) reviewed the application, (B) determined that the Project
constitutes an "Unlisted Action," and (C) determined that the Project will not
have a "significant effect" on the environment and issued a "negative
declaration" with respect to the Project (as said quoted terms are used in
SEQRA); and

     WHEREAS, the Issuer (A) caused notice of a public hearing of the Issuer
(the "Public Hearing") pursuant to Section 859-a of the Act and Section 147(f)
of the Internal Revenue Code of 1986, as amended (the "Code"), to hear all
persons interested in the Project and the financial assistance being
contemplated by the Issuer with respect to the Project, mailed on May ___, 2002
to the chief executive officers of the county and of each city, town, village
and school district in which the Project Facility is to be located, (B) caused
notice of the Public Hearing to be

                                        3



published on May ___, 2002 in The Post Star, a newspaper of general circulation
available to residents of the City of Albany, (C) conducted the Public Hearing
on June 17, 2002 at 3:00 o'clock, local time in the Board of Supervisors
Chambers in the Warren County Municipal Center, Queensbury, New York 12804, and
(D) prepared a report of the Public Hearing (the "Report") which fairly
summarized the views presented at said public hearing and distributed same to
the members of the Issuer and to the Courts Legislatures of Warren and
Washington County; and

     WHEREAS, by certificates dated June 21, 2002 and July 17, 2002 (the "Public
Approval"), the County Legislatures of Washington County and Warren County,
respectively, approved the issuance of the Bonds for purposes of Section 147(f)
of the Code; and

     WHEREAS, by resolution adopted by the members of the Issuer on July 15,
2002 (the "Bond Resolution"), the Issuer determined to (A) issue the Initial
Bonds pursuant to the provisions of the Indenture, (B) enter into this Mortgage
and Security Agreement, and (C) enter into certain other documents related to
the foregoing; and

     WHEREAS, the Issuer proposes to undertake the Project, to appoint the
Company as agent of the Issuer to undertake the acquisition, construction and
installation of the Current Project, and to sell the Issuer's interest in the
Project Facility to the Company, and the Company desires to act as agent of the
Issuer to undertake the acquisition, construction and installation of the
Current Project and to purchase the Issuer's interest in the Project Facility
from the Issuer, all pursuant to the terms and conditions set forth in the
installment sale agreement dated as of August 1, 2002 (the "Installment Sale
Agreement") between the Issuer and the Company; and

     WHEREAS, pursuant to the Deed to Issuer, the Company will convey to the
Issuer the Land; and

     WHEREAS, as security for the Bonds, the Issuer will assign to the Bank
certain of the Issuer's rights and remedies under the Installment Sale
Agreement, including the right to receive installment purchase payments and
other amounts payable thereunder, but not including the Unassigned Rights (as
hereinafter defined), pursuant to a pledge and assignment dated as of August 1,
2002 (the "Pledge and Assignment") from the Issuer to the Bank,

     WHEREAS, the Company's obligation to make all installment purchase payments
due under the Installment Sale Agreement, and to perform all obligations related
thereto, and the Issuer's obligation to repay the Bonds, will be further secured
by a guaranty dated as of August 1, 2002 (the "Guaranty") from the Company to
the Bank; and

     WHEREAS, as security for the Bonds and the Company's obligations under the
Guaranty and the other Financing Documents (as hereinafter defined), the Issuer
and the Company now intend to grant to the Bank a mortgage Lien (as hereinafter
defined) on and security interest in the Project Facility pursuant to this
Mortgage; and

                                        4



     WHEREAS, all things necessary to constitute this Mortgage a valid first
Lien on and pledge of the Mortgaged Property (as hereinafter defined) herein
described in accordance with the terms hereof, have been done and performed, and
the creation, execution and delivery of this Mortgage, as security for the
payment of the principal of, premium, if any, and interest on the Bonds and as
security for the Company's obligations under the Reimbursement Agreement and the
other Financing Documents (as hereinafter defined), have in all respects been
duly authorized;

     NOW THEREFORE, THIS MORTGAGE FURTHER WITNESSETH:

     KNOW ALL MEN BY THESE PRESENTS, that the Company and the Issuer, in order
to secure payment of the principal of, premium, if any, and interest on the
Bonds, originally in the aggregate principal amount of $3,500,000 according to
the tenor and effect of the Bonds, the payment of all other sums required to be
paid hereunder and under the Indenture, the Reimbursement Agreement and the
other Financing Documents, and the performance and observance by the Issuer and
the Company of all of the covenants, agreements, representations and warranties
herein and in the Indenture, and the other Financing Documents, do hereby
covenant and agree as follows:


                                        5



                                    ARTICLE I

                                   DEFINITIONS

SECTION 101.  DEFINITIONS. The following words and terms used in this Indenture
shall have the respective meanings set forth below unless the context or use
indicates another or different meaning or intent:

     "Accountant" means an independent certified public accountant or a firm of
independent certified public accountants selected by the Company and acceptable
to the Bank.

     "Act" means Title 1 of Article 18-A of the General Municipal Law of the
State, as amended from time to time, together with Chapter 862 of the Laws of
1971 of the State, as amended from time to time.

     "Act of Bankruptcy" means the filing of a petition in bankruptcy (or the
other commencement of a bankruptcy or similar proceeding) by or against the
Bank, the Company or the Issuer under any applicable bankruptcy, insolvency,
reorganization or similar law, now or hereafter in effect.

     "Additional Bonds" means any bonds issued by the Issuer pursuant to Section
214 of the Indenture.

     "Additional Facility" means any additional property financed with the
proceeds of Additional Bonds.

     "Additional Project" means the purposes for which any Additional Bonds may
be issued.

     "Affiliate" of any specified entity means any other entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified entity and "control", when used with respect to any
specified entity, means the power to direct the management and policies of such
entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

     "Alternate Credit Facility" means any direct pay letter of credit or other
credit enhancement or support facility that has terms which are the same in all
material respects (except for the term and maximum interest rate but including
coverage of accrued interest on the Bonds for 98 days if the Bonds bear interest
at the Weekly Rate or for 183 days if the Bonds bear interest at the Semi-Annual
Rate or the Long-Term Rate) as the then current Credit Facility and (A) shall
have a term of not less than one year, (except if the Long-Term Rate shall then
be in

                                        6



effect, the term of such Alternate Credit Facility shall not expire prior to (a)
the first par redemption date plus 15 days or (b) the first redemption date plus
15 days if the Alternate Credit Facility covers the redemption premium) (B)
shall be issued by a bank, a trust company or other financial institution or
credit provider, and (C) with respect to which the Trustee shall have received
the opinions required by Section 408(F) of the Indenture.

     "Applicable Laws" means all statutes, codes, laws, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all Governmental Authorities,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to or affect the Project Facility or any part
thereof or the conduct of work on the Project Facility or any part thereof or to
the operation, use, manner of use or condition of the Project Facility or any
part thereof (the applicability of such statutes, codes, laws, acts, ordinances,
orders, rules, regulations, directions and requirements to be determined both as
if the Issuer were the owner of the Project Facility and as if the Company and
not the Issuer were the owner of the Project Facility), including but not
limited to (1)applicable building, zoning, environmental, planning and
subdivision laws, ordinances, rules and regulations of Governmental Authorities
having jurisdiction over the Project Facility, (2)restrictions, conditions or
other requirements applicable to any permits, licenses or other governmental
authorizations issued with respect to the foregoing, and (3) judgments, decrees
or injunctions issued by any court or other judicial or quasi-judicial
Governmental Authority.

     "Arbitrage Certificate" means the certificate dated the Closing Date for
the Initial Bonds executed by the Issuer and relating to certain requirements
set forth in Section 148 of the Code.

     "Authenticating Agent" means the Trustee and any agent so designated in and
appointed pursuant to Section 204 of the Indenture.

     "Authorized Investments" means any of the following: (A) Government
Obligations; (B)obligations issued or guaranteed by any state or political
subdivision thereof rated A or higher by Moody's and by S&P; (C) open market
commercial or finance paper of any corporation having a net worth in excess of
$100,000,000 and which is rated either P-1 or A-1 or an equivalent by Moody's
and S&P; (D) bankers' acceptances drawn on and accepted by commercial banks
including the Trustee or its affiliates; (E) investments due within 12 months in
certificates of deposit issued by, or bankers' acceptances of, the Trustee or
its affiliates, or of banks or trust companies organized under the laws of the
United States of America or any state thereof, which must have a reported
capital and surplus of at least $25,000,000 in dollars of the United States of
America; (F) bank repurchase agreements, including the Trustee's or its
affiliate's, fully secured by obligations of the type described in (A) above;
(G) variable rate demand securities redeemable within 7 days or able to be
tendered for remarketing or purchase upon no more than 7 days' notice and
secured by a credit facility issued by a financial institution, which financial
institution (or its corporate parent) maintains a long term debt rating assigned
by Moody's and S&P which is not lower than the third highest long term debt
category (without regard to numerical or other modifiers assigned within the
category) by either Rating Service, or

                                        7



by both Rating Services, if rated by both Rating Services; and (H)shares of any
so called "money market mutual fund", including any "money market mutual fund"
which the Trustee or any of its affiliates provide services for a fee, whether
as an investment advisor, custodian, transfer agent, registrar, sponsor,
distributor, manager or otherwise, which invests solely in obligations described
in items (A) through (G) above; and further provided that any such investment or
deposit is not prohibited by law.

     "Authorized Newspaper" means a newspaper in English customarily published
each Business Day and generally circulated in the Borough of Manhattan, City and
State of New York.

     "Authorized Representative" means the Person or Persons at the time
designated to act on behalf of the Issuer, the Bank or the Company, as the case
may be, by written certificate furnished to the Issuer, the Company, the Bank
and the Trustee containing the specimen signature of each such Person and signed
on behalf of (A) the Issuer by its Chairman or Vice Chairman, or such other
person as may be authorized by resolution of the members of the Issuer to act on
behalf of the Issuer, (B) the Bank by a Vice President or an Assistant Vice
President, or such other person as may be authorized by the board of directors
of the Bank to act on behalf of the Bank, and (C) the Company by its President
or any Vice President, or such other person as may be authorized by the board of
directors of the Company to act on behalf of the Company.

     "Available Moneys" means, with respect to any date, (A) funds which (1)
have been paid to the Trustee by the Issuer, the Company, any Affiliate of the
Company, any Guarantor or any Insider of any of the foregoing and deposited into
and held in a separate and segregated subaccount or subaccounts in the
Redemption Premium Account of the Bond Fund in which no moneys not deposited on
the same date were at any time held, (2) have been on deposit in the Redemption
Premium Account of the Bond Fund for a period of at least one hundred
twenty-three (123) consecutive days prior to such date, during and prior to
which period no Event of Bankruptcy has occurred and (3) are represented by cash
or its equivalent as of such date; (B) moneys drawn under the Letter of Credit
and deposited directly into the Credit Facility Account of the Bond Fund; (C)
the proceeds deposited directly into the Defeasance Account of the Bond Fund
from the sale of refunding obligations other than, directly or indirectly, to
the Issuer, the Company, any Guarantor, any Affiliate of the Company or any
Guarantor or any Insider of any of them or any entity who at the time of the
purchase of the Bonds, is a secured creditor of the Company or any Guarantor;
(D) proceeds deposited directly into the Remarketing Proceeds Account of the
Bond Fund from the marketing or remarketing of Bonds to any purchaser other
than, directly or indirectly, the Company, the Issuer, any Guarantor, any
Affiliate of the Company or any Guarantor or any Insider of any of them or any
entity who at the time of the purchase of the Bonds, is a secured creditor of
the Company or any Guarantor; (E) proceeds from investment of the foregoing,
provided such proceeds are retained in the Account in which they were earned;
and (F) any other funds or payments so long as, in the opinion of reputable
bankruptcy counsel, such payments will not constitute an avoidable preference
under the standards set forth in the Bankruptcy Code.

                                        8



     "Bank" means the Credit Facility Issuer.

     "Bank Documents" means the Letter of Credit, the Reimbursement Agreement,
the Mortgage, the Bond Pledge Agreement, the Security Agreement and any other
document now or hereafter executed by the Issuer, the Company or any Guarantor
in favor of the Bank which affects the rights of the Bank in or to the Project
Facility, in whole or in part, or which secures or guarantees any sum due under
any Bank Document.

     "Bank Rate" means the rate of interest being charged to the Company by the
Credit Facility Issuer under the Reimbursement Agreement.

     "Bankruptcy Code" means Title 11 of the United States Code, as it is
amended from time to time.

     "Beneficial Owner" means, with respect to the Bonds, a Person owning a
Beneficial Ownership Interest therein, as evidenced to the satisfaction of the
Trustee.

     "Beneficial Ownership Interest" means the beneficial right to receive
payments and notices with respect to the Bonds which are held by the Depository
under a book entry system.

     "Bill of Sale to Company" means the bill of sale from the Issuer to the
Company conveying all of the Issuer's interest in the Project Facility to the
Company, substantially in the form attached as Exhibit B to the Installment Sale
Agreement.

     "Bill of Sale to Issuer" means the bill of sale delivered on the Closing
Date from the Company to the Issuer conveying all of the Company's interest in
the Project Facility to the Issuer.

     "Bond" or "Bonds" means, collectively, (A) the Initial Bonds and (B) any
Additional Bonds.

     "Bond Counsel" means the law firm of Bond, Schoeneck & King, LLP, Albany,
New York or such other attorney or firm of attorneys located in the State whose
experience in matters relating to the issuance of obligations by states and
their political subdivisions is nationally recognized and who are acceptable to
the Issuer.

     "Bond Fund" means the fund so designated established pursuant to Section
401 (A) (2) of the Indenture.

     "Bond Payment Date" means each Interest Payment Date and each date on which
principal, interest or premium, if any, shall be payable on the Bonds according
to their terms and the Indenture, including without limitation, scheduled
mandatory redemption dates, unscheduled

                                        9



mandatory redemption dates, optional redemption dates and Stated Maturity, so
long as any Bonds shall be Outstanding.

     "Bond Pledge Agreement" means (A) the bond pledge agreement dated as of
August 1, 2002 from the Company to the KeyBank National Association, as may be
amended or supplemented from time to time, and (B) any similar bond pledge
agreement by and between the Company and any Substitute Bank, as said bond
pledge agreement may be amended or supplemented from time to time.

     "Bond Proceeds" means (A) with respect to the Initial Bonds, the amount
paid to the Issuer by the initial purchasers of the Initial Bonds as the
purchase price for the Initial Bonds and (B) with respect to any Additional
Bonds, the amount paid to the Issuer by the initial purchasers of the Additional
Bonds as the purchase price for the Additional Bonds.

     "Bond Purchase Agreement" means the bond purchase agreement dated August
28, 2002 among the Issuer, the Company and the Underwriter.

     "Bond Rate" means with respect to any Bond, the applicable rate of interest
on such Bond, as set forth in such Bond.

     "Bond Register" means the register maintained by the Bond Registrar in
which, subject to such reasonable regulations as it, the Trustee or the Bond
Registrar may prescribe, the Issuer shall provide for the registration of the
Bonds and for the registration of transfers of the Bonds.

     "Bond Registrar" means the Trustee, acting in its capacity as bond
registrar under the Indenture, and its successors and assigns as bond registrar
under the Indenture.

     "Bond Resolution" means the resolution of the members of the Issuer duly
adopted on July 15, 2002 authorizing the Issuer to undertake the Project, to
issue and sell the Initial Bonds and to execute and deliver the Financing
Documents to which the Issuer is a party.

     "Bond Year" means each one (1) year period ending on the anniversary of the
Closing Date, or such other annual period provided for the computation of
arbitrage rebate selected by the Company in the manner allowed under Section 148
of the Code.

     "Bondholder" or "Holder" or "Owner of the Bonds" means the registered owner
of any Bond as indicated on the bond register maintained by the Bond Registrar,
other than the registered owner of any Bond which has been purchased pursuant to
Section 304 of the Indenture and not surrendered for payment of the purchase
price thereof.

     "Book Entry Bonds" means the Bonds held in Book Entry Form, with respect to
which the provisions of Section 213 of the Indenture shall apply.

                                       10



     "Book Entry Form" or "Book Entry System" means, with respect to the Bonds,
a form or system, as applicable, under which (A) the Beneficial Ownership
Interests may be transferred only through a book entry and (B) physical Bond
certificates in fully registered form are registered only in the name of a
Depository or its nominee as Bondholder, with the physical Bond certificates
"immobilized" in the custody of the Depository. The Book Entry System maintained
by and the responsibility of the Depository and not maintained by or the
responsibility of the Issuer or the Trustee is the record that identifies, and
records the transfer of the interests of, the owners of book entry interests in
the Bonds.

     "Building Loan Agreement" means the Building Loan agreement dated as of
August 1, 2002 by and between the Bank and the Company, as said building loan
agreement may be amended or supplemented from time to time.

     "Business Day" means any day other than (A) a Saturday or Sunday, (B) a day
on which the New York Stock Exchange is closed or (C) any day on which banks
located in the city in which the principal corporate trust office of the Trustee
is located, or city in which the office of the Credit Facility Issuer at which
demands for payment are to be presented is located are required or authorized by
applicable law to remain closed.

     "Certificate of Authentication" means the certificate of authentication in
substantially the form attached to the forms of the Initial Bonds attached as
Schedule I to the Indenture.

     "Closing Date" means (A) with respect to the Initial Bonds, the date on
which authenticated Initial Bonds are delivered to or upon the order of the
Placement Agent and payment is received therefor by the Trustee on behalf of the
Issuer, and (B) with respect to any Additional Bonds, the date on which such
Additional Bonds are authenticated and delivered to the purchaser thereof and
payment therefor is received by the Trustee on behalf of the Issuer.

     "Code" means the Internal Revenue Code of 1986, as amended, including, when
appropriate, the statutory predecessor of said Code, and the applicable
regulations (whether proposed, temporary or final) of the United States Treasury
Department promulgated under said Code and the statutory predecessor of said
Code, and any official rulings and judicial determinations under the foregoing
applicable to the Bonds.

     "Company" means Angiodynamics, Inc., a business corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, to the extent permitted by Section 8.4 of the Installment Sale
Agreement.

     "Completion Date" means the earlier of (A) August 1, 2005 or (B) the date
of substantial completion of the Project Facility as evidenced in the manner
provided in Section 4.4 of the Installment Sale Agreement.

                                       11



     "Condemnation" means the taking of title to, or the use of, Property under
the exercise of the power of eminent domain by any Governmental Authority.

     "Construction Period" means the period (A) beginning on the Inducement Date
and (B) ending on the Completion Date.

     "Continuing Disclosure Agreement" means, if required by Section 516 of the
Indenture, the continuing disclosure agreement by and between the Company and
the Trustee, as said continuing disclosure agreement may be amended or
supplemented from time to time.

     "Conversion" means (A) any conversion from time to time in accordance with
the terms of the Indenture of the Bonds from one Interest Rate Mode to another
Interest Rate Mode and (B) the end of any Long-Term Rate Period.

     "Conversion Date" means the first date any Conversion becomes effective.

     "Conveyance Documents" means the Bill of Sale to Issuer and the Deed to
Issuer.

     "Cost of the Project" means all those costs and items of expense enumerated
in Section 4.3 of the Installment Sale Agreement.

     "Credit Facility" means the Letter of Credit or any Alternate Credit
Facility delivered to the Trustee pursuant to the provisions of the Indenture.

     "Credit Facility Account" means the special account so named established
within the Bond Fund pursuant to Section 401(A)(2)(a) of the Indenture.

     "Credit Facility Issuer" means (A), initially, KeyBank National
Association, a national banking association organized under the laws of the
United States, as issuer of the initial Letter of Credit, and (B) in the event
an Alternate Credit Facility is outstanding, the institution issuing such
Alternate Credit Facility.

     "Debt Service Payment" means, with respect to any Bond Payment Date, (A)
the interest payable on the Bonds on such Bond Payment Date, plus (B) the
principal, if any, payable on the Bonds on such Bond Payment Date, plus (C) the
premium, if any, payable on the Bonds on such Bond Payment Date, plus (D) the
purchase price, if any, payable on the Bonds on such Bond Payment Date.

     "Deed to Issuer" means the deed dated as of August 1, 2002 from the Company
to the Issuer.

     "Default Interest Rate" means a per annum rate of interest equal to the
lesser of (A) the Prime Rate plus one percent (1%) per annum, or (B) the maximum
permitted by law.

                                       12



     "Defaulted Interest" shall have the meaning ascribed to such term in
Section 207(C) of the Indenture.

     "Depository" means The Depository Trust Company, New York, New York, a
limited purpose trust company organized under the laws of the State, or its
nominee, or any other securities depository designated in any supplemental
resolution of the Issuer to serve as securities depository for the Bonds that is
a clearing agency under federal law operating and maintaining, with its
participants or otherwise, a Book Entry System to record ownership of book entry
interests in Bonds, and to effect transfers of book entry interests in Book
Entry Bonds.

     "Determination of Taxability" means, with respect to the Initial Bonds, (A)
the enactment of legislation or the adoption of final regulations or a final
decision, ruling or technical advice by any federal judicial or administrative
authority which has the effect of requiring interest on the Initial Bonds to be
included in the gross income of the Bondholders for federal income tax purposes
(other than a Bondholder who is a "substantial user" of the Project or a
"related person", as said quoted terms are used in Section 144 and Section
147(a) of the Code), (B) the receipt by the Trustee of a written opinion of Bond
Counsel to the effect that interest on the Initial Bonds must be included in the
gross income of the Bondholders for federal income tax purposes (other than a
Bondholder who is a "substantial user" of the Project or a "related person", as
said quoted terms are used in Section 144 and Section 147(a) of the Code) or (C)
the delivery to the Trustee of a written statement signed by an Authorized
Representative of the Company to the effect that (1) the Company has exceeded or
will exceed the maximum amount of capital expenditures permitted under Section
144(a)(4) of the Code or (2) the Company or another "test-period beneficiary"
(as said quoted term is defined in Section 144(a)(10)(D) of the Code) has
exceeded or will exceed the maximum amount of tax-exempt obligations permitted
to be outstanding under Section 144(a)(10) of the Code; provided that no
decision by any court or decision, ruling or technical advice by any
administrative authority shall be considered final (A)unless the Bondholder
involved in the proceeding or action giving rise to such decision, ruling or
technical advice (1) gives the Company and the Trustee prompt notice of the
commencement thereof and (2) offers the Company the opportunity to control the
contest thereof, provided the Company shall have agreed to bear all expenses in
connection therewith and to indemnify that Bondholder against all liabilities in
connection therewith, and (B) until the expiration of all periods for judicial
review or appeal.

     "Direct Participant" means a Participant as defined in the Letter of
Representations.

     "Environmental Claim" shall mean, with respect to any person, any action,
suit, proceeding, investigation, notice, claim, complaint, demand, request for
information or other communication (written or oral) by any other person
(including any governmental authority, citizens group or employee or former
employee of such person) alleging, asserting or claiming any actual or
potential: (a) violation of any Environmental Law, (b) liability under any
Environmental Law or (c) liability for investigatory costs, cleanup costs,
governmental response

                                       13



costs, natural resources damages, property damages, personal injuries, fines or
penalties arising out of, based on, or resulting from, the presence or release
into the environment of any Hazardous Materials at any location, whether or not
owned by such person.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     "Event of Bankruptcy" means the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceedings) by or against the
Issuer, the Company, a Guarantor, any Affiliate of the Company or any Guarantor
or any Insider of any of them as debtor, under any applicable bankruptcy,
reorganization, insolvency or other similar law as now or hereafter in effect
applicable to the Issuer, the Company, any Guarantor, any Affiliate of the
Issuer, the Company or of any Guarantor or Insider of any of them.

     "Event of Default" means (A) with respect to the Indenture, any of those
events defined as an Event of Default by the terms of Article VI of the
Indenture, (B) with respect to the Installment Sale Agreement, any of those
events defined as an Event of Default by the terms of Article X of the
Installment Sale Agreement, and (C) with respect to any other Financing
Document, any of those events defined as an Event of Default by the terms
thereof.

     "Excess Earnings" means an amount equal to the sum of (A) plus (B), where
(A) is the excess of (1) the aggregate amount earned from the date of issuance
of the Initial Bonds on all nonpurpose investments in which gross proceeds of
the Bonds are invested (other than investments attributable to an excess
described in this clause (1)), over (2) the amount that would have been earned
if such nonpurpose investments (other than amounts attributable to an excess
described in this clause (1)) had been invested at a rate equal to the yield on
the Bonds; and (B)is any income attributable to the excess described in clause
(1) of this definition. The sum of (A) plus (B) shall be determined in
accordance with Section 148(f) of the Code. As used herein, the terms "gross
proceeds", "nonpurpose investments" and "yield" have the meanings assigned to
them for purposes of Section 148 of the Code.

     "Extraordinary Services" and "Extraordinary Expenses" means all reasonable
services rendered and all reasonable expenses incurred by the Trustee or any
paying agent under the Indenture, other than Ordinary Services and Ordinary
Expenses, including, but not limited to, reasonable attorneys fees and any
services rendered and any expenses incurred with respect to an Event of Default
or with respect to the occurrence of an event which upon the giving of notice or
the passage of time would ripen into an Event of Default under any of the
Financing Documents.

     "Financing Documents" means the Bonds, the Indenture, the Installment Sale
Agreement, the Mortgage, the Pledge and Assignment, the Building Loan Agreement,
the Guaranty, the Tax Documents, the Conveyance Documents, the Bank Documents,
the Remarketing Agreement and any other document now or hereafter executed by
the Issuer, the Company, any Guarantor or the Bank in favor of the Bondholders,
the Trustee or the Bank which affects the rights of the

                                       14



Bondholders, the Trustee or the Bank in or to the Project Facility, in whole or
in part, or which secures or guarantees any sum due under the Bonds or any other
Financing Document, each as amended from time to time, and all documents related
thereto and executed in connection therewith.

     "Financial Institution" means (A) any national bank, banking corporation,
trust company or other banking institution, whether acting in its individual or
fiduciary capacity, organized under the laws of the United States, any state,
any territory or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the Comptroller of the
Currency or a comparable state or territorial official or agency; (B) an
insurance company whose primary and predominant business activity is the writing
of insurance or the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a similar
official or agency of a state, a territory or the District of Columbia; (C)an
investment company registered under the Investment Company Act of 1940 or a
business development company as described in Section 2(a)(48) of that Act; (D)
an employee benefit plan, including an individual retirement account, which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, insurance company or
registered investment company; or (E) institutional investors or other entities
who customarily purchase commercial paper or tax-exempt securities in large
denominations.

     "Governmental Obligations" means (A) direct obligations of the United
States of America, (B) obligations unconditionally guaranteed by the United
States of America and (C)securities or receipts evidencing ownership interests
in obligations or specified portions (such as principal or interest) of
obligations described in (A) or (B).

     "Governmental Authority" means the United States of America, the State, any
other state and any political subdivision thereof, and any agency, department,
commission, board, bureau or instrumentality of any of them.

     "Gross Proceeds" means one hundred percent (100%) of the proceeds of the
transaction with respect to which such term is used, including, but not limited
to, the settlement of any insurance claim or Condemnation award.

     "Guarantor" means the Company and any other guarantor of the obligations of
the Company under the Reimbursement Agreement.

     "Guaranty" means the guaranty dated as of August 1, 2002 from the Company
to the Trustee, as said guaranty may be amended or supplemented from time to
time.

     "Hazardous Materials" means all hazardous materials including, without
limitation, any flammable explosives, radioactive materials, radon, asbestos,
urea formaldehyde foam insulation, polychlorinated byphenyls, petroleum,
petroleum products, methane, hazardous materials,

                                       15



hazardous wastes, hazardous or toxic substances, or related materials as set
forth in or regulated under or defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act,
as amended (42 U.S. C. Sections 6901, et seq.), Articles 15 or 27 of the State
Environmental Conservation Law, or in the regulations adopted and publications
promulgated pursuant thereto, or any other Federal, state or local environmental
law, ordinance, rule or regulation.

     "Immediate Notice" means notice transmitted through a time-sharing
terminal, if operative as between any two parties, or if not operative, in
writing or by telephone (promptly confirmed in writing).

     "Indebtedness" means (A) the payment of the Debt Service Payments on the
Bonds according to their tenor and effect, (B) all other payments due from the
Issuer or the Company to the Trustee or the Bank pursuant to the Installment
Sale Agreement or any other Financing Document, (C) the performance and
observance by the Issuer and the Company of all of the covenants, agreements,
representations and warranties made for the benefit of the Trustee or the Bank
pursuant to the Installment Sale Agreement or any other Financing Document, (D)
the monetary obligations of the Company to the Issuer and its members, officers,
agents, servants and employees under the Installment Sale Agreement and the
other Financing Documents, and (E) all interest accrued on any of the foregoing.

     "Indenture" means the trust indenture dated as of August 1, 2002 by and
between the Issuer and the Trustee, as said trust indenture may be amended or
supplemented from time to time.

     "Independent Counsel" means an attorney or firm of attorneys duly admitted
to practice law before the highest court of any state and approved by the Bank
and not a full-time employee of the Company or the Issuer.

     "Indirect Participant" means a Person utilizing the book entry system of
the Depository by, directly or indirectly, clearing through or maintaining a
custodial relationship with a Direct Participant.

     "Insider" means any entity referred to or described in accordance with the
standards set forth in Section 101(31) of the Bankruptcy Code, assuming for this
purpose that the Issuer, the Company, any Guarantor, or any Affiliate of any of
them, as applicable, is a debtor, and any limited partner or limited liability
company member thereof.

     "Inducement Date" means June 24, 2002.

     "Initial Bonds" means the Issuer's Multi-Mode Variable Rate Industrial
Development

                                       16



Revenue Bonds (Angiodynamics, Inc. Project - Letter of Credit Secured), Series
2002 in the aggregate principal amount of $3,500,000, issued pursuant to the
Bond Resolution and Article II of the Indenture and sold by the Underwriter
pursuant to the provisions of the Bond Purchase Agreement, and any Bonds issued
in exchange or substitution thereof.

     "Installment Sale Agreement" means the installment sale agreement dated as
of August 1, 2002 by and between the Issuer and the Company, as said installment
sale agreement may be amended or supplemented from time to time.

     "Insurance and Condemnation Fund" means the fund so designated established
pursuant to Section 401(A)(3) of the Indenture.

     "Interest Payment Date" means, (A) with respect to any Additional Bonds,
the Interest Payment Dates on said Additional Bonds, as established pursuant to
the supplemental Indenture authorizing issuance of said Additional Bonds, and
(B) with respect to the Initial Bonds, (1)while the Initial Bonds bear interest
at the Weekly Rate, the first Thursday of each January, April, July and October,
and (2) while the Initial Bonds bear interest at the Semi-Annual Rate or the
Long-Term Rate, April 1 and October 1 of each year. The first Interest Payment
Date relating to the Initial Bonds shall be the Interest Payment Date in
October, 2002. In any case, the final Interest Payment Date relating to the
Initial Bonds shall be the Maturity Date of the Initial Bonds.

     "Interest Period" means, for all Bonds, the period from and including each
Interest Payment Date to and including the day next preceding the next Interest
Payment Date. The first Interest Period for the Initial Bonds shall begin on
(and include) the date of the initial delivery of the Initial Bonds. The final
Interest Period for a Bond shall end on the Maturity Date (or redemption date)
for such Bond.

     "Interest Rate Mode" means the Weekly Rate, the Semi-Annual Rate or the
Long-Term Rate.

     "Issuer" means (A) Counties of Warren and Washington Industrial Development
Agency and its successors and assigns, and (B) any public benefit corporation or
other public corporation resulting from or surviving any consolidation or merger
to which Counties of Warren and Washington Industrial Development Agency or its
successors or assigns may be a party.

     "Letter of Credit" means the irrevocable transferable direct-pay letter of
credit dated the Closing Date, issued by the Bank in favor of the Trustee
pursuant to the Reimbursement Agreement as security for the Initial Bonds, in a
maximum amount (which shall decline at fixed intervals) equal to $3,575,179,
said sum representing the aggregate of (A) the principal of the Initial Bonds
Outstanding, plus (B) 98 days' interest on all Outstanding Initial Bonds
(computed at an assumed interest rate of 8%).

     "Letter of Representations" means (A), with respect to the Initial Bonds,
the letter of

                                       17



representations by and among the Issuer and the Depository relating to the
Initial Bonds and any amendments or supplements thereto entered into with
respect thereto, and (B), with respect to any Additional Bonds, any letter of
representations by and among the Issuer, the Trustee and the Depository relating
to the Additional Bonds, and any amendments or supplements thereto entered into
with respect thereto.

     "Lien" means any interest in Property securing an obligation owed to a
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, projections, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions and
encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property. For purposes hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.

     "Lien Law" means the Lien Law of the State.

     "Long-Term Rate" means the Interest Rate Mode for the Initial Bonds in
which the interest rate on the Initial Bonds is determined in accordance with
Section 209(C)(3) of the Indenture.

     "Long-Term Rate Period" means any period beginning on, and including, the
Conversion Date to the Long-Term Rate and ending on, and including, the day
preceding the Interest Payment Date selected by the Company in accordance with
the requirements of Section 209(D) of the Indenture and each period of the same
duration (or as close as possible) ending on the day preceding an Interest
Payment Date thereafter until the earliest of the day preceding the change to a
different Long-Term Rate Period, the Conversion to a different Interest Rate
Mode or the maturity of the Bonds.

     "Mandatory Tender" means the mandatory tender of Bonds by the owner thereof
upon (A) a Conversion pursuant to Section 209(B)(2)(e) of the Indenture, or (B)
the delivery by the Company of an Alternate Credit Facility pursuant to Section
304 of the Indenture.

     "Maturity Date" means, with respect to any Bond, the final Stated Maturity
of the principal of such Bond.

     "Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the

                                       18



Company.

     "Mortgage" means the mortgage and security agreement dated as of August 1,
2002 from the Company and the Issuer to the Bank granting the Bank a lien on the
Project Facility as additional security for the obligations of the Company to
the Bank pursuant to the Reimbursement Agreement, as said mortgage may be
amended to supplemented from time to time.

     "Net Proceeds" means so much of the Gross Proceeds with respect to which
that term is used as remain after payment of all fees for services, expenses,
costs and taxes (including attorneys' fees) incurred in obtaining such Gross
Proceeds.

     "Non-Qualifying Alternate Credit Facility" means an Alternate Credit
Facility which is not a Qualifying Alternate Credit Facility.

     "Office of the Trustee" means the corporate trust office of the Trustee
specified in Section 1103 of the Indenture, or such other address as the Trustee
shall designate pursuant to Section 1103 of the Indenture.

     "Optional Redemption Premium" means the maximum applicable premium payable
upon an optional redemption of the Bonds after the Conversion Date, as
determined by the Remarketing Agent pursuant to Section 301(B)(2) of the
Indenture.

     "Ordinary Services" and "Ordinary Expenses" means those reasonable services
normally rendered with those reasonable expenses, including reasonable
attorneys' fees, normally incurred by a trustee or a paying agent, as the case
may be, under instruments similar to the Indenture.

     "Outstanding" means, when used with reference to the Bonds as of any date,
all Bonds which have been duly authenticated and delivered by the Trustee under
the Indenture, except:

     (A)  Bonds theretofore canceled or deemed cancelled by the Trustee or
theretofore delivered to the Trustee for cancellation;

     (B)  Bonds for the payment or redemption of which moneys or Government
Obligations shall have been theretofore deposited with the Trustee (whether upon
or prior to the maturity or redemption date of any such Bonds); provided that,
if such Bonds are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given or arrangements satisfactory to the Trustee
shall have been made therefor, or waiver of such notice satisfactory in form to
the Trustee shall have been filed with the Trustee; and

     (C)  Bonds in lieu of or in substitution for which other Bonds have been
authenticated and delivered under the Indenture.

                                       19



In determining whether the owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Company (unless all of the outstanding Bonds are
then owned by the Company) shall be disregarded for the purpose of any such
determination. Notwithstanding the foregoing, Bonds so owned which have been
pledged in good faith shall not be disregarded as aforesaid if the pledgee
established to the satisfaction of the Bond Registrar the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Company. If the
Indenture shall be discharged pursuant to Article X thereof, no Bonds shall be
deemed to be Outstanding within the meaning of this definition.

     "Participant" shall have the meaning assigned to such term in the Letter of
Representations.

     "Paying Agent" or "Co-Paying Agent" means any national banking association,
federal savings bank, bank and trust company or trust company appointed by the
Company and meeting the qualifications of, and subject to the obligations of,
the Trustee in Article XI hereof. "Principal Office" of any Paying Agent shall
mean the office thereof designated in writing to the Trustee.

     "Permitted Encumbrances" means (A) utility, access and other easements,
rights of way, restrictions, encroachments and exceptions that benefit or do not
materially impair the utility or the value of the Property affected thereby for
the purposes for which it is intended, (B)mechanics', materialmen's,
warehousemen's, carriers' and other similar Liens to the extent permitted by
Section 8.8(B) of the Installment Sale Agreement, (C) Liens for taxes,
assessments and utility charges (1) to the extent permitted by Section 6.2(B) of
the Installment Sale Agreement, or (2) at the time not delinquent, (D) any Lien
on the Project Facility obtained through any Financing Document, and (E) any
Lien on the Project Facility in favor of the Trustee or the Bank, or (F) any
lien on the Project Facility approved in writing by the Bank (or, if the Bank is
in default under the then current Credit Facility, the Trustee).

     "Person" means an individual, partnership, corporation, trust,
unincorporated organization or Governmental Authority.

     "Plans and Specifications" means with respect to the Issuer, the
description of the Project Facility appearing in the fifth recital clause to the
Indenture and the Installment Sale Agreement.

     "Pledge and Assignment" means the pledge and assignment dated as of August
1, 2002 from the Issuer to the Trustee, pursuant to which the Issuer has
assigned to the Trustee its rights under the Installment Sale Agreement (except
the Unassigned Rights), as said pledge and assignment may be amended or
supplemented from time to time.

     "Pledged Bonds" means any Bond at any time purchased, in whole or in part,
with the proceeds of a draw on the Letter of Credit upon tender of such Bond and
held by the Trustee as

                                       20



nominee for the Bank pursuant to the provisions of Section 305 of the Indenture.

     "Predecessor Bonds" of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for purposes of this definition, any Bond authenticated
and delivered under Section 205 of the Indenture in lieu of a lost, destroyed or
stolen Bond shall be deemed to evidence the same debt as the lost, destroyed or
stolen Bond.

     "Prime Rate" shall mean the KeyBank National Association Prime Rate, which
is that per annum interest rate announced from time to time publicly by the Bank
as a reference rate for determining interest rates charged on certain loans, but
is not necessarily the lowest rate at which the Bank lends. Any change in the
Prime Rate shall be effective on the date such rate is raised or lowered at the
Bank, with or without notice to the Company.

     "Principal Payment Date" means, the dates for the payment of principal on
the Bonds in accordance with the Company's irrevocable notice of optional
redemption delivered to the Trustee on the Closing Date, which shall occur
quarterly in each year on the Interest Payment Date of the first day of
February, May, August and November of each year in the manner as set forth in
the Reimbursement Agreement.

     "Project" shall have the meaning set forth in the fifth recital clause to
the Indenture and the Installment Sale Agreement.

     "Project Costs" means Costs of the Project.

     "Project Facility" means all materials, machinery, equipment, fixtures or
furnishings intended to be acquired with the proceeds of the Bonds or any
payment made by the Company pursuant to Section 4.5 of the Installment Sale
Agreement, and such substitutions and replacements therefor and additions
thereto as may be made from time to time pursuant to the Installment Sale
Agreement, including, without limitation, all of the Property described in
Exhibit A attached to the Installment Sale Agreement.

     "Project Fund" means the fund so designated established pursuant to Section
401(A)(1) of the Indenture.

     "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "Purchase Date" means (A) if the Interest Rate Mode is the Weekly Rate, any
Business Day as set forth in Section 304(A)(1) and Section 304(A)(4) of the
Indenture, respectively, (B) if the Interest Rate Mode is the Semi-Annual Rate,
any Interest Payment Date, (C) if the Interest Rate Mode is the Long-Term Rate,
the final Interest Payment Date for each Long-Term Rate Period, and (D) each day
that Bonds are subject to mandatory purchase pursuant to Section

                                       21



304(B) of the Indenture.

     "Purchase Price" means an amount equal to one hundred percent (100%) of the
principal amount of any Bond tendered or deemed tendered pursuant to Section 304
or Section 305 of the Indenture, plus accrued and unpaid interest thereon to the
Purchase Date.

     "Qualifying Alternate Credit Facility" means an Alternate Credit Facility
in connection with which the Trustee shall have received (A), if the Bonds are
then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) from the Rating Service then rating the Bonds to
the effect that such Rating Service has reviewed the proposed Alternate Credit
Facility and that the substitution of the Alternate Credit Facility will not, by
itself, result in (1) a permanent withdrawal of its rating of the Bonds or (2)
the reduction of the current rating of the Bonds, or (B) if the Bonds are not
then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) that the Alternate Credit Facility would be issued
by a Credit Facility Issuer which, or the parent corporation of which, has a
long-term debt rating assigned by a Rating Service which is equal to or better
than the rating of the Credit Facility Issuer being replaced.

     "Rate Period" means any period during which a single interest rate is in
effect for a Bond.

     "Rating Service" means Moody's, if the Bonds are rated by Moody's at the
time, and/or S&P, if the Bonds are rated by S&P at the time, and their
successors and assigns.

     "Rebate Amount" as of any date means the Excess Earnings as of such date,
or such other amount as may be due to the United States pursuant to Section
148(f) of the Code.

     "Rebate Fund" means the fund so designated established pursuant to Section
401(A)(4) of the Indenture.

     "Rebate Fund Earnings Subaccount" means the special account so designated
within the Rebate Fund established pursuant to Section 401(A)(4)(b) of the
Indenture.

     "Rebate Fund Principal Subaccount" means the account so designated within
the Rebate Fund established pursuant to Section 401(A)(4)(a) of the Indenture.

     "Record Date" means, as the case may be, the applicable Regular Record Date
or Special Record Date.

     "Redemption Price" means, when used with respect to a Bond, the principal
amount thereof plus the applicable premium, if any, payable upon the prior
redemption thereof pursuant to the provisions of the Indenture and such Bond.

     "Redemption Premium Account" means the Redemption Premium Account created
under

                                       22



Section 405 of the Indenture.

     "Regular Record Date" means, with respect to any Interest Period, the close
of business on the last Business Day of such Interest Period.

     "Reimbursement Agreement" means the Reimbursement Agreement dated as of
August 1, 2002 between the Company and KeyBank National Association, as the same
may be amended from time to time and filed with the Trustee, and any agreement
of the Company with a Credit Facility Issuer setting forth the obligations of
the Company to such Credit Facility Issuer arising out of any payments under a
Credit Facility and which provides that it shall be deemed to be a Reimbursement
Agreement for the purpose of the Indenture.

     "Related Person" means any Person constituting a "related person" within
the meaning ascribed to such quoted term in Section 144(a)(3) of the Code,
except when used in connection with the phrase "substantial user", in which case
the phrase "Related Person" shall have the meaning set forth in Section 147(a)
of the Code.

     "Remarketing Agent" means McDonald Investments Inc. and its successors as
provided in Section 718 of the Indenture. "Principal Office" of the Remarketing
Agent means the office designated as such in writing to the Company, the Trustee
and the Tender Agent.

     "Remarketing Agreement" means the remarketing agreement dated as of August
1, 2002 by and among the Company, the Issuer and the Remarketing Agent, as said
remarketing agreement may be amended or supplemented from time to time, and any
remarketing agreement between the Company and a successor Remarketing Agent.

     "Remarketing Proceeds Account" means the Remarketing Proceeds Account
created under Section 405 of the Indenture.

     "Request for Disbursement" means a request from the Company, as agent of
the Issuer, stating the amount of the disbursement sought and containing the
statements, representations and other items required by Section 4.3 of the
Installment Sale Agreement, the Reimbursement Agreement and the Indenture, in
substantially the form of Exhibit C attached to the Indenture.

     "Requirement" or "Local Requirement" means any law, ordinance, order, rule
or regulation of a Governmental Authority or a local authority, respectively.

     "Revenues" means (a) all amounts payable to the Trustee with respect to the
principal or redemption price of, or interest on, the Bonds (i) by the Company
as required under the Installment Sale Agreement, (ii) upon deposit in the Bond
Fund from the proceeds of the Bonds, and (iii) by the Credit Facility Issuer
under a Credit Facility, and (b) investment income with respect to any moneys
held by the Trustee in the Bond Fund. The term "Revenues" does not include any
moneys or investments in the Rebate Fund.

                                       23



     "Sales Tax Exemption Letter" shall have the meaning assigned to such term
in Section 8.14 of the Installment Sale Agreement.

     "Security Agreement" means the security agreement dated as of August 1,
2002 from the Company to the Bank, as paid security agreement may be amended or
supplemented from time to time.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Semi-Annual Rate" means the Interest Rate Mode for the Bonds in which the
interest rate on the Bonds is determined in accordance with Section 209(C)(3).

     "Semi-Annual Rate Period" means any period beginning on, and including, the
Conversion Date to the Semi-Annual Rate and ending on, and including, the day
preceding the next Interest Payment Date thereafter and each successive six (6)
month period thereafter until the day preceding Conversion to a different
Interest Rate Mode or the maturity of the Bonds.

     "SEQRA" means Article 8 of the Environmental Conservation Law of the State
and the statewide and local regulations thereunder.

     "Special Record Date" means a date for the payment of any Defaulted
Interest on the Bonds fixed by the Trustee pursuant to Section 207(C) of the
Indenture.

     "Standard & Poor's" means Standard & Poor's Ratings Group, a New York
corporation, its successors and assigns, and, if such entity shall be dissolved
or liquidated or shall no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.

     "State" means the State of New York.

     "Stated Maturity" means, when used with respect to any Bond or any
installment of interest or principal thereon, the date specified in such Bond as
the fixed date on which the principal of such Bond or such installment of
interest on such Bond is due and payable.

     "Substitute Bank" means the issuer of any Alternate Credit Facility.

     "Tax Documents" means, collectively, (A) with respect to the Initial Bonds,
the Arbitrage Certificate and the Tax Regulatory Agreement and (B) with respect
to any Additional Bonds, any similar documents executed by the Issuer and/or the
Company in connection with the issuance of such Additional Bonds.

     "Tax Incidence Date" means, with respect to any recipient of interest paid
or payable on

                                       24



the Bonds, the first such date of the period for which any interest paid or
payable on the Bonds was or is includable in the gross income of such recipient
thereof for purposes of income taxation under the laws of the United States,
without regard to whether or not any such recipient exercised any or all of the
rights or remedies granted such recipient by the Financing Documents or by law.

     "Tax Regulatory Agreement" means the tax regulatory agreement dated the
Closing Date executed by the Company in favor of the Issuer and the Trustee,
with a certificate of the Placement Agent attached thereto, regarding, among
other things, the restrictions prescribed by the Code in order for interest on
the Initial Bonds to remain excludable from gross income for federal income tax
purposes.

     "Tender Agent" means the initial and any successor tender agent appointed
in accordance with Section 716 of the Indenture. "Principal Office" of the
Tender Agent means the office thereof designated as such in writing to the
Trustee, the Company and the Remarketing Agent.

     "Tendered Bond" means any Bond or portion thereof which is the subject of
(A) a demand from the Owner thereof that such Bond be purchased pursuant to
Section 304(A) of the Indenture or (B) a mandatory purchase pursuant to Section
304(B) of the Indenture.

     "Termination of Installment Sale Agreement" means a termination of the
Installment Sale Agreement by and between the Company, as purchaser, and the
Issuer, as seller, intended to evidence the termination of the Installment Sale
Agreement, substantially in the form attached as Exhibit C to the Installment
Sale Agreement.

     "Trust Estate" means all Property which may from time to time be subject to
a Lien in favor of the Trustee created by the Indenture or any other Financing
Document.

     "Trust Revenues" means (A) all payments of installment purchase payments
made or to be made by or on behalf of the Company under the Installment Sale
Agreement (except payments made with respect to the Unassigned Rights), (B) all
other amounts pledged to the Trustee by the Issuer or the Company to secure the
Bonds or performance of their respective obligations under the Installment Sale
Agreement and the Indenture, (C) the Net Proceeds (except proceeds with respect
to the Unassigned Rights) of insurance settlements and Condemnation awards with
respect to the Project Facility, (D) all payments received by the Trustee under
the Letter of Credit, (E) moneys and investments held from time to time in each
fund and account established under the Indenture and all investment income
thereon, except (1)moneys deposited with or paid to the Trustee for the
redemption of Bonds, notice of which has been duly given, (2) moneys deposited
with the Trustee or the Tender Agent for the purchase of Tendered Bonds, and (3)
as specifically otherwise provided, and (F) all other moneys received or held by
the Trustee for the benefit of the Bondholders pursuant to the Indenture.
Notwithstanding anything to the contrary, amounts held in the Rebate Fund shall
not be considered Trust Revenues and shall not be subject to the Lien of the
Indenture, and amounts

                                       25



held therein shall not secure any amount payable on the Bonds.

     "Trustee" means The Huntington National Bank, a national banking
association organized and existing under the laws of the United States of
America, or any successor trustee or co-trustee acting as trustee under the
Indenture.

     "Unassigned Rights" means (A) the rights of the Issuer granted pursuant to
Sections 2.2, 3.2, 3.3, 4.1(B), 4.1(D), 4.1(E)(2), 4.1(F), 4.1(G), 5.2(A),
5.2(D), 5.3(B)(2), 5.3(B)(3), 5.4(A), 5.4(B), 6. 1(A), 6. 1(B), 6.3, 6.4, 6.5,
6.6, 7.1, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.11, 8.15, 8.16,
9.1, 9.3, 9.4, 11.1, 11.4, 11.8 and 11.10 of the Installment Sale Agreement, (B)
the moneys due and to become due to the Issuer for its own account or the
members, officers, agents (other than the Company) and employees of the Issuer
for their own account pursuant to Sections 2.2(F), 3.3, 4. 1(F), 5.3(B)(2),
5.3(C), 6.4(B), 8.2, 10.2 and 10.4 of the Installment Sale Agreement, (C) the
rights of the Issuer under Section 6.6 of the Installment Sale Agreement, and
(D) the right to enforce the foregoing pursuant to Article X of the Installment
Sale Agreement. Notwithstanding the preceding sentence, to the extent the
obligations of the Company under the Sections of the Installment Sale Agreement
listed in (A), (B), (C) and (D) above do not relate to the payment of moneys to
the Issuer for its own account or to the members, officers, directors, agents
(other than the Company) and employees of the Issuer for their own account, such
obligations, upon assignment of the Installment Sale Agreement by the Issuer to
the Trustee pursuant to the Pledge and Assignment, shall be deemed to and shall
constitute obligations of the Company to the Issuer, the Trustee and the Bank,
jointly and severally, and either the Issuer, the Trustee or the Bank may
commence an action to enforce the Company's obligations under the Installment
Sale Agreement.

     "Underwriter" means McDonald Investments Inc., a Key Corp Company, as
underwriter for the Initial Bonds.

     "Weekly Rate" means the Interest Rate Mode for the Bonds in which the
interest rate on the Bonds is determined weekly in accordance with Section
209(C)(3) of the Indenture.

     "Weekly Rate Period" means the period beginning on, and including, the date
of issuance of the Bonds, and ending on, and including, the next Wednesday
(except if the date of issuance of the Bonds is a Wednesday then the first
Weekly Rate Period shall begin and end on such Wednesday) and thereafter the
period beginning on, and including, any Thursday and ending on, and including,
the next Wednesday.

                                       26



     SECTION 1.02. INTERPRETATION. In this Mortgage, unless the context
otherwise requires:

          (A)  the terms "hereby", "hereof","herein", "hereunder", and any
similar terms as used in this Mortgage, refer to this Mortgage, and the term
"heretofore" shall mean before the date of this Mortgage, and the term
"hereafter" shall mean after the date of this Mortgage;

          (B)  words of masculine gender shall mean and include correlative
words of feminine and neuter genders;

          (C)  words importing the singular number shall mean and include the
plural number, and vice versa; and

          (D)  any certificates, letters or opinions required to be given
pursuant to this Mortgage shall mean a signed document attesting to or
acknowledging the circumstances, representations, opinions of law or other
matters therein stated or set forth or setting forth matters to be determined
pursuant to this Mortgage.

                                       27



                                   ARTICLE II

                        LAND MORTGAGE; GRANTING CLAUSES;
                      SECURITY AGREEMENT; GENERAL COVENANTS

     SECTION 2.01. GRANTING CLAUSES. The Issuer and the Company, in
consideration of the execution and delivery by the Bank of the Indenture and the
purchase and acceptance of the Bonds by the holders and owners thereof and for
other good and valuable consideration, receipt of which is hereby acknowledged,
and in order to secure (1) the payment of the principal of, premium, if any, and
interest on the Bonds, issued in the original aggregate principal amount of
$3,500,000 according to their tenor and effect, (2) the payment of all other
sums required to be paid hereunder and under the Indenture, the Reimbursement
Agreement and the other Financing Documents, and (3) the performance and
observance by the Issuer and the Company of all of the covenants, agreements,
representations and warranties herein and in the Indenture, the Guaranty and the
other Financing Documents (all of the above in (1) through (3) being
collectively referred to herein as the "Mortgage Indebtedness"); hereby warrant,
assign, mortgage, hypothecate, pledge, grant a Lien on and security interest in,
set over and confirm unto the Bank and their respective successors and assigns
forever, all of the estate, right, title and interest of the Issuer and the
Company in, to and under any and all of the following described property (the
"Mortgaged Property"), whether now owned or held or hereafter acquired:

     (A)  The Land (as more particularly described in Exhibit A attached
hereto), together with the appurtenances thereto and the title in and to any
portion of the Land lying in the streets and roads in front of and adjoining
said the Land;

     (B)  All buildings, structures, improvements and appurtenances now
standing, or at any time hereafter constructed or placed, upon the Land or any
part thereof, including all right, title and interest of the Issuer and the
Company in and to all building materials and fixtures of every kind and nature
whatsoever on the Land or in any building now or hereafter standing on the Land
or any part thereof, including, without limitation, the Facility;

     (C)  The Equipment (as more particularly described in Exhibit B attached
hereto), together with all repairs, replacements, improvements, substitutions
and renewals thereof and therefor, and all parts, accessories and additions
incorporated therein or affixed thereon;

     (D)  All easements, royalties, mineral, oil and gas rights and profits,
water, water rights and water stock relating to the Land necessary for the
ownership, operation, use and maintenance of the Facility;

     (E)  Any and all moneys and securities from time to time held by the Bank
under the terms of this Mortgage and the Indenture (other than moneys and
securities held in the Rebate Fund), and any and all other Property of every
name and nature, from time to time hereinafter by

                                       28



delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or
transferred as and for additional security hereunder by the Issuer or by anyone
on its behalf or with its written consent in favor of the Bank;

     (F)  All rights and interests of the Issuer in any and all moneys due or to
become due to the Issuer and any and all other rights and remedies of the Issuer
under or arising out of the Installment Sale Agreement (except the Unassigned
Rights, and moneys payable pursuant to the Unassigned Rights); provided, that
the assignment made by this clause shall not impair or diminish any obligation
of the Issuer under the Installment Sale Agreement; provided, further, however,
that the assignment made by this clause shall not give to the Bank the right to
amend the Installment Sale Agreement without the prior written consent of the
Issuer;

     (G)  All leases, subleases, licenses, contract rights, general intangibles
and other agreements affecting the use, operation or occupancy of all or any
portion of the Facilities or the other real property described above now or
hereafter entered into, including, but not limited to, any and all rights
therein under and pursuant to the Installment Sale Agreement (except the
Unassigned Rights) and the right to receive and apply the rents, issues and
profits of the Land or the Facility or the other real property described above
to the payment of the Mortgage Indebtedness;

     (H)  All proceeds of and any unearned premiums on any insurance policies
covering the Land, the Facility or the Equipment or the other real property
described above, including, without limitation, the right to receive and apply
the proceeds of any insurance or judgments, or settlements made in lieu thereof,
for damage to any of the foregoing, subject to the Company's right to use such
insurance proceeds or condemnation award for restoration of the Project Facility
as provided in the Installment Sale Agreement;

     (I)  All other proceeds of the conversion, whether voluntary or
involuntary, of the Land, the Facility or the Equipment, or any other Property
or rights encumbered or conveyed hereby into cash or liquidated claims,
including, without limitation, all title insurance, hazard insurance,
Condemnation and other awards; and

     (J)  All extensions, additions, substitutions and accessions with respect
to any of the foregoing.

     TO HAVE AND TO HOLD the foregoing Mortgaged Property unto the Bank and its
successors and assigns forever;

     SUBJECT, HOWEVER, to the Permitted Encumbrances;

     EXCEPTING, THEREFROM, the Unassigned Rights;

                                       29



     PROVIDED, HOWEVER, that, if (A) there shall be no Event of Default under
the Indenture, (B) the Issuer and the Company shall perform and observe all the
covenants to be performed and observed hereunder and perform all obligations
under the Indenture, the Installment Sale Agreement and the other Financing
Documents to which they are parties and (C) the Company has paid or caused to be
paid to the Bank all sums or money due or to become due to it in accordance with
the terms and provisions hereof and of the other Financing Documents to which it
is a party, including, without limitation all amounts owed under all
indemnification provisions, then upon such final payments and such performance
and observance, this Mortgage and the rights hereby granted shall cease,
terminate and be void; otherwise, this Mortgage to be and remain in full force
and effect.

     SECTION 2.02. SECURITY AGREEMENT. The Mortgaged Property includes both real
and personal Property and all other rights and interest, whether tangible or
intangible in nature, of the Issuer and the Company in the Mortgaged Property.
This Mortgage shall also constitute a security agreement under the Uniform
Commercial Code of the State so that the Bank shall have and may enforce a
security interest in any or all of the Mortgaged Property, in addition to (but
not in limitation of) the Lien upon that portion of the Mortgaged Property
constituting part of the realty imposed by the foregoing provisions hereof, such
security interest to attach at the earliest moment permitted by law and also to
include and attach to all additions and accessions thereto, all substitutions
and replacements therefor, all proceeds thereof, including insurance and
Condemnation proceeds, and all contract rights, rental or lease payments and
general intangibles of the Issuer and the Company obtained in connection with or
relating to the Mortgaged Property (except for the Unassigned Rights and moneys
received pursuant thereto) as well as any and all items of Property in the
foregoing classifications which are hereafter acquired. The Issuer and the
Company shall, at the request of the Bank, deliver to the Bank, as the case may
be, any and all further instruments which the Bank shall require in order to
further secure and perfect the Lien of this Mortgage. Pursuant to the Uniform
Commercial Code of the State, the Issuer and the Company hereby authorize the
Bank to execute and file continuation statements without the necessity of the
Issuer's or the Company's signature as debtor if the Bank shall determine that
such are necessary or advisable in order to perfect or continue the perfection
of their respective security interests in any of the Mortgaged Property covered
by this Mortgage, and shall pay to the Bank, within three Business Days after
written demand, any expenses incurred by the Bank in connection with the
preparation, execution and filing of such statements and any continuation
statements that may be filed by the Bank. The Bank shall promptly provide copies
of any documents executed by them pursuant to this authorization to the Company.

     SECTION 2.03. INFORMATION UNDER THE UNIFORM COMMERCIAL CODE. The following
information is stated in order to facilitate filings under the Uniform
Commercial Code of the State: The Secured Party is KEYBANK NATIONAL ASSOCIATION,
as the Bank, having an office for the transaction of business located at 66
South Pearl Street, Albany, New York 12207 The Debtors are ANGIODYNAMICS, INC.,
603 Queensbury Avenue, Queensbury, New York 12804 and COUNTIES OF WARREN AND
WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY, 5 Warren Street, Glens Falls, New York
12801.

                                       30



     SECTION 2.04. PERFORMANCE OF COVENANTS. The Issuer and the Company hereby
covenant that they will faithfully observe and perform, or cause to be observed
and performed, at all times any and all covenants, undertakings, stipulations
and provisions on their respective parts to be observed or performed contained
in this Mortgage and the other Financing Documents to be executed by them.

     SECTION 2.05. PRIORITY OF LIEN OF MORTGAGE; DISCHARGE OF LIENS AND
ENCUMBRANCES. (A) The Company hereby represents and warrants that, except for
Permitted Encumbrances, the Company and the Issuer are lawfully seized of the
estate conveyed hereby and the Issuer and the Company have the right to grant
and convey the Mortgaged Property, and the Company will warrant and defend title
to the Mortgaged Property against all claims and demands, excepting the
Permitted Encumbrances.

     (B)  The Issuer and the Company shall not permit or create or suffer to be
permitted or created any Lien, except for Permitted Encumbrances, upon the
Mortgaged Property or any part thereof, without the prior written consent of the
Bank.

     (C)  Notwithstanding the provisions of subsection (B) of this Section 2.05,
the Company may in good faith contest any such Lien, provided that the Company
(1) first shall have notified the Bank of such contest, (2) no Event of Default
has occurred under any of the Financing Documents, (3) shall have set aside
adequate cash reserves for the discharge of any such Lien and furnished evidence
thereof reasonably satisfactory to the Bank, and (4) demonstrates to the
reasonable satisfaction of the Bank that the failure to discharge any such Lien
will not subject the Mortgaged Property or any part thereof or any funds of the
Issuer applicable to the acquisition, construction or installation of the
Mortgaged Property to loss or forfeiture.

                                       31



                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
hereby represents and warrants that it is duly authorized under the Constitution
and laws of the State, including particularly and without limitation, the Act,
to issue the Bonds, to execute and deliver the Financing Documents to which the
Issuer is a party and to pledge and encumber the Mortgaged Property in the
manner and to the extent herein set forth; and that all action on the part of
the Issuer for the issuance of the Bonds and the execution and delivery of the
Financing Documents to which the Issuer is a party has been duly and effectively
taken.

     SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants as follows:

     (A)  (1) The Company and/or the Issuer have good, marketable and insurable
title to the Mortgaged Property, subject only to Permitted Encumbrances, (2) the
Company and/or the Issuer owns or will own all fixtures and articles of personal
Property now or hereafter constituting part of the Mortgaged Property, including
any substitutions or replacements thereof, free and clear of all Liens and
claims, and (3) this Mortgage is and will remain a valid and enforceable Lien on
the Mortgaged Property.

     (B)  The Company is a corporation organized existing under the laws of the
State of New York and has the power to enter into and perform this Mortgage and
the other Financing Documents executed by the Company and to mortgage and pledge
the Mortgaged Property in the manner and to the extent herein set forth, and
this Mortgage and the other Financing Documents executed by the Company
constitute valid and enforceable obligations according to their respective
terms.

     (C)  Neither the execution and delivery of this Mortgage or the other
Financing Documents executed by the Company, the consummation of the
transactions contemplated hereby or thereby nor the fulfillment of or compliance
with the provisions hereof or thereof will violate any provision of the
Company's certificate of incorporation or bylaws, or conflict with or result in
a material breach of or default under any of the material terms, conditions or
provisions of any order, judgment, law, restriction, material agreement or
instrument to which the Company is a party to or by which the Company or any of
its Property is or may be bound, or result in the creation or imposition of any
Lien of any nature upon any of the Property of the Company under the terms of
any such instrument or agreement.

     (D)  The Project Facility and the operation thereof currently complies and
will continue to comply with all Applicable Laws.

                                       32



     (E)  The Land is not located in an area identified by the Secretary of
Housing and Urban Development as an area having special flood hazards pursuant
to the terms of the National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973, as same may have been amended to date.

     (F)  The Company has, or at the time the same may be required shall have,
all necessary certificates, licenses, authorizations, registrations, permits and
approvals necessary for the commencement of the construction on and the
operation of the Mortgaged Property, including, but not limited to, all required
environmental permits, all of which are in full force and effect and not, to the
knowledge of the Company, subject to any revocation, amendment, release,
suspension, forfeiture or the like; the present and contemplated use and
occupancy of the Mortgaged Property does not conflict with or violate any such
certificate, license, authorization, registration, permit of approval.

     SECTION 3.03. PAYMENT OF PRINCIPAL AND INTEREST ON THE BONDS. The Issuer
and the Company hereby covenant that they will promptly pay, or cause to be
paid, the Debt Service Payments on the Bonds at the place, on the dates and in
the manner provided therein. All Debt Service Payments on the Bonds paid by the
Issuer shall be payable solely from installment purchase payments and other
revenues and receipts received pursuant to the Installment Sale Agreement (but
not including any amounts received in connection with the Unassigned Rights).
Nothing in the Bonds, the Indenture or in this Mortgage shall be construed as
pledging or mortgaging any funds or assets of the Issuer other than those
pledged or mortgaged hereby or thereby. Neither the State nor any political
subdivision thereof (other than the Issuer and the Company) shall in any event
be liable for the payment of any Debt Service Payment on the Bonds or for the
performance of any pledge, mortgage, obligation or agreement undertaken by the
Issuer and the Company.

                                       33



                                   ARTICLE IV

                 MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

     SECTION 4.01. MAINTENANCE OF AND MODIFICATIONS TO THE MORTGAGED PROPERTY BY
THE COMPANY. The Company shall (A) keep the Mortgaged Property in good condition
and repair and preserve the same against waste, loss, damage and depreciation,
ordinary wear and tear excepted, (B) make all necessary repairs and replacements
to the Mortgaged Property or any part thereof (whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen) which is
damaged, destroyed or condemned, (C) except as permitted by Financing Documents,
not remove or demolish any portion of the Mortgaged Property or alter in any
material respect the character of any improvement without the prior written
consent of the Bank, (D) not permit the Mortgaged Property to become deserted or
abandoned, and (E) operate the Mortgaged Property in a sound and economic
manner.

     SECTION 4.02. INSURANCE REQUIRED. At all times throughout the term of this
Mortgage, including, without limitation, during any period of construction of
the Mortgaged Property, the Company shall maintain the insurance described in
Article VI of the Installment Sale Agreement, regardless of whether the
Installment Sale Agreement shall be terminated or shall be for any reason not in
full force and effect, and shall within ten (10) days of request therefor by the
Bank deliver proof to the Bank that such insurance has been and is being
maintained.

     SECTION 4.03. TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) The Company shall
pay or cause to be paid, as the same respectively become due, (1) all taxes and
governmental charges of any kind whatsoever which may at any time be lawfully
assessed or levied against or with respect to the Mortgaged Property, (2) all
utility and other charges, including "service charges", incurred or imposed for
the operation, maintenance, use, occupancy, upkeep and improvement of the
Mortgaged Property, and (3) all assessments and charges of any kind whatsoever
lawfully made by any Governmental Authority for public improvements, provided
that, with respect to special assessments or other governmental charges that may
lawfully be paid in installments over a period of years, the Company shall be
obligated under this Mortgage to pay or cause to be paid only such installments
as are required to be paid during the term of this Mortgage.

     (B)  Notwithstanding the provisions of subsection (A) of this Section 4.03,
the Company may withhold any such payment and the Company may in good faith
actively contest any such taxes, assessments and other charges provided that the
Company (1) first shall have notified the Issuer and the Bank in writing of such
contest, (2) an Event of Default has not occurred and shall not be continuing
under any of the Financing Documents, (3) shall have set aside adequate cash
reserves for any such taxes, assessments and other charges, and (4) demonstrates
to the reasonable satisfaction of the Issuer and the Bank that the non-payment
of such items will not

                                       34



subject the Lien of this Mortgage, or subject the Project Facility or any part
thereof, to loss or forfeiture. Otherwise, such taxes, assessments or charges
shall be paid promptly or secured by posting a bond in form and substance
satisfactory to the Issuer and the Bank.


                                       35



                                    ARTICLE V

                                SPECIAL COVENANTS

     SECTION 5.01. RIGHT OF ACCESS TO THE MORTGAGED PROPERTY. The Issuer and the
Company agree that the Bank or the duly authorized agents of the Bank shall have
the right at all reasonable times and upon reasonable notice to enter upon and
to examine and inspect the Mortgaged Property.

     SECTION 5.02. INSPECTION OF BOOKS AND RECORDS. The Issuer and the Company
hereby covenant that all books and documents in their respective possession
relating to the Mortgaged Property shall at all reasonable times be open to
inspection by such accountants or other agents as the Bank may from time to time
designate.

     SECTION 5.03. AGREEMENT TO PROVIDE INFORMATION. The Company agrees,
whenever requested by the Bank, to provide and certify or cause to be provided
and certified such information concerning the Company, its finances and other
topics as the Bank from time to time reasonably considers necessary or
appropriate, including, but not limited to, such information as to enable the
Bank to make any reports required by Applicable Laws.

     SECTION 5.04. BOOKS OF RECORD AND ACCOUNT. The Company agrees to maintain
proper accounts, records and books in which full and correct entries shall be
made, in accordance with generally accepted accounting principles, of all
business and affairs of the Company.

     SECTION 5.05. COMPLIANCE WITH APPLICABLE LAWS. (A) The Company agrees that
it will, at all times prior to the termination of this Mortgage, promptly and
fully comply with all (1) Applicable Laws, (2) covenants, conditions and
restrictions of record relating to the ownership, use, operation or leasing of
the Mortgaged Property, (3) covenants, conditions and restrictions set forth in
any document or instrument creating a lien or charge upon all or any portion of
the Mortgaged Property, and (4) policies of insurance at any time in force with
respect to the Mortgaged Property.

     (B)  The Company may in good faith actively contest the validity or the
applicability of any such requirements, provided that the Company (1) first
shall have notified the Bank of such contest, (2) no Event of Default has
occurred under any of the Financing Documents, (3) shall have set aside adequate
cash reserves for any such requirement, and (4) provides an opinion of counsel
or otherwise demonstrates to the reasonable satisfaction of the Bank that
noncompliance with such requirement or requirements will not subject the Lien of
this Mortgage as to any part of the Mortgaged Property, or the value of the
Mortgaged Property or any part thereof, to loss or forfeiture. Otherwise, the
Company shall promptly take such action with respect thereto as shall

                                       36



be satisfactory to the Bank. This Section 5.05(B) shall not be deemed to apply
to the payment of taxes or assessments (which is covered by Section 4.03).

     SECTION 5.06. RECORDATION OF MORTGAGE AND FILING OF SECURITY INSTRUMENTS.
(A) The Issuer hereby covenants that it will, at the sole cost and expense of
the Company, cause this Mortgage, together with all other security instruments
and financing statements, to be recorded and filed, as the case may be, in such
manner and in such places as may be requested by the Bank in order to perfect
the Liens created by the Financing Documents. The Company covenants that it
will, upon request of the Bank, cause to be filed all documents requested by the
Bank including, without limitation, continuation statements under the Uniform
Commercial Code of the State, in such manner and in such places as may be
required by law in order to protect and maintain in force the Liens of the
Financing Documents.

     (B)  Without limiting the foregoing, the Issuer and the Company hereby
irrevocably appoint the Bank as attorney-in-fact for the Issuer and the Company
to execute, deliver and file such instruments for and on behalf of the Issuer
and the Company without the necessity of the signature of the Issuer and the
Company or anyone claiming under or through the Issuer and the Company,
including, but not limited to, the Company.

     SECTION 5.07. ENFORCEMENT OF DUTIES AND OBLIGATIONS OF THE COMPANY. The
Issuer and the Company hereby covenant that they will take all legally available
action to cause the Company to fully comply with the covenants of the Company
contained in the Installment Sale Agreement in the manner and at the times
provided in the Installment Sale Agreement.

     SECTION 5.08. ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS.

          (A)  The Company makes the following representations and warranties
with respect to the Land and the Facility which shall survive the issuance of
the Bonds:

               (1)  To the best of the Company's knowledge, the Company is in
     compliance in all respects with all applicable federal, state and local
     laws, including, without limitation, all Environmental Laws.

               (2)  To the best of the Company's knowledge, no portion of the
     Facility Parcels or the Facilities are being used for the Disposal,
     storage, treatment, processing or other handling of any Hazardous Materials
     except in accordance with applicable law and the environmental and
     ecological condition of the Facility Parcels and the Facilities is not in
     violation of any Environmental Law applicable thereto and all Environmental
     Permits for the operation of the Facilities have been or will be obtained
     and are in full force and effect.

                                       37



               (3)  To the best of the Company's knowledge the soil, surface
     water and ground water are free from any solid wastes, Hazardous Materials
     or contaminant and any discharge of sewage or effluent.

               (4)  Neither the Federal government nor the State Department of
     Environmental Conservation or any other governmental or quasi-governmental
     entity has filed a Lien on the Facility Parcels or the Facilities, nor are
     there any governmental, judicial or administrative actions with respect to
     environmental matters pending, or to the best of the Company's knowledge,
     threatened, which involve the Facility Parcels or the Facilities.

          (B)  The Company agrees that the Issuer or the Bank or their
respective members, officers, agents or representatives may, at any reasonable
time and at the Company's expense inspect the Company's books and records and
inspect and conduct any reasonable tests on the Land or the Facility including
taking soil samples in order to determine whether the Company is in continuing
compliance with all environmental laws and regulations.

          (C)  If any environmental contamination is found on the Facility
Parcels or the Facilities for which any removal or remedial action is required
pursuant to law, ordinance, order, rule, regulation or governmental action, the
Company agrees that it will at its sole cost and expense take such removal or
remedial action promptly and to the Issuer's and the Bank's satisfaction, to the
extent that it is not another party's obligation to do so.

          (D)  The Company agrees to defend, indemnify and hold harmless the
Issuer and the Bank, and their respective employees, agents, officers and
directors from and against any claims, actions, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) of whatever kind or nature known or unknown
contingent or otherwise arising out of or in any way related to:

               (1)  The disposal, Release or threatened Release of any Hazardous
     Materials on the Land or the Facility whether prior to or during the term
     of this Mortgage.

               (2)  Any personal injury (including wrongful death or property
     damages, real or personal) arising out of or related to such Hazardous
     Materials;

               (3)  Any lawsuit brought or threatened, settlement reached or
     government order given relating to such Hazardous Materials; and/or

               (4)  Any violation of any law, order, regulation, requirement, or
     demand of any government authority, or any policies or requirements of the
     Issuer or the Bank, which are based upon or in any way related to such
     Hazardous Materials.

                                       38



          (E)  The Company knows of no on-site or off-site locations where
Hazardous Materials from the operation of the Facility Parcels or the Facilities
have been stored, treated, recycled or disposed of.

          (F)  If the Issuer or the Bank incur any of the costs that the Company
agrees to assume under this Section 5.08, those costs will be repaid immediately
at a rate of interest equal to the Default Rate.

          (G)  The provisions of this Section 5.08 shall be in addition to any
other obligations and liabilities the Company may have to the Issuer and the
Bank at common law and shall survive the transactions contemplated herein.

          (H)  The Issuer or the Bank may, at their option, and in addition to
the requirements of Sections 6.3 and 6.4 of the Installment Sale Agreement,
require the Company to carry adequate insurance, if reasonably necessary, to
fulfill the Company's obligations under this Section 5.08 in the event such
insurance shall become available at a reasonable cost during the term of the
Bonds.

                                       39



                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES

     SECTION 6.01.  EVENTS OF DEFAULT DEFINED. (A) The following shall be
"Events of Default" under this Mortgage and the terms "Event of Default" or
"default" shall mean, whenever they are used in this Mortgage, any one or more
of the following events:

          (1)  default by the Issuer in the due and punctual payment of
     principal of, premium, if any, and interest on the Bonds;

          (2)  an Event of Default under the Installment Sale Agreement;

          (3)  a default in the performance or observance of any other of the
     covenants, agreements or conditions on the part of the Issuer or the
     Company in this Mortgage or any other Financing Document to be performed or
     observed and the continuance thereof for a period of thirty (30) days after
     written notice is given by the Bank to the Issuer and the Company, or, if
     such covenant, condition or agreement is capable of cure but cannot be
     cured within such thirty (30) day period, the failure of the Company to
     commence to cure within such thirty (30) day period and to thereafter
     prosecute the same with due diligence;

          (4)  any representation or warranty made by the Issuer or the Company
     herein or in any other Financing Document shall have been false in any
     material respect at the time that it was made;

          (5)  the Company shall generally not pay its debts as such debts
     become due or admits its inability to pay its debts as they become due;

          (6)  the Company shall conceal, remove or permit to be concealed or
     removed any part of its Property, with intent to hinder, delay or defraud
     its creditors, or any one of them, or shall make or suffer a transfer of
     any of its Property which is fraudulent under any bankruptcy, fraudulent
     conveyance or similar law; or make any transfer of its Property to or for
     the benefit of a creditor at a time when other creditors similarly situated
     have not been paid; or shall suffer or permit, while insolvent, any
     creditor to obtain a Lien upon any of its Property through legal
     proceedings or distraint which is not vacated within thirty (30) days from
     the date thereof;

          (7)  the Mortgaged Property, or any part thereof, is in any manner,
     whether voluntarily or involuntarily, encumbered, assigned, leased,
     subleased, sold, transferred or conveyed, except as is expressly provided
     in or to the extent permitted under the Installment Sale Agreement or a
     Permitted Encumbrance;

                                       40



          (8)  (a) the filing by the Company of a voluntary petition under Title
     11 of the United States Code or any other federal or state bankruptcy
     statute; (b) the failure by the Company within ninety (90) days to lift any
     execution, garnishment or attachment of such consequence as will impair the
     Company's ability to carry out its obligations hereunder; (c) the
     commencement of a case under Title II of the United States Code against the
     Company as the debtor or commencement under any other federal or state
     bankruptcy statute of a case, action or proceeding against the Company and
     continuation of such case, action or proceeding without dismissal for a
     period of sixty (60) days; (d) the entry of an order for relief by a court
     of competent jurisdiction under Title II of the United States Code or any
     other federal or state bankruptcy statute with respect to the debts of the
     Company; or (e) in connection with any insolvency or bankruptcy case,
     action or proceeding, appointment by final order, judgment or decree of a
     court of competent jurisdiction of a receiver or Bank of the whole or a
     substantial portion of the Property of the Company unless such order,
     judgment or decree is vacated, dismissed or dissolved within ninety (90)
     days of such appointment;

          (9)  final judgment for the payment of money in excess of $150,000
     shall be rendered against the Company and the Company shall not discharge
     the same or cause it to be bonded or discharged within thirty (30) days
     from the entry thereof, or shall not appeal therefrom or from the order,
     decree or process upon which or pursuant to which said judgment was
     granted, based or entered and secure a stay of execution pending such
     appeal; and

          (10) the imposition of a Lien on the Mortgaged Property other than a
     Lien being contested as provided in Section 8.8(B) of the Installment Sale
     Agreement or a Permitted Encumbrance.

     SECTION 6.02.  ACCELERATION; ANNULMENT OF ACCELERATION. (A) Upon the
occurrence and continuance of an Event of Default hereunder, the Bank may, by
notice in writing delivered to the Company and the Issuer, declare the whole of
the Mortgage Indebtedness immediately due and payable, whereupon the same shall
become and be immediately due and payable, anything in this Mortgage or any
other Financing Document to the contrary notwithstanding. In such event, there
shall be due and payable the total amount of the Mortgage Indebtedness plus all
accrued but unpaid interest thereon and all interest which will accrue thereon
to the date of payment together with any premium payable thereon. If the Bonds
shall become so immediately due and payable, the Issuer and the Bank shall
immediately declare by written notice to the Company all unpaid installment
purchase payments payable by the Company under Section 5.3(A) of the Installment
Sale Agreement or otherwise to be immediately due and payable.

     (B)  At any time after the principal of the Bonds shall have been so
declared to be due and payable and before the entry of final judgment or decree
in any suit, action or proceeding

                                       41



instituted on account of such default, or before the completion of the
enforcement of any other remedy under this Mortgage, the Bank may, at its
option, annul such declaration and its consequences. No such annulment shall
extend to or affect any subsequent default or impair any right consequent
thereon.

     SECTION 6.03.  ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and
continuance of any Event of Default, the Bank may proceed forthwith to protect
and enforce its rights under this Mortgage and the other Financing Documents by
such suits, actions or proceedings as the Bank shall deem appropriate,
including, without limitation, an action to foreclose the Lien of this Mortgage,
against all or, from time to time, against any part of the interest of the
Issuer and the Company in the Mortgaged Property and to have the same sold under
the judgment or decree of a court of competent jurisdiction to the highest
bidder, at public or private sale for cash or credit in one or more interests
and in any order or manner, subject to statutory and other legal requirements,
if any, including all right, title and interest, claim and demand therein and
thereto and all right of redemption thereof and further including the right to
sell same and all estate, claim, demand, right, title and interest of the Issuer
and the Company therein and rights of redemption thereof, pursuant to power of
sale or otherwise. Without limiting any other rights of the Bank, hereunder or
otherwise granted, upon default of this Mortgage, or the indebtedness or other
obligation secured thereby, the Bank shall have the right to sell the Mortgaged
Property in the manner prescribed in Article 14 of the New York Real Property
Actions and Proceeding Law, or any successors or companion statute, law or
promulgation, for a non-judicial proceeding for foreclosure by power of sale.

     (B)  The Bank may sue for, enforce payment of and receive any amounts due
or becoming due from the Company for principal, premium, interest or otherwise
under any of the provisions of this Mortgage or the other Financing Documents,
without prejudice to any other right or remedy of the Bank.

     (C)  Regardless of the happening of an Event of Default, the Bank may
institute and maintain such suits and proceedings as the Bank may be advised
shall be necessary or expedient to prevent any impairment of the security under
this Mortgage by any acts which may be unlawful or in violation of this
Mortgage, or to preserve or protect the interests of the Bank.

     (D)  The Bank shall have the right to appear in and defend any action or
preceding brought with respect to the Mortgaged Property and to bring any action
or proceeding, in the name and on behalf of the Issuer or the Company, which the
Bank, in its discretion, feels should be brought to protect its interests in the
Mortgaged Property.

     (E)  Upon the occurrence of any Event of Default hereunder, the Company,
upon demand of the Bank, shall forthwith surrender the possession of, and it
shall be lawful for the Bank, by such officer or agent as it may appoint, to
take possession of, all or any part of the Mortgaged Property, together with the
books, papers and accounts of the Company pertaining thereto, and to hold,
operate and manage the same, and from time to time to make all needed

                                       42



repairs and improvements as the Bank shall deem wise; and the Bank may sell the
Mortgaged Property or any part thereof, or lease the Mortgaged Property or any
part thereof in the name and for the account of the Issuer or the Company,
collect, receive and sequester the rents, revenues, earnings, income, products
and profits therefrom, and pay out of the same all proper costs and expenses of
taking, holding, leasing, selling and managing the Mortgaged Property, including
reasonable compensation to the Bank and its agents and counsel, and any charges
of the Bank hereunder, and any taxes and other charges prior to the Lien of this
Mortgage which the Bank may deem it wise to pay, and all expenses of such
repairs and improvements, and apply the remainder of the moneys so received in
accordance with the provisions of Section 6.05 hereof.

     To the extent permitted by law, notwithstanding anything herein contained
to the contrary, the Issuer and the Company and anyone claiming through or under
the Issuer or the Company (1) will not (a) at any time insist upon, or plead, or
in any manner whatever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Mortgage, (b) claim, take or insist upon any benefit or advantage of any
law now or hereafter in force providing for the valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or sales thereof
which may be made pursuant to any provision hereof, or pursuant to the decree,
judgment or order of any court of competent jurisdiction, or (c) after any such
sale or sales, claim or exercise any right under any statute heretofore or
hereafter enacted to redeem the Property so sold or any part thereof, (2) hereby
expressly waive all benefit or advantage of any such law or laws, and (3)
covenant not to hinder, delay or impede the execution of any power herein
granted or delegated to the Bank, but to suffer and permit the execution of
every power as though no such law or laws had been made or enacted. The Company
and the Issuer, for themselves and all who may claim under them, waive, to the
extent they lawfully may, all rights to the Mortgaged Property marshaled upon
any foreclosure hereof.

     (F)  The Bank may exercise any and/or all of the rights and remedies
available to a secured party under the New York Uniform Commercial Code in such
order and in such manner as the Bank, in its sole discretion, may determine;
provided, however, that the expenses of retaking, holding, preparing for sale or
the like as provided thereunder shall include reasonable attorney's fees and
other actual expenses of the Bank and shall be additionally secured by this
Mortgage.

     SECTION 6.04.  APPOINTMENT OF RECEIVERS. Upon the occurrence and during the
continuance of an Event of Default hereunder, the Bank shall be entitled, as a
matter of right, without notice and without regard to the adequacy of any
security for the debt secured hereby, to the appointment of a receiver or
receivers of the Mortgaged Property and of the revenues and receipts thereof,
pending the conclusion of such proceedings and any appeal therefrom, with such
powers as the court making such appointment shall confer. The Receiver shall be
entitled to occupational rent from an owner/occupant and may upon non-payment of
said rent evict the owner/occupant.

                                       43



     SECTION 6.05.  APPLICATION OF MONEYS. The Net Proceeds received by the Bank
pursuant to any right given or action taken under the provisions of this Article
VI shall be applied by the Bank in accordance with Section 609 of the Indenture.

     SECTION 6.06.  REMEDIES CUMULATIVE. No remedy herein conferred upon or
reserved to the Bank is intended to be exclusive of any other available remedy,
but each and every such remedy shall be cumulative and in addition to every
other remedy given under this Mortgage or under any other Financing Document or
now or hereafter existing at law or in equity. No delay or omission to exercise
any right or power accruing upon any Event of Default shall impair any such
right or power, or shall be construed to be a waiver thereof or an acquiescence
therein, and every right or remedy given by this Mortgage to the Bank may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Bank to exercise any remedy reserved to it in this Article VI, it
shall not be necessary to give any notice, other than such notice as may be
expressly required in this Mortgage.

     SECTION 6.07.  TERMINATION OF PROCEEDINGS. In case any proceeding taken by
the Bank on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Bank,
then the Issuer, the Bank and the Company shall be restored to their former
positions and rights hereunder, and all rights, remedies and powers of the Bank
shall continue as if no such proceeding had been taken.

     SECTION 6.08.  WAIVER AND NON-WAIVER OF EVENT OF DEFAULT. (A) The Bank may,
in its discretion, in writing, agree to waive any Event of Default hereunder and
its consequences and annul any acceleration in accordance with Section 6.02
hereof. No such waiver shall extend to or affect any other existing or any
subsequent Event of Default.

          (B)  The failure of the Bank to insist upon strict performance of any
term hereof shall not be deemed to be a waiver of any term of this Mortgage.
Neither the Issuer nor the Company shall be relieved of its respective
obligations hereunder by reason of (1) failure of the Bank to comply with any
request of the Company to take any action to foreclose this Mortgage or
otherwise enforce any of the provisions hereof, (2) the release, regardless of
consideration, of the whole or any part of the Mortgaged Property, or (3) any
agreement or stipulation by the Bank extending the time of payment or otherwise
modifying or supplementing the terms of this Mortgage or any of the other
Financing Documents. The Bank may resort for the payment of the Mortgage
Indebtedness to any other security held by the Bank pursuant to the Financing
Documents in such order and manner as the Bank, in its discretion, may elect.
The Bank may take action to recover the Mortgage Indebtedness, or any portion
thereof, or to enforce any covenant hereof without prejudice to the right of the
Bank thereafter to foreclose this Mortgage. The rights of the Bank under this
Mortgage shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of the Bank shall be construed as
an election to proceed under any one provision herein to the exclusion of any
other provision. No

                                       44



waiver of any right of the Bank shall be effective unless it is in a writing
signed by an officer of the Bank.

     SECTION 6.09.  REPAYMENT AND SECURING OF EXPENSES PAID BY THE BANK. In the
event the Bank shall pay any premiums on any policies of insurance required to
be maintained or procured by Section 4.02 hereof, or in the event the Bank shall
expend any funds for the payment of any unpaid taxes or assessments upon the
Mortgaged Property, or pay or perform any other obligation of either the Issuer
or the Company under any of the Financing Documents, then in any such event such
payment shall be deemed to be secured by this Mortgage and shall be payable to
the Bank in the manner provided and with interest as provided herein, or if not
so provided herein, shall be payable on demand with interest at the Default
Interest Rate.

     SECTION 6.10.  REPAYMENT AND SECURING OF COLLECTION COSTS INCURRED BY THE
BANK. (A) In the event this Mortgage or the Bonds or any of the other Financing
Documents or all of the foregoing are placed in the hands of an attorney (1) for
collection of any sum payable hereunder or thereunder, (2) for the foreclosure
of this Mortgage, or (3) for the enforcement of any of the terms, conditions and
obligations of this Mortgage or any of the Financing Documents, the Company
agrees to pay all costs of collection (including reasonable counsel fees and
expenses) incurred by the Bank, together with interest thereon at the Default
Interest Rate. All such costs as incurred shall be deemed to be secured by this
Mortgage and collectible out of the proceeds of this Mortgage in any manner
permitted by law or by this Mortgage.

     (B)  In addition to and not in limitation of the foregoing, in any action
or proceeding to foreclose this Mortgage, or to recover or collect the debt
secured hereby, the provisions of law respecting the recovery of costs,
disbursements and allowances shall also apply. The reasonable expenses of
pursuing, searching for, retaking, receiving, holding, storing, safe-guarding,
any environmental testing and cleanup, insuring, accounting for, advertising,
preparing for sale or lease, selling, leasing and the like, plus attorney's
fees, fees for certified public accountants, fees for auctioneers, fees for
brokers and/or appraisers, fees for security guards, fees for environmental
auditors and engineers, fees for hazard insurance premiums, or any other
reasonable costs or disbursements whatsoever incurred by or contracted for by
the Bank in connection with the disposition of the Mortgaged Property (including
any of the foregoing incurred or contracted for by the Bank in connection with
any bankruptcy or insolvency proceedings involving the Issuer or the Company)
shall all be chargeable to the Issuer and the Company and shall be secured by
this Mortgage, and the Issuer and the Company will also be responsible for any
deficiency (but, in the case of the Issuer, only to the extent set forth in
Section 7.10 hereof).

     SECTION 6.11.  OTHER ACTIONS BY THE HOLDER. Regardless of the happening of
the Event of Default, the Bank may institute and maintain such suits and
proceedings as it shall deem necessary or expedient to prevent any impairment of
the security under this Mortgage by

                                       45



any acts which may be unlawful or in violation of this Mortgage, or to preserve
or protect the interests of the Bank.

     SECTION 6.12.  SALE IN ONE PARCEL. In case of a sale, the Project Facility
may be sold in one parcel. Should the Project Facility consists of more than one
parcel, in the even of a foreclosure of this Mortgage or any mortgage at any
time consolidated with this Mortgage, the Company and the Issuer agree that the
Bank shall be entitled to a judgment directing the referee appointed in the
foreclosure proceeding to sell all of the parcels constituting the Project
Facility at one foreclosure sale, either as a group or separately and that the
Company and the Issuer expressly waive any right that each may now have or
hereafter acquire to (i) request or require that the parcels be sold separately
or (ii) request, if the Bank has elected to sell parcels separately, that there
be a determination of any deficiency amount after any such separate sale or
otherwise require a calculation of whether said parcel or parcels separately
sold were conveyed for their "fair market value".

                                   ARTICLE VII

                                  MISCELLANEOUS

     SECTION 7.01.  LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from
this Mortgage or the other Financing Documents is intended or shall be construed
to give any Person, other than the parties hereto or thereto, and their
successors and assigns, any right, remedy or claim under or with respect to this
Mortgage or any covenants, conditions and provisions herein contained. This
Mortgage and all of the covenants, conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the parties hereto and their
successors and assigns as herein provided.

     SECTION 7.02.  NOTICES. (A) All notices, certificates and other
communications hereunder shall be in writing and shall be sufficiently given and
shall be deemed given when (1) delivered to the applicable address stated below
by registered or certified mail, return receipt requested, or by such other
means as shall provide the sender with documentary evidence of such delivery, or
(2) delivery is refused by the addressee, as evidenced by the affidavit of the
Person who attempted to effect such delivery.

     (B)  The addresses to which notices, certificates and other communications
hereunder shall be delivered are as follows:

IF TO THE ISSUER:

     Counties of Warren and Washington Industrial Development Agency
     5 Warren Street

                                       46



     Glens Falls, New York 12801
     Attention: Chairman

WITH A COPY TO:

     Fitzgerald Morris Baker Firth P.C.
     One Broad Street Plaza
     Glens Falls, New York 12801
     Attention: Robert C. Morris, Esq.


                                       47



IF TO THE COMPANY:
Angiodynamics, Inc.
603 Queensbury Avenue
Queensbury, New York 12804
Attention: Joseph Gerardi, Vice President and Controller

WITH A COPY TO:

     Kevin J. Kelley, Esq.
     Bond, Schoeneck & King, PLLC
     111 Washington Avenue
     Albany, New York 12210

IF TO THE BANK:

     KeyBank National Association
     166 South Pearl Street
     Albany, New York 12207
     Attn:

WITH A COPY TO:

     Lemery Greisler, LLC
     10 Railroad Place
     Saratoga Springs, New York 12866
     Attention: James A. Carminucci, Esq.

     (C)  A duplicate copy of each notice, certificate and other communication
given by the Issuer or the Company shall be given to the Bank.

     (D)  The Issuer, the Company and the Bank may, by notice given hereunder,
designate any further or different address to which subsequent notices,
certificates and other communications shall be sent.

     (E)  Whenever in this Mortgage the giving of notice by mail or otherwise is
required, the giving of such notice may be waived in writing by the Person or
Persons entitled to receive such notice.

     SECTION 7.03.  COUNTERPARTS. This Mortgage may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

                                       48



     SECTION 7.04.  APPLICABLE LAW. This Mortgage shall be governed exclusively
by the applicable laws of the State.

     SECTION 7.05.  TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING. The
table of contents and the headings of the several articles and sections of this
Mortgage have been prepared for convenience of reference only and shall not
control, affect the meaning of or be taken as an interpretation of any provision
of this Mortgage.

     SECTION 7.06.  SEVERABILITY. (A) If any provision of this Mortgage shall,
for any reason, be held or shall, in fact, be inoperative or unenforceable in
any particular case, such circumstance shall not render the provision in
question inoperative or unenforceable in any other case or circumstance or
render any other provision herein contained inoperative or unenforceable.

     (B)  The invalidity of any one or more phrases, sentences, clauses,
paragraphs or sections in this Mortgage shall not affect the remaining portions
of this Mortgage or any part thereof.

     SECTION 7.07.  COVENANTS RUN WITH THE LAND. All of the grants, covenants,
terms, provisions and conditions herein shall run with the Land and the Facility
and shall apply to, bind and inure to the benefit of the parties hereto and
their successors and assigns.

     SECTION 7.08.  AMENDMENT. Neither this Mortgage nor any provisions hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

     SECTION 7.09.  USURY. Notwithstanding anything to the contrary contained
herein, in no event shall the total of all charges payable hereunder or under
any of the Financing Documents which are or could be held to be in the nature of
interest exceed the maximum rate permitted to be charged under applicable law.
Should the Bank receive any payment which is or would be in excess of that
permitted to be charged under any applicable law, such payment shall have been,
and shall be deemed to have been, made in error and shall automatically be
applied to reduce the Mortgage Indebtedness.

     SECTION 7.10.  NO RECOURSE; SPECIAL OBLIGATION. (A) The obligations and
agreements of the Issuer contained herein and in the other Financing Documents
and in any other instrument or document executed in connection herewith or
therewith, and any other instrument or document supplemental hereto or thereto,
shall be deemed the obligations and agreements of the Issuer, and not of any
member, officer, director, agent (other than the Company) or employee of the
Issuer in his individual capacity, and the members, officers, directors, agents
(other than the Company) and employees of the Issuer shall not be liable
personally hereon or thereon or be

                                       49



subject to any personal liability or accountability based upon or in respect
hereof or thereof or of any transaction contemplated hereby or thereby.

     (B)  The obligations and agreements of the Issuer contained herein and
therein shall not constitute or give rise to an obligation of the State of New
York or the Counties of Warren and Washington, New York, and neither the State
of New York nor the Counties of Warren and Washington, New York shall be liable
hereon or thereon, and further, such obligations and agreements shall not
constitute or give rise to a general obligation of the Issuer, but rather shall
constitute limited obligations of the Issuer payable solely from the revenues of
the Issuer derived and to be derived from the sale or other disposition of the
Mortgaged Property (except for revenues derived by the Issuer with respect to
the Unassigned Rights) and the other security pledged to the payment of the
Bonds.

     (C)  No order or decree of specific performance with respect to any of the
obligations of the Issuer hereunder or thereunder shall be sought or enforced
against the Issuer unless (1) the party seeking such order or decree shall first
have requested the Issuer in writing to take the action sought in such order or
decree of specific performance, and ten (10) days shall have elapsed from the
date of receipt of such request, and the Issuer shall have refused to comply
with such request (or, if compliance therewith would reasonably be expected to
take longer than ten [10] days, shall have failed to institute and diligently
pursue action to cause compliance with such request) or failed to respond within
such notice period, (2) if the Issuer refuses to comply with such request and
the Issuer's refusal to comply is based on its reasonable expectation that it
will incur fees and expenses, the party seeking such order or decree shall have
placed in an account with the Issuer an amount or undertaking sufficient to
cover such reasonable fees and expenses, and (3) if the Issuer refuses to comply
with such request and the Issuer's refusal to comply is based on its reasonable
expectation that it or any of its members, directors, officers, agents (other
than the Company) or employees shall be subject to potential liability, the
party seeking such order or decree shall (a) agree to indemnify, defend and hold
harmless the Issuer and its members, directors, officers, agents (other than the
Company) and employees against any liability incurred as a result of its
compliance with such demand, and (b) if requested by the Issuer, shall furnish
to the Issuer satisfactory security to protect the Issuer and its members,
officers, agents (other than the Company) and employees against all liability
expected to be incurred as a result of compliance with such request.

     (D)  The limitations on the obligations of the Issuer contained in this
Section 7.10 by virtue of any lack of assurance or indemnity required by
paragraph (C) hereof shall not be deemed to prevent the occurrence and full
force and effect of any Event of Default pursuant to Section 6.01 hereof.

     SECTION 7.11.  TAX LAWS. If any law or ordinance is enacted or adopted
which imposes a tax, either directly or indirectly, on this Mortgage, the
Company will pay, or cause to be paid, such tax, with interest and penalties
thereon, if any.

                                       50



     SECTION 7.12.  REVENUE STAMPS. If at any time any Governmental Authority
shall require revenue or other stamps to be affixed to this Mortgage, the
Company will pay, or cause to be paid, the same, with interest and penalties
thereon, if any.

