PARLEX CORP
EXHIBIT 10Z
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<TYPE>EX-10
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<FILENAME>parl-10z.txt
<DESCRIPTION>EXHIBIT 10Z
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Exhibit 10-Z

                                                     As of October 31, 2002


Parlex Corporation
One Parlex Place
Methuen, MA  01844

Attn:  Peter J. Murphy, President

Re:    Third Amendment of Loan Agreement dated March 1, 2000

Gentlemen:

      Reference is made to that certain Loan Agreement dated March 1, 2000,
as amended (the "Agreement") by and between Parlex Corporation (the
"Borrower") and Fleet National Bank (the "Bank").  Notwithstanding any
provisions of the Agreement to the contrary, the Agreement is hereby amended,
effective immediately, as follows:

      1.    All capitalized terms used herein, unless otherwise defined,
shall have the meanings ascribed to them in the Agreement.

      2.    Section 1.1 of the Agreement is hereby deleted in its entity and
the following new Section 1.1 substituted therefor as follows:

            "1.1A  Subject to the terms and conditions of this Agreement,
      the Bank hereby establishes a revolving line of credit of up to
      Fourteen Million ($14,000,000.00) Dollars (the "Revolving Loan") to
      be advanced as hereinafter provided.  The Bank shall, as long as no
      Event of Default has occurred hereunder, from time to time, make
      advances in the form of direct loans or letters of credit issued for
      the account of the Borrower comprising the Revolving Loan (all of
      which shall be called "Loans" hereunder) to the Borrower upon the
      Borrower's request; provided, however, that no advance or other
      financial accommodation will be made if, after giving effect to the
      Borrower's request for such advance or other financial accommodation,
      the outstanding principal balance of the Revolving Loan would exceed
      the lesser of:

            (a)   $14,000,000.00 which amount shall automatically reduce to
                  13,000,000.00 on December 31, 2002 and to $12,000,000.00
                  on March 31, 2003 the "Credit Limit") or


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            (b)   the sum of:

                  (i)   eighty percent (80%) of the face amount of eligible
                        accounts receivable less than ninety (90) days from
                        the invoice date thereof, plus

                  (ii)  seventy percent (70%) of the "as is" appraised
                        market value of the Premises located at One Parlex
                        Place Methuen MA (the Bank reserves the right to
                        have the Premises appraised from time to time to
                        establish or adjust such value, which is currently
                        Seven Million Two Hundred Thousand ($7,200,000.00)
                        Dollars, which is equal to seventy percent (70%) of
                        the Ten Million Three Hundred Thousand
                        ($10,300,000.00) Dollar "as is" value of the
                        Premises based on the appraisal from MacPherson
                        Appraisal Company dated May 17, 2002), minus

                  (iii) one hundred (100%) percent of the aggregate
                        amount of all letters of credit or acceptances
                        issued for the account of the account of the
                        Borrower (the sum of (i) plus (ii) minus (iii) is
                        hereinafter called the "Borrowing Base").

            1.1B  For purposes of the Borrowing Base calculation set forth
      above, eligible accounts receivable are those which are owing to the
      Borrower which met the following specifications at the time it came
      into existence and continues to meet the same until collected in
      full:

                  (i)   The account arose from the performance of services
                        or an outright sale of goods by Borrower, such
                        goods have been shipped to the account debtor, and
                        Borrower has possession of, or has delivered to
                        Bank, shipping and delivery receipts evidencing
                        such shipment.

                  (ii)  The account is not subject to any prior assignment,
                        claim, lien, or security interest, and Borrower
                        will not make any further assignment thereof or
                        create any further security interest therein, nor
                        permit Borrower's rights therein to be reached by
                        attachment, levy, garnishment or other judicial
                        process.

                  (iii) The account is not subject to set?off, credit,
                        allowance or adjustment by the account debtor,
                        except discount allowed for


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                        prompt payment and the account debtor has not
                        complained as to his liability thereon and has not
                        returned any of the goods from the sale of which
                        the account arose.

                  (iv)  The account arose in the ordinary course of
                        Borrower's business and did not arise from the
                        performance of services or a sale of goods to a
                        supplier or employee of the Borrower.

                  (v)   No notice of bankruptcy or insolvency of the
                        account debtor has been received by or is known to
                        the Borrower.

                  (vi)  The account is not owed by an account debtor whose
                        principal place of business is outside the United
                        States of America, unless such account is supported
                        by a letter of credit acceptable to the Bank in all
                        respects (which requirement may be modified or
                        waived in Bank's sole discretion).

