EXHIBIT 10.1

 

@ Fleet

  Small Business Services

 

LINE OF CREDIT AGREEMENT WITH LETTER OF CREDIT AND/OR ACCEPTANCE FINANCING
AGREEMENT

 

TECHNICAL COMMUNICATIONS CORPORATION of 100 Domino Drive, Concord, MA, 01742
(jointly and severally if more than one, the “Borrower”) and Fleet National
Bank, a Bank of America company, a national banking association created and
existing under the laws of the United States of America with its principal
office located at 111 Westminster Street, Providence, RI 02903 (the “Bank”), for
valuable consideration, the receipt of which is hereby acknowledged, agree as
follows:

 

I. DEFINITIONS.

 

  1. Each reference herein to:

 

  a. “Acceptance” shall mean a draft drawn by the Borrower on and accepted by
the Bank, payable to the order of the Borrower and endorsed by the Borrower
either in blank or to the order of the Bank, and having a tenor not in excess of
180 days, and created pursuant to the Acceptance Financing provisions of this
Agreement;

 

  b. “Acceptance Credit Limit” shall mean the maximum amount of the Credit Limit
which may be used for the creation of Acceptances as set forth in the Acceptance
Financing provisions of this Agreement;

 

  c. “Accounts”, “Chattel Paper including Electronic Chattel Paper”, Contract
and Letter of Credit Rights”, “Deposit Accounts”, “Documents”, “Fixtures”,
“General Intangibles”, “Payment Intangibles”, “Goods”, “Instruments”,
“Inventory”, “Investment Property”, “Machinery, Furniture and Equipment and any
accessions thereto”, “Money”, “Promissory Notes”, “Securities”, and “Software”
shall have the meaning assigned to each in the Uniform Commercial Code from time
to time in effect in the State (the “UCC”);

 

  d. “Affiliates of Borrower” means any person or entity that, directly or
indirectly, controls, is controlled by or is under common control with the
Borrower or is an inside director or officer of the Borrower. For purposes of
this definition, the term “control” (including the terms “controlling”,
“controlled by” and “under common control with”) means the possession, direct or
indirect, of the power to vote five percent (5%) or more of (i) the voting stock
of a corporation, (ii) the partnership interests of a partnership, or (iii) the
membership interests of a limited liability company, or to direct or cause the
direction of the management and policies of any such entity, whether through the
ownership of voting stock, partnership interests, membership interests, by
contract or otherwise;

 

  e. “Books and Records” shall mean all books, correspondence, credit files,
records and other documents relating directly or indirectly to the Obligations
and the Collateral, including, without limitation, all tapes, cards, runs, data
bases, software programs, diskettes, and other papers and documents in the
possession or control of the Borrower, any computer service bureau, or other
agent or independent contractor;

 

  f. “Clean Advance” shall mean a cash advance expressly excluding the issuance
of Letters of Credit and the creation of Acceptances) by the Bank to the
Borrower under the Clean Advances provisions of this Agreement;

 

  g. “Commercial Letters of Credit” shall mean Letters of Credit, the
beneficiary of which is under a contractual obligation to sell Goods to the
Borrower, which Goods will constitute Inventory in the hands of the Borrower;

 

  h. “L/C Credit Limit” shall mean the maximum amount of the Credit Limit which
may be used for issuance of Letters of Credit as set forth in the Letters of
Credit provisions of this Agreement;

 

  i. “Letter of Credit Application” shall mean the agreement or agreements
between the Bank and the Borrower with respect to the issuance of Letters of
Credit;

 

  j. “Letters of Credit” shall mean irrevocable credits as defined in the UCP
issued by the Bank to one or more beneficiaries for the account of the Borrower
and consisting of either or both of Commercial Letters of Credit and Standby
Letters of Credit as provided in the Letters of Credit provisions of this
Agreement;

 

  k. “Loan Documents” shall mean this Agreement, the Note, any Bank issued
Commitment Letter and any amendments thereto, and any and all mortgages, pledge
agreements, security agreements, financing statements, guaranties and other
documents related to this Agreement and/or the Loan;

 

  l. “Material Adverse Change” shall mean with respect to the Borrower and any
guarantors and any of their respective properties or revenues, an event, action
or condition that would or is reasonably likely to (i) adversely affect the
validity or enforceability of, or the authority of the Borrower and/or any
guarantor to perform their respective obligations under, the Loan Documents, or
(ii) materially adversely affect the business, operations, assets or condition
(financial or otherwise) of the Borrower and/or any guarantor or the ability of
the Borrower and/or any guarantor to perform their respective obligations under
any of the Loan Documents, or (iii) materially adversely affect the value of any
Collateral;

 

  m. “Rate” The term “Prime Rate” means the variable per annum rate of interest
so designated from time to time by the Bank as its prime rate. The Prime Rate is
a reference rate and does not necessarily represent the lowest or best rate
being charged to any customer. Changes in the rate of interest resulting from
changes in the Prime Rate shall take place immediately without notice or demand
of any kind;

 

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  n. “Standby Letters of Credit” shall mean Letters of Credit which represent
the Bank’s obligation to the beneficiary (i) to repay money borrowed by or
advanced to or for the account of the Borrower, or (ii) to make payment on
account of any indebtedness undertaken by the Borrower, or (iii) to make payment
on account of any default by the Borrower in the performance of an obligation;

 

  o. “State” shall mean the Commonwealth of Massachusetts.

 

  p. “TSOC” shall mean the Bank’s Trade Services Operation Center operated by
Fleet Services Corporation;

 

  q. “UCP” shall mean the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce Publication No. 500 (1993 Revision or the most
recent revision or successor thereto).

 

II. LOAN.

 

  1. Credit Limit. This Agreement evidences a line of credit for the Borrower’s
short-term borrowing needs (“the Loan”) with a credit limit (the “Credit Limit”)
not to exceed the maximum principal sum of Six Hundred Thousand and No/100
Dollars ($600,000.00). Such Credit Limit is further modified by the provisions
of Paragraph 10 of this Part II. Within such Credit Limit, until demand by the
Bank and or termination of the Bank’s commitment upon the occurrence of an Event
of Default, the Borrower may borrow, repay, and re-borrow hereunder.