     SECTION 7.13.  FURTHER ASSURANCE. The Issuer and the Company will execute
and procure for the Bank and cause to be done any further conveyances,
instruments or acts of further assurance as the Bank shall reasonably require to
perfect the security of the Bank in the Mortgaged Property intended now or
hereafter to be covered by this Mortgage or otherwise for carrying out the
intention of facilitating the performance of the terms of this Mortgage.

     SECTION 7.14.  SATISFACTION OF MORTGAGE. Upon the payment in full of all of
the amounts due under the Bonds, if (A) there is no Event of Default under the
Indenture, (B) the Issuer and the Company have performed and observed all the
covenants to be performed and observed hereunder and have performed all
obligations under the Indenture, the Installment Sale Agreement and the other
Financing Documents to which they are parties, and (C) the Company has paid or
caused to be paid to the Bank all sums of money due or to become due to it in
accordance with the terms and provisions hereof and of the other Financing
Documents to which it is a party, including, without limitation all
indemnification provisions, the Bank by acceptance of this Mortgage, agrees to
execute and deliver (after the expiration of the preference period under federal
bankruptcy law and any similar period under any similar statute affecting
creditors' rights), any and all instruments necessary and/or appropriate to
discharge the Lien of this Mortgage of record and to terminate the UCC-1
Financing Statements filed in connection with this Mortgage and the other
Financing Documents.

     SECTION 7.15   LIEN LAW. The Issuer and the Company will receive the
advances to be made hereunder subject to the trust provisions of Section 13 of
the Lien Law of the State of New York, and will hold the right to receive such
advances as a trust fund to be applied first for the purpose of paying the cost
of constructing the improvements to the Facility Parcel and will apply the same
first to such payment before using any part of the same for any other purpose,
but nothing herein shall be construed to impose upon the Bank any obligation to
see to the proper allocation of such advances by the Issuer.

                                       51



     IN WITNESS WHEREOF, the Issuer and the Company have caused this Mortgage to
be executed in their respective names by their duly authorized officers and have
caused this; Mortgage to be dated as of the day and year first above written.

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        By:  /s/ Bruce A. Ferguson
                                           -------------------------------------
                                             Bruce A. Ferguson, Chairman

                                        ANGIODYNAMICS, INC.


                                        By:  /s/ Eamonn P. Hobbes
                                           -------------------------------------
                                             Authorized Officer

STATE OF NEW YORK  )
                   ) SS.:
COUNTY OF WARREN   )

          On the 27th day of August, in the year 2002, before me, the
undersigned, a notary public in and for said state, personally appeared BRUCE A.
FERGUSON, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual or the person upon behalf of
which the individual acted, executed the instrument.


                                          /s/ Justin S. Miller
                                        ----------------------------------------
                                                     Notary Public

[Notary Stamp]

                                       52



STATE OF NEW YORK  )
                   ) SS.:
COUNTY OF ALBANY   )

          On the 28th day of August, in the year 2002, before me, the
undersigned, a notary public in and for said state, personally appeared EAMONN
P. HOBBS personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual or the person upon behalf of
which the individual acted, executed the instrument.


                                                 /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                                     Notary Public

                                        [Notary Stamp]

                                       53



                                    EXHIBIT A

                             DESCRIPTION OF THE LAND


                                       54



                                    EXHIBIT B

                          DESCRIPTION OF THE EQUIPMENT

     All articles of personal property and all appurtenances acquired with the
proceeds of the Multimode Variable Rate Industrial Development Revenue Bonds
(Angiodynamics, Inc. Project), Series 2002 in the aggregate principal amount of
$3,500,000 issued by the Counties of Warren and Washington Industrial
Development Agency(the "Issuer") and now or hereafter attached to, contained in
or used in connection with the Project Facility (as defined in the Mortgage and
Security Agreement) or placed on any part thereof, though not attached thereto,
including but not limited to the following:

     (1)  Pipes, screens, fixtures, heating, lighting, plumbing, ventilation,
air conditioning, compacting and elevator plants, call systems, stoves, ranges,
refrigerators and other lunch room facilities, rugs, movable partitions,
cleaning equipment, maintenance equipment, shelving, flagpoles, signs, waste
containers, outdoor benches, drapes, blinds and accessories, sprinkler systems
and other fire prevention and extinguishing apparatus and materials, motors and
machinery;

     (2)  Together with any and all products of any of the above, all
substitutions, replacements, additions or accessions therefor, and any and all
cash proceeds or non-cash proceeds realized from the sale, transfers or
conversion of any of the above.

                                       55



                                                                   EXHIBIT 10.12
CLOSING ITEM NO.: A-2

- --------------------------------------------------------------------------------

         COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY

                                       AND

                          THE HUNTINGTON NATIONAL BANK
                                   AS TRUSTEE

                                   ----------

                                 TRUST INDENTURE

                                   ----------

                           DATED AS OF AUGUST 1, 2002

                                   ----------

  RELATING TO THE MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BONDS
(ANGIODYNAMICS, INC. PROJECT - LETTER OF CREDIT SECURED), SERIES 2002 ISSUED BY
COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY IN THE AGGREGATE
                         PRINCIPAL AMOUNT OF $3,500,000.

- --------------------------------------------------------------------------------

THIS INSTRUMENT IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT UNDER THE UNIFORM
                    COMMERCIAL CODE OF THE STATE OF NEW YORK.



                                 TRUST INDENTURE

     THIS TRUST INDENTURE dated as of August 1, 2002 (the "Indenture") by and
between COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY, a
public benefit corporation of the State of New York having an office for the
transaction of business located at the 5 Warren Street, Glens Falls, New York
12801 (the "Issuer") and THE HUNTINGTON NATIONAL BANK, a national banking
association organized and existing under the laws of the United States of
America having an office for the transaction of business located at Corporate
Trust Department, 7 Easton Oval-EA4E63, Columbus, Ohio 43219, as trustee (the
"Trustee") for the holders of the Issuer's Industrial Development Revenue Bonds
(Angiodynamics, Inc. Project - Letter of Credit Secured), Series 2002 in the
aggregate principal amount of $3,500,000 (the "Bonds") issued by the Issuer
hereunder;

                                   WITNESSETH:

     WHEREAS, Title 1 of Article 18-A of the General Municipal Law of the State
of New York (the "Enabling Act") was duly enacted into law as Chapter 1030 of
the Laws of 1969 of the State of New York; and

     WHEREAS, the Enabling Act authorizes and provides for the creation of
industrial development agencies for the benefit of the several counties, cities,
villages and towns in the State of New York (the "State") and empowers such
agencies, among other things, to acquire, construct, reconstruct, lease,
improve, maintain, equip and dispose of land and any building or other
improvement, and all real and personal properties, including, but not limited
to, machinery and equipment deemed necessary in connection therewith, whether or
not now in existence or under construction, which shall be suitable for
manufacturing, warehousing, research, civic, commercial or industrial purposes,
in order to advance the job opportunities, health, general prosperity and
economic welfare of the people of the State and to improve their standard of
living; and

     WHEREAS, the Enabling Act further authorizes each such agency to lease or
sell any or all of its facilities, to issue its bonds, for the purpose of
carrying out any of its corporate purposes and, as security for the payment of
the principal and redemption price of and interest on any such bonds so issued
and any agreements made in connection therewith, to mortgage and pledge any or
all of its facilities, whether then owned or thereafter acquired, and to pledge
the revenues and receipts from the lease or sale thereof to secure the payment
of such bonds and interest thereon; and

     WHEREAS, the Issuer was created, pursuant to and in accordance with the
provisions of the Enabling Act, by Chapter 862 of the Laws of 1971 of the State,
as amended, constituting Section 890-C of the General Municipal Law (said
Section and the Enabling Act being collectively referred to as the "Act") and is
empowered under the Act to undertake the Project (as hereinafter defined) in
order to so advance the job opportunities, health, general prosperity and
economic welfare of the people of the State and improve their standard of
living; and

                                        1



     WHEREAS, in April, 2002, Angiodynamics, Inc. (the "Company") presented an
application (the "Application") to the Issuer, which Application requested that
the Issuer consider undertaking a project (the "Project") consisting of the
following: (A)(i) the acquisition of an interest in a certain parcel or parcels
of land located at 603 Queensbury Avenue, Town of Queensbury, County of Warren,
State of New York (the "Land"), (ii) the acquisition thereon of an approximately
32,000 square foot facility (the "Existing Facility"), together with equipment
therein (the "Existing Equipment"), (iii) the making of certain renovations to
the Existing Facility (as so renovated, the "Facility") consistent with its
present and authorized use, (iv) the construction of approximately 32,000 square
feet of additions(s) to the Existing Facility, (v) the purchase of additional
equipment (together with the Existing Equipment, the "Equipment" and, together
with the Land and the Facility, the "Project Facility") and (B) the financing of
a part of the cost of the foregoing by issuing its tax-exempt Industrial
Development Revenue Bonds (the "Bonds") in an aggregate principal amount not to
exceed $4,500,000.00, all pursuant to Title 1 of Article 18-A of the General
Municipal Law of the State of New York (collectively, the "Act"), as amended,
the proceeds of which may be applied to the costs of issuance, and, as necessary
and appropriate, the provision of a debt service reserve fund, capitalized
interest or other means of providing credit enhancement for the Bonds; and (C)
to lease (with the option to purchase) and/or sell the Project Facility to the
Company, all pursuant to the Act;

     WHEREAS, pursuant to Article 8 of the Environmental Conservation Law,
Chapter 43-B of the Consolidated Laws of New York, as amended (the "SEQR Act"),
and the regulations adopted pursuant thereto by the Department of Environmental
Conservation of the State of New York, being 6 NYCRR Part 617, as amended (the
"Regulations," and collectively with the SEQR Act, "SEQRA"), the Issuer has made
a preliminary determination that the Project will not have a significant impact
on the environment; and

     WHEREAS, by resolution adopted by the members of the Issuer on June 24,
2002 (the "Inducement Resolution"), the members of the Issuer agreed, subject to
numerous conditions, including (A) all requirements of the SEQR Act that relate
to the Project and (B) the public hearing and notice requirements and other
procedural requirements contained in Section 859-a of the Act, to accept the
Application and enter into a preliminary agreement (the "Preliminary Agreement")
relating to the Project; and

     WHEREAS, pursuant to the authorization contained in a resolution of the
Issuer dated May 20, 2002, the Executive Director of the Issuer (A) caused
notice of a public hearing of the Issuer (the "Public Hearing") pursuant to
Section 859-a of the Act and Section 147(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to hear all persons interested in the Project and
the Financial Assistance being contemplated by the Issuer with respect to the
Project, to be mailed to the chief executive officers of the county and of each
city, town, village and school district in which the Project Facility is to be
located, (B) caused notice of the Public Hearing to be published on May 15,
2002, in The Post Star, a newspaper of general circulation available to
residents of the Town of Queensbury, (C) conducted the Public Hearing on June
17, 2002 at 3:00 o'clock p.m., local time in the Board of Supervisers Chambers
in the Warren County Municipal Center, Queensbury, New York, and (D) prepared a
report of the Public Hearing (the "Report") which fairly summarized the views
presented at said public hearing and

                                        2



distributed same to the members of the Issuer and to the County Legislature of
both Warren and Washington County, New York (the "County Legislature"). By
resolutions dated June 21, 2002 and July 17, 2002 (collectively, the "Public
Approval"), the County Legislature of Washington County, and Warren County
respectively, approved the issuance of the bonds for purposes of Section 147(f)
of the Code; and

     WHEREAS, the Issuer, by resolution adopted by the members of the Issuer on
July 15, 2002 (the "Bond Resolution"), determined to issue the Initial Bonds for
the purpose of financing the costs of undertaking the Project; and

     WHEREAS, in connection with the issuance of the Initial Bonds and as a
condition to the issuance thereof, the Issuer and the Company have entered into
an installment sale agreement dated as of August 1, 2002 (the "Installment Sale
Agreement") specifying the terms and conditions pursuant to which the Issuer
agrees to acquire, construct and install the Project Facility, to appoint the
Company as agent of the Issuer to undertake such acquisition, construction and
installation of the Project Facility, and to sell the Project Facility to the
Company; and

     WHEREAS, simultaneously with the issuance of the Initial Bonds, for the
purpose of undertaking and completing the Project, the Issuer proposes to
acquire from the Company all right, title and interest of the Company in the
Project Facility pursuant to (a) a bill of sale dated as of August 1, 2002 (the
"Bill of Sale to Issuer") from the Company, as grantor, to the Issuer, as
grantee and (b) a deed dated as of August 1, 2002 (the "Deed to Issuer") from
the Company and Issuer; and

     WHEREAS, as security for the Initial Bonds, the Company will enter into a
reimbursement agreement dated as of August 1, 2002 (the "Reimbursement
Agreement") with KeyBank National Association, a national banking association
corporation organized and existing under the laws of the United States of
America (the "Bank"), pursuant to which the Bank is to issue in favor of the
Trustee an irrevocable transferable direct-pay letter of credit (the "Letter of
Credit"), said Letter of Credit to be in a maximum amount (which shall decline
at fixed intervals) equal to $3,500,000, plus an amount sufficient to cover
accrued interest if necessary; and

     WHEREAS, as security for all amounts payable to the Bank pursuant to the
Reimbursement Agreement, the Issuer and Company will grant to the Bank a
mortgage Lien on and security interest in the Project Facility pursuant to a
mortgage and security agreement dated as of August 1, 2002 (the "Mortgage") from
the Issuer and the Company to the Bank; and

     WHEREAS, as security for the Bonds, the Issuer will assign to the Trustee
certain of the Issuer's rights and remedies under the Installment Sale
Agreement, including the right to receive installment purchase payments and
other amounts payable thereunder, but not including the Unassigned Rights (as
hereinafter defined), pursuant to a pledge and assignment dated as of August 1,
2002 (the "Pledge and Assignment") from the Issuer to the Trustee; and

                                        3



     WHEREAS, the Company's obligation to make all installment purchase payments
due under the Installment Sale Agreement, and to perform all obligations related
thereto, and the Issuer's obligation to repay the Bonds, will be further secured
by a guaranty dated as of August 1, 2002 (the "Guaranty") from the Company to
the Trustee; and

     WHEREAS, the Trustee has the power to enter into this Indenture and to
execute the trusts hereby created and in evidence thereof has joined in the
execution hereof; and

     WHEREAS, the execution and delivery of this Indenture and the issuance of
the Bonds under the Act as herein provided have been in all respects approved
and duly and validly authorized by the Bond Resolution; and

     WHEREAS, the providing of the Project Facility is for a proper purpose, to
wit, to promote the job opportunities, the health and the general prosperity and
economic welfare of the inhabitants of the State pursuant to the provisions of
the Act; and

     WHEREAS, the Issuer deems it appropriate and necessary that the proceeds of
the sale of the Bonds shall be deposited with the Trustee, and that, upon
satisfaction of the requirements set forth herein, in the Installment Sale
Agreement and in the Reimbursement Agreement, the Trustee shall disburse such
proceeds to pay the Cost of the Project (as hereinafter defined); and

     WHEREAS, the Bonds shall be payable solely from the Trust Revenues (as
hereinafter defined), which include, without limitation, installment purchase
payments made by the Company under the Installment Sale Agreement and payments
made by the Bank pursuant to the Letter of Credit; and

     WHEREAS, the Issuer, by the terms of this Indenture and as security for the
Bonds, will grant the Trustee a first priority security interest in the Trust
Revenues; and

     WHEREAS, the Initial Bonds and the Trustee's certificate of authentication
to be endorsed on the Initial Bonds are to be in substantially the forms
attached hereto as Schedule I, and made a part hereof, as the case may be, with
necessary and appropriate variations, omissions and insertions as permitted or
required by this Indenture; and

     WHEREAS, all things necessary to make the Bonds, when authenticated by the
Trustee and issued as in this Indenture provided, the valid, binding and legal
special obligations of the Issuer according to the import thereof, and to
constitute this Indenture a valid pledge of and Lien (as hereinafter defined) on
the Trust Revenues herein pledged to the payment of the Bonds, have been done
and performed, and the creation, execution and delivery of this Indenture, and
the execution and issuance of the Initial Bonds, subject to the terms hereof,
have in all respects been duly authorized;

                                GRANTING CLAUSES

     NOW, THEREFORE, the Issuer, in consideration of the premises and the
acceptance by the Trustee of the trusts hereby created and of the purchase and
acceptance of the Bonds by the

                                        4



holders and owners thereof, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, and in order to secure in the following
order of priority, first, the payment of Debt Service Payments on, and the
purchase price of, the Bonds according to their true intent and meaning, to
secure the performance and observance of all of the covenants, agreements,
obligations and conditions contained therein and herein, and to declare the
terms and conditions upon and subject to which the Bonds are and are intended to
be issued, held, secured and enforced and, second, the payment to the Bank and
performance by the Company of its reimbursement and other obligations under the
Reimbursement Agreement, and in consideration of the premises and the acceptance
by the Trustee of the trusts created herein and of the purchase and acceptance
of the Bonds by the Bondholders and for other good and valuable consideration,
the receipt of which is acknowledged, the Issuer has executed and delivered this
Indenture and does hereby unto the Trustee and its successors and assigns, for
the benefit of the holders and all future holders of the Bonds, GRANT A SECURITY
INTEREST IN, PLEDGE AND ASSIGN the following (hereinafter referred to as the
"Trust Estate"):

                                        I

     All right, title and interest of the Issuer in and to the Trust Revenues,
including any payment made by the Bank pursuant to the Letter of Credit;

                                       II

     Any and all moneys and securities from time to time held by the Trustee
under the terms of this Indenture, except (A) moneys on deposit in the Letter of
Credit Account, the Redemption Premium Account and the Remarketing Proceeds
Account of the Bond Fund and all moneys and investments therein (including
without limitation the proceeds of the Credit Facility) deposited with or paid
to the Trustee for the redemption of Bonds, notice of which has been duly given,
or for the purchase of Tendered Bonds (as hereinafter defined) pursuant to this
Indenture, and (B) moneys on deposit in the Rebate Fund (as hereinafter
defined);

                                       III

     Any and all other Property (as hereinafter defined) of every name and
nature from time to time hereafter by delivery or by writing of any kind
conveyed, mortgaged, pledged, assigned or transferred, as and for additional
security hereunder, by the Issuer or by anyone in its behalf or with its written
consent in favor of the Trustee;

     This Indenture is also intended to constitute a security agreement under
the Uniform Commercial Code of the State so that the Trustee shall have and may
enforce a security interest, to secure payment of all sums due or to become due
under the Bonds and this Indenture, in so much of the Property (as hereinafter
defined) described in Granting Clauses I through III above as may be made
subject to such a security interest, including the moneys held by the Trustee
hereunder, such security interest to attach at the earliest moment permitted by
law and also to include and attach to all additions and accessions thereto, all
substitutions and replacements therefor and all proceeds and products thereof
and proceeds of proceeds, and all other contract rights and general intangibles
of the Issuer (except the Unassigned Rights, as hereinafter defined)

                                        5



obtained in connection with or relating to the Project Facility, as well as any
and all items of property in the foregoing classifications which are hereafter
acquired;

     SUBJECT, HOWEVER, to Permitted Encumbrances (as hereinafter defined);

     EXCEPTING THEREFROM, the Unassigned Rights (as hereinafter defined);

     TO HAVE AND TO HOLD all the same with all privileges and appurtenances
hereby pledged and assigned, or agreed or intended so to be, unto the Trustee
and its successors in said trust and to it and its assigns forever;

     IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, and
subject to the provisions hereof, (A) except as provided otherwise herein,
first, for the equal and proportionate benefit, security and protection of all
present and future Bondholders of the Bonds issued or to be issued under and
secured by this Indenture, (B) for the enforcement of the payment of the Debt
Service Payments on the Bonds, when payable, according to the true intent and
meaning thereof and of this Indenture, and (C) to secure the performance and
observance of and compliance with the covenants, agreements, obligations, terms
and conditions of this Indenture, in each case, without preference, priority or
distinction, as to lien or otherwise, of any one Bond over any other by reason
of designation, number, date of the Bonds or of authorization, issuance, sale,
execution, authentication, delivery or maturity thereof, or otherwise, so that
each Bond and all Bonds shall have the same right, lien and privilege under this
Indenture and shall be secured equally and ratably hereby, it being intended
that the lien and security of this Indenture shall take effect from the date
hereof, without regard to the date of the actual issue, sale or disposition of
the Bonds, as though upon that date all of the Bonds were actually issued, sold
and delivered to purchasers for value; and, second, for the benefit and security
of the Bank with respect to the Company's obligations under the Reimbursement
Agreement; provided, however, that the Bank shall have no right to take any
action, other than provided in Article X hereof, to enforce its rights or
interest in the Trust Estate prior to the payment of all Debt Service Payments
on the Bonds;

     PROVIDED, HOWEVER, that (A) if the principal of the Bonds and the interest
due or to become due thereon together with any premium required by redemption of
any of the Bonds prior to maturity shall be well and truly paid, at the times
and in the manner to which reference is made in the Bonds, according to the true
intent and meaning thereof, or the outstanding Bonds shall have been paid and
discharged in accordance with Article X hereof, and (B) if all of the covenants,
agreements, obligations, terms and conditions of the Issuer under this Indenture
shall have been kept, performed and observed and there shall have been paid to
the Trustee, the Registrar, the Paying Agents and the Authenticating Agents all
sums of money due or to become due to them in accordance with the terms and
provisions hereof, and (C) if the Company shall pay and perform or cause to be
paid and performed all of its reimbursement and other obligations under the
Reimbursement Agreement, then, upon such final payments and subject to the
provisions of Article X hereof, this Indenture and the Lien upon the Property
described in Granting Clauses I through III above and the pledge of the Trust
Revenues and the rights assigned and security interests granted hereby shall
cease, determine and be void (except as provided in Section 1003 hereof with
respect to the survival of certain provisions hereof and

                                        6



except for the interests absolutely assigned in the Credit Facility Account, the
Redemption Premium Account and the Remarketing Proceeds Account of the Bond
Fund), and thereupon the Trustee shall execute and deliver to the Person (as
hereinafter defined) or Persons designated in Article X such instruments in
writing as shall be requisite to satisfy the Lien hereof upon the Property
described in Granting Clauses I through III above, and convey to the Person or
Persons designated in Article X the moneys and other Property, if any, then held
by the Trustee, except moneys held by the Trustee for the payment of interest
on, premium, if any, and principal of the Bonds and except as expressly provided
in this Indenture; otherwise, this Indenture shall be and remain in full force
and effect, upon the trusts and subject to the covenants and conditions
hereinafter set forth.

     THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all
Bonds issued and secured hereunder are to be issued, authenticated and delivered
and the Lien on all of the Property described in Granting Clauses I through III
above and all Trust Revenues, including without limitation the revenues,
receipts and other moneys hereby assigned and pledged, are to be dealt with and
disposed of under, upon and subject to the terms, conditions, stipulations,
covenants, agreements, trusts, uses and purposes as hereinafter expressed, and
the Issuer hereby agrees and covenants with the Trustee and with the respective
holders and owners, from time to time, of the Bonds, as follows:

                          [Balance of page left blank]

                                        7



                                    ARTICLE I

                                   DEFINITIONS

SECTION 101.  DEFINITIONS. The following words and terms used in this Indenture
shall have the respective meanings set forth below unless the context or use
indicates another or different meaning or intent:

     "Accountant" means an independent certified public accountant or a firm of
independent certified public accountants selected by the Company and acceptable
to the Bank.

     "Act" means Title 1 of Article 18-A of the General Municipal Law of the
State, as amended from time to time, together with Chapter 862 of the Laws of
1971 of the State, as amended from time to time.

     "Act of Bankruptcy" means the filing of a petition in bankruptcy (or the
other commencement of a bankruptcy or similar proceeding) by or against the
Bank, the Company or the Issuer under any applicable bankruptcy, insolvency,
reorganization or similar law, now or hereafter in effect.

     "Additional Bonds" means any bonds issued by the Issuer pursuant to Section
214 of the Indenture.

     "Additional Facility" means any additional property financed with the
proceeds of Additional Bonds.

     "Additional Project" means the purposes for which any Additional Bonds may
be issued.

     "Affiliate" of any specified entity means any other entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified entity and "control", when used with respect to any
specified entity, means the power to direct the management and policies of such
entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

     "Alternate Credit Facility" means any direct pay letter of credit or other
credit enhancement or support facility that has terms which are the same in all
material respects (except for the term and maximum interest rate but including
coverage of accrued interest on the Bonds for 98 days if the Bonds bear interest
at the Weekly Rate or for 183 days if the Bonds bear interest at the Semi-Annual
Rate or the Long-Term Rate) as the then current Credit Facility and (A) shall
have a term of not less than one year, (except if the Long-Term Rate shall then
be in effect, the term of such Alternate Credit Facility shall not expire prior
to (a) the first par redemption date plus 15 days or (b) the first redemption
date plus 15 days if the Alternate Credit Facility covers the redemption
premium) (B) shall be issued by a bank, a trust company or other financial
institution or credit provider, and (C) with respect to which the Trustee shall
have received the opinions required by Section 408(F) of the Indenture.

                                        8



     "Applicable Laws" means all statutes, codes, laws, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all Governmental Authorities,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to or affect the Project Facility or any part
thereof or the conduct of work on the Project Facility or any part thereof or to
the operation, use, manner of use or condition of the Project Facility or any
part thereof (the applicability of such statutes, codes, laws, acts, ordinances,
orders, rules, regulations, directions and requirements to be determined both as
if the Issuer were the owner of the Project Facility and as if the Company and
not the Issuer were the owner of the Project Facility), including but not
limited to (1)applicable building, zoning, environmental, planning and
subdivision laws, ordinances, rules and regulations of Governmental Authorities
having jurisdiction over the Project Facility, (2)restrictions, conditions or
other requirements applicable to any permits, licenses or other governmental
authorizations issued with respect to the foregoing, and (3) judgments, decrees
or injunctions issued by any court or other judicial or quasi-judicial
Governmental Authority.

     "Arbitrage Certificate" means the certificate dated the Closing Date for
the Initial Bonds executed by the Issuer and relating to certain requirements
set forth in Section 148 of the Code.

     "Authenticating Agent" means the Trustee and any agent so designated in and
appointed pursuant to Section 204 of the Indenture.

     "Authorized Investments" means any of the following: (A) Government
Obligations; (B)obligations issued or guaranteed by any state or political
subdivision thereof rated A or higher by Moody's and by S&P; (C) open market
commercial or finance paper of any corporation having a net worth in excess of
$100,000,000 and which is rated either P-1 or A-1 or an equivalent by Moody's
and S&P; (D) bankers' acceptances drawn on and accepted by commercial banks
including the Trustee or its affiliates; (E) investments due within 12 months in
certificates of deposit issued by, or bankers' acceptances of, the Trustee or
its affiliates, or of banks or trust companies organized under the laws of the
United States of America or any state thereof, which must have a reported
capital and surplus of at least $25,000,000 in dollars of the United States of
America; (F) bank repurchase agreements, including the Trustee's or its
affiliate's, fully secured by obligations of the type described in (A) above;
(G) variable rate demand securities redeemable within 7 days or able to be
tendered for remarketing or purchase upon no more than 7 days' notice and
secured by a credit facility issued by a financial institution, which financial
institution (or its corporate parent) maintains a long term debt rating assigned
by Moody's and S&P which is not lower than the third highest long term debt
category (without regard to numerical or other modifiers assigned within the
category) by either Rating Service, or by both Rating Services, if rated by both
Rating Services; and (H)shares of any so called "money market mutual fund",
including any "money market mutual fund" which the Trustee or any of its
affiliates provide services for a fee, whether as an investment advisor,
custodian, transfer agent, registrar, sponsor, distributor, manager or
otherwise, which invests solely in obligations described in items (A) through
(G) above; and further provided that any such investment or deposit is not
prohibited by law.

                                        9



     "Authorized Newspaper" means a newspaper in English customarily published
each Business Day and generally circulated in the Borough of Manhattan, City and
State of New York.

     "Authorized Representative" means the Person or Persons at the time
designated to act on behalf of the Issuer, the Bank or the Company, as the case
may be, by written certificate furnished to the Issuer, the Company, the Bank
and the Trustee containing the specimen signature of each such Person and signed
on behalf of (A) the Issuer by its Chairman or Vice Chairman, or such other
person as may be authorized by resolution of the members of the Issuer to act on
behalf of the Issuer, (B) the Bank by a Vice President or an Assistant Vice
President, or such other person as may be authorized by the board of directors
of the Bank to act on behalf of the Bank, and (C) the Company by its President
or any Vice President, or such other person as may be authorized by the board of
directors of the Company to act on behalf of the Company.

     "Available Moneys" means, with respect to any date, (A) funds which (1)
have been paid to the Trustee by the Issuer, the Company, any Affiliate of the
Company, any Guarantor or any Insider of any of the foregoing and deposited into
and held in a separate and segregated subaccount or subaccounts in the
Redemption Premium Account of the Bond Fund in which no moneys not deposited on
the same date were at any time held, (2) have been on deposit in the Redemption
Premium Account of the Bond Fund for a period of at least one hundred
twenty-three (123) consecutive days prior to such date, during and prior to
which period no Event of Bankruptcy has occurred and (3) are represented by cash
or its equivalent as of such date; (B) moneys drawn under the Letter of Credit
and deposited directly into the Credit Facility Account of the Bond Fund; (C)
the proceeds deposited directly into the Defeasance Account of the Bond Fund
from the sale of refunding obligations other than, directly or indirectly, to
the Issuer, the Company, any Guarantor, any Affiliate of the Company or any
Guarantor or any Insider of any of them or any entity who at the time of the
purchase of the Bonds, is a secured creditor of the Company or any Guarantor;
(D) proceeds deposited directly into the Remarketing Proceeds Account of the
Bond Fund from the marketing or remarketing of Bonds to any purchaser other
than, directly or indirectly, the Company, the Issuer, any Guarantor, any
Affiliate of the Company or any Guarantor or any Insider of any of them or any
entity who at the time of the purchase of the Bonds, is a secured creditor of
the Company or any Guarantor; (E) proceeds from investment of the foregoing,
provided such proceeds are retained in the Account in which they were earned;
and (F) any other funds or payments so long as, in the opinion of reputable
bankruptcy counsel, such payments will not constitute an avoidable preference
under the standards set forth in the Bankruptcy Code.

     "Bank" means the Credit Facility Issuer.

     "Bank Documents" means the Letter of Credit, the Reimbursement Agreement,
the Mortgage, the Bond Pledge Agreement, the Security Agreement and any other
document now or hereafter executed by the Issuer, the Company or any Guarantor
in favor of the Bank which affects the rights of the Bank in or to the Project
Facility, in whole or in part, or which secures or guarantees any sum due under
any Bank Document.

                                       10



     "Bank Rate" means the rate of interest being charged to the Company by the
Credit Facility Issuer under the Reimbursement Agreement.

     "Bankruptcy Code" means Title 11 of the United States Code, as it is
amended from time to time.

     "Beneficial Owner" means, with respect to the Bonds, a Person owning a
Beneficial Ownership Interest therein, as evidenced to the satisfaction of the
Trustee.

     "Beneficial Ownership Interest" means the beneficial right to receive
payments and notices with respect to the Bonds which are held by the Depository
under a book entry system.

     "Bill of Sale to Company" means the bill of sale from the Issuer to the
Company conveying all of the Issuer's interest in the Project Facility to the
Company, substantially in the form attached as Exhibit B to the Installment Sale
Agreement.

     "Bill of Sale to Issuer" means the bill of sale delivered on the Closing
Date from the Company to the Issuer conveying all of the Company's interest in
the Project Facility to the Issuer.

     "Bond" or "Bonds" means, collectively, (A) the Initial Bonds and (B) any
Additional Bonds.

     "Bond Counsel" means the law firm of Bond, Schoeneck & King, LLP, Albany,
New York or such other attorney or firm of attorneys located in the State whose
experience in matters relating to the issuance of obligations by states and
their political subdivisions is nationally recognized and who are acceptable to
the Issuer.

     "Bond Fund" means the fund so designated established pursuant to Section
401 (A) (2) of the Indenture.

     "Bond Payment Date" means each Interest Payment Date and each date on which
principal, interest or premium, if any, shall be payable on the Bonds according
to their terms and the Indenture, including without limitation, scheduled
mandatory redemption dates, unscheduled mandatory redemption dates, optional
redemption dates and Stated Maturity, so long as any Bonds shall be Outstanding.

     "Bond Pledge Agreement" means (A) the bond pledge agreement dated as of
August 1, 2002 from the Company to the KeyBank National Association, as may be
amended or supplemented from time to time, and (B) any similar bond pledge
agreement by and between the Company and any Substitute Bank, as said bond
pledge agreement may be amended or supplemented from time to time.

     "Bond Proceeds" means (A) with respect to the Initial Bonds, the amount
paid to the Issuer by the initial purchasers of the Initial Bonds as the
purchase price for the Initial Bonds and

                                       11



(B) with respect to any Additional Bonds, the amount paid to the Issuer by the
initial purchasers of the Additional Bonds as the purchase price for the
Additional Bonds.

     "Bond Purchase Agreement" means the bond purchase agreement dated August
28, 2002 among the Issuer, the Company and the Underwriter.

     "Bond Rate" means with respect to any Bond, the applicable rate of interest
on such Bond, as set forth in such Bond.

     "Bond Register" means the register maintained by the Bond Registrar in
which, subject to such reasonable regulations as it, the Trustee or the Bond
Registrar may prescribe, the Issuer shall provide for the registration of the
Bonds and for the registration of transfers of the Bonds.

     "Bond Registrar" means the Trustee, acting in its capacity as bond
registrar under the Indenture, and its successors and assigns as bond registrar
under the Indenture.

     "Bond Resolution" means the resolution of the members of the Issuer duly
adopted on July 15, 2002 authorizing the Issuer to undertake the Project, to
issue and sell the Initial Bonds and to execute and deliver the Financing
Documents to which the Issuer is a party.

     "Bond Year" means each one (1) year period ending on the anniversary of the
Closing Date, or such other annual period provided for the computation of
arbitrage rebate selected by the Company in the manner allowed under Section 148
of the Code.

     "Bondholder" or "Holder" or "Owner of the Bonds" means the registered owner
of any Bond as indicated on the bond register maintained by the Bond Registrar,
other than the registered owner of any Bond which has been purchased pursuant to
Section 304 of the Indenture and not surrendered for payment of the purchase
price thereof.

     "Book Entry Bonds" means the Bonds held in Book Entry Form, with respect to
which the provisions of Section 213 of the Indenture shall apply.

     "Book Entry Form" or "Book Entry System" means, with respect to the Bonds,
a form or system, as applicable, under which (A) the Beneficial Ownership
Interests may be transferred only through a book entry and (B) physical Bond
certificates in fully registered form are registered only in the name of a
Depository or its nominee as Bondholder, with the physical Bond certificates
"immobilized" in the custody of the Depository. The Book Entry System maintained
by and the responsibility of the Depository and not maintained by or the
responsibility of the Issuer or the Trustee is the record that identifies, and
records the transfer of the interests of, the owners of book entry interests in
the Bonds.

     "Building Loan Agreement" means the Building Loan agreement dated as of
August 1, 2002 by and between the Bank and the Company, as said building loan
agreement may be amended or supplemented from time to time.

                                       12



     "Business Day" means any day other than (A) a Saturday or Sunday, (B) a day
on which the New York Stock Exchange is closed or (C) any day on which banks
located in the city in which the principal corporate trust office of the Trustee
is located, or city in which the office of the Credit Facility Issuer at which
demands for payment are to be presented is located are required or authorized by
applicable law to remain closed.

     "Certificate of Authentication" means the certificate of authentication in
substantially the form attached to the forms of the Initial Bonds attached as
Schedule I to the Indenture.

     "Closing Date" means (A) with respect to the Initial Bonds, the date on
which authenticated Initial Bonds are delivered to or upon the order of the
Placement Agent and payment is received therefor by the Trustee on behalf of the
Issuer, and (B) with respect to any Additional Bonds, the date on which such
Additional Bonds are authenticated and delivered to the purchaser thereof and
payment therefor is received by the Trustee on behalf of the Issuer.

     "Code" means the Internal Revenue Code of 1986, as amended, including, when
appropriate, the statutory predecessor of said Code, and the applicable
regulations (whether proposed, temporary or final) of the United States Treasury
Department promulgated under said Code and the statutory predecessor of said
Code, and any official rulings and judicial determinations under the foregoing
applicable to the Bonds.

     "Company" means Angiodynamics, Inc., a business corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, to the extent permitted by Section 8.4 of the Installment Sale
Agreement.

     "Completion Date" means the earlier of (A) August 1, 2005 or (B) the date
of substantial completion of the Project Facility as evidenced in the manner
provided in Section 4.4 of the Installment Sale Agreement.

     "Condemnation" means the taking of title to, or the use of, Property under
the exercise of the power of eminent domain by any Governmental Authority.

     "Construction Period" means the period (A) beginning on the Inducement Date
and (B) ending on the Completion Date.

     "Continuing Disclosure Agreement" means, if required by Section 516 of the
Indenture, the continuing disclosure agreement by and between the Company and
the Trustee, as said continuing disclosure agreement may be amended or
supplemented from time to time.

     "Conversion" means (A) any conversion from time to time in accordance with
the terms of the Indenture of the Bonds from one Interest Rate Mode to another
Interest Rate Mode and (B) the end of any Long-Term Rate Period.

     "Conversion Date" means the first date any Conversion becomes effective.

     "Conveyance Documents" means the Bill of Sale to Issuer and the Deed to
Issuer.

                                       13



     "Cost of the Project" means all those costs and items of expense enumerated
in Section 4.3 of the Installment Sale Agreement.

     "Credit Facility" means the Letter of Credit or any Alternate Credit
Facility delivered to the Trustee pursuant to the provisions of the Indenture.

     "Credit Facility Account" means the special account so named established
within the Bond Fund pursuant to Section 401(A)(2)(a) of the Indenture.

     "Credit Facility Issuer" means (A), initially, KeyBank National
Association, a national banking association organized under the laws of the
United States, as issuer of the initial Letter of Credit, and (B) in the event
an Alternate Credit Facility is outstanding, the institution issuing such
Alternate Credit Facility.

     "Debt Service Payment" means, with respect to any Bond Payment Date, (A)
the interest payable on the Bonds on such Bond Payment Date, plus (B) the
principal, if any, payable on the Bonds on such Bond Payment Date, plus (C) the
premium, if any, payable on the Bonds on such Bond Payment Date, plus (D) the
purchase price, if any, payable on the Bonds on such Bond Payment Date.

     "Deed to Issuer" means the deed dated as of August 1, 2002 from the Company
to the Issuer.

     "Default Interest Rate" means a per annum rate of interest equal to the
lesser of (A) the Prime Rate plus one percent (1%) per annum, or (B) the maximum
permitted by law.

     "Defaulted Interest" shall have the meaning ascribed to such term in
Section 207(C) of the Indenture.

     "Depository" means The Depository Trust Company, New York, New York, a
limited purpose trust company organized under the laws of the State, or its
nominee, or any other securities depository designated in any supplemental
resolution of the Issuer to serve as securities depository for the Bonds that is
a clearing agency under federal law operating and maintaining, with its
participants or otherwise, a Book Entry System to record ownership of book entry
interests in Bonds, and to effect transfers of book entry interests in Book
Entry Bonds.

     "Determination of Taxability" means, with respect to the Initial Bonds, (A)
the enactment of legislation or the adoption of final regulations or a final
decision, ruling or technical advice by any federal judicial or administrative
authority which has the effect of requiring interest on the Initial Bonds to be
included in the gross income of the Bondholders for federal income tax purposes
(other than a Bondholder who is a "substantial user" of the Project or a
"related person", as said quoted terms are used in Section 144 and Section
147(a) of the Code), (B) the receipt by the Trustee of a written opinion of Bond
Counsel to the effect that interest on the Initial Bonds must be included in the
gross income of the Bondholders for federal income tax purposes (other than a
Bondholder who is a "substantial user" of the Project or a "related

                                       14



person", as said quoted terms are used in Section 144 and Section 147(a) of the
Code) or (C) the delivery to the Trustee of a written statement signed by an
Authorized Representative of the Company to the effect that (1) the Company has
exceeded or will exceed the maximum amount of capital expenditures permitted
under Section 144(a)(4) of the Code or (2) the Company or another "test-period
beneficiary" (as said quoted term is defined in Section 144(a)(10)(D) of the
Code) has exceeded or will exceed the maximum amount of tax-exempt obligations
permitted to be outstanding under Section 144(a)(10) of the Code; provided that
no decision by any court or decision, ruling or technical advice by any
administrative authority shall be considered final (A)unless the Bondholder
involved in the proceeding or action giving rise to such decision, ruling or
technical advice (1) gives the Company and the Trustee prompt notice of the
commencement thereof and (2) offers the Company the opportunity to control the
contest thereof, provided the Company shall have agreed to bear all expenses in
connection therewith and to indemnify that Bondholder against all liabilities in
connection therewith, and (B) until the expiration of all periods for judicial
review or appeal.

     "Direct Participant" means a Participant as defined in the Letter of
Representations.

     "Environmental Claim" shall mean, with respect to any person, any action,
suit, proceeding, investigation, notice, claim, complaint, demand, request for
information or other communication (written or oral) by any other person
(including any governmental authority, citizens group or employee or former
employee of such person) alleging, asserting or claiming any actual or
potential: (a) violation of any Environmental Law, (b) liability under any
Environmental Law or (c) liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on, or resulting
from, the presence or release into the environment of any Hazardous Materials at
any location, whether or not owned by such person.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     "Event of Bankruptcy" means the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceedings) by or against the
Issuer, the Company, a Guarantor, any Affiliate of the Company or any Guarantor
or any Insider of any of them as debtor, under any applicable bankruptcy,
reorganization, insolvency or other similar law as now or hereafter in effect
applicable to the Issuer, the Company, any Guarantor, any Affiliate of the
Issuer, the Company or of any Guarantor or Insider of any of them.

     "Event of Default" means (A) with respect to the Indenture, any of those
events defined as an Event of Default by the terms of Article VI of the
Indenture, (B) with respect to the Installment Sale Agreement, any of those
events defined as an Event of Default by the terms of Article X of the
Installment Sale Agreement, and (C) with respect to any other Financing
Document, any of those events defined as an Event of Default by the terms
thereof.

     "Excess Earnings" means an amount equal to the sum of (A) plus (B), where
(A) is the excess of (1) the aggregate amount earned from the date of issuance
of the Initial Bonds on all nonpurpose investments in which gross proceeds of
the Bonds are invested (other than

                                       15



investments attributable to an excess described in this clause (1)), over (2)
the amount that would have been earned if such nonpurpose investments (other
than amounts attributable to an excess described in this clause (1)) had been
invested at a rate equal to the yield on the Bonds; and (B)is any income
attributable to the excess described in clause (1) of this definition. The sum
of (A) plus (B) shall be determined in accordance with Section 148(f) of the
Code. As used herein, the terms "gross proceeds", "nonpurpose investments" and
"yield" have the meanings assigned to them for purposes of Section 148 of the
Code.

     "Extraordinary Services" and "Extraordinary Expenses" means all reasonable
services rendered and all reasonable expenses incurred by the Trustee or any
paying agent under the Indenture, other than Ordinary Services and Ordinary
Expenses, including, but not limited to, reasonable attorneys fees and any
services rendered and any expenses incurred with respect to an Event of Default
or with respect to the occurrence of an event which upon the giving of notice or
the passage of time would ripen into an Event of Default under any of the
Financing Documents.

     "Financing Documents" means the Bonds, the Indenture, the Installment Sale
Agreement, the Mortgage, the Pledge and Assignment, the Building Loan Agreement,
the Guaranty, the Tax Documents, the Conveyance Documents, the Bank Documents,
the Remarketing Agreement and any other document now or hereafter executed by
the Issuer, the Company, any Guarantor or the Bank in favor of the Bondholders,
the Trustee or the Bank which affects the rights of the Bondholders, the Trustee
or the Bank in or to the Project Facility, in whole or in part, or which secures
or guarantees any sum due under the Bonds or any other Financing Document, each
as amended from time to time, and all documents related thereto and executed in
connection therewith.

     "Financial Institution" means (A) any national bank, banking corporation,
trust company or other banking institution, whether acting in its individual or
fiduciary capacity, organized under the laws of the United States, any state,
any territory or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the Comptroller of the
Currency or a comparable state or territorial official or agency; (B) an
insurance company whose primary and predominant business activity is the writing
of insurance or the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a similar
official or agency of a state, a territory or the District of Columbia; (C)an
investment company registered under the Investment Company Act of 1940 or a
business development company as described in Section 2(a)(48) of that Act; (D)
an employee benefit plan, including an individual retirement account, which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, insurance company or
registered investment company; or (E) institutional investors or other entities
who customarily purchase commercial paper or tax-exempt securities in large
denominations.

     "Governmental Obligations" means (A) direct obligations of the United
States of America, (B) obligations unconditionally guaranteed by the United
States of America and (C)securities or receipts evidencing ownership interests
in obligations or specified portions (such as principal or interest) of
obligations described in (A) or (B).

                                       16



     "Governmental Authority" means the United States of America, the State, any
other state and any political subdivision thereof, and any agency, department,
commission, board, bureau or instrumentality of any of them.

     "Gross Proceeds" means one hundred percent (100%) of the proceeds of the
transaction with respect to which such term is used, including, but not limited
to, the settlement of any insurance claim or Condemnation award.

     "Guarantor" means the Company and any other guarantor of the obligations of
the Company under the Reimbursement Agreement.

     "Guaranty" means the guaranty dated as of August 1, 2002 from the Company
to the Trustee, as said guaranty may be amended or supplemented from time to
time.

     "Hazardous Materials" means all hazardous materials including, without
limitation, any flammable explosives, radioactive materials, radon, asbestos,
urea formaldehyde foam insulation, polychlorinated byphenyls, petroleum,
petroleum products, methane, hazardous materials, hazardous wastes, hazardous or
toxic substances, or related materials as set forth in or regulated under or
defined in the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S. C. Sections 6901, et
seq.), Articles 15 or 27 of the State Environmental Conservation Law, or in the
regulations adopted and publications promulgated pursuant thereto, or any other
Federal, state or local environmental law, ordinance, rule or regulation.

     "Immediate Notice" means notice transmitted through a time-sharing
terminal, if operative as between any two parties, or if not operative, in
writing or by telephone (promptly confirmed in writing).

     "Indebtedness" means (A) the payment of the Debt Service Payments on the
Bonds according to their tenor and effect, (B) all other payments due from the
Issuer or the Company to the Trustee or the Bank pursuant to the Installment
Sale Agreement or any other Financing Document, (C) the performance and
observance by the Issuer and the Company of all of the covenants, agreements,
representations and warranties made for the benefit of the Trustee or the Bank
pursuant to the Installment Sale Agreement or any other Financing Document, (D)
the monetary obligations of the Company to the Issuer and its members, officers,
agents, servants and employees under the Installment Sale Agreement and the
other Financing Documents, and (E) all interest accrued on any of the foregoing.

     "Indenture" means the trust indenture dated as of August 1, 2002 by and
between the Issuer and the Trustee, as said trust indenture may be amended or
supplemented from time to time.

                                       17



     "Independent Counsel" means an attorney or firm of attorneys duly admitted
to practice law before the highest court of any state and approved by the Bank
and not a full-time employee of the Company or the Issuer.

     "Indirect Participant" means a Person utilizing the book entry system of
the Depository by, directly or indirectly, clearing through or maintaining a
custodial relationship with a Direct Participant.

     "Insider" means any entity referred to or described in accordance with the
standards set forth in Section 101(31) of the Bankruptcy Code, assuming for this
purpose that the Issuer, the Company, any Guarantor, or any Affiliate of any of
them, as applicable, is a debtor, and any limited partner or limited liability
company member thereof.

     "Inducement Date" means June 24, 2002.

     "Initial Bonds" means the Issuer's Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Angiodynamics, Inc. Project - Letter of Credit
Secured), Series 2002 in the aggregate principal amount of $3,500,000, issued
pursuant to the Bond Resolution and Article II of the Indenture and sold by the
Underwriter pursuant to the provisions of the Bond Purchase Agreement, and any
Bonds issued in exchange or substitution thereof.

     "Installment Sale Agreement" means the installment sale agreement dated as
of August 1, 2002 by and between the Issuer and the Company, as said installment
sale agreement may be amended or supplemented from time to time.

     "Insurance and Condemnation Fund" means the fund so designated established
pursuant to Section 401(A)(3) of the Indenture.

     "Interest Payment Date" means, (A) with respect to any Additional Bonds,
the Interest Payment Dates on said Additional Bonds, as established pursuant to
the supplemental Indenture authorizing issuance of said Additional Bonds, and
(B) with respect to the Initial Bonds, (1)while the Initial Bonds bear interest
at the Weekly Rate, the first Thursday of each January, April, July and October,
and (2) while the Initial Bonds bear interest at the Semi-Annual Rate or the
Long-Term Rate, February 1 and August 1 of each year. The first Interest Payment
Date relating to the Initial Bonds shall be the Interest Payment Date in
November, 2002. In any case, the final Interest Payment Date relating to the
Initial Bonds shall be the Maturity Date of the Initial Bonds.

     "Interest Period" means, for all Bonds, the period from and including each
Interest Payment Date to and including the day next preceding the next Interest
Payment Date. The first Interest Period for the Initial Bonds shall begin on
(and include) the date of the initial delivery of the Initial Bonds. The final
Interest Period for a Bond shall end on the Maturity Date (or redemption date)
for such Bond.

     "Interest Rate Mode" means the Weekly Rate, the Semi-Annual Rate or the
Long-Term Rate.

                                       18



     "Issuer" means (A) Counties of Warren and Washington Industrial Development
Agency and its successors and assigns, and (B) any public benefit corporation or
other public corporation resulting from or surviving any consolidation or merger
to which Counties of Warren and Washington Industrial Development Agency or its
successors or assigns may be a party.

     "Letter of Credit" means the irrevocable transferable direct-pay letter of
credit dated the Closing Date, issued by the Bank in favor of the Trustee
pursuant to the Reimbursement Agreement as security for the Initial Bonds, in a
maximum amount (which shall decline at fixed intervals) equal to $3,575,179,
said sum representing the aggregate of (A) the principal of the Initial Bonds
Outstanding, plus (B) 98 days' interest on all Outstanding Initial Bonds
(computed at an assumed interest rate of 8%).

     "Letter of Representations" means (A), with respect to the Initial Bonds,
the letter of representations by and among the Issuer and the Depository
relating to the Initial Bonds and any amendments or supplements thereto entered
into with respect thereto, and (B), with respect to any Additional Bonds, any
letter of representations by and among the Issuer, the Trustee and the
Depository relating to the Additional Bonds, and any amendments or supplements
thereto entered into with respect thereto.

     "Lien" means any interest in Property securing an obligation owed to a
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, projections, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions and
encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property. For purposes hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.

     "Lien Law" means the Lien Law of the State.

     "Long-Term Rate" means the Interest Rate Mode for the Initial Bonds in
which the interest rate on the Initial Bonds is determined in accordance with
Section 209(C)(3) of the Indenture.

     "Long-Term Rate Period" means any period beginning on, and including, the
Conversion Date to the Long-Term Rate and ending on, and including, the day
preceding the Interest Payment Date selected by the Company in accordance with
the requirements of Section 209(D) of the Indenture and each period of the same
duration (or as close as possible) ending on the day preceding an Interest
Payment Date thereafter until the earliest of the day preceding the change to a
different Long-Term Rate Period, the Conversion to a different Interest Rate
Mode or the maturity of the Bonds.

                                       19



     "Mandatory Tender" means the mandatory tender of Bonds by the owner thereof
upon (A) a Conversion pursuant to Section 209(B)(2)(e) of the Indenture, or (B)
the delivery by the Company of an Alternate Credit Facility pursuant to Section
304 of the Indenture.

     "Maturity Date" means, with respect to any Bond, the final Stated Maturity
of the principal of such Bond.

     "Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.

     "Mortgage" means the mortgage and security agreement dated as of August 1,
2002 from the Company and the Issuer to the Bank granting the Bank a lien on the
Project Facility as additional security for the obligations of the Company to
the Bank pursuant to the Reimbursement Agreement, as said mortgage may be
amended to supplemented from time to time.

     "Net Proceeds" means so much of the Gross Proceeds with respect to which
that term is used as remain after payment of all fees for services, expenses,
costs and taxes (including attorneys' fees) incurred in obtaining such Gross
Proceeds.

     "Non-Qualifying Alternate Credit Facility" means an Alternate Credit
Facility which is not a Qualifying Alternate Credit Facility.

     "Office of the Trustee" means the corporate trust office of the Trustee
specified in Section 1103 of the Indenture, or such other address as the Trustee
shall designate pursuant to Section 1103 of the Indenture.

     "Optional Redemption Premium" means the maximum applicable premium payable
upon an optional redemption of the Bonds after the Conversion Date, as
determined by the Remarketing Agent pursuant to Section 301(B)(2) of the
Indenture.

     "Ordinary Services" and "Ordinary Expenses" means those reasonable services
normally rendered with those reasonable expenses, including reasonable
attorneys' fees, normally incurred by a trustee or a paying agent, as the case
may be, under instruments similar to the Indenture.

     "Outstanding" means, when used with reference to the Bonds as of any date,
all Bonds which have been duly authenticated and delivered by the Trustee under
the Indenture, except:

     (A)  Bonds theretofore canceled or deemed cancelled by the Trustee or
theretofore delivered to the Trustee for cancellation;

     (B)  Bonds for the payment or redemption of which moneys or Government
Obligations shall have been theretofore deposited with the Trustee (whether upon
or prior to the

                                       20



maturity or redemption date of any such Bonds); provided that, if such Bonds are
to be redeemed prior to the maturity thereof, notice of such redemption shall
have been given or arrangements satisfactory to the Trustee shall have been made
therefor, or waiver of such notice satisfactory in form to the Trustee shall
have been filed with the Trustee; and

     (C)  Bonds in lieu of or in substitution for which other Bonds have been
authenticated and delivered under the Indenture.

In determining whether the owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Company (unless all of the outstanding Bonds are
then owned by the Company) shall be disregarded for the purpose of any such
determination. Notwithstanding the foregoing, Bonds so owned which have been
pledged in good faith shall not be disregarded as aforesaid if the pledgee
established to the satisfaction of the Bond Registrar the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Company. If the
Indenture shall be discharged pursuant to Article X thereof, no Bonds shall be
deemed to be Outstanding within the meaning of this definition.

     "Participant" shall have the meaning assigned to such term in the Letter of
Representations.

     "Paying Agent" or "Co-Paying Agent" means any national banking association,
federal savings bank, bank and trust company or trust company appointed by the
Company and meeting the qualifications of, and subject to the obligations of,
the Trustee in Article XI hereof. "Principal Office" of any Paying Agent shall
mean the office thereof designated in writing to the Trustee.

     "Permitted Encumbrances" means (A) utility, access and other easements,
rights of way, restrictions, encroachments and exceptions that benefit or do not
materially impair the utility or the value of the Property affected thereby for
the purposes for which it is intended, (B)mechanics', materialmen's,
warehousemen's, carriers' and other similar Liens to the extent permitted by
Section 8.8(B) of the Installment Sale Agreement, (C) Liens for taxes,
assessments and utility charges (1) to the extent permitted by Section 6.2(B) of
the Installment Sale Agreement, or (2) at the time not delinquent, (D) any Lien
on the Project Facility obtained through any Financing Document, and (E) any
Lien on the Project Facility in favor of the Trustee or the Bank, or (F) any
lien on the Project Facility approved in writing by the Bank (or, if the Bank is
in default under the then current Credit Facility, the Trustee).

     "Person" means an individual, partnership, corporation, trust,
unincorporated organization or Governmental Authority.

     "Plans and Specifications" means with respect to the Issuer, the
description of the Project Facility appearing in the fifth recital clause to the
Indenture and the Installment Sale Agreement.

     "Pledge and Assignment" means the pledge and assignment dated as of August
1, 2002 from the Issuer to the Trustee, pursuant to which the Issuer has
assigned to the Trustee its rights

                                       21



under the Installment Sale Agreement (except the Unassigned Rights), as said
pledge and assignment may be amended or supplemented from time to time.

     "Pledged Bonds" means any Bond at any time purchased, in whole or in part,
with the proceeds of a draw on the Letter of Credit upon tender of such Bond and
held by the Trustee as nominee for the Bank pursuant to the provisions of
Section 305 of the Indenture.

     "Predecessor Bonds" of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for purposes of this definition, any Bond authenticated
and delivered under Section 205 of the Indenture in lieu of a lost, destroyed or
stolen Bond shall be deemed to evidence the same debt as the lost, destroyed or
stolen Bond.

     "Prime Rate" shall mean the KeyBank National Association Prime Rate, which
is that per annum interest rate announced from time to time publicly by the Bank
as a reference rate for determining interest rates charged on certain loans, but
is not necessarily the lowest rate at which the Bank lends. Any change in the
Prime Rate shall be effective on the date such rate is raised or lowered at the
Bank, with or without notice to the Company.

     "Principal Payment Date" means, the dates for the payment of principal on
the Bonds in accordance with the Company's irrevocable notice of optional
redemption delivered to the Trustee on the Closing Date, which shall occur
quarterly in each year on the Interest Payment Date of the first day of
February, May, August and November of each year in the manner as set forth in
the Reimbursement Agreement.

     "Project" shall have the meaning set forth in the fifth recital clause to
the Indenture and the Installment Sale Agreement.

     "Project Costs" means Costs of the Project.

     "Project Facility" means all materials, machinery, equipment, fixtures or
furnishings intended to be acquired with the proceeds of the Bonds or any
payment made by the Company pursuant to Section 4.5 of the Installment Sale
Agreement, and such substitutions and replacements therefor and additions
thereto as may be made from time to time pursuant to the Installment Sale
Agreement, including, without limitation, all of the Property described in
Exhibit A attached to the Installment Sale Agreement.

     "Project Fund" means the fund so designated established pursuant to Section
401(A)(1) of the Indenture.

     "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "Purchase Date" means (A) if the Interest Rate Mode is the Weekly Rate, any
Business Day as set forth in Section 304(A)(1) and Section 304(A)(4) of the
Indenture, respectively, (B) if the Interest Rate Mode is the Semi-Annual Rate,
any Interest Payment Date, (C) if the Interest

                                       22



Rate Mode is the Long-Term Rate, the final Interest Payment Date for each
Long-Term Rate Period, and (D) each day that Bonds are subject to mandatory
purchase pursuant to Section 304(B) of the Indenture.

     "Purchase Price" means an amount equal to one hundred percent (100%) of the
principal amount of any Bond tendered or deemed tendered pursuant to Section 304
or Section 305 of the Indenture, plus accrued and unpaid interest thereon to the
Purchase Date.

     "Qualifying Alternate Credit Facility" means an Alternate Credit Facility
in connection with which the Trustee shall have received (A), if the Bonds are
then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) from the Rating Service then rating the Bonds to
the effect that such Rating Service has reviewed the proposed Alternate Credit
Facility and that the substitution of the Alternate Credit Facility will not, by
itself, result in (1) a permanent withdrawal of its rating of the Bonds or (2)
the reduction of the current rating of the Bonds, or (B) if the Bonds are not
then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) that the Alternate Credit Facility would be issued
by a Credit Facility Issuer which, or the parent corporation of which, has a
long-term debt rating assigned by a Rating Service which is equal to or better
than the rating of the Credit Facility Issuer being replaced.

     "Rate Period" means any period during which a single interest rate is in
effect for a Bond.

     "Rating Service" means Moody's, if the Bonds are rated by Moody's at the
time, and/or S&P, if the Bonds are rated by S&P at the time, and their
successors and assigns.

     "Rebate Amount" as of any date means the Excess Earnings as of such date,
or such other amount as may be due to the United States pursuant to Section
148(f) of the Code.

     "Rebate Fund" means the fund so designated established pursuant to Section
401(A)(4) of the Indenture.

     "Rebate Fund Earnings Subaccount" means the special account so designated
within the Rebate Fund established pursuant to Section 401(A)(4)(b) of the
Indenture.

     "Rebate Fund Principal Subaccount" means the account so designated within
the Rebate Fund established pursuant to Section 401(A)(4)(a) of the Indenture.

     "Record Date" means, as the case may be, the applicable Regular Record Date
or Special Record Date.

     "Redemption Price" means, when used with respect to a Bond, the principal
amount thereof plus the applicable premium, if any, payable upon the prior
redemption thereof pursuant to the provisions of the Indenture and such Bond.

     "Redemption Premium Account" means the Redemption Premium Account created
under Section 405 of the Indenture.

                                       23



     "Regular Record Date" means, with respect to any Interest Period, the close
of business on the last Business Day of such Interest Period.

     "Reimbursement Agreement" means the Reimbursement Agreement dated as of
August 1, 2002 between the Company and KeyBank National Association, as the same
may be amended from time to time and filed with the Trustee, and any agreement
of the Company with a Credit Facility Issuer setting forth the obligations of
the Company to such Credit Facility Issuer arising out of any payments under a
Credit Facility and which provides that it shall be deemed to be a Reimbursement
Agreement for the purpose of the Indenture.

     "Related Person" means any Person constituting a "related person" within
the meaning ascribed to such quoted term in Section 144(a)(3) of the Code,
except when used in connection with the phrase "substantial user", in which case
the phrase "Related Person" shall have the meaning set forth in Section 147(a)
of the Code.

     "Remarketing Agent" means McDonald Investments Inc. and its successors as
provided in Section 718 of the Indenture. "Principal Office" of the Remarketing
Agent means the office designated as such in writing to the Company, the Trustee
and the Tender Agent.

     "Remarketing Agreement" means the remarketing agreement dated as of August
1, 2002 by and among the Company, the Issuer and the Remarketing Agent, as said
remarketing agreement may be amended or supplemented from time to time, and any
remarketing agreement between the Company and a successor Remarketing Agent.

     "Remarketing Proceeds Account" means the Remarketing Proceeds Account
created under Section 405 of the Indenture.

     "Request for Disbursement" means a request from the Company, as agent of
the Issuer, stating the amount of the disbursement sought and containing the
statements, representations and other items required by Section 4.3 of the
Installment Sale Agreement, the Reimbursement Agreement and the Indenture, in
substantially the form of Exhibit C attached to the Indenture.

     "Requirement" or "Local Requirement" means any law, ordinance, order, rule
or regulation of a Governmental Authority or a local authority, respectively.

     "Revenues" means (a) all amounts payable to the Trustee with respect to the
principal or redemption price of, or interest on, the Bonds (i) by the Company
as required under the Installment Sale Agreement, (ii) upon deposit in the Bond
Fund from the proceeds of the Bonds, and (iii) by the Credit Facility Issuer
under a Credit Facility, and (b) investment income with respect to any moneys
held by the Trustee in the Bond Fund. The term "Revenues" does not include any
moneys or investments in the Rebate Fund.

     "Sales Tax Exemption Letter" shall have the meaning assigned to such term
in Section 8.14 of the Installment Sale Agreement.

                                       24



     "Security Agreement" means the security agreement dated as of August 1,
2002 from the Company to the Bank, as paid security agreement may be amended or
supplemented from time to time.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Semi-Annual Rate" means the Interest Rate Mode for the Bonds in which the
interest rate on the Bonds is determined in accordance with Section 209(C)(3).

     "Semi-Annual Rate Period" means any period beginning on, and including, the
Conversion Date to the Semi-Annual Rate and ending on, and including, the day
preceding the next Interest Payment Date thereafter and each successive six (6)
month period thereafter until the day preceding Conversion to a different
Interest Rate Mode or the maturity of the Bonds.

     "SEQRA" means Article 8 of the Environmental Conservation Law of the State
and the statewide and local regulations thereunder.

     "Special Record Date" means a date for the payment of any Defaulted
Interest on the Bonds fixed by the Trustee pursuant to Section 207(C) of the
Indenture.

     "Standard & Poor's" means Standard & Poor's Ratings Group, a New York
corporation, its successors and assigns, and, if such entity shall be dissolved
or liquidated or shall no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.

     "State" means the State of New York.

     "Stated Maturity" means, when used with respect to any Bond or any
installment of interest or principal thereon, the date specified in such Bond as
the fixed date on which the principal of such Bond or such installment of
interest on such Bond is due and payable.

     "Substitute Bank" means the issuer of any Alternate Credit Facility.

     "Tax Documents" means, collectively, (A) with respect to the Initial Bonds,
the Arbitrage Certificate and the Tax Regulatory Agreement and (B) with respect
to any Additional Bonds, any similar documents executed by the Issuer and/or the
Company in connection with the issuance of such Additional Bonds.

     "Tax Incidence Date" means, with respect to any recipient of interest paid
or payable on the Bonds, the first such date of the period for which any
interest paid or payable on the Bonds was or is includable in the gross income
of such recipient thereof for purposes of income taxation under the laws of the
United States, without regard to whether or not any such recipient exercised any
or all of the rights or remedies granted such recipient by the Financing
Documents or by law.

                                       25



     "Tax Regulatory Agreement" means the tax regulatory agreement dated the
Closing Date executed by the Company in favor of the Issuer and the Trustee,
with a certificate of the Placement Agent attached thereto, regarding, among
other things, the restrictions prescribed by the Code in order for interest on
the Initial Bonds to remain excludable from gross income for federal income tax
purposes.

     "Tender Agent" means the initial and any successor tender agent appointed
in accordance with Section 716 of the Indenture. "Principal Office" of the
Tender Agent means the office thereof designated as such in writing to the
Trustee, the Company and the Remarketing Agent.

     "Tendered Bond" means any Bond or portion thereof which is the subject of
(A) a demand from the Owner thereof that such Bond be purchased pursuant to
Section 304(A) of the Indenture or (B) a mandatory purchase pursuant to Section
304(B) of the Indenture.

     "Termination of Installment Sale Agreement" means a termination of the
Installment Sale Agreement by and between the Company, as purchaser, and the
Issuer, as seller, intended to evidence the termination of the Installment Sale
Agreement, substantially in the form attached as Exhibit C to the Installment
Sale Agreement.

     "Trust Estate" means all Property which may from time to time be subject to
a Lien in favor of the Trustee created by the Indenture or any other Financing
Document.

     "Trust Revenues" means (A) all payments of installment purchase payments
made or to be made by or on behalf of the Company under the Installment Sale
Agreement (except payments made with respect to the Unassigned Rights), (B) all
other amounts pledged to the Trustee by the Issuer or the Company to secure the
Bonds or performance of their respective obligations under the Installment Sale
Agreement and the Indenture, (C) the Net Proceeds (except proceeds with respect
to the Unassigned Rights) of insurance settlements and Condemnation awards with
respect to the Project Facility, (D) all payments received by the Trustee under
the Letter of Credit, (E) moneys and investments held from time to time in each
fund and account established under the Indenture and all investment income
thereon, except (1)moneys deposited with or paid to the Trustee for the
redemption of Bonds, notice of which has been duly given, (2) moneys deposited
with the Trustee or the Tender Agent for the purchase of Tendered Bonds, and (3)
as specifically otherwise provided, and (F) all other moneys received or held by
the Trustee for the benefit of the Bondholders pursuant to the Indenture.
Notwithstanding anything to the contrary, amounts held in the Rebate Fund shall
not be considered Trust Revenues and shall not be subject to the Lien of the
Indenture, and amounts held therein shall not secure any amount payable on the
Bonds.

     "Trustee" means The Huntington National Bank, a national banking
association organized and existing under the laws of the United States of
America, or any successor trustee or co-trustee acting as trustee under the
Indenture.

     "Unassigned Rights" means (A) the rights of the Issuer granted pursuant to
Sections 2.2, 3.2, 3.3, 4.1(B), 4.1(D), 4.1(E)(2), 4.1(F), 4.1(G), 5.2(A),
5.2(D), 5.3(B)(2), 5.3(B)(3), 5.4(A), 5.4(B), 6. 1(A), 6. 1(B), 6.3, 6.4, 6.5,
6.6, 7.1, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.11,

                                       26



8.15, 8.16, 9.1, 9.3, 9.4, 11.1, 11.4, 11.8 and 11.10 of the Installment Sale
Agreement, (B) the moneys due and to become due to the Issuer for its own
account or the members, officers, agents (other than the Company) and employees
of the Issuer for their own account pursuant to Sections 2.2(F), 3.3, 4. 1(F),
5.3(B)(2), 5.3(C), 6.4(B), 8.2, 10.2 and 10.4 of the Installment Sale Agreement,
(C) the rights of the Issuer under Section 6.6 of the Installment Sale
Agreement, and (D) the right to enforce the foregoing pursuant to Article X of
the Installment Sale Agreement. Notwithstanding the preceding sentence, to the
extent the obligations of the Company under the Sections of the Installment Sale
Agreement listed in (A), (B), (C) and (D) above do not relate to the payment of
moneys to the Issuer for its own account or to the members, officers, directors,
agents (other than the Company) and employees of the Issuer for their own
account, such obligations, upon assignment of the Installment Sale Agreement by
the Issuer to the Trustee pursuant to the Pledge and Assignment, shall be deemed
to and shall constitute obligations of the Company to the Issuer, the Trustee
and the Bank, jointly and severally, and either the Issuer, the Trustee or the
Bank may commence an action to enforce the Company's obligations under the
Installment Sale Agreement.

     "Underwriter" means McDonald Investments Inc., a Key Corp Company, as
underwriter for the Initial Bonds.

     "Weekly Rate" means the Interest Rate Mode for the Bonds in which the
interest rate on the Bonds is determined weekly in accordance with Section
209(C)(3) of the Indenture.

     "Weekly Rate Period" means the period beginning on, and including, the date
of issuance of the Bonds, and ending on, and including, the next Wednesday
(except if the date of issuance of the Bonds is a Wednesday then the first
Weekly Rate Period shall begin and end on such Wednesday) and thereafter the
period beginning on, and including, any Thursday and ending on, and including,
the next Wednesday.

SECTION 102.  INTERPRETATION. (A) In this Indenture, unless the context
otherwise requires:

     (1)  the terms "hereby", "hereof", "hereto", "herein", "hereunder", and any
similar terms, as used in this Indenture, refer to this Indenture, and the term
"heretofore" shall mean before, and the term "hereafter" shall mean after, the
date of this Indenture;

     (2)  words of the masculine gender shall mean and include correlative words
of the feminine and neuter genders;

     (3)  words importing the singular number shall mean and include the plural
number, and vice versa;

     (4)  any headings preceding the texts of the several Articles and Sections
of this Indenture, and any table of contents or marginal notes appended to
copies hereof, shall be solely for convenience of reference and shall neither
constitute a part of this Indenture nor affect its meaning, construction or
effect;

                                       27



     (5)  words importing the redemption or redeeming of a Bond or the calling
of a Bond for redemption do not include or connote the payment of such Bond at
its Stated Maturity or the purchase of said Bond;

     (6)  all references to time in this document refer to New York City time;
and

     (7)  any certificates, letters or opinions required to be given pursuant to
this Indenture shall mean a signed document attesting to or acknowledging the
circumstances, representations, opinions of law or other matters therein stated
or set forth or setting forth matters to be determined pursuant to this
Indenture.

     (B)  Nothing in this Indenture expressed or implied is intended or shall be
construed to confer upon, or to give to, any persons, other than the Issuer, the
Trustee, the Bank and the holders of the Bonds, any right, remedy or claim under
or by any reason of this Indenture or any covenant, condition or stipulation
thereof. All the covenants, stipulations, promises and agreements herein
contained by and on behalf of the Issuer shall be for the sole and exclusive
benefit of the Issuer, the Trustee, the Bank and the holders of the Bonds.

     (C)  If any one or more of the covenants or agreements provided herein on
the part of the Issuer or the Trustee to be performed shall, for any reason, be
held or shall, in fact, be inoperative, unenforceable or contrary to law, in any
particular case, such circumstance shall not render the provision in question
inoperative or unenforceable in any other case or circumstance. Further, if any
one or more of the phrases, sentences, clauses, paragraphs or sections herein
should be contrary to law, then such covenant or covenants or agreement or
agreements shall be deemed separable from the remaining covenants and agreements
hereof and shall in no way affect the validity of the other provisions of this
Indenture or of the Bonds.

SECTION 103.  CONDITIONS PRECEDENT SATISFIED. All acts, conditions and things
required by law to exist, happen and be performed precedent to and in connection
with the execution and entering into of this Indenture have happened and have
been performed in regular and due time, form and manner as required by law, and
the parties hereto are now duly empowered to execute and enter into this
Indenture.

                          [Balance of page left blank]

                                       28



                                   ARTICLE II

                                    THE BONDS

SECTION 201.  RESTRICTION ON ISSUANCE OF BONDS. No Bonds may be authenticated
and issued under the provisions of this Indenture except in accordance with this
Article II. Except as provided in Section 205 and Section 214 hereof, the total
aggregate principal amount of Bonds that may be issued and authenticated
hereunder is expressly limited to $3,500,000.

SECTION 202.  LIMITED OBLIGATIONS. (A) The Bonds, together with the premium, if
any, and the interest thereon, shall be limited obligations of the Issuer
payable, with respect to the Issuer, solely from the Trust Revenues, which Trust
Revenues are hereby pledged and assigned for the equal and ratable payment of
all sums due under the Bonds, and shall be used for no other purpose than to pay
the principal of, premium, if any, on and interest on the Bonds except as may be
otherwise expressly provided herein.

     (B)  THE BONDS ARE NOT AND SHALL NOT BE A DEBT OF THE STATE OR OF THE
COUNTIES OF WARREN AND WASHINGTON, NEW YORK AND NEITHER THE STATE NOR THE
COUNTIES OF WARREN AND WASHINGTON, NEW YORK SHALL BE LIABLE THEREON. THE BONDS
DO NOT GIVE RISE TO A PECUNIARY LIABILITY OR CHARGE AGAINST THE GENERAL CREDIT
OR TAXING POWERS OF THE STATE OR OF THE COUNTIES OF WARREN AND WASHINGTON, NEW
YORK.

     (C)  No recourse shall be had for the payment of the principal of, or the
premium, if any, or the interest on, any Bond or for any claim based thereon or
on this Indenture against any past, present or future member, officer, employee
or agent (other than the Company), as such, of the Issuer or of any predecessor
or successor corporation, either directly or through the Issuer or otherwise,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise.

SECTION 203.  EXECUTION. (A) The Bonds shall be executed on behalf of the Issuer
by the manual or facsimile signature of its Chairman or its Vice Chairman, and
the Issuer's corporate seal, or a reproduction thereof, shall be impressed,
imprinted or otherwise reproduced thereon and attested by the manual or
facsimile signature of its Secretary or its Assistant Secretary. All such
facsimile signatures shall have the same force and effect as if said officers
had manually signed the Bonds. The reproduction of the Issuer's corporate seal
on the Bonds shall have the same force and effect as if the Issuer's corporate
seal had been impressed on the Bonds.

     (B)  In case any officer of the Issuer whose signature shall appear on any
Bond shall cease to be such officer before the delivery of such Bond or the
issuance of a new Bond following a transfer or exchange, such signature or such
facsimile shall nevertheless be valid and sufficient for all purposes, the same
as if such officer had remained in office until delivery.

SECTION 204.  AUTHENTICATION. (A)Only such Bonds as shall have endorsed thereon
a Certificate of Authentication substantially in the form set forth in the form
of Bond attached

                                       29



hereto as Schedule I duly executed by the manual signature of an authorized
officer of the Trustee or its Authenticating Agent shall be entitled to any
right or benefit under this Indenture.

No Bonds shall be valid or obligatory for any purpose unless and until such
Certificate of Authentication shall have been duly executed by the Trustee or
its Authenticating Agent; and such executed Certificate of Authentication upon
any such Bond shall be conclusive evidence that such Bond has been authenticated
and delivered under this Indenture. The Certificate of Authentication executed
by the Trustee or its Authenticating Agent on any Bond shall be deemed to have
been executed by the Trustee if signed by an authorized officer of the Trustee
or its Authenticating Agent, as the case may be, but it shall not be necessary
that the same person sign the Certificate of Authentication on all of the Bonds.

     (B)  If the Bond Registrar is other than the Trustee, the Trustee may
appoint the Bond Registrar as an Authenticating Agent with the power to act on
the Trustee's behalf and subject to its direction in the authentication and
delivery of Bonds in connection with the registration of transfers and exchanges
under Section 206 hereof, and the authentication and delivery of Bonds by an
Authenticating Agent pursuant to this Section shall, for all purposes of this
Indenture, be deemed to be the authentication and delivery "by the Trustee". The
Trustee shall, however, itself authenticate all Bonds upon their initial
issuance and any Bonds issued in substitution for other Bonds pursuant to
Sections 205 and 208 hereof. The Trustee shall be entitled to be reimbursed for
payments made to any Authenticating Agent as reasonable compensation for its
services.

     (C)  Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible as a Bond
Registrar under Section 206 hereof, without the execution or filing or the
taking of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.

     (D)  Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent, the Company and the Issuer. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any Authenticating Agent shall cease to be eligible under this Section,
the Trustee may appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Company and shall mail notice of such
appointment to all owners of Bonds as the names and addresses of such owners
appear on the Bond Register.

SECTION 205.  MUTILATED, LOST, STOLEN OR DESTROYED BONDS. (A) In the event any
Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and the
Trustee may authenticate a new Bond, executed by the Issuer as provided in
Section 203 hereof, of like maturity, interest rate and denomination as the Bond
so mutilated, lost, stolen or destroyed. Any mutilated Bond shall first be
surrendered to the Trustee; and in the case of any lost, stolen or destroyed
Bond, there shall first be furnished to the Trustee evidence of such loss, theft
or

                                       30



destruction satisfactory to the Trustee, together with indemnity satisfactory to
the Trustee. The Issuer or the Trustee may charge the holder or owner of such
Bond a sum sufficient to cover any tax or other governmental charge in
connection with such exchange or substitution of such new Bond, together with
any other reasonable fees and expenses incurred by the Issuer or the Trustee in
connection therewith.

     (B)  Every Bond issued pursuant to the provisions of this Section 205 shall
be equally and proportionately entitled to the benefits of this Indenture with
all other Bonds secured by this Indenture. However, the Trustee shall not be
required to treat both the original Bond and any Bond issued in lieu thereof as
being Outstanding for purposes of determining the principal amount of Bonds
Outstanding under this Indenture or for the purpose of determining any
percentage of Bonds Outstanding hereunder, but both the original Bond and the
Bond issued in lieu thereof shall be treated as one and the same.

     (C)  Notwithstanding any other provision of this Section 205, in lieu of
delivering a new Bond for a Bond which has been mutilated, lost, stolen or
destroyed and which has matured, upon receipt of evidence of such mutilation,
loss, theft or destruction and indemnity satisfactory to the Trustee, the
Trustee may make payment for such Bond.

     (D)  All Bonds shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other
rights or remedies, notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment of negotiable
instrument or investment or other securities without their surrender.

SECTION 206.  TRANSFER AND EXCHANGE OF BONDS; PERSONS TREATED AS OWNERS. (A) All
Bonds shall be issued in fully registered form. The Bonds shall be registered
upon original issuance and upon subsequent transfer or exchange as provided in
this Indenture.

     (B)  The Company shall designate one or more persons to act as Bond
Registrar for the Bonds, provided that the Bond Registrar appointed for the
Bonds shall be either the Trustee or a person which would meet the requirements
for qualification as a successor trustee imposed by Section 708(B) hereof. The
Trustee is designated and agrees to act as Bond Registrar for the Bonds. Any
person other than the Trustee undertaking to act as Bond Registrar shall first
execute a written agreement, in form satisfactory to the Trustee, to perform the
duties of a Bond Registrar under this Indenture, which agreement shall be filed
with the Trustee.

     (C)  The Bond Registrar shall act as registrar and transfer agent for the
Bonds. The Bond Registrar shall cause a Bond Register to be kept on behalf of
the Issuer at an office of the Bond Registrar in which, subject to such
reasonable regulations as it, the Trustee, the Authenticating Agent or the
Issuer may prescribe, the Bond Registrar shall provide for the registration of
transfers of Bonds. The Issuer shall cause the Bond Registrar to designate, by a
written notification to the Trustee, a specific office location (which may be
changed from time to time, upon similar notification) at which the Bond Register
is to be kept. If the Bond Registrar is the Trustee, such location shall be the
Office of the Trustee.

                                       31



     (D)  Except as provided in Section 213 hereof, any Bond, upon the surrender
of such Bond to the Bond Registrar for registration of transfer, may be
transferred, but only upon delivery to the Bond Registrar of an assignment duly
executed by the registered owner or his duly authorized legal representative in
the form imprinted on the Bond or in such other form as shall be satisfactory to
the Bond Registrar. In the event of the appointment of a Tender Agent, other
than the Trustee, such Tender Agent may act as co-bond registrar with respect to
Tendered Bonds.

     (E)  Except as otherwise provided in Section 206(I) or Section 213 hereof,
upon receipt of such Bond and upon satisfaction of the conditions set forth in
Section 206(D) and Section 206(F) hereof, the Bond Registrar shall immediately
record the transfer of such Bond on the Bond Register and cause the transferee
or transferees to be the registered owner of such Bond. Upon any such
registration of transfer, the Issuer shall execute and the Trustee or its
Authenticating Agent shall authenticate and deliver in exchange for such Bond
one or more new Bonds, executed by the Issuer as provided in Section 203 hereof,
registered in the name of the designated transferee thereof, of any denomination
or denominations authorized by this Indenture and for the same aggregate
principal amount as the Bond or Bonds surrendered for transfer.

     (F)  At the option of the registered owner, Bonds may be exchanged for
other Bonds of any other authorized denomination, of a like aggregate principal
amount, upon surrender of the Bonds to be exchanged at any such office or
agency. Whenever any Bonds are so surrendered for exchange, the Issuer shall
execute, and the Trustee or the Authenticating Agent shall authenticate and
deliver, the Bonds which the Bondholder making the exchange is entitled to
receive.

     (G)  No service charge shall be made for any transfer or exchange of Bonds,
but in all cases in which Bonds shall be transferred or exchanged hereunder, the
Issuer, the Bond Registrar or the Trustee may make a charge for every transfer
or exchange of Bonds sufficient to reimburse them for any tax, fee or other
governmental charge required to be paid with respect to such transfer or
exchange, and such charge shall be paid before any such new Bond shall be
delivered.

     (H)  The Person in whose name any Bond shall be registered shall be deemed
and regarded as the absolute Owner thereof for all purposes, and payment of or
on account of the principal of, or the premium if any or interest on, any such
Bond shall be made only to or upon the order of the registered Holder thereof or
his duly authorized legal representative, subject to the terms of Section 207(C)
hereof. Such registration may be changed only as provided in this Section 206,
and no other notice to the Issuer or the Trustee shall affect the rights or
obligations with respect to the transference of any Bond or be effective to
transfer any Bond. All payments to the Person in whose name any Bond shall be
registered shall be valid and effectual to satisfy and discharge the liability
upon such Bond to the extent of the sum or sums so paid.

     (I)  Neither the Issuer, the Trustee nor the Bond Registrar shall be
required to register or otherwise make any such transfer or exchange of (1) any
Bond during the fifteen (15) days next preceding a Bond Payment Date or (2) any
Bond selected for redemption in whole or in part

                                       32



under Article III hereof or (3), other than as provided pursuant to Article III
hereof, any Bond with respect to which the Owner thereof has submitted a demand
for purchase in accordance with Section 304(A) hereof or which has been
purchased pursuant to Section 304(B) hereof; provided, however, that in the
event of a Bond selected for redemption in part, nothing in this subsection
shall prohibit exchange of the remaining portion of such Bond redeemed in part
for a new Bond with a reduced principal amount or the transfer or exchange of
any such new Bond.

     (J)  The Bond Registrar shall forthwith following each Regular Record Date
and at any other time as reasonably requested by the Trustee, the Tender Agent
or the Remarketing Agent, certify and furnish to the Trustee, the Tender Agent,
the Remarketing Agent and any Paying Agent as the Trustee shall specify, the
names, addresses, and holdings of Bondholders and any other relevant information
reflected in the Bond Register, and the Trustee, the Tender Agent, the
Remarketing Agent and any such Paying Agent shall for all purposes be fully
entitled to rely upon the information so furnished to them and shall have no
liability or responsibility in connection with the preparation thereof.

SECTION 207.  PAYMENT PROVISIONS. (A) Payment of the principal of, premium, if
any, on and interest on the Bonds shall be made in coin or currency of the
United States of America which, at the time of payment, is legal tender for the
payment of public and private debts, at the Principal Office of any Paying
Agent, including funds evidenced by wire transfer.

     (B)  Except as otherwise provided in Section 213 hereof, interest on any
Bond which is payable, and which is punctually paid or duly provided for, on any
Bond Payment Date shall be paid to the Person appearing on the bond register as
the Holder of that Bond (or one or more Predecessor Bonds) at the close of
business on the Regular Record Date, by check or draft of the Trustee mailed by
the Trustee on such Bond Payment Date to such Holder at his address as it
appears on the bond register; provided that, at the option of any Holder of
Bonds in an aggregate principal amount of $250,000 or greater, the Trustee shall
cause such amounts to be transmitted on such Bond Payment Date by wire transfer
at such Holder's written request to the bank account number of such Holder
specified in such request and entered by the Bond Registrar on the Bond
Register, provided such Holder has delivered adequate instructions regarding
same to the Bond Registrar and to the Trustee at least one Business Days prior
to the corresponding Record Date.

     (C)  Any interest any Bond which is payable, but is not punctually paid or
duly provided for, on any Bond Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the Person appearing on the bond register
as the registered Owner of such Bond on the relevant Regular Record Date solely
by virtue of such Person having been such registered owner; and the Trustee
shall make payment of any Defaulted Interest on Bonds to the Persons in whose
names such Bonds (or their respective Predecessor Bonds) are registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Trustee shall
determine the amount of Defaulted Interest to be paid on each Bond and establish
the date of the proposed payment (which date shall be such as will enable the
Trustee to comply with the next sentence hereof), and money in the aggregate
amount of the proposed Defaulted Interest shall be segregated by the Trustee to
be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this subsection provided and not to be deemed part of the Trust
Revenues. Thereupon, the Trustee shall fix a

                                       33



Special Record Date for the payment of such Defaulted Interest which shall be
not more than fifteen (15) nor less than ten (10) days prior to the date of the
proposed payment. The Trustee shall promptly notify the Issuer, the Bank and the
Company of such Special Record Date and shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record date therefor to be
mailed one time, first-class postage prepaid, to each registered owner of a Bond
at his address as it appears in the bond register not less than ten (10) days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose names
the Bonds (or their respective Predecessor Bonds) are registered on such Special
Record Date.

     (D)  Subject to the foregoing provisions of this Section, each Bond
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Bond shall carry all the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Bond, and each such Bond shall bear
interest from such date so that neither gain nor loss in interest shall result
from such transfer, exchange or substitution.

     (E)  The principal of a Bond, and the premium, if any, and interest on such
Bond due at maturity, shall be payable at the Office of the Trustee, upon
presentation and surrender of such Bond by the registered owner thereof or his
duly authorized legal representative at the maturity of such Bond or such other
date as such payments become due, by redemption or otherwise. Except as provided
in subsection (B) hereof, in the event of a partial redemption of any Bond,
payment of the Redemption Price shall be made to the registered owner or his
duly authorized legal representative only upon surrender to the Trustee of such
Bond, and upon such surrender the Trustee shall authenticate a new Bond executed
by the Issuer as provided in Section 203 for the unredeemed portion of such
Bond.

     (F)  Notwithstanding anything herein to the contrary, when any Bond is
registered in the name of a Depository or its nominee, the principal and
redemption price of and interest on such Bond shall be payable in same day funds
delivered or transmitted to the Depository or its nominee.

SECTION 208.  TEMPORARY BONDS. (A) Until definitive Bonds are ready for
delivery, there may be executed, and upon the request of the Issuer the Trustee
shall authenticate and deliver in lieu of definitive Bonds, temporary printed,
lithographed or typewritten Bonds, in any authorized denomination, in
substantially the form set forth in Schedule I, attached hereto and with such
appropriate omissions, insertions and variations as may be required.

     (B)  If the Bonds are no longer Book Entry Bonds and if temporary Bonds
shall have been issued, the Issuer shall, at the sole cost and expense of the
Company, cause definitive Bonds to be prepared and to be executed and delivered
to the Trustee, and the Trustee, upon presentation of any temporary Bond to the
Trustee at the Office of the Trustee, shall cancel the same and authenticate and
deliver in exchange therefor, without charge to the Holder thereof, a definitive
Bond or Bonds of an equal aggregate principal amount of the same maturity and
bearing interest at the same rate as the temporary Bond surrendered. Until so
exchanged, the

                                       34



temporary Bonds shall in all respects be entitled to the same benefit and
security of this Indenture as the definitive Bonds to be issued and
authenticated hereunder.

SECTION 209.  SPECIFIC DETAILS OF THE INITIAL BONDS. (A) The Initial Bonds shall
be issued in the aggregate principal amount of $3,500,000, shall be designated
"Counties of Warren and Washington Industrial Development Agency Multi-Mode
Variable Rate Industrial Development Revenue Bonds (Angiodynamics, Inc. Project
- - Letter of Credit Secured), Series 2002". The Initial Bonds shall be numbered
from one upward and prefixed "R". The Initial Bonds shall be issued as fully
registered bonds without coupons in the denomination of $100,000 or any integral
multiple of $5,000 in excess thereof. Each Initial Bond shall be of a single
maturity. The Initial Bonds shall mature on August 1, 2022.

     (B)  The Initial Bonds shall be dated the date of their authentication and
shall bear interest from the Interest Payment Date to which interest has accrued
and has been paid, or if prior to the first Interest Payment Date for the Bonds,
from the date of the original issuance of the Bonds until payment of the
principal or redemption price thereof shall have been made or provided for in
accordance with the provisions of this Indenture, whether upon maturity,
redemption or otherwise. The Initial Bonds shall be initially issued as Book
Entry Bonds. While the Initial Bonds are in Book Entry Form, the provisions of
Section 213 of this Indenture shall apply to the Initial Bonds.

     (C)  The Initial Bonds shall bear interest as follows:

     (1)  The Initial Bonds shall all bear interest in the same Interest Rate
Mode at all times. The Initial Bonds initially shall bear interest at the Weekly
Rate, which rate shall continue in effect until the Company shall cause a
Conversion to a different Interest Rate Mode as hereinafter provided.

     (2)  The first Interest Payment Date shall be the Interest Payment Date in
November, 2002. During each Interest Period for each Interest Rate Mode, the
interest rate for the Initial Bonds shall be determined in accordance with
Section 209(C)(3) hereof and shall be payable on the Interest Payment Date for
such Interest Period; provided that the interest rate borne by the Initial Bonds
shall not exceed the lesser of (a) fifteen percent (15%) per annum or (b) so
long as the Bonds are entitled to the benefits of a Credit Facility, the maximum
interest rate with respect to the Initial Bonds specified in the Credit
Facility. Interest on the Initial Bonds at the interest rate or rates for the
Weekly Rate shall be computed upon the basis of a 365 or 366-day year, as
applicable, for the actual number of days elapsed. Interest on the Initial Bonds
at the interest rate or rates for the Semi-Annual Rate and the Long-Term Rate
shall be computed upon the basis of a 360-day year, consisting of twelve 30-day
months. Each Bond shall bear interest on overdue principal and, to the extent
permitted by law, on overdue interest at the Default Rate computed from the date
of the Default or Event of Default.

     (3)  The interest rate borne by the Initial Bonds as of any particular date
shall be determined as follows:

                                       35



     (a)  If the Interest Rate Mode for the Initial Bonds is the Weekly Rate,
the interest rate on the Initial Bonds for a particular Weekly Rate Period shall
be the rate established by the Remarketing Agent no later than 3:00 p.m. (New
York time) on the Wednesday preceding the Weekly Rate Period (or the day
preceding the Conversion of the Interest Rate Mode to the Weekly Rate), or, if
such day is not a Business Day, on the next succeeding Business Day, as the
minimum rate of interest necessary, in the judgment of the Remarketing Agent, to
enable the Remarketing Agent to sell the Initial Bonds on such Business Day at a
price equal to the principal amount thereof, plus accrued interest, if any,
thereon.

     (b)  If the Interest Rate Mode for the Initial Bonds is the Semi-Annual
Rate, the interest rate on the Initial Bonds for a particular Semi-Annual Rate
Period shall be the rate established by the Remarketing Agent no later than 3:00
p.m. (New York time) on the 10th Business Day next preceding the first day of
such Semi-Annual Rate Period as the minimum rate of interest necessary, in the
judgment of the Remarketing Agent, to enable the Remarketing Agent to sell the
Initial Bonds on such first day at a price equal to the principal amount
thereof.

     (c)  If the Interest Rate Mode for the Initial Bonds is the Long-Term Rate,
the interest rate on the Initial Bonds for a particular Long-Term Rate Period
shall be the rate established by the Remarketing Agent not later than the 15th
Business Day preceding the first day of such Long-Term Rate Period as the
minimum rate of interest necessary, in the judgment of the Remarketing Agent, to
enable the Remarketing Agent to sell the Initial Bonds on such first day at a
price equal to the principal amount thereof.

     (d)  The Remarketing Agent shall provide the Company and the Trustee and
the Tender Agent with Immediate Notice of all interest rates.

     (e)  If for any reason the interest rate on a Bond is not determined by the
Remarketing Agent pursuant to (a), (b) or (c) above, the Interest Rate Mode for
such Bond shall remain the same and the interest rate for such Bond for the next
succeeding Rate Period shall be the interest rate in effect for such Bond for
the preceding Rate Period.

     (D)  If the Company causes the Conversion of the Interest Rate Mode of the
Initial Bonds to the Long-Term Rate, the Long-Term Rate Period applicable
thereto shall be determined as follows:

     (1)  The Long-Term Rate Period shall be established by the Company in the
notice given pursuant to Section 209(E) hereof (the first such Long-Term Rate
Period commencing on the Conversion Date for the Initial Bonds to a Long-Term
Rate) and thereafter each successive Long-Term Rate Period shall be the same as
that so established by the Company until a different Long-Term Rate Period is
specified by the Company in accordance with this Section (in which case, the
duration of that Long-Term Rate Period shall control succeeding Long-Term Rate
Periods) or until the occurrence of a Conversion Date. Each Long-Term Rate
Period shall be one year or more in duration and shall end on the day next
preceding an Interest Payment Date; provided that if the first Long-Term Rate
Period commences on a Conversion Date other than an April 1 or an October 1,
such first Long-Term Rate Period shall be of a duration as close as possible to
(but not in excess of) such Long-Term Rate Period and shall terminate on a day

                                       36



preceding an Interest Payment Date; and further provided that no Long-Term Rate
Period shall extend beyond the Maturity Date of the Initial Bonds.

     (2)  The Company may change from one Long-Term Rate Period to another
Long-Term Rate Period on any Business Day on which the Initial Bonds are subject
to optional redemption pursuant to Section 301(E) by notifying the Trustee, the
Issuer, the Credit Facility Issuer, the Tender Agent and the Remarketing Agent
at least 4 Business Days prior to the 30th day prior to the proposed effective
date of the change. Such notice shall specify the last day of the next Long-Term
Rate Period which shall be the earlier of the day before the maturity date of
the Initial Bonds or the day immediately preceding an October 1 or April 1 and
which is one year or more after the effective date and, if such change is
conditional, the interest rate limitations. Any such notice shall be accompanied
by (a) an opinion of Independent Counsel stating that such change is authorized
by this Indenture, (b) an opinion of Bond Counsel that such change will not, in
and of itself, adversely affect the exclusion from gross income for federal
income tax purposes of the interest on the Initial Bonds, (c) a resolution of
the members of the Issuer authorizing and approving the change in the Long-Term
Rate Period, and (d) if the stated amount of the Credit Facility, if any, to be
held by the Trustee after such change in the Long-Term Rate Period is increased
over that of the then current Credit Facility, an opinion of reputable
bankruptcy counsel stating that payments of principal and interest on the
Initial Bonds from funds drawn on such Credit Facility will not constitute
avoidable preferences with respect to the bankruptcy of the Company under the
United States Bankruptcy Code. Any change by the Company of the Long-Term Rate
Period may be made conditional on the interest rate being within certain limits
established by the Company. The Remarketing Agent shall establish what would be
the interest rate for the proposed Long-Term Rate Period in accordance with
Section 209(C). If the interest rate established by the Remarketing Agent is not
within the limits established, then the change in the Long-Term Rate Period may
be cancelled by the Company, in which case the Company's notice of the proposed
change shall be of no effect and the Initial Bonds shall not be subject to any
mandatory purchase pursuant to Section 304 hereof. Notice of such cancellation
shall be promptly given to all Bondholders.

     (3)  The Trustee shall notify the Bondholders of any change in the
Long-Term Rate Period proposed pursuant to Section 209(D)(2) hereof by first
class mail, postage prepaid, at least 30 but not more than 60 days before the
proposed effective date of such change. Each such notice shall state: (a)
whether the change in the Long-Term Rate Period is conditional and, if
conditional, the interest rate limitations established by the Company, (b) that
the interest rate for the new Long-Term Rate Period will be determined by the
Remarketing Agent not later than the 15th Business Day preceding the first day
of the new Long-Term Rate Period, (c) the effective date of and the end of the
new Long-Term Rate Period, (d) that the Bonds will be subject to mandatory
purchase on the effective date in accordance with Section 304(B). Any notice
provided under this Section 209(D)(3) shall be for informational purposes only
and shall not waive or otherwise affect the mandatory purchase of the Initial
Bonds at the end of any Long-Term Rate Period as set forth in Section 304
hereof.