                  (vii) The account is not owed by an entity which is a
                        parent, brother/sister, subsidiary or affiliate of
                        Borrower.

                  (viii) The account debtor is not located in the State of
                        New Jersey or Indiana, unless Borrower has filed
                        and shall file all legally required Notice of
                        Business Activities Report(s) with the New Jersey
                        Division of Taxation or the Indiana Department of
                        Revenue, respectively.

                  (ix)  The account is not evidenced by a promissory note.

                  (x)   The account did not arise out of any sale made on a
                        bill and hold, dating or delayed shipment basis.

                  (xi)  The account when aggregated with all of the
                        accounts of that account debtor does not exceed
                        twenty-five percent (25%) of the then aggregate
                        eligible accounts.

                  (xii) The account did not arise out of a contract with
                        the United States government or any department,
                        agency or instrumentality thereof, unless the
                        Borrower has complied with the Federal Assignment
                        of Claims Act.


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                  (xiii) The Bank in its reasonable discretion exercised in
                        its good faith banking judgment, does not deem the
                        account to be unacceptable for any reason.

            Provided that if any time twenty-five percent (25%) or more of
      the aggregate amount of the accounts due from any account debtor are
      unpaid in whole or in part more than ninety (90) days from the
      respective dates of invoice, from and after such time none of the
      accounts (then existing or thereafter arising) due from such account
      debtor shall be deemed to be eligible accounts until such time as all
      accounts due from such account debtor are (as a result of actual
      payments received thereon) no more than ninety (90) days from the
      date of invoice; accounts payable by Borrower to an account debtor
      shall be netted against accounts due from such account debtor and the
      difference (if positive) shall constitute eligible accounts from such
      account debtor for purposes of determining the Borrowing Base
      (notwithstanding sub-paragraph (iii) above); characterization of any
      account due from an account debtor as an eligible account shall not
      be deemed a determination by Bank as to its actual value nor in any
      way obligate Bank to accept any account subsequently arising from
      such account debtor to be, or to continue to deem such account to be,
      an eligible account; it is the Borrower's responsibility to determine
      the creditworthiness of account debtors and all risks concerning the
      same and collection of accounts are with Borrower; and all accounts,
      whether or not eligible accounts, constitute Collateral (as
      hereinafter defined)."

      2.    Sections 4.9 thru and including 4.17 of the Agreement are hereby
deleted in their entirety and the following new Sections 4.9 thru 4.17 are
substituted therefor as follows:

            "4.9   (Minimum Current Ratio).  The Borrower will not permit
      the ratio of its current assets to its current liabilities,
      determined on a consolidated basis, to be less than 2.0 to 1 as at
      the last day of any fiscal quarter of the Borrower.

            4.10   (Minimum Tangible Net Worth).  The Borrower will not
      permit its tangible net worth, determined on a consolidated basis, to
      be less than $65,500,000.00 as at the last day of the fiscal quarter
      ending  June 30, 2002 or less than $65,500,000.00 plus fifty (50%)
      percent of the prior quarter's net income for each subsequent fiscal
      quarter thereafter (without reduction for any losses sustained in any
      fiscal quarter).  The term "tangible net worth" shall mean
      stockholders' equity determined in accordance with generally accepted
      accounting principles, consistently applied, subtracting therefrom:
      (i) intangibles (as determined in accordance with such principles so
      applied), including, without limitation, goodwill, purchased
      technology and capitalized software development


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      costs; and (ii) accounts and indebtedness owing from any employee or
      parent, subsidiary or other affiliate.

            4.11  (Maximum Total Liabilities to Tangible Net Worth Ratio).
      The Borrower will not permit the ratio of its total liabilities
      (including, without limitation, all deferred taxes and contingent
      liabilities such as guarantees) to its tangible net worth, determined
      on a consolidated basis, to be more than 1.0 to 1 as at the last day
      of each fiscal quarter of the Borrower.

            4.12  [Intentionally deleted]

            4.13  (Maximum Senior Funded Indebtedness to EBITDA).  The
      Borrower will not permit the ratio of its senior indebtedness to its
      EBITDA, determined on a consolidated basis, to be more than 2.0 to 1
      for the twelve-month period ending on the last day of any fiscal
      quarter, commencing with the fiscal quarter ending June 30, 2003.
      The term "EBITDA" as used herein, shall mean, for the applicable
      period, income from operations before the payment of interest and
      taxes, plus depreciation and amortization.  Prior to the Expiration
      Date, outstanding balances under the Revolving Loan shall not be
      considered current maturities of long term indebtedness.