 

  2. Advances. The Bank agrees to make advances to the Borrower until demand by
the Bank and/or termination of the Bank’s commitment upon the occurrence of an
Event of Default, provided that the aggregate principal amount of the Loan does
not exceed the Credit Limit. The outstanding principal balance of all advances
shall bear interest at the sum of the Prime Rate plus One percent (1.00%) per
annum.

 

  3. Excess Advances. If for any reason the aggregate outstanding principal
balance of the Loan should at any time exceed the Credit Limit, the Borrower
shall, without demand, immediately pay to the Bank a sum sufficient to reduce
the outstanding principal balance of the Loan to the Credit Limit, together with
accrued interest on the portion of the principal repaid.

 

III. CLEAN ADVANCES.

 

  1. Maximum Amount. The Borrower may utilize the Loan for Clean Advances in the
following maximum amount (which assumes the maximum amount of the Credit Limit
is available to the Borrower): The maximum amount of Six Hundred Thousand and
No/100 Dollars ($600,000.00). Such Credit Limit is further modified by the
provisions of Paragraph 10 of this Part II.

 

  2. Minimum Amount of Advance. Each advance under this Agreement shall be in
the minimum amount of One Thousand Dollars ($1,000.00) or the unadvanced balance
of the Credit Limit, whichever is less.

 

  3. Telephone Access. The Borrower shall access the Loan by a telephonic
request. The Borrower accepts all risks inherent in such request. The Borrower
absolves the Bank from all damages, loss and liabilities of whatsoever nature
which may result from an unauthorized telephonic request, a defective
transmission, or a telephonic request which is misunderstood by the Bank
employee. Neither the Bank nor any of its directors, officers or employees shall
be under any duty to pass upon the validity, accuracy, authorization,
effectiveness, or genuineness of any telephonic request, and the Bank and its
directors, officers and employees shall be entitled to assume that any such
telephonic instructions are valid, effective, accurate, genuine and authorized.
The Borrower consents to the Bank’s taping and recording of all telephonic
conversations relating to this Agreement and the Loan. All advances shall be
disbursed by the Bank by deposit of the Loan proceeds to the Borrower’s deposit
account with the Bank

 

  4. DEMAND LOAN. ON DEMAND BY THE BANK, THE ENTIRE OUTSTANDING PRINCIPAL
BALANCE OF THE LOAN AND ALL ACCRUED INTEREST SHALL IMMEDIATELY BECOME DUE AND
PAYABLE.

 

  5. Note; Interest Calculation. The Loan shall be evidenced by the Borrower’s
note of even date with this Agreement (which note and all amendments thereto and
any additional or supplementary notes executed pursuant to this Agreement are
herein referred to collectively as the “Note”). After demand, all principal and
other amounts outstanding and payable under the Note shall, at the Bank’s
option, bear interest at a rate which is four percent (4%) per annum greater
than that which would otherwise be applicable. All computations of interest
shall be made on the basis of a three hundred sixty (360) day year and the
actual number of days elapsed.

 

  6. Late Fee. If the entire amount of any required principal and/or interest is
not paid in full within ten (10) days after the same is due (whether as a result
of acceleration, maturity or otherwise) the Borrower shall pay to the Bank a
late fee equal to five percent (5%) of the required payment; provided that such
late fee shall be reduced to three percent (3%) of any required principal and
interest payment that is not paid within fifteen (15) days of the date it is due
if the Note is secured by a mortgage on an owner-occupied residence.

 

  7. Prepayment. The Borrower shall have the right at any time and from time to
time to prepay the Loan in whole or in part, without premium or penalty, but
with accrued interest to the day of such prepayment on the amount prepaid.

 

  8. Annual Clean Up. As long as this Agreement remains in effect, the Borrower
shall at least once each twelve (12) month period pay such amount of outstanding
Clean Advances and accrued interest thereon as may be necessary to maintain for
a period of at least thirty (30) consecutive days thereafter a Clean Advance
balance less than or equal to zero percent (0%) of the maximum amount of Clean
Advances. The Borrower’s compliance with this clean-up provision of this
paragraph shall not cause a termination of any security agreements, mortgages or
other agreements which may secure the Loan.

 

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IV. REPRESENTATIONS AND WARRANTIES.

 

The Borrower represents and warrants that:

 

  1. Organization and Powers. (a) If a corporate, partnership, limited liability
company or trust Borrower, it is duly organized, validly existing and in good
standing, (b) it has the power and authority to own its properties and to carry
on its business as now being conducted and, if a corporate, partnership, limited
liability company or trust Borrower, is qualified to do business in every
jurisdiction where such qualification is necessary, (c) it has the power to
execute, deliver and perform the Loan Documents, (d) the execution, delivery and
performance of the Loan Documents have been duly authorized by all requisite
action, (e) the execution, delivery and performance of the Loan Documents will
not violate any provision of law, any order of any court or other agency of
government, the Articles of Organization or By-laws of a corporate Borrower, the
partnership agreement of a partnership Borrower, the Articles of Organization or
Operating Agreement of a limited liability company Borrower, or the trust
agreement of a trust Borrower, or any indenture, agreement or other instrument
to which it is a party, or by which it is bound, or be in conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Borrower (other than in
favor of the Bank) or the acceleration of any of its outstanding indebtedness.

 

  2. Financial Statements. The Borrower has heretofore furnished to the Bank
accurate and complete financial data and other information based on its
operations in previous years, and said financial data fairly presents the
financial position and the results of operations for the periods indicated
therein. There has been no Material Adverse Change since the date of the most
recent financial statement.

 

  3. Litigation. There is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or other agency now pending or
threatened against or affecting the Borrower in which an adverse settlement,
decision or ruling will result in an award, penalty or damages of Ten Thousand
Dollars ($10,000) or more.