     (E)  If the Company desires to cause the Conversion of the Interest Rate
Mode of the Initial Bonds from one Interest Rate Mode to another Interest Rate
Mode, the following procedures shall apply thereto:

                                       37



     (1)  The Interest Rate Mode for the Initial Bonds is subject to Conversion
to a different Interest Rate Mode from time to time in whole (and not in part)
at the option of the Company, such right to be exercised by notifying the
Trustee, the Credit Facility Issuer, the Tender Agent, the Issuer and the
Remarketing Agent at least 4 Business Days prior to the 30th day prior to the
effective date of such proposed Conversion. Such notice shall specify (a) the
effective date, (b) the proposed Interest Rate Mode, (c) if the Conversion is to
the Long-Term Rate, the end of the Long-Term Rate Period and what the interest
rate for the proposed Long-Term Rate Period would have been if such rate had
been determined immediately prior to the mailing of such notice and (d) if such
Conversion is conditional, the interest rate limitations established by the
Company. The notice must be accompanied by (i) an opinion of Independent Counsel
stating that the Conversion is lawful under the Act and permitted by this
Indenture, (ii) an opinion of Bond Counsel stating that the Conversion will not,
in and of itself, adversely affect the exclusion of interest on the Initial
Bonds from gross income for federal income tax purposes, (ii) a resolution of
the members of the Issuer authorizing and approving the Conversion, and (iv) if
the stated amount of the Credit Facility, if any, to be held by the Trustee
after such Conversion is increased over that of the then current Credit
Facility, an opinion of reputable bankruptcy counsel (which may be counsel to
the Company) stating that payments of principal and interest on the Initial
Bonds from funds drawn on such Credit Facility will not constitute avoidable
preferences with respect to the bankruptcy of the Company under the Bankruptcy
Code. Any Conversion by the Company of the Interest Rate Mode to the Long-Term
Rate may be made conditional on the initial interest rate determined for such
Interest Rate Mode being within certain limits established by the Company in the
notice referred to above. The Remarketing Agent shall establish what would be
the interest rate for the proposed Interest Rate Mode in accordance with Section
209(C) hereof. If the interest rate so established by the Remarketing Agent is
not within the limits established, then such Conversion may be canceled by the
Company, in which case the Company's notice of Conversion shall be of no effect,
the terms of the Initial Bonds shall continue as they were prior to the proposed
Conversion and the Initial Bonds shall not be subject to any mandatory purchase
pursuant to Section 304 hereof. Notice of such cancellation shall be given
promptly to all Bondholders.

     (2)  Any Conversion of the Interest Rate Mode for the Initial Bonds
pursuant to Section 209(E)(1) above must comply with the following:

     (a)  the Conversion Date must be an Interest Payment Date which is a date
on which the Initial Bonds are subject to extraordinary optional redemption
pursuant to Section 301(A) or optional redemption pursuant to Section 301(A) or
Section 301(B) hereof;

     (b)  the Conversion Date must be a Business Day; and

     (c)  the Credit Facility, if any, to be held by the Trustee must cover
accrued interest for the Initial Bonds for 98 days, if the Conversion is to the
Weekly Rate, or for 183 days, if the Conversion is to the Semi-Annual Rate or
the Long-Term Rate.

     (3)  The Trustee shall notify the Bondholders of each Conversion by first
class mail, postage prepaid, at least 30 days but not more than 60 days before
the Conversion Date. Each

                                       38



such notice shall state: (a) that the Interest Rate Mode will be converted and
what the new Interest Rate Mode will be; (b) the Conversion Date; (c) if the
Conversion is to the Long-Term Rate, whether the conversion is conditional and,
if conditional, the interest rate limitations set by the Company, and (d) that
the Initial Bonds will be subject to mandatory purchase on the Conversion Date
in accordance with Section 304(B). If the Conversion is to the Long-Term Rate,
the notice will also state the information required by Section 209(D)(3). Any
notice provided under this Section 2.09(e)(3) shall be for informational
purposes only and shall not waive or otherwise affect the mandatory purchase of
the Bonds on a Conversion Date as set forth in Section 3.01(b) hereof.

     (4)  Notwithstanding any provision of this Section 209, the Interest Rate
Mode shall not be converted if (a) the Remarketing Agent has not determined the
initial interest rate for the new Interest Rate Mode in accordance with this
Section 209 or (b) the Trustee shall receive written notice prior to such
Conversion that any opinion or resolution required under Section 209(E)(1) has
been rescinded. If the Trustee shall have sent any notice to the Bondholders
regarding a Conversion of the Interest Rate Mode under Section 209(E)(3), the
Trustee shall promptly notify all Bondholders of such rescission and the
cancellation of any mandatory purchase pursuant to Section 304(B).

     (F)  The determination of each interest rate in accordance with the terms
of this Indenture shall be conclusive and binding upon the owners of the Bonds,
the Issuer, the Company, the Trustee, each Paying Agent, the Tender Agent, the
Remarketing Agent and the Credit Facility Issuer, if any.

     (G)  Notwithstanding anything herein or in the Initial Bonds to the
contrary, in no event will the rate of interest bond by any Initial Bond (except
any Initial Bond constituting a Pledged Bond) exceed fifteen percent (15%) per
annum or, if the Initial Bonds are then supported by a Credit Facility, the
maximum rate stated in the Credit Facility.

SECTION 210.  DELIVERY OF THE INITIAL BONDS. Upon the execution and delivery of
this Indenture, the Issuer shall execute and deliver the Initial Bonds
(including a reasonable number of additional Initial Bonds to be retained by the
Trustee for authentication and delivery upon transfer or exchange of any Initial
Bond) to the Trustee, and the Trustee shall authenticate and deliver the Initial
Bonds to the purchasers thereof against payment of the purchase price therefor,
plus accrued interest to the day preceding the date of delivery, upon receipt by
the Trustee of the following:

     (A)  a certified copy of the Bond Resolution;

     (B)  the executed original Letter of Credit;

     (C)  executed counterparts of this Indenture and the other Financing
Documents;

     (D)  a request and authorization to the Trustee on behalf of the Issuer
signed by an Authorized Representative of the Issuer to deliver the Initial
Bonds to the purchasers thereof upon payment to the Trustee for the account of
the Issuer of the purchase price therefor;

                                       39



     (E)  signed copies of the opinions of counsel to the Issuer, the Company
and the Bank, and of Bond Counsel;

     (F)  the certificates and policies, if available, of the insurance required
by the Installment Sale Agreement;

     (G)  proof of compliance with SEQRA;

     (H)  evidence that a completed Internal Revenue Service Form 8038 with
respect to the Initial Bonds has been signed by the Issuer; and

     (I)  such other documents as the Trustee, the Bank or Bond Counsel may
reasonably require.

SECTION 211.  CANCELLATION OF BONDS. All Bonds surrendered to the Trustee for
payment, redemption, transfer or exchange, and Bonds surrendered to the Trustee
by the Issuer, or by the Company on behalf of the Issuer, for cancellation,
shall be promptly canceled by the Trustee. No Bond shall be authenticated in
lieu of or in exchange for any Bond canceled as provided in this Section 211,
except as expressly provided by this Indenture. All Bonds canceled by the
Trustee shall be destroyed by the Trustee and shall not be reissued. At the
request of the Company, certificates of destruction evidencing such destruction
shall be furnished by the Trustee to the Issuer and the Company.

SECTION 212.  PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. In any case where
the date of maturity of interest on or the principal of any Bond, or the date
fixed for redemption of any Bond, shall not be a Business Day, then payment of
the interest on or the principal or Redemption Price of such Bond shall be made
on the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.

SECTION 213.  BOOK ENTRY BONDS. (A) Notwithstanding any other provision of this
Indenture, the Bonds are hereby authorized to be issued in book entry form as
Book Entry Bonds, with respect to which the following procedures shall apply.
Book Entry Bonds shall be originally issued only to a Depository to be held in a
Book Entry System and: (1) the Book Entry Bonds shall be registered in the name
of the Depository or its nominee, as Bondholder, and immobilized in the custody
of the Depository; (2) unless otherwise requested by the Depository, there shall
be a single Bond certificate for each Bond maturity; and (3) the Book Entry
Bonds shall not be transferable or exchangeable, except for transfer to another
Depository or another nominee of a Depository, without further action by the
Issuer as set forth in the Section 213(B) hereof. While the Bonds are in book
entry only form, Bonds in the form of physical certificates shall only be
delivered to the Depository.

     (B)  For all purposes of this Indenture, except as provided in Section
213(D) hereof, the Depository shall be deemed to be holder of a Book Entry Bond
and neither the Issuer, the Company nor the Trustee shall have any
responsibility or obligation to the Beneficial Owner of

                                       40



such Bond or to any Direct Participant or Indirect Participant in such
Depository. Without limiting the generality of the foregoing, neither the
Issuer, the Company nor the Trustee shall have any responsibility or obligation
to any such Direct Participant or Indirect Participant or to the Beneficial
Owner of a Book Entry Bond with respect to (1) the accuracy of the records of
the Depository or any participant with respect to any Beneficial Ownership
Interest in such Book Entry Bond, (2) the delivery to any participant of the
Depository, the Beneficial Owner of such Book Entry Bond or any other person,
other than the Depository, of any notice with respect to such Book Entry Bond,
including any notice of the redemption thereof, (3) the payment to any
participant of the Depository, the Beneficial Owner of such Book Entry Bond or
any other person, other than the Depository, of any amount with respect to the
principal or Redemption Price of, or interest on, such Book Entry Bond or (4)
any consent given or any other action taken by the Depository as Holder of the
Book Entry Bonds.

     (C)  For all purposes of this Indenture, except as provided in Section
213(D) hereof, the Issuer and the Trustee shall treat the Depository of a Book
Entry Bond as the absolute owner of such Book Entry Bond for all purposes,
including (1) payment of Debt Service Payments on such Book Entry Bond, (2)
giving notices of redemption and of other matters with respect to such Book
Entry Bond, (3) registering transfers with respect to such Book Entry Bond, (4)
the enforcement of remedies and (5) for all other purposes whatsoever. The
Trustee shall pay all principal of, and premium, if any, and interest on, such
Book Entry Bond only to or upon the order of the Depository, and all such
payments shall be valid and effective to fully satisfy and discharge the Book
Entry Bonds with respect to such principal of, premium, if any, and interest to
the extent of the sum or sums so paid. No person other than the Depository shall
receive a Book Entry Bond or other instrument evidencing the Issuer's obligation
to make payments of the principal of, premium, if any, and interest thereon.

     (D)  The crediting of payments of Debt Service Payments on the Bonds and
the transmittal of notices and other communications by the Depository to the
Direct Participants in whose Depository account the Bonds are recorded, and such
crediting and transmittal by Direct Participants to Indirect Participants or
Beneficial Owners and by Indirect Participants to Beneficial Owners, are the
respective responsibilities of the Depository and the Direct Participants and
Indirect Participants and are not the responsibility of the Issuer or the
Trustee; provided, however, that the Issuer and the Trustee understand that
neither the Depository or its nominee shall provide any consent requested of
holders of Bonds pursuant to this Indenture, and that the Depository will mail
an omnibus proxy (including a list identifying the Direct Participants) to the
Issuer which assigns the Depository's, or its nominee's, voting rights to the
Direct Participants to whose accounts at the Depository the Bonds are credited
as of the record date for mailing of requests for such consents. Upon receipt of
such omnibus proxy, the Issuer shall promptly provide such omnibus proxy
(including the list identifying the Direct Participants attached thereto) to the
Trustee, who shall then treat such Direct Participants as Bondholders for
purposes of obtaining any consents pursuant to the terms of this Indenture.

     (E)  As long as any of the Bonds are registered in the name of a
Depository, or its nominee, the Trustee agrees to comply with the terms and
provisions of the Letter of Representations, including the provisions of the
Letter of Representations with respect to any

                                       41



delivery of the Bonds to the Trustee, which provisions shall supersede the
provisions of this Indenture with respect thereto.

     (F)  The Issuer, in its sole discretion, upon thirty (30) days prior
written notice to the Trustee and without the consent of the Trustee or the
beneficial owner of a Book Entry Bond or any other person, may terminate the
services of the Depository with respect to a Book Entry Bond if the Issuer
determines that (1) the Depository is unable to discharge its responsibilities
with respect to such Book Entry Bond or (2) a continuation of the requirement
that all of the Outstanding Bonds issued in book entry form be registered in the
registration books of the Issuer in the name of the Depository, is not in the
best interest of the beneficial owners of such Bonds, and the Issuer shall
terminate the services of the Depository upon receipt by the Issuer and the
Trustee of written notice from the Depository that it has received written
requests that such Depository be removed from its participants having beneficial
interests, as shown in the records of the Depository, in an aggregate amount of
not less than fifty percent in principal amount of the then Outstanding Book
Entry Bonds.

     (G)  Upon the termination of the services of a Depository with respect to a
Book Entry Bond, or upon the resignation of a Depository with respect to a Book
Entry Bond, the Issuer may attempt to have established a securities
depository/book entry system relationship with another Depository under this
Indenture. If the Issuer does not or is unable to do so, the Issuer and the
Trustee, after the Trustee has made provision for notification of the Beneficial
Owners by appropriate notice to the then Depository, shall permit withdrawal of
the Bonds from the Depository and shall authenticate and deliver Bond
certificates in fully registered form to the assignees of the Depository or its
nominee or to the Beneficial Owners. Such withdrawal, authentication and
delivery shall be at the cost and expense (including costs of printing or
otherwise preparing and delivering such replacement Bonds) of the Company. Such
replacement Bonds shall be in the denominations specified in Section 209(A) of
this Indenture, with a minimum denomination of $100,000. Upon registration of a
Bond in the name of the Beneficial Owner thereof as aforesaid, the Beneficial
Owner of such Bond shall become the Holder of such Bond.

SECTION 214.  ADDITIONAL BONDS. (A) So long as the Installment Sale Agreement is
in effect and no Event of Default exists thereunder or hereunder (and no event
exists which, upon notice or lapse of time or both, would become an Event of
Default thereunder or hereunder), and subject to the Bank's prior written
consent, which consent may be withheld in its sole and absolute discretion, the
Issuer may, upon a request from the Company complying with the provisions of
this Section 214, issue one or more series of Additional Bonds to provide funds
to pay any one or more of the following: (1) costs of completion of the Project
Facility in excess of the amount in the Project Fund; (2) costs of refunding or
advance refunding any or all of the Bonds previously issued; (3) costs of making
any modifications, additions or improvements to the Project Facility that the
Company may deem necessary or desirable; or (4) costs of the issuance and sale
of the Additional Bonds, capitalized interest, funding debt service reserves,
and other costs reasonably related to any of the foregoing. Additional Bonds may
mature at different times, bear interest at different rates and otherwise vary
from the Initial Bonds authorized under Section 209 of this Indenture, all as
may be provided in the supplemental Indenture authorizing the issuance of such
Additional Bonds.

                                       42



     (B)  Prior to the execution of a supplemental Indenture authorizing the
issuance of Additional Bonds, the Issuer must deliver the following documents to
the Trustee:

     (1)  an amendment to the Reimbursement Agreement and the Credit Facility
providing for issuance by the Credit Facility Issuer of a Qualifying Alternate
Credit Facility in the aggregate principal amount of all Bonds then Outstanding
plus the principal amount of the proposed Additional Bonds, together with
coverage of accrued interest on the Bonds for 98 days if the Bonds bear interest
at the Weekly Rate or for 183 days if the Bonds bear interest at the Semi-Annual
Rate or the Long-Term Rate, together with a written opinion of counsel to the
Credit Facility Issuer which shall state that the execution and delivery of such
Qualifying Alternate Credit Facility by the Credit Facility Issuer has been duly
authorized, executed and delivered by the Credit Facility Issuer and that the
Qualifying Alternate Credit Facility, as amended, constitutes the legal, valid
and binding obligation of the Credit Facility Issuer enforceable against the
Credit Facility Issuer in accordance with its terms, subject to the standard
exceptions with respect to bankruptcy laws, equitable remedies and specific
performance;

     (2)  evidence that the Financing Documents, as amended or supplemented in
connection with the issuance of the Additional Bonds, provide that (a) the Bonds
referred to therein shall mean and include the Additional Bonds being issued as
well as the Initial Bonds originally issued under this Indenture and any
Additional Bonds theretofore issued, and (b) the Project Facility referred to in
the Financing Documents includes any Additional Facilities being financed;

     (3)  a copy of the resolution of the board of directors of the Company,
duly certified by the secretary or assistant secretary of the Company, which
approves the issuance of the Additional Bonds and authorizes the execution and
delivery by the Company of the amendments to the Financing Documents described
in paragraphs (1) and (2) above;

     (4)  a written opinion of counsel to the Company which shall state that the
execution and delivery by the Company of the amendments to the Financing
Documents described in paragraphs (1) and (2) above have been duly authorized,
executed and delivered by the Company and that the Financing Documents, as
amended, constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to the standard exceptions with respect to bankruptcy laws, equitable
remedies and specific performance;

     (5)  a copy of the resolution of the members of the Issuer, duly certified
by the secretary or assistant secretary of the Issuer, authorizing the issuance
of the Additional Bonds and the execution and delivery by the Issuer of the
amendments to the Financing Documents described in paragraph (2) above to be
executed by the Issuer in connection therewith;

     (6)  an opinion of counsel to the Issuer stating that the supplements and
amendments to the Financing Documents described above have been duly authorized
and lawfully executed and delivered on behalf of the Issuer; that such
amendments to the Financing Documents are in full force and effect and are valid
and binding upon the Issuer; and that all conditions precedent

                                       43



provided for in this Indenture to the issuance, execution and delivery of the
Additional Bonds have been complied with;

     (7)  an opinion of Bond Counsel stating that, in the opinion of such Bond
Counsel, the Issuer is duly authorized and entitled to issue such Additional
Bonds and that, upon the execution, authentication and delivery thereof, such
Additional Bonds will be duly and validly issued and will constitute valid and
binding special obligations of the Issuer, subject to the standard exceptions
with respect to bankruptcy laws, equitable remedies and specific performance;
and that the issuance of the Additional Bonds will not, in and of itself,
adversely affect the validity of the Initial Bonds originally issued under this
Indenture or any Additional Bonds theretofore issued or the exclusion of the
interest payable on the Initial Bonds and any Additional Bonds theretofore
issued as federally tax-exempt obligations from the gross income of the Holders
thereof for federal income tax purposes;

     (8)  written evidence from each Rating Service, if any, by which the Bonds
are then rated, to the effect that the issuance of such Additional Bonds will
not, by itself, result in a reduction or withdrawal of the rating(s) on the
Initial Bonds applicable immediately prior to the issuance of the Additional
Bonds;

     (9)  a written order to the Trustee executed by an Authorized
Representative of the Issuer requesting that the Trustee authenticate and
deliver the Additional Bonds to the purchasers therein identified; and

     (10) such other documents as the Trustee may reasonably request.

     (C)  Each series of Additional Bonds shall be equally and ratably secured
under this Indenture with the Initial Bonds issued on the Closing Date and with
all other series of Additional Bonds, if any, previously issued under this
Indenture, without preference, priority or distinction of any Bond over any
other Bond.

     (D)  The consent of the Holders of the Bonds shall not be required prior to
the issuance of Additional Bonds, or to the execution and delivery of any
amendments to the Financing Documents required in connection therewith. The
Trustee shall, however, mail notice to the Holders of the Bonds and each Rating
Service, if any, by which the Bonds are then rated of the proposed issuance of
the Additional Bonds, detailing, at least, the aggregate principal amount of
such Additional Bonds, and summarizing the nature of the amendments to the
Financing Documents proposed to be executed in connection therewith.

                          [Balance of page left blank]

                                       44



                                   ARTICLE III

         REDEMPTION AND PURCHASE OF BONDS PRIOR TO MATURITY; REMARKETING

SECTION 301.  REDEMPTION OF BONDS PRIOR TO MATURITY. (A) The Bonds are subject
to redemption prior to maturity (1) as a whole, without premium, as provided in
Section 406 hereof, in the event of (a) a taking in Condemnation of, or failure
of title to, all or substantially all of the Project Facility, (b) damage to or
destruction of part or all of the Project Facility and election by the Company
or the Bank to redeem the Bonds in accordance with Section 7.1 of the
Installment Sale Agreement, or (c) a taking in Condemnation of part of the
Project Facility and election by the Company or the Bank to redeem the Bonds in
accordance with Section 7.2 of the Installment Sale Agreement, or (2) in part,
without premium, (a) as provided in Section 406(G) hereof, in the event that (i)
excess moneys remain in the Insurance and Condemnation Fund following damage or
condemnation of a portion of the Project Facility and completion of the repair,
rebuilding or restoration of the Project Facility by the Company, and (ii) such
moneys are not paid to the Company pursuant to Section 406(G) hereof, (b) as
provided in Section 404 hereof, excess moneys remain in the Project Fund after
the Completion Date, or (c) excess recoveries from contractors are applied to
redeem Bonds pursuant to Section 3.4 or Section 4.6 of the Installment Sale
Agreement. In any such event, the Bonds shall be redeemed, as a whole or in
part, as the case may be, in the manner provided in this Article III, at such
time as the Trustee determines, at a Redemption Price equal to the principal
amount thereof, plus accrued interest to the redemption date, without premium.

     (B)  (1)  Whenever the Interest Rate Mode for the Bonds is the Weekly Rate
or the Semi-Annual Rate, the Bonds shall be subject to redemption prior to
maturity, at the option of the Issuer, upon the direction of the Company, by
exercise of its right to prepay the installment purchase payments payable under
the Installment Sale Agreement as provided in Section 5.5 of the Installment
Sale Agreement, in whole on any date or in part on any Interest Payment Date, in
denominations of $100,000 or any integral multiple of $5,000 in excess thereof,
in the manner provided in this Article III, at a redemption price equal to the
principal amount thereof, plus accrued interest to the redemption date, without
premium.

     (2)  Whenever the Interest Rate Mode for the Bonds is the Long-Term Rate,
the Bonds shall be subject to redemption prior to the end of the then current
Long-Term Rate Period at the option of the Issuer, upon the direction of the
Company, at any time during the redemption periods and at the redemption prices
set forth below, plus interest accrued to the redemption date (which redemption
price and accrued interest shall be paid only from Available Moneys):

          (i)  If the duration of the Long-Term Rate Period is five years or
     less, Bonds shall not be eligible for optional redemption at any time
     during the Long-Term Rate Period.

          (ii) If the duration of the Long-Term Rate Period is greater than five
     years, Bonds may be optionally redeemed, with the redemption period
     beginning on that date which marks the expiration of one-half (1/3) of the
     Long-Term Rate Period, or, if such day is not a Business Day, the next
     succeeding Business Day. The redemption price,

                                       45



     expressed as a percentage of principal amount, shall be 102% declining by
     1% on each succeeding anniversary of the first day of the redemption period
     until reaching 100% and thereafter 100%.

If, at the time of the Issuer's notice of Conversion of the Interest Rate Mode
for the Bonds to the Long-Term Rate pursuant to Section 209(E) hereof, the
Issuer provides a certification of the Remarketing Agent to the Trustee and the
Issuer that the foregoing schedule is not consistent with prevailing market
conditions, the foregoing redemption periods and redemption prices may be
revised, effective as of the Conversion Date, as determined by the Remarketing
Agent in its judgment, taking into account the then prevailing market
conditions, as stipulated in such certification, which shall be appended by the
Trustee to its counterpart of this Indenture.

     (C)  The Bonds are also subject to redemption prior to maturity upon
receipt by the Trustee of a written notice from the Bank of the occurrence and
continuance of a default by the Company under the Reimbursement Agreement and
the Bank's election to compel redemption of the Bonds. In such event, the Bonds
shall be redeemed, as a whole, in the manner provided in this Article III, on
the earliest date for which the Trustee can give notice of redemption pursuant
to Section 303 hereof, at a Redemption Price equal to the principal amount
thereof, plus accrued interest to the redemption date, without premium.

     (D)  The Bonds are also subject to redemption prior to maturity upon the
occurrence of a Determination of Taxability. In such event, the Bonds shall be
subject to redemption, as a whole, as soon as possible after the discovery of
such Determination of Taxability, at a redemption price equal to the principal
amount thereof, plus accrued interest thereon to the redemption date, without
premium. If any Bonds are paid at maturity or purchased by the Trustee or
redeemed subsequent to a Tax Incidence Date without payment of an amount at
least equal to the redemption price that would have been received if such Bonds
had been redeemed as a result of a Determination of Taxability, the owners of
such Bonds at the time of maturity, purchase or redemption, upon establishing
their then ownership thereof, shall be entitled to receive, as an additional
premium thereon, an amount equal to the difference between the amounts actually
received and the amounts that would have been received if such Bonds had been
redeemed as a result of a Determination of Taxability.

     (E)  So long as a Credit Facility is then held by the Trustee, the Trustee
shall only call Bonds for optional redemption if it has Available Moneys in the
Redemption Premium Account of the Bond Fund or will receive Available Moneys
from the proceeds of refunding bonds or from drawings under the Credit Facility,
in the aggregate, sufficient to pay the redemption price of the Bonds to be
called for redemption, plus accrued interest thereon.

     (F)  In the event of any partial redemption, the particular Bonds or
portions thereof to be redeemed shall be selected by the Trustee not more than
sixty (60) days prior to the redemption date in inverse order of maturity, and
within each maturity by lot or by such other such method as the Trustee shall
deem fair and appropriate; provided, however, that in connection with any
redemption of Bonds the Trustee shall first select for redemption any Pledged
Bonds prior to any other method of selection. The Trustee shall apply any
partial redemption payments (other than a scheduled mandatory redemption) to the
schedule of

                                       46



mandatory redemption in inverse order of maturity. The Trustee shall treat any
Bond of a denomination greater than $5,000 as representing that number of
separate Bonds each of the denomination of $5,000 as can be obtained by dividing
the actual principal amount of such Bond by $5,000; provided that at any time,
no $5,000 portion of a Bond shall be redeemed if it results in the unredeemed
portion of the Bond being less than $100,000.

     (G)  The Bonds are not subject to mandatory redemption prior to stated
maturity pursuant to any mandatory sinking fund requirements.

SECTION 302.  COMPANY'S ELECTION TO REDEEM. (A) The Company shall give written
notice to the Trustee, the Bank and the Issuer of its election to cause
redemption of Bonds prior to maturity pursuant to subsections (A) and (B) of
Section 301 hereof and of the redemption date.

     (B)  In the event of an election by the Company to redeem the Bonds
pursuant to Section 301(B) hereof, such notice shall be given at the time the
Company delivers to the Trustee either (1) the prepayment of installment
purchase payments with which the Bonds are to be redeemed, or (2) the assurance
from the Bank that the Letter of Credit may be drawn upon to pay the redemption
price of the Bonds described in Section 5.5 of the Installment Sale Agreement,
and the redemption date specified in such notice shall be deemed to be
(notwithstanding the actual date set forth therein) the first Interest Payment
Date more than thirty (30) days after such payment or assurance, as the case may
be, is received by the Trustee.

SECTION 303.  NOTICE OF REDEMPTION; PAYMENT OF REDEEMED BONDS. (A)Notice of the
intended redemption of each Bond subject to redemption shall be given by the
Trustee one time by first class mail postage prepaid to the registered Owner of
such Bond at the address of such Owner shown on the Trustee's bond register and
to the Bank at its address set forth of in Section 1103 hereof. All such
redemption notices shall be given not more than 60 days prior nor less than 30
days prior to the date fixed for redemption. A follow-up notice shall be given
by the Trustee by registered or certified mail to each registered owner who has
not submitted a Bond subject to redemption within 90 to 120 days following the
redemption date. Each notice shall specify the Redemption Price, the principal
amount of the Bonds to be redeemed, the numbers of the Bonds to be redeemed if
less than all of the Bonds are to be redeemed, the redemption date and the place
or places where amounts due upon such redemption will be payable. Such notice
shall further state that payment of the applicable Redemption Price plus accrued
interest to the redemption date will be made upon presentation and surrender of
the Bonds or portions thereof to be redeemed; that upon presentation and
surrender to the Trustee of any Bond being redeemed in part, a new Bond in the
principal amount of the unredeemed portion of such Bond will be issued; and that
the Bonds or portions thereof so called for redemption will be deemed redeemed
and will cease to bear interest on the specified redemption date, provided that
Non-Preference Moneys for their redemption have been duly deposited in the Bond
Fund; and, except for the purpose of payment, that such Bonds will no longer be
protected by this Indenture. The failure to give any such notice, or any defect
therein, shall not affect the validity of any proceeding for the redemption of
any Bond with respect to which no such failure to give notice, or defect
therein, has occurred. Notwithstanding anything herein to the contrary, the
Trustee shall not give any notice under this Section 303 in the case of an
optional redemption

                                       47



pursuant to Section 301(B) hereof requiring the payment of a premium upon such
redemption unless the Company shall have complied with the provisions of Section
302(B) hereof.

     (B)  After notice shall have been given in the manner provided in
Subsection (A) above, the Bonds or portions thereof called for redemption shall
become due and payable on the redemption date so designated. Upon presentation
and surrender of such Bonds at the Office of the Trustee, such Bonds shall be
paid at the Redemption Price for such Bonds, plus accrued interest to the
redemption date. If there shall be selected for redemption less than all of a
Bond, the Issuer shall, upon the surrender of such Bond and with no charge to
the Owner thereof, (1)pay the Redemption Price of the principal amount thereof
called for redemption, and (2)cause the Trustee to authenticate and deliver for
the unredeemed balance of the principal amount of such Bond so surrendered a
fully registered Bond of like maturity in any of the authorized denominations.

     (C)  If, on the redemption date, moneys for the redemption of all Bonds or
portions thereof to be redeemed, in an amount equal to the principal of such
Bonds or portions thereof to be redeemed, together with any premium due thereon
and interest thereon to the redemption date, shall be held by the Trustee so as
to be available therefor on such date, the Bonds or portions thereof so called
for redemption shall cease to bear interest, and such Bonds or portions thereof
shall no longer be Outstanding under this Indenture or be secured by or be
entitled to the benefits of this Indenture. If such moneys shall not be so
available on the redemption date, such Bonds or portions thereof shall continue
to bear interest until paid at the same rate as they would have borne had they
not been called for redemption and shall remain Outstanding under this Indenture
and shall continue to be secured by and be entitled to the benefits of this
Indenture until paid.

     (D)  Notwithstanding any other provision of this Indenture, any notice of
redemption given with respect to a Book-Entry Bond shall comply with the
requirements for notice contained in the Letter of Representations from the
Issuer to the Depository relating to such Book-Entry Bond 30 days prior to the
redemption date. Failure to mail any such notice or defect in the mailing
thereof in respect of any Bond shall not affect the validity of the redemption
of any other Bond. Notices of such redemptions shall also be mailed to the
Remarketing Agent, the Tender Agent and the Credit Facility Issuer, if any, (and
the Rating Service, if the Bonds are then rated by a Rating Service). Any such
notice shall be given in the name of the Company, shall identify the Bonds to be
redeemed (and, in the case of partial redemption of any Bonds, the respective
principal amounts thereof to be redeemed), shall specify the redemption date and
the redemption price and when any interest accrued to the redemption date will
be payable, and shall state that on the redemption date the redemption price of
the Bonds called for redemption will be payable at the principal corporate trust
office of the Trustee and/or of one or more Paying Agents and from that date
interest will cease to accrue. The Trustee shall at all reasonable times make
available to any interested party complete information as to Bonds which have
been redeemed or called for redemption.

     (E)  If at the time of mailing of notice of any optional redemption in
connection with a refunding of the Bonds the Company shall not have deposited
with the Trustee moneys sufficient to redeem all the Bonds called for
redemption, such notice may state that it is conditional in that it is subject
to the deposit of the proceeds of refunding notes with the Trustee not later
than the

                                       48



redemption date, and such notice and such optional redemption shall be of no
effect unless such moneys are so deposited.

     (F)  Notice of any redemption hereunder with respect to Bonds held under a
book entry system shall be given by the Registrar or the Trustee only to the
Depository, or its nominee, as the holder of such Bonds. Selection of book entry
interests in the Bonds called for redemption is the responsibility of the
Depository and any failure of any Direct Participant, Indirect Participant or
Beneficial Owner to receive such notice and its contents or effect will not
affect the validity of such notice or any proceedings for the redemption of such
Bonds.

SECTION 304.  PURCHASE OF BONDS ON DEMAND; MANDATORY PURCHASE. (A)The Bonds are
subject to purchase on demand of the Holder thereof, as follows:

     (1)  If the Interest Rate Mode for the Bonds is the Weekly Rate, any Bond
shall be purchased on the demand of the owner thereof, on any Business Day at a
purchase price equal to the principal amount thereof, plus accrued interest, if
any, to the Purchase Date, upon written notice to the Tender Agent, at its
Principal Office on or before 4:00 p.m. (New York time) on a Business Day not
later than the 7th calendar day prior to the Purchase Date, which notice
(a)states the number and principal amount (or portion thereof in an authorized
denomination) of such Bond to be purchased, (b) states the Purchase Date on
which such Bond shall be purchased and (c) irrevocably requests such purchase
and agrees to deliver such Bond, duly endorsed in blank for transfer, with all
signatures guaranteed, to the Tender Agent at or prior to 12:00 Noon (New York
time) on such Purchase Date. The Tender Agent shall promptly, but in no event
later than 4:00 p.m. (New York time) on the next succeeding Business Day,
provide the Remarketing Agent and the Trustee with Immediate Notice of the
receipt of the notice referred to in the preceding paragraph. Upon its receipt
of such Immediate Notice from the Tender Agent, the Remarketing Agent shall
promptly provide the Company with Immediate Notice of the receipt of the notice
referred to in the preceding sentence.

     (2)  If the Interest Rate Mode for the Bonds is the Semi-Annual Rate, any
Bond shall be purchased, on the demand of the owner thereof, on any Interest
Payment Date for a Semi-Annual Rate Period at a purchase price equal to the
principal amount thereof, upon written notice to the Tender Agent, at its
Principal Office on a Business Day not later than the 8th Business Day prior to
such Purchase Date, which notice (a) states the number and principal amount (or
portion thereof in an authorized denomination) of such Bond to be purchased, (b)
states the Purchase Date on which such Bond shall be purchased and (c)
irrevocably requests such purchase and agrees to deliver such Bond, duly
endorsed in blank for transfer, with all signatures guaranteed, to the Tender
Agent at or prior to 12:00 Noon (New York time) on such Purchase Date. The
Tender Agent shall promptly, but in no event later than 4:00 p.m. (New York
time) on the next succeeding Business Day, provide the Remarketing Agent and
Trustee with Immediate Notice of the receipt of the notice referred to in the
preceding sentence.

     (3)  Bonds shall not be purchased upon the demand of the owner thereof
during any Long-Term Rate Period in whole or in part. At the end of each
Long-Term Rate Period, the Bonds shall be subject to mandatory purchase as set
forth in Section 304(B) hereof.

                                       49



     (4)  Notwithstanding any other provision of this Section 304(A), the Holder
of a Bond may demand purchase of a portion of such Bond only if the portion to
be purchased and the portion to be retained by the Holder will be in authorized
denominations.

     (B)  The Bonds are subject to mandatory purchase on each Conversion Date
and upon failure to extend a Credit Facility or provide an Alternate Credit
Facility, as follows:

     (1)  The Bonds shall be subject to mandatory purchase at a purchase price
equal to the principal amount thereof, plus, if the Interest Rate Mode is the
Long-Term Rate, the redemption premium which would be payable under Section
301(B) hereof if the Bonds were redeemed on the Purchase Date, plus accrued
interest, if any, thereon to the Purchase Date on each Conversion Date for any
Conversion.

     (2)  While the Bonds bear interest at the Weekly or Semi-Annual Rate, the
Bonds shall be subject to mandatory purchase at a purchase price equal to the
principal amount thereof plus accrued interest, if any, thereon to the Purchase
Date, upon expiration of the term of the then current Credit Facility (whether
by expiration according to its terms or upon delivery of an Alternate Credit
Facility) unless such Credit Facility is extended or replaced prior to its
expiration with an Alternate Credit Facility issued by the then current Credit
Facility Issuer. The Purchase Date will be the earlier of (i) Interest Payment
Date immediately preceding (by at least 15 calendar days) the date of expiration
of the then current Credit Facility or (ii) the Interest Payment Date on which
the Alternate Credit Facility is delivered to the Trustee.

     (3)  While the Bonds bear interest at the Long-Term Rate and the Bonds are
subject to optional redemption by the Issuer pursuant to Section 301(B) hereof,
the Bonds shall be subject to mandatory purchase at a purchase price equal to
the principal amount thereof, plus the redemption premium, if any, which would
be payable under Section 301(B) hereof if the Bonds were redeemed on the
Purchase Date, plus accrued interest, if any, thereon to the Purchase Date, upon
expiration of the term of the then current Credit Facility (whether by
expiration according to its terms or upon delivery of an Alternate Credit
Facility) unless such Credit Facility is replaced prior to its expiration with a
Qualifying Alternate Credit Facility. Any premium to be paid in connection with
such mandatory purchase, if not covered by the then current Credit Facility,
shall be paid from Available Moneys deposited by the Issuer into the Redemption
Premium Account of the Bond Fund. If there are no such Available Moneys, the
then current Credit Facility may not be replaced unless replaced with a
Qualifying Alternate Credit Facility. The Purchase Date will be the Interest
Payment Date immediately preceding (by at least 15 calendar days) the date of
expiration of the then current Credit Facility. While the Bonds bear interest at
the Long-Term Rate, but are not yet subject to optional redemption by the Issuer
pursuant to Section 301(B) hereof, upon expiration of the term of the then
current Credit Facility (whether by expiration according to its terms or upon
delivery of an Alternate Credit Facility), the Company must replace the then
current Credit Facility with a Qualifying Alternate Credit Facility. While the
Bonds bear interest at the Long-Term Rate but are not yet subject to optional
redemption pursuant to Section 301(B) hereof, the Bonds shall not be subject to
mandatory purchase under this Section 304(B)(2) hereof. The Purchase Date will
be the Interest Payment Date immediately preceding (by at least 15 calendar
days) the date of expiration or replacement of the then current Credit Facility.

                                       50



     (4)  While the Bonds bear interest at the Weekly Rate or Semi-Annual Rate,
the Bonds shall be subject to mandatory purchase at a purchase price equal to
the principal amount thereof plus accrued interest, if any, thereon to the
Purchase Date upon any replacement, removal or other substitution of the Credit
Facility Issuer. The Purchase Date will be the Interest Payment Date immediately
preceding (by at least 15 calendar days) the date on which the change in Credit
Facility is to become effective.

     (5)  Notice of any mandatory purchase pursuant to this Section 304(b) shall
be given by the Trustee thirty (30) days prior to the date of purchase in the
same manner as a notice of redemption pursuant to Section 303 hereof; provided
that failure to receive notice by mailing, or any defect in that notice, as to
any Bond shall not affect the validity of the proceedings for the purchase of
any other Bond.

     (6)  As provided in Section 408 hereof, in order to avoid the mandatory
purchase of the Bonds, the then current Credit Facility must be replaced within
the time set forth in Section 408(G) hereof.

     (C)  The purchase price of any Bond purchased pursuant to Section 304 shall
be payable upon delivery of such Bond to the Tender Agent; provided that such
Bond must be delivered to the Tender Agent on or prior to 12:00 Noon (New York
time) for payment by the close of business on the Purchase Date in immediately
available funds; provided, however, that if the Purchase Date is not a Business
Day, the purchase price shall be payable on the next succeeding Business Day.

     (D)  Any Bond delivered for payment of the purchase price shall be
accompanied by an instrument of transfer thereof in form satisfactory to the
Tender Agent executed in blank by the Holder thereof and with all signatures
guaranteed by a participant in a signature guarantee program as provided by 12
C.F.R. 240.17(A)(d)-15. The Tender Agent may refuse to accept delivery of any
Bond for which an instrument of transfer satisfactory to it has not been
provided and shall have no obligation to pay the purchase price of such Bond
until a satisfactory instrument is delivered.

     (E)  The Tender Agent shall hold all Bonds delivered for purchase pursuant
to this Section 304 hereof in trust for the benefit of the Holders thereof until
moneys representing the purchase price of such Bonds shall have been delivered
to or for the account of or to the order of such Holders, and thereafter shall
deliver such Bonds to the purchasers thereof. All amounts received by the
Trustee from a drawing under a Credit Facility for the purchase of Bonds shall
be transferred immediately to the Tender Agent. The Tender Agent shall also hold
all such amounts from a drawing under a Credit Facility that the Tender Agent
shall have received from the Trustee in a separate and segregated account
pending payment of the purchase price of Bonds as set forth in Section 306
hereof and neither the Issuer, the Company, any Guarantor, any Affiliate of the
Issuer or of any Guarantor, nor any Insider of any of them shall have any right
to take, control or receive the moneys and investments therein.

                                       51



     (F)  IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS REQUIRED TO BE TENDERED
TO DELIVER ITS BONDS ON OR PRIOR TO THE CONVERSION DATE OR THE ALTERNATE
SECURITY DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING ANY
INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE CONVERSION DATE OR THE ALTERNATE
SECURITY DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY
SUCH UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS
INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.

     (G)  No purchase of Bonds pursuant to this Section 304 shall be deemed to
be a payment or redemption of such Bonds or any portion thereof and such
purchase will not operate to extinguish or discharge the indebtedness evidenced
by such Bonds.

SECTION 305.  REMARKETING OF BONDS. (A) Upon the receipt by the Remarketing
Agent of any notice pursuant to Section 304(A) hereof, the Remarketing Agent,
subject to the terms of the Remarketing Agreement, shall offer for sale, and
shall use its best efforts to sell (other than to the Issuer, the Company or
their affiliates), the Bonds in respect of which such notice has been given.
Unless otherwise instructed by the Issuer or the Company, the Remarketing Agent
will offer for sale and use its best efforts to sell any Bonds purchased
pursuant to Section 304(B) hereof. Any such Bonds shall be offered: (1) at 100%
of the principal amount thereof, plus interest accrued, if any, to the Purchase
Date, and (2) pursuant to terms calling for payment of the purchase price on
such Purchase Date against delivery of such Bonds; provided that the Remarketing
Agent shall not sell any Bond if the amount to be received from the sale of such
Bond (including accrued interest, if any) plus the amount available to be drawn
by the Trustee under the Credit Facility with respect to the Available Moneys
available to the Trustee for such purpose is less than the purchase price
(including accrued interest, if any) to be paid for such Bond. The Remarketing
Agent shall direct any person to whom such Bonds (or authorized portions
thereof) are remarketed pursuant to this Section to deliver the purchase price
thereof in immediately available funds to the Trustee at its principal office on
or before 10:00 a.m. (New York time) on the Purchase Date. Upon receipt and
pending disbursement thereof, the Trustee shall deposit such moneys in the
Remarketing Proceeds Account. The Trustee, the Tender Agent or the Credit
Facility Issuer may purchase any Bonds offered pursuant to this Section 305 for
its own account. Each of the Issuer and the Company acknowledges that it shall
have no interest in any proceeds of the remarketing of Bonds, all of which shall
be held in trust by the Trustee or the Tender Agent for the sole benefit of the
Holders of the Bonds and, to the extent that the Holders have been paid with
draws on the Credit Facility, for the benefit of the Credit Facility Issuer. The
Remarketing Agent shall, no later than 10:30 a.m. on the Purchase Date, give
oral or telephonic notice to the Tender Agent and the Trustee of the Bonds
remarketed pursuant to this Section and the Purchase Date therefor, such notice
to be promptly confirmed by telex, telegram or telecopier to the Company and the
Credit Facility Issuer.

     (B)  The Remarketing Agent shall, subject to the terms of the Remarketing
Agreement, offer for sale, and use its best efforts to sell, on behalf of the
Issuer, Bonds held pursuant to Section 308 hereof. Any such Bonds shall be
offered at 100% of the principal amount thereof, plus interest accrued to the
sale date.

                                       52



SECTION 306.  PURCHASE OF BONDS; UNDELIVERED BONDS. (A) On each date Bonds are
to be purchased pursuant to Section 304 hereof, the Tender Agent shall purchase,
but only from the funds listed below, such Bonds from the owners thereof. Funds
for the payment of such purchase price shall be derived from the following
sources in the order of priority indicated, provided that funds derived from
Section 306(A)(1) and Section 306(A)(2) hereof shall not be combined with funds
derived from Section 306(A)(3) hereof to purchase any one Bond (or authorized
denomination thereof):

     (1)  Proceeds deposited in the Remarketing Proceeds Accounts from the
remarketing of such Bonds to persons other than the Issuer, the Company, or
Affiliates of the Company or any person constituting an Insider of the Company
(exclusive of any premium) pursuant to Section 3.05(A);

     (2)  Available Moneys furnished by the Trustee to the Tender Agent
representing proceeds of a drawing by the Trustee under the Credit Facility; and

     (3)  Available Moneys deposited by the Issuer or the Company into the
Redemption Premium Account, if necessary, to pay any premium included in the
Purchase Price;

     (4)  Moneys paid by the Company to pay the purchase price furnished by the
Trustee to the Tender Agent.

     (B)  In the event that any holder of a Bond who shall have given notice
demanding purchase pursuant to Section 304(A) hereof, or which is subject to
mandatory purchase pursuant to Section 304(B) hereof, shall fail to deliver such
Bond to the Tender Agent at the place and on the applicable date and time
specified, or shall fail to deliver such Bond properly endorsed, such Bond shall
constitute an Undelivered Bond. If funds in the amount of the purchase price of
the Undelivered Bond are available for payment to the holder thereof on the date
and at the time specified, then, from and after the date and time of that
required delivery, (1) the Undelivered Bond shall no longer be deemed to be
Outstanding under this Indenture; (2) interest shall no longer accrue thereon;
and (3) funds in the amount of the purchase price of the Undelivered Bonds shall
be held by the Tender Agent, without liability for interest thereon, for the
benefit of the Holder thereof (and in no event for the benefit of the Issuer,
the Company, their affiliates, the Remarketing Agent, the Tender Agent or any
other party). The Issuer, the Company and their affiliates shall have no
interest in the moneys held by the Tender Agent. Any funds held by the Tender
Agent as described in clause (3) of the preceding sentence shall be held
uninvested. Any moneys deposited with and held by the Tender Agent not so
applied to the payment of Bonds, if any, within two years after the Purchase
Date of such Bonds shall be paid by the Tender Agent to the Company and
thereafter the former Holders of such Bonds shall be entitled to look only to
the Company for payment, and then only to the extent of the amount so repaid,
and the Company shall not be liable for any interest thereon and shall not be
regarded as a trustee of such money.

SECTION 307.  DELIVERY OF REMARKETED OR PURCHASED BONDS. (A) Bonds and
Beneficial Ownership Interests purchased pursuant to Section 306 hereof shall be
delivered as follows:

                                       53



     (1)  Bonds sold by the Remarketing Agent to persons or entities other than
the Issuer or the Company shall be delivered to the purchasers thereof. With
respect to Beneficial Ownership Interests sold by the Remarketing Agent pursuant
to Section 305 hereof, the Remarketing Agent and the Trustee shall take such
actions as may be necessary to reflect the transfer of such Beneficial Ownership
Interests to the purchasers thereof in the Book Entry System maintained by the
Depository.

     (2)  Bonds purchased or to be purchased with moneys described in Section
306(A)(2) hereof shall be delivered to the Tender Agent to be held pursuant to
Section 308 hereof. With respect to Beneficial Ownership Interests purchased
with moneys described in Section 306(A)(2) hereof, the Remarketing Agent and the
Trustee shall take such actions as may be necessary to reflect the transfer of
such Beneficial Ownership Interests to the purchasers thereof in the Book Entry
System maintained by the Depository.

     (3)  Bonds purchased with moneys described in Section 306(A)(3) hereof
shall, at the direction of the Company, be (a) delivered to or held by the
Tender Agent for the account of the Company, (b) delivered to the Trustee for
cancellation or (c) delivered to the Company. With respect to Beneficial
Ownership Interests purchased with moneys described in Section 306(A)(3) hereof,
the Remarketing Agent and the Trustee shall take such actions as may be
necessary to reflect the transfer of such Beneficial Ownership Interests to the
purchasers thereof in the Book Entry System maintained by the Depository.

     (B)  If, on any date prior to the release of Bonds held by or for the
account of the Company pursuant to Section 307(A)(3) hereof, all Bonds are
called for redemption pursuant to Section 301 hereof or an acceleration of the
Bonds pursuant to Section 602 hereof occurs, such Bonds shall be deemed to have
been paid and shall thereupon be canceled by the Trustee.

     (C)  Bonds or Beneficial Ownership Interests (other than Bonds pledged to
the Credit Facility Issuer) delivered as provided in this Section shall be
registered (or recorded through the Depository) in the manner directed by the
recipient thereof.

SECTION 308.  BONDS PLEDGED TO THE CREDIT FACILITY ISSUER. The Bond Registrar
shall register (or the Depository shall record) in the name of the Company any
Bonds delivered to the Tender Agent pursuant to Section 307(A)(2) hereof.
Thereafter, the Tender Agent shall hold such Bonds unless and until the Tender
Agent shall have received from the Credit Facility Issuer written notice or
telephonic notice, promptly confirmed in writing, which specifies that the
Tender Agent shall deliver such Bonds to the Company or the Remarketing Agent.
Upon receipt of such notice, the Tender Agent shall deliver such Bonds to the
Company or the Remarketing Agent.

SECTION 309.  DRAWINGS ON CREDIT FACILITY. Except as provided in Section 311
hereof, on each day on which Bonds are to be purchased pursuant to Section 304
hereof, except to the extent that the Trustee shall have received telephonic
notification from the Remarketing Agent on or prior to 10:30 o'clock a.m. (New
York time) on the Purchase Date to the effect that such Bonds shall have been
remarketed pursuant to Section 305 hereof and that the moneys

                                       54



described in Section 306(A)(1) hereof will be sufficient to pay the purchase
price of such Bonds, the Trustee shall by 11:00 o'clock a.m. (New York time) on
the Purchase Date draw under the Credit Facility an amount equal to the purchase
price of such Bonds which cannot be purchased from the proceeds of remarketing
then on deposit in the Remarketing Proceeds Account and immediately upon receipt
of such proceeds furnish the proceeds of such drawing to the Tender Agent, and
shall further provide Immediate Notice of such drawing to the Issuer and the
Company. If the less than the full purchase price is received for the Bonds that
are to be remarketed, the Trustee shall, by 11:00 o'clock a.m. (New York time)
on the Purchase Date, draw under the Credit Facility an amount which, together
with the remarketing proceeds of the Bonds sold by the Remarketing Agent and
received by the Trustee, will be equal to the purchase price of such Bonds and
immediately upon the receipt of such proceeds furnish the proceeds of such
drawing to the Tender Agent.

SECTION 310.  DELIVERY OF PROCEEDS OF SALE. The proceeds of the sale by the
Remarketing Agent of any Bonds held by it for the account of the Company, or
delivered to it by any Bondholder or the Tender Agent, shall be deposited in the
Remarketing Proceeds Account.

SECTION 311.  LIMITATION ON PURCHASE AND REMARKETING. Anything in this Indenture
to the contrary notwithstanding, there shall be no purchase of Bonds pursuant to
Section 304(A) hereof if there shall have occurred and be continuing an Event of
Default under Section 601(A), Section 601(B) or Section 601(F) hereof and there
shall be no remarketing of Bonds pursuant to Section 305 hereof if there shall
have occurred and be continuing an Event of Default, except in the sole
discretion of the Remarketing Agent.

                          [Balance of page left blank]

                                       55



                                   ARTICLE IV

             FUNDS AND APPLICATION OF PROCEEDS OF BONDS AND REVENUES

SECTION 401.  ESTABLISHMENT OF FUNDS. (A) The Issuer hereby establishes and
creates the following special separate trust funds:

     (1)  Counties of Warren and Washington Industrial Development Agency -
Angiodynamics, Inc. Project - Project Fund (the "Project Fund");

     (2)  Counties of Warren and Washington Industrial Development Agency -
Angiodynamics, Inc. Project - Bond Fund (the "Bond Fund") and, within the Bond
Fund, the following special accounts: (a) the Bond Fund Credit Facility Account;
(b) the Bond Fund Defeasance Account; (c) the Bond Fund Redemption Premium
Account; and (d) the Bond Fund Remarketing Proceeds Account;

     (3)  Counties of Warren and Washington Industrial Development Agency -
Angiodynamics, Inc. Project - Insurance and Condemnation Fund (the "Insurance
and Condemnation Fund"); and

     (4)  Counties of Warren and Washington Industrial Development Agency -
Angiodynamics, Inc. Project - Rebate Fund (the "Rebate Fund") and, within the
Rebate Fund, the following special accounts: (a) the Rebate Fund Principal
Subaccount; and (b) the Rebate Fund Earnings Subaccount.

     (B)  The funds created under this Indenture shall be maintained by the
Trustee and shall be held in the custody of the Trustee. The Issuer authorizes
and directs the Trustee to withdraw moneys from said funds for the purposes
specified herein, which authorization and direction the Trustee hereby accepts.
All moneys required to be deposited with or paid to the Trustee under any
provision of this Indenture (1) shall be held by the Trustee in trust, and
(2)except for moneys held by the Trustee (a) for the redemption of Bonds, notice
of redemption of which has been duly given, or (b) for the purchase of Tendered
Bonds, or (c) in the Rebate Fund, shall, while held by the Trustee constitute
part of the Trust Revenues and be subject to the Lien of this Indenture. Moneys
which have been deposited with, paid to or received by the Trustee for the
redemption of a portion of the Bonds or for the payment of Bonds or interest
thereon due and payable otherwise than upon acceleration by declaration, shall
be held in trust for and be subject to a Lien in favor of only the Holders of
such Bonds so redeemed or so due and payable.

     (C)  Moneys held in the Rebate Fund shall not be subject to a security
interest, pledge, assignment, Lien or charge in favor of the Trustee or any
other Person.

SECTION 402.  APPLICATION OF PROCEEDS OF BONDS. (A) The Issuer shall deposit
with the Trustee all of the proceeds from the sale of the Initial Bonds,
including accrued interest payable on the Initial Bonds. The Trustee shall
deposit the proceeds from the sale of the Initial Bonds as follows: (1) the
Trustee shall deposit the portion of the proceeds of the sale of the

                                       56



Initial Bonds representing accrued interest on the Initial Bonds into the Bond
Fund, and (2) the Trustee shall deposit the remainder of such proceeds into the
Project Fund.

     (B)  The proceeds of any Additional Bonds shall be deposited as provided in
the supplement to this Indenture authorizing the issuance of such Additional
Bonds. Any such proceeds required to be deposited in the Project Fund shall be
deposited in the appropriate subaccount relating to such Additional Bonds within
the Project Fund.

SECTION 403.  TRANSFERS OF TRUST REVENUES TO FUNDS. (A) Commencing the first
date on which installment purchase payments are received from the Company
pursuant to the Installment Sale Agreement, and from month to month thereafter,
the Trustee shall deposit such payments, upon the receipt thereof, in the Bond
Fund.

     (B)  The Net Proceeds of any insurance settlement or Condemnation award
received by the Trustee shall, upon receipt thereof, be deposited in the
Insurance and Condemnation Fund.

SECTION 404.  PROJECT FUND. (A) In addition to moneys deposited in the Project
Fund from the proceeds of sale of the Bonds pursuant to Section 402 hereof,
there shall be deposited into the Project Fund all other moneys received by the
Trustee under or pursuant to this Indenture or the other Financing Documents
which, by the terms hereof or thereof, are to be deposited in the Project Fund.

     (B)  Moneys on deposit in the Project Fund shall be disbursed and applied
by the Trustee to pay the Costs of the Project pursuant to the provisions of
Section 4.3 of the Installment Sale Agreement, this Section 404, and the
applicable provisions of the Reimbursement Agreement. The Trustee is hereby
authorized and directed to disburse moneys from the Project Fund upon receipt by
the Trustee of a Request for Disbursement, in substantially the form attached
hereto as Exhibit C, certified to by an Authorized Representative of the Company
and approved in writing by the Bank in accordance with the applicable provisions
of this Indenture, the Reimbursement Agreement and the Installment Sale
Agreement.

     (C)  All earnings on amounts held in the Project Fund shall be deposited by
the Trustee into the Project Fund.

     (D)  (1) Except for any amount retained for the payment of incurred and
unpaid items of the Cost of the Project, after the Completion Date, all moneys
in the Project Fund (in excess of any amount required to be transferred to the
Rebate Fund pursuant to Section 407 hereof and the Tax Documents) shall be
transferred from the Project Fund to the Bond Fund and be applied as soon as
possible to the redemption of Bonds in accordance with Article III hereof.

     (2)  In the event the unpaid principal amount of the Bonds shall be
accelerated upon the occurrence of an Event of Default, the balance in the
Project Fund (in excess of any amount required to be transferred to the Rebate
Fund pursuant to Section 407 hereof and the Tax Documents) shall be transferred
from the Project Fund to the Bond Fund as soon as possible and shall be used to
pay the principal of, premium, if any, on and interest on the Bonds.

                                       57



     (E)  The Trustee shall maintain adequate records pertaining to the Project
Fund and all disbursements therefrom, and shall, upon request and within sixty
(60) days after the Completion Date, file an accounting thereof with the Issuer,
the Company and the Bank.

SECTION 405.  BOND FUND. (A) In addition to the moneys deposited to the Bond
Fund (1)from the proceeds of the Bonds pursuant to Section 402 hereof and (2)
pursuant to Sections 403, 404 and 410 hereof, there shall be deposited into the
Bond Fund (a) all installment purchase payments received from the Company under
the Installment Sale Agreement (except payments made with respect to the
Unassigned Rights), (b) any amount in the Insurance and Condemnation Fund
directed to be paid into the Bond Fund under Section 406 hereof, (c) any amounts
received from the Company pursuant to Section 3.4 or Section 4.6 of the
Installment Sale Agreement, (d)all prepayments by the Company in accordance with
Section 5.5 of the Installment Sale Agreement in connection with which notice
has been given to the Trustee pursuant to Section 302 hereof, (e) any amounts
received by the Trustee under the Credit Facility, and (f) all other moneys
received by the Trustee under and pursuant to this Indenture or the other
Financing Documents which by the terms hereof or thereof are to be deposited
into the Bond Fund, or are accompanied by directions from the Company or the
Issuer that such moneys are to be paid into the Bond Fund.

     (B)  The Trustee shall deposit into the following specified accounts of the
Bond Fund the following amounts:

     (1)  into the Credit Facility Account, all moneys drawn by the Trustee
under the Credit Facility, which account shall hold no other moneys;

     (2)  into the Remarketing Proceeds Account, all amounts representing the
proceeds from a remarketing of the Bonds, which account shall hold no other
moneys;

     (3)  into the Redemption Premium Account, all amounts deposited to pay
premiums on the Bonds, which account shall hold no other moneys; and

     (4)  into the Defeasance Account, all amounts deposited to pay and
discharge the Bonds pursuant to Section 1001 hereof, which account shall hold no
other moneys.

Neither the Issuer, the Company, any Guarantor, any affiliate of the Company or
any Guarantor or any Insider of any of them shall have any interest in, nor any
right whatsoever to take or control (other than the right of the Company to
direct investments pursuant to Section 410 hereof), the Credit Facility Account,
the Credit Facility, the Redemption Premium Account, the Remarketing Proceeds
Account, the Defeasance Account or any subaccounts of any of the foregoing
accounts, or the moneys and Authorized Investments therein, including any
proceeds thereof, all of which shall be held in trust by the Trustee for the
sole benefit of the Bondholders until all Debt Service Payments on the Bonds are
paid and thereafter for the benefit of the Credit Facility Issuer; provided,
however, that any amounts which were deposited in the Redemption Premium Account
of the Bond Fund for the purpose of causing such amounts to constitute Available
Moneys and which remain after all of the Outstanding Bonds shall be deemed paid
and discharged under this Indenture, shall be retained by the Trustee and shall
not be paid to or for

                                       58



the benefit of the Company, any Guarantor, any Affiliate of the Company or any
Guarantor or any Insider of any of them, which shall have no right to take or
control such amounts. If the Bonds are then rated by a Rating Service or Rating
Services, no moneys in the Redemption Premium Account or the Defeasance Account
may be used to pay Debt Service Payments on the Bonds until the Company delivers
to such Rating Service or Rating Services an opinion of nationally recognized
counsel experienced in bankruptcy matters to the effect that payments on the
Bonds from such moneys will not constitute voidable preferences under the U.S.
Bankruptcy Code in the event a petition in bankruptcy is subsequently filed by
or against the Company or the Issuer. The Trustee shall establish separate
subaccounts within the Redemption Premium Account and the Defeasance Account for
each deposit (including any investment income thereon) made into the Bond Fund
so that the Trustee may at all times ascertain the date and source of deposit of
the funds in such accounts and the Trustee shall assure moneys having different
dates of deposit and held in separate subaccounts shall not be commingled.

     (C)  Moneys on deposit in the Bond Fund shall be disbursed and applied by
the Trustee to pay the Debt Service Payments on the Bonds as said Debt Service
Payments become due and payable on the Bonds in accordance with the provisions
of the Bonds and this Indenture. Except as otherwise provided in Section
609(A)(1) hereof, moneys in the Bond Fund shall be used solely for the payment
of the principal or redemption price of the Bonds and interest on the Bonds from
the following source or sources, but only in the following order of priority:

     (1)  Available Moneys held in the Credit Facility Account, provided that in
no event shall moneys held in the Credit Facility Account be used to pay any
amount which may be due on Bonds held pursuant to Section 308 hereof;

     (2)  Available Moneys held on deposit in the Redemption Premium Account;

     (3)  any other Available Moneys in the Bond Fund; and

     (4)  any other amounts available in the Bond Fund.

     (D)  To the extent moneys described under Section 405(C)(1) hereof are not
available in the Bond Fund to pay principal or redemption price of the Bonds and
interest on the Bonds on any maturity date, Interest Payment Date, redemption
date or Purchase Date (other than Bonds held pursuant to Section 308 hereof,
except for interest payments on Bonds that were not held pursuant to Section 308
hereof on the Record Date for such payment), the Trustee shall, on or before
11:00 o'clock a.m.(New York time) on the Business Day prior to such due date, or
11:00 o'clock a.m. (New York time) on such Purchase Date, draw upon or demand
payment under the Credit Facility, if any, then held by the Trustee in a manner
so as to provide immediately available funds by the close of business on such
date in an amount necessary to make the required payments of the principal of
and premium, if applicable and if payable from a draw on the Credit Facility,
and interest on the Bonds on such maturity date, Interest Payment Date,
redemption date or to purchase the Bonds tendered or deemed tendered on such
Purchase Date. Upon receipt of such moneys from the Credit Facility Issuer, the
Trustee shall (1)(a)deposit the amount representing a drawing on the Credit
Facility for the payment of principal of and interest on the Bonds in the Credit
Facility Account of the Bond Fund, and apply the same to the

                                       59



payment of such principal and interest due on the Bonds or (b) use the proceeds
of the draw to the pay the purchase price of the Bonds in accordance with
Section 309 hereof, and (2) pay, on behalf of the Company, but only from and to
the extent of any amounts described in Section 405(C)(3) hereof and Section
405(C)(4) hereof then on deposit in the Bond Fund, any and all amounts then due
and payable under the Reimbursement Agreement. Any payment made by the Trustee
on behalf of the Company described in clause (2) of the immediately preceding
sentence shall be made by wire transfer of immediately available funds to the
account of the Credit Facility Issuer on the date the Trustee receives moneys
pursuant to a drawing upon the Credit Facility.

     (E)  (1)  Moneys on deposit in the Bond Fund shall be invested in
Authorized Investments in accordance with Section 410 hereof. All interest and
other income accrued and earned on moneys on deposit in the Bond Fund shall be
deposited by the Trustee into the Bond Fund.

     (2)  Moneys on deposit in the Bond Fund shall be applied by the Trustee to
pay the principal of, premium, if any, and interest on the Bonds as the same
become due, whether at Stated Maturity, upon acceleration of the Bonds or upon
redemption of the Bonds, except as provided in Section 411 and Section 408(E)
hereof.

     (F)  Notwithstanding anything herein to the contrary, in NO EVENT shall
moneys deposited in the Bond Fund be retained therein for a period in excess of
one (1) year.

     (G)  The Issuer acknowledges that it has no interest in the Credit Facility
Account, and any moneys and Authorized Investments therein, all of which shall
be held in trust by the Trustee for the sole benefit of the holders of the
Bonds, and that the Issuer has no interest in the Bond Fund and any moneys and
Authorized Investments therein, all of which shall be held in trust by the
Trustee for the benefit of the holders of the Bonds and, to the extent that the
holders of the Bonds are paid through draws under a Credit Facility, the Credit
Facility Issuer.

SECTION 406.  INSURANCE AND CONDEMNATION FUND. (A) The Net Proceeds of any
insurance settlement or Condemnation award received by the Trustee in connection
with damage to or destruction of or the taking of part or all of the Project
Facility shall be deposited into the Insurance and Condemnation Fund.

     (B)  If, pursuant to Sections 7.1 or 7.2 of the Installment Sale Agreement,
following damage to or Condemnation of all or a portion of the Project Facility,
(1) the Company exercises its option not to repair, rebuild or restore the
Project Facility and to require the redemption of the Bonds, or (2) if a taking
in Condemnation as described in Section 7.2(C) of the Installment Sale Agreement
occurs, or (3) the Bank exercises its options to apply the Net Proceeds of any
insurance or Condemnation award to the redemption of the Bonds, the Trustee
shall, after any transfer to the Rebate Fund required by the Tax Documents and
Section 407 hereof is made, transfer all moneys held in the Insurance and
Condemnation Fund to the Bond Fund to be applied to the redemption of the Bonds
then Outstanding pursuant to Section 301(A) hereof, except as provided in
Section 411 and Section 408(E) hereof.

                                       60



     (C)  If, following damage to or condemnation of all or a portion of the
Project Facility, the Company elects to repair, rebuild or restore the Project
Facility, and provided no Event of Default thereunder or under any other
Financing Document has occurred and is continuing, moneys held in the Insurance
and Condemnation Fund and attributable to the damage to or the destruction of or
the taking of the Project Facility shall, after any transfer to the Rebate Fund
required by the Tax Documents and Section 407 hereof is made, be applied to pay
the costs of such repairs, rebuilding or restoration in accordance with the
terms and conditions set forth in Section 406(D) hereof.

     (D)  The Trustee is hereby authorized to and shall make such disbursements,
at the Company's request, either upon the completion of such repairs, rebuilding
or restoration or periodically as such repairs, rebuilding or restoration
progress, upon receipt by the Trustee of a certificate of an Authorized
Representative of the Company, approved in writing by the Bank, stating, with
respect to each payment to be made: (1) the amount or amounts to be paid, the
Person or Persons (which may include the Company for reimbursement of such
costs) to whom an amount is to be paid and the total sum of all such amounts;
(2) that the Company has expended, or is expending, concurrently with the
delivery of such certificate, such amount or amounts on account of costs
incurred in connection with the repair, rebuilding or restoration of the Project
Facility; (3) that all contractors, workmen and suppliers have been or will be
paid through the date of such certificate from the funds to be disbursed; (4)
that there exists no Event of Default hereunder or under any other Financing
Document and no condition, event or act which, with notice or the lapse of time
or both, would constitute an Event of Default hereunder or under any other
Financing Document; (5) that such Authorized Representative of the Company has
no knowledge, after diligent inquiry and after searching the records of the
appropriate state and local filing offices, of any vendor's Lien, mechanic's
Lien or security interest which should be satisfied, discharged or bonded before
the payment as requisitioned is made or which will not be discharged by such
payment; (6) that no certificate with respect to such expenditures has
previously been delivered to the Trustee; and (7) that there remain sufficient
moneys in the Insurance and Condemnation Fund attributable to the damage to,
destruction of, or taking of the Project Facility to complete the repair,
rebuilding or restoration of the Project Facility. Each such requisition shall
be accompanied by bills, invoices or other evidences reasonably satisfactory to
the Trustee and the Bank. The Trustee shall be entitled to rely on such
requisition.

     (E)  Upon completion of the repair, rebuilding or restoration of the
Project Facility, an Authorized Representative of the Company shall deliver to
the Issuer, the Trustee and the Bank a certificate stating (1) the date of such
completion, (2) that all labor, services, materials and supplies used therefor
and all costs and expenses in connection therewith have been paid, (3) that the
Project Facility has been restored to substantially its condition immediately
prior to the damage or Condemnation thereof, or to a condition of at least
equivalent value, operating efficiency and function, (4) that the Issuer or the
Company has good and valid title to all Property constituting part of the
restored Project Facility, and that the Project Facility is subject to the
Installment Sale Agreement and the Liens and security interests of this
Indenture and (5)that the restored Project Facility is ready for occupancy, use
and operation for its intended purposes. Notwithstanding the foregoing, such
certificate may state (a) that it is given without prejudice to any rights of
the Company against third parties which exist at the date of such

                                       61



certificate or which may subsequently come into being, (b) that it is given only
for the purposes of this Section 406, and (c) that no Person other than the
Issuer, the Bank or the Trustee may benefit therefrom. Such certificate shall be
accompanied by a certificate of occupancy, if required, and any and all
permissions, licenses or consents required of Governmental Authorities for the
occupancy, operation and use of the Project Facility for its intended purposes.

     (F)  All earnings on amounts held in the Insurance and Condemnation
Proceeds Fund shall be transferred by the Trustee to the Insurance and
Condemnation Fund.

     (G)  If the cost of the repairs, rebuilding or restoration of the Project
Facility effected by the Company shall be less than the amount in the Insurance
and Condemnation Fund, then on the completion of such repairs, rebuilding or
restoration, the Trustee shall transfer such difference to the Bond Fund and be
used to redeem the Bonds in accordance with Article III hereof; provided that
such amounts may be transferred to the Company for its purposes if (1) the
Company so requests, (2) the Company obtains the prior written consent of the
Bank thereto, and (3) the Company furnishes to the Trustee and the Bank an
opinion of Bond Counsel to the effect that payment of such moneys to the Company
will not, in and of itself, adversely affect the inclusion of the interest paid
or payable on the Bonds from gross income for federal income tax purposes.

     (H)  If the cost of the repair, rebuilding or restoration of the Project
Facility shall be in excess of the moneys held in the Insurance and Condemnation
Fund, the Company shall deposit such additional moneys in the Insurance and
Condemnation Fund as are necessary to pay the cost of completing such repair,
rebuilding or restoration.

SECTION 407.  REBATE FUND. (A) The Trustee shall make information regarding the
Bonds and investments hereunder available to the Company. The Trustee shall have
no obligation to calculate the amount of or make any required payment as
provided in this Section 407. If a deposit to the Rebate Fund is required as a
result of the computations made or caused to be made by the Company, the Trustee
shall upon receipt of written direction from the Company accept such payment for
the benefit of the Company. If amounts in excess of that required to be rebated
to the United States of America accumulate in the Rebate Fund, the Trustee shall
upon written direction from the Designated Representative transfer such amount
to the Company. Records of the determinations required by this Section and the
instructions must be retained by the Trustee until six years after the Bonds are
no longer outstanding. The amount to be deposited in the Rebate Fund shall be
withdrawn from the fund or funds designated by the Company, or, in the event the
amounts held in such fund or funds are less than the Rebate Amount, the amount
to be deposited shall be withdrawn from the fund or funds designated by the
Company or from other moneys made available by the Company. Any provision hereof
to the contrary notwithstanding, amounts credited to the Rebate Fund shall be
free and clear of any lien hereunder.

     (B)  Not later than 30 days after August 1, 2007 (or such other date as the
Company may choose, provided the Company receive an opinion of Bond Counsel that
such change will not cause interest on the Bonds to be included in gross income
for federal income tax purposes) and every five years thereafter until final
retirement of the Bonds, upon written direction from the Company, the Trustee
shall pay to the United States of America ninety percent (90%) of the

                                       62



amount required to be on deposit in the Rebate Fund as of such payment date. Not
later than 30 days after the final retirement of the Bonds, upon written
direction from the Company the Trustee shall pay to the United States of America
one hundred percent (100%) of the balance of the amount required to be on
deposit in the Rebate Fund as of such payment date.

     (C)  The Trustee shall make deposits and disbursements from the Rebate Fund
in accordance with the written instructions received from the Authorized
Representative of the Company, shall invest the amounts held in the Rebate Fund
pursuant to written instructions from the Authorized Representative of the
Company and shall deposit income from such investments immediately upon receipt
thereof in the Rebate Fund. Amounts on deposit in the Rebate Fund Principal
Subaccount shall be invested in accordance with the provisions of Section 410
hereof and the Tax Documents. All income from such investments shall be
deposited in the Rebate Fund Earnings Subaccount and paid to the United States
on the date of any payment made pursuant to Section 407(D) hereof.

     (D)  In the event that on the first day of any Bond Year, after the
calculation of the Rebate Amount, the amount on deposit in the Rebate Fund
Principal Subaccount exceeds the Rebate Amount, the Trustee, upon the receipt of
written instructions from an Authorized Representative of the Issuer or the
Company, shall transfer such excess to the Bond Fund to be applied to the
payment of the principal and interest coming due on the Bonds on the next
following Bond Payment Date.

     (E)  The Trustee, upon the receipt of written instructions from an
Authorized Representative of the Company, shall pay to the United States, from
amounts on deposit in the Rebate Fund or from other moneys supplied by the
Company, (1) not less frequently than once every five (5) years after the date
of original issuance of the Bonds, an amount such that, together with prior
amounts paid to the United States, the total amount paid to the United States is
equal to ninety percent (90%) of the Rebate Amount with respect to the Bonds as
of the date of such payment plus all amounts then held in the Rebate Fund
Earnings Subaccount, and (2) not later than thirty (30) days after the date on
which all Bonds of any particular series have been paid in full, one hundred
percent (100 %) of the Rebate Amount with respect to such Bonds as of the date
of such payment plus all amounts then held in the Rebate Fund Earnings
Subaccount.

     (F)  This Section 407 may be amended, without notice to or consent of the
Bondholders, at the request of the Issuer or the Company, to comply with the
applicable regulations of the Treasury Department, upon the delivery by the
Issuer or the Company to the Trustee of an opinion of Bond Counsel that such
amendment will not adversely affect the exclusion from gross income for federal
income tax purposes of the interest payable on the Bonds which exists on the
Closing Date.

SECTION 408.  THE LETTER OF CREDIT; ALTERNATE CREDIT FACILITIES. (A) (1)The
Initial Bonds are initially secured by the Letter of Credit. The Trustee shall,
without any further authorization or direction, timely present in person, by
facsimile transmission or by tested telex at or before 11:00 o'clock a.m. on the
Business Day immediately preceding a Bond Payment Date to the Bank a sight
draft, together with all accompanying documentation as is required by the Letter
of Credit by the terms thereof, in order to draw funds on the Letter of Credit
in an

                                       63



amount which will be sufficient to pay in full when due (whether by reason of
maturity, redemption or otherwise) the Debt Service Payments due on the Bonds on
such Bond Payment Date.

     (2)  In addition, immediately upon a declaration under Section 602 hereof
that the principal of and accrued interest on all the Bonds then Outstanding has
become due and payable by virtue of acceleration, the Trustee shall, without any
further authorization or direction, present to the Bank a sight draft, together
with all accompanying documentation as is required under the Letter of Credit by
the terms thereof, in order to draw funds under the Letter of Credit in an
amount which shall be necessary to pay the principal of, premium, if any, and
accrued interest on the Bonds then Outstanding due by virtue of such
acceleration.

     (3)  In addition, at or before 11:00 o'clock a.m. on the Purchase Date, the
Trustee shall, without any further authorization or direction, present to the
Bank a sight draft, together with all accompanying documentation as is required
under the Letter of Credit by the terms thereof, in order to draw funds under
the Letter of Credit to the extent moneys described in the following sentence
are not available to pay when due the Purchase Price of Bonds tendered pursuant
to Sections 304 and 307 hereof. In calculating the amount to be drawn on the
Letter of Credit for the purchase of the Bonds, the Trustee shall take into
account only the remarketing proceeds, if any, deposited into the Remarketing
Proceeds Account with respect to the remarketing of such Bonds on or before
10:00 o'clock a.m. (New York time) on the Purchase Date, including proceeds from
the purchase of the Bonds by the Remarketing Agent or the Tender Agent for its
own account, but not including the remarketing of the Bonds to the Issuer or the
Company.

     (4)  In no event will the Trustee be entitled to make drawings under the
Letter of Credit for the payment of any amount due on any Pledged Bond, except
for interest payments on Bonds that were not Pledged Bonds on the Record Date
for such payment.

     (B)  (1)  The Trustee shall exercise any and all rights under the Letter of
Credit, regardless of whether the Bank is in default under the Letter of Credit,
in the manner provided therein and in this Indenture, and the Trustee shall
bring such actions and proceedings under the Letter of Credit as shall be
required for the enforcement thereof in accordance with its terms and the terms
of this Indenture.

          (2)  All funds received by the Trustee under the Letter of Credit
shall be deposited by the Trustee in the Credit Facility Account in the Bond
Fund and used solely to pay the principal of, and the premium, if any, and
interest on, the Bonds; provided, however, that moneys drawn by the Trustee
under the Letter of Credit will not be used to pay the principal of, or the
premium, if any, or interest on, any Pledged Bonds.

     (C)  Except as provided below, any obligations of the Issuer under this
Indenture and the Bonds or of the Company under the Installment Sale Agreement
which are satisfied from the exercise of the Trustee's rights under the Letter
of Credit or under this Section 408 shall be deemed to be satisfied, and no
claim therefor shall be made by the Bondholders against the Issuer, the Trustee
or the Company or by the Issuer, the Trustee or the Bondholders against the

                                       64



Company in respect of such obligations; provided, however, that to the extent
the Bank has not been reimbursed for amounts paid under the Letter of Credit or
under any other Financing Document, such obligations shall not be deemed
satisfied, and the Bank shall be subrogated to the rights of the Issuer under
the Installment Sale Agreement (except the Unassigned Rights) and the rights of
the Trustee hereunder and under the other Financing Documents (except the rights
of the Trustee to receive payments for fees, expenses, indemnification's or
other amounts which are payable to the Trustee individually under the Financing
Documents and are not to be subsequently delivered to the Bondholders), and,
further, such subrogation shall not release the Company from its obligations
under the Reimbursement Agreement or under the other Financing Documents.

     (D)  (1)  After a drawing on the Letter of Credit described in Section
408(A)(1) hereof, any and all moneys held by the Trustee in the Bond Fund shall
be paid on the same day as the draw on the Letter of Credit to the Bank to be
applied against the Company's obligations under the Reimbursement Agreement.

          (2)  After a drawing on the Letter of Credit described in Section
408(A)(2) hereof, any and all moneys held by the Trustee in any fund or account
established by this Indenture (excepting moneys on deposit in the Rebate Fund)
shall be paid on the same day as the draw on the Letter of Credit to the Bank to
be applied against the Company's obligations under the Reimbursement Agreement.

     (E)  If at any time there shall cease to be any Bonds Outstanding
hereunder, the Trustee shall promptly surrender the current Credit Facility to
the Credit Facility Issuer for cancellation. The Trustee shall comply with the
procedures set forth in the Credit Facility relating to the termination thereof.

     (F)  The Company may, at its option, provide for the delivery to the
Trustee of an Alternate Credit Facility which, if the Interest Rate Mode is the
Long-Term Rate, shall be a Qualified Alternate Credit Facility. Such Alternate
Credit Facility shall have a term of not less than 1 year and set forth a
maximum interest rate on the Bonds with respect to which drawings may be made.
The Company shall give the Trustee an irrevocable written notice of its
intention to replace the then current Credit Facility with an Alternate Credit
Facility prior to the stated expiration date of the then current Credit Facility
at least 35 days before the Interest Payment Date preceding (by at least 15
calendar days) the date of delivery of such Alternate Credit Facility stated in
such notice. On or before the date of delivery of an Alternate Credit Facility
to the Trustee, the Company shall provide the Trustee with (1) an opinion of
Counsel stating that the delivery of such Alternate Credit Facility to the
Trustee is authorized under this Indenture and complies with the terms hereof,
(2) an opinion of counsel to the issuer or provider of such Alternate Credit
Facility stating that such Credit Facility is a legal, valid, binding and
enforceable obligation of such issuer or obligor in accordance with its terms,
and (3) if the stated amount of the Alternate Credit Facility is increased over
that of the Credit Facility being replaced, an opinion of Independent Counsel
stating that payments of principal and interest on the Bonds from funds drawn on
such Credit Facility will not constitute avoidable preferences with respect to
the subsequent bankruptcy of the Issuer or the Company under the Bankruptcy
Code. The Trustee shall then accept such Alternate Credit Facility and surrender
the previously

                                       65



held Credit Facility, if any, to the previous Credit Facility Issuer for
cancellation promptly on or after the 5th Business Day after the Alternate
Credit Facility becomes effective, but not earlier than the 5th Business Day
following the last Interest Payment Date covered by the Credit Facility to be
canceled. Each Alternate Credit Facility shall have a term of not less than 1
year.

     (G)  Unless all of the conditions of Section 408(F) hereof shall have been
satisfied, and the expiring Credit Facility (whether by expiration according to
its terms or upon delivery of an Alternate Credit Facility) shall have been
replaced with an Alternate Credit Facility, which if the Interest Rate Mode is
the Long-Term Rate, shall be a Qualifying Alternate Credit Facility, and if the
Interest Rate Mode is the Weekly Rate or the Semi-Annual Rate, shall be issued
by the then current Credit Facility Issuer, at least 35 days before the Interest
Payment Date immediately preceding (by at least 15 calendar days) the expiration
date of the Credit Facility being replaced, the Trustee shall call the Bonds for
purchase pursuant to Section 304(B) and Section 408(H) hereof. In any event, the
Trustee shall not give notice of purchase of the Bonds on account of a failure
to provide a Qualifying Alternate Credit Facility until the time specified in
the preceding sentence for delivery of such Qualifying Alternate Credit
Facility.

(H)  (1)  The Trustee shall notify the Bondholders of the expiration of the term
of the Credit Facility (whether by expiration according to its terms or upon
delivery of an Alternate Credit Facility) which will subject the Bonds to
mandatory purchase in accordance with Section 3.04(B) hereof by first class mail
delivered to each Bondholder's registered address at least 30 days but not more
than 60 days before any Purchase Date resulting from such expiration. The notice
will state (a) that the Credit Facility is expiring according to its terms, or
will expire upon delivery of an Alternate Credit Facility, and (b) the Purchase
Date for the Bonds.

          (2)  The Trustee shall notify Bondholders of the replacement of a
Credit Facility with any Alternate Credit Facility by first class mail delivered
to each Bondholder's registered address at least 30 days but not more than 60
days prior to the effective date of such replacement.

SECTION 409.  NON-PRESENTMENT OF BONDS. (A) Subject to the provisions of
Sections 205, 206 and 207 hereof, in the event any Bond shall not be presented
for payment when the principal thereof becomes due, either at maturity or at the
date fixed for redemption thereof or otherwise, if Non-Preference Moneys
sufficient to pay such Bond shall have been deposited with the Trustee for the
benefit of the Holder thereof, such Bond shall be deemed canceled, redeemed or
retired on such date even if not presented on such date and all liability of the
Issuer to the Holder thereof for the payment of such Bond shall forthwith cease,
determine and be completely discharged; and thereupon it shall be the duty of
the Trustee to hold such funds, without liability for interest thereon, for the
benefit of the Holder of such Bond who shall thereafter be restricted
exclusively to such funds for any claim of whatever nature on his part under
this Indenture or with respect to such Bond.

     (B)  If any Bond shall not be presented for payment prior to the earlier of
(1) two (2) years following the date when such Bond becomes due, either at
maturity or at the date fixed for redemption or otherwise, or (2) the date on
which such moneys would escheat to the State, such amounts shall be paid by the
Trustee first to the Bank to the extent any amounts remain unpaid

                                       66



by the Company under the Reimbursement Agreement or under any other Financing
Document, with any balance to be paid to the Company. Thereafter, Bondholders
shall be entitled to look only to the Company and/or the Bank, as the case may
be, for payment, and then only to the extent of the amount so repaid to the
respective parties, who shall not be liable for any interest thereon and shall
not be regarded as trustees of such money. The Trustee shall, at least sixty
(60) days prior to the expiration of the above described period, give notice to
any Owner who has not presented any Bond for payment that any moneys held for
the payment of any such Bond will be returned as provided in this Section 409 at
the expiration of such period. The failure of the Trustee to give any such
notice shall not affect the validity of any transfer of funds pursuant to this
Section 409.

SECTION 410.  INVESTMENT OF FUNDS. (A)Any moneys held as part of any fund
created herein shall be continuously invested and reinvested, from time to time,
by the Trustee in Authorized Investments at the written or oral direction of an
Authorized Representative of the Company, but, if oral, to be promptly confirmed
in writing by an Authorized Representative of the Company. The Company shall
direct that any moneys held in any fund shall be invested so that (1) all
investments shall mature or be subject to mandatory redemption by the holder of
such investments (at not less than the principal amount thereof, or the cost of
acquisition, whichever is lower), and all deposits in time accounts shall be
subject to withdrawal, without penalty, not later than the date when the amounts
will foreseeably be needed for purposes of this Indenture, (2)investments of
moneys on deposit in the Bond Fund shall mature or be subject to mandatory
redemption by the holder (at not less than the principal amount thereof) not
more than ninety (90) days from the date of acquisition, and further shall
mature or be redeemable at the option of the Trustee at the times and in the
amounts necessary to provide moneys to pay Debt Service Payments as they become
due on the Bonds, whether at Stated Maturity or by redemption, (3)no portion of
the proceeds derived from the sale of the Bonds or any other moneys held in any
fund established under this Article shall be invested, directly or indirectly,
in such manner as to cause any Bond to be an "arbitrage bond" within the meaning
of that quoted term in Section 148 of the Code, (4) in no event shall any moneys
transferred from the Project Fund to the Bond Fund pursuant to Section 404(D)
hereof be invested at a "yield" (as defined in Section 148 of the Code) greater
than the "yield" on the Bonds, (5) investments of moneys on deposit in the
Rebate Fund shall mature or be redeemable at such time as may be necessary to
make payments from the Rebate Fund required pursuant to Section 148 of the Code
or Section 513 hereof, and (6)moneys received pursuant to a draw on the Letter
of Credit and moneys in the Credit Facility Account, Defeasance Account,
Remarketing Proceeds Account or Redemption Premium Account of the Bond Fund
shall only be invested as described in Section 410(E) hereof. The investments so
purchased shall be held by the Trustee and shall be deemed at all times to be a
part of the fund in which such moneys were held.

     (B)  At no time shall any funds constituting gross proceeds of the Bonds be
used in any manner to cause or result in a prohibited payment under applicable
regulations pertaining to, or in any other fashion as would constitute failure
of compliance with, Section 148 of the Code, or otherwise violate Section 513
hereof. The Trustee is directed to sell and reduce to cash a sufficient amount
of such investments whenever the cash balance in said fund shall be insufficient
to cover a proper disbursement from said fund.

                                       67



     (C)  Net income or gain received and collected from such investments shall
be credited and losses charged to (1) the Rebate Fund Earnings Subaccount, with
respect to the investment of amounts held in the Rebate Fund, and (2) the
Project Fund, the Bond Fund, or the Insurance and Condemnation Fund, as the case
may be, with respect to the investment of amounts held in such funds.

     (D)  Subject to any directions from an Authorized Representative of the
Company with respect thereto, from time to time, the Trustee may sell any
investments authorized hereunder and reinvest the proceeds therefrom in
Authorized Investments maturing or redeemable as aforesaid. Any such investments
may be purchased from or sold to the Trustee, the Bond Registrar, an
Authenticating Agent or a Paying Agent, or any bank, trust company or savings
and loan association affiliated with any of the foregoing. The Trustee shall
sell or redeem investments credited to the Bond Fund to produce sufficient
moneys applicable hereunder to and at the times required for the purposes of
paying Debt Service Payments on the Bonds when due as aforesaid, and shall do so
without necessity for any order on behalf of the Issuer and without restriction
by reason of any order. For purposes of this Indenture, those investments shall
be valued at face amount or market value, whichever is less. The Trustee shall
not be liable (except for gross negligence or willful misconduct) for any
depreciation in the value of any investment made pursuant to this Section 410 or
for any loss arising from such investment.

     (E)  Moneys deposited in the Credit Facility Account in the Bond Fund shall
be invested by the Trustee only in obligations described under clause (A) of the
definition of Authorized Investments. Proceeds received from the remarketing of
the Bonds and deposited in the Remarketing Proceeds Account shall be invested by
the Trustee only in obligations described under clause (A) or clause (B) of the
definition of Authorized Investments (provided that if the Bonds are then rated
by a Rating Service or Rating Services, obligations described under clause (B)
of such definition must be prerefunded or escrowed to maturity with obligations
described in clause (A) of such definition and be rated "Aaa" by Moody's and/or
"AAA" by Standard & Poor's, as applicable to the Rating Service or Rating
Services then rating the Bonds). Such obligations shall be noncallable, and
shall mature in 30 days or less and at the times and in the amounts necessary to
make payments of the Debt Service Payments on, or the purchase price of, Bonds
when due or the aforesaid moneys shall be held uninvested in their respective
accounts pending application pursuant to the terms of this Article IV hereof,
provided that the holding of such moneys uninvested will not cause the Bonds to
be deemed "arbitrage bonds" within the meaning of Section 148 of the Code.
Moneys deposited in the Defeasance Account in the Bond Fund shall be invested by
the Trustee in accordance with Section 1001 hereof.

SECTION 411.  FINAL DISPOSITION OF MONEYS. In the event there are no Bonds
Outstanding, and subject to any applicable law to the contrary, after payment of
all fees, charges and expenses, including, but not limited to reasonable
attorney's fees, of the Issuer, the Trustee, the Company and the Bank and any
Paying Agents or Authenticating Agents and all other amounts required to be paid
hereunder and under the other Financing Documents and after payment of any
amounts required to be rebated to the United States hereunder and under the Tax
Documents or any provision of the Code, all amounts remaining in any fund
established under this Indenture shall be transferred to the Company (except
amounts held with respect to the Unassigned Rights, which amounts shall be paid
to the Issuer) and, except for moneys held for

                                       68



the payment or redemption of Bonds which have matured or been defeased or notice
of the redemption of which has been duly given; provided, however, that, in the
event that the Bonds are retired, redeemed or otherwise paid, in whole or in
part, from amounts drawn on the Letter of Credit and the Bank remains
unreimbursed for such amounts, such remaining amounts shall be transferred to
the Bank to be applied against the obligation of the Company to repay the Bank
for amounts paid under the Letter of Credit or any other Financing Document, and
any amounts in excess thereof shall be paid to the Company; provided, however,
that notwithstanding any provision to the contrary in this Indenture or
elsewhere, any moneys in the Credit Facility Account, the Defeasance Account,
the Remarketing Proceeds Account or the Redemption Premium Account may not be
paid to the Company; and provided, further, that any amounts which were
deposited in the Redemption Premium Account of the Bond Fund for the purpose of
causing such amounts to constitute Available Moneys and which remain after all
of the Outstanding Bonds shall be deemed paid and discharged under this
Indenture, shall be retained by the Trustee and shall not be paid to or for the
benefit of the Company, who shall have no right to take or control such amounts.

SECTION 412.  PERIODIC REPORTS BY TRUSTEE. On or before the fifteenth (15th) day
of each March, June, September and December, the Trustee shall furnish to the
Issuer, the Company and the Bank, commencing on or before the fifteenth day of
the first such date following the date in which the Bonds are delivered, a
report on the status of each of the funds established under this Article IV,
showing at least the balance in each such fund as of the final day of the period
with respect to which the last such report described (or, if such report is to
first such report, as of the Closing Date), the total of deposits into
(including interest on investments) and the total of disbursements from each
such fund, the dates of such deposits and disbursements, and the balance in each
such fund on the last day of the period to which such report relates (which date
shall be not earlier than the last day of the calendar month preceding the date
of such report).

                          [Balance of page left blank]

                                       69



                                    ARTICLE V

                                GENERAL COVENANTS

SECTION 501.  AUTHORITY OF ISSUER; VALIDITY OF INDENTURE AND BONDS. The Issuer
hereby represents, warrants and covenants that it is duly authorized under the
Constitution and laws of the State, including particularly and without
limitation the Act, to issue the Bonds authorized hereby, to execute this
Indenture and to pledge the revenues and receipts in the manner necessary for
the issuance of the Bonds authorized hereby; that the execution and delivery of
this Indenture has been duly and effectively authorized; and that such Bonds in
the hands of the owners thereof are and will be valid and enforceable special
obligations of the Issuer according to the import thereof.

SECTION 502.  PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants that it
shall promptly pay the principal of, premium, if any, and interest on every Bond
issued under this Indenture at the place, on the dates and in the manner
provided herein and in the Bonds, according to the true intent and meaning
thereof, subject to the provisions of Section 202 and Section 1109 hereof.

SECTION 503.  PROCESSING OF TRANSFERS. Subject to the provisions of Section
206(D) hereof, the Trustee represents to and covenants with the Issuer and the
Bondholders that it will take all reasonable action required and capable of
performance on its part to process transfers of Bonds within three (3) Business
Days of receipt of a request therefor.

SECTION 504.  PERFORMANCE OF COVENANTS; AUTHORITY OF ISSUER. The Issuer
covenants, and the Trustee by executing this Indenture covenants, that each will
faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder and in all proceedings
pertaining thereto. The Issuer covenants and represents that it is duly
authorized under the laws of the State to issue the Bonds authorized hereby and
to execute and deliver this Indenture, to convey the interests described herein
and conveyed hereby, to pledge the revenues, receipts and other moneys hereby
pledged in the manner and to the extent herein set forth and to execute and
deliver the Financing Documents to which it is a party; that all action on its
part for the issuance of the Bonds and the execution and delivery of the
Financing Documents to which it is a party has been duly and effectively taken;
and that the Bonds in the hands of the holders and owners thereof are and will
be valid and enforceable special obligations of the Issuer according to the
import thereof.

SECTION 505.  PRIORITY OF LIEN OF INDENTURE. The Issuer hereby represents,
warrants and covenants that this Indenture is and will be a first Lien upon the
Trust Revenues and the Issuer agrees not to create or suffer to be created any
Lien having priority or preference over the Lien of this Indenture upon the
Trust Revenues or any part thereof, except as otherwise specifically provided
herein.

SECTION 506.  INSTRUMENTS OF FURTHER ASSURANCE. The Issuer covenants that it
will do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and

                                       70



delivered such indentures supplemental hereto, and such further acts,
instruments and transfers as the Trustee may reasonably require for the better
assuring, transferring, conveying, pledging, assigning and confining unto the
Trustee all and singular its interest in all Property purported to be made
subject to the Lien hereof by the Granting Clauses hereof, and in the Trust
Estate herein described and pledged hereby to the payment of the principal of,
premium, if any, and interest on the Bonds. Any and all interest in the Trust
Estate or any other Property hereafter acquired which is of any kind or nature
herein provided to be and become subject to the Lien hereof shall, without any
further conveyance, assignment or act on the part of the Issuer or the Trustee,
become and be subject to the Lien of this Indenture as fully and completely as
though specifically described herein, but nothing in this sentence contained
shall be deemed to modify or change the obligations of the Issuer under this
Section. The Issuer covenants and agrees that, except as herein otherwise
provided, it has not and will not sell, convey, mortgage, encumber or otherwise
dispose of any part of its interest in the Trust Revenues.

SECTION 507.  INSPECTION OF PROJECT BOOKS. The Issuer covenants and agrees that
all books and documents in its possession relating to the Project Facility and
the Bonds shall at all times be open to inspection by such accountants or other
agencies as the Trustee or the Bank may from time to time reasonably designate.

SECTION 508.  NO MODIFICATION OF SECURITY; LIMITATION ON LIENS. The Issuer
covenants that it will not, without the written consent of the Trustee and the
Bank, alter, modify or cancel, or agree to alter, modify or cancel, the
Installment Sale Agreement or any other Financing Document to which the Issuer
is a party, or which has been assigned to the Issuer, and which relates to or
affects the security for the Bonds, except as contemplated hereby or pursuant to
the terms of such document. The Issuer further covenants that, except for the
Financing Documents and other Permitted Encumbrances, the Issuer will not incur,
or suffer to be incurred, any mortgage, Lien, charge or encumbrance on or pledge
of any of the Trust Revenues prior to or on a parity with the Lien of this
Indenture.

SECTION 509.  DAMAGE OR DESTRUCTION. The rights and obligations of the Company,
the Issuer, the Trustee and the Bank in the event of damage or destruction of
the Project Facility or part thereof shall be determined by reference to Section
7.1 of the Installment Sale Agreement and this Indenture.

SECTION 510.  CONDEMNATION. The rights and obligations of the Company, the
Issuer, the Trustee and the Bank in the event of a taking of part or all of the
Project Facility by Condemnation shall be determined by reference to Section 7.2
of the Installment Sale Agreement and this Indenture.

SECTION 511.  ACCOUNTS AND AUDITS. The Trustee shall keep proper books of record
and account (separate from all other records and accounts) in which complete and
correct entries shall be made of its transactions relating to the Project
Facility or any part thereof, and which, together with all other books and
papers of the Trustee in connection with the Project Facility, shall at all
reasonable times be subject to the inspection of the Company, the Bank and the
Issuer, or the holder or holders of not less than five percent (5%) in aggregate
principal amount of the Bonds then Outstanding or their representatives duly
authorized in writing.

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SECTION 512.  RECORDATION; FINANCING STATEMENTS. (A) The security interests of
the Trustee created by this Indenture and the other Financing Documents and the
security interests of the Issuer assigned to the Trustee shall be perfected by
the filing by the Company in the office of the New York State Department of
State, Uniform Commercial Code Unit of financing and continuation statements
required to be filed pursuant to the Uniform Commercial Code of the State in
order to perfect and to maintain the perfection of the security interests
created by this Indenture and the Financing Documents.

     (B)  The Company shall furnish, from time to time as reasonably requested
by the Trustee, satisfactory evidence to the Trustee of the recording and filing
of all financing statements, continuation statements and other instruments
necessary to preserve, perfect and maintain the perfection of the Liens of the
Financing Documents.

     (C)  The Issuer and the Company irrevocably appoint the Trustee as their
lawful attorney and agent to execute and file such financing statements and
continuation statements on their behalf (and without their signature where
allowed by law) as in the opinion of the Trustee are necessary to preserve,
perfect and maintain the perfection of the Liens created by this Indenture and
the other Financing Documents. However this shall in no way relieve the Company
from the duties and obligations of recording and filing of all financing
statements, continuation statements and other instruments necessary to preserve,
perfect and maintain the perfection of the Liens of the Financing Documents.

SECTION 513.  COVENANT AGAINST ARBITRAGE BONDS. (A) Notwithstanding any other
provision of this Indenture, so long as any Bonds shall be Outstanding, the
Issuer shall not use or direct or permit the use of the proceeds of the Bonds or
any other moneys in its control (including, without limitation, the proceeds of
any insurance settlement or Condemnation award with respect to the Project
Facility) in such manner as would cause any of the Bonds to be an "arbitrage
bond" within the meaning of such quoted term in Section 148 of the Code.