            4.14  (Minimum EBITDA).  The Borrower will not permit its
      EBITDA to be less than $1.00 for the fiscal quarter ending September
      30, 2002 or less than $500,000.00 for the fiscal quarter ending
      December 31, 2002, or for any fiscal quarter thereafter.

            4.15  (Minimum Net Income).  The Borrower's net income after
      taxes will not be less than $1.00 for any fiscal quarter, commencing
      with the fiscal quarter ending March 31, 2003.

            4.16  (Maximum Capital Expenditures).  The Borrower will not
      permit Borrower's Capital Expenditures to exceed $8,000,000.00 for
      any fiscal year of Borrower, commencing with the fiscal year ending
      June 30, 2002.  The term "Capital Expenditures" as used herein means,
      for any period, the aggregate amount of all expenditures for the
      acquisition, construction, replacement or purchase of Capital Assets
      and Intangible Assets, including, but not limited to, expenditures
      under Capital Leases.  The term "Capital Assets" as used herein means
      assets that according to generally accepted accounting principles
      consistently applied are required or permitted to be depreciated or
      amortized on Borrower's balance sheet.  The term "Intangible Assets"
      as used herein means assets that according to generally accepted
      accounting principles


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      consistently applied are properly classified as intangible assets,
      including, but not limited to, goodwill, franchises, licenses,
      patents, trademarks, trade names and copyrights.  The term "Capital
      Leases" as used herein means capital leases, conditional sales
      contracts and other title retention agreements related to the
      purchase or acquisitions of Capital Assets.  In calculating Capital
      Expenditures, Borrower will be assessed the value of Borrower's
      capital expenditures for Borrower's Chinese Joint Venture (the Joint
      Venture") times Borrower's percentage interest in such Joint Venture.
      Furthermore, capital equipment being transferred (or sold) from
      Borrower's locations to China will be excluded in calculating
      Borrower's Capital Expenditures for purposes of this covenant.

            4.17  All accounting terms not otherwise specifically defined
      herein shall be construed and interpreted in accordance with generally
      accepted accounting principles consistently applied."

      3.    Section 7.14 of the Agreement is hereby deleted in its entirety
and a new subsection 7.14 substituted therefor, as follows:

            "7.14 All Liabilities of the Borrower to the Bank, whether now
      existing or hereafter arising, shall be secured by a security interest
      in substantially all assets of the Borrower pursuant to a Security
      Agreement (All Assets) dated April 16, 2002, as the same may be
      amended, supplemented or superceded from time to time and by a
      Mortgage, Security Agreement and Financing Statement with respect to
      Premises located at One Parlex Place, Methuen, MA."

      4.    Exhibit B and Exhibit C of the Agreement are hereby deleted in
their entirety and Exhibit B and Exhibit C attached hereto are substituted
therefor.

      5.    In addition to the foregoing, the Borrower and Bank hereby agree
that until such time as the Borrower delivers a Covenant Compliance
Certificate to the Bank as of the end of any fiscal quarter of Borrower which
demonstrates the Borrower's full compliance with the financial covenants
contained in Section 4 of the Agreement and provided no Event of Default has
occurred under the Agreement which has not been otherwise waived or cured,
the "Margin" over the applicable LIBOR Interest Rate in the Revolving Note
shall be 250 basis points instead of 225 basis points and shall revert to 225
basis points upon delivery of the Covenant Compliance Certificate by the
Borrower to the Bank reflecting full compliance with the financial covenants
contained in


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Section 4 of the Agreement.  Borrower and Bank acknowledge that the
provisions of this Section shall specifically amend the Revolving Note, which
shall otherwise remain in full force and effect.

      Except as specifically amended hereby, the Agreement shall remain in
full force and effect, and the Borrower hereby reaffirms all representations
and warranties contained therein, as of date hereof.

      Please acknowledge your acceptance and agreement to the matters
contained herein by signing this letter in the space provided and returning
it to the undersigned, whereupon it shall take effect as an instrument under
seal.

                                     Very truly yours,

                                     FLEET NATIONAL BANK


                                     By:__________________________________
                                     Thomas F. Brennan, Senior Vice President

ACCEPTED AND AGREED TO:
PARLEX CORPORATION


By:_________________________________
      Peter J. Murphy, President


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