 

  4. No Conflict. The Borrower is not a party to any agreement or instrument or
subject to any restriction materially or adversely affecting its business,
properties or assets, operations or condition, financial or otherwise. The
Borrower has no knowledge that it is in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument to which it is a party.

 

  5. Use of Proceeds. No part of the proceeds of the Loan will be used for
consumer purposes or will be used to purchase or carry, directly or indirectly,
any margin stock or margin security (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or margin
security. If requested by the Bank, the Borrower will furnish in connection with
this Agreement a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in said Regulation U.

 

V. CONDITIONS OF LENDING.

 

Until such time as the Bank’s commitment is terminated in accordance with this
Agreement the Bank shall be obligated to make advances under this Agreement only
if on the date such advance is requested:

 

  a. The representations and warranties in Part III hereof are true and correct;

 

  b. No Event of Default exists; and

 

  c. The Bank shall have received: (a) certificate of authority, (b) the
original Loan Documents, and (c) such additional supporting documents as the
Bank may reasonably request. .

 

VI. COVENANTS.

 

The Borrower covenants and agrees that it will:

 

  1. (a) Legal Existence; Insurance; Etc. Keep in full force and effect its
legal existence (if a corporation, partnership, limited liability company or
trust), rights, licenses, permits and franchises and operate its business as
conducted prior to the date hereof; maintain all property used in the conduct of
its business and keep the same in good repair, working order and condition; and
maintain adequate insurance on its properties against fire, theft, and extended
coverage risks and against public liability and property damage and products
liability and such other risks as may be required by law or as may be reasonably
required by the Bank, in such form, for such periods, and written by such
companies as may be satisfactory to the Bank, such insurance in the case of a
secured loan to name the Bank as additional insured and/or mortgagee/loss payee.
All policies of insurance shall provide for at least twenty (20) days’ written
notice to the Bank prior to cancellation or change in the coverage, scope or
amount of any such policies or policies. Borrower shall furnish the Bank with
certificates of compliance with the foregoing insurance provision.

 

(b) Compliance with Laws. Comply with all present and future applicable laws,
ordinances, rules, regulations, directives and other requirements of all
governmental instrumentalities, including without limitation those relating to
Hazardous Substances, within such time periods as required thereby, with time
being of the essence.

 

  2. Operation of Business. Maintain and operate its business in a proper and
efficient manner.

 

  3. Payment of Taxes. Pay and discharge all taxes, assessments, and
governmental charges imposed upon Borrower, its income or its property before
the same shall be in default, as well as all lawful claims for labor, materials
and supplies or otherwise which, if unpaid, might become a lien upon any such
properties.

 

  4. Financial Statements. Furnish to the Bank

 

  a. promptly, from time to time as requested by the Bank, and in all events
within one hundred twenty (120) days after the close of each applicable party’s
tax year, (i) with respect to the Borrower and all corporate, partnership or
trust guarantors, financial statements, balance sheets, profit and loss
statements, together with supporting schedules, signed and in such form as may
be acceptable to the Bank; (ii) with respect to all individual guarantors,
signed personal financial statements;

 

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and (iii) with respect to all entities and individuals referred to in (i) and
(ii), current Federal income tax returns (with all schedules and exhibits), or
in the case of a partnership, Form1065 (with all schedules and exhibits). In any
event, all the documents referred to in this subparagraph (a), regardless of
when last submitted, must be submitted to the Bank, as often as the Bank shall
deem necessary, if there occurs a Material Adverse Change.

 

  b. promptly, from time to time, such other information regarding the
operations, assets, business, affairs and financial condition of the Borrower
and all guarantors, as the Bank may reasonably request; and

 

  c. with respect to all personal financial statements submitted by individual
guarantors, such statements shall be on forms prescribed by the Bank.

 

  5. Inspection. Permit agents or representatives of the Bank, at reasonable
hours and upon reasonable notice, to inspect the Books and Records of the
Borrower and to make abstracts or reproductions thereof, all at the Borrower’s
expense.

 

  6. Adverse Changes. Promptly advise the Bank of any Material Adverse Change.

 

  7. Accounting System. Maintain a standard system of accounting in accordance
with generally accepted accounting principles.

 

  8. Depository. Maintain the Bank as the Borrower’s principal depository.

 

  9. Indebtedness. Not incur or permit to exist any indebtedness or liability
except indebtedness to the Bank or any Bank affiliate, indebtedness with respect
to warranty, trade obligations and other liabilities incurred in the ordinary
course of business, and any indebtedness or liability permitted in writing by
the Bank.

 

  10. Liens. Not create, assume or suffer to exist any mortgage, security
interest, or lien on any of its assets, now or hereafter owned, other than liens
securing indebtedness to the Bank or any Bank affiliate, liens securing the
payment of taxes not yet due, liens imposed by law (other than for borrowed
money), liens incurred by the Borrower in good faith in the ordinary course of
business, and other liens permitted in writing by the Bank.

 

  11. Guaranties; Etc. Not guarantee, endorse or otherwise become or be
responsible for obligations of any other person or entity, whether by agreement
to purchase the indebtedness of any other person or entity or agreement for the
furnishing of funds to any other person or entity through purchase of Goods,
supplies or services, or by way of stock purchase, capital contribution, advance
or loan, for the purpose of paying or discharging any indebtedness or obligation
of such other person or entity, or otherwise, except endorsements of negotiable
instruments for collection in the ordinary course of business.

 

  12. Investments. Except with the prior written consent of the Bank, not
purchase, invest in or otherwise acquire or hold Securities including, without
limitation, capital stock (including closely held stock) and evidences of
indebtedness of, or make loans or advances to, or enter into any arrangement for
the purpose of providing funds or credit to, any other person or entity
(including, without limitation, all Affiliates of the Borrower), except (i)
readily marketable direct obligations of, or obligations guaranteed by, the
United States of America or any agency thereof; (ii) other investment grade debt
securities; (iii) publicly listed mutual funds and money market accounts, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this section; (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the Bank
or any Bank affiliate; and (v) deposits with or certificates of deposit issued
by any other bank organized in the United States and insured by the Federal
Deposit Insurance Corporation or by any other agency of the United States.