     (B)  The Trustee shall not be responsible for the calculation, or the
payment from its own funds, of any amount required to be rebated to the United
States under Section 148 of the Code. The Trustee shall, however, make such
transfers to the Rebate Fund and pay such amounts from the funds and accounts
created hereunder and from the Company's funds to the United States as the
Company, in accordance with this Indenture and the Tax Documents, shall direct.

SECTION 514.  COVENANT REGARDING ADJUSTMENT OF DEBTS. In any case under Chapter
9 of Title 11 of the United States Code involving the Issuer as debtor, the
Issuer, unless compelled by a court of competent jurisdiction, shall neither
list the Trust Revenues or any part thereof or the Project Facility or any part
thereof as an asset or property of the Issuer nor list any amounts owed upon the
Bonds Outstanding as a debt of or claim against the Issuer.

SECTION 515.  LIMITATION ON OBLIGATIONS OF THE ISSUER. Notwithstanding any
provision of this Indenture to the contrary, no order or decree of specific
performance with respect to any of the obligations of the Issuer hereunder shall
be sought or enforced against the

                                       72



Issuer unless (A) the party seeking such order or decree shall first have
requested the Issuer in writing to take the action sought in such order or
decree of specific performance, and ten (10) days shall have elapsed from the
date of receipt of such request, and the Issuer shall have refused to comply
with such request (or, if compliance therewith would reasonably be expected to
take longer than ten (10) days, shall have failed to institute and diligently
pursue action to cause compliance with such request within such ten (10) day
period) or failed to respond within such notice period, (B) if the Issuer
refuses to comply with such request and the Issuer's refusal to comply is based
on its reasonable expectation that it will incur fees and expenses, the party
seeking such order or decree shall have placed in an account with the Issuer an
amount or undertaking sufficient to cover such reasonable fees and expenses, and
(C) if the Issuer refuses to comply with such request and the Issuer's refusal
to comply is based on its reasonable expectation that it or any of its members,
directors, officers, agents (other than the Company) or employees shall be
subject to potential liability, the party seeking such order or decree shall
(1)agree to indemnify and hold harmless the Issuer and its members, directors,
officers, agents (other than the Company) and employees against any liability
incurred as a result of its compliance with such demand, and (2) if requested by
the Issuer, furnish to the Issuer satisfactory security to protect the Issuer
and its members, directors, officers, agents (other than the Company) and
employees against all liability expected to be incurred as a result of
compliance with such request; provided, however, that no limitation on the
obligations of the Issuer contained in this Section 515 by virtue of any lack of
assurance provided in (A), (B) or (C) hereof shall be deemed to prevent the
occurrence and full force and effect of any Event of Default hereunder.

SECTION 516.  AGREEMENT TO PROVIDE INFORMATION; CONTINUING DISCLOSURE. (A) The
Trustee agrees, whenever requested in writing by the Issuer or the Company, to
provide such information that is known to the Trustee relating to the Bonds as
the Issuer or the Company from time to time may reasonably request at the
Company's expense, including, but not limited to, such information as may be
necessary to enable the Issuer or the Company to make any reports required by
any Federal, state or local law or regulation.

     (B)  Upon notice being delivered pursuant to Section 209(E) (Notice of
conversion of the Bonds to a Long-Term Rate Period), the Trustee shall enter
into a written agreement with the Company (the "Continuing Disclosure
Agreement"), in a form acceptable to the Remarketing Agent, for the benefit of
the Holders of the Bonds, which shall be executed and delivered solely to assist
the Remarketing Agent in complying with Rule 15C2-12(b)(5) of the Securities
Exchange Act of 1934, as in effect on such date.

SECTION 517.  CERTIFICATES WITH RESPECT TO $10,000,000 LIMITATION OF SECTION
144(a)(4) OF THE CODE. Upon receipt by the Trustee of a certificate of the
Company delivered pursuant to the Tax Regulatory Agreement indicating that the
$10,000,000 limit in Section 144(a)(4) of the Code has been or may have been
exceeded at any time during the three-year period commencing on the date the
Bonds are issued, the Company shall deliver to the Trustee an opinion of Bond
Counsel as to whether, on the basis of the written statements, certificates,
audits, filings and other documentation delivered to the Trustee in accordance
with the Tax Regulatory Agreement, the $10,000,000 limit (or any greater or
lesser limit that may hereafter be imposed by the Code) of Section 144(a)(4) of
the Code was exceeded at any time

                                       73



during such three-year period. If at any time Bond Counsel shall opine that the
$10,000,000 limit of Section 144(a)(4) of the Code was exceeded during such
three-year period, the Trustee shall call the Bonds for redemption pursuant to
Section 301(D) hereof.

                          [Balance of page left blank]

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                                   ARTICLE VI

           DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS

SECTION 601.  EVENTS OF DEFAULT. The following shall be "Events of Default"
under this Indenture, and the terms "Event of Default" shall mean, when they are
used in this Indenture, any one or more of the following events:

     (A)  Payment of the principal or redemption price of any Bond is not made
when it becomes due and payable at maturity or upon call for redemption; or

     (B)  Payment of any interest on any Bond is not made when it becomes due
and payable; or

     (C)  If no Credit Facility is then held by the Trustee, failure by the
Issuer to observe and perform any covenant, condition or agreement on its part
to be observed or performed hereunder, other than any such failure which results
in an Event of Default under Section 601 (A), Section 601 (B) or Section 601 (F)
of this Indenture, for a period of 30 days after written notice of such failure
requesting such failure to be remedied, given to the Issuer and the Company by
the Trustee, unless the Trustee shall agree in writing to an extension of such
time prior to its expiration, which notice may be given by the Trustee in its
discretion and shall be given by the Trustee at the written request of the
Bondholders of not less than 25 percent in aggregate principal amount of Bonds
then outstanding; or

     (D)  The Trustee receives notice from the Credit Facility Issuer, if any,
of the Credit Facility then held by the Trustee that an Event of Default under
the Reimbursement Agreement has occurred and is continuing and the Trustee is to
accelerate the maturity of the Bonds; or

     (E)  If a Credit Facility is then held by the Trustee, receipt by the
Trustee, on or before the close of business on the 10th day following a drawing
under such Credit Facility to pay interest on the Bonds on an Interest Payment
Date or the portion of the purchase price of Bonds corresponding to interest on
the Bonds, of notice by telephone (promptly confirmed in writing) or facsimile
from the Credit Facility Issuer that the interest component of the Credit
Facility will not be reinstated as of the date of such notice to the amount
required to be maintained pursuant to this Indenture; or

     (F)  If payment of the purchase price of any Bond required to be purchased
pursuant to Section 304 of this Indenture is not made when such payment has
become due and payable; or

     (G)  If a Credit Facility is then held by the Trustee, the Credit Facility
Issuer fails to honor any proper drawing under the Credit Facility; or

     (H)  If a Credit Facility is then held by the Trustee, a decree or order of
a court or agency or supervisory authority, having jurisdiction in the premises
for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling or assets and liabilities or
similar proceeding, or for the winding-up or liquidation of its affairs,

                                       75



shall have been entered against the Credit Facility Issuer or the Credit
Facility Issuer shall have consented to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Credit
Facility Issuer or of or relating to all or substantially all of its property
and the lapse of 60 days during which an Alternate Credit Facility Issuer
complying with the terms hereof has not been delivered to the Trustee; or

     (1)  The occurrence and continuance of an Event of Default under the
Installment Sale Agreement.

SECTION 602.  ACCELERATION. (A) Upon (1) the occurrence of an Event of Default
under Section 601 (D), Section 601 (E) or Section 601 (H), the Trustee shall, or
(2) the occurrence of any other Event of Default under Section 601 hereof and so
long as such Event of Default is continuing, the Trustee may, and upon the
written request of the holders of not less than 25% in aggregate principal
amount of Bonds then Outstanding the Trustee shall, by notice in writing
delivered to the Company, with copies of such notice being sent to the Issuer
and the Bank, declare the entire principal amount of all Bonds then Outstanding
and the interest accrued thereon to be immediately due and payable, and such
principal and interest shall thereupon become and be immediately due and
payable. Upon any such declaration, the Trustee shall immediately declare an
amount equal to all amounts then due and payable on the Bonds to be immediately
due and payable under the Installment Sale Agreement.

     (B)  Upon the occurrence of any declaration by the Trustee under this
Section 602, the principal of the Bonds then Outstanding and the interest
accrued thereon shall thereupon become and be immediately due and payable, and
interest shall cease to accrue thereon, and the Trustee shall immediately draw
upon the Letter of Credit to the extent and in the manner provided in Section
408 hereof.

     (C)  Immediately after any acceleration hereunder, the Trustee, to the
extent it has not already done so, shall notify in writing the Issuer, the
Company, the Credit Facility Issuer, the Tender Agent and the Remarketing Agent
of the occurrence of such acceleration. Within 5 days of the occurrence of any
acceleration hereunder, the Trustee shall notify by first class mail, postage
prepaid, the owners of all Bonds Outstanding of the occurrence of such
acceleration.

     (D)  If, after the principal of the Bonds has become due and payable, all
arrears of interest upon the Bonds are paid by the Company, and the Company also
performs all other things in respect to which it may have been in default
hereunder and pays the reasonable charges of the Trustee and the Bondholders,
including reasonable attorneys' fees, then, and in every such case, the owners
of a majority in principal amount of the Bonds then Outstanding, by notice to
the Company and to the Trustee, may annul such acceleration and its
consequences, and such annulment shall be binding upon the Trustee and upon all
owners of Bonds issued hereunder; provided, however, that the Trustee shall not
annul any declaration resulting from (1) an Event of Default specified in
Section 601(E) hereof, (2) an Event of Default specified in Section 601(D)
hereof without the prior written consent of the Credit Facility Issuer or (3)
any Event of Default which has resulted in a drawing under the Credit Facility,
unless the Trustee has received written confirmation from the Credit Facility
Issuer that the Credit Facility has been reinstated to an

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amount equal to the amount thereof prior to such drawing. No such annulment
shall extend to or affect any subsequent default or impair any right or remedy
consequent thereon. The Trustee shall forward a copy of any notice from
Bondholders received by it pursuant to this paragraph to the Company and to the
Credit Facility Issuer. Immediately upon such annulment, the Trustee shall
cancel, by notice to the Issuer, the Company and to the Credit Facility Issuer,
any demand for acceleration of payments hereunder and under the Bonds made by
the Trustee pursuant to this Section 602. The Trustee shall promptly give
written notice of such annulment to the Issuer, the Company, the Credit Facility
Issuer, the Tender Agent, the Remarketing Agent, and, if notice of the
acceleration of the Bonds shall have been given to the Bondholders, shall give
notice thereof to the Bondholders.

SECTION 603.  ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and continuance
of any Event of Default, the Trustee shall exercise such of the rights and
powers vested in the Trustee by this Indenture and use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs. In considering what actions are
or are not prudent in the circumstances, the Trustee shall consider whether or
not to take such action as may be permitted to be taken by the Trustee under any
of the Financing Documents.

     (B)  Upon the occurrence and continuance of any Event of Default, the
Trustee shall give such notices and take all actions necessary to cause payments
to be made under the Letter of Credit and may proceed forthwith to protect and
enforce its rights under the Act, the Letter of Credit, the Installment Sale
Agreement and the other Financing Documents by such suits, actions or
proceedings as the Trustee, being advised by counsel, shall deem expedient.

     (C)  Upon the occurrence and continuance of any Event of Default, the
Trustee may pursue any available remedy at law or in equity by suit, action,
mandamus or other proceeding to enforce payment of and receive any amounts due
or becoming due from the Issuer, the Bank or the Company under any of the
provisions of this Indenture, the Installment Sale Agreement and the other
Financing Documents, without prejudice to any other right or remedy of the
Trustee or the Bondholders.

     (D)  Regardless of the happening of an Event of Default, the Trustee may
institute and maintain such suits and proceedings as it may be advised shall be
necessary or expedient to prevent any impairment of the security under this
Indenture and the other Financing Documents by any acts which may be unlawful or
in violation of this Indenture or of any other Financing Document or of any
resolution authorizing the Bonds, or to preserve or protect the interest of the
Trustee and/or the Bondholders.

     (E)  Notwithstanding anything to the contrary herein, so long as the Letter
of Credit is in effect and the Bank is making all required payments with respect
to the Letter of Credit in accordance with the terms of the Letter of Credit,
the Trustee shall not exercise any remedies under this Article VI and the
Trustee shall not, without the prior written consent of the Bank, take any
actions which the Trustee is required or entitled to take under this Article VI
unless and until the Trustee shall have accelerated the Bonds and drawn upon the
Letter of Credit in accordance with Section 602 hereof and the Bank shall have
defaulted in the performance of its

                                       77



obligations under the Letter of Credit, in which case the Bank shall have no
authority to exercise any further rights hereunder unless and until said default
shall have been cured by the Bank to the reasonable satisfaction of the Trustee.

     (F)  In the event of a default by the Bank in the performance of its
obligations under the Letter of Credit, notwithstanding the provisions of
subparagraph (E) above, the Bank shall have no authority to exercise any further
rights hereunder, unless and until said default shall have been cured by the
Bank to the reasonable satisfaction of the Trustee.

SECTION 604.  APPOINTMENT OF RECEIVERS. Upon the occurrence and continuance of
an Event of Default and upon the filing of a suit or commencement of other
judicial proceedings to enforce the rights of the Trustee under this Indenture
and the other Financing Documents, the Trustee shall, to the extent permitted by
law, be entitled, as a matter of right, to the appointment of a receiver or
receivers of the Project Facility and of the revenues and receipts thereof,
pending such proceedings, with such powers as the court making such appointment
shall confer.

SECTION 605.  RIGHTS OF BONDHOLDERS TO OBLIGATE TRUSTEE TO PROTECT BONDHOLDERS.
Subject to the provisions of Section 603(E) hereof, if an Event of Default shall
have happened, and if requested so to do by the holders of not less than 25% in
aggregate principal amount of Bonds then Outstanding, and if secured and
indemnified as provided in Section 701(I) herein, the Trustee shall be obligated
to proceed to protect its rights and the rights of the Bondholders under
applicable law, the Installment Sale Agreement, the Bonds, the Letter of Credit,
this Indenture and the other Financing Documents, as the Trustee, being advised
by Independent Counsel, shall deem most expedient in the interest of the
Bondholders.

SECTION 606.  REMEDIES NOT EXCLUSIVE; WAIVER AND NON-WAIVER OF EVENT OF DEFAULT.
(A) No remedy by the terms of this Indenture conferred upon or reserved to the
Trustee or to the Bondholders is intended to be exclusive of any other remedy,
but each and every such remedy shall be cumulative and shall be in addition to
any other remedy given to the Trustee or to the Bondholders hereunder or now or
hereafter existing at law or in equity or by statute.

     (B)  No delay or omission to exercise any right or power accruing upon any
Event of Default shall impair any such right or power or shall be construed to
be a waiver of any such Event of Default or acquiescence therein; and every such
right and power may be exercised from time to time and as often as may be deemed
expedient.

     (C)  No waiver of any Event of Default hereunder, whether by the Trustee or
by the Bondholders, shall extend to or shall affect any subsequent or concurrent
Event of Default or shall impair any rights or remedies consequent thereto.

SECTION 607.  RIGHTS OF BONDHOLDERS TO DIRECT PROCEEDINGS. Anything in this
Indenture to the contrary notwithstanding, but nonetheless subject to the
provisions of Section 603(E) hereof, the Holders of a majority in aggregate
principal amount of the Bonds then Outstanding shall have the right at any time,
by an instrument in writing executed and delivered to the Trustee and upon
offering the Trustee the security and indemnity provided for in Section

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701(I) herein, to direct the time, method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, the Letter of Credit, the Installment Sale
Agreement or the other Financing Documents, or for the appointment of a receiver
or any other proceedings hereunder, provided that such direction, in the sole
opinion of the Trustee, is in accordance with the provisions of law and is not
unduly prejudicial to the interests of the Bondholders not joining such
direction.

SECTION 608.  WAIVER BY ISSUER. Upon the occurrence of an Event of Default, to
the extent that such right may then lawfully be waived, neither the Issuer, nor
anyone claiming through or under it, shall set up, claim or seek to take
advantage of any appraisal, valuation, stay, extension or redemption laws now or
hereafter in force, in order to prevent or hinder the enforcement of this
Indenture; and the Issuer, for itself and all who may claim through or under it,
hereby waives, to the extent that it may lawfully do so, the benefit of all such
laws and all rights of appraisal and redemption to which it may be entitled
under the laws of the State.

SECTION 609.  APPLICATION OF MONEYS. (A) Except as provided in subsection (C)
below, all moneys received by the Trustee pursuant to any right given or action
taken under the provisions of this Article VI shall, after payment of the cost
and expenses of the proceedings resulting in the collection of such moneys and
of the fees, expenses, liabilities and advances (including reasonable attorneys'
fees) incurred or made by the Trustee, be deposited into the Bond Fund; and all
moneys in the Bond Fund shall be applied, together with the other moneys held by
the Trustee hereunder (other than amounts in the Rebate Fund), as follows:

     (1)  Unless the principal of all the Bonds shall have become due or shall
have been declared due and payable, all such moneys shall be applied:

     FIRST - to the payment to the Persons entitled thereto of all installments
of interest then due on the Bonds, in the order of the maturity of the
installments of such interest and, if the amount available shall not be
sufficient to pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to the Persons
entitled thereto, without any discrimination or privilege;

     SECOND - to the payment to the Persons entitled thereto of the unpaid
principal of and any premium on the Bonds (other than Bonds called for
redemption for the payment of which moneys shall be held pursuant to the
provisions of this Indenture) which shall have become due, in order of their
maturities, with interest from the date upon which they became due and, if the
amount available shall not be sufficient to pay in full the principal of and
premium, if any, and interest on the Bonds due on any particular date, then to
the payment ratably, according to amounts due respectively for principal,
interest and premium, if any, to the Persons entitled thereto, without any
discrimination or privilege;

     THIRD - to the payment to the Persons entitled thereto of the principal of,
premium, if any, on, or interest on the Bonds which may thereafter become due
and payable, and, if the amount available shall not be sufficient to pay in full
Bonds due on any particular date, together with interest and premium, if any,
then due and owing thereon, payment shall be made ratably

                                       79



according to the amount of interest, principal and premium, if any, due on such
date to the Persons entitled thereto, without any discrimination or privilege;
and

     FOURTH - to the payment to the Credit Facility Issuer of all amounts due to
the Credit Facility Issuer pursuant to the Reimbursement Agreement.

     (2)  If the principal of all the Bonds shall have become due or shall have
been declared due and payable, all such moneys shall be applied to the payment
of the principal, premium, if any, and interest then due and unpaid upon the
Bonds, without preference or priority of principal and premium over interest or
of interest over principal and premium, or of any installment of interest over
any other installment of interest, or of any Bonds over any other Bonds,
ratably, according to the amounts due respectively for principal, premium, if
any, and interest, to the Persons entitled thereto without any discrimination or
privilege.

     (B)  Whenever moneys are to be applied pursuant to the provisions of
Section 609(A)(1) hereof, such moneys shall be applied at such times, and from
time to time, as the Trustee shall determine, having due regard to the amount of
such moneys available for such application and the likelihood of additional
moneys becoming available in the future. Whenever the Trustee shall apply such
moneys under Section 609(A)(1), it shall fix the date (which shall be an
Interest Payment Date unless it shall deem another date more suitable) upon
which such application is to be made, and upon such date interest on the amounts
of principal to be paid on such date shall cease to accrue. Whenever moneys are
to be applied pursuant to the provisions of Section 609(A)(2), such moneys shall
be applied as soon as practicable upon receipt thereof. In either case, the
Trustee shall give such notice as it may deem appropriate of the deposit with it
of any such moneys and of the fixing of any such date, and shall not be required
to make payment to the holder of any Bond until such Bond shall be presented to
the Trustee and a new Bond is issued or the Bond is canceled if fully paid.

     (C)  Any moneys received by the Trustee from the Bank pursuant to the
exercise of any rights granted hereunder or under the Letter of Credit shall
first be applied in accordance with Section 408 hereof.

SECTION 610.  REMEDIES VESTED IN TRUSTEE. All rights of action, including the
right to file proof of claims, under this Indenture or under any of the Bonds
may be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without the necessity of joining as plaintiffs or defendants any
holders of the Bonds. Subject to the provisions of Section 609 hereof, any
recovery or judgment shall be for the equal benefit of the holders of the
Outstanding Bonds.

SECTION 611.  RIGHTS AND REMEDIES OF BONDHOLDERS. No holder of any Bond shall
have any right to institute any suit, action or proceeding in equity or at law
for the enforcement of this Indenture or for the execution of any trust under
this Indenture or for the appointment to the extent permitted by law of a
receiver or any other remedy hereunder, unless an Event of Default under Section
601(D), Section 601(E) or Section 601(H) hereof has occurred or a default under
Section 601 hereof has occurred of which the Trustee has been notified as

                                       80



provided in Section 614 hereof; nor unless also (A) such default, in the case of
a default other than a default under Section 601(D), Section 601(E) or Section
601(H), shall have become an Event of Default, and (B) the Holders of at least
25% in aggregate principal amount of Bonds then Outstanding shall have made
written request to the Trustee and shall have offered reasonable opportunity
either to proceed to exercise the powers hereinbefore granted or to institute
such action, suit or proceeding in its own name; nor unless also they have
offered to the Trustee indemnity as provided in Section 701(I) hereof; nor
unless the Trustee shall thereafter fail or refuse to exercise the powers
hereinbefore granted, or to institute such action, suit or proceeding for a
period of thirty (30) days after receipt by the Trustee of such request and
offer of indemnity; and such notification, request and offer of indemnity are
hereby declared in every case at the option of the Trustee to be conditions
precedent to the execution of the powers and trusts of this Indenture, and to
any action or cause of action for the enforcement of this Indenture, or for the
appointment to the extent permitted by law of a receiver or for any other remedy
hereunder; it being understood and intended that no one or more Holders of the
Bonds shall have any right in any manner whatsoever to affect, disturb, or
prejudice the Lien of this Indenture by any action or to enforce any right
hereunder except in the manner herein provided, and that all proceedings at law
or in equity shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of the Holders of all Bonds then Outstanding.
Nothing in this Indenture shall, however, affect or impair the right of any
Bondholder to enforce the payment of the principal of and interest on any Bond
at and after the maturity thereof, or the obligation of the Issuer to pay the
principal of and interest on each of the Bonds issued hereunder to the
respective Holders thereof, at the time and place and from the source and in the
manner in the Bonds expressed. The rights of the Holder of the Bonds under this
Section 611 are subject to the rights of the Bank under Section 603(E) hereof.

SECTION 612.  TERMINATION OF PROCEEDINGS. In case the Trustee shall have
undertaken any proceedings to enforce any right under this Indenture and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely, then and in every such case, the Issuer, the
Company, the Bank and the Trustee shall be restored to their former positions
and rights hereunder, and all rights, remedies and powers of the Trustee shall
continue as if no such proceedings had been taken.

SECTION 613.  WAIVERS OF EVENTS OF DEFAULT. The Trustee, with the prior written
consent of the Bank, shall waive any Event of Default hereunder and its
consequences and rescind any declaration of maturity of principal of and
interest on the Bonds upon the written request of the holders of a majority of
the aggregate principal amount of all the Bonds then Outstanding; provided,
however, that there shall not be waived (A) any default in the payment of the
principal of any Outstanding Bond at the date of maturity specified therein, or
upon proceedings for mandatory redemption, (B) any Event of Default requiring a
draw under the Letter of Credit unless the Trustee shall have received written
notice from the Bank that the Letter of Credit has been reinstated to its full
stated amount, if there has been a reduction thereon, or (C) any default in the
payment when due of the interest or premium on any such Bonds, unless prior to
such waiver or rescission all arrears of interest, with interest (to the extent
permitted by law) at the rate bond by the Bonds in respect of which such default
shall have occurred on overdue installments of interest or all arrears of
payments of principal when due (whether at the stated maturity thereof or upon
proceedings for redemption) as the case may be,

                                       81



shall have been paid or provided for, and no such waiver or rescission shall
extend to any subsequent or other default, or impair any right consequent
thereto. The Trustee shall not grant any waiver or rescission hereunder unless
all ordinary and extraordinary fees and expenses of the Trustee, including, but
not limited to, reasonable attorneys' fees, incurred in connection with said
default have been paid or provided for, and in case of any such waiver or
rescission, or in case any proceeding taken by the Trustee on account of any
such default shall have been discontinued or abandoned or determined adversely,
then, and in every such case, the Issuer, the Trustee, the Bank and the
Bondholders, respectively, shall be restored to their former positions and
rights hereunder.

SECTION 614.  NOTICE OF DEFAULTS; OPPORTUNITY TO CURE. (A) Anything herein to
the contrary notwithstanding, no default under Section 601 other than a default
under Section 601(D), Section 601(E) or Section 601(H) hereof shall constitute
an Event of Default until the Trustee shall have received written notice thereof
or shall have actual notice thereof and until actual notice of such default by
registered or certified mail shall be given by the Trustee or by the Holders of
not less than 25% percent of the aggregate principal amount of Bonds then
Outstanding to the Issuer, the Bank and the Company, and the Issuer, the Bank
and the Company shall have had thirty (30) days after receipt of such notice to
correct said default or cause said default to be corrected, and shall not have
corrected said default or caused said default to be corrected within the
applicable period; provided, however, if said default be such that it cannot be
corrected within the applicable period, it shall not constitute an Event of
Default if corrective action is instituted by the Issuer, the Bank or the
Company within the applicable period and diligently pursued until the default is
corrected.

     (B)  The Trustee shall immediately notify the Issuer, the Company and the
Bank of any Event of Default known to the Trustee.

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                                   ARTICLE VII

                                   THE TRUSTEE

SECTION 701.  ACCEPTANCE OF THE TRUSTS. The Trustee hereby accepts the trusts
imposed upon it by this Indenture and agrees to perform said trusts upon the
following terms and conditions:

     (A)  The Trustee may execute any of the trusts or powers hereof and perform
any of its duties hereunder by or through attorneys, agents, receivers or
employees, but shall not be answerable for the conduct of the same if appointed
with due care, and shall be entitled to advice of counsel concerning all matters
of the trusts hereof and the duties hereunder, and may in all cases pay such
reasonable compensation to all such attorneys, agents, receivers and employees
as may be reasonably employed in connection with the trusts hereof. The Trustee
may act upon the opinion or advice of any attorney appointed with due care, who
may be the attorney or attorneys for the Issuer, and shall not be responsible
for any loss or damage resulting from any action or nonaction in reliance upon
any such opinion or advice.

     (B)  Except as expressly provided herein, the Trustee shall not be
responsible for any recital herein or in the Bonds (except in respect to the
authentication certificate of the Trustee endorsed on the Bonds), or for the
validity of the execution by the Issuer of this Indenture or of any supplements
thereto or instruments of further assurance, or for the sufficiency of the
security for the Bonds issued hereunder or intended to be secured hereby, or for
insuring the Property subject to the Lien of the Financing Documents, or for the
value or title of any of the Property subject to the Lien of the Financing
Documents, or to see to the recording or filing of this Indenture or any
financing statement or any other document or instrument whatsoever, or for the
payment of, or for minimizing taxes, charges, assessments or Liens upon the
same, or otherwise as to the maintenance of the security hereof, except as to
the safekeeping of the pledged collateral and except that, in the event the
Trustee enters into possession of part or all of the Property subject to the
Lien of the Financing Documents pursuant to any provision thereof, it shall use
due diligence in preserving the same, and the Trustee shall not be bound to
ascertain or inquire as to the performance or observance of any covenant,
condition or agreement on the part of the Issuer or the Company, but the Trustee
may require of the Issuer and the Company full information and advice as to the
performance of the covenants, conditions and agreements aforesaid and as to the
condition of the Property subject to the Lien of the Financing Documents.

     (C)  The Trustee may become the owner of Bonds secured hereby with the same
rights which it would have if not the Trustee.

     (D)  The Trustee shall be protected in acting upon any notice, request,
consent, certificate, order, affidavit, letter, telegram or other paper or
document reasonably believed to be genuine and correct and to have been signed
or sent by the proper Person or Persons. Any action taken by the Trustee
pursuant to this Indenture upon the request or authority or consent of any
Person who at the time of making such request or giving such authority or
consent is the owner of any Bond shall be conclusive and binding upon all future
owners of the same Bond and of any Bond or Bonds issued in exchange therefore or
in place thereof.

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     (E)  The Trustee may accept a certificate of the Secretary or Assistant
Secretary of the Issuer under its corporate seal to the effect that a resolution
in the form therein set forth has been adopted by the Issuer as conclusive
evidence that such resolution has been duly adopted and is in full force and
effect. As to the existence or nonexistence of any fact or as to the sufficiency
or validity of any instrument, paper or proceeding, the Trustee shall be
entitled to rely upon a certificate of the Company or the Bank signed by an
Authorized Representative of the Company or the Bank, as the case may be, or a
certificate of an Authorized Representative of the Issuer under seal, as
sufficient evidence of the facts therein contained and, prior to the occurrence
of a default of which it has been notified as provided in paragraph (M) of this
Section or of which by said paragraph it is deemed to have notice, shall also be
at liberty to accept a similar certificate to the effect that any particular
dealing, transaction or action is or is not necessary or expedient, but may at
its discretion, at the reasonable expense of the Company, in every case secure
such further evidence as it may think necessary or advisable, but shall in no
case be bound to secure the same.

     (F)  The permissive right of the Trustee to do things enumerated in the
Financing Documents shall not be construed as a duty unless so specified herein,
and in doing or not doing so the Trustee shall not be answerable for other than
its own gross or willful misconduct.

     (G)  At any and all reasonable times, the Trustee, and its duly authorized
agents, attorneys, experts, accountants and representatives, shall have the
right fully to inspect all books, papers and records of the Issuer pertaining to
the Project Facility and the Bonds, and to take such memoranda from and in
regard thereto as may be desired.

     (H)  Notwithstanding anything elsewhere in this Indenture, the Trustee
shall have the right, but shall not be required, to demand, in respect of the
authentication of any Bonds, the withdrawal of any moneys, the release of any
interest in Property or any action whatsoever, within the purview of this
Indenture, any showings, certificates, opinions, appraisals or other
information, or corporate action or evidence thereof, in addition to those
required herein.

     (I)  Before taking any action hereunder (except declaring an Event of
Default or drawing under the Letter of Credit on an Interest Payment Date or a
Bond Payment Date), the Trustee may require that a security and indemnity
reasonably satisfactory to it be deposited with it for the reimbursement of all
fees, costs and expenses including, but not limited to, reasonable attorney's
fees to which it may be put and to protect it against all liability, except
liability which is adjudicated to have resulted from its gross negligence or
willful misconduct by reason of any action so taken.

     (J)  All moneys received by the Trustee or any paying agent shall, until
used or applied or invested as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required by law or by this Indenture. Neither the
Trustee nor any paying agent shall be under any liability for interest on any
moneys received hereunder except such as may be agreed upon with the Issuer.

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     (K)  The Trustee, prior to an Event of Default hereunder and after curing
all Events of Default which may have occurred, undertakes to perform only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has happened which has not been cured, the Trustee shall exercise the
rights, duties and powers vested in it by this Indenture in good faith and with
that degree of diligence, care and skill which ordinarily prudent persons would
exercise under similar circumstances in handling their own affairs.

     (L)  The Trustee shall furnish to the Issuer during the term of this
Indenture upon the written request of the Issuer any reports or other account of
the use of any of the Issuer's funds held by the Trustee that may be required by
any governmental body.

     (M)  The Trustee shall not be required to take notice or be deemed to have
notice of the occurrence of any Event of Default other than an Event of Default
under Section 601(D), Section 601(E) or Section 601(H), unless the Trustee shall
have actual notice of such Event of Default or unless the Trustee shall be
specifically notified in writing of such Event of Default by the Issuer, the
Bank or the Company or by the owners of at least 25% in aggregate principal
amount of Bonds Outstanding hereunder, and all notices or other instruments
required by this Indenture to be delivered to the Trustee must, in order to be
effective, be delivered at the Office of the Trustee, and, in the absence of
such notice so delivered, the Trustee may conclusively assume there is no Event
of Default, except as aforesaid.

     (N)  The Trustee shall not be personally liable for any debts contracted or
for damages to Persons or to personal Property injured or damaged, or for
salaries or nonfulfillment of contracts, during any period in which it may be in
the possession of or managing any Property subject to the Lien of the Financing
Documents as in this Indenture provided.

     (O)  The Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in respect
of the premises.

     (P)  There shall be no additional fee charged by the Trustee for a draw
under the Letter of Credit as contemplated by Section 408 hereof or by the terms
of the Letter of Credit. Nothing in the foregoing sentence, however, shall limit
the Trustee's right to charge additional fees in the event it is required to
perform Extraordinary Services hereunder.

     (Q)  Before taking any action hereunder, or under any other Financing
Document, which would result in the Trustee acquiring title to or taking
possession of any portion or all of the Project Facility, the Trustee may
require such environmental inspections and tests of the Project Facility and
other environmental reviews as the Trustee deems necessary and, if the Trustee
determines that the taking of title or possession of all or any portion of the
Project Facility will expose the Trustee to claims or damages resulting from
environmental or ecological conditions in any way relating to the Project
Facility or any activities at the Project Facility, the Trustee may decline to
take title to or possession of the Project Facility.

SECTION 702.  FEES, CHARGES AND EXPENSES OF TRUSTEE. The Trustee shall be
entitled to payment for its Ordinary Services and Ordinary Expenses, including,
but not limited to, reasonable attorney's fees, rendered or incurred hereunder
and, in the event that it should

                                       85



become necessary for the Trustee to perform Extraordinary Services, it shall be
entitled to reasonable extra compensation therefor, and to reimbursement for
reasonable and necessary Extraordinary Expenses, including, but not limited to,
reasonable attorney's fees, in connection therewith; provided that, if such
Extraordinary Services or Extraordinary Expenses are occasioned by the gross
negligence or willful misconduct of the Trustee, it shall not be entitled to
compensation or reimbursement therefor.

SECTION 703.  NOTICE TO BONDHOLDERS OF DEFAULT. If an Event of Default occurs of
which the Trustee is, by Section 614 or paragraph (M) of Section 701 hereof,
required to take notice or if notice of an Event of Default has been given to it
as in said Section 614 or paragraph (M) provided, then the Trustee shall give
written notice thereof by mail to all owners of Bonds then Outstanding as shown
on the bond register maintained by the Trustee.

SECTION 704.  INTERVENTION BY TRUSTEE. In any judicial proceeding to which the
Issuer is a party and which in the opinion of the Trustee and its counsel has a
substantial bearing on the interests of Bondholders, the Trustee may intervene
on behalf of Bondholders and shall do so if requested in writing by the owners
of at least 25% in aggregate principal amount of all Bonds then Outstanding if
offered the security and indemnity provided for in Section 701(I). The rights
and obligations of the Trustee under this Section 704 are subject to the
approval of a court of competent jurisdiction.

SECTION 705.  SUCCESSOR TRUSTEE. Any corporation or association into which the
Trustee may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer to which it is a party,
shall, ipso facto, be and become successor Trustee hereunder and vested with all
of the title to the Trust Revenues and all the trusts, powers, discretions,
immunities, privileges and all other matters as was its predecessor, without the
execution or filing of any instruments or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

SECTION 706.  RESIGNATION BY THE TRUSTEE. The Trustee and any successor Trustee
may at any time resign from the trusts hereby created by giving sixty (60) days'
written notice to the Issuer, the Bank and the Company and by registered or
certified mail to each Owner of Bonds then Outstanding and such resignation
shall take effect at the end of such sixty (60) day period, but not prior to the
acceptance of appointment by a successor Trustee under Section 709 hereof. Such
notice to the Issuer, the Bank and the Company may be served personally or sent
by registered mail. If an instrument of acceptance by a successor Trustee shall
not be delivered to the Trustee within sixty (60) days after the giving of such
notice of resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

SECTION 707.  REMOVAL OF THE TRUSTEE. (A) The Trustee may be removed at any
time, by an instrument or concurrent instruments in writing delivered to the
Trustee, the Issuer, the Bank and the Company, and signed by the Owners of a
majority in aggregate principal amount

                                       86



of all Bonds then Outstanding. Such notice shall specify the date that such
removal shall take effect.

     (B)  No removal of the Trustee under this Section 707 shall be effective
until a successor Trustee shall have been appointed and shall have accepted the
terms and conditions imposed hereby.

SECTION 708.  APPOINTMENT OF SUCCESSOR TRUSTEE BY THE BONDHOLDERS; TEMPORARY
TRUSTEE. (A) In case the Trustee hereunder shall resign or be removed, or be
dissolved, or shall be in course of dissolution or liquidation, or otherwise
become incapable of acting hereunder, or in case it shall be taken under the
control of any public officer or officers, or of a receiver appointed by a
court, a successor may be appointed by the owners of a majority in aggregate
principal amount of Bonds then Outstanding, by an instrument or concurrent
instruments in writing signed by such owners, or by their duly authorized
attorneys; provided, nevertheless, that in case of vacancy, the Issuer by an
instrument executed and signed by the Chairman or Vice Chairman and attested by
the Secretary or Assistant Secretary of the Issuer under its seal, may appoint a
temporary Trustee to fill such vacancy until a successor Trustee shall be
appointed by such Bondholders in the manner above provided; and any such
temporary Trustee so appointed by the Issuer shall immediately and without
further act be superseded by the Trustee so appointed by such Bondholders.

     (B)  Every such successor or temporary Trustee appointed pursuant to the
provisions of this Section 708 shall (1) be a trust company or bank organized
under the laws of the United States of America or any state thereof and which is
in good standing, (2) be located within or outside the State, (3) be duly
authorized to exercise trust powers in the State, (4) be subject to examination
by a federal or state authority, and (5) maintain a reported capital and surplus
of not less than $20,000,000 (or a combined capital and surplus in excess of
$3,500,000 and the obligations of which, whether now in existence or hereafter
incurred, are fully guaranteed by a corporation organized and doing business
under the laws of the United States, any State or Territory thereof or of the
District of Columbia, that has a combined capital and surplus of at least
$50,000,000), if there be one able and willing to accept the trust on reasonable
and customary terms.

SECTION 709.  CONCERNING ANY SUCCESSOR TRUSTEE. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and also to the Issuer an instrument in writing accepting such appointment
hereunder, and thereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, Properties, rights,
powers, trusts, duties and obligations of its predecessor; but such predecessor
shall, nevertheless, on the written request of the Issuer, or of its successor,
and upon payment of all amounts due such predecessor, execute and deliver an
instrument transferring to such successor Trustee all the estates, Properties,
rights, powers and trusts of such predecessor hereunder; and every predecessor
Trustee shall deliver all securities and moneys held by it as Trustee hereunder
to its successor. Should any instrument in writing from the Issuer be required
by a successor Trustee for more fully and certainly vesting in such successor
the estates, Properties, rights, powers and duties hereby vested or intended to
be vested in the predecessor, any and all such instruments in writing shall, on
request, be executed, acknowledged and

                                       87



delivered by the Issuer. The resignation of any Trustee and the instrument or
instruments removing any Trustee and appointing a successor hereunder, together
with all other instruments provided for in this Article VII, shall be filed
and/or recorded by the successor Trustee in each recording office where this
Indenture shall have been filed and/or recorded.

SECTION 710.  TRUSTEE PROTECTED IN RELYING UPON RESOLUTIONS, ETC. The
resolutions, opinions, certificates and other instruments provided for in this
Indenture may be accepted by the Trustee as conclusive evidence of the facts and
conclusions stated therein and shall be full warrant, protection and authority
to the Trustee for the release of property and the withdrawal of moneys
hereunder.

SECTION 711.  SUCCESSOR TRUSTEE AS TRUSTEE, PAYING AGENT AND BOND REGISTRAR. In
the event of a change in the office of Trustee, the predecessor Trustee which
has resigned or has been removed shall cease to be Trustee and paying agent on
the Bonds and Bond Registrar, and the successor Trustee shall become such
Trustee and paying agent and Bond Registrar.

SECTION 712.  TRUST MAY BE VESTED IN SEPARATE OR CO-TRUSTEE. (A) It is the
purpose of this Indenture that there shall be no violation of any law of any
jurisdiction, including particularly the law of the State, denying or
restricting the right of banking corporations or associations to transact
business as trustee in such jurisdiction. It is recognized that in case of
litigation under this Indenture, and in particular in case of the enforcement of
any such instrument on default, or in case the Trustee deems that by reason of
any present or future law of any jurisdiction it may not exercise any of the
powers, rights or remedies herein granted to the Trustee or hold title to the
trust herein created, or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that the Trustee appoint
an additional individual or institution as a separate or co-trustee.

     (B)  In the event that the Trustee appoints an additional institution as a
separate or co-trustee, each and every remedy, power, right, claim, demand,
cause of action, immunity, estate, title, interest and lien expressed or
intended by this Indenture to be exercised by or vested in or conveyed to the
Trustee with respect thereto shall be exercisable by and vest in such separate
or co-trustee, but only to the extent necessary to enable such separate or
co-trustee to exercise such powers, rights and remedies; and every covenant and
obligation necessary to the exercise thereof by such separate or co-trustee
shall run to and be enforceable by either of them.

     (C)  Should any deed, conveyance or instrument in writing from the Issuer
be required by the separate trustee or co-trustee so appointed by the Trustee
for more fully and certainly vesting in and confirming to him or it such
Properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer. In case any separate trustee or
co-trustee, or a successor to either, shall die, become incapable of acting,
resign or be removed, all the estates, Properties, rights, powers, trusts,
duties and obligations of such separate trustee or co-trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a new trustee or successor to such separate trustee or
co-trustee.

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SECTION 713.  TRUSTEE TO EXERCISE POWERS OF STATUTORY TRUSTEE. The Trustee shall
be and is hereby vested with all of the rights, powers and duties of a Trustee
which could be appointed by the Bondholders pursuant to Section 878 of the Act,
and the right of the Bondholders to appoint a Trustee pursuant to Section 878 of
the Act is hereby abrogated in accordance with the provisions of the Act.

SECTION 714.  NEW YORK REAL PROPERTY LAW. (A) To the extent, if any, that
Article 4-a of the New York Real Property Law, as in effect from time to time,
may apply to this Indenture or the transactions contemplated hereby, then and in
such event, notwithstanding any provision of this Indenture to the contrary, the
following provisions of this Section 714 shall apply to this Indenture.

     (B)  The Trustee shall have, without limitation, the following additional
powers and duties:

     (1)  To receive and collect directly and without the intervention or
assistance of any fiscal agent or other intermediary all payments of monies
required to be made under this Indenture and to disburse the same pursuant to
the terms hereof.

     (2)  To act as tax withholding agent, and to receive, collect and pay the
necessary taxes and hold the surplus, if any, in trust for the rightful owner
thereof.

     (3)  In the event of a default in the payment or deposit of interest,
amortization, taxes, assessments or principal (without any request from the
Bondholders or any of them) with due diligence, prudence and care in its
discretion:

     (a)  to take such action as may be necessary or proper to sequester the
rents and income from the Project Facility and otherwise from the Trust Estate;

     (b)  to procure from the owner of the Project Facility and/or of the Trust
Estate an assignment of rents and/or a consent to enter into possession of the
Project Facility and/or the Trust Estate and to collect the rents and income
therefrom;

     (c)  to apply to any court of competent jurisdiction for the appointment of
a receiver of the rents and income from the Project Facility and the Trust
Estate;

     (d)  to declare due and payable forthwith any principal amount remaining
due and unpaid and commence an action to foreclose any Lien on the Project
Facility and/or the Trust Estate;

     (e)  to apply the moneys received as rents and income from the Project
Facility and/or the Trust Estate as well as moneys received by the Trustee from
any receiver appointed for the Project Facility and/or the Trust Estate in his
discretion, to the maintenance and operation of such Trust Estate, the payment
of taxes, water rents and assessments levied thereon and any arrears thereof, to
the payment of underlying Liens, and to the creation and maintenance of a
reserve or sinking fund, and after the commencement of an action to foreclose
any Lien on the

                                       89



Project Facility and/or the Trust Estate, to distribute ratably among the
Bondholders any moneys remaining in its hands; and

     (f)  to render annually to the Bondholders, after the occurrence of an
Event of Default, unless such Event of Default be previously cured, a summarized
statement of income and expenditures in connection with the Trust Estate.

     (4)  To permit the Issuer or other Person in possession or control of the
Project Facility and/or the Trust Estate, or its successors in interest, to be
free to select the insurance broker or agent through whom any insurance of any
kind is to be placed or written on any property affected or covered by a
mortgage held by such Trustee.

     (C)  The powers and duties conferred and imposed in subsection (B) of this
Section 714 shall be in addition to those conferred and imposed by other
provisions of this Indenture and, in case of a conflict, the provisions of said
subsection (B) shall prevail; provided, however, that if Article 4-A of the Real
Property Law of the State (or any successor provision) or any portion thereof
should at any time be repealed or should be construed by a non-appealable
judicial decision of a State or Federal court specifically to be inapplicable to
this Indenture, said subsection (B) or the corresponding provisions of said
subsection (B), as the case may be, shall cease to have any further force and
effect; provided, further, that any modification of the powers and duties of a
trustee pursuant to Article 4-A of the Real Property Law of the State shall be
incorporated by reference herein as part of said subsection (B).

SECTION 715.  CONFLICTS OF INTEREST. (A) To the extent, if any, that Article 4-A
of the New York Real Property Law, as in effect from time to time, may apply to
this Indenture or the transactions contemplated hereby, then and in such event,
notwithstanding any provision of this Indenture to the contrary, the following
provisions of this Section 715 shall apply to this Indenture. If the Trustee has
or shall acquire any conflicting interest as hereinafter defined:

     (1)  the Trustee shall, within ninety (90) days after ascertaining that it
has such conflicting interest, either eliminate such conflicting interest or
resign, such resignation to become effective upon the appointment of a successor
trustee and such successor's acceptance of such appointment; and the Issuer
shall take prompt steps to have a successor appointed in the manner provided in
this Indenture;

     (2)  in the event that the Trustee shall fail to comply with the provisions
of paragraph (1) of this subsection (A), the Trustee shall, within ten (10) days
after the expiration of such ninety-day period, transmit notice of such failure
by mail (a) to all registered Holders of Bonds, as the names and addresses of
such Holders appear upon the registration books of the Issuer, (b)to such
Holders of Bonds as have, within the two (2) years preceding such transmission,
filed their names and addresses with the Trustee for the purpose of receiving
notices or reports to Holders of Bonds and (c) to all Holders of Bonds whose
names and addresses are contained in information currently preserved by the
Trustee for such purpose in accordance with subsection (G) of this Section 715;
and

                                       90



     (3)  any Holder of Bonds who has been a bona fide Holder thereof for at
least six (6) months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee, and the appointment of a successor, if the Trustee fails, after written
request therefor by such Holder, to comply with the provisions of paragraph (1)
of this subsection (A).

     (B)  For purposes of subsection (A) of this Section 715, the Trustee shall
be deemed to have a conflicting interest if:

     (1)  the Trustee is trustee under another mortgage, deed of trust, trust
indenture or other similar instrument (hereinafter in this Section 715 referred
to as an "indenture") under which any other securities, or certificates of
interest or participation in any other securities, of an obligor upon the Bonds
are outstanding unless (1) such other indenture is a collateral trust indenture
under which the only collateral consists of Bonds issued under this Indenture,
or (2)such obligor has no substantial unmortgaged assets and is engaged
primarily in the business of owning, or of owning and developing or operating,
real estate, and this Indenture and such other indenture are secured by wholly
separate and distinct parcels of real estate; provided, however, that there
shall be excluded from the operation of this paragraph any other indenture or
indentures which shall have been qualified with the United States Securities and
Exchange Commission pursuant to the provisions of the Trust Indenture Act of
1939, as from time to time amended and in force;

     (2)  the Trustee or any of its directors or executive officers is an
obligor upon the Bonds or an underwriter for such an obligor;

     (3)  the Trustee directly or indirectly controls, or is directly or
indirectly controlled by or is under direct or indirect common control with, an
obligor upon the Bonds or an underwriter for such an obligor;

     (4)  the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of an obligor
upon the Bonds, or of an underwriter (other than the Trustee itself) for such an
obligor who is currently engaged in the business of underwriting, except that
(a) one individual may be a director or an executive officer of the Trustee and
a director or an executive officer of such obligor, but may not be at the same
time an executive officer of both the Trustee and of such obligor, and (b) if
and so long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive officer of the
Trustee and a director of such obligor, and (c) the Trustee may be designated by
any such obligor or by any underwriter for any such obligor to act in the
capacity of transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent or depositary, or in any other similar capacity, or, subject to the
provisions of paragraph (1) of this subsection (B), to act as trustee, whether
under an indenture or otherwise;

     (5)  ten percent or more of the voting securities of the Trustee is
beneficially owned either by an obligor upon the Bonds or by any director,
partner or executive officer thereof, or twenty percent or more of such voting
securities is beneficially owned, collectively, by any two or more of such
persons; or ten per centum or more of the voting securities of the Trustee is

                                       91



beneficially owned either by an underwriter for any such obligor or by any
director, partner or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;

     (6)  the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default as hereinafter defined, (a) five
per centum or more of the voting securities, or ten per centum or more of any
other class of security, of an obligor upon the Bonds, not including the Bonds
and securities issued under any other indenture under which the Trustee is also
such trustee, or (b) ten per centum or more of any class of securities of an
underwriter for any such obligor;

     (7)  the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default as hereinafter defined, five per
centum or more of the voting securities of any person who, to the knowledge of
the Trustee, owns ten per centum or more of the voting securities of, or
controls directly or indirectly or is under direct or indirect control with, an
obligor upon the Bonds;

     (8)  the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default as hereinafter defined, ten per
centum or more of any class of securities of any person who, to the knowledge of
the Trustee, owns fifty per centum or more of the voting securities of an
obligor upon the Bonds; or

     (9)  the Trustee owns, on October fifteenth in any calendar year, in the
capacity of executor, administrator, testamentary or inter vivos trustee,
guardian, committee or conservator, or in any other similar capacity, an
aggregate of twenty-five per centum or more of the voting securities, or of any
class of securities, of any person, the beneficial ownership of a specified
percentage of which would have constituted a conflicting interest under
paragraph (6), (7) or (8) of this subsection (B). As to any such securities of
which the Trustee acquired ownership through becoming executor, administrator or
testamentary trustee of an estate which included them, the provisions of the
preceding sentence shall not apply, for a period of not more than two (2) years
from the date of such acquisition, to the extent that such securities included
in such estate do not exceed twenty-five per centum of such voting securities or
twenty-five per centum of any such class of securities. Promptly after October
fifteenth in each calendar year, the Trustee shall make a check of its holdings
of such securities in any of the above-mentioned capacities as of such October
fifteenth. If the Issuer fails to make payment in full of principal or interest
under this Indenture when and as the same becomes due and payable, and such
failure continues for thirty (30) days thereafter, the Trustee shall make a
prompt check of its holdings of such securities in any of the above-mentioned
capacities as of the date of the expiration of such thirty-day period, and after
such date, notwithstanding the foregoing provisions of this paragraph, all such
securities so held by the Trustee, with sole or joint control over such
securities vested in it, shall be considered as though beneficially owned by the
Trustee, for the purposes of paragraphs (6), (7) and (8) of this subsection (B).

     (C)  The specification of percentages of paragraphs (5) through (9),
inclusive, of subsection (B) of this Section 715 shall not be construed as
indicating that the ownership of such

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percentages of the securities of a Person is or is not necessary or sufficient
to constitute direct or indirect control for the purposes of paragraph (3) or
(7) of subsection (B) of this Section 7.15.

     (D)  For the purposes of paragraphs (6), (7), (8) and (9) of paragraph (B)
of this Section 715, (1) the terms "security" and "securities" shall include
only such securities as are generally known as corporate securities, but shall
not include any note or other evidence of indebtedness issued to evidence an
obligation to repay monies lent to a Person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness; (2) an obligation shall be deemed to
be "in default" when a default in payment of principal shall have continued for
thirty (30) days or more, and shall not have been cured; and (3) the Trustee
shall not be deemed the owner or holder of (a) any security which it holds as
collateral security (as trustee or otherwise) for an obligation which is not in
default as above defined, or (b) any security which it holds as collateral
security under this Indenture, irrespective of any default thereunder, or (c)
any security which it holds as agent for collection, or as custodian, escrow
agent or depositary, or in any similar representative capacity.

     (E)  For the purposes of subsection (B) of this Section 715, the term
"underwriter", when used with reference to an obligor upon the Bonds, means
every Person who, within three (3) years prior to the time as of which the
determination is made, was an underwriter of any security of such obligor
outstanding at such time.

     (F)  When used in subsections (B) through (E), inclusive, of this Section
715, unless the context otherwise requires:

     (1)  The term "underwriter" means any Person who has purchased from an
issuer with a view to, or offers or sells for an issuer in connection with, the
distribution of any security, or participates or has a direct or indirect
participation in any such undertaking, or participates or has a participation in
the direct or indirect underwriting of any such undertaking; but such term shall
not include a Person whose interest is limited to a commission from an
underwriter or dealer not in excess of the usual and customary distributors' or
sellers' commission.

     (2)  The term "director" means any director of a corporation or any
individual performing similar functions with respect to any organization,
whether incorporated or unincorporated.

     (3)  The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary, and the treasurer of
a corporation, and any individual customarily performing similar functions with
respect to any organization, whether incorporated or unincorporated, but shall
not include the chairman of the board of directors.

     (4)  The term "obligor", when used with respect to the Bonds, means every
person who is liable thereon.

     (5)  The term "voting security" means any security presently entitling the
owner or holder thereof to vote in the direction or management of the affairs of
a person, or any security issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or

                                       93



agent or agents for the owner or holder of such security are presently entitled
to vote in the direction or management of the affairs of a Person; and a
specified percentage of the voting securities of a Person means such amount of
the outstanding voting securities of such Person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes which
the holders of all the outstanding voting securities of such Person are entitled
to cast in the direction or management of the affairs of such Person.

     (G)  The Issuer agrees that it will furnish or cause to be furnished to the
Trustee as soon as reasonably practicable after receipt thereof and at such
other times as the Trustee may request in writing all information in the
possession or control of the Issuer as to the names and addresses of the Holders
of the Bonds. The Trustee shall preserve, in as current a form as is reasonably
practicable, all such information so furnished to it.

SECTION 716.  DESIGNATION AND SUCCESSION OF TENDER AGENTS. (A) The Trustee
hereby agrees to act as Tender Agent for the Bonds. In the event a Tender Agent,
other than the Trustee, is required in connection with the remarketing of the
Bonds, the Company is hereby authorized to appoint a Tender Agent meeting the
requirements set forth in Section 717 hereof. Upon the appointment of a Tender
Agent pursuant to Section 717 hereof, the Tender Agent shall agree to provide,
as soon as practicable, the Trustee with copies of all written notices it
receives in connection with its duties as Tender Agent.

     (B)  Any corporation or association into which a Tender Agent may be
merged, or with which it may be consolidated, or to which it may sell, lease or
transfer its corporate trust business and assets as a whole or substantially as
a whole, shall be and become successor hereunder and shall be vested with all
the powers, rights, obligations and duties hereunder as was its predecessor,
without the execution or filing of any instrument by any party hereto. Any
Tender Agent may at any time resign and be discharged of the duties and
obligations created by this Indenture by giving at least sixty (60) days notice
to the Issuer, the Company, the Bank and the Trustee; provided, that such
resignation shall not take effect until a successor Tender Agent shall have
accepted its duties and obligations hereunder. The Tender Agent may be removed
at any time upon at least sixty (60) days' notice by an instrument, signed by
the Issuer at the direction of the Company and delivered to the Tender Agent and
filed with the Trustee.

     (C)  In the event of the resignation or removal of a Tender Agent, or in
the event the Tender Agent shall be dissolved, or if the property or affairs of
a Tender Agent shall be taken under the control of any state or federal court or
administrative body by reason of insolvency or bankruptcy, the Issuer shall, or
for any other reason the Issuer may, with the consent of the Bank and the
Company, appoint a successor Tender Agent, meeting the requirements set forth in
Section 717 hereof. The former Tender Agent shall pay over, assign and deliver
any moneys and Bonds held by it in such capacity to the successor Tender Agent
when appointed, or, if there be no successor Tender Agent appointed with thirty
(30) days, to the Trustee. In the event that (1)the Issuer shall fail to propose
for the consent of the Bank and the Company a successor Tender Agent hereunder
or, (2) the position of Tender Agent shall be vacant for any other reason, the
Trustee, shall accept the assignment and delivery of the moneys and Bonds held
by the former Tender Agent and shall hold and dispose of them as set forth in
this Section. It is expressly understood hereunder that if in the event the
position of Tender Agent is vacant for any

                                       94



reason, the Trustee shall assume the duties of Tender Agent hereunder. If the
Issuer shall fail to propose a successor Tender Agent for the consent of the
Bank and the Company within thirty (30) days after request, the Trustee may
appoint a successor Tender Agent with the consent of the Bank and the Company.
Neither the Issuer nor the Trustee shall incur any liability as a result of any
appointment or failure to appoint the Tender Agent or a successor Tender Agent.

     (D)  The Trustee shall, within 10 days of the resignation or removal of the
Tender Agent or the appointment of a successor Tender Agent, give notice thereof
by first class mail, postage prepaid, to the owners of the Bonds.

SECTION 717.  QUALIFICATIONS OF TENDER AGENT. (A) The Tender Agent shall be a
corporation duly organized under the laws of the United States of America or any
state or territory thereof, and, if the Bonds are rated by Moody's and, if not a
bank or trust company, rated at least Baa3/P3 or otherwise qualified by Moody's,
having a combined capital and surplus of at least $20,000,000 (or a combined
capital and surplus in excess of $3,500,000 and the obligations of which,
whether now in existence or hereafter incurred, are fully guaranteed by a
corporation organized and doing business under the laws of the United States,
and State or Territory thereof or of the District of Columbia, that has a
combined capital and surplus of at least $50,000,000) and authorized by law to
perform all the duties imposed upon it by this Indenture.

     (B)  Any successor Tender Agent shall designate its Principal Office and
signify its acceptance of the duties and obligations imposed upon it hereunder
by a written instrument of acceptance delivered to the Trustee, the Issuer and
the Credit Facility Issuer in which the Tender Agent will agree, particularly:

     (1)  to hold all Bonds delivered to it pursuant to Section 304 hereof, as
agent and bailee of, and in escrow for the benefit of, the respective owners
thereof until moneys representing the purchase price of such Bonds shall have
been delivered to or for the account of or to the order of such owners;

     (2)  to hold all moneys (without investment thereof) delivered to it
hereunder for the purchase of Bonds pursuant to Section 304 hereof as agent and
bailee of, and in escrow for the benefit of, the person or entity which shall
have so delivered such moneys until the Bonds purchased with such moneys shall
have been delivered to or for the account of such person or entity;

     (3)  to hold Bonds for the account of the Issuer as contemplated by Section
307(A)(3) hereof;

     (4)  to hold Bonds purchased pursuant to Section 304 hereof with moneys
representing the proceeds of a drawing under the Credit Facility to be held
pursuant to Section 3.08 hereof as agent and bailee; and

                                       95



     (5)  to keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available for inspection by
the Trustee and the Issuer at all reasonable times.

SECTION 718.  DESIGNATION AND SUCCESSION OF REMARKETING AGENT. (A) The Issuer
hereby appoints McDonald Investments Inc., a Key Corp Company, as Remarketing
Agent under this Indenture. The Issuer may appoint a different Remarketing
Agent. Each Remarketing Agent, by written instrument delivered to the Trustee,
the Company and the Issuer, shall accept the duties and obligations imposed on
it under this Indenture and shall become a party to the Remarketing Agreement.

     (B)  In addition to the other obligations imposed on the Remarketing Agent
hereunder, the Remarketing Agent shall agree to keep such books and records as
shall be consistent with prudent industry practice and make such books and
records available for inspection by the Issuer and the Trustee at all reasonable
times.

     (C)  If at any time a Remarketing Agent is unable or unwilling to act as a
Remarketing Agent, such Remarketing Agent, upon 60 days' prior written notice to
the Issuer, the Trustee, the Tender Agent, and any other Remarketing Agent, may
resign. Any Remarketing Agent may be removed at any time by the Issuer, by
written notice signed by the Issuer and delivered to the Trustee and such
Remarketing Agent. Upon resignation or removal of a Remarketing Agent, the
Issuer shall either appoint a successor Remarketing Agent or authorize the
remaining Remarketing Agent or Agents to act alone in such capacity, in which
case all reference in this Indenture to the Remarketing Agent shall mean the
remaining Remarketing Agent or Agents. If the remaining Remarketing Agent
resigns or is removed, the Issuer shall appoint a substitute Remarketing Agent
or Agents.

     (D)  In the event that the Issuer shall fail to appoint a successor
Remarketing Agent or Agents, upon the resignation or removal of the remaining
Remarketing Agents or upon their dissolution, insolvency or bankruptcy, the
Trustee shall appoint a Remarketing Agent or Agents.

     (E)  The Trustee shall, within 10 Business days of the resignation or
removal of the Remarketing Agent or the appointment of a successor Remarketing
Agent, give notice thereof by first class mail, postage prepaid, to the owners
of the Bonds.

SECTION 719.  QUALIFICATIONS OF REMARKETING AGENT. Any successor Remarketing
Agent shall be an institution authorized by law to perform all the duties
imposed upon it under this Indenture and the Remarketing Agreement.

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                                       96



                                  ARTICLE VIII

                             SUPPLEMENTAL INDENTURES

SECTION 801.  SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS. (A)
The Issuer and the Trustee, without the consent of, or notice to, any of the
Bondholders, may enter into an indenture or indentures supplemental to this
Indenture and not inconsistent with the terms and provisions hereof or, in the
sole judgment of the Trustee, materially adverse to the interests of the Holders
of the Bonds or to the Bank, for any one or more of the following purposes:

     (1)  to cure any ambiguity or formal defect or omission in this Indenture;

     (2)  to grant to or confer upon the Trustee for the benefit of the
Bondholders any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the Bondholders or the Trustee or any
of them;

     (3)  to subject additional rights and revenues to the Lien of this
Indenture, or to identify more precisely the Trust Estate;

     (4)  to obtain or maintain a rating on the Bonds from Moody's or Standard &
Poor's;

     (5)  to comply with the provisions of the Code necessary to maintain the
exclusion of interest on the Bonds from gross income for federal income tax
purposes;

     (6)  to modify, amend or supplement this Indenture or any indenture
supplemental hereto in such manner as to permit the qualification hereof and
thereof under the Trust Indenture Act of 1939 or any similar Federal statute
hereafter in effect or under any state Blue Sky Law;

     (7)  to enable the issuance of Additional Bonds; or

     (8)  for any other purpose not materially adverse to the interests of the
Holders of the Bonds.

     (B)  The Issuer and the Trustee may rely on an opinion of Independent
Counsel as conclusive evidence that the execution and delivery of any amendment
or supplemental indenture has been effected in compliance with this Section 801.

SECTION 802.  SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS. (A)
Except for supplemental indentures as provided in Section 801 hereof, the
Holders of not less than two-thirds in aggregate principal amount of the Bonds
then Outstanding shall have the right, from time to time, anything in this
Indenture to the contrary notwithstanding, to consent to and approve the
execution by the Issuer and the Trustee of such indenture or indentures
supplemental hereto as shall be deemed necessary or desirable by the Issuer or
the Trustee for the purpose of modifying, altering, amending, adding to or
rescinding, in any particular, any of the terms or provisions contained in this
Indenture or in any

                                       97



supplemental indenture; provided, however, that nothing contained in this
Section 802 shall permit or be construed as permitting (1) without the consent
of the Holder of such Bond, (a) a reduction in the rate, or extension of the
time of payment, of interest on any Bond, (b) a reduction of any premium payable
on the redemption of any Bond, or an extension of time for such payment, or (c)
a reduction in the principal amount payable on any Bond, or an extension of time
in which the principal amount of any Bond is payable, whether at the stated or
declared maturity or redemption thereof, (2) the creation of any Lien prior to
or on a parity with the Lien of this Indenture (other than that parity Lien
created to secure the Additional Bonds), (3) a reduction in the aforesaid
aggregate principal amount of Bonds, the Holders of which are required to
consent to any such supplemental indenture, without the consent of the Holders
of all the Bonds at the time Outstanding which would be affected by the action
to be taken, (4) the modification of the rights, duties or immunities of the
Trustee, without the written consent of the Trustee, or (5) a privilege or
priority of any Bond or Bonds over any other Bond or Bonds.

     (B)  If at any time the Issuer and the Trustee propose to enter into any
such supplemental indenture for any of the purposes specified in this Section
802, the Trustee shall, upon being satisfactorily secured and indemnified as
provided in Section 701(I) hereof with respect to fees, costs and expenses,
including, but not limited to, reasonable attorneys' fees, cause notice of the
proposed execution of such supplemental indenture to be mailed to each
Bondholder. Such notice shall briefly set forth the nature of the proposed
supplemental indenture and shall state that copies thereof are on file at the
Office of the Trustee for inspection by all Bondholders. If, within sixty (60)
days or such longer period as shall be prescribed by the Trustee following the
mailing of such notice, the Holders of not less than two-thirds in aggregate
principal amount of the Bonds Outstanding at the time of the execution of any
such supplemental indenture shall have consented to and approved the execution
thereof as herein provided, no Holder of any Bond shall have any right to object
to any of the terms and provisions contained therein, or the operation thereof,
or in any manner to question the propriety of the execution thereof, or to
enjoin or restrain the Trustee or the Issuer from executing the same or from
taking any action pursuant to the provisions thereof. Upon the execution of any
such supplemental indenture as in this Section 802 permitted and provided, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith.

     (C)  The Issuer and the Trustee may rely upon an opinion of Independent
Counsel as conclusive evidence that the execution and delivery of a supplemental
indenture has been effected in compliance with the provisions of this Section
802.

SECTION 803.  SUPPLEMENTAL INDENTURES; CONSENT OF CREDIT FACILITY ISSUER.
Notwithstanding anything to the contrary herein contained, if there is in effect
a Credit Facility or an Alternate Credit Facility relating to the Bonds and
there exists no wrongful dishonor of any drawing presented under the Credit
Facility or Alternate Credit Facility then in effect, the Issuer and the Trustee
shall in no event enter into any indenture supplemental to this Indenture under
Section 801 or Section 802 hereof without the prior written consent of the
Credit Facility Issuer and such other assurance from the Credit Facility Issuer
as counsel to the Trustee may require that the Credit Facility Issuer's
obligations under the Credit Facility have not been diminished or otherwise
affected by such supplemental indenture. The Issuer and the Trustee

                                       98



shall be entitled to rely upon such certificates or opinions delivered by the
Credit Facility Issuer or its counsel to such effect.

SECTION 804.  SUPPLEMENTAL INDENTURES; CONSENT OF THE COMPANY. Notwithstanding
anything contained in this Indenture to the contrary, no supplemental indenture
which affects any rights or liabilities of the Company shall become effective
unless or until the Company shall have consented in writing to the execution and
delivery of such supplemental indenture. In this regard, the Trustee shall cause
notice of the proposed execution and delivery of any such supplemental indenture
to be mailed by certified or registered mail to the Company at least fifteen
(15) days prior to the proposed date of execution and delivery of any
supplemental indenture. The Company shall be deemed to have consented to the
execution and delivery of any supplemental indenture if the Trustee has not
received a letter of protest or objection signed by the Company within fifteen
(15) days after the mailing of said notice and a copy of the supplemental
indenture. The Trustee may rely upon an opinion of Independent Counsel as
conclusive evidence whether or not a supplemental indenture affects any rights
or liabilities of the Company within the meaning of, and for the purposes of,
this Section 804.

SECTION 805.  EFFECT OF SUPPLEMENTAL INDENTURES. Any supplemental indenture
executed in accordance with the provisions of this Article VIII shall thereafter
form part of the terms and conditions of this Indenture for any and all
purposes.

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                                       99



                                   ARTICLE IX

                    AMENDMENT TO INSTALLMENT SALE AGREEMENT,
                  CREDIT FACILITY OR OTHER FINANCING DOCUMENTS

SECTION 901.  AMENDMENTS TO INSTALLMENT SALE AGREEMENT OR OTHER FINANCING
DOCUMENTS NOT REQUIRING CONSENT OF BONDHOLDERS. (A) The Issuer, the Company and
the Trustee may, without the consent of or notice to the Bondholders, consent to
any amendment, change or modification of the Installment Sale Agreement or any
other Financing Document (other than this Indenture) as may be required (1) by
the provisions of any Financing Document, (2) for the purpose of curing any
ambiguity or formal defect therein or omission therefrom, (3) so as to identify
more precisely the Project Facility, (4) in connection with any supplemental
indenture entered into pursuant to Section 8.01 hereof, (5) to obtain or
maintain a rating on the Bonds from Moody's or Standard & Poor's, (6) to permit
the issuance of Additional Bonds, (7) to comply with the provisions of the Code
necessary to maintain the exclusion of interest on the Bonds from gross income
for federal income tax purposes, (8) in connection with any other supplemental
indenture, but only if any such amendment, change or modification, in the sole
judgment of the Trustee, is not to the prejudice of the Trustee or the
Bondholders, or (9) as may be requested by the Credit Facility Issuer pursuant
to Section 905 hereof.

     (B)  The Trustee may rely upon an opinion of Independent Counsel as
conclusive evidence that the execution and delivery of any amendment, change or
modification to the Installment Sale Agreement or any other Financing Document
other than this Indenture has been effected in compliance with the provisions of
this Section 901.

SECTION 902.  AMENDMENTS TO INSTALLMENT SALE AGREEMENT OR OTHER FINANCING
DOCUMENTS REQUIRING CONSENT OF BONDHOLDERS. (A) Except for the amendments,
changes or modifications as provided in Section 901 hereof, neither the Issuer,
the Company nor the Trustee shall consent to any other amendment, change or
modification of the Installment Sale Agreement or any other Financing Document
(other than this Indenture) without the mailing of notice and the written
approval or consent thereto of the Holders of not less than two-thirds in
aggregate principal amount of the Bonds at the time Outstanding given as in this
Section 902 provided.

     (B)  If at any time the Issuer and the Company shall request the consent of
the Trustee to any such proposed amendment, change or modification of the
Installment Sale Agreement or any other Financing Document (other than this
Indenture) not authorized by Section 901 hereof, the Trustee shall, upon being
satisfactorily secured and indemnified as provided in Section 701(I) hereof with
respect to fees, costs and expenses including, but not limited to, reasonable
attorney's fees, cause notice of such proposed amendment, change or modification
to be given in the same manner as provided by Section 702 hereof with respect to
supplemental indentures. Such notice shall briefly set forth the nature of such
proposed amendment, change or modification and shall state that copies of the
instrument embodying the same are on file at the Office of the Trustee for
inspection by all Bondholders.

                                      100



     (C)  The Trustee may rely upon an opinion of Independent Counsel as
conclusive evidence that the execution and delivery of this Indenture has been
effected in compliance with the provisions of this Section 902.

SECTION 903.  AMENDMENTS TO INSTALLMENT SALE AGREEMENT OR OTHER FINANCING
DOCUMENTS; CONSENT OF CREDIT FACILITY ISSUER. Notwithstanding anything to the
contrary herein contained, if there is in effect a Credit Facility relating to
the Bonds and there exists no wrongful dishonor of any drawing presented under
the Credit Facility then in effect, the Issuer and the Trustee shall in no event
consent to any amendment, change or modification of the Installment Sale
Agreement or any other Financing Document (other than this Indenture, amendments
to which are provided for in Article VIII) without the prior written consent of
the Credit Facility Issuer and such other assurance from the Credit Facility
Issuer as counsel to the Trustee may require that the Credit Facility Issuer's
obligations under the Credit Facility have not been diminished or otherwise
affected by such amendment, change or modification of the Installment Sale
Agreement. The Issuer and the Trustee shall be entitled to rely upon such
certificates or opinions delivered by the Credit Facility Issuer or its counsel
to such effect.

SECTION 904.  AMENDMENTS TO CREDIT FACILITY. The Trustee shall notify
Bondholders of a proposed amendment of the Credit Facility which would
materially adversely affect the interests of the Bondholders and may consent
thereto with the consent of the owners of at least a majority in aggregate
principal amount of the Bonds then Outstanding which would be affected by the
action proposed to be taken; provided, that the Trustee shall not, while the
Interest Rate Mode is the Long-Term Rate, without the unanimous consent of the
owners of all Bonds then Outstanding, consent to any amendment which would (1)
decrease the amount payable under the Credit Facility or (2) reduce the term of
the Credit Facility.

SECTION 905.  AMENDMENTS REQUESTED BY CREDIT FACILITY ISSUER. If there is in
effect a Credit Facility relating to the Bonds and there exists no wrongful
dishonor of any drawing presented under the Credit Facility then in effect, the
Issuer, the Company and the Trustee may, without the consent of or notice to the
Bondholders, consent to any amendment, change or modification of the Installment
Sale Agreement or any other Financing Document (other than this Indenture)
requested by the Credit Facility Issuer, but only if such amendment, change or
modification is requested in writing by the Credit Facility Issuer, the Credit
Facility Issuer has not failed to make any payment required to be made by it
under the Letter of Credit and the Trustee shall receive such assurance from the
Credit Facility Issuer as counsel to the Trustee may require that the Credit
Facility Issuer's obligations under the Credit Facility have not been diminished
or otherwise affected by such amendment, change or modification.

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                                      101



                                    ARTICLE X

              SATISFACTION AND DISCHARGE OR ASSIGNMENT OF INDENTURE

SECTION 1001. SATISFACTION AND DISCHARGE OR ASSIGNMENT OF LIEN. (A) If the
Issuer (1) shall pay or cause to be paid, from sources other than the proceeds
of a draw under the Credit Facility, to the Holders and Owners of the Bonds, the
principal of the Bonds and premium, if any, due on the Bonds, at the times and
in the manner stipulated therein and herein, (2) shall pay or cause to be paid
from any source, to the Holders and Owners of Bonds, the interest to become due
on the Bonds at the times and in the manner stipulated therein and herein, (3)
shall have paid all fees, costs and expenses including, but not limited to,
reasonable attorney's fees of the Trustee and each paying agent, (4) shall pay
or cause to be paid the entire Rebate Amount to the United States in accordance
with the Tax Documents and Section 407 hereof, and (5) shall pay or cause to be
paid to the Bank any and all sums due and to become due under the Reimbursement
Agreement or any other Financing Document, then these presents and the trust and
rights hereby granted shall cease, terminate and be void, and thereupon the
Trustee shall (a)cancel and discharge the Lien of this Indenture upon the Trust
Estate and the Trustee's rights under the other Financing Documents and execute
and deliver to the Issuer such instruments in writing as shall be requisite to
satisfy same, (b) reconvey to the Issuer the Installment Sale Agreement and the
trust hereby conveyed, (c) assign and deliver to the Company any interest in
Property at the time subject to the Lien of this Indenture which may then be in
its possession, except amounts held by the Trustee for the payment of principal
of, interest and premium, if any, on the Bonds, and (d) deliver to the Credit
Facility Issuer the Credit Facility for cancellation.

     (B)  If the Trustee draws on the Credit Facility for payment of the entire
principal of, premium, if any, and interest on the Bonds Outstanding in
accordance with the provisions of this Indenture, then, simultaneously with the
delivery to the Credit Facility Issuer of a sight draft and required
accompanying documentation, the Trustee shall deliver to the Credit Facility
Issuer, in escrow, an instrument or instruments in form for recording, executed
by the Trustee evidencing the assignment to the Credit Facility Issuer without
recourse of the Lien of this Indenture and the rights of the Trustee under the
other Financing Documents, together with instructions to the Bank that such
instrument or instruments be released from escrow upon confirmation from a
member bank of the Federal Reserve wire system that same day funds in the amount
of the Trustee's draw on the Credit Facility have been transmitted for the
account of the Trustee, and the amount paid by the Letter of Credit Issuer under
the Credit Facility and any additional sums due the Bank pursuant to the
Reimbursement Agreement shall thereafter constitute the debt secured by this
Indenture.

     (C)  All Outstanding Bonds shall, prior to the maturity or redemption date
thereof, be deemed to have been paid within the meaning and with the effect
expressed in Section 1001(A) if, under circumstances which, in the opinion of
Bond Counsel, do not adversely affect the exclusion under the Code of interest
on the Bonds from the gross income of the Holders thereof for Federal income tax
purposes, the following conditions shall have been fulfilled: (1) in case any of
the Bonds are to be redeemed on any date prior to their maturity, the provisions
in Article III hereof relating to such redemption shall have been satisfied; and
(2) there shall be on deposit with the Trustee in the Defeasance Account, in
trust and irrevocably set aside exclusively for

                                      102



such payment in the Defeasance Account, (a) moneys sufficient to make such
payment and any payment of the purchase price of Bonds pursuant to Section 304
hereof; provided, that if a Credit Facility is then held by the Trustee, any
such moneys necessary for the payment of Bonds not yet due shall constitute
Available Moneys and/or (b) Governmental Obligations maturing as to principal
and interest in such amounts and at such times as will provide sufficient moneys
(without consideration of any reinvestment thereof) to make such payment and any
payment of the purchase price of Bonds pursuant to Section 304 hereof, and which
are not subject to prepayment, redemption or call prior to their stated
maturity; provided, that if a Credit Facility is then held by the Trustee, such
Governmental Obligations shall have been on deposit with the Trustee in a
separate and segregated account for a period of 95 days during which no Event of
Bankruptcy has occurred, or shall have been purchased with Available Moneys.

     (D)  No Bonds in respect of which a deposit under clause (a) or (b) of
Section 1001(C)(2) above has been made shall be deemed paid within the meaning
of this Article unless the Trustee is satisfied that the amounts deposited are
sufficient to make all payments that might become due on the Bonds; provided
that notwithstanding any other provision of this Indenture, any Bonds purchased
with such moneys pursuant to Section 304 hereof shall be surrendered to the
Trustee for cancellation and shall not be remarketed. Notwithstanding the
foregoing, no delivery to the Trustee under this Section 1001(C) hereof shall be
deemed a payment of any Bonds which are to be redeemed prior to their stated
maturity until such Bonds shall have been irrevocably called or designated for
redemption on a date thereafter on which such Bonds may be redeemed in
accordance with the provisions of this Indenture and proper notice of such
redemption shall have been given in accordance with Article III or the Issuer
shall have given the Trustee, in form satisfactory to the Trustee, irrevocable
instructions to give, in the manner and at the times prescribed by Article III,
notice of redemption. Neither the obligations nor moneys deposited with the
Trustee pursuant to this Section shall be withdrawn or used for any purpose
other than, and shall be segregated and held in trust for, the payment of the
principal of, redemption price of and interest on the Bonds with respect to
which such deposit has been made. In the event that such moneys or obligations
are to be applied to the payment of principal or redemption price of any Bonds
more than 60 days following the deposit thereof with the Trustee, the Trustee
shall mail once to all owners of Bonds for the payment of which such moneys or
obligations are being held at their registered addresses a notice stating that
such moneys or obligations have been deposited and identifying the Bonds for the
payment of which such moneys or obligations are being held and shall mail copies
of all such notices to the Rating Service, if the Bonds are then rated by a
Rating Service.

     (E)  The Trustee may rely upon (1) an opinion of an Accountant as to the
sufficiency of the cash or such Government Obligations on deposit and (2) an
opinion of counsel reasonably acceptable to the Trustee and to each Rating
Service by which the Bonds are then rated and experienced in bankruptcy matters
to the effect that such moneys constitute Available Moneys.

     (F)  Anything in Article VIII to the contrary notwithstanding, if moneys or
Governmental Obligations have been deposited or set aside with the Trustee
pursuant to this Article for the payment of the principal or redemption price of
the Bonds and the interest thereon and the principal or redemption price of such
Bonds and the interest thereon shall not have in

                                      103



fact been actually paid in full, no amendment to the provisions of this Article
shall be made without the consent of the owner of each of the Bonds affected
thereby.

     (G)  Notwithstanding the foregoing, those provisions relating to the
purchase of Bonds, the maturity of Bonds, interest payments and dates thereof,
optional and mandatory redemption provisions, exchange, transfer and
registration of Bonds, replacement of mutilated, destroyed, lost or stolen
Bonds, the safekeeping and cancellation of Bonds, non-presentment of Bonds, the
holding of moneys in trust, and repayments to the Company and the Bank from the
Bond Fund, the rebate of moneys to the United States in accordance with Section
505 hereof, and the duties of the Trustee and the Registrar in connection with
all of the foregoing, shall remain in effect and be binding upon the Trustee,
the Registrar, the Authenticating Agents, Paying Agents and the Bondholders
notwithstanding the release and discharge of this Indenture. The provisions in
this Article shall survive the release, discharge and satisfaction of this
Indenture.

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                                      104



                                   ARTICLE XI

                                  MISCELLANEOUS

SECTION 1101. CONSENTS AND OTHER INSTRUMENTS OF BONDHOLDERS. Any consent,
request, direction, approval, waiver, objection, appointment or other instrument
required by this Indenture to be signed and executed by the Bondholders may be
signed and executed in any number of concurrent writings of similar tenor and
may be signed or executed by such Bondholders in person or by agent appointed in
writing. Proof of the execution of any such instrument, if made in the following
manner, shall be sufficient for any of the purposes of this Indenture, and shall
be conclusive in favor of the Trustee with regard to any action taken under such
instrument, namely:

     (A)  The fact and date of the execution by any Person of any such
instrument may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer of any jurisdiction,
authorized by the laws thereof to take acknowledgments of deeds, certifying to
the execution thereof. Where such execution is by an officer of a corporation or
association or a member of a partnership on behalf of such corporation,
association or partnership, such affidavit or certificate shall also constitute
sufficient proof of his authority.

     (B)  The ownership of Bonds shall be proven by the bond register.

     (C)  Any request, consent or vote of the Holder of any Bond shall bind
every future holder of the same Bond and the holder of every Bond issued in
exchange therefor or in lieu thereof, in respect of anything done or permitted
to be done by the Trustee or the Issuer pursuant to such request, consent or
vote.

     (D)  In determining whether the Holders of the requisite aggregate
principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are owned by the Issuer, the
Company, the Bank or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer, the
Bank or the Company shall be disregarded and deemed not to be Outstanding for
the purposes of determining whether the Trustee shall be protected in relying on
any such demand, request, direction, consent or waiver. Only Bonds which the
Trustee knows to be so owned shall be disregarded. Bonds so owned which have
been pledged in good faith may be regarded as Outstanding for the purposes of
this Section 1101 if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right to vote such Bonds. In case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be
full protection to the Trustee.

SECTION 1102. LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or to be implied from this Indenture or
the Bonds is intended or shall be construed to give to any person other than the
parties hereto and the holders of the Bonds, any legal or equitable right,
remedy or claim under or in respect to this Indenture or any covenants,
conditions and provisions hereof.

                                      105



SECTION 1103. NOTICES. (A) All notices, certificates or other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (1) delivered to the applicable address stated below by
registered or certified mail, return receipt requested, or by such other means
as shall provide the sender with documentary evidence of such delivery, or (2)
delivery is refused by the addressee, as evidenced by the Person who attempted
to effect such delivery.

     (B)  The addresses to which notices, certificates and other communications
hereunder shall be delivered are as follows:

IF TO THE ISSUER:

Counties of Warren and Washington Industrial Development Agency
5 Warren Street
Glens Falls, New York 12801

Attention: Chairman

WITH A COPY TO:

Fitzgerald Morris Baker Firth, P.C.
One Broad Street Plaza
Glens Falls, New York 12801

Attention: Robert C. Morris, Esq.

IF TO THE COMPANY:

ANGIODYNAMICS, INC.
603 Queensbury Avenue
Queensbury, New York 12804

Attention: Eamonn P. Hobbs, Joseph Gerardi

WITH A COPY TO:

Kevin J. Kelley, Esq.
Bond, Schoeneck & King
111 Washington Avenue
Albany, New York 12210

                                      106



IF TO THE TRUSTEE:

The Huntington National Bank
7 Easton Oval - EA4E63
Columbus, Ohio 43219

Attention: Corporate Trust Department

IF TO THE BANK:

KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: Bryant Cassella

WITH A COPY TO:

Lemery Greisler, LLC
10 Railroad Place
Saratoga Springs, New York 12866

Attention: James A. Carminucci, Esq.

     (C)  A duplicate copy of each notice, certificate and other communication
given hereunder by (1) the Company or the Issuer shall also be given to the
Trustee, and (2) the Company, the Issuer or the Trustee shall also be given to
the Bank.

     (D)  The Issuer, the Company, the Bank and the Trustee may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificate or other communications shall be sent.

SECTION 1104. TRUSTEE AS PAYING AGENT AND BOND REGISTRAR. The Trustee is hereby
designated and agrees to act as paying agent and the Bond Registrar for and in
respect to the Bonds.

SECTION 1105. COUNTERPARTS. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

SECTION 1106. SUCCESSORS AND ASSIGNS. All the covenants and representations
contained in this Indenture, by or on behalf of the Issuer, shall bind and inure
to the benefit of its successors and assigns, whether so expressed or not.

SECTION 1107. INFORMATION UNDER UNIFORM COMMERCIAL CODE. The Issuer is the
Debtor. The Trustee is the Secured Party. The address of the Trustee from which

                                      107



information concerning the security interest may be obtained and the address of
the Issuer are set forth in Section 1103 of this Indenture.

SECTION 1108. APPLICABLE LAW. This Indenture shall be governed exclusively by
the applicable laws of the State.

SECTION 1109. NO RECOURSE; SPECIAL OBLIGATION. (A) The obligations and
agreements of the Issuer contained herein and in the other Financing Documents
and any other instrument or document executed in connection therewith, and any
other instrument or document supplemental hereto or thereto, shall be deemed the
obligations and agreements of the Issuer, and not of any member, officer,
director, agent (other than the Company) or employee of the Issuer in his
individual capacity, and the members, officers, directors, agents (other than
the Company) and employees of the Issuer shall not be liable personally hereon
or be subject to any personal liability or accountability based upon or in
respect hereof or thereof or of any transaction contemplated hereby or thereby.

     (B)  The obligations and agreements of the Issuer contained herein shall
not constitute or give rise to any obligations of the State or the Counties of
Warren and Washington, New York, and neither the State nor the Counties of
Warren and Washington, New York shall be liable thereon, and further, such
obligations and agreements shall not constitute or give rise to a general
obligation of the Issuer, but rather shall constitute limited obligations of the
Issuer payable solely from the revenues of the Issuer derived and to be derived
from the sale or other disposition of the Project Facility (except for revenues
derived by the Issuer with respect to the Unassigned Rights).

     (C)  No order or decree of specific performance with respect to any of the
obligations of the Issuer hereunder (other than pursuant to Section 502 hereof,
and then only to the extent of the Issuer's obligations thereunder) shall be
sought or enforced against the Issuer unless the party seeking such order or
decree shall first have complied with Section 515 hereof.

     (D)  The Issuer shall be entitled to the advice of counsel (who may be
counsel to any party or to any Bondholder) appointed with due care and shall be
wholly protected as to any action taken or omitted to be taken in good faith in
reliance on such advice. The Issuer may rely conclusively on any notice,
certificate or other document furnished to it under any Financing Document and
reasonably believed by it to be genuine. The Issuer shall not be liable for any
action taken by it in good faith and reasonably believed by it to be within the
discretion or power conferred upon it, or in good faith omitted to be taken by
it and reasonably believed to be beyond such discretion or power, or taken by it
pursuant to any direction or instruction by which it is governed under any
Financing Document, or omitted to be taken by it by reason of the lack of
direction or instruction required for such action under any Financing Document,
and shall not be responsible for the consequences of any error of judgment
reasonably made by it. When any payment, consent or other action by the Issuer
is called for by this Indenture, the Issuer may defer such action pending an
investigation or inquiry or receipt of such evidence, if any, as it may require
in support thereof. A permissive right or power to act shall not be construed as
a requirement to act, and no delay in the exercise of a right or power shall
affect the subsequent exercise thereof. The Issuer shall in no event be liable
for the application or misapplication of

                                      108



funds or for other acts or defaults by any Person except by its own members,
officers and employees.

     (E)  In approving, concurring in or consenting to any action or in
exercising any discretion or in making any determination under this Indenture,
the Issuer may consider the interests of the public, which shall include the
anticipated effect of any transaction on tax revenues and employment, as well as
the interests of the other parties hereto and the Bondholders; provided,
however, that nothing herein shall be construed as conferring on any Person
other than the Trustee, the Bank and the Bondholders any right to notice,
hearing or participation in the Issuer's consideration, and nothing in this
Section 1109 shall be construed as conferring on any of them any right
additional to those conferred elsewhere herein. Subject to the foregoing, the
Issuer shall not unreasonably withhold any approval or consent to be given by it
hereunder.

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                                      109



     IN WITNESS WHEREOF, the Issuer has caused these presents to be signed in
its name and behalf by its Chairman or Vice Chairman, and to evidence its
acceptance of the trusts hereby created, the Trustee has caused these presents
to be signed in its name and behalf by one of its duly authorized trust
officers, all as of the day and year first hereinabove written.

                                        COUNTIES OF WARREN AND
                                        WASHINGTON INDUSTRIAL
                                        DEVELOPMENT AGENCY


                                        BY:  /s/ Bruce A. Ferguson
                                           -------------------------------------
                                             Chairman

                                        THE HUNTINGTON NATIONAL BANK,
                                        as Trustee


                                        BY:  /s/ Cheri Scott Geraci
                                           -------------------------------------
                                             Authorized Officer

     The Company hereby approves, consents to and agrees to be bound by all of
the terms and provisions of this Indenture insofar as such terms or provisions,
directly or indirectly, relate to, apply to, require or prohibit action by or
deal with the Company, or Property of the Company, including, without
limitation, the Project Facility, and including, but not limited to, all
provisions for the deposit or payment of moneys to funds held by the Trustee
under this Indenture. The Company hereby agrees, at its own expense, to do all
things and take all actions as shall be necessary to enable the Issuer to
perform its obligations under this Indenture. This paragraph shall bind the
Company and its successors and assigns.

                                        ANGIODYNAMICS, INC.


                                        BY:  /s/ Eamonn P. Hobbes
                                           -------------------------------------
                                             Authorized Officer

                                      110



STATE OF NEW YORK     )
COUNTY OF WARREN) ss.:

          On the 27 day of August in the year 2002 before me, the undersigned, a
notary public in and for the said State, personally appeared BRUCE FERGUSON
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed this instrument.


                                                  /s/ Justin S. Miller
                                        ----------------------------------------
                                                     Notary Public
[Notary Stamp]

STATE OF NEW YORK    )
COUNTY OF ALBANY     ) ss.:

          On the 28/th/ day of August in the year 2002 before me, the
undersigned, a notary public in and for the said State, personally appeared
Cheri Scott Geraci personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual or the
person upon behalf of which the individual acted, executed this instrument.


                                                    /s/ K. J. Kelly
                                        ----------------------------------------
                                                     Notary Public
                                        [Notary Stamp]

STATE OF NEW YORK    )
COUNTY OF ALBANY     ) ss.:

          On the 28 day of August in the year 2002 before me, the undersigned, a
notary public in and for the said State, personally appeared Eamonn P. Hobbs
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed this instrument.


                                                 /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                                     Notary Public
                                        [Notary Stamp]

                                      111



                                   SCHEDULE I

                                  FORM OF BOND

          UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
          REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
          LIMITED PURPOSE TRUST COMPANY ("DTC") TO THE ISSUER OR ITS
          AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
          AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
          OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
          REPRESENTATIVE OR DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
          OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
          REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
          HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
          WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
          CO., HAS AN INTEREST HEREIN.

COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY MULTI-MODE
VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BOND (ANGIODYNAMICS, INC. PROJECT
- -LETTER OF CREDIT SECURED), SERIES 2002

NO.: R- 1                               MATURITY DATE: August 1, 2022

INTEREST RATE: as described below       CUSIP No.: _____________________________

DATED DATE: _________________________

REGISTERED OWNER: CEDE & COMPANY

PRINCIPAL AMOUNT: _____________________ DOLLARS ($_____________________________)

     Counties of Warren and Washington Industrial Development Agency, a public
benefit corporation of the State of New York (the "Issuer"), for value received,
hereby promises to pay, solely from the sources hereinafter described, to CEDE &
CO. or registered assigns, on the Maturity Date identified above (subject to any
right of prior redemption hereinafter provided for), the Principal Sum set forth
above (subject to reduction as hereinafter provided) and interest thereon from
the Dated Date set forth above, or from the most recent Interest Payment Date
(as hereinafter defined) to which interest has been paid, to the Maturity Date
identified above (or such earlier date on which the principal hereof has been
paid or duly provided for), initially at the Weekly Rate (as defined below)
(subject to conversion to an alternate interest rate as described below), on the
following dates (each, an "Interest Payment Date"): (A) while this Bond bears

                                      112



interest at the Weekly Rate, the first Thursday of each February, May, August
and November, commencing with the first Thursday of November, 2002; and (B)
while this Bond bears interest at the Semi-Annual Rate or the Long-Term Rate (as
defined below), on April 1 and October 1 of each year; provided, that in any
case the final Interest Payment Date shall be the Maturity Date.

     The principal of, premium, if any, on and interest on this Bond are payable
in coin or currency of the United States of America which, at the time of
payment, is legal tender for the payment of public and private debts. The
principal or redemption price of this Bond, and the interest due upon this Bond
at maturity, shall be paid upon presentation and surrender hereof at the
corporate trust office presently located at Corporate Trust Department, 7 Easton
Oval - EA4E63, Columbus, Ohio 43219 (the Office of the Trustee ") of The
Huntington National Bank, as trustee (together with its successors in trust, the
"Trustee") under the trust indenture dated as of August 1, 2002 (from time to
time, as amended or supplemented, the "Indenture") by and between the Issuer and
the Trustee, or at the duly designated office of any successor trustee under the
Indenture. Reference is made to the Indenture for a more complete description of
the Project, the provisions, among others, with respect to the nature and extent
of the security for the Bonds, the rights, duties and obligations of the Issuer,
the Trustee and the Bondholders, and the terms and conditions upon which the
Bonds are issued and secured. All terms used herein with initial capitalization
where the rules of grammar or context do not otherwise require shall have the
meanings as set forth in the Indenture. Each Bondholder assents, by its
acceptance hereof, to all of the provisions of the Indenture.

     Except when the Bonds are Book Entry Bonds, the installments of interest
due on this Bond prior to maturity shall, as provided in the Indenture, be paid
to the Person in whose name this Bond (or one or more Predecessor Bonds) is
registered at the close of business on the Business Day next preceding any
Interest Payment Date (the "Regular Record Date"), and shall be paid by check or
draft of the Trustee mailed by the Trustee on such Interest Payment Date to such
registered owner at his address appearing on the registration books of the
Issuer, or at the option of any holder of Bonds in an aggregate principal amount
of $250,000 or greater be transmitted on such Interest Payment Date by wire
transfer in immediately available funds at such owner's written request to the
bank account number on file with the Trustee, provided such Holder has delivered
adequate instructions regarding same to the Trustee at least ten (10) Business
Days prior to such Bond Payment Date. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the registered owner
on such Regular Record Date, and may be paid to the Person in whose name this
Bond (or one or more Predecessor Bonds) is registered at the close of business
on a date for the payment of such Defaulted Interest to be fixed by the Trustee
(the "Special Record Date"), notice whereof being mailed one time, first-class
postage prepaid to registered owners of the Bonds not less than ten (10) days
prior to such Special Record Date, or may be paid in any other lawful manner as
shall be determined by the Trustee. Notwithstanding anything herein to the
contrary, when this Bond is registered in the name of a Depository (as
hereinafter defined) or its nominee, the principal and redemption price of and
interest on this Bond shall be payable in next day or federal funds delivered or
transmitted to the Depository or its nominee.

     This Bond is one of a duly authorized issue of bonds of the Issuer
designated "Counties of Warren and Washington Industrial Development Agency
Industrial Development Revenue

                                      113



Bonds (Angiodynamics, Inc. Project - Letter of Credit Secured), Series 2002" in
the aggregate principal amount of $3,500,000 (the "Initial Bonds"). The Initial
Bonds are issued for the purpose of assisting in providing financing to the
Issuer for a project (the "Project") consisting of the following: (A)(i) the
acquisition of an interest in a certain parcel or parcels of land located at 603
Queensbury Avenue, Town of Queensbury, County of Warren, State of New York (the
"Land"), (ii) the acquisition thereon of an approximately 32,000 square foot
facility (the "Existing Facility"), together with equipment therein (the
"Existing Equipment"), (iii) the making of certain renovations to the Existing
Facility (as so renovated, the "Facility") consistent with its present and
authorized use, (iv) the construction of approximately 32,000 square feet of
additions(s) to the Existing Facility, (v) the purchase of additional equipment
(together with the Existing Equipment, the "Equipment" and, together with the
Land and the Facility, the "Project Facility") and (B) the financing of a part
of the cost of the foregoing by issuing its tax-exempt Industrial Development
Revenue Bonds (the "Bonds") in an aggregate principal amount not to exceed
$4,500,000.00, all pursuant to Title 1 of Article 18-A of the General Municipal
Law of the State of New York (collectively, the "Act"), as amended, the proceeds
of which may be applied to the costs of issuance, and, as necessary and
appropriate, the provision of a debt service reserve fund, capitalized interest
or other means of providing credit enhancement for the Bonds; and (C) to lease
(with the option to purchase) and/or sell the Project Facility to the Company,
all pursuant to the Act;

     To provide for the payment of the Debt Service Payments on the Bonds, the
Issuer, in the Indenture, has (A) absolutely and irrevocably assigned to the
Trustee all of the Issuer's right, title and interest in and to (1) the
Installment Sale Agreement (except for the Issuer's Unassigned Rights), and (2)
the Credit Facility Account, Redemption Premium Account, Remarketing Proceeds
Account and the Defeasance Account of the Bond Fund and all moneys and
investments therein, including without limitation the proceeds of the Letter of
Credit (as hereinafter defined), and (B) granted a security interest in all
moneys and investments in the Project Fund and the Revenues (other than the
above-referenced accounts of the Bond Fund, all moneys and investments therein
and the proceeds of the Credit Facility).