 

  13. Sales of Accounts and Instruments. Not sell, assign, discount or dispose
of any Accounts or Instruments held by the Borrower, with or without recourse,
except for collection (including endorsements) in the ordinary course of
business.

 

  14. Sales and Transfers. Not sell, assign, lease, transfer, sell and
leaseback, or otherwise dispose of all or any material amount of its assets not
in the ordinary course of business to any person or entity or turn over the
management of, or enter into a management contract with respect to, such assets.

 

  15. Valuation. Not write up (by creating an appraisal surplus or otherwise)
the value of any capital assets above their cost less the depreciation regularly
allowable thereon.

 

  16. Fundamental Changes. Not dissolve, liquidate, consolidate with or merge
with any corporation, limited liability company or other entity or agree to do
any of the foregoing.

 

  17. Distributions. If a corporate Borrower, not declare or pay any dividends,
or make any distribution to holders of shares of its capital stock (and on
account of such capital stock) of cash, capital stock or other property, or
directly or indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock of any class; and if a partnership or limited liability company
Borrower, not permit the return or withdrawal of any capital contributions;
provided, however, that if the Borrower is a limited liability company or an “S”
Corporation under the Internal Revenue Code, the Borrower may make annually such
cash distributions to its members or shareholders as shall equal the sum of
federal income taxes which are allocable to such members’ or shareholders’
income received or deemed to have been received on account of such members’ or
shareholders’ membership interest or capital stock in the Borrower.

 

  18. Notice of Default. Upon becoming aware of any Event of Default, or of any
occurrence which but for the giving of notice or the passage of time would
become an Event of Default, the Borrower shall promptly deliver written notice
thereof to the Bank.

 

VII. SECURITY AGREEMENT AND OTHER SECURITY DOCUMENTS.

 

  1. Security Interest; Collateral; Obligations. The Borrower hereby grants to
the Bank, as security for any and all obligations whatsoever of the Borrower to
the Bank, whether direct, indirect, absolute or contingent, due or to become
due, and whether now existing or hereafter arising and howsoever evidenced or
acquired, including without limitation all indebtedness and liabilities
evidenced by the Loan, this Agreement, the other Loan Documents, or arising
under any foreign exchange contracts, interest rate swap, cap, floor or hedging
agreements, or other similar agreements or arrangements, letter of credit
reimbursement agreements, and checking account overdrafts and any other amount
due to the Bank under any existing or

 

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future agreements relating to cash management services, excluding, however,
indebtedness incurred primarily for personal, family or household purposes
(collectively, the “Obligations”), a first lien on, and a security interest in
and agrees and acknowledges that the Bank has and will continue to have a first
lien on and a perfected security interest in all of the Collateral described
below, both presently owned and after acquired, together with all proceeds and
products thereof, additions and accessions thereto, and all replacements and
substitutions therefor (collectively, the “Collateral”), excluding, however, all
such Collateral which constitutes Consumer Goods in the hands of the Borrower:
All personal property of the Borrower, wherever located, and whether now owned
or hereafter acquired or arising, including, without limitation, Accounts,
Chattel Paper including Electronic Chattel Paper, Contract and Letter of Credit
Rights, Deposit Accounts, Documents, Farm Products, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property, Machinery,
Furniture, Equipment and any accessions thereto, Money, Payment Intangibles,
Promissory Notes, Securities, Software.

 

  2. Borrower hereby warrants, covenants and agrees that:

 

  a. Title; Adverse Liens. Except for prior security interests disclosed on
|Exhibit A-2 (if any) and except for the security interest granted hereby, the
Borrower is the owner of presently owned Collateral and will be the owner of
Collateral hereafter acquired free from any adverse lien, and Borrower will
defend the Collateral against the claims and demands of all persons at any time
claiming the same or any interest therein.

 

  b. Financing Statements. Except for financing statements evidencing the
security interests which may be listed on |Exhibit A-2 (if any), no financing
statements covering any Collateral are on file in any public office. At the
request of the Bank, the Borrower will execute one or more (i) financing
statements pursuant to the UCC; (ii) title certificate lien application forms;
and (iii) other documents necessary or advisable to perfect the security
interests evidenced hereby, all in form satisfactory to the Bank. Where allowed
by law, the Borrower hereby irrevocably authorizes the Bank to file financing
statements and amendments without the signature of the Borrower. The Borrower
will pay the cost of filing the aforesaid documents or filing or recording this
Agreement in all public offices wherever filing or recording is deemed by the
Bank to be necessary or desirable.

 

  c. Adverse Liens. The Borrower will keep the Collateral free from any future
adverse liens.

 

  d. Machinery; Equipment. If the Borrower has granted a security interest in
Machinery or Equipment:

 

  i. The Collateral is used primarily for business purposes.

 

  ii. The Collateral will be kept at the location listed on affixed Exhibit A-3.
Borrower will promptly notify Bank of any change in the location of the
Collateral, and Borrower will not remove the Machinery or Equipment from such
location without the prior written consent of the Bank.

 

  e. Inventory. If the Borrower has granted a security interest in Inventory:

 

  i. The Inventory is acquired for business purposes. In the absence of an Event
of Default hereunder, the Borrower may sell the Inventory in the ordinary course
of its business upon terms not exceeding ninety (90) days, or upon such further
terms as the Bank may from time to time approve. The Borrower shall not without
the consent of the Bank sell the Inventory to any supplier or employee of the
Borrower or to any person to whom the Borrower is indebted or under
circumstances which would otherwise create an adverse lien, including a right of
set-off, against the Account resulting from such sale.

 

  ii. Inventory will be kept at the location listed on affixed Exhibit A-3. The
Borrower will promptly notify the Bank of any change in the location of the
Inventory, and the Borrower will not remove the Inventory from such location
without the prior written consent of the Bank.

 

  f. Accounts. If the Borrower has granted a security interest in Accounts:

 

  i. The Borrower will upon demand render to the Bank a statement indicating the
total dollar value of the Accounts.

 

  ii. The only offices where the Borrower keeps Books and Records concerning any
Accounts is at the location listed on affixed Exhibit A-3. The Borrower will not
remove any of such Books and Records from said offices without the prior written
consent of the Bank.

 

  iii. During the five years immediately preceding the grant of the security
interest hereby to the Secured Party, Borrower has maintained its chief
executive office at the address (es), and during the time periods, set forth on
Exhibit A-3. Without the prior written consent of the Secured Party, Borrower
will not change its chief executive office or state of incorporation or
organization.

 

  iv. The Borrower will at all times keep accurate and complete Books and
Records of its Accounts, and the Bank or any of its agents shall have the right
to inspect the Borrower’s Books and Records relating to said Accounts or to any
other transactions to which the Borrower is a party and from which an Account
might arise and to make extracts from said Books and Records, all at the
Borrower’s expense. The Bank may in its own name or in the names of others,
communicate with account debtors in order to verify with them, to the Bank’s
satisfaction, the existence, amount and terms of any Accounts. The Borrower
shall immediately notify the Bank of any event causing loss or depreciation in
value of any of its Accounts and the amount of such loss or depreciation.

 

  v. If any of the Borrower’s Accounts arise out of contracts with the United
States or any department, agency or instrumentality thereof, the Borrower will
immediately notify the Bank thereof in writing and execute any instruments and
take any steps required by the Bank in order that all monies due and to become
due under such contracts shall be assigned to the Bank and notice thereof given
to the government under the Federal Assignment of Claims Act.

 

  vi. If any of the Borrower’s Accounts should be evidenced by Instruments, the
Borrower will immediately deliver such Instruments to the Bank, appropriately
endorsed to the Bank’s order and, regardless of the form of such endorsement,
the Borrower hereby waives presentment, demand or notice of any kind with
respect thereto.

 

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  vii. This Agreement may, but need not be supplemented by separate assignments
of Accounts to the Bank, and if such assignments are given, the rights given
thereby shall be in addition to and not in limitation of the rights and security
interests given by this Agreement.

 

  g. Fixtures; Farm Products. If the Borrower has granted a security interest in
Fixtures and/or Farm Products, there is affixed hereto as Exhibit A-4 a
description of the applicable real estate and the name(s) of the record owner.

 

  h. Investment Property; Securities. If the Borrower has granted a security
interest in Investment Property or Securities the Bank may transfer Collateral
into its name or that of its nominee and may receive the income and any
distributions thereon and hold the same as Collateral for the Obligations, or
apply the same to any Obligation, whether or not an Event of Default has
occurred.

 

  i. Taxes. The Borrower will pay promptly when due all taxes and assessments
upon the Collateral or for its use or operation or upon this Agreement and any
of the other Loan Documents.

 

  j. Insurance. With respect to all required insurance policies and coverage,
the Bank may act either in its name or as attorney for the Borrower (for that
purpose by these presents duly authorized and appointed with full power of
substitution and revocation) in obtaining, adjusting, settling and canceling
such insurance and endorsing any drafts in payment of any loss.

 

  k. Preservation of Collateral. The Bank may, at its election, discharge taxes
and liens levied or placed on the Collateral, pay for insurance on the
Collateral and pay for the maintenance and preservation of the Collateral. The
Borrower agrees to reimburse Bank on demand for any payment made, or any expense
incurred by the Bank pursuant to the foregoing authorization, and in any event
all such payments and expenses shall constitute an Obligation hereunder. If the
Borrower fails to insure Collateral as required by this Agreement or any of the
Loan Documents, the Borrower shall pay to the Bank on the date of such failure a
nonrefundable fee for each such failure equal to the sum of (i) $100 plus (ii)
the amount of the insurance premium cost incurred by the Bank. Notwithstanding
the foregoing, neither the charging or payment of such fee nor this provision
shall in any way be deemed to waive or imply or constitute a basis for waiver of
any default occasioned by Borrower’s failure to comply with the insurance
requirements of this Agreement or any of the Loan Documents.

 

  l. Possession and Use. Other than with respect to Collateral in which the
Bank’s security interest is perfected by the Bank’s possession thereof, such as
instruments, documents, cash, bank accounts, etc., which so long as any of the
Obligations remain outstanding and unpaid shall remain in the possession of the
Bank, until an Event of Default, the Borrower may have possession of the
collateral, provided that the Borrower will not use the Collateral in any
unlawful manner or in a manner in consistent with this Agreement, the Loan
Documents, or any policy of insurance thereon.

 

  m. Power of Attorney. The Borrower irrevocably designates and appoints the
Bank its true and lawful attorney with full power of substitution and revocation
to execute, deliver, and record in the name of the Borrower all financing
statements, amendments, continuation statements, title certificate lien
applications and other documents deemed by the Bank to be necessary or advisable
to perfect or to continue the perfection of the security interests granted
hereunder.

 

  n. Reproduction as Financing Statement. A carbon, photographic, or other
reproduction of a security agreement or a financing statement is sufficient as a
financing statement.

 

  o. Remedies. If an Event of Default occurs, the Bank shall have the rights and
remedies provided in this Agreement, including without limitation in Part VII
hereof. In addition, the Bank may exercise and shall have any and all rights and
remedies accorded it by the UCC. The Bank may require the Borrower to assemble
the Collateral and make it available to the Bank at a place to be designated by
the Bank which is reasonably convenient to both parties. The requirement of
reasonable notice shall be met, if notice is mailed, postage prepaid, to the
Borrower or other person entitled thereto at least ten (10) days (including
non-business days) before the time of sale or disposition of the Collateral. The
Bank at its option may have a receiver appointed to take possession of the
Collateral, to use and operate the Collateral, to collect the profits and
proceeds therefrom, and to apply the same as the court may direct. The Borrower
agrees that the Bank’s legal remedies are inadequate and that the Bank shall be
entitled to obtain equitable relief upon the occurrence of an Event of Default.
The Borrower shall pay to the Bank on demand all expenses, including reasonable
legal expenses and attorney’s fees (which may include costs allocated by the
Bank’s internal legal department), incurred or paid by the Bank in protecting or
enforcing any rights of the Bank hereunder, including its right to take
possession of the Collateral, storing and disposing of the same or in collecting
the proceeds thereof.