     The Debt Service Payments on the Bonds are payable solely from moneys held
by the Trustee under the Indenture for such purpose, including moneys drawn by
the Trustee under the Letter of Credit referred to below or such other credit
facility, if any, as may then be held by the Trustee under the Indenture for the
benefit of the Bondholders (the Letter of Credit or any such other credit
facility is hereinafter referred to as the "Credit Facility").

     THE BONDS ARE SPECIAL OBLIGATIONS OF THE ISSUER AND DO NOT REPRESENT OR
CONSTITUTE A DEBT OR PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF NEW YORK OR
THE COUNTIES OF WARREN AND WASHINGTON, NEW YORK OR ANY POLITICAL SUBDIVISION
THEREOF, AND WILL NOT BE SECURED BY AN OBLIGATION OR PLEDGE OF ANY MONEYS RAISED
BY TAXATION. THE DEBT SERVICE PAYMENTS ON THE BONDS WILL BE PAYABLE SOLELY FROM
THE REVENUES PLEDGED AND ASSIGNED BY THE ISSUER TO SECURE PAYMENT THEREOF BY THE
INDENTURE.

                                      114



     As provided in the Indenture, additional series of Bonds (the "Additional
Bonds", and collectively with the Initial Bonds, the "Bonds") may be issued from
time to time pursuant to supplements to the Indenture on a parity with, and
secured and payable equally and ratably with, all other series of Bonds issued
under the Indenture, which Additional Bonds may mature at different times, may
bear interest at different rates, and may otherwise vary as provided in the
Indenture and the supplement thereto authorizing any such series of Additional
Bonds. The aggregate principal amount of Bonds which may be issued under the
Indenture is not limited, except as otherwise provided in the Indenture.

     If an Event of Default as defined in the Indenture occurs, the principal of
all Bonds issued under the Indenture may become due and payable upon the
conditions and in the manner and with the effect provided in the Indenture.

     This Bond is not valid unless the Certificate of Authentication endorsed
hereon is duly executed.

                        (Determination of Interest Rates)

     The Initial Bonds initially shall bear interest at the Weekly Rate
(hereinafter described), which rate shall continue in effect until converted to
a different interest rate or rates determined for the "Interest Rate Mode" (as
described more fully in the Indenture) selected by the Company. The "Interest
Rate Modes" which may be selected are as follows: (A) a Weekly Rate, in which
the interest rate is determined on the 7th day preceding conversion to a Weekly
Rate and on each Tuesday thereafter or, if not a Business Day, on the next
succeeding Business Day; (B) a Semi-Annual Rate, in which the interest rate is
determined on the tenth Business Day preceding each Semi-Annual Rate Period; and
(C) a Long-Term Rate for a period of one year or more ending on an Interest
Payment Date selected by the Company, in which the interest rate is determined
not later than the 15th Business Day preceding the 1st day of such Long-Term
Rate Period.

     On any Interest Payment Date upon which the Bonds are subject to optional
redemption, the Company may from time to time cause the conversion of the
Interest Rate Mode for the Bonds to another Interest Rate Mode (a "Conversion")
in accordance with the terms of the Indenture. To cause a Conversion, the
Company shall deliver, at least 4 Business Days prior to the 15th day (the 30th
day in the case of Conversion to or from the Long-Term Rate) prior to the
proposed effective date of such Conversion, written notice to the Trustee, the
Credit Facility Issuer, the Tender Agent and the Remarketing Agent of the
Company's election to cause a Conversion. Notice of the intended Conversion of
the interest rate on this Bond shall be given not more than 60 days nor less
than 30 days prior to the proposed effective date of such Conversion by the
Trustee one time by first class mail postage prepaid to the registered owner of
this Bond at the address of such owner shown on the Trustee's bond register. The
failure to give any such notice, or any defect therein, shall not affect the
validity of any proceeding for the Conversion of any Bond with respect to which
no such failure to give notice, or defect therein, has occurred. On the
Conversion Date, this Bond shall be subject to a Mandatory Tender for purchase
as provided in Section 304 of the Indenture. Notwithstanding anything to the
contrary contained in the Indenture or herein, such notice shall not be
effective unless the Bank shall have consented thereto in writing and such
notice is accompanied by:

                                      115



     (A)  an opinion of Counsel stating that the Conversion is authorized by the
Indenture;

     (B)  if the stated amount of the Credit Facility, if any, to be held by the
Trustee after such Conversion is increased over that of the then current Credit
Facility, an opinion of reputable bankruptcy counsel stating that payments of
principal and interest on the Bonds from funds drawn on such Credit Facility
will not constitute avoidable preferences with respect to the bankruptcy of the
Company under the Bankruptcy Code;

     (C)  a resolution of the members of the Issuer authorizing and approving
the Conversion; and

     (D)  an opinion of Bond Counsel to the effect that the exercise of the
Conversion Option is lawful under the Act and permitted by the Indenture and
that the Conversion will not, in and of itself, adversely affect the exclusion
of interest on the Initial Bonds from gross income for federal income tax
purposes.

If the Trustee has given notice of a proposed Conversion as aforesaid and such
proposed Conversion shall thereafter be canceled or rescinded, the Trustee shall
promptly notify all Bondholders of such cancellation or recision.

     Interest on the Initial Bonds shall be computed on the basis of a year of
365 or 366 days, as appropriate, for the actual number of days elapsed, while
the Interest Rate Mode is the Weekly Rate, and on the basis of a 360-day year
consisting of twelve 30-day months for the actual number of days elapsed, while
the Interest Rate Mode is the Semi-Annual Rate or the Long-Term Rate. The
interest rate or rates for each Interest Rate Mode for the Initial Bonds shall
be determined by the Remarketing Agent on the dates and at such times as
specified in the Indenture. If the Remarketing Agent fails to determine the
interest rate on the Initial Bonds in accordance with the Indenture, the
interest rate on the Initial Bonds shall be the interest rate in effect for the
previous interest rate period. Each interest rate determined by the Remarketing
Agent shall be the minimum rate of interest necessary, in the judgment of the
Remarketing Agent, to enable the Remarketing Agent to sell the Initial Bonds at
a price equal to the principal amount thereof, plus accrued interest, if any.
Notwithstanding the foregoing, the interest rate bond by the Initial Bonds shall
not exceed the lesser of (A) 15 % per annum or (B) so long as the Initial Bonds
are entitled to the benefit of a Credit Facility, the maximum interest rate
specified in the Credit Facility.

                         (Mandatory Tender and Purchase)

     The Initial Bonds are subject to mandatory purchase in whole (A) on the
effective date of any Conversion of the Interest Rate Mode for the Initial Bonds
and (B) if the Initial Bonds are then bearing interest at the Weekly or
Semi-Annual Rate, on the Interest Payment Date immediately preceding (by at
least 15 calendar days) the date of the expiration of the then current Credit
Facility (whether by expiration according to its terms or upon delivery of an
Alternate Credit Facility), if any, unless the then current Credit Facility
Issuer has provided an Alternate

                                      116



Credit Facility in accordance with the Indenture, at a purchase price equal to
100% of the principal amount hereof plus accrued interest, if any.

     In addition, the Initial Bonds are subject to mandatory purchase in whole
if the Initial Bonds are then bearing interest at the Long-Term Rate and the
Initial Bonds are then subject to optional redemption by the Issuer upon the
direction of the Company pursuant to the Indenture, on the Interest Payment Date
immediately preceding (by at least 15 calendar days) the date of the expiration
of the then current Credit Facility (whether by expiration according to its
terms or upon delivery of an Alternate Credit Facility), if any, unless a
Qualifying Alternate Credit Facility has been provided in accordance with the
Indenture, at a purchase price equal to 100% of the principal amount hereof,
plus the optional redemption premium, if any, which would be payable under the
Indenture if the Initial Bonds were redeemed on such date, plus accrued
interest, if any. If the Initial Bonds are bearing interest at the Long-Term
Rate, but the Initial Bonds are not then subject to optional redemption by the
Company pursuant to the Indenture, upon expiration of the then current Credit
Facility, the Company must replace the Credit Facility with a Qualifying
Alternate Credit Facility.

     If the Interest Rate Mode on the Initial Bonds is the Weekly Rate, this
Bond shall be purchased at the option of the registered owner hereof upon demand
by such registered owner, on any Business Day at a purchase price equal to the
principal amount hereof, plus accrued interest, if any, to the Purchase Date,
upon written notice to the Tender Agent on or before 4:00 p.m. (New York time)
on a Business Day not later than the 7th calendar day prior to the Purchase
Date. If the Interest Rate Mode on the Initial Bonds is the Semi-Annual Rate,
this Bond shall be purchased on the demand of the registered owner hereof, on
any Interest Payment Date at a purchase price equal to the principal amount
hereof, upon written notice to the Tender Agent on a Business Day not later than
the 8th Business Day prior to such Purchase Date. If the Interest Rate Mode on
the Initial Bonds is the Long-Term Rate, this Bond shall be subject to mandatory
purchase only as set forth in the immediately preceding paragraphs.

     If the Interest Rate Mode on the Initial Bonds is the Weekly Rate or the
Semi-Annual Rate, this Bond is also subject to mandatory purchase, in whole,
upon any replacement, removal or other substitution of the then current Credit
Facility Issuer.

     Any notice in connection with a demand for purchase of this Bond as set
forth in the preceding paragraphs hereof shall be given at the address of the
Tender Agent designated to the Trustee and shall (A) state the number and
principal amount (or portion thereof in an authorized denomination) of this Bond
to be purchased, (B) state the Purchase Date on which this Bond shall be
purchased and (C) irrevocably request such purchase and agree to deliver this
Bond to the Tender Agent on the Purchase Date. ANY SUCH NOTICE SHALL BE
IRREVOCABLE WITH RESPECT TO THE PURCHASE FOR WHICH SUCH DIRECTION WAS DELIVERED
AND, UNTIL SURRENDERED TO THE TENDER AGENT, THIS BOND OR ANY PORTION HEREOF WITH
RESPECT TO WHICH SUCH DIRECTION WAS DELIVERED SHALL NOT BE TRANSFERABLE. This
Bond must be delivered (together with an appropriate instrument of transfer
executed in blank in form satisfactory to the Tender Agent) at the principal
office of the Tender Agent at or prior to 12:00 noon (New York time) on the date
specified in the aforesaid notice in order for the owner hereof to receive
payment in

                                      117



same day funds of the purchase price due on such Purchase Date. NO REGISTERED
OWNER SHALL BE ENTITLED TO PAYMENT OF THE PURCHASE PRICE DUE ON SUCH PURCHASE
DATE EXCEPT UPON SURRENDER OF THIS BOND AS SET FORTH HEREIN. Notwithstanding the
foregoing, this Bond shall not be purchased during the existence of a Default
under the Indenture relating to failure to pay principal due on any Bond, or the
redemption price or purchase price due with respect to any Bond, or the interest
due on any Bond. No purchase of Bonds pursuant to the Indenture shall be deemed
to be a payment or redemption of such Bonds or any portion thereof within the
meaning of the Indenture.

     BY ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREOF AGREES THAT THIS
BOND WILL BE PURCHASED, WHETHER OR NOT SURRENDERED, (A) ON THE APPLICABLE
PURCHASE DATE IN CONNECTION WITH THE CONVERSION OF THE INTEREST RATE MODE FOR
THE BONDS OR ANY EXPIRATION OF THE CREDIT FACILITY AS DESCRIBED ABOVE, OR ANY
REPLACEMENT OF THE THEN CURRENT CREDIT FACILITY ISSUER, IF THE BONDS ARE IN THE
WEEKLY RATE MODE OR THE SEMI-ANNUAL RATE MODE AS DESCRIBED ABOVE, OR (B) ON ANY
PURCHASE DATE SPECIFIED BY THE REGISTERED OWNER HEREOF IN THE EXERCISE OF THE
RIGHT TO DEMAND PURCHASE OF THIS BOND AS DESCRIBED ABOVE. IN SUCH EVENT, THE
REGISTERED OWNER OF THIS BOND SHALL NOT BE ENTITLED TO RECEIVE ANY FURTHER
INTEREST HEREON, SHALL HAVE NO FURTHER RIGHTS UNDER THIS BOND OR THE INDENTURE
EXCEPT TO PAYMENT OF THE PURCHASE PRICE HELD THEREFOR, AND SHALL THEREAFTER HOLD
THIS BOND AS AGENT FOR THE TENDER AGENT.

                          (Letter of Credit Provisions)

     Pursuant to the Reimbursement Agreement, the Company has caused a Letter of
Credit issued by KeyBank National Association (the "Bank") to be delivered to
the Trustee (the "Letter of Credit"). Under the Letter of Credit, the Bank is
obligated to pay to the Trustee, upon presentation of a sight draft and required
accompanying documentation, the amount necessary to pay the principal or
purchase price (but not the redemption premium) of the outstanding Initial Bonds
plus an amount equal to 98 days' accrued interest on the outstanding Initial
Bonds at a rate of eight percent (8%) per annum (other than Initial Bonds which
are Pledged Bonds or Bonds owned by the Company) then due and payable (whether
by mandatory redemption or by maturity due to acceleration or otherwise). On
each Bond Payment Date and immediately upon (A) a declaration that all the
Initial Bonds have become due and payable by acceleration, or (B) a mandatory
redemption of all the Initial Bonds Outstanding, the Trustee shall present to
the Bank a sight draft and required accompanying documentation and draw upon the
Letter of Credit for the principal amount, and accrued interest then due on the
Initial Bonds. The Letter of Credit provides that it shall expire on August
____, 2005 or earlier under certain circumstances. Subject to the provisions of
the Indenture, the Company may, but is not required to, provide another Credit
Facility upon the termination of the Letter of Credit or the then current Credit
Facility. While the Initial Bonds bear interest at the Weekly Rate or the
Semi-Annual Rate, the Initial Bonds shall be subject to mandatory tender for
purchase upon any change in the then current Credit Facility Issuer. While the
Initial Bonds bear interest at the Long-Term Rate, the

                                      118



Company may substitute any Qualifying Credit Facility for the then current
Letter or Credit or other Credit Facility and the Trustee shall give written
notice of such substitute to the Registered Owners thereof.

                   (Extraordinary Redemption Without Premium)

     The Initial Bonds are subject to redemption prior to maturity (A) as a
whole, without premium, in the event of (1) a taking in Condemnation of, or
failure of title to, all or substantially all of the Project Facility, (2)
damage to or destruction of part or all of the Project Facility and election by
the Company or the Bank to redeem the Initial Bonds, or (3) a taking in
Condemnation of part of the Project Facility and election by the Company or the
Bank to redeem the Bonds, or (B) in part, without premium, in the event that (1)
to the extent excess moneys remain in the Insurance and Condemnation Fund
following damage or condemnation of a portion of the Project Facility and
completion of the repair, rebuilding or restoration of the Project Facility by
the Company and, pursuant to the Indenture, such excess moneys are not paid to
the Company, (2) excess moneys remain in the Project Fund after the Completion
Date or (3) excess proceeds of title insurance or recoveries from contractors
are applied to redeem Bonds pursuant to the Installment Sale Agreement. In any
such event, the Initial Bonds shall be redeemed, as a whole or in part, at such
time as the Trustee determines, at a redemption price equal to the principal
amount thereof, plus accrued interest to the redemption date, without premium.

         (Extraordinary Redemption Without Premium at Election of Bank)

     The Initial Bonds are also subject to redemption prior to maturity upon
receipt by the Trustee of a written notice from the Bank of the occurrence and
continuance of a default by the Company under the Reimbursement Agreement and
the Bank's election to compel redemption of the Bonds. In such event, the
Initial Bonds shall be redeemed, as a whole, in the manner provided in Article
III of the Indenture, on the earliest date for which the Trustee can give notice
of redemption pursuant to Section 303 of the Indenture, at a redemption price
equal to the principal amount thereof, plus accrued interest to the redemption
date, without premium.

          (Mandatory Redemption With Premium in an Event of Taxability)

     The Initial Bonds are also subject to redemption prior to maturity upon the
occurrence of a Determination of Taxability (as defined in the Indenture). In
such event, the Initial Bonds shall be subject to redemption, as a whole, as
soon as possible after the discovery of such Determination of Taxability, at a
redemption price equal to the principal amount thereof, plus accrued interest
thereon to the redemption date, without premium. If any Initial Bonds are paid
at maturity or purchased by the Trustee or redeemed subsequent to a Tax
Incidence Date without payment of an amount at least equal to the redemption
price that would have been received if such Bonds had been redeemed as a result
of a Determination of Taxability, the owners of such Bonds at the time of
maturity, purchase or redemption, upon establishing their then ownership
thereof, shall be entitled to receive, as an additional premium thereon, an
amount equal to the difference between the amounts actually received and the
amounts that would have been received if such Bonds had been redeemed as a
result of a Determination of Taxability.

                                      119



            (Optional Redemption Without Premium at Company's Option
                   During Weekly or Semi-Annual Rate Periods)

     Whenever the Interest Rate Mode is the Weekly Rate or the Semi-Annual Rate,
the Initial Bond shall be subject to redemption, in whole on any date or in part
on any Interest Payment Date, at the option of the Issuer, upon the direction of
the Company, at a redemption price of 100% of the principal amount hereof, plus
accrued interest to the redemption date, without premium.

              (Optional Redemption With Premium at Company's Option
                          During Long-Term Rate Period)

     Whenever the Interest Rate Mode is the Long-Term Rate, the Initial Bonds
shall be subject to redemption at the option of the Issuer, upon the direction
of the Company, at any time prior to the end of the then current Long-Term Rate
Period at the redemption prices set forth below, plus interest accrued to the
redemption date (which redemption price and accrued interest shall be paid only
from Available Moneys):

Length of Current Long-   Commencement of        Redemption Price as
Term Rate Period (Years)  Redemption Period      Percentage of Principal

More than 9 years         5th anniversary of     102%, declining by 1% on each
                          commencement of Long-  succeeding anniversary of the
                          Term Rate Period       first day of the redemption
                                                 period until reaching 100%
                                                 and thereafter 100%

More than 7, but not      4th anniversary of     101%, declining by 1% on each
more than 9 years         commencement of Long-  succeeding anniversary of the
                          Term Rate Period       first day of the redemption
                                                 period until reaching 100% and
                                                 thereafter 100%

More than 5, but not      3rd anniversary of     101%, declining by 1% on each
more than 7 years         commencement of Long-  succeeding anniversary of the
                          Term Rate Period       first day of the redemption
                                                 period until reaching 100% and
                                                 thereafter 100%.

If, at the time of the Issuer's notice of Conversion of the Interest Rate Mode
for the Initial Bonds to the Long-Term Rate pursuant to the Indenture, the
Issuer provides a certification of the Remarketing Agent to the Trustee and the
Issuer that the foregoing schedule is not consistent with prevailing market
conditions, the foregoing redemption periods and redemption prices may

                                      120



be revised, effective as of the Conversion Date, as determined by the
Remarketing Agent in its judgment, taking into account the then prevailing
market conditions, as stipulated in such certification, which shall be appended
by the Trustee to its counterpart of this Indenture.

                           (Procedures for Redemption)

     Notice of the intended redemption of each Bond subject to redemption shall
be given not more than 60 days nor less than 30 days prior to the redemption
date by the Trustee one time by first class mail postage prepaid to the
registered owner at the address of such owner shown on the Trustee's bond
register. The failure to give any such notice, or any defect therein, shall not
affect the validity of any proceeding for the redemption of any Bond with
respect to which no such failure to give notice, or defect therein, has
occurred. Notice of any redemption hereunder with respect to Bonds held under a
book entry system shall be given by the Registrar or the Trustee only to the
Depository, or its nominee, as the holder of such Bonds. Selection of book entry
interests in the Bonds called for redemption is the responsibility of the
Depository and any failure of any Direct Participant, Indirect Participant or
Beneficial Owner to receive such notice and its contents or effect will not
affect the validity of such notice or any proceedings for the redemption of such
Bonds.

     In the event of any partial redemption, the particular Bonds or portions
thereof to be redeemed shall be selected by the Trustee not more than sixty (60)
days prior to the redemption date in inverse order of maturity, and within each
maturity by lot or by such other such method as the Trustee shall deem fair and
appropriate; provided, however, that in connection with any redemption of Bonds
the Trustee shall first select for redemption any Bonds held by or pledged to
the Bank pursuant to the Indenture. The Trustee may provide for the redemption
of portions (equal to $100,000 or any integral multiple of $5,000 in excess
thereof) of Outstanding Bonds. In no event shall the principal amount of Bonds
subject to any partial redemption be other than $100,000 or any integral
multiple of $5,000 in excess thereof.

     Bonds (or portions thereof as aforesaid) for whose redemption and payment
provision is made in accordance with the Indenture shall thereupon cease to be
entitled to the Lien of the Indenture and shall cease to bear interest from and
after the date fixed for redemption.

                       (Additional Security for the Bonds)

     The Bonds are issued under and are equally and ratably secured by the
Indenture. The Indenture grants the Trustee a first security interest in the
Trust Revenues (as defined in the Indenture).

     As security for payment of the principal of, premium, if any, and interest
on the Bonds, the Issuer and the Company have granted a mortgage Lien on and a
security interest in the Project Facility to the Bank pursuant to a mortgage and
security agreement dated as of August 1, 2002 (the "Mortgage") from the Issuer
and the Company to the Bank. As additional security for the payment of principal
of, premium, if any, and interest on the Bonds, the Issuer has assigned to the
Trustee all of the Issuer's rights and remedies under the Installment Sale
Agreement (except the Unassigned Rights), including the right to receive
installment purchase payments and

                                      121



other amounts payable thereunder pursuant to a pledge and assignment dated as of
August 1, 2002 (the "Pledge and Assignment") from the Issuer to the Trustee.
Further security for the repayment of the Bonds is provided by a guaranty dated
as of August 1, 2002 (the "Guaranty") from the Company to the Trustee.

     Reference is hereby made to the Indenture, the Installment Sale Agreement,
the Reimbursement Agreement, the Mortgage, the Pledge and Assignment, the
Guaranty and the Letter of Credit, and to all amendments and supplements
thereto, for a description of the nature and extent of the security for the
Bonds, the terms and conditions upon which the Bonds are issued and secured and
the rights, duties and obligations of the Issuer, the Trustee, the Company, the
Bank and the Bondholders. Copies of such documents are on file in the Office of
the Trustee.

                              (General Provisions)

     The initial Remarketing Agent under the Indenture is McDonald Investments
Inc., a Key Corp Company, and the initial Tender Agent under the Indenture is
The Huntington National Bank. The Remarketing Agent and the Tender Agent may be
changed at any time in accordance with the Indenture.

     The Initial Bonds are issuable only as fully registered bonds in the
denominations of $100,000 and in any integral multiple of $5,000 in excess
thereof and shall be originally issued only to a Depository to be held in a book
entry system and, while so held in book entry only form, (A) the Initial Bonds
shall be registered in the name of the Depository or its nominee, as Bondholder,
and immobilized in the custody of the Depository, (B) unless otherwise requested
by the Depository, there shall be a single Bond certificate for each maturity of
the Initial Bonds, and (C) the Initial Bonds shall not be transferable or
exchangeable, except for transfer to another Depository or another nominee of a
Depository, without further action by the Issuer. While the Initial Bonds are in
book entry only form, Bonds in the form of physical certificates shall only be
delivered to the Depository. If any Depository determines not to continue to act
as a Depository for the Initial Bonds for use in a book entry system, the Issuer
may attempt to have established a securities depository/book entry system
relationship with another qualified Depository under the Indenture. If the
Issuer does not or is unable to do so, the Issuer and the Trustee, after the
Trustee has made provision for notification to the Beneficial Owners of book
entry interests by the then Depository, shall permit withdrawal of the Bonds
from the Depository, and authenticate and deliver Bond certificates in fully
registered form (in denominations of $100,000 and in any integral multiple of
$5,000 in excess thereof) to the assignees of the Depository or its nominee.

     While a Depository is the sole holder of the Initial Bonds, delivery or
notation of partial redemption or tender for purchase of Bonds shall be effected
in accordance with the provisions of the Letter of Representations, as defined
in the Indenture.

     This Bond is transferable by the registered owner hereof or his duly
authorized attorney upon surrender of this Bond to the Trustee, as Bond
Registrar, at the Office of the Trustee, accompanied by a duly executed
instrument of transfer in form and with guaranty of signature satisfactory to
the Bond Registrar, subject to such reasonable regulations as the Company, the

                                      122



Issuer or the Bond Registrar may prescribe, PROVIDED, THAT, IF MONEYS FOR THE
MANDATORY PURCHASE OF THIS BOND HAVE BEEN DEPOSITED WITH THE TRUSTEE UNDER THE
INDENTURE, THIS BOND SHALL NOT BE TRANSFERABLE TO ANYONE UNTIL DELIVERED TO THE
TENDER AGENT. Upon any such transfer, a new Bond or Bonds in the same aggregate
principal amount will be issued to the transferee. No service charge shall be
made for any transfer or exchange of Bonds, but the Issuer or the Trustee may
make a charge for transfer or exchange of Bonds sufficient to reimburse them for
any tax, fee or other governmental charge required to be paid with respect to
such transfer or exchange, and such charge shall be paid before any new Bond
shall be delivered.

     Except as set forth in this Bond and as otherwise provided in the
Indenture, the person in whose name this Bond is registered shall be deemed the
owner hereof for all purposes, and payment or on account of the principal of, or
premium if any interest on, this Bond shall be made only to or upon the order of
the registered owner thereof or his duly authorized legal representative, and
the Issuer, the Company, any Paying Agents, the Bond Registrar, the Tender
Agent, the Remarketing Agent and the Trustee shall not be affected by any notice
to the contrary. Such registration may be changed only as provided in this Bond
and in the Indenture, and no other notice to the Issuer or the Trustee shall
affect the rights or obligations with respect to the transference of a Bond or
be effective to transfer any Bond. All payments to the Person in whose name any
Bond shall be registered shall be valid and effectual to satisfy and discharge
the liability upon such Bond to the extent of the sum or sums to be paid.

     THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM
PAYMENTS MADE BY THE BANK UNDER THE LETTER OF CREDIT AND BY THE COMPANY UNDER
THE INSTALLMENT SALE AGREEMENT, MONEYS AND SECURITIES HELD BY THE TRUSTEE UNDER
THE INDENTURE, AND THE SECURITY PROVIDED BY THE MORTGAGE, THE PLEDGE AND
ASSIGNMENT AND THE GUARANTY.

     The owner of this Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any Event of Default under the Indenture, or to
institute, appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.

     The Indenture permits certain amendments or supplements to the Installment
Sale Agreement, the Indenture and the other Financing Documents not prejudicial
to the Bondholders to be made without the consent of or notice to the
Bondholders, and other amendments or supplements thereto to be made with the
consent of the holders of not less than a majority in aggregate principal amount
of the Bonds then outstanding.

     The principal hereof may be declared or may become due on the conditions
and in the manner and at the time set forth in the Indenture upon the occurrence
of an Event of Default as provided in the Indenture.

     NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR REDEMPTION
PRICE OF OR THE INTEREST ON THIS BOND OR FOR ANY CLAIM

                                      123



BASED HEREON OR ON THE INDENTURE, AGAINST ANY PAST, PRESENT OR FUTURE MEMBER,
OFFICER, DIRECTOR, EMPLOYEE OR AGENT (EXCEPT THE COMPANY), AS SUCH, OF THE
ISSUER OR OF ANY PREDECESSOR OR SUCCESSOR CORPORATION, EITHER DIRECTLY OR
THROUGH THE ISSUER OR OTHERWISE, WHETHER BY VIRTUE OF ANY CONSTITUTION, STATUTE
OR RULE OF LAW, OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY, OR
OTHERWISE, ALL SUCH LIABILITY BEING, BY THE ACCEPTANCE HEREOF, EXPRESSLY WAIVED
AND RELEASED.

     This Bond shall not be entitled to any benefit under the Indenture or
become valid or obligatory for any purpose until the certificate of
authentication of the Trustee shall be endorsed hereon.

     THE BONDS DO NOT CONSTITUTE AND SHALL NOT BE A DEBT OF THE STATE OF NEW
YORK OR THE COUNTIES OF WARREN AND WASHINGTON, NEW YORK AND NEITHER THE STATE OF
NEW YORK NOR THE COUNTIES OF WARREN AND WASHINGTON, NEW YORK SHALL BE LIABLE
THEREON. THE BONDS DO NOT GIVE RISE TO A PECUNIARY LIABILITY OR CHARGE AGAINST
THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OF NEW YORK OR THE COUNTIES OF
WARREN AND WASHINGTON, NEW YORK.

     It is hereby certified, recited and declared that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
execution and delivery of the Indenture, and the issuance of this Bond, do
exist, have happened and have been performed in the time, form and manner as
required by law, and that the issuance of the Bonds does not violate any
constitutional or statutory limitation.

     IN WITNESS WHEREOF, Counties of Warren and Washington Industrial
Development Agency has caused this Bond to be duly executed in its name by the
manual or facsimile signature of its Chairman or Vice Chairman, and its
corporate seal to be impressed or reproduced hereon, attested by the manual or
facsimile signature of its Secretary or Assistant Secretary, all as of the Dated
Date identified above.

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        BY:
                                           -------------------------------------
                                             (Vice) Chairman

(SEAL)

ATTEST:

                                      124




- --------------------------------------
(Assistant) Secretary


                                      125



                    (Form of Certificate of Authentication)

This Bond is one of the Bonds of the issue described in the within-mentioned
Indenture.

                                        THE HUNTINGTON NATIONAL BANK,
                                        as Trustee


                                        BY:
                                           -------------------------------------
                                              Authorized Officer


- --------------------------------------
Date of Authentication

                                      126



                       [Form of Assignment for Transfer]

     FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
(please insert name, address and social security or tax identification number of
assignee): _______________________________________ the within Bond and does
hereby irrevocably constitute and appoint _____________________________ to
transfer the said Bond on the books kept for registration thereof, with full
power of substitution in the premises.

Dated:
       -------------------------------


                                        ----------------------------------------
                                        NOTICE: The signatures) on this
                                        assignment must correspond with the
                                        name(s) as it (they) appear(s) on the
                                        face of the within Bond in every
                                        particular.

In the presence of:


- --------------------------------------

                                      127



                                    EXHIBIT A

                       DESCRIPTION OF THE PROJECT FACILITY


                                      128



                                    EXHIBIT B

                        FORM OF REQUEST FOR DISBURSEMENT

To:  The Huntington National Bank, as Trustee
     7 Easton Oval - EA4E63
     Columbus, Ohio 43219
     Attention: Corporate Trust Group

Re:  Counties of Warren and Washington Industrial Development Agency
     Angiodynamics, Inc. Project

Requisition Number: 1

Dated:
       --------------

You are hereby authorized and directed to make, from the Project Fund as defined
in the trust indenture dated as of August 1, 2002 (the "Indenture") by and
between Counties of Warren and Washington Industrial Development Agency (the
"Issuer") and The Huntington National Bank, as trustee (capitalized terms used
herein, and not otherwise defined herein, shall have the meanings assigned to
them in the Indenture) the disbursements set forth in this Request for
Disbursement. In connection with this request, the Company hereby represents and
warrants to the Issuer and Trustee as follows:

     (A)  The items for which payment is to be made were not paid or incurred
prior to June 24, 2002, and the payment of all amounts requested hereby is
consistent in all material respects with the Tax Regulatory Agreement;

     (B)  With respect to the item(s) for which payment is to be made, the
undersigned has no knowledge of any Lien which should be satisfied or discharged
before the payment as requested is made or which will not be discharged by such
payment;

     (C)  If the amount requested is to reimburse to the Company for costs or
expenses of the Company incurred by reason of work performed or supervised by
officers or employees of the Company, (1) such officers or employees were
specifically employed or designated by the Company for such purpose, (2) the
amount to be paid does not exceed the actual cost thereof to the Company, and
(3) such costs or expenses will be treated by the Company on its books as
capital expenditures in conformity with generally accepted accounting principles
applied on a consistent basis (or would have been so treated either with an
election by the Company or but for an election by the Company to deduct the
amount of such payment);

     (D)  The payment of the amount requested is chargeable to the capital
account of the Project for federal income tax purposes, or would be so
chargeable either with an election by the Company or but for an election by the
Company to deduct the amount of such payment.

                                      129



     (E)  The payment of the amount requested, when added to all other payments
previously made from the Project Fund, will not result in (1) less than
ninety-five percent (95%) of the proceeds of the Initial Bonds (including any
investment earnings on the Initial Bonds) being used for the acquisition,
construction, reconstruction or improvement of land or Property subject to the
allowance for depreciation provided in Section 167 of the Code paid or incurred
after June 24, 2002 or (2) more than two percent (2%) of the proceeds of the
Initial Bonds being used to pay issuance costs of the Initial Bonds;

     (F)  As of the date of this Request for Disbursement, the representations
and covenants made in Section 2.2 of the Installment Sale Agreement are true and
correct, and there is no Event of Default under any of the Financing Documents,
nor any event, condition or act that, with the passage of time or the giving of
notice or both, would ripen into such an Event of Default;

     (G)  The names and addresses of the persons to whom disbursement is to be
made, the amount to be paid to each, and the description of the purpose for
which the requested disbursement from the Project Fund is to be made and the
general classification of the expenditure are as set forth on Schedule "A"
attached hereto;

     (H)  The disbursement is for a proper expenditure of moneys under Section
4.3 of the Installment Sale Agreement;

     (I)  ______________________ percent of the work on the construction and
installment of the Project Facility (as defined in the Indenture) has been
completed and the undisbursed portion of the Bond Proceeds is sufficient to
complete the construction and installation of the Project Facility in accordance
with the Plans and Specifications;

     (J)  No item(s) for which payment is requested has (have) been the basis
for any prior advance of the Bond Proceeds (requests for advances of retainage
amounts under any contract relating to the construction of the Facility shall
not be deemed made for an item which has been the basis of a prior advance by
virtue of requests for advance of amounts covering the cost of such
construction, less the retainage amounts);

     (K)  The Project Facility has not been materially injured or damaged by
fire or other casualty;

     (L)  All sums due workmen, suppliers, employees and materialmen have been
paid or will be paid from the proceeds of this Advance;

     (M)  That none of the items for which requisition is made constitutes
personal property (including, without limitation, fixtures and equipment) other
than that listed on all accompanying schedules sufficient for identification
purposes in connection with the filing of UCC-1 and/or UCC-3 financing
statements;

     (N)  That all advances for construction and non-construction items shall be
for costs actually expended; and

                                      130



     (O)  This Request for Advance is accompanied by bills, bills of sale,
invoices or other proof to substantiate the amount requested and the payee.

                                        ANGIODYNAMICS, INC.


                                        BY:
                                           -------------------------------------
                                              Authorized Officer


Payment of the foregoing
Request for Disbursement
is hereby approved by the
undersigned, as issuer
of the Letter of Credit
securing the Bonds.

KeyBank National Association


BY:
   -----------------------------------
      Authorized Officer


                                      131



                                                                   EXHIBIT 10.13

                              REMARKETING AGREEMENT

                                      among

                               ANGIODYNAMICS, INC.

                                       and

                          MCDONALD INVESTMENTS INC., AS
                                REMARKETING AGENT

                                       and

         COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY

                           --------------------------

                           Dated as of August 1, 2002

                           --------------------------

                                   $3,500,000
         Counties of Warren and Washington Industrial Development Agency
          Multi-Mode Variable Rate Industrial Development Revenue Bonds
      (Angiodynamics, Inc. Project - Letter of Credit Secured), Series 2002




                              REMARKETING AGREEMENT
                              ---------------------

          This REMARKETING AGREEMENT, dated as of August 1, 2002 (the
"Agreement"), is made by and among Angiodynamics, Inc. (the "Company"), McDonald
Investments Inc., as remarketing agent (the "Remarketing Agent"), and Counties
of Warren and Washington Industrial Development Agency (the "Issuer"), and is
entered in connection with the issuance by the Issuer of its Multi-Mode Variable
Rate Industrial Development Revenue Bonds (Angiodynamics, Inc. Project - Letter
of Credit Secured), Series 2002 in the total aggregate principal amount of
$3,500,000 (the "Bonds").

                                    ARTICLE I
                                    ---------

                                   Definitions
                                   -----------

Section 1.01.  Capitalized Terms.
               -----------------

          Capitalized terms used in this Remarketing Agreement, unless otherwise
defined herein, shall have the meanings assigned to them in the Trust Indenture,
dated as of August 1, 2002 (the "Indenture"), between the Issuer and The
Huntington National Bank, as Trustee, with respect to the Bonds.

Section 1.02.  Rules of Interpretation.
               -----------------------

          (a)  This Remarketing Agreement shall be interpreted in accordance
     with and governed by the laws of the State of New York.

          (b)  The words "herein" and "hereof" and words of similar import,
     without reference to any particular Article, Section or subsection, refer
     to this Remarketing Agreement as a whole rather than to any particular
     Article, Section or subsection hereof.

          (c)  The headings of Articles and Sections herein are for convenience
     only and shall not affect the construction hereof.

                                   ARTICLE II
                                   ----------

                              Remarketing of Bonds
                              --------------------

Section 2.01.  Representations and Warranties of the Company.
               ---------------------------------------------

          The Company hereby represents and warrants, for the benefit of the
Remarketing Agent, that:

          (a)  The Company is a corporation, organized and existing and in good
     standing under the laws of the State of New York, and has full power and
     authority to enter into the Installment Sale Agreement, the Bond Purchase
     Agreement, this Remarketing Agreement and the Reimbursement Agreement and
     to carry out the provisions hereof and thereof.

                                        1



          (b)  The Installment Sale Agreement, the Bond Purchase Agreement, the
     Reimbursement Agreement and this Remarketing Agreement have been duly
     authorized, executed and delivered by the Company and, assuming the due
     execution and delivery of such agreements by the other parties thereto, are
     valid obligations legally binding upon the Company and enforceable in
     accordance with their respective terms, except as enforceability may be
     limited by bankruptcy or other laws affecting the enforcement of creditors'
     rights generally or by general principles of equity and public policy. The
     Company has approved the use and distribution of the Offering Circular
     dated August 28, 2002 (the "Offering Circular") in connection with the
     limited offering and remarketing of the Bonds.

          (c)  Except for all consents, approvals or authorizations of, or
     declarations or filings under any federal or state securities or "blue sky"
     laws, no consent, approval or authorization of, or declaration or filing
     with, any governmental authority or any other third party is a condition to
     the execution and delivery by the Company of the Installment Sale
     Agreement, the Bond Purchase Agreement, this Remarketing Agreement or the
     Reimbursement Agreement, or is required in connection with the offer,
     issuance and delivery by the Company of the instruments contemplated
     hereby. Neither the execution and delivery of the Indenture, the
     Installment Sale Agreement, the Bond Purchase Agreement, the Reimbursement
     Agreement, this Remarketing Agreement or the Bonds nor consummation of the
     transaction contemplated hereby or thereby or by the Offering Circular,
     will violate any provision of law or any applicable regulation, order, writ
     or decree of any court or governmental authority or will conflict or will
     be inconsistent with, or will result in any breach of any of the terms of,
     or will constitute a default under, any indenture, mortgage, deed of trust,
     agreement or other instrument to which the Company is a party or by which
     it may be bound, or will violate any provision of the Company's certificate
     of incorporation or by-laws.

          (d)  There is no action, suit, proceeding, inquiry or investigation,
     at law or in equity, or before or by any court, public board or body,
     pending or, to the best knowledge of the Company, threatened which
     challenges the validity of or seeks to enjoin the execution and delivery by
     the Company of, or the performance by the Company of its obligations with
     respect to, the Indenture, the Installment Sale Agreement, the Bond
     Purchase Agreement, the Remarketing Agreement, the Reimbursement Agreement
     or the Bonds, and there is no action, suit, proceeding, inquiry or
     investigation, at law or in equity, or before or by any court, public board
     or body, pending or, to the best knowledge of the Company, threatened
     against or affecting the Company (and to the best knowledge of the Company
     there is no basis therefor) wherein there is a reasonable possibility of an
     unfavorable decision, ruling or finding which would materially adversely
     affect any of the transactions contemplated by the Offering Circular, or
     which might result in any material adverse change in the properties,
     condition (financial or otherwise) or operations of the Company.

          (e)  Subject to the proviso that the Offering Circular is a summary
     and does not contain detailed information about the Company or its intended
     use of proceeds from the sale of the Bonds, and that the Company makes no
     representation as to the financial

                                        2



     condition of the Bank, or the information contained in the Offering
     Circular on the cover page and under the captions "THE ISSUER," "THE LETTER
     OF CREDIT BANK," "UNDERWRITING OF THE BONDS," APPENDIX A-1, APPENDIX A-2,
     APPENDIX B and APPENDIX C of the Offering Circular does not contain an
     untrue or misleading statement of a material fact or omit to state any
     material fact necessary in order to make the statements contained therein,
     in light of the circumstances under which they were made, not misleading.

Section 2.02.  Representations and Warranties of the Issuer.
               --------------------------------------------

          The Issuer hereby represents and warrants, for the benefit of the
Remarketing Agent, as remarketing agent, that:

          (a)  The Issuer is a public benefit corporation duly organized and
     existing under the laws of the State of New York and has full power and
     authority to enter into the Indenture, the Installment Sale Agreement, the
     Bond Purchase Agreement, this Remarketing Agreement and to issue the Bonds
     and to carry out the provisions hereof and thereof.

          (b)  The Indenture, the Installment Sale Agreement, the Bond Purchase
     Agreement, this Remarketing Agreement and the Bonds have been duly
     authorized, executed and delivered by the Issuer and, assuming the due
     execution and delivery of such agreements by the other parties thereto, are
     valid special obligations legally binding upon the Issuer and enforceable
     in accordance with their respective terms, except as enforceability may be
     limited by bankruptcy or other laws affecting the enforcement of creditors'
     rights generally or by general principles of equity and public policy.

          (c)  Except for all consents, approvals or authorizations of, or
     declarations or filings under any federal or state securities or "blue sky"
     laws, no consent, approval or authorization of, or declaration or filing
     with, any governmental authority or any other third party is a condition to
     the execution and delivery by the Issuer of the Indenture, the Installment
     Sale Agreement, the Bond Purchase Agreement or this Remarketing Agreement,
     or is required in connection with the execution, issuance and delivery by
     the Issuer of the instruments contemplated hereby. To the Issuer's
     knowledge, neither the execution and delivery of the Indenture, the
     Installment Sale Agreement, the Bond Purchase Agreement, this Remarketing
     Agreement or the Bonds nor consummation of the transaction contemplated
     hereby or thereby, will constitute on the part of the Issuer a violation of
     or will conflict or will be inconsistent with, or will result in any breach
     of any of the terms of, or will constitute a default under, any provision
     of law or any applicable regulation, order, unit or decree of any court or
     governmental authority or any indenture, mortgage, deed of trust, agreement
     or other instrument to which the Issuer is a party or by which it may be
     bound.

          (d)  To the Issuer's knowledge, there is no action, suit, proceeding,
     inquiry or investigation, at law or in equity, or before or by any court,
     public board or body, as to which the Issuer has been served or otherwise
     received official notice, is any such action, suit, proceeding, inquiry or
     investigation threatened, which challenges the validity of or

                                        3



     seeks to enjoin the execution and delivery by the Issuer of, or the
     performance by the Issuer of its obligations with respect to, the
     Indenture, the Installment Sale Agreement, the Bond Purchase Agreement, the
     Remarketing Agreement or the Bonds.

Section 2.03   Representations and Warranties of the Remarketing Agent
               -------------------------------------------------------

          The Remarketing Agent represents and warrants as the basis for the
undertakings on the part of the Remarketing Agent herein contained and
throughout the term of this Remarketing Agreement, that (i) the Remarketing
Agent is a corporation organized and existing under the laws of the State of
Ohio that is registered as a broker-dealer with the Securities and Exchange
Commission; (ii) the Remarketing Agent has all requisite power to execute and
deliver this Remarketing Agreement, and has by proper action duly authorized the
execution and delivery of this Remarketing Agreement, and (iii) this Remarketing
Agreement constitutes the legal, valid and binding obligation of the Remarketing
Agent enforceable against the Remarketing Agent in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar law or principles of equity relating
to or affect the enforcement of creditors' rights or contractual obligations
generally.

Section 2.04.  Remarketing Agent's Acceptance.
               ------------------------------

          McDonald Investments Inc. hereby accepts the appointment made by the
Issuer pursuant to the Indenture to serve as Remarketing Agent for the Bonds.
Acceptance of that appointment as Remarketing Agent under the Indenture is
expressly subject to the condition that the Remarketing Agent shall not
undertake to perform any duties or assume any obligations to the Issuer, the
Trustee, the Holders or the Company other than those expressly set forth herein
and in the Indenture.

Section 2.05.  Remarketing Agent's Obligations.
               -------------------------------

          McDonald Investments Inc. agrees to accept the duties and obligations
imposed upon it as Remarketing Agent under the Indenture, and agrees
particularly in accordance with Article 718 of the Indenture:

          (i)   to determine the interest rates on the Bonds in accordance with
     Section 209 of the Indenture;

          (ii)  to give notice, by wire, telex, telegraph or telecopier or other
     similar means of communication, of each interest rate on the Bonds on the
     determination date of said interest rates as provided in Section 209 of the
     Indenture to the Company and the Trustee;

          (iii) to keep such books and records as shall be consistent with
     prudent industry practice and to make such books and records available for
     inspection by the Issuer and the Trustee at all reasonable times;

                                        4



          (iv)  to use its best efforts to remarket the Bonds in accordance with
     Section 305 of the Indenture; and

          (v)   to comply with all applicable laws in connection with its
efforts to remarket the Bonds.

                                   ARTICLE III
                                   -----------

                                   Disclosure
                                   ----------

Section 3.01.  Provision of Disclosure Materials.
               ---------------------------------

          If the Remarketing Agent determines that it is necessary or desirable
to use an amended or supplemented Offering Circular in connection with any
remarketing of Bonds, the Remarketing Agent will so notify the Company and the
Company agrees that it shall provide an amended or supplemented Offering
Circular satisfactory to the Remarketing Agent for use in connection with the
marketing of the Bonds. The Company agrees to supply to the Remarketing Agent
such number of copies of any Offering Circular and documents related thereto as
are reasonably requested from time to time by the Remarketing Agent and further
agrees to amend or supplement such Offering Circular (and/or any documents
incorporated by reference therein), in connection with any future remarketing,
so that at all times the Offering Circular and documents related thereto will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. The Issuer has not
confirmed, and assumes no responsibility for, the accuracy, sufficiency or
fairness of any statements in the Offering Circular or any supplements thereto,
or in any reports, financial information, offering or disclosure documents or
other information in any way relating to the Project, the Company, the Bank or
the Original Purchaser.

Section 3.02.  Continuing Disclosures.
               ----------------------

          The Company and Issuer agree that the Bonds are exempt from the
requirement of Paragraph (b)(5)(i) of Securities and Exchange Commission Rule
15c2-12 under the Securities Exchange Act of 1934, as amended (the "Rule")
pursuant to Paragraph (d)(1) of the Rule. The Company hereby covenants and
agrees that if as a result of a conversion of Interest Rate Mode or as a result
of any amendment or supplement to the Indenture or the Installment Sale
Agreement, the Bonds cease to be exempt under the Rule, the Company will enter
into an agreement or contract, constituting an undertaking, to provide ongoing
disclosure as may be necessary to comply with the Rule as then in effect. The
covenant and agreement contained herein is for the benefit of the Bondholders
and Beneficial Owners as required by the Rule.

                                   ARTICLE IV
                                   ----------

                                     General
                                     -------

Section 4.01.  Indemnification.
               ---------------

                                        5



          The Company agrees to indemnify the Remarketing Agent and the Issuer
for and to hold each harmless against all liabilities, claims, costs and
expenses incurred on the part of the Issuer or without negligence or bad faith
on the part of the Remarketing Agent on account of any action taken or omitted
to be taken by the Remarketing Agent or the Issuer, respectively, in accordance
with the terms of the Bonds, the Reimbursement Agreement, the Installment Sale
Agreement, the Bond Purchase Agreement, the Letter of Credit or the Indenture,
or in connection with the remarketing of the Bonds, including the use of the
Offering Circular, or any action taken at the request of or with the consent of
the Company, including the reasonable costs and expenses of the Remarketing
Agent or the Issuer in defending itself against any such claim, action or
proceeding brought in connection with the exercise or performance of any of its
powers or duties under the Bonds, the Indenture, the Installment Sale Agreement,
the Bond Purchase Agreement, the Reimbursement Agreement or the Letter of
Credit; except to the extent that any such claim, liability, cost or expense
arises in connection with (i) in respect of the Remarketing Agent, the failure
by the Remarketing Agent to deliver any amended or supplemented Offering
Circular or amendment or supplement to the Offering Circular, to any purchaser
of the Bonds if the Company has provided any amended or supplemented Offering
Circular or amendment or supplement to the Offering Circular (in accordance with
Section 3.01 hereof), as the case may be, to the Remarketing Agent for use in
connection with the remarketing of the Bonds, or (ii) in respect of the
Remarketing Agent, any untrue or misleading statement, or alleged untrue or
misleading statement, or omission or alleged omission in information relating to
the Remarketing Agent provided by the Remarketing Agent for inclusion in any
amended or supplemented Offering Circular or any amendment or supplement to the
Offering Circular.

          In case any claim, action or proceeding is brought against the
Remarketing Agent or the Issuer in respect of which indemnity may be sought
hereunder, the Remarketing Agent or the Issuer, as appropriate, promptly shall
give notice of that claim, action or proceeding to the Company, and the Company,
upon receipt of that notice, shall have the right, or, if requested by either
the Remarketing Agent or the Issuer, the obligation to assume the defense of the
claim, action or proceeding at the Company's expense. Such notice shall be given
in sufficient time to allow the Company to defend or participate in such claim,
action or proceeding; provided, that failure of the Remarketing Agent or the
Issuer, as appropriate to give that notice shall not relieve the Company from
any of its obligations under this Section. At their own expense, the Remarketing
Agent and the Issuer may employ separate counsel and participate in the defense.
The Company shall not be liable for any settlement made without its consent,
which consent shall not be unreasonably withheld.

          The indemnification set forth above is intended to and shall include
the indemnification of all affected officials, directors, officers and employees
of the Remarketing Agent and the Issuer. Such indemnification is intended to and
shall be enforceable by the Remarketing Agent and the Issuer to the full extent
permitted by law.

Section 4.02.  Remarketing Fees.
               ----------------

          The Company shall pay the Remarketing Agent, for its services as
Remarketing Agent, an annual fee equal to 10 basis points (1/10h of 1%) per
annum of the amount of Bonds outstanding, payable semi-annually in arrears, on
each February 1 and August 1, beginning with February 1, 2003. For any
semi-annual payment of the annual fee not paid within fifteen (15)

                                        6



days after date of invoice corresponding to such payment due, the Company shall
pay a late charge of an amount equal to the greater of ten percent (10%) of the
amount of the payment or $100.

          The Company also shall pay (i) all expenses in connection with the
provision of information required for the preparation of any amendment or
supplement to the Offering Circular provided pursuant to Section 3.01 of this
Remarketing Agreement, (ii) all fees and expenses incurred with the prior
consent of the Company in connection with the registration of the Bonds under
any state securities laws or the procurement of an exemption therefrom, (iii)
all expenses and costs to effect the authorization, preparation, issuance,
registration under any federal securities laws or the procurement of an
exemption therefrom, delivery and sale of the Bonds, (iv) a fee equal to
$5,000.00, plus all expenses and costs (including, but not limited to, related
attorney's fees) in connection with every and any change of the Credit Facility
Issuer and (v) the reasonable cost of obtaining any rating on the Bonds.

Section 4.03.  Term.
               ----

          This Remarketing Agreement will terminate upon the effective date of
the resignation or removal of McDonald Investments Inc. as Remarketing Agent in
accordance with the provisions of this Remarketing Agreement and Section 718 of
the Indenture.

          Upon the termination of this Remarketing Agreement, the provisions of
Section 4.01 hereof will continue to remain in effect and any Bonds or moneys
then held by McDonald Investments Inc. as Remarketing Agent will be delivered to
the successor remarketing agent or, if there is no successor, to the Trustee.

Section 4.04   Suspension of Remarketing.
               -------------------------

     The Remarketing Agent may suspend its remarketing efforts immediately upon
the occurrence of any of the following events, but only after notice (a
"Discretionary Suspension Notice") to the Issuer, the Company, the Trustee, and
the Credit Facility Issuer, which suspension will continue only so long as the
event continues to exist if, in the Remarketing Agent's reasonable judgment, the
continuance of the event has a material adverse effect on its ability to
remarket the Bonds:

               (a)  a suspension or material limitation in trading in securities
          generally on the New York Stock Exchange;

               (b)  a general moratorium on commercial banking activities in New
          York or Ohio is declared by either federal or New York State or Ohio
          State authorities;

               (c)  the engagement by the United States in hostilities resulting
          in a declaration of war or national emergency, or the occurrence of
          any other outbreak of hostilities or national or international
          calamity or crisis, financial or otherwise;

                                        7



               (d)  the enactment of a federal law, or the rendering of a
          decision by a court of the United States, or the issuance or making of
          a stop order, ruling, regulation or official statement by, or on
          behalf of, the United States Securities and Exchange Commission or
          other governmental agency having jurisdiction of the subject matter,
          in any such case to the effect that, the offering or sale of
          obligations of the general character of the Bonds, or the remarketing
          of the Bonds, as contemplated hereby, is or would be in violation of
          any provision of the Securities Act of 1933, as amended (the
          "Securities Act") and as then in effect, or the Securities Exchange
          Act of 1934, as amended (the "Exchange Act") and as then in effect, or
          the Trust Indenture Act of 1939, as amended (the "Trust Indenture
          Act") and as then in effect, or with the purpose or effect of
          otherwise prohibiting the offering or sale of obligations of the
          general character of the Bonds, or the Bonds, as contemplated hereby;

               (e)  any event shall occur or information shall become known,
          which, in the Remarketing Agent's reasonable judgment, makes untrue,
          incorrect or misleading in any material respect any statement or
          information contained in the then most current Offering Circular
          provided to the Remarketing Agent in connection with the performance
          of its duties hereunder, or causes such document to contain an untrue,
          incorrect or misleading statement of a material fact or to omit to
          state a material fact required to be stated therein or necessary to
          make the statements made therein, in light of the circumstances under
          which they were made, not misleading;

               (f)  any governmental authority shall impose, as to the Bonds, or
          obligations of the general character of the Bonds, any material
          restrictions not now in force, or increase materially those now in
          force;

               (g)  any of the material representations and warranties of the
          Company made hereunder shall not have been true and correct on the
          date made; or

               (h)  the Company fails to observe any of the material covenants
          or agreements made herein.

Section 4.05.  Remarketing Agent's Performance.
               -------------------------------

          The duties and obligations of the Remarketing Agent shall be
determined solely by the express provisions of this Remarketing Agreement and
the Indenture, and the Remarketing Agent shall not be responsible for the
performance of any duties and obligations other than as are specifically set
forth in this Remarketing Agreement and the Indenture, and no implied covenants
or obligations shall be read into this Remarketing Agreement or the Indenture
against the Remarketing Agent. The Remarketing Agent may conclusively rely upon
any notice or document given or furnished to it, and conforming to the
requirements of this Remarketing Agreement or the Indenture, and the Remarketing
Agent may rely and shall be protected in acting upon such notice or any document
reasonably believed by it to be genuine and to have been given, signed or
presented by the proper party or parties. The Remarketing Agent will

                                        8



endeavor to comply with all applicable laws and regulations in the performance
of its duties hereunder and under the Indenture and the Installment Sale
Agreement.

Section 4.06   Remarketing Agent Not to Act as Underwriter.
               -------------------------------------------

     It is understood and agreed that the Remarketing Agent, in entering into
this Remarketing Agreement, is obligated to remarket the Bonds upon
consideration of prevailing financial market conditions pursuant to the
Indenture. The Remarketing Agent shall not, in fulfilling its obligations
hereunder, act as an underwriter for Bonds and is in no way obligated, directly
or indirectly, to advance its own funds to purchase Bonds delivered to it
pursuant to the Indenture; provided, however, that the Remarketing Agent, in its
individual capacity, may in good faith buy, sell, own, hold and deal in any of
the Bonds offered and sold by the Remarketing Agent pursuant to this Remarketing
Agreement, and may join in any action that any holder may be entitled to take
with like effect as if it did not act in any capacity hereunder.

Section 4.07.  Notices.
               -------

          Unless otherwise specified, any notices, requests or other
communications given or made hereunder or pursuant hereto shall be made in
writing and shall be deemed to have been validly given or made if either duly
mailed by certified or registered mail, return receipt requested, or hand
delivered, addressed as follows: if to the Company, 603 Queensbury Avenue,
Queensbury, NY 12804, Attention: Joseph G. Gerardi; if to the Issuer, Counties
of Warren and Washington Industrial Development Agency, 5 Warren Street, Glens
Falls, NY 12801, Attention: Chairman, and if to the Remarketing Agent, McDonald
Investments Inc., 800 Superior Avenue, 17th Floor, Municipal Department,
Cleveland, Ohio 44114. The Notice Address shall constitute, for the purposes set
forth in the Indenture, the principal office of McDonald Investments Inc. as
Remarketing Agent.

                                        9



          IN WITNESS WHEREOF, the Issuer, the Company and the Remarketing Agent
have caused this Remarketing Agreement to be duly executed by their duly
authorized representatives, respectively, as of the date first above written.

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        By:  /s/ Bruce A. Ferguson
                                            ------------------------------------
                                        Its: Chairman
                                            ------------------------------------

                                        ANGIODYNAMICS, INC.


                                        By:  /s/ Eamonn P. Hobbes
                                            ------------------------------------
                                        Its: President & CEO
                                            ------------------------------------

                                        MCDONALD INVESTMENTS INC.


                                        By:  /s/ [Illegible]
                                            ------------------------------------
                                        Its:     V.P.
                                            ------------------------------------

                                       10



                                                                   EXHIBIT 10.14

          UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
          REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
          LIMITED PURPOSE TRUST COMPANY ("DTC") TO THE ISSUER OR ITS
          AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
          AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
          OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
          REPRESENTATIVE OR DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
          OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
          REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
          HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
          WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
          CO., HAS AN INTEREST HEREIN.

COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY MULTI-MODE
VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BOND (ANGIODYNAMICS, INC. PROJECT
- -LETTER OF CREDIT SECURED), SERIES 2002

NO.: R- 1                               MATURITY DATE: AUGUST 1, 2022

INTEREST RATE: as described below       CUSIP No.: 934653DQ6

DATED DATE: AUGUST 29, 2002

REGISTERED OWNER: CEDE & COMPANY

PRINCIPAL AMOUNT: THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000)

     Counties of Warren and Washington Industrial Development Agency, a public
benefit corporation of the State of New York (the "Issuer"), for value received,
hereby promises to pay, solely from the sources hereinafter described, to CEDE &
CO. or registered assigns, on the Maturity Date identified above (subject to any
right of prior redemption hereinafter provided for), the Principal Sum set forth
above (subject to reduction as hereinafter provided) and interest thereon from
the Dated Date set forth above, or from the most recent Interest Payment Date
(as hereinafter defined) to which interest has been paid, to the Maturity Date
identified above (or such earlier date on which the principal hereof has been
paid or duly provided for), initially at the Weekly Rate (as defined below)
(subject to conversion to an alternate interest rate as described below), on the
following dates (each, an "Interest Payment Date"): (A) while this Bond bears
interest at the Weekly Rate, the first Thursday of each February, May, August
and November, commencing with the first Thursday of November, 2002; and (B)
while this Bond bears interest at



the Semi-Annual Rate or the Long-Term Rate (as defined below), on February 1 and
August 1 of each year; provided, that in any case the final Interest Payment
Date shall be the Maturity Date.

     The principal of, premium, if any, on and interest on this Bond are payable
in coin or currency of the United States of America which, at the time of
payment, is legal tender for the payment of public and private debts. The
principal or redemption price of this Bond, and the interest due upon this Bond
at maturity, shall be paid upon presentation and surrender hereof at the
corporate trust office presently located at Corporate Trust Department, 7 Easton
Oval - EA4E63, Columbus, Ohio 43219 (the Office of the Trustee ") of The
Huntington National Bank, as trustee (together with its successors in trust, the
"Trustee") under the trust indenture dated as of August 1, 2002 (from time to
time, as amended or supplemented, the "Indenture") by and between the Issuer and
the Trustee, or at the duly designated office of any successor trustee under the
Indenture. Reference is made to the Indenture for a more complete description of
the Project, the provisions, among others, with respect to the nature and extent
of the security for the Bonds, the rights, duties and obligations of the Issuer,
the Trustee and the Bondholders, and the terms and conditions upon which the
Bonds are issued and secured. All terms used herein with initial capitalization
where the rules of grammar or context do not otherwise require shall have the
meanings as set forth in the Indenture. Each Bondholder assents, by its
acceptance hereof, to all of the provisions of the Indenture.

     Except when the Bonds are Book Entry Bonds, the installments of interest
due on this Bond prior to maturity shall, as provided in the Indenture, be paid
to the Person in whose name this Bond (or one or more Predecessor Bonds) is
registered at the close of business on the Business Day next preceding any
Interest Payment Date (the "Regular Record Date"), and shall be paid by check or
draft of the Trustee mailed by the Trustee on such Interest Payment Date to such
registered owner at his address appearing on the registration books of the
Issuer, or at the option of any holder of Bonds in an aggregate principal amount
of $250,000 or greater be transmitted on such Interest Payment Date by wire
transfer in immediately available funds at such owner's written request to the
bank account number on file with the Trustee, provided such Holder has delivered
adequate instructions regarding same to the Trustee at least ten (10) Business
Days prior to such Bond Payment Date. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the registered owner
on such Regular Record Date, and may be paid to the Person in whose name this
Bond (or one or more Predecessor Bonds) is registered at the close of business
on a date for the payment of such Defaulted Interest to be fixed by the Trustee
(the "Special Record Date"), notice whereof being mailed one time, first-class
postage prepaid to registered owners of the Bonds not less than ten (10) days
prior to such Special Record Date, or may be paid in any other lawful manner as
shall be determined by the Trustee. Notwithstanding anything herein to the
contrary, when this Bond is registered in the name of a Depository (as
hereinafter defined) or its nominee, the principal and redemption price of and
interest on this Bond shall be payable in next day or federal funds delivered or
transmitted to the Depository or its nominee.

     This Bond is one of a duly authorized issue of bonds of the Issuer
designated "Counties of Warren and Washington Industrial Development Agency
Industrial Development Revenue Bonds (Angiodynamics, Inc. Project - Letter of
Credit Secured), Series 2002" in the aggregate principal amount of $3,500,000
(the "Initial Bonds"). The Initial Bonds are issued for the

                                        2



purpose of assisting in providing financing to the Issuer for a project (the
"Project") consisting of the following: (A)(i) the acquisition of an interest in
a certain parcel or parcels of land located at 603 Queensbury Avenue, Town of
Queensbury, County of Warren, State of New York (the "Land"), (ii) the
acquisition thereon of an approximately 32,000 square foot facility (the
"Existing Facility"), together with equipment therein (the "Existing
Equipment"), (iii) the making of certain renovations to the Existing Facility
(as so renovated, the "Facility") consistent with its present and authorized
use, (iv) the construction of approximately 32,000 square feet of additions(s)
to the Existing Facility, (v) the purchase of additional equipment (together
with the Existing Equipment, the "Equipment" and, together with the Land and the
Facility, the "Project Facility") and (B) the financing of a part of the cost of
the foregoing by issuing its tax-exempt Industrial Development Revenue Bonds
(the "Bonds") in an aggregate principal amount not to exceed $4,500,000.00, all
pursuant to Title 1 of Article 18-A of the General Municipal Law of the State of
New York (collectively, the "Act"), as amended, the proceeds of which may be
applied to the costs of issuance, and, as necessary and appropriate, the
provision of a debt service reserve fund, capitalized interest or other means of
providing credit enhancement for the Bonds; and (C) to lease (with the option to
purchase) and/or sell the Project Facility to the Company, all pursuant to the
Act;

     To provide for the payment of the Debt Service Payments on the Bonds, the
Issuer, in the Indenture, has (A) absolutely and irrevocably assigned to the
Trustee all of the Issuer's right, title and interest in and to (1) the
Installment Sale Agreement (except for the Issuer's Unassigned Rights), and (2)
the Credit Facility Account, Redemption Premium Account, Remarketing Proceeds
Account and the Defeasance Account of the Bond Fund and all moneys and
investments therein, including without limitation the proceeds of the Letter of
Credit (as hereinafter defined), and (B) granted a security interest in all
moneys and investments in the Project Fund and the Revenues (other than the
above-referenced accounts of the Bond Fund, all moneys and investments therein
and the proceeds of the Credit Facility).

     The Debt Service Payments on the Bonds are payable solely from moneys held
by the Trustee under the Indenture for such purpose, including moneys drawn by
the Trustee under the Letter of Credit referred to below or such other credit
facility, if any, as may then be held by the Trustee under the Indenture for the
benefit of the Bondholders (the Letter of Credit or any such other credit
facility is hereinafter referred to as the "Credit Facility").

     THE BONDS ARE SPECIAL OBLIGATIONS OF THE ISSUER AND DO NOT REPRESENT OR
CONSTITUTE A DEBT OR PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF NEW YORK OR
THE COUNTIES OF WARREN AND WASHINGTON, NEW YORK OR ANY POLITICAL SUBDIVISION
THEREOF, AND WILL NOT BE SECURED BY AN OBLIGATION OR PLEDGE OF ANY MONEYS RAISED
BY TAXATION. THE DEBT SERVICE PAYMENTS ON THE BONDS WILL BE PAYABLE SOLELY FROM
THE REVENUES PLEDGED AND ASSIGNED BY THE ISSUER TO SECURE PAYMENT THEREOF BY THE
INDENTURE.

     As provided in the Indenture, additional series of Bonds (the "Additional
Bonds", and collectively with the Initial Bonds, the "Bonds") may be issued from
time to time pursuant to supplements to the Indenture on a parity with, and
secured and payable equally and ratably with,

                                        3



all other series of Bonds issued under the Indenture, which Additional Bonds may
mature at different times, may bear interest at different rates, and may
otherwise vary as provided in the Indenture and the supplement thereto
authorizing any such series of Additional Bonds. The aggregate principal amount
of Bonds which may be issued under the Indenture is not limited, except as
otherwise provided in the Indenture.

     If an Event of Default as defined in the Indenture occurs, the principal of
all Bonds issued under the Indenture may become due and payable upon the
conditions and in the manner and with the effect provided in the Indenture.

     This Bond is not valid unless the Certificate of Authentication endorsed
hereon is duly executed.

                        (Determination of Interest Rates)

     The Initial Bonds initially shall bear interest at the Weekly Rate
(hereinafter described), which rate shall continue in effect until converted to
a different interest rate or rates determined for the "Interest Rate Mode" (as
described more fully in the Indenture) selected by the Company. The "Interest
Rate Modes" which may be selected are as follows: (A) a Weekly Rate, in which
the interest rate is determined on the 7th day preceding conversion to a Weekly
Rate and on each Tuesday thereafter or, if not a Business Day, on the next
succeeding Business Day; (B) a Semi-Annual Rate, in which the interest rate is
determined on the tenth Business Day preceding each Semi-Annual Rate Period; and
(C) a Long-Term Rate for a period of one year or more ending on an Interest
Payment Date selected by the Company, in which the interest rate is determined
not later than the 15th Business Day preceding the lst day of such Long-Term
Rate Period.

     On any Interest Payment Date upon which the Bonds are subject to optional
redemption, the Company may from time to time cause the conversion of the
Interest Rate Mode for the Bonds to another Interest Rate Mode (a "Conversion")
in accordance with the terms of the Indenture. To cause a Conversion, the
Company shall deliver, at least 4 Business Days prior to the 15th day (the 30th
day in the case of Conversion to or from the Long-Term Rate) prior to the
proposed effective date of such Conversion, written notice to the Trustee, the
Credit Facility Issuer, the Tender Agent and the Remarketing Agent of the
Company's election to cause a Conversion. Notice of the intended Conversion of
the interest rate on this Bond shall be given not more than 60 days nor less
than 30 days prior to the proposed effective date of such Conversion by the
Trustee one time by first class mail postage prepaid to the registered owner of
this Bond at the address of such owner shown on the Trustee's bond register. The
failure to give any such notice, or any defect therein, shall not affect the
validity of any proceeding for the Conversion of any Bond with respect to which
no such failure to give notice, or defect therein, has occurred. On the
Conversion Date, this Bond shall be subject to a Mandatory Tender for purchase
as provided in Section 304 of the Indenture. Notwithstanding anything to the
contrary contained in the Indenture or herein, such notice shall not be
effective unless the Bank shall have consented thereto in writing and such
notice is accompanied by:

     (A)  an opinion of Counsel stating that the Conversion is authorized by the
Indenture;

                                        4



     (B)  if the stated amount of the Credit Facility, if any, to be held by the
Trustee after such Conversion is increased over that of the then current Credit
Facility, an opinion of reputable bankruptcy counsel stating that payments of
principal and interest on the Bonds from funds drawn on such Credit Facility
will not constitute avoidable preferences with respect to the bankruptcy of the
Company under the Bankruptcy Code;

     (C)  a resolution of the members of the Issuer authorizing and approving
the Conversion; and

     (D)  an opinion of Bond Counsel to the effect that the exercise of the
Conversion Option is lawful under the Act and permitted by the Indenture and
that the Conversion will not, in and of itself, adversely affect the exclusion
of interest on the Initial Bonds from gross income for federal income tax
purposes.

If the Trustee has given notice of a proposed Conversion as aforesaid and such
proposed Conversion shall thereafter be canceled or rescinded, the Trustee shall
promptly notify all Bondholders of such cancellation or recision.

     Interest on the Initial Bonds shall be computed on the basis of a year of
365 or 366 days, as appropriate, for the actual number of days elapsed, while
the Interest Rate Mode is the Weekly Rate, and on the basis of a 360-day year
consisting of twelve 30-day months for the actual number of days elapsed, while
the Interest Rate Mode is the Semi-Annual Rate or the Long-Term Rate. The
interest rate or rates for each Interest Rate Mode for the Initial Bonds shall
be determined by the Remarketing Agent on the dates and at such times as
specified in the Indenture. If the Remarketing Agent fails to determine the
interest rate on the Initial Bonds in accordance with the Indenture, the
interest rate on the Initial Bonds shall be the interest rate in effect for the
previous interest rate period. Each interest rate determined by the Remarketing
Agent shall be the minimum rate of interest necessary, in the judgment of the
Remarketing Agent, to enable the Remarketing Agent to sell the Initial Bonds at
a price equal to the principal amount thereof, plus accrued interest, if any.
Notwithstanding the foregoing, the interest rate bond by the Initial Bonds shall
not exceed the lesser of (A) 15 % per annum or (B) so long as the Initial Bonds
are entitled to the benefit of a Credit Facility, the maximum interest rate
specified in the Credit Facility.

                         (Mandatory Tender and Purchase)

     The Initial Bonds are subject to mandatory purchase in whole (A) on the
effective date of any Conversion of the Interest Rate Mode for the Initial Bonds
and (B) if the Initial Bonds are then bearing interest at the Weekly or
Semi-Annual Rate, on the Interest Payment Date immediately preceding (by at
least 15 calendar days) the date of the expiration of the then current Credit
Facility (whether by expiration according to its terms or upon delivery of an
Alternate Credit Facility), if any, unless the then current Credit Facility
Issuer has provided an Alternate Credit Facility in accordance with the
Indenture, at a purchase price equal to 100% of the principal amount hereof plus
accrued interest, if any.

                                        5



     In addition, the Initial Bonds are subject to mandatory purchase in whole
if the Initial Bonds are then bearing interest at the Long-Term Rate and the
Initial Bonds are then subject to optional redemption by the Issuer upon the
direction of the Company pursuant to the Indenture, on the Interest Payment Date
immediately preceding (by at least 15 calendar days) the date of the expiration
of the then current Credit Facility (whether by expiration according to its
terms or upon delivery of an Alternate Credit Facility), if any, unless a
Qualifying Alternate Credit Facility has been provided in accordance with the
Indenture, at a purchase price equal to 100% of the principal amount hereof,
plus the optional redemption premium, if any, which would be payable under the
Indenture if the Initial Bonds were redeemed on such date, plus accrued
interest, if any. If the Initial Bonds are bearing interest at the Long-Term
Rate, but the Initial Bonds are not then subject to optional redemption by the
Company pursuant to the Indenture, upon expiration of the then current Credit
Facility, the Company must replace the Credit Facility with a Qualifying
Alternate Credit Facility.

     If the Interest Rate Mode on the Initial Bonds is the Weekly Rate, this
Bond shall be purchased at the option of the registered owner hereof upon demand
by such registered owner, on any Business Day at a purchase price equal to the
principal amount hereof, plus accrued interest, if any, to the Purchase Date,
upon written notice to the Tender Agent on or before 4:00 p.m. (New York time)
on a Business Day not later than the 7th calendar day prior to the Purchase
Date. If the Interest Rate Mode on the Initial Bonds is the Semi-Annual Rate,
this Bond shall be purchased on the demand of the registered owner hereof, on
any Interest Payment Date at a purchase price equal to the principal amount
hereof, upon written notice to the Tender Agent on a Business Day not later than
the 8th Business Day prior to such Purchase Date. If the Interest Rate Mode on
the Initial Bonds is the Long-Term Rate, this Bond shall be subject to mandatory
purchase only as set forth in the immediately preceding paragraphs.

     If the Interest Rate Mode on the Initial Bonds is the Weekly Rate or the
Semi-Annual Rate, this Bond is also subject to mandatory purchase, in whole,
upon any replacement, removal or other substitution of the then current Credit
Facility Issuer.

     Any notice in connection with a demand for purchase of this Bond as set
forth in the preceding paragraphs hereof shall be given at the address of the
Tender Agent designated to the Trustee and shall (A) state the number and
principal amount (or portion thereof in an authorized denomination) of this Bond
to be purchased, (B) state the Purchase Date on which this Bond shall be
purchased and (C) irrevocably request such purchase and agree to deliver this
Bond to the Tender Agent on the Purchase Date. ANY SUCH NOTICE SHALL BE
IRREVOCABLE WITH RESPECT TO THE PURCHASE FOR WHICH SUCH DIRECTION WAS DELIVERED
AND, UNTIL SURRENDERED TO THE TENDER AGENT, THIS BOND OR ANY PORTION HEREOF WITH
RESPECT TO WHICH SUCH DIRECTION WAS DELIVERED SHALL NOT BE TRANSFERABLE. This
Bond must be delivered (together with an appropriate instrument of transfer
executed in blank in form satisfactory to the Tender Agent) at the principal
office of the Tender Agent at or prior to 12:00 noon (New York time) on the date
specified in the aforesaid notice in order for the owner hereof to receive
payment in same day funds of the purchase price due on such Purchase Date. NO
REGISTERED OWNER SHALL BE ENTITLED TO PAYMENT OF THE PURCHASE PRICE DUE ON SUCH
PURCHASE DATE EXCEPT UPON SURRENDER OF THIS BOND AS SET FORTH

                                        6



HEREIN. Notwithstanding the foregoing, this Bond shall not be purchased during
the existence of a Default under the Indenture relating to failure to pay
principal due on any Bond, or the redemption price or purchase price due with
respect to any Bond, or the interest due on any Bond. No purchase of Bonds
pursuant to the Indenture shall be deemed to be a payment or redemption of such
Bonds or any portion thereof within the meaning of the Indenture.

     BY ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREOF AGREES THAT THIS
BOND WILL BE PURCHASED, WHETHER OR NOT SURRENDERED, (A) ON THE APPLICABLE
PURCHASE DATE IN CONNECTION WITH THE CONVERSION OF THE INTEREST RATE MODE FOR
THE BONDS OR ANY EXPIRATION OF THE CREDIT FACILITY AS DESCRIBED ABOVE, OR ANY
REPLACEMENT OF THE THEN CURRENT CREDIT FACILITY ISSUER, IF THE BONDS ARE IN THE
WEEKLY RATE MODE OR THE SEMI-ANNUAL RATE MODE AS DESCRIBED ABOVE, OR (B) ON ANY
PURCHASE DATE SPECIFIED BY THE REGISTERED OWNER HEREOF IN THE EXERCISE OF THE
RIGHT TO DEMAND PURCHASE OF THIS BOND AS DESCRIBED ABOVE. IN SUCH EVENT, THE
REGISTERED OWNER OF THIS BOND SHALL NOT BE ENTITLED TO RECEIVE ANY FURTHER
INTEREST HEREON, SHALL HAVE NO FURTHER RIGHTS UNDER THIS BOND OR THE INDENTURE
EXCEPT TO PAYMENT OF THE PURCHASE PRICE HELD THEREFOR, AND SHALL THEREAFTER HOLD
THIS BOND AS AGENT FOR THE TENDER AGENT.

                          (Letter of Credit Provisions)

     Pursuant to the Reimbursement Agreement, the Company has caused a Letter of
Credit issued by KeyBank National Association (the "Bank") to be delivered to
the Trustee (the "Letter of Credit"). Under the Letter of Credit, the Bank is
obligated to pay to the Trustee, upon presentation of a sight draft and required
accompanying documentation, the amount necessary to pay the principal or
purchase price (but not the redemption premium) of the outstanding Initial Bonds
plus an amount equal to 98 days' accrued interest on the outstanding Initial
Bonds at a rate of eight percent (8%) per annum (other than Initial Bonds which
are Pledged Bonds or Bonds owned by the Company) then due and payable (whether
by mandatory redemption or by maturity due to acceleration or otherwise). On
each Bond Payment Date and immediately upon (A) a declaration that all the
Initial Bonds have become due and payable by acceleration, or (B) a mandatory
redemption of all the Initial Bonds Outstanding, the Trustee shall present to
the Bank a sight draft and required accompanying documentation and draw upon the
Letter of Credit for the principal amount, and accrued interest then due on the
Initial Bonds. The Letter of Credit provides that it shall expire on August 29,
2005 or earlier under certain circumstances. Subject to the provisions of the
Indenture, the Company may, but is not required to, provide another Credit
Facility upon the termination of the Letter of Credit or the then current Credit
Facility. While the Initial Bonds bear interest at the Weekly Rate or the
Semi-Annual Rate, the Initial Bonds shall be subject to mandatory tender for
purchase upon any change in the then current Credit Facility Issuer. While the
Initial Bonds bear interest at the Long-Term Rate, the Company may substitute
any Qualifying Credit Facility for the then current Letter or Credit or other
Credit Facility and the Trustee shall give written notice of such substitute to
the Registered Owners thereof.

                                        7



                   (Extraordinary Redemption Without Premium)

     The Initial Bonds are subject to redemption prior to maturity (A) as a
whole, without premium, in the event of (1) a taking in Condemnation of, or
failure of title to, all or substantially all of the Project Facility, (2)
damage to or destruction of part or all of the Project Facility and election by
the Company or the Bank to redeem the Initial Bonds, or (3) a taking in
Condemnation of part of the Project Facility and election by the Company or the
Bank to redeem the Bonds, or (B) in part, without premium, in the event that (1)
to the extent excess moneys remain in the Insurance and Condemnation Fund
following damage or condemnation of a portion of the Project Facility and
completion of the repair, rebuilding or restoration of the Project Facility by
the Company and, pursuant to the Indenture, such excess moneys are not paid to
the Company, (2) excess moneys remain in the Project Fund after the Completion
Date or (3) excess proceeds of title insurance or recoveries from contractors
are applied to redeem Bonds pursuant to the Installment Sale Agreement. In any
such event, the Initial Bonds shall be redeemed, as a whole or in part, at such
time as the Trustee determines, at a redemption price equal to the principal
amount thereof, plus accrued interest to the redemption date, without premium.

         (Extraordinary Redemption Without Premium at Election of Bank)

     The Initial Bonds are also subject to redemption prior to maturity upon
receipt by the Trustee of a written notice from the Bank of the occurrence and
continuance of a default by the Company under the Reimbursement Agreement and
the Bank's election to compel redemption of the Bonds. In such event, the
Initial Bonds shall be redeemed, as a whole, in the manner provided in Article
III of the Indenture, on the earliest date for which the Trustee can give notice
of redemption pursuant to Section 303 of the Indenture, at a redemption price
equal to the principal amount thereof, plus accrued interest to the redemption
date, without premium.

          (Mandatory Redemption With Premium in an Event of Taxability)

     The Initial Bonds are also subject to redemption prior to maturity upon the
occurrence of a Determination of Taxability (as defined in the Indenture). In
such event, the Initial Bonds shall be subject to redemption, as a whole, as
soon as possible after the discovery of such Determination of Taxability, at a
redemption price equal to the principal amount thereof, plus accrued interest
thereon to the redemption date, without premium. If any Initial Bonds are paid
at maturity or purchased by the Trustee or redeemed subsequent to a Tax
Incidence Date without payment of an amount at least equal to the redemption
price that would have been received if such Bonds had been redeemed as a result
of a Determination of Taxability, the owners of such Bonds at the time of
maturity, purchase or redemption, upon establishing their then ownership
thereof, shall be entitled to receive, as an additional premium thereon, an
amount equal to the difference between the amounts actually received and the
amounts that would have been received if such Bonds had been redeemed as a
result of a Determination of Taxability.

            (Optional Redemption Without Premium at Company's Option
                   During Weekly or Semi-Annual Rate Periods)

                                        8



     Whenever the Interest Rate Mode is the Weekly Rate or the Semi-Annual Rate,
the Initial Bond shall be subject to redemption, in whole on any date or in part
on any Interest Payment Date, at the option of the Issuer, upon the direction of
the Company, at a redemption price of 100% of the principal amount hereof, plus
accrued interest to the redemption date, without premium.

              (Optional Redemption With Premium at Company's Option
                          During Long-Term Rate Period)

     Whenever the Interest Rate Mode is the Long-Term Rate, the Initial Bonds
shall be subject to redemption at the option of the Issuer, upon the direction
of the Company, at any time prior to the end of the then current Long-Term Rate
Period at the redemption prices set forth below, plus interest accrued to the
redemption date (which redemption price and accrued interest shall be paid only
from Available Moneys):

Length of Current Long-    Commencement of         Redemption Price as
Term Rate Period (Years)   Redemption Period       Percentage of Principal

More than 9 years          5th anniversary of      102%, declining by 1% on each
                           commencement of Long-   succeeding anniversary of the
                           Term Rate Period        first day of the redemption
                                                   period until reaching 100%
                                                   and thereafter 100%

More than 7, but not       4th anniversary of      101%, declining by 1% on each
more than 9 years          commencement of Long-   succeeding anniversary of the
                           Term Rate Period        first day of the redemption
                                                   period until reaching 100%
                                                   and thereafter 100%

More than 5, but not       3rd anniversary of      101%, declining by 1% on each
more than 7 years          commencement of Long-   succeeding anniversary of the
                           Term Rate Period        first day of the redemption
                                                   period until reaching 100%
                                                   and thereafter 100%.

If, at the time of the Issuer's notice of Conversion of the Interest Rate Mode
for the Initial Bonds to the Long-Term Rate pursuant to the Indenture, the
Issuer provides a certification of the Remarketing Agent to the Trustee and the
Issuer that the foregoing schedule is not consistent with prevailing market
conditions, the foregoing redemption periods and redemption prices may be
revised, effective as of the Conversion Date, as determined by the Remarketing
Agent in its judgment, taking into account the then prevailing market
conditions, as stipulated in such certification, which shall be appended by the
Trustee to its counterpart of this Indenture.

                                        9



                           (Procedures for Redemption)

     Notice of the intended redemption of each Bond subject to redemption shall
be given not more than 60 days nor less than 30 days prior to the redemption
date by the Trustee one time by first class mail postage prepaid to the
registered owner at the address of such owner shown on the Trustee's bond
register. The failure to give any such notice, or any defect therein, shall not
affect the validity of any proceeding for the redemption of any Bond with
respect to which no such failure to give notice, or defect therein, has
occurred. Notice of any redemption hereunder with respect to Bonds held under a
book entry system shall be given by the Registrar or the Trustee only to the
Depository, or its nominee, as the holder of such Bonds. Selection of book entry
interests in the Bonds called for redemption is the responsibility of the
Depository and any failure of any Direct Participant, Indirect Participant or
Beneficial Owner to receive such notice and its contents or effect will not
affect the validity of such notice or any proceedings for the redemption of such
Bonds.

     In the event of any partial redemption, the particular Bonds or portions
thereof to be redeemed shall be selected by the Trustee not more than sixty (60)
days prior to the redemption date in inverse order of maturity, and within each
maturity by lot or by such other such method as the Trustee shall deem fair and
appropriate; provided, however, that in connection with any redemption of Bonds
the Trustee shall first select for redemption any Bonds held by or pledged to
the Bank pursuant to the Indenture. The Trustee may provide for the redemption
of portions (equal to $100,000 or any integral multiple of $5,000 in excess
thereof) of Outstanding Bonds. In no event shall the principal amount of Bonds
subject to any partial redemption be other than $100,000 or any integral
multiple of $5,000 in excess thereof.

     Bonds (or portions thereof as aforesaid) for whose redemption and payment
provision is made in accordance with the Indenture shall thereupon cease to be
entitled to the Lien of the Indenture and shall cease to bear interest from and
after the date fixed for redemption.

                       (Additional Security for the Bonds)

     The Bonds are issued under and are equally and ratably secured by the
Indenture. The Indenture grants the Trustee a first security interest in the
Trust Revenues (as defined in the Indenture).

     As security for payment of the principal of, premium, if any, and interest
on the Bonds, the Issuer and the Company have granted a mortgage Lien on and a
security interest in the Project Facility to the Bank pursuant to a mortgage and
security agreement dated as of August 1, 2002 (the "Mortgage") from the Issuer
and the Company to the Bank. As additional security for the payment of principal
of, premium, if any, and interest on the Bonds, the Issuer has assigned to the
Trustee all of the Issuer's rights and remedies under the Installment Sale
Agreement (except the Unassigned Rights), including the right to receive
installment purchase payments and other amounts payable thereunder pursuant to a
pledge and assignment dated as of August 1, 2002 (the "Pledge and Assignment")
from the Issuer to the Trustee. Further security for the

                                       10



repayment of the Bonds is provided by a guaranty dated as of August 1, 2002 (the
"Guaranty") from the Company to the Trustee.

     Reference is hereby made to the Indenture, the Installment Sale Agreement,
the Reimbursement Agreement, the Mortgage, the Pledge and Assignment, the
Guaranty and the Letter of Credit, and to all amendments and supplements
thereto, for a description of the nature and extent of the security for the
Bonds, the terms and conditions upon which the Bonds are issued and secured and
the rights, duties and obligations of the Issuer, the Trustee, the Company, the
Bank and the Bondholders. Copies of such documents are on file in the Office of
the Trustee.

                              (General Provisions)

     The initial Remarketing Agent under the Indenture is McDonald Investments
Inc., a Key Corp Company, and the initial Tender Agent under the Indenture is
The Huntington National Bank. The Remarketing Agent and the Tender Agent may be
changed at any time in accordance with the Indenture.

     The Initial Bonds are issuable only as fully registered bonds in the
denominations of $100,000 and in any integral multiple of $5,000 in excess
thereof and shall be originally issued only to a Depository to be held in a book
entry system and, while so held in book entry only form, (A) the Initial Bonds
shall be registered in the name of the Depository or its nominee, as Bondholder,
and immobilized in the custody of the Depository, (B) unless otherwise requested
by the Depository, there shall be a single Bond certificate for each maturity of
the Initial Bonds, and (C) the Initial Bonds shall not be transferable or
exchangeable, except for transfer to another Depository or another nominee of a
Depository, without further action by the Issuer. While the Initial Bonds are in
book entry only form, Bonds in the form of physical certificates shall only be
delivered to the Depository. If any Depository determines not to continue to act
as a Depository for the Initial Bonds for use in a book entry system, the Issuer
may attempt to have established a securities depository/book entry system
relationship with another qualified Depository under the Indenture. If the
Issuer does not or is unable to do so, the Issuer and the Trustee, after the
Trustee has made provision for notification to the Beneficial Owners of book
entry interests by the then Depository, shall permit withdrawal of the Bonds
from the Depository, and authenticate and deliver Bond certificates in fully
registered form (in denominations of $100,000 and in any integral multiple of
$5,000 in excess thereof) to the assignees of the Depository or its nominee.

     While a Depository is the sole holder of the Initial Bonds, delivery or
notation of partial redemption or tender for purchase of Bonds shall be effected
in accordance with the provisions of the Letter of Representations, as defined
in the Indenture.

     This Bond is transferable by the registered owner hereof or his duly
authorized attorney upon surrender of this Bond to the Trustee, as Bond
Registrar, at the Office of the Trustee, accompanied by a duly executed
instrument of transfer in form and with guaranty of signature satisfactory to
the Bond Registrar, subject to such reasonable regulations as the Company, the
Issuer or the Bond Registrar may prescribe, PROVIDED, THAT, IF MONEYS FOR THE
MANDATORY PURCHASE OF THIS BOND HAVE BEEN DEPOSITED WITH THE

                                       11



TRUSTEE UNDER THE INDENTURE, THIS BOND SHALL NOT BE TRANSFERABLE TO ANYONE UNTIL
DELIVERED TO THE TENDER AGENT. Upon any such transfer, a new Bond or Bonds in
the same aggregate principal amount will be issued to the transferee. No service
charge shall be made for any transfer or exchange of Bonds, but the Issuer or
the Trustee may make a charge for transfer or exchange of Bonds sufficient to
reimburse them for any tax, fee or other governmental charge required to be paid
with respect to such transfer or exchange, and such charge shall be paid before
any new Bond shall be delivered.

     Except as set forth in this Bond and as otherwise provided in the
Indenture, the person in whose name this Bond is registered shall be deemed the
owner hereof for all purposes, and payment or on account of the principal of, or
premium if any interest on, this Bond shall be made only to or upon the order of
the registered owner thereof or his duly authorized legal representative, and
the Issuer, the Company, any Paying Agents, the Bond Registrar, the Tender
Agent, the Remarketing Agent and the Trustee shall not be affected by any notice
to the contrary. Such registration may be changed only as provided in this Bond
and in the Indenture, and no other notice to the Issuer or the Trustee shall
affect the rights or obligations with respect to the transference of a Bond or
be effective to transfer any Bond. All payments to the Person in whose name any
Bond shall be registered shall be valid and effectual to satisfy and discharge
the liability upon such Bond to the extent of the sum or sums to be paid.

     THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM
PAYMENTS MADE BY THE BANK UNDER THE LETTER OF CREDIT AND BY THE COMPANY UNDER
THE INSTALLMENT SALE AGREEMENT, MONEYS AND SECURITIES HELD BY THE TRUSTEE UNDER
THE INDENTURE, AND THE SECURITY PROVIDED BY THE MORTGAGE, THE PLEDGE AND
ASSIGNMENT AND THE GUARANTY.

     The owner of this Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any Event of Default under the Indenture, or to
institute, appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.

     The Indenture permits certain amendments or supplements to the Installment
Sale Agreement, the Indenture and the other Financing Documents not prejudicial
to the Bondholders to be made without the consent of or notice to the
Bondholders, and other amendments or supplements thereto to be made with the
consent of the holders of not less than a majority in aggregate principal amount
of the Bonds then outstanding.

     The principal hereof may be declared or may become due on the conditions
and in the manner and at the time set forth in the Indenture upon the occurrence
of an Event of Default as provided in the Indenture.

     NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR REDEMPTION
PRICE OF OR THE INTEREST ON THIS BOND OR FOR ANY CLAIM BASED HEREON OR ON THE
INDENTURE, AGAINST ANY PAST, PRESENT OR FUTURE MEMBER, OFFICER, DIRECTOR,
EMPLOYEE OR AGENT (EXCEPT THE

                                       12



COMPANY), AS SUCH, OF THE ISSUER OR OF ANY PREDECESSOR OR SUCCESSOR CORPORATION,
EITHER DIRECTLY OR THROUGH THE ISSUER OR OTHERWISE, WHETHER BY VIRTUE OF ANY
CONSTITUTION, STATUTE OR RULE OF LAW, OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR
PENALTY, OR OTHERWISE, ALL SUCH LIABILITY BEING, BY THE ACCEPTANCE HEREOF,
EXPRESSLY WAIVED AND RELEASED.

     This Bond shall not be entitled to any benefit under the Indenture or
become valid or obligatory for any purpose until the certificate of
authentication of the Trustee shall be endorsed hereon.

     THE BONDS DO NOT CONSTITUTE AND SHALL NOT BE A DEBT OF THE STATE OF NEW
YORK OR THE COUNTIES OF WARREN AND WASHINGTON, NEW YORK AND NEITHER THE STATE OF
NEW YORK NOR THE COUNTIES OF WARREN AND WASHINGTON, NEW YORK SHALL BE LIABLE
THEREON. THE BONDS DO NOT GIVE RISE TO A PECUNIARY LIABILITY OR CHARGE AGAINST
THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OF NEW YORK OR THE COUNTIES OF
WARREN AND WASHINGTON, NEW YORK.

     It is hereby certified, recited and declared that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
execution and delivery of the Indenture, and the issuance of this Bond, do
exist, have happened and have been performed in the time, form and manner as
required by law, and that the issuance of the Bonds does not violate any
constitutional or statutory limitation.

                                      12-A



     IN WITNESS WHEREOF, Counties of Warren and Washington Industrial
Development Agency has caused this Bond to be duly executed in its name by the
manual or facsimile signature of its Chairman or Vice Chairman, and its
corporate seal to be impressed or reproduced hereon, attested by the manual or
facsimile signature of its Secretary or Assistant Secretary, all as of the Dated
Date identified above.

                                          COUNTIES OF WARREN AND WASHINGTON
                                          INDUSTRIAL DEVELOPMENT AGENCY


                                          BY:  /s/ Bruce A. Ferguson
                                             -----------------------------------
                                               Bruce A. Ferguson, Chairman

(SEAL)

ATTEST:


/s/ N. A. Caimano
- --------------------------------------
Nicholas A. Caimano, Secretary

                                       13



                     (Form of Certificate of Authentication)

This Bond is one of the Bonds of the issue described in the within-mentioned
Indenture.

                                          THE HUNTINGTON NATIONAL BANK,
                                          as Trustee


                                          BY:   /s/ Cheri Scott Geraci
                                             -----------------------------------
                                                Authorized Officer

   8/29/02
- --------------------------------------
Date of Authentication

                                       14



                        [Form of Assignment for Transfer]

     FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
(please insert name, address and social security or tax identification number of
assignee): _______________________________________ the within Bond and does
hereby irrevocably constitute and appoint _____________________________ to
transfer the said Bond on the books kept for registration thereof, with full
power of substitution in the premises.

Dated:
       -------------------------------

                                          --------------------------------------
                                          NOTICE: The signatures) on this
                                          assignment must correspond with the
                                          name(s) as it (they)appear(s) on the
                                          face of the within Bond in every
                                          particular.

In the presence of:


- --------------------------------------

                                       15



                                                                   EXHIBIT 10.15

CLOSING ITEM NO.: A-4

================================================================================

                        COUNTIES OF WARREN AND WASHINGTON
                          INDUSTRIAL DEVELOPMENT AGENCY

                                       AND

                               ANGIODYNAMICS, INC.

                                   ----------

                           INSTALLMENT SALE AGREEMENT

                                   ----------

                           DATED AS OF AUGUST 1, 2002

                                   ----------

                CERTAIN RIGHTS OF COUNTIES OF WARREN AND
                WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY (THE
                "ISSUER") UNDER THIS INSTALLMENT SALE AGREEMENT
                AND CERTAIN MONEYS DUE AND TO BECOME DUE TO THE
                ISSUER HEREUNDER, HAVE BEEN ASSIGNED (A) TO THE
                HUNTINGTON NATIONAL BANK, AS TRUSTEE (THE
                "TRUSTEE"), PURSUANT TO A PLEDGE AND ASSIGNMENT
                DATED AS OF AUGUST 1, 2002 FROM THE ISSUER TO THE
                TRUSTEE AND (B) TO KEYBANK NATIONAL ASSOCIATION
                (THE "BANK") PURSUANT TO A MORTGAGE AND SECURITY
                AGREEMENT DATED AS OF AUGUST 1, 2002 FROM THE
                ISSUER AND ANGIODYNAMICS, INC. TO THE BANK.

================================================================================

THIS INSTALLMENT SALE AGREEMENT IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT
UNDER THE UNIFORM COMMERCIAL CODE OF THE STATE OF NEW YORK.



                                TABLE OF CONTENTS

             (This Table of Contents is not part of the Installment
            Sale Agreement and is for convenience of reference only.)

                                                                            PAGE
                                                                            ----

PARTIES........................................................................1
RECITALS.......................................................................1

                                    ARTICLE I

                                   DEFINITIONS

Section 1.1.   Definitions.....................................................5

                                   ARTICLE II

                           REPRESENTATIONS, WARRANTIES
                                  AND COVENANTS

Section 2.1.   Representations, Warranties and Covenants of the Issuer........25
Section 2.2.   Representations, Warranties and Covenants of the Company.......26
Section 2.3.   Covenant with Trustee, Bondholders and Bank....................29

                               ARTICLE III

                          CONVEYANCE AND USE OF
                          THE PROJECT FACILITY

Section 3.1.   Conveyance to the Issuer.......................................30
Section 3.2.   Use of the Project Facility....................................30
Section 3.3.   Hazardous Materials............................................30
Section 3.4.   [Reserved].....................................................31
Section 3.5.   Non-Merger.....................................................31

                                       -i



                                   ARTICLE IV

                   UNDERTAKING AND COMPLETION OF THE PROJECT;
                     ISSUANCE OF BONDS; USE OF BOND PROCEEDS

Section 4.1.   Acquisition, Construction and Installation of the
               Project Facility...............................................33
Section 4.2.   Issuance of the Bonds..........................................34
Section 4.3.   Application of Bond Proceeds...................................34
Section 4.4.   Completion of the Project Facility.............................36
Section 4.5.   Completion by the Company......................................36
Section 4.6.   Remedies to be Pursued Against Contractors,
               Subcontractors, Materialmen and their Sureties.................36

                                    ARTICLE V

              AGREEMENT TO CONVEY THE PROJECT FACILITY; INSTALLMENT
                   PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE

Section 5.1.   Agreement to Convey the Project Facility.......................38
Section 5.2.   Conveyance; Instruments; Survival..............................38
Section 5.3.   Installment Purchase Payments and Other Amounts Payable........39
Section 5.4.   Nature of Obligations of the Company Hereunder.................41
Section 5.5.   Prepayment of Installment Purchase Payments....................42
Section 5.6.   [Reserved].....................................................42
Section 5.7.   Grant of Security Interest.....................................42
Section 5.8.   The Credit Facility............................................42
Section 5.9.   Earlier Conveyance of Project Facility.........................43

                                   ARTICLE VI

                 MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE

Section 6.1.   Maintenance and Modification of the Project Facility...........44
Section 6.2.   Taxes, Assessments and Utility Charges.........................44
Section 6.3.   Insurance Required.............................................44
Section 6.4.   Additional Provisions Respecting Insurance.....................46
Section 6.5.   Application of Net Proceeds of Insurance.......................46

                                      -ii



                                   ARTICLE VII

                      DAMAGE, DESTRUCTION AND CONDEMNATION

Section 7.1.   Damage or Destruction..........................................47
Section 7.2.   Condemnation...................................................48
Section 7.3.   Additions to the Project Facility..............................51

                              ARTICLE VIII

                            SPECIAL COVENANTS

Section 8.1.   No Warranty of Condition or Suitability by Issuer;
               Acceptance "As Is".............................................51
Section 8.2.   Hold Harmless Provisions.......................................51
Section 8.3.   Right of Access to the Project Facility........................52
Section 8.4.   Company Not to Terminate Existence or Dispose of Assets;
               Condition under which Exceptions Are Permitted.................52
Section 8.5.   Agreement to Provide Information...............................53
Section 8.6.   Books of Record and Account; Compliance Certificates...........53
Section 8.7.   Compliance with Applicable Laws................................53
Section 8.8.   Discharge of Liens and Encumbrances............................54
Section 8.9.   Performance of Company's Obligations...........................54
Section 8.10.  Depreciation Deductions and Tax Credits........................54
Section 8.11.  Covenant Against Arbitrage Bonds...............................55
Section 8.12.  Identification of Equipment....................................55
Section 8.13.  Indemnification of the Trustee.................................55
Section 8.14.  Indemnification of the Bank....................................56
Section 8.15.  Employment Opportunities.......................................56
Section 8.16.  Sales and Use Tax Exemption....................................56

                                   ARTICLE IX

                        ASSIGNMENTS; MERGER OF THE ISSUER

Section 9.1.   Assignment of Installment Sale Agreement by the Company........58
Section 9.2.   Pledge and Assignment of Issuer's Interests to Trustee.........58
Section 9.3.   Merger of the Issuer...........................................58
Section 9.4.   Sale of the Project Facility...................................59

                                      -iii



                                    ARTICLE X

                         EVENTS OF DEFAULT AND REMEDIES

Section 10.1.  Events of Default Defined......................................60
Section 10.2.  Remedies on Default............................................62
Section 10.3.  Remedies Cumulative............................................62
Section 10.4.  Agreement to Pay Attorneys' Fees and Expenses..................63
Section 10.5.  No Additional Waiver Implied by One Waiver.....................63

                               ARTICLE XI

                              MISCELLANEOUS

Section 11.1.  Notices........................................................64
Section 11.2.  Binding Effect.................................................65
Section 11.3.  Severability...................................................65
Section 11.4.  Amendment......................................................66
Section 11.5.  Execution of Counterparts......................................66
Section 11.6.  Applicable Law.................................................66
Section 11.7.  Recording and Filing...........................................66
Section 11.8.  Survival of Obligations........................................66
Section 11.9.  Table of Contents and Section Headings Not Controlling.........66
Section 11.10. No Recourse; Special Obligation................................67

TESTIMONIUM.....................................................................
SIGNATURES....................................................................68
ACKNOWLEDGMENTS...........................................................68, 70

EXHIBIT A - Description of the Equipment.....................................A-1
EXHIBIT B - Form of Bill of Sale to Company..................................B-1
EXHIBIT C - Form of Termination of Installment Sale Agreement................C-1
EXHIBIT D - Form of Sales Tax Exemption Letter...............................D-1
EXHIBIT E - Current Form of Annual Report....................................E-1

                                      -iv



                           INSTALLMENT SALE AGREEMENT

     THIS INSTALLMENT SALE AGREEMENT dated as of August 1, 2002 (the
"Installment Sale Agreement") by and between COUNTIES OF WARREN AND WASHINGTON
INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New
York (the "State") having an office for the transaction of business located at
the 5 Glen Street, Glens Falls, New York 12801 (the "Issuer"), and
ANGIODYNAMICS, INC., a business corporation organized and existing under the
laws of the State of Delaware having an office for the transaction of business
located at 603 Queensbury Avenue, Queensbury, New York 12804 (the "Company");

                                   WITNESSETH:

     WHEREAS, Title 1 of Article 18-A of the General Municipal Law of the State
of New York (the "Enabling Act") was duly enacted into law as Chapter 1030 of
the Laws of 1969 of the State of New York; and

     WHEREAS, the Enabling Act authorizes and provides for the creation of
industrial development agencies for the benefit of the several counties, cities,
villages and towns in the State of New York (the "State") and empowers such
agencies, among other things, to acquire, construct, reconstruct, lease,
improve, maintain, equip and dispose of land and any building or other
improvement, and all real and personal properties, including, but not limited
to, machinery and equipment deemed necessary in connection therewith, whether or
not now in existence or under construction, which shall be suitable for
manufacturing, warehousing, research, civic, commercial or industrial purposes,
in order to advance the job opportunities, health, general prosperity and
economic welfare of the people of the State and to improve their standard of
living; and

     WHEREAS, the Enabling Act further authorizes each such agency to lease or
sell any or all of its facilities, to issue its bonds, for the purpose of
carrying out any of its corporate purposes and, as security for the payment of
the principal and redemption price of and interest on any such bonds so issued
and any agreements made in connection therewith, to mortgage and pledge any or
all of its facilities, whether then owned or thereafter acquired, and to pledge
the revenues and receipts from the lease or sale thereof to secure the payment
of such bonds and interest thereon; and

     WHEREAS, the Issuer was created, pursuant to and in accordance with the
provisions of the Enabling Act, by Chapter 862 of the Laws of 1971 of the State,
as amended, constituting Section 890-C of the General Municipal Law (said
Section and the Enabling Act being collectively referred to as the "Act") and is
empowered under the Act to undertake the Project (as hereinafter defined) in
order to so advance the job opportunities, health, general prosperity and
economic welfare of the people of the State and improve their standard of
living; and

     WHEREAS, in April 2002, the Company presented an application (the
"Application") to the Issuer, which Application requested that the Issuer
consider undertaking a project (the

                                        1



"Project") consisting of the following: (A)(i) the acquisition of an interest in
a certain parcel or parcels of land located at 603 Queensbury Avenue, Town of
Queensbury, County of Warren, State of New York (the "Land"), (ii) the
acquisition thereon of an approximately 32,000 square foot facility (the
"Existing Facility"), together with equipment therein (the "Existing
Equipment"), (iii) the making of certain renovations to the Existing Facility
(as so renovated, the "Facility") consistent with its present and authorized
use, (iv) the construction of approximately 32,000 square feet of additions(s)
to the Existing Facility, (v) the purchase of additional equipment (together
with the Existing Equipment, the "Equipment" and, together with the Land and the
Facility, the "Project Facility") and (B) the financing of a part of the cost of
the foregoing by issuing its tax-exempt Industrial Development Revenue Bonds
(the "Bonds") in an aggregate principal amount not to exceed $4,500,000.00, all
pursuant to Title 1 of Article 18-A of the General Municipal Law of the State of
New York (collectively, the "Act"), as amended, the proceeds of which may be
applied to the costs of issuance, and, as necessary and appropriate, the
provision of a debt service reserve fund, capitalized interest or other means of
providing credit enhancement for the Bonds; and (C) to lease (with the option to
purchase) and/or sell the Project Facility to the Company, all pursuant to the
Act;

     WHEREAS, pursuant to Article 8 of the Environmental Conservation Law,
Chapter 43-B of the Consolidated Laws of New York, as amended (the "SEQR Act"),
and the regulations adopted pursuant thereto by the Department of Environmental
Conservation of the State of New York, being 6 NYCRR Part 617, as amended (the
"Regulations," and collectively with the SEQR Act, "SEQRA"), the Issuer has made
a preliminary determination that the Project will not have a significant impact
on the environment; and

     WHEREAS, by resolution adopted by the members of the Issuer on June 24,
2002 (the "Preliminary Inducement Resolution"), the members of the Issuer
agreed, subject to numerous conditions, including (A) all requirements of the
SEQR Act that relate to the Project and (B) the public hearing and notice
requirements and other procedural requirements contained in Section 859-a of the
Act, to accept the Application and enter into a preliminary agreement (the
"Preliminary Agreement") relating to the Project; and

     WHEREAS, pursuant to the authorization contained in the a resolution of the
Issuer dated May 20, 2002, the Executive Director of the Issuer (A) caused
notice of a public hearing of the Issuer (the "Public Hearing") pursuant to
Section 859-a of the Act and Section 147(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to hear all persons interested in the Project and
the financial assistance being contemplated by the Issuer with respect to the
Project, to be mailed to the chief executive officers of the county and of each
city, town, village and school district in which the Project Facility is to be
located, (B) caused notice of the Public Hearing to be published on May 15, 2002
in The Post Star, a newspaper of general circulation available to residents of
the Town of Queensbury, (C) conducted the Public Hearing on June 17, 2002 at
3:00 o'clock p.m., local time in the Board of Supervisors in the Warren County
Municipal Center, Queensbury, New York, and (D) prepared a report of the Public
Hearing (the "Report") which fairly summarized the views presented at said
public hearing and distributed same to the members of the Issuer and to the
County Legislatures of both Warren and Washington County, New York
(collectively, the "County Legislature"). By resolutions dated

                                        2



June 21, 2002 and July 17, 2002 (the "Public Approval"), the County Legislature
approved the issuance of the bonds for purposes of Section 147(f) of the Code;
and

     WHEREAS, by resolution adopted by the members of the Issuer on July 15,
2002 (the "Bond Resolution"), the Issuer determined to (A) issue its Multi-Mode
Variable Rate Industrial Development Revenue Bonds (Angiodynamics, Inc. Project
- - Letter of Credit Secured), Series 2002 in the aggregate principal amount of
$3,500,000 (the "Initial Bonds") pursuant to the provisions of a trust indenture
dated as of August 1, 2002 (the "Indenture") by and between the Issuer and The
Huntington National Bank, as trustee (the "Trustee") for the holders of the
Initial Bonds and any additional bonds (the "Additional Bonds", and collectively
with the Initial Bonds, the "Bonds") issued pursuant to the Indenture, (B) enter
into this Installment Sale Agreement, and (C) enter into certain other documents
related to the foregoing; and

     WHEREAS, simultaneously with the issuance of the Initial Bonds, for the
purpose of undertaking and completing the Project, the Issuer proposes to
acquire from the Company all right, title and interest of the company in the
Project Facility pursuant to (a) a bill of sale dated as of August 1, 2002 (the
"Bill of Sale to Issuer") from the Company, as grantor, to the Issuer, as
grantee; and (b) a deed to Issuer dated as of August 1, 2002 (the "Deed to
Issuer") from the Company to the Issuer;

     WHEREAS, the Issuer proposes to undertake the Project, to appoint the
Company as agent of the Issuer to undertake the acquisition and installation of
the Project Facility, and to sell the Project Facility to the Company, and the
Company desires to act as agent of the Issuer to undertake the acquisition, and
installation of the Project Facility and to purchase the Project Facility from
the Issuer, all pursuant to the terms and conditions hereinafter set forth in
this Installment Sale Agreement; and

     WHEREAS, as security for the Initial Bonds, the Company will enter into a
reimbursement agreement dated as of August 1, 2002 (the "Reimbursement
Agreement") with KeyBank National Association, a national banking corporation
organized and existing under the laws of the United States (the "Bank"),
pursuant to which the Bank is to issue in favor of the Trustee an irrevocable
transferable direct-pay letter of credit (the "Letter of Credit"), said Letter
of Credit to be in a maximum amount (which shall decline at fixed intervals)
equal to $3,500,000, plus an amount sufficient to cover accrued interest and
interest premium if necessary; and

     WHEREAS, as security for the Bonds, the Issuer will assign to the Trustee
certain of the Issuer's rights and remedies under this Installment Sale
Agreement, including the right to receive installment purchase payments and
other amounts payable thereunder, but not including the Unassigned Rights (as
hereinafter defined), pursuant to a pledge and assignment dated as of August 1,
2002 (the "Pledge and Assignment") from the Issuer to the Trustee; and

     WHEREAS, as additional security for the Bonds and the Company's obligations
under the Reimbursement Agreement, the Issuer and the Company will grant to the
Bank a first priority mortgage Lien on and a security interest in the Project
Facility pursuant to a mortgage and

                                        3



security agreement dated as of August 1, 2002 from the Issuer and the Company to
the Bank (the "Mortgage"); and

     WHEREAS, the Company's obligation to make all installment purchase payments
due under this Installment Sale Agreement, and to perform all obligations
related thereto, and the Issuer's obligation to repay the Initial Bonds, will be
further secured by a guaranty dated as of August 1, 2002 (the "Guaranty") from
the Company to the Trustee; and

     WHEREAS, the providing of the Project Facility and the sale of the Project
Facility to the Company pursuant to this Installment Sale Agreement is for a
proper purpose, to wit, to advance the job opportunities, health, general
prosperity and economic welfare of the inhabitants of the State, pursuant to the
provisions of the Act; and

     WHEREAS, all things necessary to constitute this Installment Sale Agreement
a valid and binding agreement by and between the parties hereto in accordance
with the terms hereof have been done and performed, and the creation, execution
and delivery of this Installment Sale Agreement have in all respects been duly
authorized by the Issuer and the Company;

     NOW, THEREFORE, FOR AND IN CONSIDERATION OF THE PREMISES AND THE MUTUAL
COVENANTS HEREINAFTER CONTAINED, THE PARTIES HERETO HEREBY FORMALLY COVENANT,
AGREE AND BIND THEMSELVES AS FOLLOWS TO WIT:

                          [Balance of page left blank]

                                        4



                                    ARTICLE I

                                   DEFINITIONS

SECTION 101.   DEFINITIONS. The following words and terms used in this Indenture
shall have the respective meanings set forth below unless the context or use
indicates another or different meaning or intent:

     "Accountant" means an independent certified public accountant or a firm of
independent certified public accountants selected by the Company and acceptable
to the Bank.

     "Act" means Title 1 of Article 18-A of the General Municipal Law of the
State, as amended from time to time, together with Chapter 862 of the Laws of
1971 of the State, as amended from time to time.

     "Act of Bankruptcy" means the filing of a petition in bankruptcy (or the
other commencement of a bankruptcy or similar proceeding) by or against the
Bank, the Company or the Issuer under any applicable bankruptcy, insolvency,
reorganization or similar law, now or hereafter in effect.

     "Additional Bonds" means any bonds issued by the Issuer pursuant to Section
214 of the Indenture.

     "Additional Facility" means any additional property financed with the
proceeds of Additional Bonds.

     "Additional Project" means the purposes for which any Additional Bonds may
be issued.

     "Affiliate" of any specified entity means any other entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified entity and "control", when used with respect to any
specified entity, means the power to direct the management and policies of such
entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

     "Alternate Credit Facility" means any direct pay letter of credit or other
credit enhancement or support facility that has terms which are the same in all
material respects (except for the term and maximum interest rate but including
coverage of accrued interest on the Bonds for 98 days if the Bonds bear interest
at the Weekly Rate or for 183 days if the Bonds bear interest at the Semi-Annual
Rate or the Long-Term Rate) as the then current Credit Facility and (A) shall
have a term of not less than one year, (except if the Long-Term Rate shall then
be in effect, the term of such Alternate Credit Facility shall not expire prior
to (a) the first par redemption date plus 15 days or (b) the first redemption
date plus 15 days if the Alternate Credit Facility covers the redemption
premium) (B) shall be issued by a bank, a trust company or other

                                        5



financial institution or credit provider, and (C) with respect to which the
Trustee shall have received the opinions required by Section 408(F) of the
Indenture.

     "Applicable Laws" means all statutes, codes, laws, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all Governmental Authorities,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to or affect the Project Facility or any part
thereof or the conduct of work on the Project Facility or any part thereof or to
the operation, use, manner of use or condition of the Project Facility or any
part thereof (the applicability of such statutes, codes, laws, acts, ordinances,
orders, rules, regulations, directions and requirements to be determined both as
if the Issuer were the owner of the Project Facility and as if the Company and
not the Issuer were the owner of the Project Facility), including but not
limited to (1)applicable building, zoning, environmental, planning and
subdivision laws, ordinances, rules and regulations of Governmental Authorities
having jurisdiction over the Project Facility, (2)restrictions, conditions or
other requirements applicable to any permits, licenses or other governmental
authorizations issued with respect to the foregoing, and (3) judgments, decrees
or injunctions issued by any court or other judicial or quasi-judicial
Governmental Authority.

     "Arbitrage Certificate" means the certificate dated the Closing Date for
the Initial Bonds executed by the Issuer and relating to certain requirements
set forth in Section 148 of the Code.

     "Authenticating Agent" means the Trustee and any agent so designated in and
appointed pursuant to Section 204 of the Indenture.

     "Authorized Investments" means any of the following: (A) Government
Obligations; (B)obligations issued or guaranteed by any state or political
subdivision thereof rated A or higher by Moody's and by S&P; (C) open market
commercial or finance paper of any corporation having a net worth in excess of
$100,000,000 and which is rated either P-1 or A-1 or an equivalent by Moody's
and S&P; (D) bankers' acceptances drawn on and accepted by commercial banks
including the Trustee or its affiliates; (E) investments due within 12 months in
certificates of deposit issued by, or bankers' acceptances of, the Trustee or
its affiliates, or of banks or trust companies organized under the laws of the
United States of America or any state thereof, which must have a reported
capital and surplus of at least $25,000,000 in dollars of the United States of
America; (F) bank repurchase agreements, including the Trustee's or its
affiliate's, fully secured by obligations of the type described in (A) above;
(G) variable rate demand securities redeemable within 7 days or able to be
tendered for remarketing or purchase upon no more than 7 days' notice and
secured by a credit facility issued by a financial institution, which financial
institution (or its corporate parent) maintains a long term debt rating assigned
by Moody's and S&P which is not lower than the third highest long term debt
category (without regard to numerical or other modifiers assigned within the
category) by either Rating Service, or by both Rating Services, if rated by both
Rating Services; and (H)shares of any so called "money market mutual fund",
including any "money market mutual fund" which the Trustee or any of its
affiliates provide services for a fee, whether as an investment advisor,
custodian, transfer agent, registrar, sponsor, distributor, manager or
otherwise, which invests solely in obligations described in items (A) through
(G) above; and further provided that any such investment or deposit is not
prohibited by law.

                                        6



     "Authorized Newspaper" means a newspaper in English customarily published
each Business Day and generally circulated in the Borough of Manhattan, City and
State of New York.

     "Authorized Representative" means the Person or Persons at the time
designated to act on behalf of the Issuer, the Bank or the Company, as the case
may be, by written certificate furnished to the Issuer, the Company, the Bank
and the Trustee containing the specimen signature of each such Person and signed
on behalf of (A) the Issuer by its Chairman or Vice Chairman, or such other
person as may be authorized by resolution of the members of the Issuer to act on
behalf of the Issuer, (B) the Bank by a Vice President or an Assistant Vice
President, or such other person as may be authorized by the board of directors
of the Bank to act on behalf of the Bank, and (C) the Company by its President
or any Vice President, or such other person as may be authorized by the board of
directors of the Company to act on behalf of the Company.

     "Available Moneys" means, with respect to any date, (A) funds which (1)
have been paid to the Trustee by the Issuer, the Company, any Affiliate of the
Company, any Guarantor or any Insider of any of the foregoing and deposited into
and held in a separate and segregated subaccount or subaccounts in the
Redemption Premium Account of the Bond Fund in which no moneys not deposited on
the same date were at any time held, (2) have been on deposit in the Redemption
Premium Account of the Bond Fund for a period of at least one hundred
twenty-three (123) consecutive days prior to such date, during and prior to
which period no Event of Bankruptcy has occurred and (3) are represented by cash
or its equivalent as of such date; (B) moneys drawn under the Letter of Credit
and deposited directly into the Credit Facility Account of the Bond Fund; (C)
the proceeds deposited directly into the Defeasance Account of the Bond Fund
from the sale of refunding obligations other than, directly or indirectly, to
the Issuer, the Company, any Guarantor, any Affiliate of the Company or any
Guarantor or any Insider of any of them or any entity who at the time of the
purchase of the Bonds, is a secured creditor of the Company or any Guarantor;
(D) proceeds deposited directly into the Remarketing Proceeds Account of the
Bond Fund from the marketing or remarketing of Bonds to any purchaser other
than, directly or indirectly, the Company, the Issuer, any Guarantor, any
Affiliate of the Company or any Guarantor or any Insider of any of them or any
entity who at the time of the purchase of the Bonds, is a secured creditor of
the Company or any Guarantor; (E) proceeds from investment of the foregoing,
provided such proceeds are retained in the Account in which they were earned;
and (F) any other funds or payments so long as, in the opinion of reputable
bankruptcy counsel, such payments will not constitute an avoidable preference
under the standards set forth in the Bankruptcy Code.

     "Bank" means the Credit Facility Issuer.

     "Bank Documents" means the Letter of Credit, the Reimbursement Agreement,
the Mortgage, the Bond Pledge Agreement, the Security Agreement and any other
document now or hereafter executed by the Issuer, the Company or any Guarantor
in favor of the Bank which affects the rights of the Bank in or to the Project
Facility, in whole or in part, or which secures or guarantees any sum due under
any Bank Document.

                                        7



     "Bank Rate" means the rate of interest being charged to the Company by the
Credit Facility Issuer under the Reimbursement Agreement.

     "Bankruptcy Code" means Title 11 of the United States Code, as it is
amended from time to time.

     "Beneficial Owner" means, with respect to the Bonds, a Person owning a
Beneficial Ownership Interest therein, as evidenced to the satisfaction of the
Trustee.

     "Beneficial Ownership Interest" means the beneficial right to receive
payments and notices with respect to the Bonds which are held by the Depository
under a book entry system.

     "Bill of Sale to Company" means the bill of sale from the Issuer to the
Company conveying all of the Issuer's interest in the Project Facility to the
Company, substantially in the form attached as Exhibit B to the Installment Sale
Agreement.

     "Bill of Sale to Issuer" means the bill of sale delivered on the Closing
Date from the Company to the Issuer conveying all of the Company's interest in
the Project Facility to the Issuer.

     "Bond" or "Bonds" means, collectively, (A) the Initial Bonds and (B) any
Additional Bonds.

     "Bond Counsel" means the law firm of Bond, Schoeneck & King, LLP, Albany,
New York or such other attorney or firm of attorneys located in the State whose
experience in matters relating to the issuance of obligations by states and
their political subdivisions is nationally recognized and who are acceptable to
the Issuer.

     "Bond Fund" means the fund so designated established pursuant to Section
401 (A) (2) of the Indenture.

     "Bond Payment Date" means each Interest Payment Date and each date on which
principal, interest or premium, if any, shall be payable on the Bonds according
to their terms and the Indenture, including without limitation, scheduled
mandatory redemption dates, unscheduled mandatory redemption dates, optional
redemption dates and Stated Maturity, so long as any Bonds shall be Outstanding.

     "Bond Pledge Agreement" means (A) the bond pledge agreement dated as of
August 1, 2002 from the Company to the KeyBank National Association, as may be
amended or supplemented from time to time, and (B) any similar bond pledge
agreement by and between the Company and any Substitute Bank, as said bond
pledge agreement may be amended or supplemented from time to time.

     "Bond Proceeds" means (A) with respect to the Initial Bonds, the amount
paid to the Issuer by the initial purchasers of the Initial Bonds as the
purchase price for the Initial Bonds and

                                        8



(B) with respect to any Additional Bonds, the amount paid to the Issuer by the
initial purchasers of the Additional Bonds as the purchase price for the
Additional Bonds.

     "Bond Purchase Agreement" means the bond purchase agreement dated August
28, 2002 among the Issuer, the Company and the Underwriter.

     "Bond Rate" means with respect to any Bond, the applicable rate of interest
on such Bond, as set forth in such Bond.

     "Bond Register" means the register maintained by the Bond Registrar in
which, subject to such reasonable regulations as it, the Trustee or the Bond
Registrar may prescribe, the Issuer shall provide for the registration of the
Bonds and for the registration of transfers of the Bonds.

     "Bond Registrar" means the Trustee, acting in its capacity as bond
registrar under the Indenture, and its successors and assigns as bond registrar
under the Indenture.

     "Bond Resolution" means the resolution of the members of the Issuer duly
adopted on July 15, 2002 authorizing the Issuer to undertake the Project, to
issue and sell the Initial Bonds and to execute and deliver the Financing
Documents to which the Issuer is a party.

     "Bond Year" means each one (1) year period ending on the anniversary of the
Closing Date, or such other annual period provided for the computation of
arbitrage rebate selected by the Company in the manner allowed under Section 148
of the Code.

     "Bondholder" or "Holder" or "Owner of the Bonds" means the registered owner
of any Bond as indicated on the bond register maintained by the Bond Registrar,
other than the registered owner of any Bond which has been purchased pursuant to
Section 304 of the Indenture and not surrendered for payment of the purchase
price thereof.

     "Book Entry Bonds" means the Bonds held in Book Entry Form, with respect to
which the provisions of Section 213 of the Indenture shall apply.

     "Book Entry Form" or "Book Entry System" means, with respect to the Bonds,
a form or system, as applicable, under which (A) the Beneficial Ownership
Interests may be transferred only through a book entry and (B) physical Bond
certificates in fully registered form are registered only in the name of a
Depository or its nominee as Bondholder, with the physical Bond certificates
"immobilized" in the custody of the Depository. The Book Entry System maintained
by and the responsibility of the Depository and not maintained by or the
responsibility of the Issuer or the Trustee is the record that identifies, and
records the transfer of the interests of, the owners of book entry interests in
the Bonds.

     "Building Loan Agreement" means the Building Loan agreement dated as of
August 1, 2002 by and between the Bank and the Company, as said building loan
agreement may be amended or supplemented from time to time.

                                        9



     "Business Day" means any day other than (A) a Saturday or Sunday, (B) a day
on which the New York Stock Exchange is closed or (C) any day on which banks
located in the city in which the principal corporate trust office of the Trustee
is located, or city in which the office of the Credit Facility Issuer at which
demands for payment are to be presented is located are required or authorized by
applicable law to remain closed.

     "Certificate of Authentication" means the certificate of authentication in
substantially the form attached to the forms of the Initial Bonds attached as
Schedule I to the Indenture.

     "Closing Date" means (A) with respect to the Initial Bonds, the date on
which authenticated Initial Bonds are delivered to or upon the order of the
Placement Agent and payment is received therefor by the Trustee on behalf of the
Issuer, and (B) with respect to any Additional Bonds, the date on which such
Additional Bonds are authenticated and delivered to the purchaser thereof and
payment therefor is received by the Trustee on behalf of the Issuer.

     "Code" means the Internal Revenue Code of 1986, as amended, including, when
appropriate, the statutory predecessor of said Code, and the applicable
regulations (whether proposed, temporary or final) of the United States Treasury
Department promulgated under said Code and the statutory predecessor of said
Code, and any official rulings and judicial determinations under the foregoing
applicable to the Bonds.

     "Company" means Angiodynamics, Inc., a business corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, to the extent permitted by Section 8.4 of the Installment Sale
Agreement.

     "Completion Date" means the earlier of (A) August 1, 2005 or (B) the date
of substantial completion of the Project Facility as evidenced in the manner
provided in Section 4.4 of the Installment Sale Agreement.

     "Condemnation" means the taking of title to, or the use of, Property under
the exercise of the power of eminent domain by any Governmental Authority.

     "Construction Period" means the period (A) beginning on the Inducement Date
and (B) ending on the Completion Date.

     "Continuing Disclosure Agreement" means, if required by Section 516 of the
Indenture, the continuing disclosure agreement by and between the Company and
the Trustee, as said continuing disclosure agreement may be amended or
supplemented from time to time.

     "Conversion" means (A) any conversion from time to time in accordance with
the terms of the Indenture of the Bonds from one Interest Rate Mode to another
Interest Rate Mode and (B) the end of any Long-Term Rate Period.

     "Conversion Date" means the first date any Conversion becomes effective.

     "Conveyance Documents" means the Bill of Sale to Issuer and the Deed to
Issuer.

                                       10



     "Cost of the Project" means all those costs and items of expense enumerated
in Section 4.3 of the Installment Sale Agreement.

     "Credit Facility" means the Letter of Credit or any Alternate Credit
Facility delivered to the Trustee pursuant to the provisions of the Indenture.

     "Credit Facility Account" means the special account so named established
within the Bond Fund pursuant to Section 401(A)(2)(a) of the Indenture.

     "Credit Facility Issuer" means (A), initially, KeyBank National
Association, a national banking association organized under the laws of the
United States, as issuer of the initial Letter of Credit, and (B) in the event
an Alternate Credit Facility is outstanding, the institution issuing such
Alternate Credit Facility.

     "Debt Service Payment" means, with respect to any Bond Payment Date, (A)
the interest payable on the Bonds on such Bond Payment Date, plus (B) the
principal, if any, payable on the Bonds on such Bond Payment Date, plus (C) the
premium, if any, payable on the Bonds on such Bond Payment Date, plus (D) the
purchase price, if any, payable on the Bonds on such Bond Payment Date.

     "Deed to Issuer" means the deed dated as of August 1, 2002 from the Company
to the Issuer.

     "Default Interest Rate" means a per annum rate of interest equal to the
lesser of (A) the Prime Rate plus one percent (1%) per annum, or (B) the maximum
permitted by law.

     "Defaulted Interest" shall have the meaning ascribed to such term in
Section 207(C) of the Indenture.

     "Depository" means The Depository Trust Company, New York, New York, a
limited purpose trust company organized under the laws of the State, or its
nominee, or any other securities depository designated in any supplemental
resolution of the Issuer to serve as securities depository for the Bonds that is
a clearing agency under federal law operating and maintaining, with its
participants or otherwise, a Book Entry System to record ownership of book entry
interests in Bonds, and to effect transfers of book entry interests in Book
Entry Bonds.

     "Determination of Taxability" means, with respect to the Initial Bonds, (A)
the enactment of legislation or the adoption of final regulations or a final
decision, ruling or technical advice by any federal judicial or administrative
authority which has the effect of requiring interest on the Initial Bonds to be
included in the gross income of the Bondholders for federal income tax purposes
(other than a Bondholder who is a "substantial user" of the Project or a
"related person", as said quoted terms are used in Section 144 and Section
147(a) of the Code), (B) the receipt by the Trustee of a written opinion of Bond
Counsel to the effect that interest on the Initial Bonds must be included in the
gross income of the Bondholders for federal income tax purposes (other than a
Bondholder who is a "substantial user" of the Project or a "related

                                       11



person", as said quoted terms are used in Section 144 and Section 147(a) of the
Code) or (C) the delivery to the Trustee of a written statement signed by an
Authorized Representative of the Company to the effect that (1) the Company has
exceeded or will exceed the maximum amount of capital expenditures permitted
under Section 144(a)(4) of the Code or (2) the Company or another "test-period
beneficiary" (as said quoted term is defined in Section 144(a)(10)(D) of the
Code) has exceeded or will exceed the maximum amount of tax-exempt obligations
permitted to be outstanding under Section 144(a)(10) of the Code; provided that
no decision by any court or decision, ruling or technical advice by any
administrative authority shall be considered final (A)unless the Bondholder
involved in the proceeding or action giving rise to such decision, ruling or
technical advice (1) gives the Company and the Trustee prompt notice of the
commencement thereof and (2) offers the Company the opportunity to control the
contest thereof, provided the Company shall have agreed to bear all expenses in
connection therewith and to indemnify that Bondholder against all liabilities in
connection therewith, and (B) until the expiration of all periods for judicial
review or appeal.

     "Direct Participant" means a Participant as defined in the Letter of
Representations.

     "Environmental Claim" shall mean, with respect to any person, any action,
suit, proceeding, investigation, notice, claim, complaint, demand, request for
information or other communication (written or oral) by any other person
(including any governmental authority, citizens group or employee or former
employee of such person) alleging, asserting or claiming any actual or
potential: (a) violation of any Environmental Law, (b) liability under any
Environmental Law or (c) liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on, or resulting
from, the presence or release into the environment of any Hazardous Materials at
any location, whether or not owned by such person.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     "Event of Bankruptcy" means the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceedings) by or against the
Issuer, the Company, a Guarantor, any Affiliate of the Company or any Guarantor
or any Insider of any of them as debtor, under any applicable bankruptcy,
reorganization, insolvency or other similar law as now or hereafter in effect
applicable to the Issuer, the Company, any Guarantor, any Affiliate of the
Issuer, the Company or of any Guarantor or Insider of any of them.

     "Event of Default" means (A) with respect to the Indenture, any of those
events defined as an Event of Default by the terms of Article VI of the
Indenture, (B) with respect to the Installment Sale Agreement, any of those
events defined as an Event of Default by the terms of Article X of the
Installment Sale Agreement, and (C) with respect to any other Financing
Document, any of those events defined as an Event of Default by the terms
thereof.

     "Excess Earnings" means an amount equal to the sum of (A) plus (B), where
(A) is the excess of (1) the aggregate amount earned from the date of issuance
of the Initial Bonds on all nonpurpose investments in which gross proceeds of
the Bonds are invested (other than

                                       12



investments attributable to an excess described in this clause (1)), over (2)
the amount that would have been earned if such nonpurpose investments (other
than amounts attributable to an excess described in this clause (1)) had been
invested at a rate equal to the yield on the Bonds; and (B)is any income
attributable to the excess described in clause (1) of this definition. The sum
of (A) plus (B) shall be determined in accordance with Section 148(f) of the
Code. As used herein, the terms "gross proceeds", "nonpurpose investments" and
"yield" have the meanings assigned to them for purposes of Section 148 of the
Code.

     "Extraordinary Services" and "Extraordinary Expenses" means all reasonable
services rendered and all reasonable expenses incurred by the Trustee or any
paying agent under the Indenture, other than Ordinary Services and Ordinary
Expenses, including, but not limited to, reasonable attorneys fees and any
services rendered and any expenses incurred with respect to an Event of Default
or with respect to the occurrence of an event which upon the giving of notice or
the passage of time would ripen into an Event of Default under any of the
Financing Documents.

     "Financing Documents" means the Bonds, the Indenture, the Installment Sale
Agreement, the Mortgage, the Pledge and Assignment, the Building Loan Agreement,
the Guaranty, the Tax Documents, the Conveyance Documents, the Bank Documents,
the Remarketing Agreement and any other document now or hereafter executed by
the Issuer, the Company, any Guarantor or the Bank in favor of the Bondholders,
the Trustee or the Bank which affects the rights of the Bondholders, the Trustee
or the Bank in or to the Project Facility, in whole or in part, or which secures
or guarantees any sum due under the Bonds or any other Financing Document, each
as amended from time to time, and all documents related thereto and executed in
connection therewith.

     "Financial Institution" means (A) any national bank, banking corporation,
trust company or other banking institution, whether acting in its individual or
fiduciary capacity, organized under the laws of the United States, any state,
any territory or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the Comptroller of the
Currency or a comparable state or territorial official or agency; (B) an
insurance company whose primary and predominant business activity is the writing
of insurance or the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a similar
official or agency of a state, a territory or the District of Columbia; (C)an
investment company registered under the Investment Company Act of 1940 or a
business development company as described in Section 2(a)(48) of that Act; (D)
an employee benefit plan, including an individual retirement account, which is
subject to the provisions of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, insurance company or
registered investment company; or (E) institutional investors or other entities
who customarily purchase commercial paper or tax-exempt securities in large
denominations.

     "Governmental Obligations" means (A) direct obligations of the United
States of America, (B) obligations unconditionally guaranteed by the United
States of America and (C)securities or receipts evidencing ownership interests
in obligations or specified portions (such as principal or interest) of
obligations described in (A) or (B).

                                       13



     "Governmental Authority" means the United States of America, the State, any
other state and any political subdivision thereof, and any agency, department,
commission, board, bureau or instrumentality of any of them.

     "Gross Proceeds" means one hundred percent (100%) of the proceeds of the
transaction with respect to which such term is used, including, but not limited
to, the settlement of any insurance claim or Condemnation award.

     "Guarantor" means the Company and any other guarantor of the obligations of
the Company under the Reimbursement Agreement.

     "Guaranty" means the guaranty dated as of August 1, 2002 from the Company
to the Trustee, as said guaranty may be amended or supplemented from time to
time.

     "Hazardous Materials" means all hazardous materials including, without
limitation, any flammable explosives, radioactive materials, radon, asbestos,
urea formaldehyde foam insulation, polychlorinated byphenyls, petroleum,
petroleum products, methane, hazardous materials, hazardous wastes, hazardous or
toxic substances, or related materials as set forth in or regulated under or
defined in the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S. C. Sections 6901, et
seq.), Articles 15 or 27 of the State Environmental Conservation Law, or in the
regulations adopted and publications promulgated pursuant thereto, or any other
Federal, state or local environmental law, ordinance, rule or regulation.

     "Immediate Notice" means notice transmitted through a time-sharing
terminal, if operative as between any two parties, or if not operative, in
writing or by telephone (promptly confirmed in writing).

     "Indebtedness" means (A) the payment of the Debt Service Payments on the
Bonds according to their tenor and effect, (B) all other payments due from the
Issuer or the Company to the Trustee or the Bank pursuant to the Installment
Sale Agreement or any other Financing Document, (C) the performance and
observance by the Issuer and the Company of all of the covenants, agreements,
representations and warranties made for the benefit of the Trustee or the Bank
pursuant to the Installment Sale Agreement or any other Financing Document, (D)
the monetary obligations of the Company to the Issuer and its members, officers,
agents, servants and employees under the Installment Sale Agreement and the
other Financing Documents, and (E) all interest accrued on any of the foregoing.

     "Indenture" means the trust indenture dated as of August 1, 2002 by and
between the Issuer and the Trustee, as said trust indenture may be amended or
supplemented from time to time.

                                       14



     "Independent Counsel" means an attorney or firm of attorneys duly admitted
to practice law before the highest court of any state and approved by the Bank
and not a full-time employee of the Company or the Issuer.

     "Indirect Participant" means a Person utilizing the book entry system of
the Depository by, directly or indirectly, clearing through or maintaining a
custodial relationship with a Direct Participant.

     "Insider" means any entity referred to or described in accordance with the
standards set forth in Section 101(31) of the Bankruptcy Code, assuming for this
purpose that the Issuer, the Company, any Guarantor, or any Affiliate of any of
them, as applicable, is a debtor, and any limited partner or limited liability
company member thereof.

     "Inducement Date" means June 24, 2002.

     "Initial Bonds" means the Issuer's Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Angiodynamics, Inc. Project - Letter of Credit
Secured), Series 2002 in the aggregate principal amount of $3,500,000, issued
pursuant to the Bond Resolution and Article II of the Indenture and sold by the
Underwriter pursuant to the provisions of the Bond Purchase Agreement, and any
Bonds issued in exchange or substitution thereof.

     "Installment Sale Agreement" means the installment sale agreement dated as
of August 1, 2002 by and between the Issuer and the Company, as said installment
sale agreement may be amended or supplemented from time to time.

     "Insurance and Condemnation Fund" means the fund so designated established
pursuant to Section 401(A)(3) of the Indenture.

     "Interest Payment Date" means, (A) with respect to any Additional Bonds,
the Interest Payment Dates on said Additional Bonds, as established pursuant to
the supplemental Indenture authorizing issuance of said Additional Bonds, and
(B) with respect to the Initial Bonds, (1)while the Initial Bonds bear interest
at the Weekly Rate, the first Thursday of each January, April, July and October,
and (2) while the Initial Bonds bear interest at the Semi-Annual Rate or the
Long-Term Rate, April 1 and October 1 of each year. The first Interest Payment
Date relating to the Initial Bonds shall be the Interest Payment Date in
October, 2002. In any case, the final Interest Payment Date relating to the
Initial Bonds shall be the Maturity Date of the Initial Bonds.

     "Interest Period" means, for all Bonds, the period from and including each
Interest Payment Date to and including the day next preceding the next Interest
Payment Date. The first Interest Period for the Initial Bonds shall begin on
(and include) the date of the initial delivery of the Initial Bonds. The final
Interest Period for a Bond shall end on the Maturity Date (or redemption date)
for such Bond.

     "Interest Rate Mode" means the Weekly Rate, the Semi-Annual Rate or the
Long-Term Rate.

                                       15



     "Issuer" means (A) Counties of Warren and Washington Industrial Development
Agency and its successors and assigns, and (B) any public benefit corporation or
other public corporation resulting from or surviving any consolidation or merger
to which Counties of Warren and Washington Industrial Development Agency or its
successors or assigns may be a party.

     "Letter of Credit" means the irrevocable transferable direct-pay letter of
credit dated the Closing Date, issued by the Bank in favor of the Trustee
pursuant to the Reimbursement Agreement as security for the Initial Bonds, in a
maximum amount (which shall decline at fixed intervals) equal to $3,575,179,
said sum representing the aggregate of (A) the principal of the Initial Bonds
Outstanding, plus (B) 98 days' interest on all Outstanding Initial Bonds
(computed at an assumed interest rate of 8%).

     "Letter of Representations" means (A), with respect to the Initial Bonds,
the letter of representations by and among the Issuer and the Depository
relating to the Initial Bonds and any amendments or supplements thereto entered
into with respect thereto, and (B), with respect to any Additional Bonds, any
letter of representations by and among the Issuer, the Trustee and the
Depository relating to the Additional Bonds, and any amendments or supplements
thereto entered into with respect thereto.

     "Lien" means any interest in Property securing an obligation owed to a
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, projections, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions and
encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property. For purposes hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.

     "Lien Law" means the Lien Law of the State.

     "Long-Term Rate" means the Interest Rate Mode for the Initial Bonds in
which the interest rate on the Initial Bonds is determined in accordance with
Section 209(C)(3) of the Indenture.

     "Long-Term Rate Period" means any period beginning on, and including, the
Conversion Date to the Long-Term Rate and ending on, and including, the day
preceding the Interest Payment Date selected by the Company in accordance with
the requirements of Section 209(D) of the Indenture and each period of the same
duration (or as close as possible) ending on the day preceding an Interest
Payment Date thereafter until the earliest of the day preceding the change to a
different Long-Term Rate Period, the Conversion to a different Interest Rate
Mode or the maturity of the Bonds.

                                       16



     "Mandatory Tender" means the mandatory tender of Bonds by the owner thereof
upon (A) a Conversion pursuant to Section 209(B)(2)(e) of the Indenture, or (B)
the delivery by the Company of an Alternate Credit Facility pursuant to Section
304 of the Indenture.

     "Maturity Date" means, with respect to any Bond, the final Stated Maturity
of the principal of such Bond.

     "Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.

     "Mortgage" means the mortgage and security agreement dated as of August 1,
2002 from the Company and the Issuer to the Bank granting the Bank a lien on the
Project Facility as additional security for the obligations of the Company to
the Bank pursuant to the Reimbursement Agreement, as said mortgage may be
amended to supplemented from time to time.

     "Net Proceeds" means so much of the Gross Proceeds with respect to which
that term is used as remain after payment of all fees for services, expenses,
costs and taxes (including attorneys' fees) incurred in obtaining such Gross
Proceeds.

     "Non-Qualifying Alternate Credit Facility" means an Alternate Credit
Facility which is not a Qualifying Alternate Credit Facility.

     "Office of the Trustee" means the corporate trust office of the Trustee
specified in Section 1103 of the Indenture, or such other address as the Trustee
shall designate pursuant to Section 1103 of the Indenture.

     "Optional Redemption Premium" means the maximum applicable premium payable
upon an optional redemption of the Bonds after the Conversion Date, as
determined by the Remarketing Agent pursuant to Section 301(B)(2) of the
Indenture.

     "Ordinary Services" and "Ordinary Expenses" means those reasonable services
normally rendered with those reasonable expenses, including reasonable
attorneys' fees, normally incurred by a trustee or a paying agent, as the case
may be, under instruments similar to the Indenture.

     "Outstanding" means, when used with reference to the Bonds as of any date,
all Bonds which have been duly authenticated and delivered by the Trustee under
the Indenture, except:

     (A)  Bonds theretofore canceled or deemed cancelled by the Trustee or
theretofore delivered to the Trustee for cancellation;

     (B)  Bonds for the payment or redemption of which moneys or Government
Obligations shall have been theretofore deposited with the Trustee (whether upon
or prior to the

                                       17



maturity or redemption date of any such Bonds); provided that, if such Bonds are
to be redeemed prior to the maturity thereof, notice of such redemption shall
have been given or arrangements satisfactory to the Trustee shall have been made
therefor, or waiver of such notice satisfactory in form to the Trustee shall
have been filed with the Trustee; and

     (C)  Bonds in lieu of or in substitution for which other Bonds have been
authenticated and delivered under the Indenture.

In determining whether the owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Company (unless all of the outstanding Bonds are
then owned by the Company) shall be disregarded for the purpose of any such
determination. Notwithstanding the foregoing, Bonds so owned which have been
pledged in good faith shall not be disregarded as aforesaid if the pledgee
established to the satisfaction of the Bond Registrar the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Company. If the
Indenture shall be discharged pursuant to Article X thereof, no Bonds shall be
deemed to be Outstanding within the meaning of this definition.

     "Participant" shall have the meaning assigned to such term in the Letter of
Representations.

     "Paying Agent" or "Co-Paying Agent" means any national banking association,
federal savings bank, bank and trust company or trust company appointed by the
Company and meeting the qualifications of, and subject to the obligations of,
the Trustee in Article XI hereof. "Principal Office" of any Paying Agent shall
mean the office thereof designated in writing to the Trustee.

     "Permitted Encumbrances" means (A) utility, access and other easements,
rights of way, restrictions, encroachments and exceptions that benefit or do not
materially impair the utility or the value of the Property affected thereby for
the purposes for which it is intended, (B)mechanics', materialmen's,
warehousemen's, carriers' and other similar Liens to the extent permitted by
Section 8.8(B) of the Installment Sale Agreement, (C) Liens for taxes,
assessments and utility charges (1) to the extent permitted by Section 6.2(B) of
the Installment Sale Agreement, or (2) at the time not delinquent, (D) any Lien
on the Project Facility obtained through any Financing Document, and (E) any
Lien on the Project Facility in favor of the Trustee or the Bank, or (F) any
lien on the Project Facility approved in writing by the Bank (or, if the Bank is
in default under the then current Credit Facility, the Trustee).

     "Person" means an individual, partnership, corporation, trust,
unincorporated organization or Governmental Authority.

     "Plans and Specifications" means with respect to the Issuer, the
description of the Project Facility appearing in the fifth recital clause to the
Indenture and the Installment Sale Agreement.

     "Pledge and Assignment" means the pledge and assignment dated as of August
1, 2002 from the Issuer to the Trustee, pursuant to which the Issuer has
assigned to the Trustee its rights

                                       18



under the Installment Sale Agreement (except the Unassigned Rights), as said
pledge and assignment may be amended or supplemented from time to time.

     "Pledged Bonds" means any Bond at any time purchased, in whole or in part,
with the proceeds of a draw on the Letter of Credit upon tender of such Bond and
held by the Trustee as nominee for the Bank pursuant to the provisions of
Section 305 of the Indenture.

     "Predecessor Bonds" of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for purposes of this definition, any Bond authenticated
and delivered under Section 205 of the Indenture in lieu of a lost, destroyed or
stolen Bond shall be deemed to evidence the same debt as the lost, destroyed or
stolen Bond.

     "Prime Rate" shall mean the KeyBank National Association Prime Rate, which
is that per annum interest rate announced from time to time publicly by the Bank
as a reference rate for determining interest rates charged on certain loans, but
is not necessarily the lowest rate at which the Bank lends. Any change in the
Prime Rate shall be effective on the date such rate is raised or lowered at the
Bank, with or without notice to the Company.

     "Principal Payment Date" means, the dates for the payment of principal on
the Bonds in accordance with the Company's irrevocable notice of optional
redemption delivered to the Trustee on the Closing Date, which shall occur
quarterly in each year on the Interest Payment Date of the first day of
February, May, August and November of each year in the manner as set forth in
the Reimbursement Agreement.

     "Project" shall have the meaning set forth in the fifth recital clause to
the Indenture and the Installment Sale Agreement.

     "Project Costs" means Costs of the Project.

     "Project Facility" means all materials, machinery, equipment, fixtures or
furnishings intended to be acquired with the proceeds of the Bonds or any
payment made by the Company pursuant to Section 4.5 of the Installment Sale
Agreement, and such substitutions and replacements therefor and additions
thereto as may be made from time to time pursuant to the Installment Sale
Agreement, including, without limitation, all of the Property described in
Exhibit A attached to the Installment Sale Agreement.

     "Project Fund" means the fund so designated established pursuant to Section
401(A)(1) of the Indenture.

     "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "Purchase Date" means (A) if the Interest Rate Mode is the Weekly Rate, any
Business Day as set forth in Section 304(A)(1) and Section 304(A)(4) of the
Indenture, respectively, (B) if the Interest Rate Mode is the Semi-Annual Rate,
any Interest Payment Date, (C) if the Interest

                                       19



Rate Mode is the Long-Term Rate, the final Interest Payment Date for each
Long-Term Rate Period, and (D) each day that Bonds are subject to mandatory
purchase pursuant to Section 304(B) of the Indenture.

     "Purchase Price" means an amount equal to one hundred percent (100%) of the
principal amount of any Bond tendered or deemed tendered pursuant to Section 304
or Section 305 of the Indenture, plus accrued and unpaid interest thereon to the
Purchase Date.

     "Qualifying Alternate Credit Facility" means an Alternate Credit Facility
in connection with which the Trustee shall have received (A), if the Bonds are
then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) from the Rating Service then rating the Bonds to
the effect that such Rating Service has reviewed the proposed Alternate Credit
Facility and that the substitution of the Alternate Credit Facility will not, by
itself, result in (1) a permanent withdrawal of its rating of the Bonds or (2)
the reduction of the current rating of the Bonds, or (B) if the Bonds are not
then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) that the Alternate Credit Facility would be issued
by a Credit Facility Issuer which, or the parent corporation of which, has a
long-term debt rating assigned by a Rating Service which is equal to or better
than the rating of the Credit Facility Issuer being replaced.

     "Rate Period" means any period during which a single interest rate is in
effect for a Bond.

     "Rating Service" means Moody's, if the Bonds are rated by Moody's at the
time, and/or S&P, if the Bonds are rated by S&P at the time, and their
successors and assigns.

     "Rebate Amount" as of any date means the Excess Earnings as of such date,
or such other amount as may be due to the United States pursuant to Section
148(f) of the Code.

     "Rebate Fund" means the fund so designated established pursuant to Section
401(A)(4) of the Indenture.

     "Rebate Fund Earnings Subaccount" means the special account so designated
within the Rebate Fund established pursuant to Section 401(A)(4)(b) of the
Indenture.

     "Rebate Fund Principal Subaccount" means the account so designated within
the Rebate Fund established pursuant to Section 401(A)(4)(a) of the Indenture.

     "Record Date" means, as the case may be, the applicable Regular Record Date
or Special Record Date.

     "Redemption Price" means, when used with respect to a Bond, the principal
amount thereof plus the applicable premium, if any, payable upon the prior
redemption thereof pursuant to the provisions of the Indenture and such Bond.

     "Redemption Premium Account" means the Redemption Premium Account created
under Section 405 of the Indenture.

                                       20



     "Regular Record Date" means, with respect to any Interest Period, the close
of business on the last Business Day of such Interest Period.

     "Reimbursement Agreement" means the Reimbursement Agreement dated as of
August 1, 2002 between the Company and KeyBank National Association, as the same
may be amended from time to time and filed with the Trustee, and any agreement
of the Company with a Credit Facility Issuer setting forth the obligations of
the Company to such Credit Facility Issuer arising out of any payments under a
Credit Facility and which provides that it shall be deemed to be a Reimbursement
Agreement for the purpose of the Indenture.

     "Related Person" means any Person constituting a "related person" within
the meaning ascribed to such quoted term in Section 144(a)(3) of the Code,
except when used in connection with the phrase "substantial user", in which case
the phrase "Related Person" shall have the meaning set forth in Section 147(a)
of the Code.

     "Remarketing Agent" means McDonald Investments Inc. and its successors as
provided in Section 718 of the Indenture. "Principal Office" of the Remarketing
Agent means the office designated as such in writing to the Company, the Trustee
and the Tender Agent.

     "Remarketing Agreement" means the remarketing agreement dated as of August
1, 2002 by and among the Company, the Issuer and the Remarketing Agent, as said
remarketing agreement may be amended or supplemented from time to time, and any
remarketing agreement between the Company and a successor Remarketing Agent.

     "Remarketing Proceeds Account" means the Remarketing Proceeds Account
created under Section 405 of the Indenture.

     "Request for Disbursement" means a request from the Company, as agent of
the Issuer, stating the amount of the disbursement sought and containing the
statements, representations and other items required by Section 4.3 of the
Installment Sale Agreement, the Reimbursement Agreement and the Indenture, in
substantially the form of Exhibit C attached to the Indenture.

     "Requirement" or "Local Requirement" means any law, ordinance, order, rule
or regulation of a Governmental Authority or a local authority, respectively.

     "Revenues" means (a) all amounts payable to the Trustee with respect to the
principal or redemption price of, or interest on, the Bonds (i) by the Company
as required under the Installment Sale Agreement, (ii) upon deposit in the Bond
Fund from the proceeds of the Bonds, and (iii) by the Credit Facility Issuer
under a Credit Facility, and (b) investment income with respect to any moneys
held by the Trustee in the Bond Fund. The term "Revenues" does not include any
moneys or investments in the Rebate Fund.

     "Sales Tax Exemption Letter" shall have the meaning assigned to such term
in Section 8.14 of the Installment Sale Agreement.

                                       21



     "Security Agreement" means the security agreement dated as of August 1,
2002 from the Company to the Bank, as paid security agreement may be amended or
supplemented from time to time.
     "Securities Act" means the Securities Act of 1933, as amended.

     "Semi-Annual Rate" means the Interest Rate Mode for the Bonds in which the
interest rate on the Bonds is determined in accordance with Section 209(C)(3).

     "Semi-Annual Rate Period" means any period beginning on, and including, the
Conversion Date to the Semi-Annual Rate and ending on, and including, the day
preceding the next Interest Payment Date thereafter and each successive six (6)
month period thereafter until the day preceding Conversion to a different
Interest Rate Mode or the maturity of the Bonds.

     "SEQRA" means Article 8 of the Environmental Conservation Law of the State
and the statewide and local regulations thereunder.

     "Special Record Date" means a date for the payment of any Defaulted
Interest on the Bonds fixed by the Trustee pursuant to Section 207(C) of the
Indenture.

     "Standard & Poor's" means Standard & Poor's Ratings Group, a New York
corporation, its successors and assigns, and, if such entity shall be dissolved
or liquidated or shall no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.

     "State" means the State of New York.

     "Stated Maturity" means, when used with respect to any Bond or any
installment of interest or principal thereon, the date specified in such Bond as
the fixed date on which the principal of such Bond or such installment of
interest on such Bond is due and payable.

     "Substitute Bank" means the issuer of any Alternate Credit Facility.

     "Tax Documents" means, collectively, (A) with respect to the Initial Bonds,
the Arbitrage Certificate and the Tax Regulatory Agreement and (B) with respect
to any Additional Bonds, any similar documents executed by the Issuer and/or the
Company in connection with the issuance of such Additional Bonds.

     "Tax Incidence Date" means, with respect to any recipient of interest paid
or payable on the Bonds, the first such date of the period for which any
interest paid or payable on the Bonds was or is includable in the gross income
of such recipient thereof for purposes of income taxation under the laws of the
United States, without regard to whether or not any such recipient exercised any
or all of the rights or remedies granted such recipient by the Financing
Documents or by law.

                                       22



     "Tax Regulatory Agreement" means the tax regulatory agreement dated the
Closing Date executed by the Company in favor of the Issuer and the Trustee,
with a certificate of the Placement Agent attached thereto, regarding, among
other things, the restrictions prescribed by the Code in order for interest on
the Initial Bonds to remain excludable from gross income for federal income tax
purposes.

     "Tender Agent" means the initial and any successor tender agent appointed
in accordance with Section 716 of the Indenture. "Principal Office" of the
Tender Agent means the office thereof designated as such in writing to the
Trustee, the Company and the Remarketing Agent.

     "Tendered Bond" means any Bond or portion thereof which is the subject of
(A) a demand from the Owner thereof that such Bond be purchased pursuant to
Section 304(A) of the Indenture or (B) a mandatory purchase pursuant to Section
304(B) of the Indenture.

     "Termination of Installment Sale Agreement" means a termination of the
Installment Sale Agreement by and between the Company, as purchaser, and the
Issuer, as seller, intended to evidence the termination of the Installment Sale
Agreement, substantially in the form attached as Exhibit C to the Installment
Sale Agreement.

     "Trust Estate" means all Property which may from time to time be subject to
a Lien in favor of the Trustee created by the Indenture or any other Financing
Document.

     "Trust Revenues" means (A) all payments of installment purchase payments
made or to be made by or on behalf of the Company under the Installment Sale
Agreement (except payments made with respect to the Unassigned Rights), (B) all
other amounts pledged to the Trustee by the Issuer or the Company to secure the
Bonds or performance of their respective obligations under the Installment Sale
Agreement and the Indenture, (C) the Net Proceeds (except proceeds with respect
to the Unassigned Rights) of insurance settlements and Condemnation awards with
respect to the Project Facility, (D) all payments received by the Trustee under
the Letter of Credit, (E) moneys and investments held from time to time in each
fund and account established under the Indenture and all investment income
thereon, except (1)moneys deposited with or paid to the Trustee for the
redemption of Bonds, notice of which has been duly given, (2) moneys deposited
with the Trustee or the Tender Agent for the purchase of Tendered Bonds, and (3)
as specifically otherwise provided, and (F) all other moneys received or held by
the Trustee for the benefit of the Bondholders pursuant to the Indenture.
Notwithstanding anything to the contrary, amounts held in the Rebate Fund shall
not be considered Trust Revenues and shall not be subject to the Lien of the
Indenture, and amounts held therein shall not secure any amount payable on the
Bonds.

     "Trustee" means The Huntington National Bank, a national banking
association organized and existing under the laws of the United States of
America, or any successor trustee or co-trustee acting as trustee under the
Indenture.

     "Unassigned Rights" means (A) the rights of the Issuer granted pursuant to
Sections 2.2, 3.2, 3.3, 4.1(B), 4.1(D), 4.1(E)(2), 4.1(F), 4.1(G), 5.2(A),
5.2(D), 5.3(B)(2), 5.3(B)(3), 5.4(A), 5.4(B), 6. 1(A), 6. 1(B), 6.3, 6.4, 6.5,
6.6, 7.1, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.11,

                                       23



8.15, 8.16, 9.1, 9.3, 9.4, 11.1, 11.4, 11.8 and 11.10 of the Installment Sale
Agreement, (B) the moneys due and to become due to the Issuer for its own
account or the members, officers, agents (other than the Company) and employees
of the Issuer for their own account pursuant to Sections 2.2(F), 3.3, 4. 1(F),
5.3(B)(2), 5.3(C), 6.4(B), 8.2, 10.2 and 10.4 of the Installment Sale Agreement,
(C) the rights of the Issuer under Section 6.6 of the Installment Sale
Agreement, and (D) the right to enforce the foregoing pursuant to Article X of
the Installment Sale Agreement. Notwithstanding the preceding sentence, to the
extent the obligations of the Company under the Sections of the Installment Sale
Agreement listed in (A), (B), (C) and (D) above do not relate to the payment of
moneys to the Issuer for its own account or to the members, officers, directors,
agents (other than the Company) and employees of the Issuer for their own
account, such obligations, upon assignment of the Installment Sale Agreement by
the Issuer to the Trustee pursuant to the Pledge and Assignment, shall be deemed
to and shall constitute obligations of the Company to the Issuer, the Trustee
and the Bank, jointly and severally, and either the Issuer, the Trustee or the
Bank may commence an action to enforce the Company's obligations under the
Installment Sale Agreement.

     "Underwriter" means McDonald Investments Inc., a Key Corp Company, as
underwriter for the Initial Bonds.

     "Weekly Rate" means the Interest Rate Mode for the Bonds in which the
interest rate on the Bonds is determined weekly in accordance with Section
209(C)(3) of the Indenture.

     "Weekly Rate Period" means the period beginning on, and including, the date
of issuance of the Bonds, and ending on, and including, the next Wednesday
(except if the date of issuance of the Bonds is a Wednesday then the first
Weekly Rate Period shall begin and end on such Wednesday) and thereafter the
period beginning on, and including, any Thursday and ending on, and including,
the next Wednesday.

                                       24



                                   ARTICLE II

                           REPRESENTATIONS, WARRANTIES
                                  AND COVENANTS

SECTION 2.1.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER. The
Issuer makes the following representations, warranties and covenants as the
basis for the undertakings on its part herein contained:

     (A)  The Issuer is duly established under the provisions of the Act and has
the power to enter into this Installment Sale Agreement and to carry out its
obligations hereunder. Based upon the representations of the Company as to the
utilization of the Project Facility, the Project Facility will constitute a
"project", as such quoted term is defined in the Act. By proper official action,
the Issuer has been duly authorized to execute, deliver and perform this
Installment Sale Agreement and the other Financing Documents to which the Issuer
is a party.

     (B)  Neither the execution and delivery of this Installment Sale Agreement,
the consummation of the transactions contemplated hereby nor the fulfillment of
or compliance with the provisions of the other Financing Documents by the Issuer
will conflict with or result in a breach by the Issuer of any of the terms,
conditions or provisions of the Act, the by-laws of the Issuer or any order,
judgment, restriction, agreement or instrument to which the Issuer is a party or
by which the Issuer is bound, or will constitute a default by the Issuer under
any of the foregoing.

     (C)  The Issuer will cause the Project Facility to be acquired, constructed
and installed and will sell the Project Facility to the Company pursuant to this
Installment Sale Agreement, all for the purpose of advancing the job
opportunities, health, general prosperity and economic welfare of the people of
the State and improving their standard of living.

     (D)  Except as provided in Article X hereof, the Issuer, to the extent of
its interest therein, shall not sell, assign, transfer, encumber or pledge as
security the Project Facility or any part thereof and shall maintain the Project
Facility free and clear of all Liens or encumbrances, except for the Permitted
Encumbrances and as contemplated or allowed by the terms of this Installment
Sale Agreement and the other Financing Documents.

     (E)  Subject to the limitations contained in Section 11.10 hereof, so long
as the Bonds shall be Outstanding, the Issuer will not take any action (or omit
to take any action required by the Financing Documents or which the Bank, the
Trustee or the Company, together with Bond Counsel, advise the Issuer in writing
should be taken), which action (or omission) would in any way cause the proceeds
from the sale of the Bonds to be applied in a manner contrary to that provided
in the Financing Documents.

     (F)  The Issuer shall cooperate with the Company in the filing by the
Company, as agent of the Issuer, of such returns and other information with the
Internal Revenue Service as the Trustee or the Company requests in writing,
provided the Company shall bear all costs of

                                       25



preparing, gathering and/or filing such returns and other information. In
addition, the Issuer, at the request of the Company, shall cooperate with the
Company in the filing by the Company, as agent of the Issuer, of such returns
and other information with the State and St. Lawrence County, New York.

     (G)  The Issuer has not been notified of any listing or proposed listing by
the Internal Revenue Service that it is a bond issuer whose arbitrage
certifications may not be relied upon.

     (H)  Subject to the limitations contained in Section 11.10 hereof, so long
as the Bonds shall be Outstanding, the Issuer will not take any action (or omit
to take any action required by the Financing Documents or which the Trustee or
the Company, together with Bond Counsel, advise the Issuer in writing should be
taken), or allow any action to be taken, which action (or omission) would in any
way cause (1) the proceeds from the sale of the Bonds to be applied in a manner
contrary to that provided in the Financing Documents, or (2) adversely affect
the exclusion of the interest paid or payable on any Bond from gross income for
federal income tax purposes. Notwithstanding the foregoing, there shall be no
such obligation upon the Issuer with respect to the use or investment of its
administrative fee, provided, however, that if the Company is required to rebate
any amount with respect to such administrative fee, the Issuer shall provide,
upon the reasonable request of the Company, such information concerning the
investment of such administrative fee as shall be requested by the Company and
as shall be reasonably available to the Issuer.

SECTION 2.2.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company makes the following representations, warranties and covenants as the
basis for the undertakings on its part herein contained:

     (A)  The Company is a business corporation duly organized and validly
existing under the laws of the State of Delaware, is duly authorized to do
business in the State, has the power to enter into this Installment Sale
Agreement and the other Financing Documents to which the Company is a party and
to carry out its obligations hereunder and thereunder, has been duly authorized
to execute this Installment Sale Agreement and the other Financing Documents to
which the Company is a party, and is qualified to do business in all
jurisdictions in which its operations or ownership of Properties so require.
This Installment Sale Agreement and the other Financing Documents to which the
Company is a party, and the transactions contemplated hereby and thereby, have
been duly authorized by all necessary action on the part of the Company's board
of directors and shareholders.

     (B)  Neither the execution and delivery of this Installment Sale Agreement
or the other Financing Documents to which the Company is a party, the
consummation of the transactions contemplated hereby and thereby nor the
fulfillment of or compliance with the provisions of this Installment Sale
Agreement or the other Financing Documents to which the Company is a party will
(1) conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or by-laws of the Company or any
other corporate restriction or any order, judgment, agreement or instrument to
which the Company is a party or by which the Company is bound, or constitute a
default under any of the foregoing, or (2) result in the creation or imposition
of any Lien of any nature upon the Project Facility under the terms of any such

                                       26



instrument or agreement, other than the Permitted Encumbrances, or (3) require
consent under (which has not been heretofore received) any corporate restriction
or any order, judgment, agreement or instrument to which the Company is a party
or by which the Company or any of its Property may be bound or affected, or (4)
require consent (which has not been heretofore received) under, conflict with or
violate any existing law, rule, regulation, judgment, order, writ, injunction or
decree of any government, governmental instrumentality or court (domestic or
foreign) having jurisdiction over the Company or any of the Property of the
Company.

     (C)  The completion of the Project Facility by the Issuer and the sale
thereof by the Issuer to the Company will not result in the removal of a plant
or facility of the Company or any other proposed occupant of the Project
Facility from one area of the State to another area of the State or in the
abandonment of one or more plants or facilities of the Company or any other
proposed occupant of the Project Facility located in the State, except as
permitted under the Act.

     (D)  The Project Facility does not constitute a facility or property which
is primarily used in making retail sales to customers who visit such facility or
property within the meaning of Section 862(2)(a) of the Act.

     (E)  The Financing Documents to which the Company is a party constitute, or
upon their execution and delivery in accordance with the terms thereof will
constitute, valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms.

     (F)  The Project Facility is, and so long as any Bond shall be Outstanding
and/or this Installment Sale Agreement shall remain in effect, the Project
Facility will continue to be, a "project", as such quoted term is defined in the
Act, and the Company will not take any action (or omit to take any action
required by the Financing Documents or which the Trustee, the Issuer or the
Bank, together with Bond Counsel, advise the Company in writing should be
taken), or allow any action to be taken, which action (or omission) would in any
way (1) cause the Project Facility not to constitute a "project", as such quoted
term is defined in the Act, (2) adversely affect the exclusion of the interest
paid or payable on the Bonds from gross income for federal income tax purposes,
or (3) cause the proceeds of the Bonds to be applied in a manner contrary to
that provided in the Financing Documents.

     (G)  The Project Facility and the operation thereof will comply in all
material respects with all Applicable Laws, and the Company will defend and save
the Issuer and its officers, members, agents and employees harmless from all
fines and penalties due to failure to comply therewith. The Company shall cause
all notices required by all Applicable Laws to be given, and shall comply or
cause compliance with all Applicable Laws, and the Company will defend and save
the Issuer and its officers, members, agents, directors and employees harmless
from all fines and penalties due to failure to comply therewith.

     (H)  The Project will not have a "significant impact on the environment"
(within the meaning of such term as used in SEQRA), and the Company hereby
covenants to comply with all mitigation measures, requirements and conditions,
if any, enumerated in the negative declaration issued by the Issuer on June 24,
2002 under SEQRA applicable to the acquisition,

                                       27



installation and operation of the Project Facility and in any other approvals
issued by any other Governmental Authority with respect to the Project Facility.
No material changes with respect to any aspect of the Project Facility have
arisen from the date of the issuance of such negative declaration which would
cause the determinations of the Issuer contained therein to be untrue.

     (I)  The Project Facility and the operation thereof will comply with all
Applicable Laws.

     (J)  All proceeds of the Bonds shall be used to pay the Cost of the
Project, and the total Cost of the Project is not expected to be less than
$3,500,000.

     (K)  The Company acknowledges receipt of notice of Section 874(8) of the
Act, which requires that the Company as agent of the Issuer must annually file a
statement with the New York State Department of Taxation and Finance, on a form
and in such a manner as is prescribed by the Commissioner of Taxation and
Finance, of the value of all sales tax exemptions claimed by the Company under
the authority granted by the Issuer.

     (L)  The Company acknowledges receipt of notice of Section 858-b of the
Act, which requires that the Company list new employment opportunities created
as a result of the Project with the following entities (hereinafter, the "JTPA
Entities"): (1) the New York State Department of Labor Community Services
Division and (2) the administrative entity of the service delivery area created
by the federal job training partnership act (P.L. No. 97-300) in which the
Project Facility is located. The Company agrees, where practicable, to first
consider for such new employment opportunities persons eligible to participate
in federal job training partnership programs who shall be referred by the JTPA
Entities.

     (M)  The Company will comply with all of the terms, conditions and
provisions of the Tax Regulatory Agreement. All of the representations,
certifications, statements of reasonable expectation and covenants made by the
Company in the Tax Regulatory Agreement are hereby declared to be for the
benefit of, among others, the Issuer and, by this reference, are incorporated by
this reference as though set forth in full herein.

     (N)  All proceeds of the Bonds shall be used to pay the Cost of the
Project, and the total Cost of the Project, including all costs related to the
issuance of the Bonds, shall not be less than the total Bond Proceeds advanced
by the Trustee under the Indenture. In no event will "costs of issuance" (within
the meaning of Section 147(g) of the Code) paid from the proceeds of the Bonds
exceed two percent (2%) of the proceeds of the Bonds.

     (O)  The Company shall perform or cause to be performed, for and on behalf
of the Issuer, each and every obligation of the Issuer which is within the
control of the Company under and pursuant to the Financing Documents and shall
defend, indemnify and hold harmless the Issuer and its members, officers,
agents, servants and employees from and against every expense, liability or
claim arising out of the failure of the Company to fulfill its obligations under
the provisions of this subsection.

                                       28



SECTION 2.3.   COVENANT WITH TRUSTEE, BONDHOLDERS AND BANK. The Issuer and the
Company agree that this Installment Sale Agreement is executed in part to induce
the Bondholders to purchase the Bonds and to induce the Bank to issue the Letter
of Credit. Accordingly, all representations, covenants and agreements on the
part of the Issuer and the Company set forth in this Installment Sale Agreement
(other than the Unassigned Rights) are hereby declared to be for the benefit of
the Issuer, the Trustee, the holders from time to time of the Bonds and the
Bank.

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                                       29



                                  ARTICLE III

                             CONVEYANCE AND USE OF
                              THE PROJECT FACILITY

SECTION 3.1.   CONVEYANCE TO THE ISSUER. Pursuant to the Bill of Sale to Issuer
and the Deed to Issuer, the Company has or will convey, or will cause to be
conveyed, to the Issuer, title to the Project Facility. The Company represents
and warrants that the Issuer's interest in the Project Facility shall be free
and clear of all Liens except for Permitted Encumbrances, and agrees that it
will defend, indemnify and hold the Issuer, the Bank and the Trustee harmless
from any expense or liability due to any defect in the Issuer's interest
therein.

SECTION 3.2.   USE OF THE PROJECT FACILITY. Subsequent to the Closing Date, (A)
unless an Event of Default has occurred and is continuing, the Company shall
have sole and exclusive (as between the Company and the Issuer) possession and
use of the Project Facility and (B) the Company shall be entitled to use the
Project Facility in any manner not otherwise prohibited by the Financing
Documents, provided such use causes the Project Facility to qualify or continue
to qualify as a "project" under the Act and does not tend, in the reasonable
judgment of the Issuer, to bring the Project Facility into disrepute as a public
project; provided, further, however, that at no time shall any such use be other
than as a manufacturing facility and uses related thereto without the prior
written consent of the Issuer and the Bank.

SECTION 3.3.   HAZARDOUS MATERIALS.

     (A)  To the best of its knowledge, the Company represents, warrants and
covenants that the Company has not used Hazardous Materials on, from or
affecting the Project Facility in any manner which violates any Applicable Law,
including but not limited to those governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal of
Hazardous Materials, and that, to the best of the Company's knowledge, no prior
owner of the Project Facility or any tenant, subtenant, prior tenant or prior
subtenant has used Hazardous Materials on, from or affecting the Project
Facility in any manner which violates any Applicable Law, including but not
limited to those governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials.

     (B)  Except in compliance with any material Applicable Laws, the Company
shall keep or cause the Project Facility to be kept free of Hazardous Materials.
Without limiting the foregoing, the Company shall not cause or permit the
Project Facility to be used to generate, manufacture, refine, transport, treat,
store, handle, dispose, transfer, produce or process Hazardous Materials, except
in compliance with all material Applicable Laws, nor shall the Company cause or
permit, as a result of any intentional or unintentional act or omission on the
part of the Company, or any tenant or subtenant of the Company, an unlawful
release of Hazardous Materials onto the Project Facility or onto any other
property.

     (C)  The Company shall comply in all material respects with, and ensure
compliance by all tenants and subtenants of the Company with, all Applicable
Laws regarding Hazardous

                                       30



Materials whenever and by whomever triggered, and shall obtain and comply with,
and ensure that all tenants and subtenants of the Company obtain and comply in
all material respects with, any and all approvals, registrations or permits
required thereunder.

     (D)  The Company shall (1) conduct and complete all investigations,
studies, sampling, and testing, and all remedial, removal, and other actions
necessary to clean up, remove or contain all Hazardous Material on, from or
affecting the Project Facility (a) in accordance with all Applicable Laws, and
(b) in accordance with the orders and directives of all federal, state and local
governmental authorities and (2) defend, indemnify, and hold harmless the Bank
and the Trustee, and their respective employees, agents, officers, and directors
and the Issuer, its employees, agents, officers and members from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature, known or unknown, contingent or otherwise,
out of, or in any way related to, (a) the presence, disposal, release or
threatened release of any Hazardous Materials used, transported, stored,
manufactured, refined, handled, produced or disposed of on or in the Project
Facility which are on, from or affecting soil, water, vegetation, buildings,
personal property, persons, animals or otherwise, (b)any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to such Hazardous Materials, (c) any lawsuit brought or threatened,
settlement reached, or any government order relating to such Hazardous
Materials, and/or (d) any violations of Applicable Laws which are based upon or
in any way related to such Hazardous Materials, including, without limitation,
attorney and consultant fees, investigation and laboratory fees, court costs and
litigation expenses. Costs under this subsection (D) will be repaid immediately,
with interest at the Default Interest Rate to accrue if not paid within 30 days
of receipt of an invoice therefor.

     (E)  In the event the Project Facility is foreclosed by the Issuer, the
Trustee or the Bank, or the Company tenders a deed in lieu of foreclosure, the
Company shall deliver the Project Facility to the purchaser free of any and all
Hazardous Materials except Hazardous Materials the presence of which do not
violate any Federal, State or local laws, ordinances, rules and regulations
governing the use and storage of such materials so that the condition of the
Project Facility shall conform in all material respects with all Applicable Laws
affecting the storage, use or disposal of Hazardous Materials at the Project
Facility.

SECTION 3.4.   [RESERVED]

SECTION 3.5.   NON-MERGER. During the term of this Installment Sale Agreement,
there shall be no merger of this Installment Sale Agreement nor of the estate
created by this Installment Sale Agreement with the fee estate in the Land or
any part thereof by reason of the fact that the same person, firm, corporation
or other entity may acquire or own or hold, directly or indirectly, (1) this
Installment Sale Agreement or the estate created by this Installment Sale
Agreement or any interest in this Installment Sale Agreement or in any such
estate and (2) the fee estate in the Premises or any part thereof or any
interest in such fee estate, and no such merger shall occur unless and until all
corporations, firms and other entities, including any mortgagee having any
interest in (x) this Installment Sale Agreement or the estate created by this
Installment Sale Agreement and (y) the fee estate in the Land or any part
thereof or any interest

                                       31



in such fee estate, shall join in a written instrument effecting such merger and
shall duly record the same.

                          [Balance of page left blank]


                                       32



                                   ARTICLE IV

                   UNDERTAKING AND COMPLETION OF THE PROJECT;
                    ISSUANCE OF BONDS; USE OF BOND PROCEEDS

SECTION 4.1.   ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT
FACILITY.

     (A)  The Company shall, on behalf of the Issuer, promptly acquire,
construct and install the Project Facility, or cause the acquisition,
construction and installation of the Project Facility, all in accordance with
this Installment Sale Agreement.

     (B)  Title to all materials, equipment, machinery and other items of
Property presently incorporated or installed in and which are a part of the
Project Facility shall vest in the Issuer immediately upon execution of the Bill
of Sale to Issuer. Title to all materials, equipment, machinery and other items
of Property acquired subsequent to the Closing Date and intended to be
incorporated or installed in and to become part of the Project Facility shall
vest in the Issuer immediately upon deposit on the Land or incorporation or
installation in the Project Facility, whichever shall first occur. The Company
shall execute, deliver and record or file all instruments necessary or
appropriate to vest title to the above in the Issuer and shall take all action
necessary or appropriate to protect such title against claims of any third
Persons.

     (C)  The Issuer shall enter into, and accept the assignment of, such
contracts as the Company may request in order to effectuate the purposes of this
Section 4.1; provided, however, that the liability of the Issuer thereunder
shall be limited to moneys disbursed under the Indenture.

     (D)  The Issuer hereby appoints the Company as its true and lawful agent to
perform the following in compliance with the terms, purposes and intent of the
Financing Documents, and the Company hereby accepts such appointment: (1) to
acquire, construct and install the Project Facility, (2) to make, execute,
acknowledge and deliver any contracts, orders, receipts, writings and
instructions with any other Persons, and in general to do all things which may
be requisite or proper, all for the acquisition, construction and installation
of the Project Facility, with the same powers and with the same validity as the
Issuer could do if acting in its own behalf, provided that the liability of the
Issuer thereunder shall be limited to moneys disbursed under the Indenture, (3)
to pay all fees, costs and expenses incurred in the acquisition and installation
of the Project Facility from funds made available therefor in accordance with
this Installment Sale Agreement and the other Financing Documents, (4) to
request on behalf of the Issuer, and receive for the purpose of paying the Cost
of the Project, disbursements of the proceeds of the Bond Proceeds pursuant to
the Financing Documents, and (5) to ask, demand, sue for, levy, recover and
receive all such sums of money, debts, dues and other demands whatsoever which
may be due, owing and payable to the Issuer under the terms of any contract,
order, receipt or writing in connection with the acquisition, construction and
installation of the Project Facility and to enforce the provisions of any
contract, agreement, obligation, bond or other performance security in
connection with the same, said appointment as agent to be

                                       33



retroactive to June 24, 2002 and to last until the earlier to occur of (a) June
24, 2005 or (b)the date of substantial completion of the Project Facility as
evidenced in the manner provided in Section 4.4 of the Installment Sale
Agreement.

     (E)  The Company has given or will give or cause to be given all notices
and has complied or will comply or cause compliance with all Applicable Laws,
and the Company will defend, indemnify and save the Issuer, the Trustee and the
Bank and their respective officers, members, directors, agents (other than the
Company), servants and employees harmless from all fines and penalties due to
failure to comply therewith. All permits and licenses necessary for the
prosecution of work on the Project Facility shall be procured promptly by the
Company.

     (F)  To the extent required by Applicable Law, the Company, as agent of the
Issuer, will cause (1) compliance with the requirements of Article 8 of the New
York Labor Law, and (2) any contractor, subcontractor and other person involved
in the acquisition and installation of the Project Facility to comply with
Article 8 of the New York Labor Law. The covenant in this subsection is not
intended as a representation that Article 8 of the New York Labor Law applies to
the Project.

     (G)  In compliance with Section 13 of the New York Lien Law to the extent
to which that Section may be found to apply by its terms, the Company covenants
that it (1) will hold the right to receive the Bond Proceeds, which have been
deposited by the Issuer in a trust fund for the purpose of paying the Cost of
the Project, as a trust fund to be applied first for the purpose of paying the
"cost of improvement" (as said term is defined in Section 2(5) of the New York
Lien Law), and (2) will apply the same first to the payment of the "cost of
improvement" before using any part of the total of the same for any other
purpose. The covenant in this subsection is not intended as a representation
that this Installment Sale Agreement or the Indenture is a "building loan
contract", as defined in Section 2(13) of the New York Lien Law.

SECTION 4.2.   ISSUANCE OF THE BONDS. In order to finance a portion of the Cost
of the Project, together with other costs and incidental expenses in connection
therewith, the Issuer agrees that it will issue, sell and cause to be delivered
to the purchaser thereof the Bonds, as provided in the Indenture. THE ISSUER
MAKES NO REPRESENTATION, EXPRESS OR IMPLIED, THAT THE NET PROCEEDS OF THE BONDS
WILL BE SUFFICIENT TO COMPLETE THE ACQUISITION, CONSTRUCTION AND INSTALLATION OF
THE PROJECT FACILITY.

SECTION 4.3.   APPLICATION OF BOND PROCEEDS.

     (A)  The proceeds of the sale of the Bonds shall be deposited by the Issuer
with the Trustee as provided in the Indenture and, upon submission to the
Trustee of a Request for Disbursement certified by an Authorized Representative
of the Company and approved in writing by the Bank and complying with the
requirements of Section 403 of the Indenture, and the Reimbursement Agreement,
shall be applied to pay the following items of cost and expenses incurred
subsequent to the Inducement Date in connection with the Project, and for no
other purpose:

                                       34



     (1)  all costs incurred in connection with the acquisition, construction
and installation of the Project Facility ;

     (2)  all fees, taxes, charges and other expenses for recording or filing,
as the case may be, the Financing Documents, any other agreement contemplated
hereby, any financing statements and any title curative documents in order to
perfect or protect the Issuer's, the Trustee's, the Bank's or the Company's
respective interests in the Project Facility, and any security interests
contemplated by the Financing Documents;

     (3)  all fees and expenses in connection with any actions or proceedings in
order to perfect or protect the Issuer's, the Trustee's, the Bank's or the
Company's respective interests in the Project Facility, except for removing
Permitted Encumbrances;

     (4)  the cost of all insurance maintained with respect to the Project
Facility pursuant to Section 6.3 hereof and the cost of maintaining any payment
or performance bond (or letter of credit in substitution therefor), if any,
relating to the Project Facility;

     (5)  all interest payable on any interim financing the Company may have
secured with respect to the Project Facility in anticipation of the issuance of
the Bonds;

     (6)  all interest payable on the Bonds during the Construction Period;

     (7)  all legal, accounting, financial advisory, investment banking,
underwriting, rating agency, blue sky, legal investment and any other fees,
discounts, costs and expenses incurred by the Issuer, the Company, the Trustee
or the Bank in connection with the preparation, reproduction, authorization,
issuance, execution, delivery and sale of the Bonds and the other Financing
Documents and all other documents in connection therewith, with the acquisition
or installation of the Project Facility, and with any other transaction
contemplated by the Bonds, the Indenture and this Installment Sale Agreement;

     (8)  the administration, acceptance and/or commitment fees, costs and
expenses (including, but not limited to, reasonable attorneys' fees) of the
Issuer, the Trustee and the Bank;

     (9)  all title insurance, appraisal and surveying costs;

     (10) payment of the taxes and assessments for the Project Facility payable
or allocable during the Construction Period; and

     (11) reimbursement to the Company for any of the above enumerated costs and
expenses paid and incurred by the Company subsequent to the Inducement Date.

     (B)  Notwithstanding any provisions contained herein, the Bank shall not be
required to approve any Request for Disbursement that does not comply with the
terms and conditions of the Reimbursement Agreement, and if there is any
conflict between the terms of this Section 4.3 and the terms of the
Reimbursement Agreement, the terms of the Reimbursement Agreement shall prevail.

                                       35



SECTION 4.4.   COMPLETION OF THE PROJECT FACILITY. The Company will proceed with
due diligence to commence and complete the acquisition, construction and
installation of the Project Facility. Completion of the same shall be evidenced
by a certificate signed by an Authorized Representative of the Company delivered
to the Issuer, the Trustee and the Bank stating (A) the date of such completion,
(B) that all labor, services, materials and supplies used therefor and all costs
and expenses in connection therewith have been paid, (C) that the acquisition,
construction and installation of the Project Facility have been completed, (D)
that the Company or the Issuer has good and valid title to all Property
constituting a portion of the Project Facility, and that the Project Facility is
subject to this Installment Sale Agreement, (E) the amount that the Trustee
shall retain in the Project Fund for the payment of Project Costs not yet due or
for liabilities which the Company is contesting or which otherwise should be
retained in the Project Fund and the reasons why such amounts should be
retained, (F) the applicable Rebate Amount with respect to the Net Proceeds of
the Project Fund and the earnings thereon (with a statement as to the
determination of the Rebate Amount and a direction to the Trustee of any
required transfer to the Rebate Fund), and (G) that the Project Facility is
ready for occupancy, use and operation for its intended purposes.
Notwithstanding the foregoing, such certificate may state (1) that it is given
without prejudice to any rights of the Company against third parties which exist
at the date of such certificate or which may subsequently come into being, (2)
that it is given only for the purposes of this Section 4.4, and (3) that no
Person other than the Issuer, the Trustee and the Bank may benefit therefrom.
Such certificate shall be accompanied by (a) any and all permissions, licenses
or consents required of Governmental Authorities for the occupancy, operation
and use of the Project Facility for its intended purposes, (b) a certificate of
the Company to the effect that the Project Facility will serve the purposes
contemplated by this Installment Sale Agreement and the Indenture, and (c) a
certificate of the Company to the effect that the Mortgage constitutes a valid
first priority mortgage Lien on and a perfected security interest on the Project
Facility subject only to Permitted Encumbrances.

SECTION 4.5.   COMPLETION BY THE COMPANY.

     (A)  In the event that the proceeds of the Bonds are not sufficient to pay
in full all costs of acquiring, constructing and installing the Project
Facility, the Company agrees, for the benefit of the Issuer, to complete such
acquisition, construction and installation and to pay all such sums as may be in
excess of the moneys available therefor in the Project Fund. Title to the
Equipment acquired or installed at Company's cost shall immediately upon such
acquisition, construction or installation vest in the Issuer. The Company shall
execute, deliver and record or file such instruments as the Issuer may request
in order to perfect or protect the Issuer's title to or interest in such
portions of the Project Facility.

     (B)  No payment by the Company pursuant to this Section 4.5 shall entitle
the Company to any reimbursement for any such expenditure from the Issuer, the
Trustee or the Bank or to any diminution or abatement of any amounts payable by
the Company under this Installment Sale Agreement or under any other Financing
Document.

SECTION 4.6.   REMEDIES TO BE PURSUED AGAINST CONTRACTORS, SUBCONTRACTORS,
MATERIALMEN AND THEIR SURETIES. In the event of a default

                                       36



by any contractor, subcontractor or materialman under any contract made by it in
connection with the acquisition, construction and installation of the Project
Facility or in the event of a breach of warranty or other liability with respect
to any materials, workmanship or performance guaranty, the Company may proceed,
either separately or in conjunction with others, to exhaust the remedies of the
Company and the Issuer against the contractor, subcontractor or materialman so
in default and against each surety for the performance of such contract. The
Company may, in its own name or, with the prior written consent of the Issuer,
in the name of the Issuer, prosecute or defend any action or proceeding or take
any other action involving any such contractor, subcontractor, materialman or
surety which the Company deems reasonably necessary, and in such event the
Issuer hereby agrees, at the Company's sole expense, to cooperate fully with the
Company and to take all action necessary to effect the substitution of the
Company for the Issuer in any such action or proceeding. The Company shall
advise the Issuer, the Trustee and the Bank of any actions or proceedings taken
hereunder. The Net Proceeds of any recovery secured by the Company as a result
of any action pursued against a contractor, subcontractor, materialman or their
sureties pursuant to this Section 4.6 shall be used to the extent necessary to
complete the Project Facility and then deposited in the Bond Fund and applied as
provided in Section 301(A) of the Indenture.

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                                       37



                                   ARTICLE V

             AGREEMENT TO CONVEY THE PROJECT FACILITY; INSTALLMENT
                  PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE

SECTION 5.1.   AGREEMENT TO CONVEY THE PROJECT FACILITY. In consideration of the
Company's covenant herein to make installment purchase payments hereunder, and
in consideration of the other covenants of the Company contained herein,
including the covenant to make additional and other payments required hereby,
the Issuer hereby agrees to sell and convey to the Company, and the Company
hereby agrees to purchase and acquire from the Issuer, the Issuer's interest in
the Project Facility. The obligation of the Issuer to convey its interest in the
Project Facility to the Company shall be subject to there being no Event of
Default existing hereunder or any other event which, but for the passage of time
or notice or both, would be an Event of Default.

SECTION 5.2.   CONVEYANCE; INSTRUMENTS; SURVIVAL.

     (A)  The Issuer's interest in the Project Facility shall be conveyed
(subject to Permitted Encumbrances and the terms of the Financing Documents)
from the Issuer to the Company on the earlier to occur of (1) the payment of all
principal, interest and other amounts payable with respect to the Bonds, or (2)
such earlier date as may be requested by the Company.

     (B)  The sale and conveyance of the Issuer's right, title and interest in
and to the Project Facility shall be effected by the delivery by the Issuer to
the Company of the Bill of Sale to Company (in substantially the form attached
hereto as Exhibit B and by this reference made a part hereof) in accordance with
the provisions of this Installment Sale Agreement. The sale and conveyance of
the Issuer's interest in the Project Facility shall be effected by the delivery
by the Issuer to the Company of the Termination of the Installment Sale
Agreement (in substantially the form attached hereto as Exhibit C and by this
reference made a part hereof) in accordance with the provisions of this
Installment Sale Agreement.

     (C)  The Company agrees to prepare the Bill of Sale to Company, the
Termination of the Installment Sale Agreement, and all schedules thereto,
together with all transfer tax affidavits, equalization and assessment forms and
other necessary documentation, and to forward same to the Issuer at least thirty
(30) days prior to the date that the Project Facility (or any portion thereof)
is to be conveyed to the Company. The Company will pay all expenses and taxes,
if any, applicable to or arising from such transfers of title.

     (D)  The Company hereby agrees to pay all expenses and taxes, if any,
applicable to or arising from the transfers contemplated by this Section 5.2.

     (E)  This Installment Sale Agreement shall survive the transfer of the
Project Facility to the Company pursuant to this Section 5.2 and shall remain in
full force and effect until all of the Indebtedness shall have been paid in
full, and thereafter the obligations of the Company shall survive as set forth
in Section 11.8 hereof.

                                       38



     (F)  Upon the payment in full of all Indebtedness under or secured by this
Installment Sale Agreement, and notwithstanding the survival of certain
obligations of the Company as described in Section 11.8 hereof, the Issuer shall
upon the request of the Company execute and deliver (and request the Trustee and
the Bank to execute and deliver) to the Company such documents as the Company
may reasonably request, in recordable form if so requested, to evidence the
termination and release of all Liens granted to the Issuer, the Trustee and the
Bank hereunder.

SECTION 5.3.   INSTALLMENT PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE.

     (A)  The Company shall pay installment purchase payments for the Project
Facility as follows:

     (1)  on or before the Business Day immediately preceding each Bond Payment
Date, the Company shall make available moneys to the Trustee for deposit into
the Bond Fund, in an amount which, when added to any amounts then held in the
Bond Fund, shall equal the amount payable as principal, interest and premium, if
any, on the Bonds on such Bond Payment Date; and

     (2)  not later than 1:00 p.m. (New York time) on the date payment therefor
is to be made, the Company shall pay to the Tender Agent in federal or other
immediately available funds an amount equal to the amount the Tender Agent
requires in order to purchase on behalf of the Company Bonds pursuant to Article
III of the Indenture; provided, however, that the amount required to be paid
under this paragraph (2) shall be reduced by an amount equal to the sum of the
amounts made available to the Tender Agent for such purpose from the proceeds of
the remarketing of such Bonds by the Remarketing Agent or proceeds of a draw
under the Credit Facility. The Company hereby authorizes the Trustee to draw
such moneys under the Credit Facility as are necessary for the purchase of Bonds
pursuant to said Article III; provided, however, that the obligation of the
Company to make any payment hereunder shall be deemed satisfied and discharged
to the extent of the corresponding payment made by the Credit Facility Issuer to
the Trustee under the Credit Facility and the reimbursement by the Company (or
the Trustee with moneys provided by the Company) to the Credit Facility Issuer
in full for such payment pursuant to the terms of the Reimbursement Agreement;
provided further, however, that any payment by the Credit Facility Issuer to the
Trustee under the Credit Facility will not relieve the Company of any of its
obligations under the Reimbursement Agreement.

     (B)  The Company shall pay as additional installment purchase payments
hereunder the following:

     (1)  Within thirty (30) days after receipt of a demand therefor from the
Trustee, the Company shall pay to the Trustee the following amounts: (a) the
reasonable fees, costs and expenses of the Trustee for performing the
obligations of the Trustee under the Indenture; (b)the sum of the expenses of
the Trustee reasonably incurred in performing the obligations of (i)the Company
under this Installment Sale Agreement, or (ii) the Issuer under the Bonds, the

                                       39



Indenture or this Installment Sale Agreement; and (c) the Trustee's reasonable
attorneys' fees incurred in connection with the foregoing and other moneys due
the Trustee pursuant to the provisions of any of the Financing Documents.

     (2)  Within thirty (30) days after receipt of a demand therefor from the
Issuer, the Company shall pay to the Issuer the sum of the reasonable expenses
of the Issuer and the officers, members, agents and employees thereof incurred
by reason of the Issuer's ownership, financing or sale of the Project Facility
or in connection with the carrying out of the Issuer's duties and obligations
under this Installment Sale Agreement or any of the other Financing Documents,
and any other fee or expense of the Issuer with respect to the Project Facility,
the sale of the Project Facility to the Company, the Bonds or any of the other
Financing Documents, the payment of which is not otherwise provided for under
this Installment Sale Agreement.

     (3)  Within five (5) days after request therefor made in writing, the
Company shall pay any and all costs and expenses incurred or to be paid by the
Issuer in connection with the issuance and delivery of the Bonds, the
remarketing of the Bonds or the Conversion of the Bonds or otherwise related to
actions taken by the Issuer under this Installment Sale Agreement or the
Indenture, the payment of which is not otherwise provided for under this
Installment Sale Agreement.

     (4)  Within five (5) days after request therefor made in writing, the
Company shall pay (a) to the Trustee, the Registrar and any Paying Agent or
Authenticating Agent, their reasonable fees, charges and expenses for acting as
such under the Indenture and (b) to the Remarketing Agent and Tender Agent, the
fees and expenses of the Remarketing Agent and Tender Agent under the Indenture
for services rendered in connection with the Bonds.

     (C)  The Company agrees to make the above-mentioned payments, without any
further notice, in lawful money of the United States of America as, at the time
of payment, shall be legal tender for the payment of public and private debts.
In the event the Company shall fail to make any payment required by this Section
5.3 for a period of more than ten (10) days from the date such payment is due,
the Company shall pay the same, together with interest thereon, at the Default
Interest Rate, from the date on which such payment was due until the date on
which such payment is made.

     (D)  In the event of an application of moneys in the Project Fund toward
prepayment of the principal of the Bonds pursuant to Section 404(D) of the
Indenture, there shall be no abatement or reduction in the amounts payable by
the Company under this Section 5.3.

     (E)  The Company shall be entitled to a credit against the installment
purchase payments next required to be made under Section 5.3(A) hereof to the
extent that the balance of the Bond Fund (other than any balance in the Credit
Facility Account, Defeasance Account, Redemption Premium Account or Remarketing
Proceeds Account) is then in excess of amounts required (1)for payment of Bonds
theretofore matured or theretofore called for redemption, (2) for payment of
interest for which checks or drafts have been drawn and mailed by the Trustee,
and (3) for deposit in the Bond Fund for use other than for the payment of Debt
Service Payments on the Interest Payment Date next following the applicable date
such installment

                                       40



purchase payments are due pursuant to Section 5.3(A) hereof. In any event,
however, if on any Interest Payment Date, the balance in the Bond Fund is
insufficient to make required payments of Debt Service Payments on the Bonds,
the Company forthwith will pay to the Trustee, for the account of the Issuer and
for deposit into the Bond Fund, any deficiency.

     (F)  Except for such interest of the Company as may hereafter arise
pursuant to Section 411 of the Indenture, the Company and the Issuer each
acknowledge that neither the Company nor the Issuer has any interest in the
Credit Facility Account, the Redemption Premium Account, the Remarketing
Proceeds Account or the Defeasance Account of the Bond Fund and any moneys
deposited therein shall be in the custody of and held by the Trustee in trust
for the benefit of the Holders and, to the extent of draws under the Credit
Facility, the Bank.

SECTION 5.4.   NATURE OF OBLIGATIONS OF THE COMPANY HEREUNDER.