 

  p. Notification of Account Debtors. The Bank shall have the right to demand
from the Borrower a list of all Accounts; and upon the occurrence of an Event of
Default, to notify any and all account debtors to make payment thereof directly
to the Bank. The Borrower irrevocably designates and appoints the Bank its true
and lawful attorney with full power of substitution and revocation in its own
name or in the name of the Borrower to demand, collect, receive, receipt for,
and sue for all amounts due and to become due on the Accounts and to endorse the
name of the Borrower on all commercial paper given in payment or part-payment
thereof and in its discretion to file any claim or take any other action which
the Bank may deem necessary or appropriate to protect and preserve and realize
upon the security interest of the Bank in the Accounts or the proceeds thereof.
The Bank shall also have the right to (i) open all mail addressed to the
Borrower; (ii) change the Post Office box or mailing address of Borrower; and
(iii) use the Borrower’s stationery and billing forms or facsimiles thereof, for
the purpose of collecting Accounts and realizing upon the Collateral.

 

  q. Inspection and Appraisal. The Bank and its agents and representatives
(including without limitation appraisers, engineers, and other professionals)
shall, upon reasonable advance notice, have access to the Borrower’s premises
for the purpose of inspecting and appraising the Collateral and/or performing
environmental site assessments. All fees and expenses incurred by the Bank in
connection with such inspections, appraisals and site assessments shall be
payable by the Borrower to the Bank upon demand, and until paid in full, shall
be secured by the Bank’s security interests.

 

TECHNICAL COMMUNICATIONS CORPORATION

 

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VIII. EVENTS OF DEFAULT.

 

  1. Listing of Events of Default. The occurrence of any of the following events
or conditions with respect to the Borrower shall, individually and collectively,
be an “Event of Default” hereunder:

 

  a. any representation or warranty made herein or in any report, certificate,
financial statement or other instrument furnished in connection with this
Agreement or the Loan shall prove to be false or misleading in any material
respect;

 

  b. failure to pay the principal of, or interest on, the Note or any other
indebtedness of the Borrower to the Bank, within ten (10) days from the date the
same or any installment thereof shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment or by acceleration or otherwise;
provided, however, that such ten (10) day period shall not apply in the event
the Bank exercises its right under the Loan Documents to demand immediate
repayment of the Note;

 

  c. default in the due observance or performance of any other covenant,
condition or agreement contained in this Agreement, any of the other Loan
Documents, or in any other agreement or document evidencing or pertaining to
Obligations, and such other default shall remain unremedied for ten (10) days;

 

  d. the acceleration of the maturity of any of the Borrower’s indebtedness
other than to the Bank;

 

  e. involvement in financial difficulties as evidenced by:

 

  i. an attachment made on the Borrower’s property or assets which remains
unreleased for a period in excess of forty-five (45) days; or

 

  ii. the inability to pay its debts (including without limitation taxes)
generally as they become due; or

 

  iii. the appointment or authorization of a custodian as defined in the
Bankruptcy Code; provided, however, that in the case of the appointment of a
receiver in an involuntary proceeding such appointment continues in effect and
undischarged for a period of thirty (30) days; or

 

  iv. the entry of an order for relief in a voluntary case under any chapter of
the Bankruptcy Code; or

 

  v. the filing of an involuntary petition under any chapter of the Bankruptcy
Code, which petition remains undismissed for a period of thirty (30) days; or

 

  vi. any other judicial modification or adjustment of the rights of Borrower’s
creditors;

 

  f. final judgment for the payment of money shall be rendered against the
Borrower and the same shall remain undischarged for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, which
judgment shall have a material adverse effect upon the Borrower’s assets,
liabilities, financial condition or business, or where the amount involved is
Twenty Five Thousand Dollars ($25,000) or more

 

  g. any transfer (which shall include, without limitation, by sale, exchange,
gift, pledge, hypothecation, or by other means except transfers by operation of
law) to any person who is not presently a partner of a partnership Borrower or
the spouse or child of a partner of a partnership Borrower of any partnership
interest in the Borrower, except any transfer of such interest upon the death of
a partner either by will or intestacy;

 

  h. any transfer (which shall include, without limitation, by sale, exchange,
gift, pledge, hypothecation, or by other means except transfers by operation of
law) to any person who is not presently a member of a limited liability company
Borrower or the spouse or child of a member of a limited liability company
Borrower of any membership interest in the Borrower, except any transfer of such
interest upon the death of a member either by will or intestacy;

 

  i. in the case of a trust Borrower, (i) any change in the beneficiaries of the
trust; (ii) any dilution of the beneficial interest of one or more of the
beneficiaries; or (iii) any change in the trustee or trustees;

 

  j. the suspension of business for cause, other than strike, casualty or other
cause beyond the Borrower’s control and in the event of such suspension for
cause beyond the Borrower’s control, failure to resume operations as soon as
possible;

 

  k. dissolution or termination of the legal existence of the Borrower;

 

  l. participation in any illegal activity or in any activity, whether or not
related to the business of the Borrower, that may subject the assets of the
Borrower to (i) a restraining order or any form of injunction issued by any
federal or state court, or (ii) seizure, forfeiture or confiscation by any
federal or state governmental instrumentality;

 

  m. if the Bank believes in good faith, at any time, that either (a) the
prospect of the Borrower’s (i) repayment of the Loan or payment of any of its
other obligations under the Loan Documents or (ii) performance of its duties
thereunder is impaired or (b) there is any Material Adverse Change; or

 

  n. a Borrower or Guarantor who is a natural person shall die; or

 

  o. with respect to any guaranty and/or subordination agreement included in the
Loan Documents, the failure of the same to remain in full force and effect until
the Loan is paid in full and this Agreement is terminated.