     (A)  The obligations of the Company to make the payments required by this
Installment Sale Agreement and to perform and observe any and all of the other
covenants and agreements on its part contained herein shall be general
obligations of the Company and shall be absolute and unconditional irrespective
of any defense or any right of set-off, recoupment, counterclaim or abatement
that the Company may otherwise have against the Issuer, the Trustee or the Bank.
The Company agrees that it will not suspend, discontinue or abate any payment
required by, or fail to observe any of its other covenants or agreements
contained in, this Installment Sale Agreement, or terminate this Installment
Sale Agreement for any cause whatsoever, including, without limiting the
generality of the foregoing, failure to complete the acquisition, construction
or installation of the Project Facility, any defect in the title, design,
operation, merchantability, fitness or condition of the Project Facility or any
part thereof or in the suitability of the Project Facility or any part thereof
for the Company's purposes or needs, failure of consideration for, destruction
of or damage to, Condemnation of title to or the use of all or any part of the
Project Facility, any change in the tax or other laws of the United States of
America or of the State or any political subdivision thereof, or any failure of
the Issuer to perform and observe any agreement, whether expressed or implied,
or any duty, liability or obligation arising out of or in connection with this
Installment Sale Agreement.

     (B)  Nothing contained in this Section 5.4 shall be construed to release
the Issuer from the performance of any of the agreements on its part contained
in this Installment Sale Agreement, and, in the event the Issuer should fail to
perform any such agreement, the Company may institute such action against the
Issuer as the Company may deem necessary to compel performance or recover
damages for non-performance (subject to the provisions of Section 11.10 hereof);
provided, however, that the Company shall look solely to the Issuer's estate and
interest in the Project Facility for the satisfaction of any right or remedy of
the Company for the collection of a judgment (or other judicial process)
requiring the payment of money by the Issuer in the event of any liability on
the part of the Issuer, and no other Property or assets of the Issuer or of the
members, officers, agents (other than the Company) or employees of the Issuer
shall be subject to levy, execution, attachment or other enforcement procedure
for the satisfaction of the Company's remedies under or with respect to this
Installment Sale Agreement, the relationship of the Issuer and the Company
hereunder or the Company's purchase of and title to the Project Facility, or any
other liability of the Issuer to the Company.

                                       41



SECTION 5.5.   PREPAYMENT OF INSTALLMENT PURCHASE PAYMENTS. At any time that the
Bonds are subject to redemption under Section 301(B) of the Indenture, the
Company may, at its option, prepay, in whole or in part, the installment
purchase payments payable hereunder by either (A) causing there to be Available
Moneys in an amount equal to the Redemption Price of the Bonds being redeemed on
deposit with the Trustee ninety-five (95) days prior to the date such moneys are
to be applied to the redemption of such Bonds under Section 301 of the
Indenture, or (B) delivering to the Trustee notice of its election to cause the
redemption of such Bonds, together with a written assurance from the Bank that
the Letter of Credit may be drawn upon to pay the Redemption Price of the Bonds
being redeemed.

SECTION 5.6.   [RESERVED]

SECTION 5.7.   GRANT OF SECURITY INTEREST. The Company hereby grants the Issuer
a security interest in all of the right, title and interest of the Company in
the Project Facility and in all additions and accessions thereto and all
proceeds thereof, all replacements and substitutions therefor and all proceeds
thereof and all books, records and accounts of the Company pertaining to the
Project Facility as security for payment of the installment purchase payments
and all other payments and obligations of the Company hereunder. The Company
hereby irrevocably appoints the Issuer as its attorney-in-fact to execute and
deliver and file any instruments necessary or convenient to perfect and continue
the security interest granted herein.

SECTION 5.8.   THE CREDIT FACILITY.

     (A)  Prior to the initial delivery of the Initial Bonds to the Original
Purchaser pursuant to Section 210 of the Indenture, the Company shall obtain and
deliver, to the Trustee, the Credit Facility. The Credit Facility: (1) shall be
issued initially by the Bank pursuant to the Reimbursement Agreement; (2) shall
be dated the date of delivery of the Initial Bonds; (3) shall obligate the Bank
to pay (a) an amount equal to the principal amount of the Bonds (i) to pay the
principal of the Initial Bonds when due whether at stated maturity, upon
redemption or acceleration or (ii) to enable the Tender Agent to pay the
purchase price or portion of the purchase price equal to the principal amount of
Initial Bonds purchased pursuant to Section 304 of the Indenture to the extent
remarketing proceeds are not available for such purpose, plus (b) an amount
equal to 98 days' interest accrued on the Initial Bonds at a rate of eight
percent (8%) per annum (i) to pay interest on the Initial Bonds when due or (ii)
to enable the Tender Agent to pay the portion of the purchase price of the
Initial Bonds purchased pursuant to Section 304 of the Indenture equal to the
interest accrued, if any, on such Bonds to the extent remarketing proceeds are
not available for such purpose.

     (B)  The Company shall take whatever action may be reasonably necessary to
maintain the Credit Facility in full force and effect during the period required
by the Indenture, including the payment of any reasonable and documented
transfer fees required by the Bank upon any transfer of the Credit Facility to
any successor Trustee pursuant to Section 709 of the Indenture.

                                       42



SECTION 5.9.   EARLIER CONVEYANCE OF PROJECT FACILITY. Notwithstanding anything
contained herein to the contrary, upon the occurrence and continuation of one
Event of Default, the Agency may, without notice to the Company, cause the
Company's interest in the Project Facility to be conveyed to the Company in
accordance with Section 5.2 hereof.

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                                       43



                                   ARTICLE VI

                MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE

SECTION 6.1.   MAINTENANCE AND MODIFICATION OF THE PROJECT FACILITY. So long as
any of the Bonds are Outstanding or any sums are due to the Bank under the
Reimbursement Agreement, and during the term of this Installment Sale Agreement,
the Company shall (1) keep the Project Facility in good condition and repair and
preserve the same against waste, loss, damage and depreciation, ordinary wear
and tear excepted, (2) make all necessary repairs and replacements to the
Project Facility or any part thereof (whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen), and (3) operate the
Project Facility in a sound and economic manner.

SECTION 6.2.   TAXES, ASSESSMENTS AND UTILITY CHARGES.

     (A)  The Company shall pay or cause to be paid, as the same respectively
become due, (1) all taxes and governmental charges of any kind whatsoever which
may at any time be lawfully assessed or levied against or with respect to the
Project Facility, (2) all utility and other charges, including "service
charges", incurred or imposed for the operation, maintenance, use, occupancy,
upkeep and improvement of the Project Facility, and (3) all assessments and
charges of any kind whatsoever lawfully made against the Project Facility by any
Governmental Authority for public improvements; provided that, with respect to
special assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Company shall be obligated hereunder to
pay only such installments as are required to be paid during all periods that
any Bond shall be Outstanding and/or during the term of this Installment Sale
Agreement or any other Financing Document.

     (B)  Notwithstanding the provisions of subsection (A) of this Section 6.2,
the Company may withhold any such payment and the Company may in good faith
actively contest any such taxes, assessments and other charges provided that the
Company (1) first shall have notified the Issuer, the Trustee and the Bank in
writing of such contest, (2) an Event of Default has not occurred under any of
the Financing Documents, including, without limitation, the Reimbursement
Agreement, (3) shall have set aside adequate reserves for any such taxes,
assessments and other charges, and (4) demonstrates to the reasonable
satisfaction of the Issuer, the Trustee and the Bank that the non-payment of
such items will not subject the Lien of any Financing Document on the Project
Facility, or subject the Project Facility or any part thereof, to loss or
forfeiture. Otherwise, such taxes, assessments or charges shall be paid promptly
or secured by posting a bond in form and substance satisfactory to the Issuer,
the Trustee and the Bank.

SECTION 6.3.   INSURANCE REQUIRED. So long as any Bond is Outstanding and/or
during the term of this Installment Sale Agreement, the Company shall maintain
insurance with respect to the Project Facility against such risks and for such
amounts as are customarily insured against

                                       44



by businesses of like size and type, paying, as the same become due and payable,
all premiums with respect thereto, including, but not necessarily limited to:

     (A)  (1) During and prior to completion of the Project Facility, builder's
risk (or equivalent coverage) insurance upon any work done or material furnished
in connection with the acquisition and installation of the Project Facility,
issued to the Company and the Issuer as insureds and the Trustee and the Bank as
security holders and loss payees, as their interests may appear, and written in
completed value form for the full insurable value of the Project Facility, and
(2) at such time that builder's risk insurance is no longer available by virtue
of completion of the acquisition and installation of the Project Facility,
insurance protecting the interests of the Company and the Issuer as insureds and
the Trustee and the Bank as security holders and loss payees, as their interests
may appear, against loss or damage to the Project Facility by fire, lightning,
vandalism, malicious mischief and other perils normally insured against with a
uniform extended coverage endorsement, such insurance at all times to be in an
amount not less than the greater of the total principal amount of the Bonds
Outstanding or the actual cash value of the Project Facility as determined at
least once every three (3) years by a recognized appraiser or insurer selected
by the Company.

     (B)  To the extent applicable, workers' compensation insurance, disability
benefits insurance and such other forms of insurance which the Company is
required by law to provide, covering loss resulting from injury, sickness,
disability or death of employees of the Company who are located at or assigned
to the Project Facility or who are responsible for the acquisition or
installation of the Project Facility.

     (C)  Insurance protecting the Company, the Issuer, the Trustee and the Bank
against loss or losses from liabilities imposed by law or assumed in any written
contract (including, without limitation, the contractual liability assumed by
the Company under Sections 8.2, 8.13 and 8.14 of this Installment Sale
Agreement) and arising from personal injury or death or damage to the Property
of others caused by any accident or occurrence, with limits of not less than
$1,000,000 per person per accident or occurrence on account of personal injury,
including death resulting therefrom, and $1,000,000 per accident or occurrence
on account of damage to the Property of others, excluding liability imposed upon
the Company by any applicable workers' compensation law, and a separate umbrella
liability policy with a limit of not less than $2,000,000.

     (D)  If the Project Facility is located within an area identified by the
Secretary of Housing and Urban Development as having special flood hazards,
insurance against loss by floods in an amount at least equal to the total
principal amount of the Bonds Outstanding or to the maximum limit of coverage
made available, whichever is less.

     (E)  THE ISSUER DOES NOT IN ANY WAY REPRESENT THAT THE INSURANCE SPECIFIED
HEREIN, WHETHER IN SCOPE OR IN LIMITS OF COVERAGE, IS ADEQUATE OR SUFFICIENT TO
PROTECT THE COMPANY'S BUSINESS OR INTERESTS.

                                       45



SECTION 6.4.   ADDITIONAL PROVISIONS RESPECTING INSURANCE.

     (A)  All insurance required by Section 6.3 hereof shall be procured and
maintained in financially sound and generally recognized responsible insurance
companies selected by the Company and authorized to write such insurance in the
State and satisfactory and having a Best rating satisfactory to the Issuer and
the Trustee. Such insurance may be written with deductible amounts comparable to
those on similar policies carried by other companies engaged in businesses
similar in size, character and other respects to those in which the Company is
engaged. All policies evidencing such insurance shall name the Company and the
Issuer as insureds and the Trustee and the Bank, as security holders and loss
payees, as their interests may appear, and provide for at least thirty (30)
days' written notice to the Company, the Issuer, the Trustee and the Bank prior
to cancellation, lapse, reduction in policy limits or material change in
coverage thereof. The insurance required by Section 6.3(A) hereof shall contain
a standard mortgagee endorsement and a lender's loss payable clause endorsement
in favor of the Trustee and the Bank, as security holders and loss payees, as
their interests may appear. All insurance required hereunder shall be in form,
content and coverage satisfactory to the Issuer and the Bank. Certificates
satisfactory in form and substance to the Issuer and the Bank to evidence all
insurance required hereby shall be delivered to the Issuer, the Trustee and the
Bank on or before the Closing Date. The Company shall deliver to the Issuer and
the Trustee on or before the first Business Day of each calendar year thereafter
a certificate dated not earlier than the immediately preceding November 1
reciting that there is in full force and effect, with a term covering at least
the next succeeding calendar year, insurance in the amounts and of the types
required by Sections 6.3 and 6.4 hereof. At least thirty (30) days prior to the
expiration of any such policy, the Company shall furnish to the Issuer, the
Trustee and the Bank evidence that the policy has been renewed or replaced or is
no longer required by this Installment Sale Agreement.

     (B)  All premiums with respect to the insurance required by Section 6.3
hereof shall be paid by the Company; provided, however, that, if the premiums
are not timely paid, the Issuer, the Trustee or the Bank may pay such premiums
and the Company shall pay immediately upon demand all sums so expended by the
Issuer, the Trustee or the Bank, together with interest at the Default Interest
Rate.

SECTION 6.5.   APPLICATION OF NET PROCEEDS OF INSURANCE. The Net Proceeds of the
insurance carried pursuant to the provisions of Section 6.3 hereof shall be
applied as follows: (A) the Net Proceeds of the insurance required by Section
6.3(A) and 6.3(D) hereof shall be paid to the Trustee and applied as provided in
Section 7.1 hereof, and (B) the Net Proceeds of the insurance required by
Section 6.3(B) and 6.3(C) hereof shall be applied toward extinguishment or
satisfaction of the liability with respect to which such insurance proceeds may
be paid.

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                                       46



                                  ARTICLE VII
                      DAMAGE, DESTRUCTION AND CONDEMNATION

SECTION 7.1.   DAMAGE OR DESTRUCTION.

     (A)  If the Project Facility shall be damaged or destroyed, in whole or in
part:

          (1)  the Issuer shall have no obligation to replace, repair or restore
     the Project Facility;

          (2)  there shall be no abatement or reduction in the amounts payable
     by the Company under this Installment Sale Agreement or under any of the
     other Financing Documents (whether or not the Project Facility is replaced,
     repaired or restored);

          (3)  the Company shall promptly give notice thereof to the Issuer, the
     Trustee and the Bank; and

          (4)  except as otherwise provided in subsection (B) of this Section
     7.1,

               (a)  the Company shall promptly replace, repair or restore the
          Project Facility to substantially the same condition and value as an
          operating entity as existed prior to such damage or destruction, with
          such changes, alterations and modifications as may be desired by the
          Company and consented to in writing by the Issuer, the Trustee and the
          Bank, provided that such changes, alterations or modifications do not
          (i) so change the nature of the Project Facility that it does not
          constitute a "project", as such quoted term is defined in the Act, or
          change the use of the Project Facility as specified in Section 3.2
          hereof without the prior written consent of the Issuer and the Bank,
          or (ii) adversely affect the tax-exempt status of the interest payable
          on the Bonds; and

               (b)  pursuant to and in accordance with Section 406 of the
          Indenture, the Trustee shall make available to the Company (from the
          Net Proceeds of any insurance settlement) such moneys as may be
          necessary to pay the costs of the replacement, repair or restoration
          of the Project Facility. In the event such Net Proceeds are not
          sufficient to pay in full the costs of such replacement, repair or
          restoration, the Company shall nonetheless complete such work and
          shall pay from its own moneys that portion of the costs thereof in
          excess of such Net Proceeds. Any balance of such Net Proceeds
          remaining in the Insurance and Condemnation Fund after payment of all
          of the costs of such replacement, repair, rebuilding or restoration
          shall be applied as provided in Section 406 of the Indenture.

     (B)  Notwithstanding anything to the contrary contained in subsection (A)
of this Section 7.1, in the event that the damage to the Project Facility
exceeds the sum of all Indebtedness then secured by a Lien on the Project
Facility or any part thereof, the Company

                                       47



shall not be obligated to replace, repair or restore the Project Facility, and
the Net Proceeds of any insurance settlement shall not be applied as provided in
subsection (A) of this Section 7.1, if the Company shall notify the Issuer, the
Trustee and the Bank that it elects to cause the Bonds to be redeemed. In such
event, or if an Event of Default shall have occurred and be continuing (or if an
event exists which with the passage of time or notice or both would become an
Event of Default), the lesser of (1) the total amount of the Net Proceeds
collected under any and all policies of insurance covering the damage to or
destruction of the Project Facility, or (2) the amount necessary to redeem the
Bonds in whole and all interest accrued thereon, together with any other sums
payable to the Issuer or the Trustee pursuant to this Installment Sale Agreement
and the Bank pursuant to the Reimbursement Agreement, shall be transferred by
the Trustee from the Insurance and Condemnation Fund to the Bond Fund to be
applied to the redemption of the Bonds and payment of all such amounts to the
Issuer, the Trustee and the Bank. If the Net Proceeds collected under any and
all policies of insurance are less than the amount necessary to redeem the Bonds
in full and pay any and all amounts payable to the Issuer, the Trustee and the
Bank, the Company shall pay the difference between such amounts and the Net
Proceeds of all insurance settlements so that all of the Bonds then Outstanding
shall be redeemed and any and all amounts payable under the Financing Documents
to the Issuer, the Trustee and the Bank shall be paid in full.

     (C)  If there are no Bonds Outstanding and all other amounts due under this
Installment Sale Agreement and the other Financing Documents are paid in full,
all such Net Proceeds or the balance thereof shall be paid to the Company for
its purposes.

     (D)  Unless an Event of Default under any of the Financing Documents shall
have occurred and be continuing (or if an event exists which with the passage of
time or notice or both would become an Event of Default), the Company may, with
the prior written consent of the Bank, adjust all claims under any policies of
insurance required by Section 6.3(A) and 6.3(D) hereof.

SECTION 7.2.   CONDEMNATION.

     (A)  To the knowledge of the Company, no condemnation or eminent domain
proceeding has been commenced or threatened against any part of the Project
Facility. The Company shall notify the Issuer and the Bank of the institution of
any condemnation proceedings and, within seven days after inquiry from the
Issuer and the Bank, inform the Issuer and the Bank in writing of the status of
such proceeding. If title to, or the use of, less than substantially all of the
Project Facility shall be taken by Condemnation:

          (1)  the Issuer shall have no obligation to restore the Project
     Facility;

          (2)  there shall be no abatement or reduction in the amounts payable
     by the Company under this Installment Sale Agreement or under any of the
     other Financing Documents (whether or not the Project Facility is
     restored);

          (3)  the Company shall promptly give notice thereof to the Issuer, the
     Trustee and the Bank; and

                                       48



          (4)  except as otherwise provided in subsection (B) of this Section
     7.2,

               (a)  the Company shall promptly restore the Project Facility
          (excluding any part of the Land or the Facility taken by Condemnation)
          to substantially the same condition and value as an operating entity
          as existed prior to such Condemnation, with such changes, alterations
          and modifications as may be desired by the Company and consented to in
          writing by the Issuer and the Bank, provided that such changes,
          alterations or modifications do not (i) so change the nature of the
          Project Facility that it does not constitute a "project" as such
          quoted term is defined in the Act, or change the use of the Project
          Facility as specified in Section 3.2 hereof without the prior written
          consent of the Issuer and the Bank, or (ii)adversely affect the
          tax-exempt status of the interest payable on the Bonds; and

               (b)  pursuant to and in accordance with Section 406 of the
          Indenture, the Trustee shall make available to the Company (from the
          Net Proceeds of any Condemnation award) such moneys as may be
          necessary to pay the costs of the restoration of the Project Facility.
          In the event such Net Proceeds are not sufficient to pay in full the
          costs of such restoration, the Company shall nonetheless complete such
          restoration and shall pay from its own moneys that portion of the
          costs thereof in excess of such Net Proceeds. Any balance of such Net
          Proceeds remaining after payment of all of the costs of such
          restoration shall be applied in accordance with Section 406 of the
          Indenture.

     (B)  Notwithstanding anything to the contrary contained in subsection (A)
of this Section 7.2, in the event the taking of the Project Facility or any part
thereof exceeds the sum of all Indebtedness then secured by a lien on the
Project Facility or any part thereof, the Company shall not be obligated to
restore the Project Facility, and the Net Proceeds of any Condemnation award
shall not be applied as provided in subsection (A) of this Section 7.2, if the
Company shall notify the Issuer, the Trustee and the Bank that it elects to
cause the redemption of the Bonds. In such event, or if an Event of Default
under any of the Financing Documents shall have occurred and be continuing, (or
if an event exists which with the passage of time or notice or both would become
an Event of Default) the lesser of (1) the Net Proceeds of any Condemnation
award, or (2) the amount necessary to redeem the Bonds in whole and all interest
accrued thereon, together with any other sums payable to the Issuer or the
Trustee pursuant to this Installment Sale Agreement or to the Bank pursuant to
the Reimbursement Agreement, shall be transferred by the Trustee from the
Insurance and Condemnation Fund to the Bond Fund to be applied to the redemption
of the Bonds and payment of all such amounts to the Issuer, the Trustee and the
Bank. If the Net Proceeds of any Condemnation award are less than the amount
necessary to redeem the Bonds in full and pay any and all amounts payable to the
Issuer, the Trustee and the Bank, the Company shall pay the difference between
such amounts and such Net Proceeds so that all of the Bonds Outstanding shall be
redeemed and any and all amounts payable under the Financing Documents to the
Issuer, the Trustee and the Bank shall be paid in full.

     (C)  If title to, or use of, all or substantially all of the Project
Facility shall be taken by Condemnation:

                                       49



          (1)  neither the Issuer nor the Company shall have any obligation to
     restore the Project Facility;

          (2)  there shall be no abatement or reduction in the amounts payable
     by the Company under this Installment Sale Agreement (or under any of the
     other Financing Documents); and

          (3)  the Net Proceeds of any Condemnation award shall be applied as
     provided in subsection (B) of this Section 7.2.

     (D)  If there are no Bonds Outstanding and all other amounts due under this
Installment Sale Agreement and the other Financing Documents have been paid in
full, all such Net Proceeds or the balance thereof shall be paid to the Company
for its purposes.

     (E)  Unless an Event of Default under any of the Financing Documents shall
have occurred and be continuing (or if an event exists which with the passage of
time or notice or both would become an Event of Default), the Company shall (but
only upon the prior written consent of the Bank) have sole control of any
Condemnation proceeding with respect to the Project Facility or any part thereof
and may (but only upon the prior written consent of the Bank) negotiate the
settlement of any such proceeding. The Company shall notify the Issuer, the
Trustee and the Bank of the institution of any Condemnation proceedings and
within seven days after inquiry from the Issuer, the Trustee or the Bank shall
inform the Issuer, the Trustee and the Bank in writing as to the status of such
proceeding.

     (F)  The Issuer shall, at the expense of the Company, cooperate fully with
the Company in the handling and conduct of any such Condemnation proceeding. In
no event shall the Issuer voluntarily settle, or consent to the settlement of,
any Condemnation proceeding without the written consent of the Company and the
Trustee and the Bank.

SECTION 7.3.   ADDITIONS TO THE PROJECT FACILITY. All replacements, repairs or
restoration made pursuant to Sections 7.1 or 7.2, whether or not requiring the
expenditure of the Company's own money, shall automatically become part of the
Project Facility as if the same were specifically described herein.

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                                       50



                                  ARTICLE VIII

                                SPECIAL COVENANTS

SECTION 8.1.   NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER; ACCEPTANCE
"AS IS". THE ISSUER MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS OF THE PROJECT
FACILITY OR ANY PART THEREOF OR AS TO THE SUITABILITY OF THE PROJECT FACILITY OR
ANY PART THEREOF FOR THE COMPANY'S PURPOSES OR NEEDS. THE COMPANY SHALL ACCEPT
TITLE TO THE PROJECT FACILITY "AS IS", WITHOUT RECOURSE OF ANY NATURE AGAINST
THE ISSUER FOR ANY CONDITION NOW OR HEREAFTER EXISTING. NO WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE OR MERCHANTABILITY IS MADE. IN THE EVENT OF ANY DEFECT
OR DEFICIENCY OF ANY NATURE, WHETHER PATENT OR LATENT, THE ISSUER SHALL HAVE NO
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO.

SECTION 8.2.   HOLD HARMLESS PROVISIONS.

     (A)  The Company hereby releases the Issuer and its members, officers,
agents (other than the Company) and employees from, agrees that the Issuer and
its members, officers, agents (other than the Company) and employees shall not
be liable for and agrees to indemnify, defend and hold the Issuer and its
members, officers, agents (other than the Company) and employees harmless from
and against any and all claims, causes of action, judgments, liabilities,
damages, losses, costs and expenses arising as a result of the Issuer's
undertaking the Project, including, but not limited to, (1) liability for loss
or damage to Property or bodily injury to or death of any and all Persons that
may be occasioned, directly or indirectly, by any cause whatsoever pertaining to
the Project Facility or arising by reason of or in connection with the
occupation or the use thereof or the presence of any Person or Property on, in
or about the Project Facility, (2) liability arising from or expense incurred by
the Issuer's financing, acquiring, constructing, equipping, installing, owning
or selling the Project Facility, including, without limiting the generality of
the foregoing, any sales or use taxes which may be payable with respect to goods
supplied or services rendered with respect to the Project Facility, all
liabilities or claims arising as a result of the Issuer's obligations under this
Installment Sale Agreement or any of the other Financing Documents or the
enforcement of or defense of validity of any provision of any Financing
Document, and all liabilities or claims arising as a result of or in connection
with the offering, issuance, sale or resale of the Bonds, (3) all claims arising
from the exercise by the Company of the authority conferred on it pursuant to
Section 4.1(E) hereof, and (4) all causes of action and attorneys' fees and
other expenses incurred in connection with any suits or actions which may arise
as a result of any of the foregoing; provided that any such claims, causes of
action, judgments, liabilities, damages, losses, costs or expenses of the Issuer
are not incurred or do not result from the intentional wrongdoing of the Issuer
or any of its members, officers, agents (other than the Company) or employees.
The foregoing indemnities shall apply notwithstanding the fault or negligence in
part of the Issuer or any of its officers, members,

                                       51



agents (other than the Company) or employees and notwithstanding the breach of
any statutory obligation or any rule of comparative or apportioned liability.

     (B)  In the event of any claim against the Issuer or its members, officers,
agents (other than the Company) or employees by any employee of the Company or
any contractor of the Company or anyone directly or indirectly employed by any
of them or anyone for whose acts any of them may be liable, the obligations of
the Company hereunder shall not be limited in any way by any limitation on the
amount or type of damages, compensation or benefits payable by or for the
Company or such contractor under workers' compensation laws, disability benefits
laws or other employee benefit laws.

     (C)  To effectuate the provisions of this Section 8.2, the Company agrees
to provide for and insure, in the liability policies required by Section 6.3(C)
of this Installment Sale Agreement, its liabilities assumed pursuant to this
Section 8.2.

     (D)  Notwithstanding any other provisions of this Installment Sale
Agreement, the obligations of the Company pursuant to this Section 8.2 shall
remain in full force and effect after the termination of this Installment Sale
Agreement until the expiration of the period stated in the applicable statute of
limitations during which a claim, cause of action or prosecution relating to the
matters herein described may be brought and the payment in full or the
satisfaction of such claim, cause of action or prosecution and the payment of
all expenses, charges and costs incurred by the Issuer, or its officers,
members, agents (other than the Company) or employees, relating thereto.

SECTION 8.3.   RIGHT OF ACCESS TO THE PROJECT FACILITY. The Company agrees that
the Issuer, the Trustee and the Bank and their duly authorized agents shall have
the right at all reasonable times to enter upon and to examine and inspect the
Project Facility. The Company further agrees that the Issuer shall have such
rights of access to the Project Facility as may be reasonably necessary to cause
the proper maintenance of the Project Facility in the event of failure by the
Company to perform its obligations hereunder.

SECTION 8.4.   COMPANY NOT TO TERMINATE EXISTENCE OR DISPOSE OF ASSETS;
CONDITIONS UNDER WHICH EXCEPTIONS ARE PERMITTED. The Company agrees that, so
long as the Bonds are Outstanding and/or during the term of this Installment
Sale Agreement, it will maintain its corporate existence, will not dissolve or
otherwise dispose of all or substantially all of its assets, and will not
consolidate with or merge into another corporation, or permit one or more
corporations to consolidate with or merge into it; provided, however, that, if
no Event of Default specified in Section 10.1 hereof shall have occurred and be
continuing (or if no event exists which with the passage of time or notice or
both would become an Event of Default), the Company may consolidate with or
merge into another domestic corporation organized and existing under the laws of
one of the states of the United States, or permit one or more such domestic
corporations to consolidate with or merge into it, or sell or otherwise transfer
to another Person all or substantially all of its assets as an entirety and
thereafter dissolve, provided that (A) the Issuer and the Bank give their prior
written consents (which consent of the Issuer will not be unreasonably withheld
or delayed), (B) the surviving, resulting or transferee corporation assumes in
writing all of the obligations of and restrictions on the

                                       52



Company under this Installment Sale Agreement and the other Financing Documents,
(C) the proposed transaction will not adversely affect the exclusion of the
interest payable on the Bonds from the gross income of the Holders thereof for
federal income tax purposes, and (D) as of the date of such transaction, the
Trustee, the Bank and the Issuer shall be furnished with (1)an opinion of Bond
Counsel as to the compliance with item (C) of this Section 8.4, (2) an opinion
of counsel to the Company as to compliance with item (B) of this Section 8.4 and
(3) a certificate, dated the effective date of such transaction, signed by an
Authorized Representative of the Company and an authorized officer of the
surviving, resulting or transferee corporation or the transferee of its assets,
as the case may be, to the effect that immediately after the consummation of the
transaction and after giving effect thereto, no Event of Default exists under
this Installment Sale Agreement and no event exists which, with notice or lapse
of time or both, would become such an Event of Default (unless waived by the
Credit Facility Issuer or the Issuer, as the case may be).

SECTION 8.5.   AGREEMENT TO PROVIDE INFORMATION. The Company agrees, whenever
requested by the Issuer, the Trustee or the Bank, to provide and certify or
cause to be provided and certified such information concerning the Company, its
finances and other topics as the Issuer, the Trustee or the Bank from time to
time reasonably considers necessary or appropriate, including, but not limited
to, such information as to enable the Issuer, the Trustee or the Bank to make
any reports required by law or governmental regulation. Notwithstanding the
foregoing, the Company shall have no obligation to provide any financial
information to the Issuer or the Trustee, except for such financial information
as may be necessary for the Issuer or the Trustee to provide any reports
required by Applicable Law.

SECTION 8.6.   BOOKS OF RECORD AND ACCOUNT; COMPLIANCE CERTIFICATES.

     (A)  The Company agrees to maintain proper accounts, records and books in
which full and correct entries shall be made, in accordance with generally
accepted accounting principles, of all business and affairs of the Company.

     (B)  As soon as possible after the end of each fiscal year of the Company
so long as any Bond shall be Outstanding, the Company shall furnish to the
Issuer and the Bank a certificate of an Authorized Representative of the Company
stating that no Event of Default hereunder has occurred or is continuing or, if
any Event of Default exists, specifying the nature and period of existence
thereof and what action the Company has taken or proposes to take with respect
thereto, and setting forth the unpaid principal balance of the Bonds and accrued
but unpaid interest thereon and that no defenses, offsets or counterclaims exist
with respect to the indebtedness evidenced thereby.

SECTION 8.7.   COMPLIANCE WITH APPLICABLE LAWS.

     (A)  The Company agrees, for the benefit of the Issuer, the Trustee and the
Bank, that it will, during any period in which any Bond is Outstanding and
during the term of this Installment Sale Agreement, promptly comply in all
material respects with all Applicable Laws.

                                       53



     (B)  Notwithstanding the provisions of subsection (A) of this Section 8.7,
the Company may in good faith actively contest the validity or the applicability
of any Applicable Law, provided that the Company (1) first shall have notified
the Issuer, the Trustee and the Bank in writing of such contest, (2) is not in
default under any of the Financing Documents, (3) shall have set aside adequate
reserves for any such requirement, and (4) demonstrates to the reasonable
satisfaction of the Issuer and the Bank that noncompliance with such Applicable
Law will not endanger the Liens of the Financing Documents as to the Project
Facility or subject the Project Facility or any part thereof to loss or
forfeiture. Otherwise, the Company shall promptly take such action with respect
thereto as shall be reasonably satisfactory to the Issuer and the Bank.

     (C)  Notwithstanding the provisions of subsection (B) of this Section 8.7,
if the Issuer or any of its members, officers, agents (other than the Company),
servants or employees may be liable for prosecution for failure to comply
therewith, the Company shall promptly take such action with respect thereto as
shall be reasonably satisfactory to the Issuer.

SECTION 8.8.   DISCHARGE OF LIENS AND ENCUMBRANCES.

     (A)  The Company hereby agrees not to create or suffer to be created any
Lien, except for Permitted Encumbrances, on the Project Facility or any part
thereof or any funds of the Issuer applicable to the Project Facility.

     (B)  Notwithstanding the provisions of subsection (A) of this Section 8.8,
the Company may in good faith actively contest any such Lien, provided that the
Company (1) first shall have notified the Issuer, the Trustee and the Bank in
writing of such contest, (2) is not in default under any of the Financing
Documents, and (3) such Lien shall be removed promptly by the Company or secured
by the Company's posting a bond in form and substance satisfactory to the Issuer
and the Bank.

SECTION 8.9.   PERFORMANCE OF THE COMPANY'S OBLIGATIONS. Should the Company fail
to make any payment or to do any act as herein provided, the Issuer, the Trustee
or the Bank may, but need not, without notice to or demand on the Company and
without releasing the Company from any obligation herein, make or do the same,
including, without limitation, appearing in and defending any action purporting
to affect the rights or powers of the Company or the Issuer, and paying all
fees, costs and expenses, including, without limitation, reasonable attorneys'
fees, incurred by the Issuer, the Trustee or the Bank in connection therewith;
and the Company shall pay immediately upon demand all sums so incurred or
expended by the Issuer, the Trustee or the Bank under the authority hereof,
together with interest thereon, at the Default Interest Rate.

SECTION 8.10.  DEPRECIATION DEDUCTIONS AND TAX CREDITS. The parties agree that
as between them the Company shall be entitled to all depreciation deductions and
accelerated cost recovery system deductions with respect to any portion of the
Project Facility pursuant to Sections 167 and 168 of the Code and to any
investment credit pursuant to Section 38 of the Code with respect to any portion
of the Project Facility which constitutes "Section 38

                                       54



Property" and to all other state and/or federal income tax deductions and
credits which may be available with respect to the Project Facility.

SECTION 8.11.  COVENANT AGAINST ARBITRAGE BONDS. So long as any Bond shall be
Outstanding, neither the Issuer nor the Company shall use, or direct or permit
the use of, the proceeds of the Bonds or any other moneys within their
respective control (including, without limitation, the proceeds of any insurance
settlement or any Condemnation award with respect to the Project Facility) in
any manner which, if such use had been reasonably expected on the date of
issuance of the Bonds, would have caused any of the Bonds to be an "arbitrage
bond" within the meaning ascribed to such quoted term in Section 148 of the
Code. The Company agrees that it will comply with all of its covenants in the
Tax Regulatory Agreement relating to the restrictions contained in Section 148
of the Code. The Issuer authorizes the Company, in the Issuer's behalf, to
calculate and make the rebate payments required by Section 148 (f) of the Code.
Notwithstanding the foregoing, there shall be no such obligation upon the Issuer
with respect to the use or investment of its administrative fee, provided,
however, that if the Company is required to rebate any amount with respect to
such administrative fee, the Issuer shall provide, upon the reasonable request
of the Company, such information concerning the investment of such
administrative fee as shall be requested by the Company and as shall be
reasonably available to the Issuer.

SECTION 8.12.  IDENTIFICATION OF EQUIPMENT. All Equipment which is or may become
part of the Project Facility pursuant to the provisions of this Installment Sale
Agreement shall be properly identified by the Company by such appropriate
records, including computerized records.

SECTION 8.13.  INDEMNIFICATION OF THE TRUSTEE.

     (A)  Notwithstanding any other provisions of the Financing Documents, the
Company agrees to indemnify and hold the Trustee, and its directors, officers,
agents and employees, harmless from and against any and all claims, causes of
action, judgments, liabilities, damages, losses, costs and expenses, including,
but not limited to, reasonable attorneys' fees, arising out of the execution,
delivery or performance of the Financing Documents, provided that the same are
not a result of the gross negligence or willful misconduct of the Trustee.

     (B)  Notwithstanding any other provisions of this Installment Sale
Agreement or other Financing Documents, the obligations of the Company pursuant
to this Section 8.13 shall remain in full force and effect after the termination
of this Installment Sale Agreement until the expiration of the period stated in
the applicable statute of limitations during which a claim, cause of action or
prosecution relating to the matters herein described may be brought and the
payment in full or the satisfaction of such claim, cause of action or
prosecution and the payment of all reasonable fees, expenses and charges paid or
incurred by the Trustee, or its directors, officers, agents or employees,
relating thereto.

     (C)  To effectuate the provisions of this Section 8.13, the Company agrees
to provide for and insure, in the liability policies required by Section 6.3(C)
of this Installment Sale Agreement, its liabilities assumed pursuant to this
Section 8.13.

                                       55



SECTION 8.14.  INDEMNIFICATION OF THE BANK.

     (A)  Notwithstanding any other provisions of the Financing Documents, the
Company agrees to indemnify and hold the Bank, and its directors, officers,
agents and employees, harmless from and against any and all claims, causes of
action, judgments, liabilities, damages, losses, costs and expenses, including,
but not limited to, reasonable attorneys' fees, arising out of the execution,
delivery or performance of the Financing Documents, provided that the same are
not a result of the gross negligence or willful misconduct of the Bank.

     (B)  Notwithstanding any other provisions of this Installment Sale
Agreement or other Financing Documents, the obligations of the Company pursuant
to this Section 8.14 shall remain in full force and effect after the termination
of this Installment Sale Agreement until the expiration of the period stated in
the applicable statute of limitations during which a claim, cause of action or
prosecution relating to the matters herein described may be brought and the
payment in full or the satisfaction of such claim, cause of action or
prosecution and the payment of all reasonable fees, expenses and charges paid or
incurred by the Bank, or its directors, officers, agents or employees, relating
thereto.

     (C)  To effectuate the provisions of this Section 8.14, the Company agrees
to provide for and insure, in the liability policies required by Section 6.3(C)
of this Installment Sale Agreement, its liabilities assumed pursuant to this
Section 8.14.

SECTION 8.15.  EMPLOYMENT OPPORTUNITIES.

     (A)  The Company shall insure that all employees and applicants for
employment with regard to the Project are afforded equal employment
opportunities without discrimination.

     (B)  Pursuant to Section 858-b of the Act, except as otherwise provided by
collective bargaining contracts or agreements, the Company agrees (1) to list
all new employment opportunities created as a result of the Project with the New
York State Department of Labor, Community Services Division ("NYSDOL") and with
the administrative entity (collectively with NYSDOL, the "JTPA Referral
Entities") of the service delivery area created by the federal Job Training
Partnership Act (P.L. No. 97-300) ("JTPA") in which the Project Facility is
located and (2), where practicable, to first consider for such new employment
opportunities persons eligible to participate in federal JTPA programs who shall
be referred by the JTPA Referral Entities.

     (C)  The Company agrees to file with the Issuer, on an annual basis,
reports regarding the number of people employed at the Project Facility and
certain other matters, in such form as shall be reasonably requested by the
Issuer.

SECTION 8.16.  SALES AND USE TAX EXEMPTION.

     (A)  Pursuant to Section 854 (14) of the Act, the parties understand that
the Issuer is exempt from certain sales taxes and use taxes imposed by the State
and local governments in the State, and that the Project may be exempted from
those taxes due to the involvement of the

                                       56



Issuer in the Project. The Issuer makes no representations or warranties that
any property is exempt from the payment of New York sales or use taxes. Any
exemption from the payment of New York sales or use taxes resulting from the
involvement of the Issuer with the Project shall be limited to purchases of
services and tangible personal property conveyed to the Issuer or utilized by
the Issuer or by the Company as agent of the Issuer as a part of the Project
prior to the Completion Date, or incorporated within the Project Facility prior
to the Completion Date. No operating expenses of the Project Facility, and no
other purchases of services or property shall be subject to an exemption from
the payment of New York sales or use tax.

     (B)  Pursuant to the provisions of Section 4.1 hereof, on the Closing Date,
the Issuer intends to issue to the Company a sales tax exemption letter in
substantially the form attached hereto as Exhibit D (the "Sales Tax Exemption
Letter").

     (C)  Pursuant to Section 874(8) of the Act, the Company agrees to annually
file with the New York State Department of Taxation and Finance, on a form and
in such manner as is prescribed by the New York State Commissioner of Taxation
and Finance (the "Annual Report"), a statement of the value of all sales and use
tax exemptions claimed by the Company and all contractors, subcontractors,
consultants and other agents of the Company under the authority granted to the
Company pursuant to Section 4.1(E) of this Installment Sale Agreement and/or the
Final Inducement Resolution and/or the Sales Tax Exemption Letter. Pursuant to
Section 874(8) of the Act, the penalty for failure to file an Annual Report
shall be removal of authority to act as agent of the Issuer. Additionally, if
the Company shall fail to comply with the requirements of this subsection (C),
the Company shall immediately cease to be the agent of the Issuer in connection
with the Project. A current sample form of such Annual Report required to be
completed by the Company pursuant to this Installment Sale Agreement is attached
hereto as Exhibit E. For future filings of the Annual Report, the Company is
responsible for obtaining from the New York State Department of Taxation and
Finance any updated or revised versions of such Annual Report.

     (D)  The Company agrees to furnish to the Issuer a copy of each such annual
report submitted to the New York State Department of Taxation and Finance by the
Company pursuant to Section 874(8) of the Act.

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                                       57



                                   ARTICLE IX

                        ASSIGNMENTS; MERGER OF THE ISSUER

SECTION 9.1.   ASSIGNMENT OF INSTALLMENT SALE AGREEMENT BY THE COMPANY. This
Installment Sale Agreement may not be assigned by the Company, in whole or in
part, without the prior written consent of the Issuer and the Bank.

SECTION 9.2.   PLEDGE AND ASSIGNMENT OF ISSUER'S INTERESTS TO TRUSTEE.

     (A)  The Issuer has pledged and assigned certain of its rights and
interests under and pursuant to this Installment Sale Agreement (1) pursuant to
the terms of the Pledge and Assignment to the Trustee as security for the
payment of the principal of, premium, if any, and interest on the Bonds and (2)
pursuant to the Security Agreement, to the Bank as security for the payment of
all obligations of the Company under the Reimbursement Agreement. Such pledge
and assignment shall in no way impair or diminish any obligations of the Issuer
under this Installment Sale Agreement.

     (B)  The Company hereby acknowledges receipt of notice of and consents to
such pledge and assignment by the Issuer to the Trustee and the Bank and
specifically agrees to perform for the benefit of the Trustee and the Bank all
of its duties and undertakings hereunder (except duties undertaken with respect
to the Unassigned Rights).

SECTION 9.3.   MERGER OF THE ISSUER.

     (A)  Nothing contained in this Installment Sale Agreement shall prevent the
consolidation of the Issuer with, or merger of the Issuer into, or assignment by
the Issuer of its rights and interests hereunder to, any other public benefit
corporation of the State or political subdivision thereof which has the legal
authority to perform the obligations of the Issuer hereunder, provided that (1)
the exclusion of the interest payable on the Bonds from gross income for Federal
income tax purposes shall not be adversely affected thereby; and (2) upon any
such consolidation, merger or assignment, the due and punctual performance and
observance of all of the agreements and conditions of this Installment Sale
Agreement, the Bonds and the Indenture to be kept and performed by the Issuer
shall be expressly assumed in writing by the public benefit corporation or
political subdivision resulting from such consolidation or surviving such merger
or to which the Issuer's rights and interests hereunder or under this
Installment Sale Agreement shall be assigned.

     (B)  As of the date of any such consolidation, merger or assignment, the
Issuer shall give notice thereof in reasonable detail to the Company, the
Trustee and the Bank. The Issuer shall promptly furnish to the Trustee, the
Company and the Bank such additional information with respect to any such
consolidation, merger or assignment as the Trustee, the Company and the Bank may
reasonably request.

                                       58



SECTION 9.4.   SALE OR LEASE OF THE PROJECT FACILITY.

     (A)  Except as otherwise provided herein, the Company may not sell, lease,
transfer, convey or otherwise dispose of the Project Facility or any part
thereof without the prior written consent of the Bank.

     (B)  In no event, however, shall the Bank consent to any sale, lease,
transfer, sublease, conveyance or other disposition of the Project Facility, or
any part thereof, prior to receipt of an opinion of Bond Counsel that such
disposition will not adversely affect the exclusion of the interest payable on
the Bonds from gross income of the holders thereof for Federal income tax
purposes.

     (C)  Notwithstanding anything to the contrary contained herein, in any
instance after the Completion Date where the Company reasonably determines that
any portion of the Project Facility has become inadequate, obsolete, worn out,
unsuitable, undesirable or unnecessary, the Company may remove such portion of
the Project Facility and may sell, trade in, exchange or otherwise dispose of
the same, as a whole or in part, without the prior written consent of the
Issuer, provided that such removal will not materially impair the value of the
Project Facility as collateral and provided, further, that same is forthwith
replaced with similar items of similar utility, free from all Liens other than
the Liens created by the Financing Documents. At the request of the Company, the
Issuer shall execute and deliver, and shall request the Trustee and the Bank to
execute and deliver, to the Company all instruments necessary or appropriate to
enable the Company to sell or otherwise dispose of any such portion of the
Project Facility free from the Liens of the Financing Documents. The Company
shall pay all costs and expenses (including counsel fees) incurred in
transferring title to and releasing from the Liens of the Financing Documents
any portion of the Project Facility removed pursuant to this Section 9.4.

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                                       59



                                    ARTICLE X

                         EVENTS OF DEFAULT AND REMEDIES

SECTION 10.1.  EVENTS OF DEFAULT DEFINED.

     (A)  The following shall be "Events of Default" under this Installment Sale
Agreement, and the terms "Event of Default" or "Default" shall mean, whenever
they are used in this Installment Sale Agreement, any one or more of the
following events:

          (1)  A default by the Company in the due and punctual payment of the
     amounts specified to be paid pursuant to Section 5.3(A) hereof.

          (2)  A default in the performance or observance of any other of the
     covenants, conditions or agreements on the part of the Company in this
     Installment Sale Agreement and the continuance thereof for a period of
     thirty (30) days after written notice thereof is given by the Issuer, the
     Trustee or the Bank to the Company, or, if such covenant, condition or
     agreement is capable of cure but cannot be cured within such thirty (30)
     day period, the failure of the Company to continence to cure within such
     thirty (30) day period and to prosecute the same with due diligence and, in
     any event, to cure such default within ninety (90) days after such written
     notice is given.

          (3)  The occurrence of an "Event of Default" under any other Financing
     Document.

          (4)  Any representation or warranty made by the Company herein or in
     any other Financing Document proves to have been false at the time it was
     made.

          (5)  The Company shall generally not pay its debts as such debts
     become due or admits its inability to pay its debts as they become due.

          (6)  Any sale, conveyance, lease agreement or any other change of
     ownership of the Project Facility, whether occurring voluntarily or
     involuntarily, or by operation of law or otherwise, by the Issuer or the
     Company (except pursuant to this Installment Sale Agreement) of their
     respective interest in the Project Facility or any part thereof, or the
     granting of any easements or restrictions or the permitting of any
     encroachments on the Project Facility, except as permitted in this
     Installment Sale Agreement.

          (7)  (a) The filing by the Company (as debtor) of a voluntary petition
     under Title 11 of the United States Code or any other federal or state
     bankruptcy statute; (b) the failure by the Company within ninety (90) days
     to lift any execution, garnishment or attachment of such consequence as
     will impair the Company's ability to carry out its obligations hereunder;
     (c) the commencement of a case under Title 11 of the United States Code
     against the Company as the debtor or commencement under any other federal
     or state bankruptcy statute of a case, action or proceeding against the
     Company

                                       60



     and continuation of such case, action or proceeding without dismissal for a
     period of ninety (90) days; (d)the entry of an order for relief by a court
     of competent jurisdiction under Title 11 of the United States Code or any
     other federal or state bankruptcy statute with respect to the debts of the
     Company; or (e) in connection with any insolvency or bankruptcy case,
     action or proceeding, appointment by final order, judgment or decree of a
     court of competent jurisdiction of a receiver or trustee of the whole or a
     substantial portion of the Property of the Company, unless such order,
     judgment or decree is vacated, dismissed or dissolved within ninety (90)
     days of such appointment.

          (8)  Final judgment for the payment of money in excess of $250,000
     shall be rendered against the Company and the Company shall not discharge
     the same or cause it to be bonded or discharged within sixty (60) days from
     the entry thereof, or shall not appeal therefrom or from the order, decree
     or process upon which or pursuant to which said judgment was granted, based
     or entered and secure a stay of execution pending such appeal.

          (9)  The imposition of a Lien on the Project Facility other than a
     Lien being contested as provided in Section 8.8(B) of this Installment Sale
     Agreement or a Permitted Encumbrance.

          (10) The removal of the Equipment or any portion thereof outside
     Warren or Washington County, New York, without the prior written consent of
     the Issuer and the Bank, other than in connection with a removal under
     Section 9.4(C) hereof.

     (B)  Notwithstanding any other provision of this Installment Sale
Agreement, failure of the Company to comply with Section 8.6(B) of this
Installment Sale Agreement shall not be considered an Event of Default; however,
the Trustee may (and, at the request of any underwriter or the Holders of at
least 51 % aggregate principal amount in Outstanding Bonds, shall) or any
Bondholder may take such actions as may be necessary and appropriate, including
seeking specific performance by court order, to cause the Company to comply with
its obligations under Section 8.6(B) hereof.

     (C)  Notwithstanding the provisions of Section 10.1(A) hereof, if by reason
of force majeure (as hereinafter defined) either party hereto shall be unable,
in whole or in part, to carry out its obligations under this Installment Sale
Agreement and if such party shall give notice and full particulars of such force
majeure in writing to the other party and to the Trustee within a reasonable
time after the occurrence of the event or cause relied upon, the obligations
under this Installment Sale Agreement of the party giving such notice, so far as
they are affected by such force majeure, shall be suspended during the
continuance of the inability, which shall include a reasonable time for the
removal of the effect thereof. The suspension of such obligations for such
period pursuant to this subsection (B) shall not be deemed an Event of Default
under this Section 10. 1. Notwithstanding anything to the contrary in this
subsection (B), an event of force majeure shall not excuse, delay or in any way
diminish the obligations of the Company to make the payments required by
Sections 4.5, 5.3 and 6.6 hereof, to obtain and continue in full force and
effect the insurance required by Article VI hereof, to provide the indemnity
required by Sections 3.3, 8.2, 8.13 and 8.14 hereof and to comply with the
provisions of Sections 2.2(G), 4.5,

                                       61



8.2, 8.4, 8.5 and 8.7(C) hereof. The term "force majeure" as used herein shall
include acts outside of the control of the Issuer and the Company, including but
not limited to acts of God, strikes, lockouts or other industrial disturbances,
acts of public enemies, orders of any kind of any Governmental Authority or any
civil or military authority, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fire, hurricanes, storms, floods, washouts, droughts,
arrests, restraint of government and people, civil disturbances, explosions,
breakage or accident to machinery, transmission pipes or canals, partial or
entire failure of utilities, or any other cause or event not reasonably within
the control of the party claiming such inability. It is agreed that the
settlement of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of the party having difficulty, and the party
having difficulty shall not be required to settle any strike, lockout or other
industrial disturbances by acceding to the demands of the opposing party or
parties.

SECTION 10.2.  REMEDIES ON DEFAULT.

     (A)  Whenever any Event of Default shall have occurred, the Issuer, the
Trustee and/or the Bank may, to the extent permitted by law, take any one or
more of the following remedial steps:

          (1)  declare, by written notice to the Company, to be immediately due
     and payable, whereupon the same shall become immediately due and payable,
     (a) all unpaid installment purchase payments payable pursuant to Section
     5.3(A) hereof, and (b) all other payments due under this Installment Sale
     Agreement or under any other Financing Document;

          (2)  terminate this Installment Sale Agreement;

          (3)  take any other action at law or in equity which may appear
     necessary or desirable to collect any amounts then due or thereafter to
     become due hereunder and to enforce the obligations, agreements or
     covenants of the Company under this Installment Sale Agreement; or

          (4)  terminate disbursement of the Bond Proceeds.

     (B)  Any sums paid to the Issuer as a consequence of any action taken
pursuant to this Section 10.2 (excepting sums payable to the Issuer as a
consequence of action taken to enforce the Unassigned Rights) shall be paid to
the Trustee and applied in accordance with the provisions of Section 609 of the
Indenture.

     (C)  No action taken pursuant to this Section 10.2 shall relieve the
Company from its obligations to make all payments required by this Installment
Sale Agreement and the other Financing Documents.

SECTION 10.3.  REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Issuer, the Trustee or the Bank is intended to be exclusive of any other
available remedy, but each and every such remedy shall be cumulative and in
addition to every other remedy given

                                       62



under this Installment Sale Agreement or the other Financing Documents or now or
hereafter existing at law or in equity. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Issuer, the Trustee or the Bank to exercise any remedy reserved to
it in this Article X, it shall not be necessary to give any notice, other than
such notice as may be herein expressly required.

SECTION 10.4.  AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the event the
Company should default under any of the provisions of this Installment Sale
Agreement, and the Issuer, the Trustee or the Bank should employ attorneys or
incur other expenses for the collection of amounts payable hereunder or the
enforcement of performance or observance of any obligations or agreements on the
part of the Company herein contained, the Company shall, on demand therefor, pay
to the Issuer, the Trustee or the Bank, as the case may be, the reasonable fees
of such attorneys and such other expenses so incurred, whether an action is
commenced or not.

SECTION 10.5.  NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event any
agreement contained herein should be breached by either party and thereafter
such breach be waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.

                          [Balance of page left blank]

                                       63



                                   ARTICLE XI

                                  MISCELLANEOUS

SECTION 11.1.  NOTICES.

     (A)  All notices, certificates and other communications hereunder shall be
in writing and shall be sufficiently given and shall be deemed given when (1)
sent to the applicable address stated below by registered or certified mail,
return receipt requested, or by such other means as shall provide the sender
with documentary evidence of such delivery, or (2) delivery is refused by the
addressee, as evidenced by the affidavit of the Person who attempted to effect
such delivery.

     (B)  The addresses to which notices, certificates and other communications
hereunder shall be delivered are as follows:

     IF TO THE ISSUER:

     Counties of Warren and Washington Industrial Development Agency
     5 Warren Street
     Glens Falls, New York 12801
     Attention: Chairman

     WITH A COPY TO:

     Fitzgerald Morris Baker Firth P.C.
     One Broad Street Plaza
     Glens Falls, New York 12801
     Attention: Robert C. Morris

     IF TO THE COMPANY:

     Angiodynamics, Inc.
     603 Queensbury Avenue
     Queensbury, New York 12804
     Attention: Eamonn P. Hobbs, President and Chief Executive Office
                Joseph Gerardi, Vice President and Controller

     WITH A COPY TO:

     Kevin J. Kelley, Esq.
     Bond, Schoeneck & King, PLLC
     111 Washington Ave
     Albany, New York 12210

                                       64



     IF TO THE TRUSTEE:

     The Huntington National Bank
     7 Easton Oval - EA4E63
     Columbus, Ohio 43219
     Attention: Corporate Trust Department

     IF TO THE BANK:

     KeyBank National Association
     Commercial Banking Division
     66 South Pearl
     Albany, New York 12207
     Attention: Bryant Cassella

     WITH A COPY TO:
     Lemery Greisler, LLC
     10 Railroad Place
     Saratoga Springs, New York 12866
     Attention: James A. Carminucci, Esq.

     (C)  A duplicate copy of each notice, certificate and other communication
given hereunder by (1) the Issuer or the Company shall also be given to the
Trustee, and (2) the Company, the Issuer or the Trustee shall also be given to
the Bank.

     (D)  The Issuer, the Company, the Trustee and the Bank may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificates and other communications shall be sent.

SECTION 11.2.  BINDING EFFECT. This Installment Sale Agreement shall inure to
the benefit of the Issuer, the Company, the Trustee, the holders of the Bonds
and the Bank and shall be binding upon the Issuer, the Company and, as permitted
by this Installment Sale Agreement, their respective successors and assigns.

SECTION 11.3.  SEVERABILITY. If any one or more of the covenants or agreements
provided herein on the part of the Issuer or the Company to be performed shall,
for any reason, be held or shall, in fact, be inoperative, unenforceable or
contrary to law in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance. Further, if any one or more of the phrases, sentences, clauses,
paragraphs or sections herein shall be contrary to law, then such covenant or
covenants or agreement or agreements shall be deemed separable from the
remaining covenants and agreements hereof and shall in no way affect the
validity of the other provisions of this Installment Sale Agreement.

                                       65



SECTION 11.4.  AMENDMENT. This Installment Sale Agreement may not be amended,
changed, modified, altered or terminated, except by an instrument in writing
signed by the parties hereto, with the written consent of the Trustee and the
Bank.

SECTION 11.5.  EXECUTION OF COUNTERPARTS. This Installment Sale Agreement may
be executed in several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.

SECTION 11.6.  APPLICABLE LAW. This Installment Sale Agreement shall be
governed exclusively by and construed in accordance with the applicable laws of
the State.

SECTION 11.7.  RECORDING AND FILING.

     (A)  The Installment Sale Agreement (or a memorandum thereof), the Pledge
and Assignment, the Mortgage and financing statements relating to the security
interests created and/or assigned thereby shall be recorded or filed, as the
case may be, by the Issuer in the office of the County Clerk of Warren County,
New York, or in such other office as may at the time be provided by law as the
proper place for the recordation or filing thereof.

     (B)  The Issuer and the Company shall execute and deliver all instruments
and shall furnish all information which the Trustee or the Bank may deem
necessary or appropriate to protect any Lien created or contemplated by this
Installment Sale Agreement or any of the other Financing Documents.

SECTION 11.8.  SURVIVAL OF OBLIGATIONS.

     (A)  The obligations of the Company to make the payments required by
Section 5.3(B) hereof and to provide the indemnity required by Sections 3.3,
8.2, 8.13 and 8.14 hereof shall survive the termination of this Installment Sale
Agreement and the full payment of the Bonds, and all such payments after such
termination shall be made upon demand of the party to whom such payment is due.

     (B)  The obligations of the Company with respect to the Unassigned Rights
shall survive the termination of this Installment Sale Agreement until the
expiration of the period stated in the applicable statute of limitations during
which a claim, cause of action or prosecution relating to the Unassigned Rights
may be brought and the payment in full or the satisfaction of such claim, cause
of action or prosecution and the payment of all expenses and charges incurred by
the Issuer, or its officers, members, agents or employees, relating thereto.

     (C)  The obligation of the Company to make installment purchase payments
under Section 5.3(A) with respect to any premium due on the Bonds upon an
occurrence of an Event of Taxability hereof shall survive the termination of
this Installment Sale Agreement.

SECTION 11.9.  TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING. The
Table of Contents and the headings of the several Sections in this Installment
Sale Agreement have been prepared for convenience of reference only and shall
not

                                       66



control, affect the meaning of or be taken as an interpretation of any provision
of this Installment Sale Agreement.

SECTION 11.10. NO RECOURSE; SPECIAL OBLIGATION.

     (A)  The obligations and agreements of the Issuer contained herein and in
the other Financing Documents and any other instrument or document executed in
connection herewith or therewith, and any other instrument or document
supplemental thereto or hereto, shall be deemed the obligations and agreements
of the Issuer, and not of any member, officer, director, agent (other than the
Company) or employee of the Issuer in his individual capacity, and the members,
officers, directors, agents (other than the Company) and employees of the Issuer
shall not be liable personally hereon or thereon or be subject to any personal
liability or accountability based upon or in respect hereof or thereof or of any
transaction contemplated hereby or thereby.

     (B)  The obligations and agreements of the Issuer contained herein and
therein shall not constitute or give rise to an obligation of the State of New
York or the Counties of Warren and Washington, New York, and neither the State
of New York nor the Counties of Warren and Washington, New York shall be liable
hereon or thereon, and, further, such obligations and agreements shall not
constitute or give rise to a general obligation of the Issuer, but rather shall
constitute limited obligations of the Issuer payable solely from the revenues of
the Issuer derived and to be derived from the sale or other disposition of the
Project Facility (except for revenues derived by the Issuer with respect to the
Unassigned Rights).

     (C)  No order or decree of specific performance with respect to any of the
obligations of the Issuer hereunder shall be sought or enforced against the
Issuer unless (1) the party seeking such order or decree shall first have
requested the Issuer in writing to take the action sought in such order or
decree of specific performance, and ten (10) days shall have elapsed from the
date of receipt of such request, and the Issuer shall have refused to comply
with such request (or, if compliance therewith would reasonably be expected to
take longer than ten days, shall have failed to institute and diligently pursue
action to cause compliance with such request within such ten day period) or
failed to respond within such notice period, (2) if the Issuer refuses to comply
with such request and the Issuer's refusal to comply is based on its reasonable
expectation that it will incur fees and expenses, the party seeking such order
or decree shall have placed in an account with the Issuer an amount or
undertaking sufficient to cover such reasonable fees and expenses, and (3) if
the Issuer refuses to comply with such request and the Issuer's refusal to
comply is based on its reasonable expectation that it or any of its members,
officers, agents (other than the Company) or employees shall be subject to
potential liability, the party seeking such order or decree shall (a) agree to
indemnify, defend and hold harmless the Issuer and its members, officers,
directors, agents (other than the Company) and employees against any liability
incurred as a result of its compliance with such demand, and (b) if requested by
the Issuer, furnish to the Issuer satisfactory security to protect the Issuer
and its members, officers, directors, agents (other than the Company) and
employees against all liability expected to be incurred as a result of
compliance with such request. Any failure to provide the indemnity and/or
security required in this Section 11.10(C) shall not affect the full force and
effect of an Event of Default hereunder.

                                       67



     IN WITNESS WHEREOF, the Issuer and the Company have caused this Installment
Sale Agreement to be executed in their respective names by their respective duly
authorized officers and have caused this Installment Sale Agreement to be dated
as of the day and year first above written.

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        BY:   /s/ Bruce A. Ferguson
                                           -------------------------------------
                                             Bruce A. Ferguson, Chairman

                                        ANGIODYNAMICS, INC.


                                        BY:   /s/ Eamonn P. Hobbs
                                           -------------------------------------
                                              Authorized Officer

                                       68



STATE OF NEW YORK        )
COUNTY OF WARREN  ) ss.:

          On the 27 day of August in the year 2002 before me, the undersigned, a
notary public in and for the said State, personally appeared BRUCE A. FERGUSON
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed this instrument.


                                              /s/ Justin Miller
                                        ----------------------------------------
                                                     Notary Public

                                        [Notary Stamp]


                                       69



STATE OF NEW YORK )
COUNTY OF ALBANY  ) ss.:

          On the 28/th/ day of August in the year 2002 before me, the
undersigned, a notary public in and for the said State, personally appeared
EAMONN P. HOBBS personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual or the
person upon behalf of which the individual acted, executed this instrument.


                                              /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                                      Notary Public

                                        [Notary Stamp]


                                       70



                                    EXHIBIT A

                          DESCRIPTION OF THE EQUIPMENT

     All materials, machinery, equipment, fixtures, furnishings and other
personal property and all appurtenances (A) acquired or intended to be acquired
with the proceeds of the Multi-Mode Variable Rate Industrial Development Revenue
Bonds (Angiodynamics, Inc. Project), Series 2002 in the aggregate principal
amount of $3,500,000 (the "Initial Bonds") issued by Counties of Warren and
Washington Industrial Development Agency (the "Issuer"), (B) the cost of which
the Company incurred in anticipation of the issuance of the Bonds and for which
the Company will be reimbursed from the proceeds of the Bonds, or (C) any
payment made by Angiodynamics, Inc. (the "Company") pursuant to Section 4.5 of
the installment sale agreement dated as of August 1, 2002 (the "Installment Sale
Agreement") by and between the Issuer and the Company and now or hereafter
attached to, contained in or used in connection with the Land (as defined in the
Installment Sale Agreement) or placed on any part thereof, though not attached
thereto, whether now owned or hereafter acquired, including but not limited to
the following:

     (1)  [Insert description of equipment]

     (2)  Together with any and all products of any of the above, all
substitutions, replacements, additions or accessions therefor and any and all
cash proceeds or non-cash proceeds realized from the sale, transfer or
conversion of any of the above.



                                    EXHIBIT B

                         FORM OF BILL OF SALE TO COMPANY

     COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY, a public
benefit corporation of the State of New York having an office for the
transaction of business located at the 5 Warren Street, Glens Falls, New York
12801 (the "Grantor"), for the consideration of One Dollar ($1.00), cash in hand
paid, and other good and valuable consideration received by the Grantor from
ANGIODYNAMICS, INC., a business corporation organized and existing under the
laws of the State of New York having an office for the transaction of business
located at Queensbury, New York 12804 (the "Grantee"), the receipt of which is
hereby acknowledged by the Grantor, hereby sells, transfers and delivers unto
the Grantee, and its successors and assigns, all those materials, machinery,
equipment, fixtures or furnishings which are described in Exhibit A attached
hereto (the "Equipment") now owned or hereafter acquired by the Grantor, which
Equipment is located or intended to be located on or used in connection with a
manufacturing facility on the real property located on the Land (the "Project
Facility").

     TO HAVE AND TO HOLD the same unto the Grantee, and its successors and
assigns, forever.

     THE GRANTOR MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS OF THE EQUIPMENT
OR ANY PART THEREOF OR AS TO THE SUITABILITY OF THE EQUIPMENT OR ANY PART
THEREOF FOR THE GRANTEE'S PURPOSES OR NEEDS. THE GRANTEE SHALL ACCEPT TITLE TO
THE EQUIPMENT "AS IS", WITHOUT RECOURSE OF ANY NATURE AGAINST THE GRANTOR FOR
ANY CONDITION NOW OR HEREAFTER EXISTING. NO WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE OR MERCHANTABILITY IS MADE. IN THE EVENT OF ANY DEFECT OR DEFICIENCY OF
ANY NATURE, WHETHER PATENT OR LATENT, THE GRANTOR SHALL HAVE NO RESPONSIBILITY
OR LIABILITY WITH RESPECT THERETO.



     IN WITNESS WHEREOF, the Grantor has caused this bill of sale to be executed
in its name by its duly authorized officer described below and dated as of the
29 day of August, 2002.

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        BY:  /s/ Bruce A. Ferguson
                                           -------------------------------------
                                                (Vice) Chairman



STATE OF NEW YORK    )
COUNTY OF WARREN) ss.:

          On the 27 day of August in the year 2002 before me, the undersigned,
personally appeared BRUCE A. FERGUSON personally known to me or proved to me on
the basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual or the
person upon behalf of which the individual acted, executed this instrument.


                                              /s/ Justin S. Miller
                                        ----------------------------------------
                                                      Notary Public

                                        [Notary Stamp]



                                    EXHIBIT C

                FORM OF TERMINATION OF INSTALLMENT SALE AGREEMENT

     WHEREAS, Angiodynamics, Inc. (the "Company"), as purchaser, and Counties of
Warren and Washington Industrial Development Agency (the "Issuer"), as seller,
entered into an installment sale agreement dated as of August 1, 2002 (the
"Installment Sale Agreement") pursuant to which, among other things, the Issuer
sold the Project Facility (as defined in the Installment Sale Agreement) to the
Company; and

     WHEREAS, pursuant to the Installment Sale Agreement, the Company and the
Issuer agreed that the Installment Sale Agreement would terminate on the earlier
to occur of (1) the payment of all principal, interest and other amounts payable
with respect to the Bonds (as defined in the Installment Sale Agreement) or (2)
such earlier date requested by the Company; and

     WHEREAS, the Installment Sale Agreement has now been terminated, and the
Company and the Issuer now desires to evidence the termination of the
Installment Sale Agreement;

     NOW, THEREFORE, it is hereby agreed that the Installment Sale Agreement has
terminated as of the dated date hereof; provided, however, that, as provided in
Section 11.8 of the Installment Sale Agreement, certain obligations of the
Company shall survive the termination of the Installment Sale Agreement, and the
execution of this termination of installment sale agreement by the Issuer is not
intended, and shall not be construed, as a waiver or alteration by the Issuer or
the Company of the provisions of Section 11.8 of the Installment Sale Agreement.



     IN WITNESS WHEREOF, the Company and the Issuer have signed this termination
of installment sale agreement and caused same to be dated as of the ____ day of
_____________, _____.

                                        ANGIODYNAMICS, INC.


                                        BY:
                                           -------------------------------------
                                             Authorized Officer

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        BY:
                                           -------------------------------------
                                             Bruce A. Ferguson, Chairman



STATE OF NEW YORK     )
COUNTY OF ____________) ss.:

          On the _____ day of ___________ in the year 2002 before me, the
undersigned, personally appeared ______________________________ personally known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual or the person upon behalf of which the individual acted, executed
this instrument.


                                        ----------------------------------------
                                                      Notary Public




STATE OF NEW YORK     )
COUNTY OF ____________) ss.:

          On the _____ day of ___________ in the year 2002 before me, the
undersigned, personally appeared ______________________________ personally known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual or the person upon behalf of which the individual acted, executed
this instrument.


                                        ----------------------------------------
                                                      Notary Public




                                    EXHIBIT D

                       FORM OF SALES TAX EXEMPTION LETTER

To Whom It May Concern:

Re:  New York State Sales or Use Tax Exemption Counties of Warren and Washington
Industrial Development Agency Angiodynamics, Inc. Project

Pursuant to TSB-M-87(7) issued by the New York State Department of Taxation and
Finance on April 1, 1987 (the "Policy Statement"), you have requested a letter
from the Counties of Warren and Washington Industrial Development Agency (the
"Agency"), a public benefit corporation created pursuant to Chapter 1030 of 1969
Laws of New York, constituting Title 1 of Article 18-A of the General Municipal
Law, Chapter 24 of the Consolidated Laws of New York, as amended (the "Enabling
Act") and Chapter 862 of the 1971 Laws of New York, as amended, constituting
Section 890-C of said General Municipal Law (said Chapter and the Enabling Act
being hereinafter collectively referred to as the "Act"), containing the
information required by the Policy Statement regarding the sales tax exemption
with respect to the captioned project (the "Project") located on a 2+/- acre
parcel of land at 603 Queensbury Road in the Town of Queensbury, Warren County,
New York (the "Project Site").

Angiodynamics, Inc. (the "Company") has applied to and been approved for
financial assistance from the Agency in the matter of completion of the Project
Facility on the Project Site. The Project includes the following: (A) the
construction of an addition to an existing building (the "Facility"), (B) the
acquisition and installation therein and thereon of certain machinery and
equipment (the "Equipment") for printing and distribution of newspapers, (the
"Project Facility"); (C) the financing of all or a portion of the foregoing by
the issuance of tax-exempt revenue bonds of the Issuer in the aggregate
principal amount sufficient to pay the costs of undertaking the Project,
together with necessary incidental costs in connection therewith, estimated to
be approximately $3,500,000 (the "bonds"); (D) the granting of certain other
"financial assistance" within the meaning of Section 854(14) of the Act with
respect to the foregoing, including potential exemptions from sales taxes, real
estate transfer taxes, mortgage recording taxes and real property taxes
(collectively with the bonds, the "Financial Assistance"); and (E) the sale of
the Project Facility to the Company or such other persons as may be designated
by the Company and agreed upon by the Issuer.

It is our opinion that the Company may make project purchases of materials to be
incorporated in the Project and machinery and equipment constituting a part of
the Project, and purchases or rentals of supplies, tools, equipment, or services
necessary to acquire or install the Project and, with respect to such specific
purchases or rentals, are exempt from any sales or use tax imposed by the State
of New York or any governmental instrumentality located within the State of New
York, if the following procedures are observed:

     1.   Purchases must be billed or invoiced by the vendor to the Company as
agent for the Agency (e.g., "COMPANY as agent for the Counties of Warren and
Washington



Industrial Development Agency") and identify the date of delivery and indicate
the place of delivery.

     2.   Payment must be made by the Company acting as agent, directly to the
vendor from either a requisition from the project bond fund, or if a separate
bond fund does not exist, then from a special project fund of the payor.

     3.   Deliveries must be made to the Project Site, or under certain
circumstances (such as where the materials require additional fabrication before
installation on the Project Site or for storage to protect materials from theft
or vandalism prior to installation at the Project Site) deliveries may be made
to a site other than the Project Site, providing the ultimate delivery of the
materials is made to the Project Site. Where delivery is made to a site other
than the Project Site, the purchases must be billed or invoiced by the vendor to
the Company as agent of the Agency, identify the date and place of delivery, the
Agency's full name and address and the Project Site where the materials will
ultimately be delivered for installation.

Pursuant to Section 874(8) of the Act, the Company, as agent of the Agency, must
annually file a statement with the New York State Department of Taxation and
Finance, on a form and in such a manner as is prescribed by the Commissioner of
Taxation and Finance, of the value of all sales tax exemptions claimed by the
Company under the authority granted by the Agency. The penalty for failure to
file such a statement under Section 874(8) of the Act shall be the removal of
authority to act as an agent for the Agency.

This letter shall serve as proof of the existence of an agency contract between
the Agency and the Company for the SOLE EXPRESS PURPOSE OF SECURING EXEMPTION
FROM NEW YORK STATE SALES TAXES FOR THE PROJECT ONLY. NO OTHER PRINCIPAL/AGENT
RELATIONSHIP BETWEEN THE AGENCY AND THE COMPANY IS INTENDED OR MAY BE IMPLIED OR
INFERRED BY THIS LETTER.

It is hereby further certified that, under the Policy Statement, since the
Agency is a public benefit corporation, neither the Agency nor the Company named
herein as its agent, is required to furnish an "Exempt Organization Certificate"
in order to secure exemption from any sales or use tax for such items or
services.

Under the Policy Statement, a copy of this letter retained by any vendor or
seller to any Agent, as Agent for the Agency, may be accepted by such vendor or
seller as a "statement and additional documentary evidence of such exemption" as
provided by New York Tax Law Section 1132(c)(2), thereby relieving such vendor
or seller from the obligation to collect sales and use tax on purchases or
rentals of such materials, supplies, tools, equipment, or services by the Agency
through its Agent.



THIS LETTER SHALL BE IN EFFECT UNTIL____________________

In the event you have any questions with respect to the above, please do not
hesitate to call ____________________.

                                        Very truly yours,

                                        COUNTIES OF WARREN AND WASHINGTON
                                        INDUSTRIAL DEVELOPMENT AGENCY


                                        By:
                                           -------------------------------------
                                        Title:
                                              ----------------------------------



                                    EXHIBIT E
                          CURRENT FORM OF ANNUAL REPORT



                                                                   EXHIBIT 10.16

                             REIMBURSEMENT AGREEMENT

     THIS REIMBURSEMENT AGREEMENT, dated as of the 1st day of August, 2002, by
and between ANGIODYNAMICS, INC., a corporation organized and existing under the
laws of the State of Delaware, having a place of business at 603 Queensbury
Avenue, Queensbury, New York 12804 (the "Company") and KEYBANK NATIONAL
ASSOCIATION, a national banking association, having an office at 66 South Pearl
Street, Albany, New York 12207 (the "Bank").

     WHEREAS, the Counties of Warren and Washington Industrial Development
Agency (the "Agency") intends to issue its Tax-Exempt Multi-Mode Variable Rate
Industrial Development Revenue Bonds (Angiodynamics, Inc. Project-Letter of
Credit Secured) Series 2002 in the amount of $3,500,000.00 (the "Bonds"), and
make available the proceeds of the Bonds to the Company as agent of the Agency
to finance costs of the Project, (as defined in the Indenture [as hereinafter
defined]); and

     WHEREAS, the Bonds are to be issued pursuant to an Indenture of Trust,
dated as of August 1, 2002, by and between Agency and The Huntington National
Bank, Cleveland, Ohio, as Trustee (the "Trustee") (as amended or supplemented
from time to time, the "Indenture"); and

     WHEREAS, in connection therewith Bank is about to issue its irrevocable
transferable direct pay letter of credit (the "Letter of Credit") in favor of
Trustee; and

     WHEREAS, the proceeds of the Bonds are to be advanced pursuant to a certain
Building Loan Agreement, dated as of August 1, 2002, by and among the Agency,
the Trustee, the Bank and Company (as amended or supplemented from time to time,
the "Building Loan Agreement; and

     WHEREAS, the Premises (as hereinafter defined) are to be sold to Company on
an installment sale basis pursuant to an Installment Sale Agreement, dated as of
August 1, 2002, by and between the Agency and Company (as amended or
supplemented from time to time, the "Installment Sale Agreement"); and

     WHEREAS, it is the purpose of this Reimbursement Agreement to set forth the
Bank's commitment to issue the Letter of Credit and Company's agreement to
reimburse Bank for any and all payments made by Bank pursuant to the Letter of
Credit and to otherwise set forth Bank's and Company's respective duties,
covenants and agreements in respect of the Letter of Credit.

     NOW THEREFORE, in consideration of the mutual agreements made herein and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:



                                   SECTION ONE
                                   -----------

                                   DEFINITIONS

     Section 1.1.  Terms Defined. As used in this Reimbursement Agreement, the
following terms have the following respective meanings. Any accounting term used
but not specifically defined herein shall be construed in accordance with GAAP
(as hereinafter defined). The definition of each agreement, document, and
instrument set forth in this Section 1.1 shall be deemed to mean and include
such agreement, document, or instrument as amended, restated, or modified from
time to time:

     "Agency" shall mean the Counties of Warren and Washington Industrial
Development Agency, a corporate governmental agency constituting a body
corporate and politic and a public benefit corporation duly organized and
existing under the laws of the state of New York, and it successors or assigns.

     "Affiliate" shall mean, with respect to any Person, any other Person
directly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control a second Person if such
first Person possesses, directly or indirectly, the power to (i) vote 10% or
more of the securities having ordinary voting power for the directors or
managers of such second Person or (ii) direct or cause the direction of the
management and policies of such second Person, whether through the ownership of
voting securities, by contract or otherwise. Notwithstanding the foregoing, (x)
a director, officer, or employee of a Person shall not, solely by reason of such
status, be considered an Affiliate of such Person and (y) the Bank shall not be
considered an Affiliate of the Company.

     "Amortization Expense" shall mean, for any period, all amortization
expenses of the Company, calculated in accordance with GAAP.

     "Architect" shall mean, whether individually or collectively, any and all
architects performing architectural services in connection with the Project.

     "Assignment of Contracts" shall mean the assignment of contracts, dated as
of August 1, 2002, by Company in favor of Bank, as said assignment of contracts
may be amended or supplemented from time to time.

     "Bond Counsel" shall mean Bond, Schoeneck & King, PLLC, or any other
nationally recognized Bond Counsel reasonably acceptable to Bank.

     "Bond Documents" shall mean the Indenture and any other document executed
by Company in connection with the issuance and sale of the Bonds (other than the
Credit Documents).

     "Bonds" shall mean, whether individually or collectively, the $3,500,000.00
in aggregate principal amount of Tax Exempt Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Angiodynamics, Inc. Project-Letter of Credit
Secured), Series 2002.

                                        2



     "Bond Pledge" shall mean the pledge and security agreement, dated as of
August 1, 2002, by and among Company, the Trustee and Bank, as said pledge and
security agreement may be amended or supplemented from time to time.

     "Building Loan Agreement" shall mean the building loan agreement, dated as
of August 1, 2002, by and between the Company and the Bank, as said building
loan agreement may be amended or supplemented from time to time.

     "Business Day" shall mean any day of the year other than (i) a Saturday or
Sunday, (ii) any day on which commercial banks located in Cleveland, Ohio, or
the city or cities in which are located the corporate trust offices of the
Trustee and the Tender Agent and the office of Bank at which demands for payment
under the Letter of Credit are to be presented are authorized by law to close,
or (iii) any day on which the New York Stock Exchange is closed.

     "Cash Interest Expense" shall mean for any period, Interest Expense,
reduced by any amount included therein which is "paid-in-kind" through an
increase to principal or the issuance of an additional debt security in a
principal amount equal to such interest.

     "Closing Date" shall mean August 29, 2002, or such other date agreed upon
by Company and Bank.

     "Change Order Amount" means $15,000.00.

     "Completion Date" shall have the meaning set forth in the Indenture.

     "Construction Contract" shall mean, whether individually or collectively,
any and all contracts, whether now existing or hereafter entered into, for the
construction of the Facility between Company and Contractor, as approved, in
writing, by Bank.

     Construction Inspector" shall mean, at Bank's option, either an officer or
employee of Bank or consulting architects, engineers or inspectors appointed by
Bank.

     "Contractor" shall mean, whether individually or collectively, any and all
contractors performing work at the Project pursuant to the Construction
Contract, all as approved, in writing, by Bank.

     "Credit" shall have the meaning set forth in Section 8.1(b) hereof.

     "Credit Documents" shall mean, whether individually or collectively, this
Reimbursement Agreement, the Mortgage, the Building Loan Agreement, any
agreement between Company and Bank, or any affiliate of Bank, with regard to the
interest payable upon any obligation, whether direct or contingent, of Company
to Bank, or any affiliate of Bank (whether individually or collectively, the
"Swap Documentation"), the Bond Pledge, the Security Agreement, the Assignment
of Contracts, the Indemnity Agreement and any other document now or hereafter
executed by Company in favor of Bank or any affiliate thereof which affects the
rights of Bank in or to the Project, in whole or in part, or which evidences,
secures or guarantees any sum due under any Credit Document or any other
obligation arising pursuant to any Credit Document.

                                        3



     "Date of Issuance" shall mean the date of issuance of the Letter of Credit.

     "Default Rate" shall mean an interest rate per annum equal to five percent
(5%) in excess of the Prime Rate, with each change in the Prime Rate
automatically changing the Default Rate.

     "Depreciation Expense' shall mean, for any period, all depreciation
expenses of the Company, calculated in accordance with GAAP.

     "Determination of Taxability" shall have the meaning assigned thereto in
the Indenture.

     "EBIT" shall mean, for any period, Net Income for such period, plus the sum
of the amounts for such period included in determining such Net Income of (i)
Interest Expense and (ii) Income Tax Expense, calculated in accordance with
GAAP.

     "EBITDA" shall mean, for any period, EBIT for such period, plus the sum
(without duplication) of the amounts for such period included in determining
EBIT of (i) Depreciation Expense, and (ii) Amortization Expense, calculated in
accordance with GAAP.

     "Environmental Law" shall mean any federal, state, or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability upon a Person in connection with the use, release or disposal
of any hazardous toxic or dangerous substance, waste or material.

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended or supplemented, and all regulations
thereunder.

     "Event of Default" shall have the meaning assigned thereto in Section 7
hereof.

     "Expiration Date" shall mean August 22, 2005, subject to extension as
provided in Section 2.5 herein.

     "Facility" shall have the meaning assigned to such term in the Indenture.

     "Fee Calculation Amount" shall have the meaning set forth in Section
2.2(b).

     "Fixed Charge Ratio" shall mean the ratio of the Company's (i) EBITDA plus
lease expense less other income less Unfunded Capital Expenditures less cash
taxes paid less dividends and distributions to (ii) current maturities of long
term debt plus current portion of long term leases plus Cash Interest Expense
paid on loans and leases plus lease expense, calculated in accordance with GAAP.

     "Funded Debt Ratio" shall mean the ratio of the Company's (i) total funded
Indebtedness to (ii) EBITDA less Unfunded Capital Expenditures, calculated in
accordance with GAAP.

     "GAAP" shall mean generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.

                                        4



     "Income Tax Expense" shall mean, for any period, all provisions for taxes
based upon Net Income (including, without limitation, any additions to such
taxes, any penalties and interest with respect thereto), calculated in
accordance with GAAP.

     "Indebtedness" shall mean, at a particular date, all indebtedness for money
borrowed or for the deferred purchase price of property and lease obligations of
Company which have been, or which in accordance with Statement of Financial
Accounting Standards No. 13, as from time to time amended, should be,
capitalized.

     "Indemnity Agreement" shall mean the environmental compliance and
indemnification agreement, dated as of August 1, 2002, by Company in favor of
Bank, as said environmental compliance and indemnification agreement may be
amended or supplemented from time to time.

     "Indenture" shall mean the indenture of trust, dated as of August 1, 2002,
between the Agency and the Trustee, as said indenture of trust may be amended or
supplemented from time to time.

     "Indenture Default" shall mean an Event of Default under and pursuant to
the Indenture.

     "Interest Commitment" shall have the respective meaning set forth in the
Letter of Credit.

     "Interest Coverage Ratio" shall mean the ratio of the Company's (i) EBIT to
(ii) Cash Interest Expense, calculated in accordance with GAAP.

     "Interest Coverage Requirement" shall mean an amount equal to (i) ninety
eight (98) days' accrued interest at the Maximum Rate on the outstanding
principal amount of the Bonds to enable the Trustee to pay the interest on the
Bonds when due and (ii) an amount equal to the interest portion, if any, of the
purchase price of any Bonds tendered for purchase by the holder thereof to the
extent remarketing proceeds are not available for such purposes.

     "Interest Drawing" shall have the respective meaning set forth in the
Letter of Credit.

     "Interest Expense" shall mean, for any period, total interest expense
(including that which is capitalized, that which is attributable to capital
leases and the pre-tax equivalent of dividends payable on redeemable stock) with
respect to all outstanding Indebtedness including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and net costs under any hedging agreements.

     "Letter of Credit" shall mean the Letter of Credit to be issued by Bank on
the Closing Date pursuant to this Reimbursement Agreement, the Letter of Credit
to be substantially in the forms of Exhibit A hereto.

     "Letter of Credit Commitment" shall have the respective meaning set forth
in the Letter of Credit.

     "Maximum Rate" shall mean, as applicable, the interest rate per annum of
eight percent (8.00%).

                                        5



     "Mortgage" shall mean the mortgage and security agreement dated as of
August 1, 2002 from the Agency and the Company in favor of the Bank, as said
mortgage and security agreement may be amended or supplemented from time to
time.

     "Net Income" shall mean, for any period, the net income (or loss), without
deduction for minority interests, for such period taken as a single accounting
period and calculated in accordance with GAAP.

     "Permitted Encumbrances" shall mean, with respect to the Pledged
Collateral, as of any particular time, (a) liens for ad valorem taxes and
special assessments not then delinquent, (b) this Reimbursement Agreement, the
Mortgage, the Bond Pledge, the Security Agreement and any security interest or
other lien created thereby, (c) any Permitted Encumbrances defined in any of the
Credit Documents, (d) any liens permitted by Section 6.8 hereof, and (e) such
minor defects, irregularities, encumbrances, clouds on title and to-be-created
utility easements necessary for operation of the Project Facility as normally
exist with respect to property similar in character to the Pledged Collateral
and as do not materially interfere with or impair the use or value of the
property affected thereby.

     "Person" shall mean any natural person, corporation (which shall be deemed
to include business trust), association, partnership, political entity, or
political subdivision thereof.

     "Plan" shall mean any plan defined in Section 4021(a) of ERISA in respect
of which Company or any Subsidiary of Company is an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.

     "Plans and Specifications" shall mean the plans and specifications for the
Project approved by Bank.

     "Pledged Collateral" shall mean the collateral in which Company has given
Bank a lien or security interest pursuant to the Mortgage, the Security
Agreement, the Assignment of Contracts and/or the Bond Pledge and/or any other
Credit Document.

     "Premises" shall mean the real property located in the Town of Queensbury,
Warren County, New York made subject to, and more fully described in the
Mortgage.

     "Prime Rate" shall mean that interest rate established from time to time by
Bank as Bank's Prime Rate, whether or not such rate is publicly announced. The
Prime Rate may not be the lowest rate charged by Bank for commercial or other
extensions of credit.

     "Principal Commitment" shall have the meaning set forth in the Letter of
Credit.

     "Principal Drawing" shall have the meaning set forth in the Letter of
Credit.

     "Project" shall have the meaning assigned to such term in the Indenture.

     "Project Facility" shall have the meaning assigned to such term in the
Indenture.

     "Project Fund" shall have the meaning assigned thereto in the Indenture.

                                        6



     "Purchaser" shall mean the original purchaser or purchasers of the Bonds.

     "Qualified Investments" shall have the meaning assigned thereto in the
Indenture.

     "Remarketing Agent" shall mean McDonald Investments Inc., Cleveland, Ohio,
and such other Person hereafter performing the duties of the Remarketing Agent
pursuant to the Indenture.

     "Remarketing Drawing" shall have the meaning set forth in the Letter of
Credit.

     "Reportable Event" shall mean any reportable event as that term is defined
in ERISA.

     "Security Agreement" shall mean the security agreement, dated as of August
1, 2002, by Company to Bank, as said security agreement may be amended or
supplemented from time to time.

     "Subsidiary" or "Subsidiaries" shall mean (i) any corporation more than
fifty percent (50%) of the capital stock of which is owned or controlled,
directly or indirectly, by Company or any Subsidiary and whose accounts are
required to be consolidated with those of Company in accordance with GAAP,
consistently applied; and (ii) any non-profit corporation which is controlled,
directly or indirectly, by Company.

     "Title Company" shall mean Chicago Title Insurance Company.

     "Title Policy" shall mean the title policy to be issued by the Title
Company, with respect to the Mortgage.

     "Total Debt" shall mean the total of all items of Indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
on the liability side of the balance sheet as of the date of determination.

     "Trustee" shall mean The Huntington National Bank, or any successor Trustee
under the Indenture.

     "Unfunded Capital Expenditures" shall mean total capital expenditures minus
any corresponding increase in long-term debt or leases, calculated in accordance
with GAAP.

                                   SECTION TWO
                                   -----------

                          ISSUANCE OF LETTER OF CREDIT

     Section 2.1.  Issuance of Letter of Credit. Subject to the terms and
conditions hereof, Bank agrees to execute and deliver the Letter of Credit. The
obligations of Bank under the Letter of Credit shall be absolute and irrevocable
and shall be performed strictly in accordance with the terms of the Letter of
Credit and this Reimbursement Agreement.

                                        7



     Section 2.2.  Fees and Reimbursement.

     (a)  Company hereby agrees to pay to Bank:

          (i)    Before 2:00 p.m., New York time, on each date that any amount
                 is drawn under the Letter of Credit pursuant to a Principal
                 Drawing or an Interest Drawing, Company shall pay a sum equal
                 to the amount so drawn under the Letter of Credit plus (x)
                 interest accrued, if any, on the amount so drawn under the
                 Letter of Credit as determined by clause (iv) of this
                 subsection (a) of this Section 2.2, plus (y) any and all
                 charges and expenses which Bank may pay or incur relative to
                 such drawing under the Letter of Credit, plus (z) a fee in the
                 amount of Two Hundred Dollars ($200.00) for that drawing under
                 the Letter of Credit;

          (ii)   Upon a Remarketing Drawing under the Letter of Credit, provided
                 there is then no uncured Event of Default, Company shall have
                 until the Expiration Date to reimburse Bank for the amount of
                 the Remarketing Drawing, subject to the right of Bank to
                 require redemption of the Bonds pursuant to Section 7.2 hereof.
                 Any amounts received by Bank from the remarketing of Bonds
                 purchased out of a Remarketing Drawing and registered to Bank
                 or, at the direction of Bank, to Company, shall be applied pro
                 rata against Company's obligation to reimburse Bank for the
                 amount of the Remarketing Drawing. The amount of any
                 unreimbursed Remarketing Drawing shall bear interest from the
                 date of the Remarketing Drawing at a rate per annum equal to
                 the Prime Rate plus one percent (1.0%). Such interest shall be
                 payable on each Interest Payment Date for so long as such
                 Remarketing Drawing or any portion thereof is unreimbursed. The
                 payments of interest hereunder shall be credited pro rata
                 against the interest accrued on the Bonds pledged to Bank under
                 the Bond Pledge. Interest hereunder shall be calculated based
                 on a 360-day year but calculated for the actual number of days
                 elapsed;

          (iii)  Upon each transfer of the Letter of Credit in accordance with
                 its terms and as a condition thereto, a transfer fee of Five
                 Hundred Dollars ($500.00) and such additional amounts as shall
                 be necessary to cover the reasonable costs and expenses to Bank
                 incurred in connection with such transfer;

          (iv)   Company shall pay interest at the Default Rate, payable on
                 demand, on any and all amounts of any Principal Drawing,
                 Interest Drawing and/or Remarketing Drawing not paid by Company
                 when due under any section of this Reimbursement Agreement from
                 the date such amounts become due until payment in full;

          (v)    For any payment of principal and/or interest not paid within
                 ten (10) Business Days after such payment is due, Company shall
                 pay a late charge of an amount equal to the greater of five
                 percent (5%) of the amount of the payment or $50.00;

                                        8



          (vi)   On demand, reasonable costs, fees and expenses incurred by Bank
                 in connection with the issuance of the Letter of Credit or the
                 preparation or execution of any documents or opinions related
                 thereto;

          (vii)  On demand, any and all reasonable expenses incurred by Bank in
                 enforcing any of its rights under this Reimbursement Agreement,
                 or any of the Credit Documents;

          (viii) On or prior to the Closing Date, any and all appraisal fees
                 relating to the appraisal of the Premises; and

          (ix)   On or prior to Closing Date, a one-time origination fee in the
                 amount of $35,751.79.

     (b)  Company hereby agrees to pay to Bank commissions (whether individually
          or collectively, the "Letter of Credit Fee") equal to an amount
          calculated at the percentage rate of the maximum respective "Fee
          Calculation Amount" as hereinafter defined, available on each date of
          payment of the Letter of Credit Fee, as set forth in the following
          table based upon the Company's Funded Debt Ratio as reflected in the
          financial information for each fiscal year end of the Company (using a
          360-day year but calculated on the number of actual days elapsed):

- --------------------------------------------------------------------------------
 Level             Funded Debt Ratio                        Annual Letter of
                                                            Credit Fee (as a
                                                           percentage of the Fee
                                                            Calculation Amount)
- --------------------------------------------------------------------------------
I    greater than or equal to  2.0 to 1.0                         1.90%
- --------------------------------------------------------------------------------
II   greater than or equal to  1.0 to less than 1.0 2.0 to 1.0    1.35%
- --------------------------------------------------------------------------------
III  less than                 1.0 to 1.0                         1.00%
- --------------------------------------------------------------------------------

          From the Closing Date until receipt of the audited financial
          statements for the Company for fiscal year end 2003, the annual Letter
          of Credit Fee shall be set at "Level II" as described in the above
          table.

          The Letter of Credit Fee shall be payable in annual installments in
          advance on each anniversary of the Date of Issuance until the
          Expiration Date of such Letter Credit; provided, however, that upon
          the Date of Issuance of the Letter of Credit, Company shall pay an
          installment of the Letter of Credit Fee for the period from the Date
          of Issuance to and including the day before the anniversary of the
          Date of Issuance in 2003. The "Fee Calculation Amount" shall be the
          sum of (i) the maximum amount then available to be drawn under the
          Letter of Credit with respect to the Principal Commitment plus (ii)
          the maximum amount then available

                                        9



          to be drawn under the Letter of Credit with respect to the Interest
          Commitment. If the Letter of Credit is terminated prior to the
          Expiration Date, the Letter of Credit Fee shall be refunded to Company
          for any calendar quarter that the Letter of Credit will not be
          outstanding provided that Company returns or causes the return of the
          Letter of Credit to Bank prior to the start of such calendar quarter.;

     (c)  Company shall pay to Bank all reasonable legal, documentation, search
          and recording fees, and construction monitoring costs associated with
          closing and funding this transaction;

     (d)  If any change in any law or regulation or in the interpretation
          thereof by any court or administrative or governmental authorities
          charged with the administration thereof shall impose, modify or deem
          applicable any reserve, special deposit or similar requirement which
          would impose on Bank any reasonable additional costs (i) generally
          upon the issuance or maintenance of letters of credit by Bank; (ii)
          specifically in respect of this Reimbursement Agreement or the Letter
          of Credit; or (iii) in respect of any capital adequacy requirement
          (including, without limitation, a requirement which affects the manner
          in which Bank allocates capital resources to its commitments), and the
          result of such imposition of additional costs as described in clause
          (i), (ii), or (iii) above shall be to increase the cost to Bank of
          issuing or maintaining the Letter of Credit (which increase in cost
          shall be the result of Bank's reasonable allocation of the aggregate
          of such cost increases resulting from such events), then (x) within
          thirty (30) days of Bank's obtaining knowledge of such change in law,
          regulations or interpretation thereof, Bank shall so notify Company,
          and (y) upon receipt of such notice from Bank, accompanied by a
          certificate as to such increased cost, Company shall pay as of the
          effective date of such change or interpretation all reasonable
          additional amounts which are necessary to compensate Bank for such
          increased cost incurred by Bank. The certificate of Bank as to such
          increased costs shall show the manner of calculation and shall be
          conclusive (absent manifest error) as to the amount thereof; and

     (e)  Company's obligations to make payments to Bank under this Section 2
          shall be deemed satisfied to the extent of payments made by the
          Trustee to Bank from funds on deposit with and held by the Trustee
          pursuant to the Indenture.

     Section 2.3.  Company's Obligations Unconditional. The payment obligations
of Company under this Reimbursement Agreement shall be absolute, unconditional
and irrevocable and shall be satisfied strictly in accordance with the terms of
this Reimbursement Agreement, under all circumstances whatsoever, including,
without limitation, the following circumstances:

     (a)  Any lack of validity or enforceability of the Credit Documents, the
          Bond Documents or any other agreement or instrument relating thereto;

     (b)  Any amendment or waiver of or any consent to departure from the terms
          of the Letter of Credit, the Credit Documents, the Bond Documents or
          any other agreement or instrument relating thereto;

                                       10



     (c)  The existence of any claim, setoff, defense or right which Company may
          have at any time against any beneficiary or any transferee of the
          Letter of Credit (or any persons or entities for whom any such
          beneficiary or any such transferee may be acting), Bank or any other
          person or entity, whether in connection with this Reimbursement
          Agreement, the transactions contemplated by the Credit Documents or
          the Bond Documents, or any unrelated transaction;

     (d)  Any statement or any other document presented under the Letter of
          Credit proving to be forged, fraudulent, invalid or insufficient in
          any respect or any statement therein being untrue or inaccurate in any
          respect whatsoever;

     (e)  Payment by Bank under the Letter of Credit against presentation of a
          request which on its face appears to be in accordance with the terms
          of the Letter of Credit; or

     (f)  Any other circumstance or happening whatsoever, whether or not similar
          to any of the foregoing.

     Section 2.4.  Payments. The payments and amounts due Bank under Section 2.2
above shall be made by Bank's debiting Company's operating account with Bank
(the "Operating Account"). Company covenants and agrees that on the date any
payment or other amount is due under Section 2.2 above, Company will have
unrestricted funds in the Operating Account in an amount no less than the amount
then due. Subject to the foregoing provisions of this Section, all payments by
Company hereunder to Bank shall be made in lawful currency of the United States
and in immediately available funds to the Bank's Standby Letter of Credit
Processing and Service Center, 4910 Tiedeman Road - OH01510435, Cleveland, Ohio
44144-2338.