 

  2. Certain Cross-Defaults. The happening of any event or condition set forth
in subsection 1(e), (f), (l), or (m) above, with respect to a general partner of
a partnership Borrower or any guarantor of the Loan shall likewise constitute an
Event of Default.

 

  3. Termination of Commitment. If an Event of Default occurs, the Bank, at its
option, may (i) make demand for payment of the entire outstanding principal
balance and all accrued interest on account of the advances and any other
amounts due to the Bank (the Bank having the right at all times, whether or not
an Event of Default has occurred, to make such demand); and (ii) terminate the
commitment to make advances under this Agreement (provided, however, that if the
Bank shall exercise its discretionary right to make demand, such demand shall
also terminate the Bank’s commitment to make advances, whether or not an Event
of Default has occurred).

 

TECHNICAL COMMUNICATIONS CORPORATION

 

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IX. MISCELLANEOUS.

 

  1. Waiver of Event of Default. No delay in terminating the Bank’s commitment
under this Agreement and/or in making demand shall affect the rights of the Bank
later to take such action with respect thereto, and no waiver as to one Event of
Default shall affect rights as to any other default.

 

  2. Notices. Except as otherwise specifically provided for herein, any notice,
demand or communication hereunder shall be given in writing and mailed or
delivered to each party at its address set forth herein, or, as to each party,
at such other address as shall be designated by such party by a prior notice to
the other party in accordance with the terms of this provision. Any notice to
the Borrower shall be sent as follows: TECHNICAL COMMUNICATIONS CORPORATION, 100
Domino Drive, Concord, MA 01742. All notices hereunder shall be effective upon
the earliest to occur of (i) five (5) business days after such notice is mailed,
by registered or certified mail, postage prepaid (return receipt requested),
(ii) upon delivery by hand (iii) upon delivery if delivered by overnight courier
(such delivery to be evidenced by the courier’s records).

 

  3. Survival. This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive any making by the Bank of the Loan and the execution and delivery of any
Loan Documents and shall continue in full force and effect until this Agreement
is terminated and all the Obligations are paid in full.

 

  4. Legal Fees and Expenses; Additional Fees and Charges. The Borrower will pay
all reasonable expenses incurred by the Bank in connection with the preparation
of the Loan Documents, the making of the Loan, and the enforcement of the rights
of the Bank in connection with this Agreement, any of the other Loan Documents
and the Loan, including, but not limited to, the reasonable fees of its counsel
(which may include costs allocated by the Bank’s internal legal department),
plus the disbursements of said counsel. Borrower further agrees to pay to the
Bank on demand all reasonable fees, costs and expenses incurred by the Bank in
connection with the administration of the Loan, including, without limitation,
overnight courier fees, lien search fees, and filing and recording fees. The
Borrower agrees to pay on demand the Bank’s service fees and charges for
administrative costs as in effect from time to time (including, without
limitation, such fees and charges as may be expressly provided for in this
Agreement). Any such fee or charge may be implemented by the Bank from time to
time or, in the case of any such existing fee or charge, the amount thereof may
be increased by the Bank from time to time, in each instance, in or to such
amount as the Bank in its sole discretion deems reasonable.

 

  5. Choice of Law. This Agreement and all the other Loan Documents shall be
construed in accordance with and governed by the local laws (excluding the
conflict of laws rules, so-called) of the State.

 

  6. Written Modification and Waiver. No modification or waiver of any provision
of this Agreement or of any of the other Loan Documents nor consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstances.

 

  7. Accounting Practice. All matters involving accounting practice are to be
determined both as to classification of items and amounts in accordance with
generally accepted principles of accounting practice consistently applied by the
Borrower’s accountants in the preparation of its previous annual financial
statements.

 

  8. Documentation. All documents required hereunder shall be in form and
substance satisfactory to the Bank.

 

  9. Joint and Several Obligations. If this Agreement is signed by more than one
Borrower, all obligations of the Borrowers are their joint and several
obligations, and all references to the Borrower herein shall be deemed to refer
to each of them, either of them, and all of them.

 

  10. Unenforceability. In the event any term or provision of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
held invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those to which it is held invalid or unenforceable, shall be valid and
enforceable to the fullest extent permitted by law.

 

  11. Cumulative Remedies; Setoff. The rights and remedies provided the Bank in
this Agreement and in the other Loan Documents shall be cumulative and shall be
in addition to and not in derogation of any rights or remedies provided the Bank
in any other document, instrument or agreement or under applicable law or
otherwise, and may be exercised concurrently or successively. Borrower and any
Guarantor hereby grant to Bank, a lien, security interest and right of setoff as
security for all liabilities and obligations to 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
Bank or any entity under the control of Bank of America Corporation, or in
transit to any of them. At any time, without demand or notice, Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any Guarantor even though unmatured and regardless of the
adequacy of any collateral securing the Loan. ANY AND ALL RIGHTS TO REQUIRE BANK
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, 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.

 

  12. Assignments and Participations and Securitizations; Credit Reporting . The
Borrower agrees that the Bank shall have the right at all times to sell all or
any portion of the Loan and all Loan Documents, and to grant one or more
participations in the Loan and in all Loan Documents. In connection therewith,
the Borrower hereby irrevocably authorizes the Bank to deliver to each such
purchaser, participant and prospective purchaser and prospective participant
originals and copies of all Loan Documents and all financial statements and
other credit and factual data from time to time in the Bank’s possession which

 

TECHNICAL COMMUNICATIONS CORPORATION

 

Page 8 of 11

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relate to the Borrower and/or all guarantors, if any, of the Loan. The Borrower
further agrees that the Bank shall have the right at all times to disclose and
report to credit reporting agencies such information pertaining to the Borrower
and/or all guarantors, if any, as is consistent with the Bank’s policies and
practices from time to time in effect.