     Section 2.5.  Letter of Credit Extension. Bank may in writing extend the
Expiration Date of the Letter of Credit; provided, however, that such extension
shall be, in each instance, made in the sole discretion of Bank and Bank may at
any time, upon written notice delivered to Company and Trustee, elect not to
extend the Expiration Date. Bank shall notify Company and Trustee of its
decision of whether the Expiration Date shall be extended no later than ninety
(90) days prior to the Expiration Date, provided that the failure of Bank to
deliver such notice, or to deliver any notice, shall not mean that Bank has
elected to extend the Expiration Date. If Bank extends the Expiration Date, it
shall do so in the form of an amendment to the Letter of Credit, which it shall
promptly deliver to Trustee.

                                  SECTION THREE
                                  -------------

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

     Company expressly represents, warrants and covenants that:

     Section 3.1.  Existence and Legal Authority. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own its property and to
carry on its business as now being conducted, to enter into the Credit Documents
and the other agreements referred to herein and transactions contemplated
thereby, and to carry out the provisions and conditions of the Credit

                                       11



Documents. Company is duly qualified to do business and is in good standing in
the State of New York and in every jurisdiction where the failure to so qualify
would have a material adverse effect on the business of Company.

     Section 3.2.  Due Execution and Delivery. Company and/or Agency has full
power, authority and legal right to incur the obligations provided for in, and
to execute and deliver and to perform and observe the terms and provisions of,
the Credit Documents, and each of them has been duly executed and delivered by
Company by all required action, and Company has obtained all requisite consents
to the transactions contemplated thereby under any instrument to which it is a
party, and the Credit Documents constitute the legal, valid and binding
obligations of Company enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency or other similar laws affecting creditors' rights generally.

     Section 3.3.  No Breach of Other Instruments. Neither the execution and
delivery of the Credit Documents, nor the compliance by Company with the terms
and conditions of the Credit Documents, nor the consummation of the transactions
contemplated thereby, will conflict with or result in a breach of Company's
Certificate of Incorporation or By-Laws, or any of the terms, conditions or
provisions of any agreement or instrument or any other restriction or law,
regulation, rule or order of any governmental body or agency to which Company is
now a party or is subject, or imposition of a lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of Company pursuant to the
terms of any such agreement or instrument.

     Section 3.4.  Government Authorization. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
consummation by Company of the transactions contemplated by the Credit
Documents.

     Section 3.5.  Pledged Collateral. Company has good fee simple title to the
Premises, free and clear of all liens, pledges, mortgages, security interests,
charges, claims and other encumbrances, except the Permitted Encumbrances.
Company has good title to the Pledged Collateral, free and clear of all liens,
pledges, mortgages, security interests, charges, claims and other encumbrances,
except Permitted Encumbrances. The Mortgage, the Security Agreement, the
Assignment of Contracts and/or Bond Pledge create a valid and prior lien or
security interest in favor of Bank in the Pledged Collateral, subject to no
other liens or encumbrances arising by, through or under Company or any other
person, except for Permitted Encumbrances.

     Section 3.6.  Absence of Defaults, etc. Company is not (i) in material
default under any indenture or contract or agreement to which it is a party or
by which it is bound; (ii) in violation of its Certificate of Incorporation or
By-Laws, each as amended to date; (iii) in default with respect to any order,
writ, injunction or decree of any court; or (iv) in default under any order or
license of any federal or state governmental department, which default or
violation in any of the aforesaid cases materially and adversely affects its
business or property. There exists no condition, event or act which constitutes,
or after notice or lapse of time or both would constitute, an Event of Default.

                                       12



     Section 3.7.  Indebtedness of Company. Company does not have outstanding on
the date hereof any Indebtedness for borrowed money, except for such
Indebtedness reflected on the financial statements referred to in Section 3.9
hereof, except in connection with the Bonds.

     Section 3.8.  Subsidiaries. Company has no Subsidiaries other than Leocor
Corporation, a Delaware corporation.

     Section 3.9.  Financial Statements. All financial statements of Company
furnished to Bank on or prior to the date hereof are correct and complete in all
material respects and fairly present the financial position of Company at the
dates thereof and the results of Company's operations for the periods covered
thereby, and such financial statements, including any notes and comments
contained therein, have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved.

     Section 3.10. No Adverse Change. Subsequent to the date of the financial
statements referred to in Section 3.9 hereof, Company has not incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business, and there has not been any increase in the aggregate amount of
Indebtedness of Company (except in connection with the issuance of the Bonds),
or any change in the business, properties or condition, financial or otherwise,
of Company, except for changes arising in the ordinary course of business or in
connection with the issuance and sale of the Bonds or as may be otherwise
disclosed in writing to Bank prior to the date hereof.

     Section 3.11. Taxes. Company has filed, or secured a lawful extension to
file, all tax returns which are to be filed and has paid, or has made adequate
provision for the payment of, all taxes which have or may become due pursuant to
said returns or to assessments received by them. Company knows of no deficiency
assessment or proposed deficiency assessment of taxes against Company, except as
may be otherwise disclosed in writing to Bank prior to the date hereof.

     Section 3.12. ERISA. No Reportable Event or Prohibited Transaction (as
defined in Section 4975 of the Internal Revenue Code) has occurred and is
continuing with respect to any Plan and Company has not incurred any
"accumulated funding deficiency" as such term is defined in Section 302 of
ERISA.

     Section 3.13. Litigation. Except as otherwise disclosed in writing to Bank
prior to the date hereof, there are no actions, suits or proceedings pending, or
to the knowledge of Company, threatened against Company or its property in any
court, or before or by any federal, state or municipal or other governmental
department, commission, board, bureau, agency or other instrumentality, domestic
or foreign, which could result in any adverse change in the business, property
or assets, or in the condition, financial or otherwise, of Company, except for
actions, suits or proceedings of a character normally incident to the kind of
business conducted by Company, none of which, either individually or in the
aggregate, if adversely determined, would materially impair Company's right or
ability to carry on its business substantially as now conducted or materially
adversely affect the financial position or operations of Company.

                                       13



     Section 3.14. Ownership of Property. Company has good and marketable fee
title to, or valid leasehold interests in its real properties in accordance with
the laws of the jurisdiction where located, and good and marketable title to
substantially all its other property and assets, subject, however, in the case
of real property, to title defects and restrictions which do not materially
interfere with the operations conducted thereon by Company. Except for (i) liens
in favor of Bank and/or (ii) liens in favor of other lenders which affect or
constitute a lien upon property other than any portion of the Project, the real
property and all other property and assets of Company are free from any liens or
encumbrances securing Indebtedness and from any other liens, encumbrances,
charges or security interests of any kind. Each lease to which Company is a
party is in full force and effect, no material default on the part of any party
thereto exists, and, as to each of such leases to which Company is party as
lessee, Company enjoys peaceful and undisturbed possession of the property
affected thereby.

     Section 3.15. No Burdensome Restrictions. Company is not a party to any
instrument or agreement or subject to any charter or other corporate restriction
which would to a material extent adversely affect the business, property,
assets, operations or condition, financial or otherwise, of Company.

     Section 3.16. Environmental Matters. Company is in compliance with all
Environmental Laws and all applicable federal, state and local health and safety
laws, regulations, ordinances or rules, except to the extent that any
non-compliance will not, in the aggregate, have a materially adverse effect on
Company or the ability of Company to fulfill its obligations under this
Reimbursement Agreement.

                                  SECTION FOUR
                                  ------------

                               CLOSING CONDITIONS

     The obligation of Bank to issue the Letter of Credit on the Closing Date
shall be subject to the following conditions precedent:

     Section 4.1.  Execution and Delivery of the Credit Documents and the Bond
Documents. Company shall have delivered to Bank fully executed copies of each of
the Credit Documents, and the Agency, the Trustee and Company shall have duly
authorized, executed and delivered the Bond Documents, transcript of
proceedings, authorizing resolutions and incumbency certificates.

     Section 4.2.  Delivery of Documents Relating to the Pledged Collateral.
Company shall have duly and validly executed and delivered the Mortgage, the
Security Agreement, the Assignment of Contracts, the Indemnity Agreement, the
Bond Pledge and UCC financing statements; the Mortgage, and UCC financing
statements shall have been duly filed in favor of Bank. In addition, Company
shall have delivered to Bank:

     (a)  Evidence that the Premises are not located in a special flood hazard
          area as identified by HUD;

     (b)  Certificates of insurance and evidence of payment of premiums therefor
          with respect to the insurance required by Bank with respect to the
          Premises as set forth

                                       14



          in Section 6.2 below, including but not limited to, general liability
          insurance and hazard insurance, and flood insurance if applicable;

     (c)  A current certified survey of the Premises prepared by a registered
          surveyor satisfactory to Bank, and containing on the face thereof the
          completed certificate of the surveyor in the form of the surveyor's
          certificate required by Bank, dated not more than ninety (90) days
          prior to the Date of Issuance, and in compliance with the Minimum
          Standard Detail Requirements for ALTA/ASCM Class A land title surveys,
          as adopted by the American Land Title Association and American
          Congress on Surveying and Mapping in 1992, or such earlier dated
          surveys as Bank may deem acceptable;

     (d)  Environmental data with respect of the Premises, satisfactory to Bank
          in its sole discretion;

     (e)  A Commitment to issue the Title Policy in the form of an ALTA Form
          B-1970 (Additional Coverage Form) Loan Policy of Title Insurance
          issued by the Title Company in the amount of the Letter of Credit (i)
          insuring that the Mortgage, as of the time of its filing for record,
          is a first and best lien upon the Premises, and that the title to the
          Premises is free, clear and unencumbered, subject only to the
          Permitted Encumbrances.

     (f)  Evidence satisfactory to Bank that the Project, when completed, and
          the Premises, and the proposed and actual use thereof, will comply
          with all applicable laws, statutes, codes, ordinances, rules and
          regulations, including, but not limited to, zoning and Environmental
          Laws, of all governmental authorities having jurisdiction over the
          same, and that there is no action or proceeding pending (or any time
          for an appeal of any decision rendered) before any court,
          quasi-judicial body or administrative agency at the Date of Issuance
          relating to the validity of this Reimbursement Agreement or the
          transactions contemplated hereby or the proposed or actual use or
          operation of the Premises; and

     (g)  A written appraisal (the "Appraisal") satisfactory to Bank in all
          respects, prepared on both an "as is" and "as completed" value basis
          by an appraiser selected and directly engaged by Bank pursuant to an
          engagement letter issued by Bank, the cost of which Appraisal and
          review thereof will be charged to Company at Closing Date, and which
          Appraisal shall be prepared in accordance with the Uniform Standards
          of Professional Appraisal Practice applicable to Federally Related
          Transactions as set out in Appendix A to the real estate appraisal
          regulations adopted by the Office of the Comptroller of the Currency
          pursuant to the Financial Institutions Reform, Recovery and
          Enforcement Act of 1989 ("FIRREA") (Sub-part C of 12 C.F.R. 34) and
          which Appraisal shall be updated, at Company's cost, upon the
          occurrence of an Event of Default under any of the Credit Documents.

     Section 4.3.  Issuance and Sale of the Bonds. The Bonds shall have been
duly issued and sold to the Purchaser pursuant to the Bond Documents.

                                       15



     Section 4.4.  Representations and Warranties True as of Closing and No
Event of Default. The representations and warranties contained in this
Reimbursement Agreement and the other Credit Documents shall be true in all
material respects on the Closing Date with the same effect as though made on and
as of that date and no condition, event or act shall have occurred which
constitutes an Event of Default or, with notice or lapse of time, or both, would
constitute an Event of Default.

     Section 4.5.  Opinion of Company's Counsel. Bank shall have received from
Bond, Schoeneck & King, LLP, counsel for Company, a closing opinion or opinions
with respect to (i) the matters described in Sections 3.1 and 3.2 of this
Reimbursement Agreement; (ii) the matters described in Sections 3.3, 3.4, 3.6
and 3.13 of this Reimbursement Agreement, to the best of such counsel's
knowledge and belief after inquiry; and (iii) such other matters incident to the
transactions contemplated hereby as Bank may reasonably request.

     Section 4.6.  Opinion of Other Counsel. Bank shall have received from Bond
Counsel an opinion with respect to the tax-exempt status of the Bonds, and from
counsel acceptable to Bank, an opinion with respect to the absence of any
securities registration requirements with respect to the Bonds under the
Securities Act of 1933, as amended.

     Section 4.7.  Proceedings Satisfactory. All proceedings taken in connection
with the execution and delivery of this Reimbursement Agreement and the other
Credit Documents shall be satisfactory to Bank, and Bank shall have received
copies of such certificates, documents and papers as reasonably requested in
connection therewith, all in form and substance satisfactory to Bank.

     Section 4.8   Additional Deliveries. Except as provided below, Company
shall furnish the following documentation to Bank at least ten (10) Business
Days prior to the Closing Date unless such date shall be extended in writing by
Bank, all in form, substance and execution satisfactory to Bank:

     (a)  Invoices for work to be performed or materials to be supplied in
          connection with the Project, in each case approved by Bank;

     (b)  A cost breakdown and itemization of all hard and soft costs for the
          Project shall be provided, in form satisfactory to Bank.

     (c)  A final construction budget, acceptable to Bank;

     (d)  Certified copy of Company's resolutions authorizing the action
          required of Company;

     (e)  Project development schedule provided by Company and development
          supervisor setting forth the approximate start and finish dates of all
          major stages of the Project; such schedule shall provide that the
          development of the Project shall commence not later than thirty (30)
          days after the Closing Date;

     (f)  Evidence of such building permits as may be required;

                                       16



     (g)  The Construction Contract, in form and substance acceptable to Bank;

     (h)  A completion bond issued on behalf of the Contractor in an amount not
          less than the fixed amount due and payable under the Construction
          Contract in form and substance acceptable to the Bank and containing a
          dual obligee rider identifying the Bank as a beneficiary thereof

     (i)  Company's federal tax identification number; and

     (j)  Such other documents which may be required by Bank to assure
          compliance with this Reimbursement Agreement and other Credit
          Documents.

                                  SECTION FIVE
                                  ------------

                         DISBURSEMENTS FROM PROJECT FUND

     Company shall not request or receive any disbursement of funds from the
Project Fund unless Bank shall have approved such disbursement in writing to the
Trustee and the following conditions have been met:

     Section 5.1.  Conditions Precedent to First Disbursement. The following
conditions must be satisfied prior to the first disbursement of funds from the
Project Fund:

     (a)  The proceeds of the Bonds shall have been deposited into the Project
          Fund, and Bank and the Trustee shall have been granted a perfected
          security interest in the Project Fund;

     (b)  Company shall have provided evidence that all insurance requirements
          set forth herein have been satisfied;

     (c)  Company shall have delivered to Bank a schedule of all Contractors, by
          trade, to be engaged in the construction and installation of the
          Project Facility, together with copies of the Construction Contract;
          and

     (d)  Company shall have delivered to Bank copies of the consent of each of
          the Project Architect and Contractor, to the Assignment of Contracts,
          if known, as provided therein.

     Section 5.2.  Bank's Inspections; Construction Inspector. Prior to each
disbursement, if required by Bank, Bank, or an agent engaged by Bank at
Company's expense, may inspect the property to verify that the request for
disbursement accurately indicates the amount of construction completed to said
date. Bank shall engage the Construction Inspector with regard to the
renovations/construction at the Premises. The Construction Inspector, at the
cost of Company, shall, at Bank's option, perform and or all of the following
services on behalf of Bank:

          (a)  To make an initial pre-cost analysis verifying that the
     Improvements can be completed for the amount available for construction
     from the Project Budget;

                                       17



          (b)  To review and advise Bank whether, in the opinion of the
     Construction Inspector, the Plans and Specifications are satisfactory;

          (c)  To review Draw Requests and change orders;

          (d)  To make periodic inspections (approximately at the date of each
     Draw Request) for the purpose of assuring that construction of the Facility
     to date is in accordance with the Plans and Specifications and to approve
     Company's then current Draw Request as being consistent with Company's
     obligations under this Agreement, including inter alia, an opinion as to
     Company's continued compliance with the provisions of Section 6.1 (g) (4)
     hereof.

     The fees of the Construction Inspector shall be paid by Company forthwith
upon billing therefor and expenses incurred by Bank on account thereof shall be
reimbursed to Bank forthwith upon request therefor, but neither Bank nor the
Construction Inspector shall have any liability to Company on account of (i) the
services performed by the Construction Inspector, (ii) any neglect or failure on
the part of the Construction Inspector to properly perform its services, or
(iii) any approval by the Construction Inspector of construction of the
Facility. Neither Bank nor the Construction Inspector assumes any obligation to
Company or any other person concerning the quality of construction of the
Facility or the absence therefrom of defects.

     Section 5.3.  No Liens. Bank shall have received evidence satisfactory to
Bank that since the last preceding disbursement from the Project Fund there has
been no change in the state of title to the Premises. Company shall pay the cost
of each title update required by Bank from the Title Company in connection with
each request for approval of disbursement and each endorsement to the Title
Policy.

     Section 5.4.  Request for Approval of Disbursement. In addition to
satisfaction of any procedures required by the terms of the Bond Documents, not
later than ten (10) business days before the date on which Company desires a
disbursement from the Project Fund, Company shall submit to Bank (i) a written
request for approval of the disbursement from the Project Fund (each a "draw
request"); (ii) a certification of Company that, among other things, Company has
paid or actually incurred the costs for which the request is being made; (iii) a
revised Project Budget showing the balance of each category of Project costs;
and (iv) a requisition in form satisfactory to Bank. Draw requests should not be
made more frequently than once per month. Bank will authorize disbursements of
amounts as approved by Bank for the cost of materials stored on site if and only
if such materials are (i) stored on site, (ii) physically secured against loss
or damage, including, but not limited to, theft and/or vandalism, (iii) clearly
identified as property of the Project and Company, and (iv) insured against loss
or damage in an amount equal to the full replacement cost of the stored
materials by an insurance company acceptable to Bank. No disbursements will be
made for materials not stored on site. Bank's "Use of Proceeds" form shall be
submitted for Bank's use to approve all draw requests submitted to the Trustee
for disbursements to be made from the Trust Estate (as defined in the Bond
Documents). All requests for disbursement with respect to construction costs
shall be accompanied by executed AIA Forms G-702 and G-703. Bank shall not be
required to approve disbursement of funds for any line item in excess of the
amount shown on Bank's Use of Proceeds form; however,

                                       18



Company may request an increase in a line item by reducing a budgeted line item.
Any such reallocation shall not cause a deficiency with respect to the
"Company's Equity" category, and must be substantiated by a cost saving in the
line item being reduced. All authorizations of draw requests shall be made
within ten (10) days after receipt of all information required by Bank to
approve the draw requests.

     Section 5.5.  Timing. Company will submit draw requests not more often than
once a month. Each disbursement shall not be more than ninety (90%) of the value
of construction work which has been completed and which is covered by such
disbursement until the Project is fully completed, and the balance will be paid
upon completion based on requirements set forth below. Retainage will be held on
a subcontract by subcontract basis, and released in connection with a particular
subcontract upon the expiration of the time for filing of any mechanic's lien
with respect to such subcontract provided all work thereunder has been completed
to the satisfaction of Bank and its inspector and a mechanic's lien waiver has
been received from the subcontractor for all their work done on the property.
There are no retainage requirements for "soft costs" on the Project. "Soft
costs" are defined as expenses which have no mechanic's lien rights on the
subject security (this does not include the contingency line item under the
Construction Contract). Upon completion of all work and prior to disbursement of
the retainage, Company shall submit evidence of substantial completion of the
Project, consisting of a certificate of the Project Architect and a certificate
of occupancy for the Facility. Notwithstanding the foregoing, Bank, in its sole
discretion, may elect to release the retainage prior to completion of the
Project.

     Section 5.6.  Supporting Documentation. Company shall furnish Bank with an
affidavit of Company identifying all subcontractors and materialmen who have
performed work or furnished materials in connection with the Project, together
with lien waivers from the Contractor and from all subcontractors and
materialmen who have provided notices of furnishing or who have performed work
or furnished materials in connection with the Project, current through the end
of the period covered by Company's most recent request, and such other evidence
or affidavits required by Bank at the time of each request to ensure that all
bills then due and payable for labor and materials used in constructing the
Facility and all bills due and payable to the Contractor, subcontractors,
materialmen and their respective subcontractors, laborers, and material
suppliers have been paid in full, except those bills to be paid with the
proceeds of such disbursement, and except for retainages. Bank shall be provided
with an update to the Title Policy as of the date of the draw request, showing
no additional liens or encumbrances upon the Premises.

     Section 5.7.  Material Damage. Notwithstanding any provision of this
Reimbursement Agreement to the contrary, if the Premises shall have suffered any
material damage or destruction prior to any disbursement from the Project Fund,
such damaged or destroyed portion shall be restored or replaced in a manner
acceptable to Bank without cost to Bank prior to the approval by Bank of any
further disbursement from the Project Fund.

     Section 5.8.  Other Disbursement Approval Conditions. Bank shall not be
obligated to approve any disbursement from the Project Fund if, at the time of a
proposed disbursement, (i) an Event of Default or an event which, with the
passage of time or service of notice, or both, would be an Event of Default
under any of the Credit Documents has occurred, or (ii) any representation or
warranty made by Company in any of the Credit Documents proves to be

                                       19



untrue in any material respect, or (iii) Bank determines, at any time, that the
Project will not be approved by the appropriate governmental regulatory
authorities.

     Section 5.9.  Permits. Company shall have delivered to Bank building,
zoning, and other required permits covering construction of the Facility
together with evidence satisfactory to Bank that all approvals required with
respect to the Premises from third parties or any governmental or
quasi-governmental authorities have been obtained or, in the case of approvals
relating to the operation of the Facility which cannot be obtained until
completion of construction, evidence satisfactory to Bank that such approvals
are obtainable.

     Section 5.10. Utilities. [Intentionally Omitted]

     Section 5.11. Conditions for Final Disbursement. Company will, on or prior
to the date of the final disbursement from the Project Fund, deliver or cause to
be delivered to Bank the following:

     (a)  If required by Bank, an additional endorsement to the Title Policy
          insuring the priority of the Mortgage in the full amount of the Letter
          of Credit against mechanic's and materialmen's liens (including
          inchoate liens) arising by reason of unpaid labor and materials
          supplied in connection with the construction and development of the
          Facility;

     (b)  An affidavit of Company stating that each person providing any
          material or performing any work in connection with the Premises has
          been (or will be, with the proceeds of and immediately following
          receipt by Company of such final disbursement) paid in full or bonded
          or insured to the reasonable satisfaction of Bank;

     (c)  Notification from the Construction Inspector to the effect that the
          improvements to the Premises have been completed in a good and
          workmanlike manner in accordance with the applicable Plans and
          Specifications;

     (d)  An as-built survey certified to the Bank and the Title Company showing
          the location of the completed improvements to the Premises; and

     (e)  A certificate of occupancy with respect to the completed improvements
          to the Premises.

     Section 5.12. Sufficiency of Project Fund to Complete Construction.
Notwithstanding anything contained in this Reimbursement Agreement to the
contrary, it is expressly understood and agreed that the Project Fund and equity
to be received from Company during construction (collectively, the "Construction
Proceeds") shall at all times be "in balance." The Construction Proceeds shall
be deemed to be "in balance" only at such time and from time to time, as Bank
may determine in Bank's sole discretion based on the certification of Bank's
Inspector that the then undisbursed portion of the Construction Proceeds equals
or exceeds the amount necessary for the timely and full payment of (i) all work
done and not theretofore paid for or to be done in connection with the
completion of the construction of the Facility in accordance with the Plans and
Specifications, including the installation of all fixtures and

                                       20



equipment required for operation of the Facility and the Premises, and (ii) all
other costs and expenses incurred and not theretofore paid for, or to be
incurred in connection with the Project and the Premises (to the extent revenues
will not, in Bank's sole judgment, be sufficient for the timely and full payment
of such costs and expenses). Company agrees that if the Construction Proceeds
are deemed not to be "in balance," Company shall, within thirty (30) days after
written request by Bank, deposit the deficiency with Bank (the "Deficiency
Deposit"), which Deficiency Deposit shall first be exhausted before any further
disbursement from the Construction Proceeds is made. Bank shall not be obligated
to make any disbursement if the Construction Proceeds are not in balance.

     Section 5.13. Contractors May Be Paid Directly. Bank reserves the right to
direct that the Trustee pay individual contractors directly upon the occurrence
of any Event of Default under the Credit Documents.

                                   SECTION SIX
                                   -----------

                                    COVENANTS

     Company covenants and agrees that, except as otherwise waived by Bank in
writing, from the date of this Reimbursement Agreement and until the obligations
of Company to Bank hereunder are satisfied in full, it will comply with the
following provisions:

     Section 6.1.  Accounting; Financial Statements and Other Information.
Company will maintain a standard system of accounting, established and
administered in accordance with GAAP consistently followed throughout the
periods involved, and will set aside on its books for each fiscal year the
proper amounts for depreciation, obsolescence, amortization, bad debts, current
and deferred taxes, and other purposes as shall be required by GAAP. Company
will deliver to Bank all in form and substance satisfactory to the Bank:

     (a)  As soon as practicable after the end of each fiscal quarter in each
          fiscal year, except the last, commencing with the fiscal quarter ended
          August 31, 2002 and in any event within forty five (45) days
          thereafter, financial statements of Company for such quarter,
          certified as complete and correct by the principal financial officer
          of Company, subject to changes resulting from year-end adjustments;

     (b)  Not later than August 15/th/ of each calendar year, a certificate on
          behalf of the Company of the chief financial officer to the effect
          that, to the best knowledge of the Company, no Default or Event of
          Default exists or, if any Default or Event of Default does exist,
          specifying the nature and extent thereof and the actions the Company
          proposes to take with respect thereto, which certificate shall set
          forth the calculation of the Funded Debt Ratio as well as the
          calculations required to establish compliance with the provisions of
          Section 6.25 hereof;

     (c)  As soon as practicable after the end of each fiscal year, commencing
          with the fiscal year ending on or about May 31, 2003 and in any event
          within one hundred twenty (120) days thereafter, (i) annual revenue
          and expense budget for the current fiscal year including the
          assumptions underlying the forecasts forming the basis thereof, and
          accounts receivable aging report, each prepared by Company,

                                       21



          together with copies of filed federal income tax returns including all
          schedules and (ii) annual statement of condition of Company as of the
          end of such year, and statements of cash flows and changes in
          financial position and/or changes in fund balances as applicable of
          Company for such year, setting forth in each case in comparative form
          the figures for the previous fiscal year, all in reasonable detail and
          certified as complete and correct by the principal financial officer
          of Company, accompanied by a report and an unqualified opinion of
          independent certified public accountants of recognized standing,
          selected by Company and satisfactory to Bank, which report and opinion
          shall be audited and prepared in accordance with generally accepted
          accounting principles;

     (d)  Promptly upon receipt thereof, copies of all other written reports
          submitted to Company by independent accountants in connection with any
          annual or interim audit of the corporate books of Company; and

     (e)  With reasonable promptness, such other data and information as from
          time to time may be reasonably requested by Bank, including Company's
          annual tax return.

     Section 6.2.  Insurance and Maintenance of Properties and Business. Company
will maintain, with financially sound and reputable insurers, insurance to
protect its properties and business against losses or damages of the kind
customarily insured against by corporations of established favorable reputation
engaged in the same or a similar business and similarly situated, including, but
not limited to, (a) adequate fire and extended coverage insurance in amounts and
issued by insurers acceptable to Bank, (b) necessary workers' compensation
insurance, (c) adequate public liability insurance, and (d) such other insurance
as may be required by law or as may be reasonably required in writing by Bank.
Company will, upon request, furnish to Bank a schedule of all insurance carried
by it, setting forth in detail the amount and type of such insurance. Company
will maintain, in good repair, working order and condition, all properties used
or useful in the business of Company.

     Section 6.3.  Payment of Indebtedness and Taxes. Company will pay (a) all
of its Indebtedness (not required to be subordinated hereunder) and other
obligations in accordance with normal terms or any applicable grace periods and
(b) all taxes, assessments, and other governmental charges levied upon any of
its respective properties or assets or in respect of its respective franchises,
business, income, or profits before the same become delinquent, except that no
such Indebtedness, obligations, taxes, assessments, or other charges need be
paid if contested by Company in good faith and by appropriate proceedings
promptly initiated and diligently conducted and if appropriate provision, if
any, as shall be required by GAAP, shall have been made therefor.

     Section 6.4.  Litigation; Adverse Changes. Company will promptly notify
Bank in writing of (a) any event which, if existing at the date hereof, would
require qualification of the representations and warranties set forth in
Sections 3.10 and 3.13 and (b) any material adverse change in the condition,
business, or prospects, financial or otherwise, of Company.

     Section 6.5.  Inspection. Company will make available for inspection during
regular business hours by duly authorized representatives of Bank, its books,
records, and properties

                                       22



when reasonably requested to do so, and will furnish Bank such information
regarding its respective business affairs and financial condition within a
reasonable time after written request therefor.

     Section 6.6.  Environmental Matters. Company:

     (a)  Shall comply with all Environmental Laws; and

     (b)  Shall deliver promptly to Bank (i) copies of any documents received
          from the United States Environmental Protection Agency or any state,
          county or municipal environmental or health agency, and (ii) copies of
          any documents submitted by Company or any of its Subsidiaries to the
          United States Environmental Protection Agency or any state, county or
          municipal environmental or health agency concerning its operations.

     Section 6.7.  Sale, Purchase of Assets. Company will not, directly or
indirectly, (a) purchase, lease, or otherwise acquire any assets except in the
ordinary course of business or as otherwise permitted in this Reimbursement
Agreement or (b) sell, lease, transfer, or otherwise dispose of any plant or any
manufacturing facility or other tangible assets, except for (i) tangible assets
sold for full and adequate consideration which an executive officer of Company
has determined to be worn out, obsolete, or no longer needed or useful in its
business, (ii) tangible assets sold in the ordinary course of business provided
that Company receives full and adequate consideration in exchange for such
assets sold. Notwithstanding anything to the contrary stated above, in any
instance when Company determines in good faith that any asset shall have become
inadequate, obsolete, worn-out, unsuitable, undesirable or unnecessary or should
otherwise be replaced, Company may remove such items, provided that Company, in
connection therewith:

     (a)  may remove, without substitution or payment, and without Bank's prior
          written consent, assets not in excess of $10,000.00 annually in the
          aggregate; or

     (b)  may substitute and install other assets having equal or greater value
          (but not necessarily the same function) in the operation of Company's
          business.

     Section 6.8.  Mortgage, Security Interests, and Liens. Company will not,
directly or indirectly, create, incur, assume, or permit to exist any mortgage,
security interest, lien, charge, encumbrance on, pledge or deposit of, or
conditional sale or other title retention agreement with respect to, any of the
Facility or the Pledged Collateral (herein called "Liens") other than:

     (a)  Liens for taxes, assessments, or governmental charges or levies the
          payment of which is not at the time required by law;

     (b)  Liens imposed by law, such as Liens of landlords, carriers,
          warehousemen, mechanics, and materialmen arising in the ordinary
          course of business for sums not yet due or being contested by
          appropriate proceedings promptly initiated and diligently conducted,
          provided other appropriate provision, if any, as shall be required by
          GAAP shall have been made therefor;

                                       23



     (c)  Liens incurred or deposits made in the ordinary course of business in
          connection with workers' compensation, unemployment insurance, and
          other types of social security, or to secure the performance of
          tenders, statutory obligations, and surety and appeal bonds, or to
          secure the performance and return of money bonds and other similar
          obligations, excluding obligations for the payment of borrowed money;

     (d)  Any judgment Lien, unless the judgment it secures shall, within thirty
          (30) days after the entry thereof, have been discharged or execution
          therefor stayed pending appeal, or shall have been discharged within
          thirty (30) days after the expiration of any such stay;

     (e)  Other Liens (other than mechanic's liens relating to the Project)
          incidental to the conduct of Company's business or ownership of
          properties and assets, which are not incurred nor granted in
          connection with the borrowing of money or the obtaining of advances or
          credits, and which do not in the aggregate materially detract from the
          value of its property or assets or materially impair the use thereof
          in the ordinary course of business; provided the aggregate amount of
          all such Liens by Company shall not exceed $10,000.00;

     (f)  Liens evidenced by the Security Agreement or the Bond Pledge, as well
          as any other Liens in favor of Bank or any affiliate of Bank.

     Section 6.9.  Borrowed Money. Company will not, directly or indirectly,
create, incur, or assume Indebtedness, or otherwise become, be, or remain liable
with respect to, any Indebtedness in excess of $100,000.00 in the aggregate
during any fiscal year, provided that the foregoing restrictions shall not apply
to:

     (a)  The Indebtedness evidenced hereunder and any other Indebtedness now or
          hereafter payable by Company to Bank or any affiliate of Bank;

     (b)  Existing Indebtedness which is reflected on Company's financial
          statements referred to in Section 3.9 hereof; or

     (c)  Indebtedness of Company evidenced by the Bonds.

     Section 6.10. Assumptions; Guaranties. Company will not assume, guarantee,
endorse, or otherwise become directly or contingently liable for (including,
without limitation, liable by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to, or otherwise invest
in any debtor or otherwise to assure the creditor against loss) any financial
obligation or Indebtedness of any other Person, except guaranties by endorsement
of negotiable instruments for deposit, collection, or similar transactions in
the ordinary course of business.

     Section 6.11. Mergers; Consolidation. Company will not merge or consolidate
with any Person, dissolve, wind up its affairs, or sell, assign, lease, or
otherwise dispose of (whether in one transaction or in a series of
transactions), all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person.

                                       24



     Section 6.12. INTENTIONALLY OMITTED.

     Section 6.13. Evidence of Payment of Costs. Company will furnish to Bank
copies of all affidavits, lien waivers, releases or other evidence reasonably
requested by Bank from time to time to establish that all bills for labor and
materials performed or furnished in connection with the Project and all bills of
the Contractor have been paid in full. Company will comply with Section 13 of
the New York Lien Law, as amended, regarding improvements on the Premises and
Company shall indemnify and hold Bank harmless from any and all claims for
unpaid amounts due for work or labor performed, or materials furnished, to the
Premises. Bank shall not be required to make any disbursements after the filing
or service upon Bank of any notice of mechanic's, materialman's or laborer's
lien until such lien is bonded or released.

     Section 6.14. Changes to Plans and Specifications, Construction Contract.
Company will not make or permit to be made (a) any material change in the Plans
and Specifications; (b) any changes in any line item of the Project budget, (c)
any material change in the terms and conditions of the Construction Contract or
(d) any change in the identity of the Contractor.

     Section 6.15. Construction and installation of Project Facility.

     (a)  Company will cause construction and installation of the Project
          Facility to be carried on continuously in phases and to be one hundred
          percent (100%) completed, lien free and ready for occupancy not later
          than the Completion Date, time being of the essence of this
          Reimbursement Agreement. The Project Facility will be constructed and
          installed substantially in accordance with the Plans and
          Specifications, and strictly in accordance with all applicable legal
          requirements. The Facility will be constructed entirely on the
          Premises and will not encroach upon or overhang any easement, building
          line or right of way and, when erected, will not violate applicable
          use or other restrictions of record. If, in Bank's judgment, the
          Project is not in conformity with the foregoing requirements, Bank
          shall notify Company in writing of any deficiencies and if such
          deficiencies are not corrected within thirty (30) days after the
          giving of such notice, Bank shall have the right to stop the work and
          order repair or reconstruction in accordance therewith and to withhold
          its consent to all further disbursements until the work is in
          satisfactory compliance with the Plans and Specifications and all
          legal requirements as required herein. Upon notice from Bank to
          Company, or Company's discovery irrespective of such notice, that the
          work is not in substantial conformity with the Plans and
          Specifications and/or in strict compliance with all legal
          requirements, Company shall commence correcting the deviation, as
          promptly as is practicable, and in any event within ten (10) days
          after the notice or discovery and shall prosecute such work diligently
          to completion, which, in no event, shall be later than twenty-five
          (25) days after such notice of discovery. No other notice shall be
          required to render such deviation an Event of Default (as hereinafter
          defined) hereunder;

     (b)  Company shall not authorize any material changes in the Plans and
          Specifications without the prior written consent of Bank except for
          change orders which have the

                                       25



          effect of increasing the cost of the Project either by itself or when
          aggregated with any prior change orders to which the Bank's consent
          was not required to be obtained pursuant to the provisions hereof by
          an amount not in excess of the Change Order Amount; and

     (c)  All materials incorporated in such construction will be purchased so
          that absolute ownership and title vest in Company upon delivery of
          such materials to the Facility.

     Section 6.16. Additional Funds. Company will, at any time or times upon
request of Bank, deposit with Bank such additional funds as are determined by
Bank or Bank's Inspector to be necessary (in excess of the proceeds of the
Bonds) to pay for completion of the Project and all costs and expenses related
thereto.

     Section 6.17. Evidence of Payment of Costs. Company will furnish to Bank
copies of all affidavits, lien waivers, releases or other evidence requested by
Bank from time to time to establish that all bills for labor and materials
performed or furnished in connection with the Project and all bills of the
Contractor and its subcontractors and material suppliers, have been paid in
full, except for retainages. Company shall indemnify and hold Bank harmless from
any and all claims for unpaid amounts due for work or labor performed, or
materials furnished, to the Premises. Bank shall not be required to make any
disbursements after the filing or service upon Bank of any notice of mechanic's,
materialman's or laborer's lien until such lien is bonded or released.

     Section 6.18. Entry; Correction of Defective Work. Company will allow Bank,
and Bank's officers, agents or employees, at all reasonable times, (a) the right
of entry and free access to the Premises to inspect all work done, labor
performed and materials furnished in furtherance of the Project and (b) to
require to be replaced or otherwise corrected any materials or work which fails
to comply with the Plans and Specifications.

     (a)  Section 6.19. INTENTIONALLY OMITTED.

     Section 6.20. Title. Company will keep the title to the Premises free and
clear of all liens, encumbrances, easements, restrictions and claims, except for
(a) the Permitted Encumbrances, (b) any lien, restriction or encumbrance created
in connection with this Reimbursement Agreement or otherwise approved by Bank,
and (c) real estate taxes and installments of special assessments, if any, which
are a lien but not yet due and payable.

     Section 6.21. Subsequent Appraisals. Company will immediately upon demand
reimburse Bank for the cost and expense of any appraisal of the Project obtained
by Bank on or after the date hereof if such appraisal is obtained by Bank
pursuant to the requirements of any law, statute, rule, regulation, interpretive
ruling, opinion, or directive of any state or federal governmental agency or
unit governing, regulating, or controlling the activities of Bank, whether now
existing or hereafter enacted.

     Section 6.22. Purchase of Materials, Equipment, etc. No materials,
equipment, personal property, or fixtures of any kind will be purchased or
acquired by Company for installation or use in or about the Facility under any
conditional sales contract or security

                                       26



agreement or any lease agreement, and all such materials, equipment, personal
property, and fixtures will be fully paid for before payment therefor becomes
past due or in any event within fifty (50) days after delivery thereof;
provided, however, that the foregoing shall not apply to amounts withheld and
unpaid on account of bona fide disputes with the suppliers.

     Section 6.23. Amendment of Contracts. Company will not without the prior
written consent of Bank modify or amend a material term contained in any
contract of Company relating to the development or financing of the Project,
including any such contracts described herein.

     Section 6.24. Payment Schedule of Bonds. Company shall cause the original
principal amount of the Bonds to be repaid not later than the scheduled payments
described in Exhibit B attached hereto and made a part hereof.

     Section 6.25. Financial Covenants.

     (a)  The Company shall maintain a minimum Fixed Charge Coverage Ratio of
     1.25 to 1.00 calculated as of each May 31st and November 30th/ /based upon
     the most recently concluded four fiscal quarters of the Company.

     (b)  The Company shall maintain a minimum Interest Coverage Ratio of 2.00
     to 1.00 calculated as of each May 31st and November 30th/ /based upon the
     most recently concluded four fiscal quarters of the Company.

     In calculating the foregoing ratios for the periods ending November 30,
     2002 and May 31st, 2003, (i) principal shall be determined using the
     current maturities of long term debt (in accordance with GAAP) on a
     pro-forma basis for the twelve months following the Closing Date, (ii) Cash
     Interest Expense shall be calculated as the pro-forma Cash Interest Expense
     for the twelve months following the Closing Date (utilizing the appropriate
     amortization schedules and interest rates for the Indebtedness, including
     the fixed rate achieved under the SWAP Agreement and all Letter of Credit
     Fees and related fees) and (iii) thereafter both principal and Cash
     Interest Expense shall be calculated on the actual principal and Cash
     Interest Expense, respectively, for the period in question.

     Section 6.26. Distributions. The Company shall not make any distributions
or payments of dividends.

     Section 6.27. Deposit and Cash Management Accounts. Company shall maintain
with the Bank all of its deposit accounts and cash management accounts.

     Section 6.28. Payments to Affiliates/other Persons; Debt Subordination.

     (a)  The Company shall not make any payments of any kind to any other
          Person, including any Affiliate of the Company, except for payments in
          the ordinary course of business.

     (b)  Any Indebtedness due and owing E Z-EM, Inc. from the Company
          (hereinafter the Subordinated Indebtedness") shall be fully
          subordinated to the repayment by the Company of all amounts due and
          owing to the Bank hereunder and under the

                                       27



          other Credit Documents. Provided that no Event of Default has
          occurred, the Company may make payments of principal with respect to
          the Subordinated Indebtedness on a semi-annual basis provided that
          after giving effect to such payment on a pro-forma basis, the Company
          shall be in full compliance with all of the terms, provisions and
          conditions set forth herein and in the other Credit Documents.

                                  SECTION SEVEN
                                  -------------

                                EVENTS OF DEFAULT

     Section 7.1.  Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default under this Reimbursement
Agreement:

     (a)  If Company fails to make or cause to be made any payment to Bank
          required to be made pursuant to the terms of the Credit Documents,
          including, but not limited to the Swap Documentation;

     (b)  If any representation or warranty made by Company or any officer
          thereof herein, in the Credit Documents or in any other written
          statement, certificate, report, or financial statement at any time
          furnished by or for Company in connection with any of the Credit
          Documents, proves to be incorrect in any material respect when made;
          or

     (c)  If Company shall fail to perform or observe any other provision,
          covenant, or agreement contained in this Reimbursement Agreement or in
          any other of the Credit Documents applicable to Company, and such
          failure remains unremedied for thirty (30) calendar days after Bank
          shall have given written notice thereof to Company; or

     (d)  If Company (i) fails to pay any Indebtedness for borrowed money (other
          than as arising under this Reimbursement Agreement) owing by Company
          when due, whether at maturity, by acceleration, or otherwise
          including, but not limited to, any Indebtedness due and owing to the
          Bank or any Affiliate thereof; or (ii) fails to perform any term,
          covenant, or agreement on its part to be performed under any agreement
          or instrument (other than this Reimbursement Agreement) evidencing,
          securing or relating to such Indebtedness when required to be
          performed, or is otherwise in default thereunder, if the effect of
          such failure is to accelerate, or to permit the holder(s) of such
          Indebtedness or the trustee(s) under any such agreement or instrument
          to accelerate, the maturity of such Indebtedness, unless waived by
          such holder(s) or trustee(s); or

     (e)  If Company discontinues business except as otherwise permitted under
          this Reimbursement Agreement; or

     (f)  If Company at any time hereafter sponsors or establishes any Plan and
          Company (i) fails to notify Bank in writing of such occurrence within
          the ten (10) days after such Plan is authorized by Company or (ii)
          fails to agree within a reasonable time

                                       28



          to such amendments to this Reimbursement Agreement regarding
          provisions with respect to ERISA that Bank customarily uses at that
          time in loan agreements with other borrowers; or

     (g)  An Indenture Default shall have occurred under the Indenture; or

     (h)  A Determination of Taxability shall have been made under the
          Indenture; or

     (i)  If Company (i) is adjudicated a debtor or insolvent, or ceases, is
          unable, or admits in writing its inability, to pay its debts as they
          mature, or makes an assignment for the benefit of creditors; (ii)
          applies for, or consents to, the appointment of any receiver, trustee,
          or similar officer for it or for all or any substantial part of its
          property, or any such receiver, trustee, or similar officer is
          appointed without the application or consent of Company; (iii)
          institutes, or consents to the institution of, by petition,
          application, or otherwise, any bankruptcy reorganization, arrangement,
          readjustment of debt, dissolution, liquidation, or similar proceeding
          relating to it under the laws of any jurisdiction; (iv) has any such
          proceeding described in clause (iii) instituted against it and such
          proceeding remains thereafter undismissed for a period of ninety (90)
          days; or (v) has any judgment, writ, warrant of attachment or
          execution or similar process issued or levied against a substantial
          part of its property and such judgment, writ, or similar process is
          not released, vacated, or fully bonded within ninety (90) days after
          its issue or levy.

     (j)  Except as otherwise permitted in this Reimbursement Agreement, if at
          any time, (i) the sum of the undisbursed portion of the Project Fund
          is less than the amount necessary for the timely and full payment of
          (a) all work done and not theretofore paid for or to be done in
          connection with the completion of the Project in accordance with the
          Plans and Specifications, including installation of all fixtures,
          furniture and equipment contemplated by the Plans and Specifications,
          and (b) all other costs incurred and not theretofore paid for, or to
          be incurred in connection with the Project, and (ii) Company fails
          within fifteen (15) Business Days after written request by Bank, to
          deposit the deficiency with Bank.

     Section 7.2.  No Waiver; Remedies. If an Event of Default occurs, Bank may
exercise any and all remedies, legal or equitable, to collect the amounts due
from Company, pursuant to this Reimbursement Agreement, and in its sole
discretion, may notify the Trustee that an Event of Default has occurred and may
instruct the Trustee to accelerate the principal amount of the Bonds. Upon
receipt by the Trustee of such instructions from Bank, the Bonds shall be paid
pursuant to the Indenture. No failure on the part of Bank to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right or remedy. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or equity.

                                       29



                                  SECTION EIGHT
                                  -------------

             TRANSFER, REDUCTION OR TERMINATION OF LETTER OF CREDIT

     Section 8.1.  Transfer of Letter of Credit; Reduction or Termination of
Letter of Credit and Related Matters.

     (a)  The Letter of Credit may be transferred in accordance with the
          provisions set forth therein;

     (b)  If Company shall be entitled to a credit against the principal amount
          of the Bonds prior to maturity (the "Credit") pursuant to an optional
          redemption of a portion of the Bonds or to the purchase of Bonds in
          the open market and cancellation of such Bonds in accordance with the
          provisions of the Indenture, and such amounts have been paid by or on
          behalf of Company other than by Bank, Company shall have the right at
          any time thereafter to reduce permanently, without penalty or premium,
          the Letter of Credit Commitment in the manner set forth below. The
          Letter of Credit Commitment will be reduced by an amount equal to the
          sum of the following corresponding reductions in the Principal
          Commitment and the Interest Commitment: (a) the respective Principal
          Commitment will be reduced pro rata by an amount equal to the amount
          of such Credit; and (b) the respective Interest Commitment will be
          reduced pro rata by an amount equal to ninety eight (98) days'
          interest on the amount of such Credit at the Maximum Rate (using a
          365-day divisor). The aforementioned reduction will occur not less
          than three (3) Business Days' after written notice to Bank,
          accompanied by the original Letter of Credit and the written
          certificate of the Trustee and Company stating that Company is
          entitled to such Credit and designating the amount of such Credit and
          the date upon which such credit shall become effective (which shall be
          a Business Day);

     (c)  If the Letter of Credit Commitment shall be reduced pursuant to
          paragraph (b) hereof, and Bank shall have received from the Trustee
          the outstanding Letter of Credit then, in substitution for the then
          outstanding Letter of Credit, a substitute irrevocable letter of
          credit, shall be issued dated such date, for an amount equal to the
          amount to which the Letter of Credit Commitment shall have been so
          reduced (also less the amount of any drawings upon the Letter of
          Credit which have not been reinstated under paragraph (d) hereof) but
          otherwise having terms identical to the then outstanding Letter of
          Credit;

     (d)  The obligation of Bank to honor Interest Drawings, under the Letter of
          Credit, up to the aggregate amount of the Interest Commitment (as same
          may have been reduced pursuant to subsection (b) of this Section 8.1
          or in connection with a Principal Drawing)will be automatically
          reinstated pro rata to the Interest Coverage Requirement on the date
          of payment of each Interest Drawing; and

     (e)  Bank shall reinstate pro rata amounts drawn under the Letter of Credit
          pursuant to a Remarketing Drawing as set forth in the Letter of
          Credit.

                                       30



     The Letter of Credit shall terminate automatically on the earliest of (i)
the payment by Bank to the Trustee of the final drawing available to be made
under the Letter of Credit; (ii) receipt by Bank of the Letter of Credit and a
certificate signed by an officer of the Trustee and an authorized representative
of Company stating that no Bonds remain outstanding; (iii) receipt by Bank of
the Letter of Credit and a certificate signed by an officer of the Trustee and
an authorized representative of Company stating that "A Substitute Letter of
Credit or a Substitute Credit Facility in substitution for the Letter of Credit
has been accepted by the Trustee and is in effect"; or (iv) the stated
Expiration Date. Notwithstanding the foregoing, the Expiration Date may be
extended at Bank's option pursuant to Section 2.5 hereof.

                                  SECTION NINE
                                  ------------

                                  MISCELLANEOUS

     Section 9.1.  Liability of Bank. Between Company and Bank, Company assumes
all risks of the acts or omissions of the Trustee and any transferee of the
Letter of Credit with respect to its use of the Letter of Credit or its
proceeds. Neither Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use which may be made of the Letter of Credit or its
proceeds or for any acts or omissions of the Trustee and any transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
inaccuracy of any of the statements or representations contained therein or of
any endorsement(s) thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (c) good faith
payment by Bank against presentation of documents which do not strictly comply
with the terms of the Letter of Credit, including any failure of any documents
to bear any reference or adequate reference to the Letter of Credit; or (d) any
other circumstances whatsoever in making or failing to make payment under the
Letter of Credit. In furtherance and not in limitation of the foregoing, Bank
may accept documents that appear on their face to be in order, and may assume
the genuineness and rightfulness of any signature thereon, without
responsibility for further investigation, regardless of any notice or
information to the contrary unless actually received by Bank; provided, that if
Bank shall receive written notification from both the Trustee and Company that
documents conforming to the terms of the Letter of Credit to be presented to
Bank are not to be honored, Bank agrees that it will not honor such documents
and Company shall indemnify and hold Bank harmless from such failure to honor.

     Section 9.2.  Right to Set-Off. Upon the occurrence of any Event of Default
hereunder Bank is hereby irrevocably authorized at any time and from time to
time without notice to Company, any such notice being expressly waived by
Company, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect or contingent or matured or unmatured, at any time held or owing by
Bank to or for the credit or the account of Company, or any part thereof in such
amounts as Bank may elect, against and on account of the obligations and
liabilities of Company to Bank hereunder and claims of every nature and
description of Bank against Company, whether arising hereunder or otherwise, as
Bank may elect, whether or not Bank has made any demand for payment and although
such obligations, liabilities and claims may be contingent or unmatured. Bank
agrees to notify in writing Company promptly of any such set-off and the
application made by Bank, provided that the failure to give such notice shall
not affect the validity of such set-off and

                                       31



application. The rights of Bank under this subsection are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which Bank may have.

     Section 9.3.  Additional Collateral. As additional security for this
Reimbursement Agreement, Company agrees that in the event that Trustee shall,
after the occurrence of a continuing Event of Default hereunder and acceleration
of the indebtedness evidenced hereby, draw upon the Letter of Credit to pay all
Bonds, Bank shall be and become the assignee of all rights and interests of the
Agency and the Trustee, all as provided more fully in the Indenture. Company
does hereby consent to such Assignment, and does agree to execute any and all
such documents, instruments and certificates in connection therewith as Bank
shall deem appropriate.

     Section 9.4.  Optional Redemption. If Company elects to exercise its option
to direct redemption of the Bonds by a prepayment, Company shall give Bank three
(3) days' prior written notice of such intent. Prior to notifying the Trustee of
its election to redeem the Bonds, Company shall deliver moneys (in good and
collected funds) in an amount equal to the amount necessary to effect the
redemption to Bank and Bank shall then inform the Trustee that those moneys are
on deposit and that the Trustee may draw on the Letter of Credit to effect that
redemption of the Bonds.

     Section 9.5.  Pledge of Bonds. Bonds which are not remarketed shall be held
by the Trustee, as agent for Bank, as security for the obligations of Company
under the Bond Pledge. Company hereby grants a lien on such Bonds while they are
so held by the Trustee.

     Section 9.6.  Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered, or mailed first-class postage prepaid, or receipt by fax,
independently confirmed by other than the Sender's machine:

     (a)  if to Bank, at:

          KeyBank National Association
          Standby Letter of Credit Processing and Service Center
          4910 Tiedeman Road - OH01510435
          Cleveland, Ohio 44114-2338
          Fax Number: (216) 813-3719

          and a copy to:

          KeyBank National Association
          66 South Pearl Street
          Albany, New York 12207
          Fax Number: (518) 257-8587
          Attention: Bryant J. Cassella, Vice President

          and to:

          Lemery Greisler LLC

                                       32



          10 Railroad Place
          Saratoga Springs, New York 12866
          Fax Number: (518) 581-8823
          Attention: James A. Carminucci, Esq.

or at such other address as may have been furnished for such purpose to Company
by Bank in writing; or

     (b)  if to Company, at:

          Angiodynamics, Inc.
          603 Queensbury Avenue
          Queensbury, New York 12804
          Fax Number: 518-798-3625
          Attention: Eamonn P. Hobbs and Joseph Gerardi

          and a copy to:

          Bond Schoeneck & King PLLC
          111 Washington Avenue
          Albany, New York 12210
          Fax Number: 518-462-7441
          Attention: Kevin J. Kelley, Esq.

or at such other address as may have been furnished for such purpose to Bank by
Company in writing.

     Section 9.7.  Survival of Representations and Warranties. All agreements,
representations and warranties contained in the Credit Documents shall survive
the execution and delivery of this Reimbursement Agreement, any investigation at
any time made by or on behalf of Bank and the issuance and acceptance of the
Letter of Credit. All statements contained in any certificates or other
instruments delivered by or on behalf of Company pursuant hereto shall
constitute representations and warranties by Company under this Reimbursement
Agreement.

     Section 9.8.  Payments on Holidays. Whenever any payment to be made
pursuant to this Reimbursement Agreement shall be stated to be due on a public
holiday in the State of New York, Saturday or Sunday, such payment may be made
on the next succeeding Business Day and such extension of time shall in such
case be included in computing interest, if any, in connection with such payment.

     Section 9.9.  Computation of Interest. Unless specified to the contrary
herein, all computations of interest hereunder shall be made on the basis of a
three hundred sixty (360) day year consisting of twelve (12) thirty (30) day
months.

     Section 9.10. Entire Agreement. The Credit Documents and the Letter of
Credit embody the entire agreement and understanding between Bank and Company
and supersede all

                                       33



prior agreements and understandings relating to the subject matter hereof,
provided, however, that in the event of any inconsistency between the Credit
Documents and the Commitment Letter, the Credit Documents shall control.

     Section 9.11. Parties in Interest. All the terms and provisions of this
Reimbursement Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.

     Section 9.12. Participations. Bank reserves the right to sell
participations in its obligations evidenced by the Letter of Credit, provided,
however, that Company shall continue to deal solely with Bank in such event, it
being understood and agreed that Company shall have no responsibility to such
participants.

     Section 9.13. Expenses. Company agrees, regardless of whether or not the
Bonds are eventually issued and sold and regardless of whether or not the
transactions contemplated hereby shall be consummated, to pay all reasonable
expenses incurred by Bank incident to such transactions in the preparation of
documentation relating thereto, including all fees and disbursement of the
counsel (whether special outside counsel or attorneys in its Law Department) to
Bank, for services to Bank. Company further agrees to pay all like expenses
incurred by Bank in connection with any amendments of or waivers or consents
requested by Company under or with respect to the Credit Documents or the
enforcement from time to time by Bank of its rights under and pursuant to the
Credit Documents.

     Section 9.14. Counterparts. This Reimbursement Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Reimbursement
Agreement by signing any such counterpart.

     Section 9.15. Governing Law. This Reimbursement Agreement shall be governed
exclusively by and construed in accordance with the applicable laws of the State
of New York.

     Section 9.16. Waiver of Jury Trial.

     (a)  Company, to the extent permitted by law, waives any right to have a
jury participate in resolving any dispute, whether sounding in contract, tort,
or otherwise, between Bank and Company arising out of, in connection with,
related to, or incidental to the relationship established between Company and
Bank in connection with this Reimbursement Agreement or any other agreement,
instrument or document executed or delivered in connection therewith or the
transactions related thereto. This waiver shall not in any way affect, waive,
limit, amend or modify Bank's ability to pursue remedies pursuant to any
confession of judgment or cognovit provision contained in this Reimbursement
Agreement, or any other agreement, instrument or document related thereto;

     (b)  Company waives demand, presentment for payment, notice of dishonor,
protest and notice of protest, and diligence in the collection and bringing suit
and agrees to the application of any bank balance as payment or part payment of
this Reimbursement Agreement, or as an offset thereto, and that Bank may extend
the time for payment, accept partial payment,

                                       34



take security therefor, or exchange or release any collateral, without
discharging or releasing Company; and

     (c)  Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the bringing of any suit, action
or proceeding arising out of or relating to this Reimbursement Agreement or any
other document related hereto in any New York state or federal court sitting in
New York. each of the parties hereto hereby waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court. Company confirms that the foregoing
waivers are informed and freely made.

                                       35



          IN WITNESS WHEREOF, the undersigned have caused this Reimbursement
Agreement to be executed as of the date first above written.

                                        ANGIODYNAMICS, INC.


                                        By:  /s/ Eamonn P. Hobbs
                                           -------------------------------------
                                             Eamonn P. Hobbs,
                                             President and Chief Executive
                                             Officer

                                        KEYBANK NATIONAL ASSOCIATION


                                        By:  /s/ Bryant J. Cassella, V.P.
                                           -------------------------------------
                                             Bryant J. Cassella, Vice President

STATE OF NEW YORK  )
                   )ss:
COUNTY OF Albany)

     On the 28 day of August in the year 2002 before me, the undersigned, a
notary public in and for said state, personally appeared EAMONN P. HOBBS,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s) or the person upon behalf of which the individual(s) acted,
executed the instrument.


                                                /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                        Notary Public

STATE OF NEW YORK  )
                   )ss:
COUNTY OF Albany)

     On the 28 day of August in the year 2002 before me, the undersigned, a
notary public in and for said state, personally appeared BRYANT J. CASSELLA,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s) or the person upon behalf of which the individual(s) acted,
executed the instrument.


                                                /s/ Carolyn A. Wildman
                                        ----------------------------------------
                                        Notary Public

[Notary Stamp]

                                       36



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                    EXHIBIT A
                                    ---------
A KeyCorp Bank

KEYBANK NATIONAL ASSOCIATION                                  SWIFT: KEYBUS33SLC
STANDBY LETTER OF CREDIT                                    TELEX: 212525 SNB UR
PROCESSING AND SERVICE CENTER                                PHONE: 216-813-3701
4910 TIEDEMAN ROAD - OH01510435                                FAX: 216-813-3719
CLEVELAND, OHIO 44144-2338, USA

         IRREVOCABLE TRANSFERABLE DIRECT PAY LETTER OF CREDIT NO.S305206

                                                           DATE: AUGUST 29, 2002

Beneficiary:                            Company:

THE HUNTINGTON NATIONAL BANK, AS        ANGIODYNAMICS, INC.
TRUSTEE                                 603 Queensbury Avenue
Corporate Trust Department              Queensbury, New York 12804
7 Easton Oval - EA4E63 (CN03/CSG)
Columbus, Ohio 43219

                                         Amount: USD $3,575,179.00

                                         Expiration Date: August 22, 2005

Dear Sirs:

     You, as Trustee under the Indenture of Trust, dated as of August 1, 2002
(the "Indenture"), between you and the Counties of Warren and Washington
Industrial Development Agency (the "Agency"), pursuant to which Three Million
Five Hundred Thousand and 00/100 Dollars ($3,500,000.00) in aggregate principal
amount of the Counties of Warren and Washington Industrial Development Agency
Multi-Mode Variable Rate Industrial Development Revenue Bonds (Angiodynamics,
Inc. Project-Letter of Credit Secured) Series 2002 (the "Bonds") are being
issued by the Agency, are hereby irrevocably authorized to draw on KeyBank
National Association pursuant to this Irrevocable Transferable Direct Pay Letter
of Credit, for the account of Angiodynamics, Inc., a Delaware corporation (the
"Company"), available by one or more of your drafts at sight, upon the terms and
conditions hereinafter set forth, an amount (subject to reinstatement as
hereinafter set forth) not exceeding Three Million Five Hundred Seventy Five
Thousand One Hundred Seventy Nine and 00/100 Dollars ($3,575,179.00) (the
"Letter of Credit Commitment") of which (a) an amount not exceeding Three
Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00) (the "Principal
Commitment") may be drawn to pay (i) the principal amount of the Bonds as and
when the same become due at maturity or by acceleration or by redemption, or
(ii) the purchase price or a portion of the purchase price equal to the
principal amount of any Bonds tendered for purchase by the Holders thereof, to
the extent remarketing proceeds are not available for


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 1 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

such purpose to pay the portion of the purchase price of any Bonds tendered for
purchase by the Holders thereof; and (b) an amount not exceeding Seventy Five
Thousand One Hundred Seventy Nine and 00/100 Dollars ($75,179.00) (the "Interest
Commitment") may be drawn with respect to the payment of (i) up to 98 days'
interest at a rate per annum of eight percent (8%) (using a 365-day divisor)
(the "Maximum Rate") to pay interest on the Bonds when due, or (ii) a portion of
the purchase price of up to 98 days' interest at a rate per annum equal to the
Maximum Rate for interest accrued, if any, on Bonds tendered for purchase by the
Holders thereof to the extent remarketing proceeds are not available for such
purpose, in each instance effective immediately and expiring at the close of
business on August 22, 2005(the "Expiration Date").

     Funds under this Letter of Credit are available to you against your
executed sight draft(s) drawn on us, stating on their face: "Drawn under KeyBank
National Association Irrevocable Transferable Direct Pay Letter of Credit No.
S305206" and accompanied by: (A) if the drawing is being made with respect to
the payment of principal on the Bonds, whether due at maturity, upon mandatory
or optional redemption or upon acceleration (a "Principal Drawing"), a
certificate signed by you in the form of Schedule 1 attached hereto
appropriately completed; (B) if the drawing is being made with respect to a
payment of interest on the Bonds when due (an "Interest Drawing"), a certificate
signed by you in the form of Schedule 2 hereto appropriately completed; and (C)
if a drawing is being made to pay the principal amount of and accrued interest
on any Bonds tendered for purchase by the Holders thereof, to the extent
remarketing proceeds are not available for such purpose (a "Remarketing
Drawing"), a certificate signed by you in the form of Schedule 3 hereto
appropriately completed. Presentation of such draft(s) and certificate(s) shall
be made at our office at Standby Letter of Credit Processing and Service Center,
4910 Tiedeman Road - OH01510435, Cleveland, Ohio 44144-2338, or at any other
office of ours which may be designated by us by written notice delivered to you.
We hereby agree that all drafts drawn under and in compliance with the terms of
this Letter of Credit and presented before 11:00 a.m. (New York City time) on a
Business Day will be duly honored by us by 2:00 p.m. (New York City time) on the
next Business Day after delivery of the draft(s) and certificate(s); provided,
however, if a Remarketing Drawing is presented and if conforming drawing
documentation is presented at or prior to 11:00 a.m. (New York City time) on a
Business Day, payments shall be made to you on such Business Day. Payments under
this Letter of Credit will be made only from our funds. If requested by you,
payment under this Letter of Credit may be made by wire transfer of federal
funds to your account at any Federal Reserve Bank, or by deposit of immediately
available funds into a designated account that you maintain with us. As used
herein, "Business Day" shall mean any day of the year other than (i) a Saturday
or Sunday, (ii) a day on which commercial banks located in Cleveland, Ohio, or
the city or cities in which are located the corporate trust offices of the
Trustee and the Tender Agent, and our office at which demands for payment under
this Letter of Credit are to be presented are authorized by law to close, or
(iii) any day on which the New York Stock Exchange is closed.

     Subject to the next succeeding paragraph, drawings hereunder shall not
exceed the Letter of Credit Commitment, as the Letter of Credit Commitment may
be reduced or reinstated pursuant hereto, and, except as hereinafter provided,
each drawing honored by us shall pro tanto reduce the amount available under
this Letter of Credit.

     We will reinstate amounts drawn hereunder pursuant to a Remarketing Drawing
hereunder, as to the Principal Commitment and the Interest Commitment, to the
extent that money is received by us (other


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 2 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

than from drawings under this Letter of Credit) from the Tender Agent described
in the Indenture, which proceeds were held by the Trustee or the Tender Agent
for the sole purpose of reimbursing us for all or a portion of the amounts drawn
pertaining to said Remarketing Drawing, or upon the Trustee's certification that
the Trustee or the Tender Agent is holding for our benefit Bonds together with
an amount of money, the aggregate amount of which is equal to or greater than
the principal portion of the Remarketing Drawing

     In connection with any Interest Drawing, the Letter of Credit will be
automatically decreased by the amount of such Interest Drawing and will be
automatically reinstated by the amount of such Interest Drawing on the day of
payment of such Interest Drawing. Upon presentation by you and payment by us of
any Principal Drawing, the Principal Commitment shall be automatically decreased
by an amount equal to the amount of such Principal Drawing and the Interest
Commitment shall be automatically reduced by an amount equal to ninety-eight
(98) days' interest at the Maximum Rate (using a 365-day divisor) on the amount
of such Principal Drawing.

     If the Company shall be entitled to a credit against the principal amount
of the Bonds prior to maturity (the "Credit") pursuant to an optional redemption
of a portion of the Bonds, or to the purchase of Bonds in the open market and
cancellation thereof in accordance with the provisions of the Indenture, and
such amounts have been paid by or on behalf of the Company other than by us, the
Company shall have the right at any time thereafter to reduce permanently,
without penalty or premium, the Letter of Credit Commitment in the manner set
forth below. The Letter of Credit Commitment will be reduced by an amount equal
to the sum of the following corresponding reductions in the Principal Commitment
and the Interest Commitment: (i) the Principal Commitment will be reduced to an
amount equal to the amount of such Credit, and (ii) the Interest Commitment will
be reduced by an amount equal to ninety eight (98) days' interest at the Maximum
Rate (using a 365-day divisor) on the amount of such Credit. The reduction in
the Letter of Credit Commitment pursuant to such Credit will occur not less than
three (3) Business Days after written notice to us, accompanied by this Letter
of Credit and your written certificate in the form of Schedule 4 attached
hereto, stating that the Company is entitled to such reduction and designating
the amount of such Credit and the date of the Business Day upon which such
reduction shall become effective. Upon such presentation we will either reissue
this Letter of Credit in the maximum amount available hereunder or otherwise
amend this Letter of Credit to reflect such maximum amount then available.

     Only you, as Trustee, may make a drawing under this Letter of Credit. Upon
the payment to you or your account of the amount specified in a sight draft
drawn hereunder, we shall be fully discharged of our obligation under this
Letter of Credit with respect to such sight draft, and we shall not thereafter
be obligated to make any further payments under this Letter of Credit in respect
of such sight draft to you or to any other person who may have made to you or
who makes to you a demand for payment of principal of or interest on any of the
Bonds.

     Except as otherwise provided herein, this Letter of Credit shall be
governed by and construed in accordance with the Uniform Customs and Practice
for Documentary Credits (1993 Revision), Publication No. 500 of the
International Chamber of Commerce (the "UCP"); provided, however, that
paragraphs d, e, f, g, h, i and j of Article 48 and the second sentence of
Article 17 shall not apply to this Letter of Credit. Furthermore, as provided in
the first sentence of Article 17 of the UCP, we assume no


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Authorized Signature                                        Authorized Signature

                                  Page 3 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

liability or responsibility for consequences arising out of the interruption of
our business by Acts of God, riots, civil commotions, insurrections, wars or any
other causes beyond our control, or strikes or lockouts. As to matters not
covered by the UCP and to the extent not inconsistent with the UCP or made
inapplicable by this Letter of Credit, this Letter of Credit shall be governed
by the laws of the State of Ohio, including the Uniform Commercial Code as in
effect in the State of Ohio.

     This Letter of Credit is transferable in its entirety (but not in part) to
any transferee who has succeeded you as Trustee under the Indenture, and such
transferred Letter of Credit may be successively transferred to any Successor
Trustee or Co-Trustee thereunder, but may not be assigned, transferred or
conveyed under any other circumstance. Transfer of the amount available under
this Letter of Credit to such transferee shall be effected by the presentation
to us of this Letter of Credit accompanied by a transfer fee of $500.00 (to be
paid by the Company) and the transfer form in the form attached hereto as
Schedule 5 and, unless this Letter of Credit is so presented to us, we shall
have no obligation hereunder to any transferee. Upon such transfer, we will
either reissue this Letter of Credit to the transferee in the maximum amount
then available hereunder or endorse the transfer on the reverse of this letter
of credit and forward it directly to the transferee with our customary notice of
transfer.

     Upon the earliest of (i) the honoring by us of the final drawing available
to be made hereunder; (ii) our receipt of this outstanding Letter of Credit and
a written certificate signed by your officer and an authorized representative of
the Company, in the form of Schedule 6 hereto appropriately completed, stating
that: (a) no Bonds are Outstanding within the meaning of the Indenture; and (b)
such officer and representative are duly authorized to sign such certificate on
behalf of you and the Company; (iii) our receipt of this Letter of Credit and a
written certificate signed by your officer and an authorized representative of
the Company, in the form of Schedule 7 hereto appropriately completed, stating
that: (a) a Substitute Letter of Credit or a Substitute Credit Facility has been
accepted by you and is in effect; and (b) such officer and representative are
duly authorized to sign such certificate on behalf of you and the Company; or
(iv) the Expiration Date, this Letter of Credit shall automatically terminate
and be delivered to us for cancellation.

     This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds or the Reimbursement Agreement),
except only the certificate(s) and the sight draft(s) referred to herein; and
any such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except for such certificate(s) and such sight
draft(s).


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Authorized Signature                                        Authorized Signature

                                  Page 4 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 1
                                   ----------

                    CERTIFICATE FOR THE PAYMENT OF PRINCIPAL
         OF THE COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT
                                     AGENCY
          MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BONDS
       (ANGIODYNAMICS, INC. PROJECT-LETTER OF CREDIT SECURED) SERIES 2002
                                  (THE "BONDS")

     The undersigned, a duly authorized signatory of The Huntington National
Bank, as Trustee (the "Trustee"), hereby certifies to KeyBank National
Association (the "Bank"), with reference to Irrevocable Transferable Direct Pay
Letter of Credit No. S305206 (the term "Letter of Credit" and other capitalized
terms used herein and not defined shall have their respective meanings as set
forth in the Letter of Credit) issued by Bank in favor of the Trustee, that:

     1.   The Trustee is the Trustee under the Indenture for the holders of the
Bonds.

     2.   The Trustee is making a drawing under the Letter of Credit with
respect to the payment of principal of the Bonds.

     3.   The amount of principal of the Bonds which will be due and payable on
_____________________, is $______________________.

     4.   The amount of the sight draft accompanying this Certificate
($___________________), together with the aggregate of all prior payments made
pursuant to Principal Drawings under this Letter of Credit for the payment of
the Bonds, does not exceed $____________________.

     5.   The amount of the sight draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Letter of Credit,
the Bonds and the Indenture.

     IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the _____ day of _____________________, ________.

                                        THE HUNTINGTON NATIONAL BANK, TRUSTEE,
                                        As Trustee


                                        By:
                                           -------------------------------------
                                        (Name and Title)


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Authorized Signature                                        Authorized Signature

                                  Page 5 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 2
                                   ----------

                     CERTIFICATE FOR THE PAYMENT OF INTEREST
       OF COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY
          MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BONDS
       (ANGIODYNAMICS, INC. PROJECT-LETTER OF CREDIT SECURED) SERIES 2002
                                  (THE "BONDS")

                                   ----------

     The undersigned, a duly authorized signatory of The Huntington National
Bank, Trustee (the "Trustee"), hereby certifies to KeyBank National Association
(the "Bank"), with reference to Irrevocable Transferable Direct Pay Letter of
Credit No. S305206 (the term "Letter of Credit" and other capitalized terms used
herein and not defined shall have their respective meanings as set forth in the
Letter of Credit) issued by Bank in favor of the Trustee, that:

     1.   The Trustee is the Trustee under the Indenture for the holders of the
Bonds.

     2.   The Trustee is making a drawing under the Letter of Credit with
respect to a payment of interest accrued on the Bonds on or prior to their
stated maturity date.

     3.   The amount of interest on the Bonds which will be due and payable on
________________, is $__________________.

     4.   The amount of the sight draft accompanying this Certificate
($_________________) does not exceed the amount available on the date hereof to
be drawn under the Letter of Credit in respect of the payment of interest
accrued on the Bonds on or prior to their stated maturity date.

     5.   The amount of the sight draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Letter of Credit,
the Bonds and the Indenture.

     6.   The amount of the Interest Commitment available after the draw, if
reinstated pursuant to the Letter of Credit, is $___________________.

     IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the ____ day of ___________________, _____.

                                        THE HUNTINGTON NATIONAL BANK, TRUSTEE,
                                        As Trustee


                                        By:
                                           -------------------------------------
                                        (Name and Title)


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Authorized Signature                                        Authorized Signature

                                  Page 6 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 3
                                   ----------

          CERTIFICATE FOR THE PAYMENT OF PURCHASE PRICE IN REMARKETING
       OF COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY
          MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BONDS
       (ANGIODYNAMICS, INC. PROJECT-LETTER OF CREDIT SECURED) SERIES 2002
                                  (THE "BONDS")

     The undersigned, a duly authorized signatory of The Huntington National
Bank, as Trustee (the "Trustee"), hereby certifies to KeyBank National
Association (the "Bank"), with reference to KeyBank National Association
Irrevocable Transferable Direct Pay Letter of Credit No. S305206 (the term
"Letter of Credit" and other capitalized terms used herein and not defined shall
have their respective meanings as set forth in the Letter of Credit) issued by
Bank in favor of the Trustee, that:

     1.   The Trustee is the Trustee under the Indenture for the holders of the
Bonds. The total amount of Bonds outstanding (as defined in the Indenture) is
$________________.

     2.   The Trustee is making a drawing under the Letter of Credit at the
written request of the Remarketing Agent (as defined in the Indenture), to pay,
pursuant to the terms of the Indenture, the purchase price equal to the
principal amount of those Bonds which the Remarketing Agent has been unable to
remarket and the interest accrued on such Bonds but not paid.

     3.   The Trustee: (a) is delivering or causing to be delivered to Bank, or
its designated agent, of the Bonds, registered in the name of the Company as
Company and Bank as pledgee; referred in this second paragraph hereof; (b)
acknowledges the pledge by the Company to Bank of the Bonds delivered pursuant
to subparagraph (a); and (c) agrees that all payments of principal, premium, if
any, and interest made on such Bonds shall be made to Bank, so long as Bank is
the pledgee of such Bonds.

     4.   The principal amount of the Bonds delivered to the Remarketing Agent
which the Remarketing Agent has been unable to remarket is $____________. The
amount of interest upon such Bonds which has accrued but is unpaid is
$____________. The amount of the draft accompanying this Certificate does not
exceed such amount due as the purchase price of the Bonds corresponding to such
principal amount of, and interest accrued on, such Bonds.

     Upon receipt by the Trustee of the amount demanded hereby, (a) the Trustee
will deliver it to Bond holders only for the purpose of payment of the purchase
price of the Bonds referenced in the second paragraph hereof, (b) no portion of
it shall be applied by the Trustee for any other purpose, and (c) no portion of
it shall be commingled with other funds held by the Trustee. This drawing is
made in accordance with the provisions of the Indenture and the Letter of
Credit.

     The amount of the draw accompanying this Certificate was computed in
accordance with the terms and conditions of the Bonds and the Indenture.


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Authorized Signature                                        Authorized Signature

                                  Page 7 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

     IN WITNESS WHEREOF, the Trustee has executed and delivered this certificate
as of the _____ day of _____________________, ______.

                                        THE HUNTINGTON NATIONAL BANK, TRUSTEE,
                                        As Trustee


                                        By:
                                           -------------------------------------
                                                    (Name and Title)


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 8 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 4
                                   ----------

                           CERTIFICATE AS TO REDUCTION
                         OF LETTER OF CREDIT COMMITMENT
         COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY
          MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BONDS
       (ANGIODYNAMICS, INC. PROJECT-LETTER OF CREDIT SECURED) SERIES 2002
                                  (THE "BONDS")

KeyBank National Association
Standby Letter of Credit
Processing and Service Center
4910 Tiedeman Road -OH01510435
Cleveland, Ohio 44144-2338,

          RE:  KeyBank National Association Irrevocable Transferable Direct Pay
               Letter of Credit No. S305206

Ladies and Gentlemen:

     The undersigned, a duly authorized signatory of The Huntington National
Bank, as Trustee (the "Trustee"), and a duly authorized representative of
Angiodynamics, Inc. (the "Company"), hereby certifies to KeyBank National
Association, with reference to KeyBank National Association Irrevocable
Transferable Direct Pay Letter of Credit No. S305206 (the term "Letter of
Credit" and other capitalized terms used herein and not defined shall have their
respective meanings as set forth in the Letter of Credit) issued by KeyBank
National Association in favor of the Trustee, that:

     A.   The Trustee is the Trustee under the Indenture for the holders of the
          Bonds.

     B.   The Company is entitled to a reduction in the Letter of Credit
          Commitment. The Letter of Credit Commitment shall be reduced,
          effective as of _________ ________________, as follows:

          1.   The Principal Commitment shall be reduced to $______________.

          2.   The Interest Commitment shall be reduced to $_______________.

     C.   The undersigned officer and representative are duly authorized to sign
          this certificate on behalf of the Trustee and on behalf of the
          Company, respectively.


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Authorized Signature                                        Authorized Signature

                                  Page 9 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

     IN WITNESS WHEREOF, the Trustee and the Company have executed and delivered
this Certificate as of the ____ day of __________________, ____.

     TRUSTEE:                           THE HUNTINGTON NATIONAL BANK, as Trustee


                                        By:
                                           -------------------------------------

                                        Title:
                                              ----------------------------------

     COMPANY:                           ANGIODYNAMICS, INC.


                                        By:
                                           -------------------------------------

                                        Title:
                                              ----------------------------------


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Authorized Signature                                        Authorized Signature

                                  Page 10 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 5
                                   ----------

                             CERTIFICATE OF TRANSFER
                             -----------------------

KeyBank National Association
Standby Letter of Credit
Processing and Service Center
4910 Tiedeman Road - OH01510435
Cleveland, Ohio 44144-2338
                                                      Date:_______________, 20__

     RE:  KeyBank National Association Irrevocable Transferable Direct Pay
          Letter of Credit No. S305206

Gentlemen:

     For value received, the undersigned beneficiary hereby irrevocably
transfers to the following (the "Transferee"):

                         (Name of Transferee)

                         (Address)

all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety.

     By this transfer, all rights of the undersigned beneficiary in the Letter
of Credit are transferred to the Transferee, and the Transferee shall have the
sole rights as beneficiary thereof, including sole rights relating to any
amendments of the Letter of Credit, whether increases in the amount to be drawn
thereunder, extensions of the Expiration Date thereof, or other amendments, and
whether such amendments now exist or are made after the date hereof. All
amendments of the Letter of Credit are to be advised directly to the Transferee
without necessity of any consent of or notice to the undersigned beneficiary.
The undersigned hereby certifies that the Transferee has become successor
Trustee under the Indenture of Trust dated as of August 1, 2002, between the
undersigned and the Counties of Warren and Washington Industrial Development
Agency (the "Agency"), relating to the Counties of Warren and Washington
Industrial Development Agency Multi-Mode Variable Rate Industrial Development
Development Revenue Bonds (Angiodynamics, Inc. Project-Letter of Credit Secured)
Series 2002 and has accepted such appointment in writing.

     We enclose the Company's check in the amount of $500.00 representing your
transfer fee.


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Authorized Signature                                        Authorized Signature

                                  Page 11 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

     The original of the Letter of Credit is returned herewith, and in
accordance therewith we ask you to endorse the within transfer on the reverse
thereof and forward it directly to the Transferee with your customary notice of
transfer, or issue a replacement Letter of Credit to the Transferee as provided
therein.

                                        Very truly yours,

                                        THE HUNTINGTON NATIONAL BANK, TRUSTEE,
                                        as Trustee


                                        By:
                                           -------------------------------------
                                        (Authorized Officer)


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Authorized Signature                                        Authorized Signature

                                  Page 12 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 6
                                   ----------

                    CERTIFICATE THAT NO BONDS ARE OUTSTANDING

KeyBank National Association
Standby Letter of Credit
Processing and Service Center
4910 Tiedeman Road - OH01510435
Cleveland, Ohio 44144-2338,

     RE:  KeyBank National Association Irrevocable Transferable Direct Pay
          Letter of Credit No. S305206

Ladies and Gentlemen:

     The undersigned, a duly authorized signatory of The Huntington National
Bank, as Trustee (the "Trustee"), and ______________________, a duly authorized
representative of Angiodynamics, Inc. (the "Company"), hereby certify to KeyBank
National Association, with reference to KeyBank National Association Irrevocable
Transferable Direct Pay Letter of Credit No. S305206 (the term "Letter of
Credit" and other capitalized terms used herein and not defined shall have their
respective meanings as set forth in the Letter of Credit) issued by KeyBank
National Association in favor of the Trustee, that:

     1.   The Trustee is the Trustee under the Indenture for the holders of the
Bonds.

     2.   No Bonds are Outstanding within the meaning of the Indenture.

     3.   The undersigned officers and representatives are duly authorized to
sign this certificate on behalf of the Trustee and on behalf of the Company,
respectively.


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 13 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

     IN WITNESS WHEREOF, the Trustee and the Company have executed and delivered
this Certificate as of the _______ day of _________________, ____.

                                        THE HUNTINGTON NATIONAL BANK, TRUSTEE,
                                        as Trustee


                                        By:
                                           -------------------------------------
                                        (Name and Title)

                                        ANGIODYNAMICS, INC.


                                        By:
                                           -------------------------------------

                                        Title:
                                              ----------------------------------


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 14 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

                                   SCHEDULE 7
                                   ----------

                     CERTIFICATE OF ACCEPTANCE OF ALTERNATE
                                LETTER OF CREDIT

KeyBank National Association
Standby Letter of Credit
Processing and Service Center
4910 Tiedeman Road - OH01510435
Cleveland, Ohio 44144-2338,

     RE:  KeyBank National Association Irrevocable Transferable Direct Pay
          Letter of Credit No. S305206

Ladies and Gentlemen:

     The undersigned, a duly authorized signatory of The Huntington National
Bank, as Trustee (the "Trustee"), and ____________________, a duly authorized
representative of Angiodynamics, Inc. (the "Company"), hereby certify to KeyBank
National Association, with reference to KeyBank National Association Irrevocable
Transferable Direct Pay Letter of Credit No. S305206 (the term "Letter of
Credit" and other capitalized terms used herein and not defined shall have their
respective meanings as set forth in the Letter of Credit) issued by KeyBank
National Association in favor of the Trustee, that:

     1.   The Trustee is the Trustee under the Indenture for the holders of the
Bonds.

     2.   An Substitute Letter of Credit or a Substitute Credit Facility in
substitution for the Letter of Credit has been accepted by the Trustee.

     3.   The undersigned officer and representative are duly authorized to sign
this certificate on behalf of the Trustee and on behalf of the Company,
respectively.


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 15 of 16



   KeyBank National Association Irrevocable Transferable Direct Pay Letter of
                               Credit No. S305206

     IN WITNESS WHEREOF, the Trustee and the Company have executed and delivered
this certificate as of the _____ day of ___________________, ____.

                                        THE HUNTINGTON NATIONAL BANK, as
                                        TRUSTEE, as Trustee


                                        By:
                                           -------------------------------------
                                        (Name and Title)

                                        ANGIODYNAMICS, INC.


                                        By:
                                           -------------------------------------

                                        Title:
                                              ----------------------------------


- --------------------------------------    --------------------------------------
Authorized Signature                                        Authorized Signature

                                  Page 16 of 16



                                   EXHIBIT "B"

                          PRINCIPAL REDUCTION SCHEDULE


                                       B-1



                                                                   Exhibit 10.17

                   FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT

     THIS FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT (the "Amendment") dated as
of December 29, 2003 by and between ANGIODYNAMICS, INC., a Delaware corporation,
with its principal place of business at 603 Queensbury Avenue, Queensbury, New
York 12804 (the "Company"), and KEYBANK NATIONAL ASSOCIATION, a national banking
association, having an office at 66 South Pearl Street, Albany, New York 12207
(the "Bank");

                              W I T N E S S E T H:

     WHEREAS, in connection with the issuance of the Letter of Credit (as
hereinafter defined), the Company and the Bank executed and delivered a certain
reimbursement agreement dated as of August 1, 2002 (the "Reimbursement
Agreement") (all terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Reimbursement Agreement); and

     WHEREAS, the parties desire to modify the Reimbursement Agreement in the
manner hereinafter set forth; and

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

     1.   Section 1.1 of the Reimbursement Agreement is hereby amended to
include the following defined terms to appear in their proper alphabetical order
with Section 1.1:

     "Senior Funded Indebtedness" shall mean total Indebtedness less any
subordinated Indebtedness.

     "Senior Leverage Ratio" shall mean the ratio of the Company's (i) Senior
Funded Indebtedness to (ii) EBITDA less Unfunded Capital Expenditures,
calculated in accordance with GAAP.

     2.   Section 1.1 of the Reimbursement Agreement is hereby amended to delete
the defined terms "Interest Coverage Ratio" and "Funded Debt Ratio".

     3.   All references in the Reimbursement Agreement to the term "Funded Debt
Ratio" shall be amended to instead refer to "Senior Leverage Ratio".

     4.   Subsection (b) of Section 6.25 of the Reimbursement Agreement is
hereby amended and restated in its entirety to read as follows:

          "(b) The Company shall not allow its Senior Leverage Ratio to exceed
          2.75 to 1.00 calculated as of each May 31st and November 30/th/ based
          upon the most recently concluded four fiscal quarters of the Company.

     5.   The Company hereby represents and warrants as follows:

          (i)   no Event of Default has occurred and no event has occurred with
which the passage of time or the giving of notice or both would constitute an
Event of Default;



          (ii)  there exist no defenses or offsets to the obligations of the
Company under the Reimbursement Agreement; and

          (iv)  the execution and delivery of this Amendment have been approved
by all necessary corporate action on the part of the Company.

     6.   As modified hereby, all of the terms, provisions and conditions of the
Loan Agreement are hereby ratified and confirmed.

     7.   The Amendment may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the day and year first above written.

                                        ANGIODYNAMICS, INC.


                                        By: /s/ Joseph G. Gerardi
                                           -------------------------------------
                                            Joseph G. Gerardi, Vice President
                                            and Controller


                                        KEYBANK NATIONAL ASSOCIATION


                                        By: /s/ Bryant J. Cassella
                                           -------------------------------------
                                            Bryant J. Cassella, Senior Vice
                                            President



                                                                   Exhibit 10.20

                                    AGREEMENT


     THIS AGREEMENT (the "Agreement"), effective as of January 1, 2004 by and
between AngioDynamics, Inc., a Delaware corporation (the "Company") and Donald
A. Meyer ("Meyer").

     WHEREAS, Meyer is a current member of the Board of Directors of the Company
(the "Board") and has served as a member of the Board for the past 8 years; and

     WHEREAS, the Company recognizes Meyer's past contributions to the Company
and wants to provide for the continuation of his contributions to the Company.

     NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:

1.   Position. Meyer shall provide to the Company certain services, including
     --------
     (i) serving as Trustee of the Company's 401(k) savings plan, and (ii) such
     other services as may reasonably be requested by the Company from time to
     time (collectively, the "Services").

2.   Independent Contractor. Meyer shall perform the Services as an independent
     ----------------------
     contractor and consultant and not as an employee of the Company. The
     Company shall not withhold any amounts for taxes from payments made to
     Meyer. Meyer shall be responsible for the payment of all taxes in
     connection with amounts paid to him by the Company and shall indemnify the
     Company and hold the Company harmless with respect to the payment of all
     such taxes.

3.   Board of Directors. Meyer hereby agrees to resign from the Board when his
     ------------------
     replacement is selected by the Board. Except as provided in Section 5,
     Meyer shall not receive any compensation for his continued service as a
     member of the Board from the effective date of this Agreement until his
     resignation.

4.   Term. The term of this Agreement shall be thirty-six (36) months,
     ----
     commencing on January 1, 2004 and terminating on December 31, 2006 (the
     "Term"). Notwithstanding the foregoing, this Agreement shall terminate upon
     the earliest to occur of (i) a change in control (as defined in the
     Company's standard change in control agreement), (ii) Meyer's death or
     (iii) thirty days after the proper giving of notice by one party of a
     material breach of this Agreement by the other party (unless such material
     breach is cured during such 30-day period).

5.   Compensation. In consideration of Meyer's continued service as a member of
     ------------
     the Board until January 24, 2004, and his performance of the Services,
     Meyer shall receive thirty-six (36) equal monthly payments of $3,500.00,
     payable on the first day of each month commencing January 1, 2004. Meyer
     shall continue to receive such payments upon his disability, but such
     payments shall cease upon the end of the month in which a change in control
     or Meyer's death occurs. Except as set forth herein, Meyer shall not
     receive any additional compensation or payments.

6.   Stock Options. The Company shall take all action deemed necessary and
     -------------
     appropriate so that all Company stock options held by Meyer as of December
     31, 2003 shall expire on the earlier of (i) December 31, 2006, or (ii) the
     10 year anniversary of the original





                                     - 2 -


     grant date of each stock option, provided, that in the event this Agreement
     is terminated, all vested stock options shall expire ninety (90) days after
     the date of termination.

7.   Business Expenses. In addition to the Compensation provided for in Section
     -----------------
     5, during the Term the Company shall reimburse Meyer for reasonable travel
     expenses incurred consistent with the Company's policies, in connection
     with his performance of the Services.

8.   Confidentiality. Meyer shall execute the Company's standard Nondisclosure
     ---------------
     and Assignment of Inventions Agreement (the "NDA"), which shall prohibit
     his use and disclosure of confidential information during the Term and
     thereafter until such information no longer constitutes confidential
     information.

9.   Non-Competition. Provided that the Company shall not be in material breach
     ---------------
     of its obligations under paragraphs 1, 3, 5 and 6 hereof (it being
     understood that no such material breach shall be deemed to have occurred
     until and unless Meyer has provided the Company with written notice of such
     material breach and the Company has not cured such breach in all material
     respects within thirty days after receipt of such notice), Meyer agrees
     that during the Term and for a period of twelve (12) months following the
     termination or expiration of this Agreement, he shall not in any state or
     territory of the United States in which the Company conducts business,
     directly or indirectly, own, manage, operate, control, be employed by, be a
     shareholder of, be an officer of, participate in, contract with or be
     connected in any capacity or any manner with any business that directly or
     indirectly (whether through related companies or otherwise) manufactures,
     develops, designs, distributes, sells, or markets any product, device or
     equipment substantially similar to any product, device or equipment which
     during the Term has been manufactured, marketed, sold or distributed by the
     Company or any product, device or equipment (unless such product, device or
     equipment has been abandoned by the Company or such product, device or
     equipment is not competitive with the Company's business) which the Company
     was developing or designing during the Term for future manufacturing,
     marketing, sale and distribution; provided, however that nothing herein
     shall prohibit Meyer from owning, directly or indirectly, as a passive
     investor, in the aggregate not more than one percent (1%) of the
     outstanding publicly traded stock of any company that competes with the
     Company. For purposes of this Section 10, E-Z-EM, Inc. shall not be deemed
     a competitor and nothing herein shall prevent Meyer from continuing to
     provide services to E-Z-EM, Inc.

10.  Miscellaneous.
     -------------

     10.1. Notices. All notices, requests and other communications hereunder
           -------
          must be in writing and shall be deemed to have been duly given only if
          delivered personally against written receipt or by facsimile
          transmission or mailed by prepaid first class certified mail, return
          receipt requested, or mailed by overnight courier prepaid, to the
          parties at the following addresses or facsimile numbers:



                                     - 3 -


               If to the Company:

               AngioDynamics, Inc.
               603 Queensbury Avenue
               Queensbury, NY 12804
               Attn:  President & CEO
               Facsimile:  (518) 798-1215


               If to Meyer:

               Donald A. Meyer
               1261 Vallecita Drive
               Santa Fe, NM  87501
               Facsimile:  (505) 982-2828

               Any party may from time to time change its address or
               facsimile number for the purpose of notices to that party
               by a similar notice specifying a new address or facsimile
               number, but no such change shall be deemed to have been
               given until it is actually received by the party sought to
               be charged with its contents.

         10.2. Entire Agreement. This Agreement supersedes all prior discussions
               ----------------
               and agreements between the parties with respect to the subject
               matter hereof and thereof and contain the sole and entire
               agreement between the parties hereto with respect to the subject
               matter hereof and thereof. Without limiting the foregoing, all
               prior agreements between the Company and Meyer provided, however,
               the foregoing shall not apply to options, vested or unvested,
               previously granted to Meyer by the Company or AngioDynamics, Inc.

         10.3. Waiver. Any term or condition of this Agreement may be waived at
               ------
               any time by the party that is entitled to the benefit thereof,
               but no such waiver shall be effective unless set forth in a
               written instrument duly executed by or on behalf of the party
               waiving such term or condition. No waiver by any party of any
               term or condition of this Agreement, in any one or more
               instances, shall be deemed to be or construed as a waiver of the
               same or any other term or condition of this Agreement on any
               future occasion. All remedies, either under this Agreement or by
               law or otherwise afforded, shall be cumulative and not
               alternative.

         10.4. Amendment. This Agreement may be amended, supplemented or
               ---------
               modified only by a written instrument duly executed by or on
               behalf of each party hereto.

         10.5. No Third Party Beneficiary. The terms and provisions of this
               --------------------------
               Agreement are intended solely for the benefit of each party
               hereto and their respective successors or permitted assigns, and
               it is not the intention of the parties to confer third-party
               beneficiary rights, and this Agreement does not confer any such
               rights, upon any other person.



                                      - 4 -


         10.6. Assignment; Binding Effect. Neither this Agreement nor any right,
               --------------------------
               interest or obligation hereunder of Meyer may be assigned (by
               operation of law or otherwise) without the prior written consent
               of the Company and any attempt to do so shall be void.

         10.7. Invalid Provisions. If any provision of this Agreement is held to
               ------------------
               be illegal, invalid or unenforceable under any present or future
               law, and if the rights or obligations of any party hereto under
               this Agreement shall not be materially and adversely affected
               thereby, (a) such provision shall be fully severable, (b) this
               Agreement shall be construed and enforced as if such illegal,
               invalid or unenforceable provision had never comprised a part
               hereof, (c) the remaining provisions of this Agreement shall
               remain in full force and effect and shall not be affected by the
               illegal, invalid or unenforceable provision or by its severance
               herefrom and (d) in lieu of such illegal, invalid or
               unenforceable provision, there shall be added automatically as a
               part of this Agreement a legal, valid and enforceable provision
               as similar in terms to such illegal, invalid or unenforceable
               provision as may be possible.

         10.8. Governing Law. This Agreement shall be governed by and construed
               -------------
               in accordance with the domestic laws of the State of New York,
               without giving effect to any choice of law or conflict of law
               provision or rule (whether of the State of New York or any other
               jurisdiction) that would cause the application of the laws of any
               jurisdiction other than the State of New York.

         10.9. Dispute Resolution. Any dispute, controversy or claim between the
               ------------------
               Company and Meyer arising from or in connection with this
               Agreement (a "Dispute") regardless of the magnitude thereof or
               the amount in controversy or whether such Dispute would otherwise
               be considered justiciable or ripe for resolution by a court or
               arbitral tribunal, shall be submitted to, and finally determined
               by, arbitration in accordance with the AAA Commercial Rules. The
               arbitration shall be held in New York, New York. Any award
               pursuant to such arbitration may be enforced in any court having
               competent jurisdiction. The prevailing party shall recover its
               legal fees and costs from the non-prevailing party.

        10.10. Construction. The parties hereto agree that this Agreement is
               ------------
               the product of negotiation between sophisticated parties and
               individuals, all of whom were represented by counsel, and each of
               whom had an opportunity to participate in and did participate in,
               the drafting of each provision hereof. Accordingly, ambiguities
               in this Agreement, if any, shall not be construed strictly or in
               favor of or against any party hereto but rather shall be given a
               fair and reasonable construction without regard to the rule of
               contra proferentum.
               ------------------

        10.11. Counterparts. This Agreement may be executed in any number of
               ------------
               counterparts, each of which shall be deemed an original, but all
               of which together shall constitute one and the same instrument.

        10.12. Captions. Captions herein are inserted for reference purposes
               --------
               only and shall not affect the interpretation or construction of
               this Agreement.



                                     - 5 -


        10.13. Further Assurances. Each party hereto, at its own expense, shall
               ------------------
               deliver all such further instruments and documents as may
               reasonably be requested by the other party in order to fully
               carry out the intent and accomplish the purposes of the
               transactions referred to therein.


            [The remainder of this page is intentionally left blank]



                                     - 6 -


     IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the date first above written.


E-Z-EM, INC.



By: /s/ Eamonn P. Hobbs                        /s/ Donald A. Meyer
    -------------------                        -------------------
Name: Eamonn P. Hobbs                          Donald A. Meyer
Its:  President & CEO



                                                                    Exhibit 21.1

                                  Exhibit 21.1

                         Subsidiaries of the Registrant
                         ------------------------------

1.   Leocor, Inc., Delaware

Consent of Grant Thornton LLP
Exhibit 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated July 3, 2003, accompanying the consolidated financial statements of AngioDynamics, Inc. and Subsidiaries, a wholly-owned subsidiary of E-Z-EM, Inc., contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/s/ GRANT THORNTON LLP

Melville, New York

March 3, 2004