 

  13. Maximum Rate of Interest. All provisions of this Agreement are expressly
subject to the condition that in no event shall the amount paid or agreed to be
paid to the Bank hereunder and deemed interest under applicable law exceed the
maximum rate of interest on the unpaid principal balance of the Loan allowed by
applicable law (the “Maximum Allowable Rate”), which shall mean the law in
effect on the date of this Agreement, except that if there is a change in such
law which results in a higher Maximum Allowable Rate being applicable to this
Agreement, then this Agreement shall be governed by such amended law from and
after its effective date. In the event that fulfillment of any provision of this
Agreement results in the interest rate hereunder being in excess of the Maximum
Allowable Rate, the obligation to be fulfilled shall automatically be reduced to
eliminate such excess. If, notwithstanding the foregoing, the Bank receives an
amount which under applicable law would cause the interest rate set forth in
this Agreement to exceed the Maximum Allowable Rate, the portion thereof which
would be excessive shall automatically be applied to and deemed a prepayment of
the unpaid principal balance of the Loan and not a payment of interest.

 

  14. WAIVER OF JURY TRIAL. THE BORROWER WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND ANY
OF THE OTHER LOAN DOCUMENTS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED
BEFORE A JUDGE SITTING WITHOUT A JURY.

 

  15. Jurisdiction and Venue. The Borrower irrevocably consents that any legal
action or proceeding against it or any of its property with respect to any
matter arising under or relating to this Agreement and the other Loan Documents
may be brought in any court of the State, or any Federal Court of the United
States of America located in the State, as the Bank may elect, and by execution
and delivery of this Agreement the Borrower hereby submits to and accepts with
regard to any such action or proceeding, for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower further irrevocably consents to the service of process in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth
herein. The foregoing, however, shall not limit the Bank’s rights to serve
process in any other manner permitted by law or to bring any legal action or
proceeding or to obtain execution of judgment in any other jurisdiction. The
Borrower irrevocably waives any objection which it may now or hereafter have to
the laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement and the other Loan Documents, and further irrevocably
waives any claim that the State is not a convenient forum for any such suit,
action or proceeding.

 

  16. Presentment; Etc. The Borrower expressly waives presentment, notice of
dishonor, protest and notice of non-payment.

 

  17. Debit. The Borrower hereby irrevocably authorizes the Bank and any
subsequent holder of the Note, both before and after demand, to debit any of the
Borrower’s business accounts maintained with the Bank (or subsequent holder for
all sums (including without limitation principal, interest, late fees, and other
fees) payable from time to time under this Agreement and the other Loan
Documents. In addition, if the Borrower has signed a separate authorization, the
Bank is authorized to initiate ACH debit transfers for the Loan payments and on
the business account(s) specified in the authorization. These provisions shall
not obligate the Bank to create or allow any overdraft, and such authority shall
not relieve the Borrower of the obligation to assure that payments are made when
due.

 

  18. Integration. The Loan Documents supersede all prior agreements between the
parties with respect to the Loan, whether oral or written, including, without
limitation, all correspondence between counsel for the respective parties. The
Loan Documents constitute the entire agreements between the parties with respect
to the Loan, and the rights, duties, and obligations of the parties with respect
thereto.

 

  19. Lender Liability. The Bank shall not be liable for any loss sustained by
any party resulting from any action, omission, or failure to act by the Bank,
whether with respect to the exercise or enforcement of the Bank’s rights or
remedies under the Loan Documents, the Loan, or otherwise, unless such loss is
caused by the actual willful misconduct of the Bank conducted in bad faith. IN
NO EVENT SHALL THE BANK EVER BE LIABLE FOR CONSEQUENTIAL OR PUNITIVE DAMAGES,
ANY RIGHT OR CLAIM THERETO BEING EXPRESSLY AND UNCONDITIONALLY WAIVED.

 

  20. Bank’s Decisional Standards. To the extent that applicable laws require
the Bank’s actions or decisions under the Loan Documents to be conducted in good
faith, the term “good faith” shall be defined (using a subjective standard) as
honesty in fact with regard to the conduct or transaction concerned based upon
the facts and circumstances actually known to the individual(s) acting for the
Bank, and such requirement may be satisfied by reliance upon the advice of
attorneys, accountants, appraisers, architects, engineers, or other qualified
professionals.

 

  21. Descriptive Headings; Context. The captions in this Agreement are for
convenience of reference only and shall not define or limit any provision.
Whenever the context requires, reference in this Agreement to the neuter gender
shall include the masculine and/or feminine gender, and the singular number
shall include the plural, and, in each case, vice versa.

 

  22. Acknowledgment of Copy. The Borrower acknowledges that it has received a
fully executed copy of this Agreement.

 

TECHNICAL COMMUNICATIONS CORPORATION

 

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The Provisions of this Agreement shall bind the heirs, executors,
administrators, assigns and successors, as applicable, of the Borrower and shall
inure to the benefit of the Bank, its successors and assigns.

 

IN WITNESS WHEREOF, the Borrower and the Bank, by persons duly authorized, have
executed or caused this Agreement to be executed under seal as of November 5,
2004.

 

WITNESS:

 

   

TECHNICAL COMMUNICATIONS CORPORATION

/s/ William N. Grinnell

--------------------------------------------------------------------------------

 

By:

 

/s/ Michael P. Malone

--------------------------------------------------------------------------------

   

Name:

 

Michael P. Malone

   

Title:

 

Chief Financial Officer/Treasurer

   

Fleet National Bank

/s/ William N. Grinnell

--------------------------------------------------------------------------------

 

By:

 

/s/ T. Clark Hayes

--------------------------------------------------------------------------------

   

Name:

 

T. Clark Hayes

   

Title:

 

V.P.

 

TECHNICAL COMMUNICATIONS CORPORATION

 

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EXHIBIT A-2

 

Prior Security Interests in Collateral

None

 

EXHIBIT A-3

 

Location of Equipment

100 Domino Drive, Concord, MA 01742

 

Location of Inventory

100 Domino Drive, Concord, MA 01742

 

Offices Containing Records of Accounts

100 Domino Drive, Concord, MA 01742

 

EXHIBIT A-4

 

Description of Real Estate

N/A

 

Name(s) of Record Owner

N/A

 

TECHNICAL COMMUNICATIONS CORPORATION

 

Page 11 of 11